[Federal Register Volume 64, Number 63 (Friday, April 2, 1999)]
[Proposed Rules]
[Pages 16026-16296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6547]


      

[[Page 16025]]

_______________________________________________________________________

Part II





Department of Agriculture





_______________________________________________________________________



Agricultural Marketing Service



_______________________________________________________________________



7 CFR Part 1000, et al.



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

  Federal Register / Vol. 64, No. 63 / Friday, April 2, 1999 / Proposed 
Rules  

[[Page 16026]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1000, 1001, 1002, 1004, 1005, 1006, 1007, 1012, 1013, 
1030, 1032, 1033, 1036, 1040, 1044, 1046, 1049, 1050, 1064, 1065, 
1068, 1076, 1079, 1106, 1124, 1126, 1131, 1134, 1135, 1137, 1138 
and 1139

[DA-97-12]


Milk in the New England and Other 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
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1000.............................  General Provisions of Federal Milk Marketing Orders.
1001.............................  New England.
1002.............................  New York-New Jersey.
1004.............................  Middle Atlantic.
1005.............................  Carolina.
1006.............................  Upper Florida.
1007.............................  Southeast.
1012.............................  Tampa Bay.
1013.............................  Southeastern Florida.
1030.............................  Chicago Regional.
1032.............................  Southern Illinois-Eastern Missouri.
1033.............................  Ohio Valley.
1036.............................  Eastern Ohio-Western Pennsylvania.
1040.............................  Southern Michigan.
1044.............................  Michigan Upper Peninsula.
1046.............................  Louisville-Lexington-Evansville.
1049.............................  Indiana.
1050.............................  Central Illinois.
1064.............................  Greater Kansas City.
1065.............................  Nebraska-Western Iowa.
1068.............................  Upper Midwest.
1076.............................  Eastern South Dakota.
1079.............................  Iowa.
1106.............................  Southwest Plains.
1124.............................  Pacific Northwest.
1126.............................  Texas.
1131.............................  Central Arizona.
1134.............................  Western Colorado.
1135.............................  Southwestern Idaho-Eastern Oregon.
1137.............................  Eastern Colorado.
1138.............................  New Mexico-West Texas.
1139.............................  Great Basin.
----------------------------------------------------------------------------------------------------------------

SUMMARY: This final decision consolidates the current 31 Federal milk 
marketing orders into 11 orders. This consolidation complies with the 
1996 Farm Bill which mandates that the current Federal milk orders be 
consolidated into between 10 to 14 orders. This decision also conforms 
to the Omnibus Consolidated and Emergency Supplemental Appropriations 
Bill, which requires that this decision be issued between February 1 
and April 4, 1999, and extends the time for implementing Federal milk 
order reform amendments to October 1, 1999. This decision sets forth a 
replacement for the Class I price structure and replaces the basic 
formula price with a multiple component pricing system. This decision 
also establishes a new Class IV which would include milk used to 
produce nonfat dry milk, butter, and other dry milk powders; 
reclassifies eggnog; and addresses other minor classification changes. 
Part 1000 is expanded to include sections that are identical to all of 
the consolidated orders to assist in simplifying and streamlining the 
orders.
    This decision does not provide for conducting referendums of 
producers to determine if they approve of the issuance of the 
consolidated orders.

DATES: A notice to conduct a referendum on each of the consolidated 
orders will be published separately at a future date.

FOR FURTHER INFORMATION CONTACT: John F. Borovies, Branch Chief, USDA/
AMS/Dairy Programs, Order Formulation Branch, Room 2971, South 
Building, PO Box 96456, Washington, DC 20090-6456, (202) 720-6274, e-
mail address John__F__B[email protected] (after

[[Page 16027]]

April 19, 1999, the e-mail address will change to 
John.B[email protected]).
    For specific information on the Final Regulatory Impact Analysis 
and the Civil Rights Impact Analysis contact: John R. Mengel, Chief 
Economist, USDA/AMS/Dairy Programs, Office of Chief Economist, Room 
2753, South Building, PO Box 96456, Washington, DC 20090-6456, (202) 
720-4664, e-mail address John__R__M[email protected] (after April 19, 
1999, the e-mail address will change to John.M[email protected]).

SUPPLEMENTARY INFORMATION:
    Major changes from the proposed rule issued on January 21, 1998, 
are as follows:

1. Consolidation of Marketing Areas

    (a) The Western New York State order was removed from the proposed 
Northeast marketing area.
    (b) Six currently-unregulated counties were removed from the 
consolidated Central marketing area.
    (c) The current Western Colorado order was moved from the 
consolidated Western order to the consolidated Central marketing area 
along with 7 currently-unregulated Colorado counties.

2. Basic Formula Price Replacement

    (a) The proposed Class III and Class IV pricing formulas are 
revised to adjust for product yields and make allowances that result in 
lowering the Class III and IV prices.
    (b) Barrel cheese prices (NASS survey) are included in the Class 
III price formula.
    (c) The basis for measuring the protein content in milk is changed 
from a test for total nitrogen to a test for true protein.
    (d) Advance pricing for Class I will continue to be provided, but 
with a shorter time period (7 days vs. 25 days) prior to the effective 
month. The proposed rule had suggested a 6-month declining average 
mover.
    (e) Provides for advance pricing for skim milk in Class II uses in 
the same manner as for Class I.

3. Class I Price Structure

    Adopts a Class I price structure that uses the generally higher 
differential levels as proposed in Option 1A while retaining the 
pricing surface of the Department's preferred option.

4. Classification

    (a) Cream cheese is moved from Class II to Class III.
    (b) Shrinkage calculations are revised.

Table of Contents

I. Prior documents
II. Legislative and Background Requirements
    Legislative Requirements
    Background
    Actions Completed During Developmental Phase
    Actions Completed During Rulemaking Phase
    Public Interaction and Input
    Executive Order 12988
    Executive Order 12866
    Civil Rights Analysis Executive Summary
    The Regulatory Flexibility Act and the Effects on Small 
Businesses
    Paperwork Reduction Act of 1995
    Request for Public Input on Analyses
    Preliminary Statement
III. Discussion of Material Issues and Proposed Amendments to the 
Orders
    Consolidation of marketing areas
    Basic formula price replacement and other class price issues
    Class I pricing structure
    Classification of milk and related issues
    Provisions applicable to all orders
    Regional Issues:
    Northeast Region
    Southeast Region
    Midwest Region
    Western Region
    Miscellaneous and Administrative
    Consolidation of the marketing service, administrative expense, 
and producer-settlement funds
    Consolidation of the transportation credit balancing funds
    General findings
IV. Order Language
    General provisions
    Northeast order provisions
    Appalachian order provisions
    Florida order provisions
    Southeast order provisions
    Upper Midwest order provisions
    Central order provisions
    Mideast order provisions
    Pacific Northwest order provisions
    Southwest order provisions
    Arizona-Las Vegas order provisions
    Western order provisions
V. Appendix
    A: Summary of Preliminary Suggested Order Consolidation Report
    B: Summary of Pricing Options
    C: Summary of Classification Report
    D: Summary of Identical Provisions Report
    E: Summary of Basic Formula Price Report
    F: Summary of Revised Preliminary Suggested Order Consolidation 
Report

I. Prior Documents

    Prior documents in this proceeding include:
    Proposed Rule: Issued January 21, 1998; published January 30, 1998 
(63 FR 4802).
    Correction: Issued February 19, 1998; published February 25, 1998 
(63 FR 9686).
    Extension of Time: Issued March 10, 1998; published March 13, 1998 
(63 FR 12417).

II. Legislative and Background Requirements

Legislative Requirements

    Section 143 of the Federal Agriculture Improvement and Reform Act 
of 1996 (Farm Bill), 7 USC 7253, required that by April 4, 
1999,1 the current Federal milk marketing orders issued 
under the Agricultural Marketing Agreement Act of 1937, as amended (7 
U.S.C. 601-674), be consolidated into between 10 to 14 orders 
2. The Secretary of Agriculture (Secretary) is also directed 
to designate the State of California as a Federal milk order if 
California dairy producers petition for and approve such an order. In 
addition, the Farm Bill provided that the Secretary may address related 
issues such as the use of utilization rates and multiple basing points 
for the pricing of fluid milk and the use of uniform multiple component 
pricing when developing one or more basic prices for manufacturing 
milk.3
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    \1\ Section 143(b)(2) requires that a proposed rule be published 
by April 4, 1998, and Section 143(b)(3) provides that ``in the event 
that the Secretary is enjoined or otherwise restrained by a court 
order from publishing or implementing the consolidation and related 
reforms under subsection (a), the length of time for which that 
injunction or other restraining order is effective shall be added to 
the time limitations specified in paragraph (2) thereby extending 
those time limitations by a period of time equal to the period of 
time for which the injunction or other restraining order is 
effective.''
    \2\ Since this proceeding was initiated on May 2, 1996, the 
Black Hills, South Dakota and the Tennessee Valley orders have been 
terminated. Effective October 1, 1996, the operating provisions of 
the Black Hills order were terminated (61 FR 47038), and the 
remaining administrative provisions were terminated effective 
December 31, 1996 (61 FR 67927). Effective October 1, 1997, the 
operating provisions of the Tennessee Valley order were terminated 
(62 FR 47923). The remaining administrative provisions of the 
Tennessee Valley order will be terminated before this consolidation 
process is completed.
    \3\ The Omnibus Consolidated and Emergency Supplemental 
Appropriations Bill, passed in October 1998, extended the time frame 
for implementing Federal milk order reform amendments from April 4, 
1999, to October 1, 1999. The extension specifies that the final 
decision, defined as the final rule for purposes of this 
legislation, will be issued between February 1 and April 4, 1999, 
with the new amendments becoming effective on October 1, 1999. The 
legislation also provides that California has from the date of 
issuance of the final decision until September 30, 1999, to become a 
separate Federal milk marketing order.
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    Besides designating a date for completion of the required 
consolidation, the Farm Bill further required that no later than April 
1, 1997, the Secretary shall submit a report to Congress on the 
progress of the Federal order reform process that included: a 
description of the progress made toward implementation, a review of the 
Federal order system in light of the reforms

[[Page 16028]]

required, and any recommendations considered appropriate for further 
improvements and reforms. This report was submitted to Congress on 
April 1, 1997.4
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    \4\  Copies of the Report to Congress can be obtain- ed from 
Dairy Programs at (202) 720-4392 or via the Internet at http://
www.ams.usda.gov/dairy/.
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    Finally, the 1996 Farm Bill specified that USDA use informal 
rulemaking to implement these reforms.

Background

    The authorization of informal rulemaking to achieve the mandated 
reforms of the Farm Bill has resulted in a rulemaking process that is 
substantially different from the formal rulemaking process required to 
promulgate or amend Federal orders. The formal rulemaking process 
requires that decisions by USDA be based solely on the evidentiary 
record of a public hearing held before an Administrative Law Judge. 
Formal rulemaking involves the presentation of sworn testimony, the 
cross-examination of witnesses, the filing of briefs, the issuance of a 
recommended decision, the filing of exceptions, the issuance of a final 
decision that is voted on by affected producers, and upon approval by 
producers, the issuance of a final order.
    The informal rulemaking process does not require these procedures. 
Instead, informal rulemaking provides for the issuance of a proposed 
rule by the Agricultural Marketing Service, a period of time for the 
filing of comments by interested parties, and the issuance of a final 
decision by the Secretary. Referendums will be conducted to determine 
approval of the final decision by the requisite number of producers 
before the new orders will become effective.
    Full participation by interested parties has been essential in the 
reform of Federal milk orders. The issues are too important and complex 
to be developed without significant input from all facets of the dairy 
industry. The experience, knowledge, and expertise of the industry and 
public have been integral to the development of the rule. To ensure 
that maximum public input into the process was received, USDA developed 
a plan of action and projected time line. The plan of action developed 
consists of three phases: Developmental, rulemaking, and 
implementation.
    The first phase of the plan was the developmental phase. The use of 
a developmental phase allowed USDA to interact freely with the public 
to develop viable proposals that accomplished the Farm Bill mandates, 
as well as related reforms. The USDA met with interested parties to 
discuss the reform process, assisted in developing ideas or provided 
data and analysis on various possibilities, issued program 
announcements, and requested public input on all aspects of the Federal 
order program. The developmental phase began on April 4, 1996, and 
concluded with the issuance of the proposed rule on January 21, 1998 
(68 FR 4802).
    The second phase of the plan is the rulemaking phase. The 
rulemaking phase began with the issuance and publication of the 
proposed rule. The proposed rule provided the public 60 days to submit 
written comments on the reform proposals to USDA. On March 10, 1998, 
(68 FR 12417) the comment period was extended for an additional 30 days 
until April 30, 1998. In addition to requests for written comments, 
four listening sessions were held to receive verbal comments on the 
proposed rule. All comments were reviewed and considered prior to the 
issuance of this rule.
    The third and final phase of the plan is the implementation phase. 
The implementation phase begins after this rule is published in the 
Federal Register. This phase consists of informational meetings 
conducted by Market Administrator personnel and 
referendums.5 The objective of the informational meetings is 
to inform producers and handlers about the newly consolidated orders 
and explain the projected effects on producers and handlers in the new 
marketing order areas. After informational meetings are held, the 
referendums will be conducted. Upon approval of the consolidated orders 
and related reforms by the required number of producers in each 
marketing area, a final order implementing the new orders will be 
issued and published in the Federal Register.
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    \5\ As previously noted, this is also the time period in which 
California can consider becoming a Federal order based on the 
Omnibus Consolidated and Emergency Supplemental Appropriations Bill 
provisions.
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    Although all of the issues regarding Federal milk order reform are 
interrelated, USDA established several committees to address specific 
issues. The use of committees allowed the reform process to be divided 
into more manageable tasks. The committees worked throughout the 
developmental and rulemaking phases. The committees established were: 
Price Structure, Basic Formula Price, Identical Provisions, 
Classification, and Regional. The Regional committee was divided into 
four subcommittees: Midwest, Northeast, Southeast, and West. Committee 
membership consisted of both field and headquarters Dairy Programs 
personnel. The committees were given specific assignments related to 
their designated issue and began meeting in May 1996.
    In addition to utilizing USDA personnel, partnerships were 
established with two university consortia to provide expert analyses on 
the issues relating to price structure and basic formula price options. 
Dr. Andrew Novakovic of Cornell University led the analysis on price 
structure and published a staff paper entitled ``U.S. Dairy Sector 
Simulator: A Spatially Disaggregated Model of the U.S. Dairy Industry'' 
and a research bulletin entitled ``An Economic and Mathematical 
Description of the U.S. Dairy Sector Simulator'' 6 Dr. 
Ronald Knutson of Texas A&M University led the analysis on basic 
formula price options and published three working papers entitled ``An 
Economic Evaluation of Basic Formula Price (BFP) Alternatives'', ``The 
Modified Product Value and Fresh Milk Base Price Formulas as BFP 
Alternatives'', and ``Evaluation of `Final' Four Basic Formula Price 
Options''. 7
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    \6\ Copies of these reports may be obtained by contacting Ms. 
Wendy Barrett, Cornell University, ARME, 348 Warren Hall, Ithaca, NY 
14853-7801, (607) 255-1581,
    \7\ Copies of these reports may be obtained by contacting Dr. 
Ronald Knutson, Agricultural and Food Policy Center, Dept. of Ag. 
Economics, Texas A&M University, College Station, TX 77843-2124, 
(409) 845-5913.
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Actions Completed During Developmental Phase

    USDA maintained frequent contact with the industry regarding the 
reform process. To begin, on May 2, 1996, the Agricultural Marketing 
Service (AMS) Dairy Division issued a memorandum to interested parties 
announcing the planned procedures for implementing the Farm Bill 
8. In this memorandum, all interested parties were requested 
to submit ideas on reforming Federal milk orders, specifically as to 
the consolidation and pricing structure of orders. Input was requested 
by July 1, 1996.
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    \8\ Copies of this announcement and all subsequent announcements 
and reports can be obtained from Dairy Programs at (202) 720-4392, 
any Market Administrator office, or via the Internet at http://
www.ams.usda.gov/dairy/.
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    On June 24, 1996, USDA issued a press release announcing that a 
public forum would be held in Madison, Wisconsin, on July 29, 1996. The 
forum would address price discovery techniques for the value of milk 
used in

[[Page 16029]]

manufactured dairy products. Thirty-one Senators, Congressmen, 
university professors, representatives of processor and producer 
organizations, and dairy farmers made presentations at the forum.
    On October 24, 1996, AMS Dairy Division issued a memorandum to 
interested parties requesting input regarding all aspects of Federal 
milk order reform and specifically as to its impact on small 
businesses. USDA anticipated that the consolidation of Federal orders 
would have an economic impact on handlers and producers affected by the 
program, and USDA wanted to ensure that, while accomplishing their 
intended purpose, the newly consolidated Federal orders would not 
unduly inhibit the ability of small businesses to compete.
    On December 3, 1996, AMS Dairy Division issued a memorandum to 
interested parties announcing the release of the preliminary report on 
Federal milk order consolidation. The report suggested the 
consolidation of the then current 32 Federal milk orders into ten 
orders. (See Appendix A for report summary.) The memorandum requested 
input from all interested parties on the suggested consolidated orders 
and on any other aspect of the milk marketing order program by February 
10, 1997.
    On March 7, 1997, AMS Dairy Division issued a memorandum to 
interested parties announcing the release of three reports that 
addressed the Class I price structure, the classification of milk, and 
the identical provisions contained in a Federal milk order. The price 
structure report consisted of a summary report and a technical report 
and discussed several options for modifying the Class I price 
structure. (See Appendix B for report summary.) The classification 
report recommended the reclassification of certain dairy products, 
including the removal of Class III-A pricing for nonfat dry milk. (See 
Appendix C for report summary.) The identical provisions report 
recommended simplifying, modifying, and eliminating unnecessary 
differences in Federal order provisions. (See Appendix D for report 
summary.) Comments on the contents of these reports, as well as on any 
other aspect of the program, were requested from interested parties by 
June 1, 1997.
    On April 18, 1997, AMS Dairy Division issued a memorandum to 
interested parties announcing the release of the preliminary report on 
Alternatives to the Basic Formula Price (BFP). The report contained 
suggestions, ideas, and initial findings for BFP alternatives. Over 
eight categories of options were identified with four options 
recommended for further review and discussion. (See Appendix E for 
report summary.) The memorandum requested input from all interested 
parties on a BFP alternative and on any other aspect of the milk 
marketing order program by June 1, 1997.
    On May 20, 1997, AMS Dairy Division issued a memorandum to 
interested parties announcing the release of a revised preliminary 
report on Federal milk order consolidation. The revisions were based on 
the input received from interested parties in response to the initial 
preliminary report on order consolidation. (See Appendix F for report 
summary.) Instead of suggesting 10 consolidated orders as in the first 
report, the revised report suggested 11 consolidated orders and 
suggested the inclusion of some currently unregulated territory. The 
memorandum requested comments from all interested parties on the 
suggested consolidated orders and on any other aspect of the milk 
marketing order program by June 15, 1997.
    To elicit further input on the role of the National Cheese Exchange 
price in calculating the basic formula price, on January 29, 1997, the 
Secretary issued a press release announcing steps being taken by USDA 
to address concerns raised by dairy producers about how milk prices are 
calculated. In the press release, the Secretary requested further 
comments from interested parties about the use of the National Cheese 
Exchange in the determination of the basic formula price, which is the 
minimum price that handlers must pay dairy farmers for milk used to 
manufacture Class III products (butter and cheese) and the price used 
to establish the Class I and Class II prices. These comments were 
requested by March 31, 1997, and were useful in analyzing alternatives 
to the basic formula price in context of the order reform process.

Actions Completed During Rulemaking Phase

    On January 21, 1998, USDA issued a proposed rule (68 FR 4802) that 
recommended consolidating the current 31 orders into 11 orders, 
proposed two options for consideration as a replacement for the Class I 
price structure, and recommended replacing the basic formula price. The 
proposed rule also recommended establishing a new Class IV which would 
include milk used to produce nonfat dry milk, butter, and other dry 
milk powders; recommended reclassifying eggnog and cream cheese, 
addressing other minor classification issues; and recommended expanding 
part 1000 to include sections that are identical to all of the 
consolidated orders. A Preliminary Regulatory Impact Analysis (PRIA) 
was also issued that evaluated the costs and benefits of the proposed 
rule contents and alternatives. Comments were requested on the proposed 
rule and the PRIA on or before March 31, 1998. An informational packet 
describing the contents of the proposed rule was sent to interested 
parties.
    On March 10, 1998, USDA issued a document that extended the time 
for filing comments on the proposed rule an additional 30 days, until 
April 30, 1998. The document also announced that USDA would conduct 
four listening sessions to assist interested parties in submitting 
comments to USDA. The listening sessions were held on March 30 in 
Atlanta, Georgia; Liverpool, New York; and Dallas, Texas; and on March 
31 in Green Bay, Wisconsin.
    On April 15, 1998, AMS Dairy Programs announced the issuance of a 
report entitled ``Report on the Impacts of the Federal Order Reform 
Proposals on Food and Nutrition Service Programs, Participants, and 
Administering Institutions'' by the Food and Nutrition Service of USDA. 
The report analyzed the potential impacts of the milk order reform 
pricing proposals contained in the proposed rule on the Food Stamp 
Program, the Women, Infants, and Children Program, and the National 
School Lunch and Breakfast Programs.9 The report indicated 
that adoption of the proposed rule with either Class I price structure 
would have minimal economic impact on these programs. Comments on the 
report were requested by April 30, 1998. No comments were received.
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    \9\ Copies of this report can be obtained from Dairy Programs at 
(202) 720-4392, or via the Internet at http://www.ams.usda.gov/
dairy/.
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Public Interaction and Input

    As a result of the developmental phase announcements and forum, 
more than 1,600 individual comments were received by USDA. In addition 
to the individual comments, more than 2,000 form letters were received. 
As a result of the rulemaking phase proposed rule and listening 
sessions, nearly 4,500 additional comments were received. A further 
breakdown of the rulemaking comments by issue is as follows: 1,273 
consolidation; 376 basic formula price; 4,224 Class I price structure; 
101 classification; and 79 provisions applicable to all orders.
    The proposed rule provided interested parties an opportunity to 
file comments until March 31, 1998. This period was later extended to 
April 30, 1998. Over 205 comments were

[[Page 16030]]

postmarked after the April 30th deadline. Most of these comments did 
not raise any issues that were not previously addressed by comments 
timely submitted and considered in this rulemaking.
    All comments that were reviewed by USDA personnel were available 
for public inspection at USDA. To assist the public in accessing the 
comments, USDA contracted to have the comments scanned and published on 
compact discs. The use of this technology allowed interested parties 
throughout the United States access to the information received by 
USDA.
    USDA also made all publications and requests for information 
available on the Internet. A separate page under the Dairy Programs 
section of the AMS Homepage was established to provide information 
about the reform process. To assist in transmitting correspondence to 
USDA, a special electronic mail account-- 
[email protected] opened to receive input on Federal 
milk order reforms.
    USDA personnel met frequently with interested parties from May 1996 
through the issuance of the proposed rule to gather information and 
ideas on the consolidation and reform of Federal milk orders. During 
this time period, USDA personnel addressed over 250 groups comprised of 
more than 22,000 individuals on various issues related to Federal order 
reform.
    USDA personnel also conducted in-person briefings for both the 
Senate and House Agricultural Committees on the progress of Federal 
milk order reforms. Since May 1996, nine briefings were conducted for 
the committees. The briefings advised the committees of the plan of 
action for implementing the Farm Bill mandates; explained the 
preliminary report on the consolidation of Federal milk orders; 
explained the contents of the reports addressing Class I price 
structure, classification of milk, identical provisions and basic 
formula price; discussed the congressional report; and explained the 
proposed rule contents.
    To ensure the involvement of all interested parties, particularly 
small businesses as defined in the Initial Regulatory Flexibility 
Analysis (IRFA), in the process of Federal order reform, three primary 
methods of contact were used: direct written notification, publication 
of notices through various media forms, and speaking and meeting with 
organizations and individuals regarding the issue of Federal order 
reforms. In addition, information has been made available to the public 
via the Internet. USDA also made one written program announcement 
specifically requesting information from small businesses. Comments 
were also specifically requested on the IRFA published in the January 
21, 1998, proposed rule. More than 1,000 comments were received from 
interested parties that specifically stated or documented they were 
small businesses. However, this number may not be fully representative 
of the number of small businesses that actually submitted comments 
because a majority of commenters did not indicate their size. A few 
comments specifically addressed the IRFA, Executive Order 12866, and 
the paperwork reduction analysis.
    All announcements and an information packet summarizing the 
proposed rule were mailed to over 20,000 interested parties, State 
Governors, State Department of Agriculture Secretaries or 
Commissioners, and the national and ten regional Small Business 
Administration offices. In addition, most dairy producers under the 
orders were notified through regular market service bulletins published 
by Market Administrators on a monthly basis. Press releases were issued 
by USDA for the May 2, 1996, December 3, 1996, January 29, 1997, March 
7, 1997, and May 20, 1997, announcements; for the July 31, 1996, public 
forum; for the January 21, 1998, proposed rule; and for the March 30 
and 31, 1998, listening sessions and extension of time for submitting 
comments.10 These press releases were distributed to 
approximately 33 wire services and trade publications and to each State 
Department of Agriculture Communications Officer. These methods of 
notification helped to ensure that virtually all identified small 
businesses were contacted.
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    \10\ Copies of these press releases may be obtained from Dairy 
Programs at (202) 720-4392, or via the Internet at http://
www.ams.usda.gov/news/newsrel.htm.
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    Departmental personnel, both in the field and from Washington, 
actively met with interested parties to gather input and to clarify and 
refine ideas already submitted. Formal presentations, round table 
discussions, and individually scheduled meetings between industry 
representatives and Departmental personnel were held. Over 250 
organizations and more than 22,000 individuals were reached through 
this method. Of these individuals, approximately 13,400 were identified 
as small businesses.

Executive Order 12988

    This final decision has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended to have a retroactive 
effect. If adopted, 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 (AMAA), as 
amended, 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 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.

Executive Order 12866

    The Department is issuing the final decision in conformance with 
Executive Order 12866. The final decision is determined to be 
economically significant for the purposes of Executive Order 12866. 
When adopting regulations which are determined to be economically 
significant, agencies are required, among other things, to: Assess the 
costs and benefits of available regulatory alternatives; base 
regulatory decisions on the best reasonably-obtainable technical, 
economic, and other information; avoid duplicative regulations; and 
tailor regulations to impose the least burden on society consistent 
with obtaining regulatory objectives. Therefore, to assist in 
fulfilling the objectives of Executive Order 12866, the Department 
prepared a final Regulatory Impact Analysis (RIA) for this action. 
Information contained in the RIA pertains to the costs and benefits of 
the revised regulatory structure and is summarized in the following 
analysis. Copies of the RIA can be obtained from Dairy Programs at 
(202) 720-4392, any Market Administrator office, or via the Internet at 
http://www.ams.usda.gov/dairy.
    This regulatory action is in accordance with section 143 of the

[[Page 16031]]

Federal Agriculture Improvement and Reform Act of 1996, 7 U.S.C. 7253, 
(the Farm Bill) which required the Secretary of Agriculture (Secretary) 
to consolidate the existing 31 Federal milk marketing orders, as 
authorized by the AMAA, into between 10 and 14 orders. The Farm Bill 
further provided that the Secretary may address related issues such as 
the use of utilization rates and multiple basing points for the pricing 
of fluid milk and the use of uniform multiple component pricing when 
developing one or more basic formula prices for manufacturing milk. The 
Secretary was also directed to designate the State of California as a 
Federal milk order if California dairy producers petition for and 
approve such an order. Finally, the Farm Bill specified that the 
Department of Agriculture use informal rulemaking to implement these 
reforms.
    The Farm Bill required that a proposed rule be published by April 
4, 1998, and all reforms of the Federal milk order program be completed 
by April 4, 1999. However, the Omnibus Consolidated and Emergency 
Supplemental Appropriations Bill, passed in October 1998, extended the 
time frame for implementing Federal milk order reform amendments from 
April 4, 1999, to October 1, 1999. The extension specified that the 
final decision, defined as the final rule for purposes of this 
legislation, be issued between February 1 and April 4, 1999, with the 
new amendments becoming effective on October 1, 1999. The legislation 
also provides that California has from the date of issuance of the 
final decision until September 30, 1999, to become a separate Federal 
milk marketing order.
    The final decision sets forth the consolidation of the current 31 
Federal milk orders into 11 orders. The marketing areas are: Northeast, 
Mideast, Upper Midwest, Central, Appalachian, Southeast, Florida, 
Southwest, Arizona-Las Vegas, Western, and Pacific Northwest. Several 
issues related to the consolidation of Federal milk orders are also 
addressed. The final decision contains a replacement for the current 
Class I price structure and the basic formula price (BFP). The final 
decision adopts a Class I price structure that uses the proposed Option 
1B price surface as modified to provide for better alignment of Class I 
prices and increases the differential level by 40 cents. The current 
BFP is replaced with a multiple component pricing system that derives 
component values from surveyed prices of manufactured dairy products. 
These changes set the stage for increasing efficiencies in supplying 
the milk needs of Class I markets and address concerns that the BFP is 
no longer a statistically significant measure of the value of 
manufacturing milk.
    The rule also classifies milk into four classes according to the 
products made from such milk. Milk used to produce defined fluid milk 
products is classified as Class I milk. Milk used to produce defined 
soft manufactured products is classified as Class II milk. Class III 
milk is milk used to produce cream cheese and defined hard manufactured 
cheeses, and Class IV milk is milk used to produce butter and all milk 
powders.
    The minimum monthly price for milk classified as Class I is equal 
to the Class I differential specified for each marketing order plus the 
Class I price mover announced on or before the 23rd day of the month 
preceding the month for which the price is being announced. The Class I 
price mover is equal to the higher result from the formulas used to 
establish Class III and Class IV prices using weighted average prices 
for manufactured products as published by the National Agricultural 
Statistics Service (NASS) for the most recent two weeks preceding the 
23rd of the month. Weekly prices are weighted by sales volumes reported 
by NASS.
    Finally, this rule expands Part 1000 to include provisions that are 
identical within each consolidated order to assist in simplifying the 
regulations. These provisions include the definitions of route 
disposition, plant, distributing plant, supply plant, nonpool plant, 
handler, other source milk, fluid milk product, fluid cream product, 
cooperative association, and commercial food processing establishment. 
In addition, the milk classification section, pricing provisions, and 
most of the provisions relating to payments have been included in the 
General Provisions. These changes adhere with the efforts of the 
National Performance Review--Regulatory Reform Initiative to simplify, 
modify, and eliminate unnecessary repetition of regulations. Unique 
regional issues or marketing conditions have been considered and 
included in each market's order provisions.
    In the summary of the initial RIA for the January 21, 1998, 
proposed rule, the economic impact of certain individual sections of 
the regulations were discussed that were considered to be economically 
significant. Not all of the changes contained in the proposed rule were 
considered economically significant. The sections individually 
addressed in the January 21st proposed rule were marketing area 
consolidation, the BFP, the Class I pricing structure and 
classification provisions. Since these are adopted together in the 
final decision, this analysis reviews the impacts of adopting all of 
the provisions simultaneously on the dairy industry. The analysis also 
reviews the impacts of adopting the provisions contained in the January 
21st proposed rule with two alternative Class I pricing structures.
    The final RIA and the final decision explain in detail the 
components adopted in the Federal order regulations and analyzed by the 
model. A review of the projected economic impacts of the final decision 
and the projected economic impacts of the alternatives that were 
considered on dairy producers, processors, consumers, and international 
trade follows. The projected impacts are compared to the baseline 
projections over a 6-year period from the years of 2000-2005. The 
baseline assumes that the Class III price would be the BFP, the Class 
II price would be the BFP plus 30 cents, each region's Class I price 
would be the BFP plus the current Class I differential and the Class 
III-a price would continue. The RIA details the impacts of the final 
decision and the other options considered on each current order, the 
Federal orders combined, the State of California, and the United 
States.
    The following table summarizes the impacts of adopting the newly 
consolidated orders and their specific provisions, including the Class 
I price structure adopted in this final decision. The table also 
provides data detailing the projected impacts of the consolidated 
orders and the specific provisions utilizing the two alternative Class 
I price structures--Location-Specific Differentials (Option 1A) and 
Relative-Value Specific Differentials (Option 1B). Since adopting new 
Federal milk order provisions affect both the regulated dairy industry 
and associated producers, as well as the unregulated and State 
regulated dairy industries, a comparison of the impacts both Federally 
and U.S.-wide are included where possible.

[[Page 16032]]



 Comparisons of Certain Impacts of Consolidated Order Changes Utilizing Three Price Structures on Federal Order
                                (Fed) and U.S. Data: 6-year Averages (2000-2005)1
----------------------------------------------------------------------------------------------------------------
                                                                                  Change from baseline
                                                                       -----------------------------------------
                                            Unit            Baseline        Final       Modified      Modified
                                                                          decision      option 1B     option 1A
----------------------------------------------------------------------------------------------------------------
Class I Diff. (Fed)..............  $/cwt................          2.56         -0.29         -0.69          0.04
Class I price (Fed)..............  $/cwt................         16.22         -0.19         -0.49          0.08
Class I price (U.S.).............  $/cwt................         16.26         -0.14         -0.38          0.06
All-Milk Price (Fed).............  $/cwt................         15.23         -0.02         -0.10          0.03
All-Milk Price (U.S.)............  $/cwt................         14.73          0.00         -0.05          0.04
Milk Marketings (Fed) 2..........  mil lbs..............    111,182.0           8.3        -130.8         149.0
Milk Marketings (U.S.)...........  mil lbs..............    165,142.2          15.2         -90.9         128.7
Class I use (Fed)................  mil lbs..............     46,955.7          42.0         106.7         -16.6
Class I use (U.S.)...............  mil lbs..............     58,782.2          37.7          98.8         -14.9
Cash Receipts (Fed) 3............  mil $................     16,944.5          -2.5        -128.4         104.9
Cash Receipts (U.S.) 4...........  mil $................     24,347.9           3.5         -89.9          77.0
Retail Price (Fed)...............  $/gal................  ............         -0.02         -0.04          0.01
Fluid Expend. (Fed)..............  mil $................      7,617.8         -80.2        -215.4          36.4
Fluid Expend. (U.S.).............  mil $................      9,562.0         -79.1        -209.7          31.3
Manufac. Expend. (Fed)...........  mil $................      9,326.7          77.7          87.0          68.5
Manufac. Expend. (U.S.)..........  mil $................     14,785.9          82.5         119.8          45.7
----------------------------------------------------------------------------------------------------------------
\1\ Includes the effects of the Class II, III, and IV pricing formulas.
\2\ Changes in the Final Decision and Modified Option 1A marketings do not include the additional milk from the
  Upper Midwest and Chicago Regional orders that is expected to be pooled under these options.
\3\ Cash receipts do not reflect the termination of the $0.15 per hundredweight transportation credit in the New
  York-New Jersey order and exclude the income from additional pooled milk in the consolidated Upper Midwest
  order for the Final Decision and Modified Option 1A.
\4\ Cash receipts do not reflect the termination of the $0.15 per hundredweight transportation credit in the New
  York-New Jersey order and exclude the income from additional pooled milk in the consolidated Upper Midwest
  order for the Final Decision and Modified Option 1A.

    As is evidenced by the summary table, the economic impacts 
resulting from the adoption of the final decision are minimal when 
compared to the total values included in the Federal order system and 
in the U.S. This is also true with the alternative options that were 
considered. Changes in the all-milk price, milk marketings, Class I 
use, and cash receipts all represent less than one percent of the total 
baseline projections. Although the total impacts are minimal from a 
national perspective, producers, processors, and consumers may 
experience a greater impact on a more localized level as is described 
in the RIA.
    The consolidation of Federal milk orders into 11 orders with the 
adopted price structure and all other provision modifications of the 
final decision best adheres to the requirements of the Farm Bill while 
fulfilling the objectives of the AMAA. The changes adopted in the final 
decision enhance the efficiencies of fluid milk markets while 
maintaining equity among processors of fluid milk selling in marketing 
order areas and among dairy farmers supplying the areas' fluid demands. 
The final decision provisions achieve this while having minor overall 
impacts on the Federal order system and on the U.S. dairy industry. 
Although both of the alternatives considered also have minimal impacts, 
the final decision best achieves economic efficiencies, equity, and 
program objectives.

Final Decision

    A brief review of the impacts that are projected to occur with the 
implementation of the final decision are:
    Producers. In general, producers in markets located in the western, 
southwestern, and northeastern areas of the U.S. may not fare as well 
as producers located in other parts of the country, as measured by the 
all-milk price and cash receipts from milk marketings. The average all-
milk price for the combined Federal order markets is expected to 
average $0.02 per hundredweight lower than the baseline. The average 
all-milk price is projected to increase in 13 current markets from 
$0.01 to $0.52 per hundredweight and decrease in 19 markets from $0.01 
to $0.50. One market is estimated to average unchanged. The average 
all-milk price throughout the entire U.S. is projected to remain 
unchanged. It is important to recognize that the all-milk price can be 
impacted considerably by the change in the Class I utilization due to 
consolidation and the necessary alignment of Class I prices within 
consolidated areas.
    Over the 2000-2005 period, gross cash receipts within the Federal 
order system are expected to increase an estimated $222.3 million 
primarily because of changes in transportation payments and the pooling 
of additional milk under the Federal order system. After adjusting for 
these changes, annual cash receipts are projected to decline from the 
baseline an average of $2.5 million during the 6-year period. With the 
baseline cash receipts averaging $16,944.5 million this represents a 
very insignificant reduction. Fifteen markets are projected to have 
increases with 18 markets projected to have decreases.
    Processors. Since the final decision is expected to have little 
effect on where milk is produced, little impact is expected on fluid 
milk processors or manufacturers of dairy products. Impacts on fluid 
milk processors will likely result from changes in the minimum Class I 
and Class II prices that are the handler's obligation under the Federal 
order system. Fluid processors in 14 of the current Federal order 
markets will experience increased differentials, while processors in 17 
of the markets will see decreases. Fluid processors in two markets will 
see no change. The estimated weighted average Class I differential for 
all current Federal order markets would decrease $0.29 per 
hundredweight. The all-market average Federal order Class I price would 
decrease $0.19 per hundredweight when compared to the baseline during 
the years of 2000-2005. The value of manufacturing milk would be 
increased, on average, $82.5 million per year during the six-year 
period.
    Consumers. Since adoption of the final decision is projected to 
result in a slight decrease in the average Class I

[[Page 16033]]

price for the years of 2000-2005, it is expected that average retail 
prices will decrease about $0.02 per gallon. On an individual order 
basis, the changes in the average retail price per gallon may range 
from an increase of $0.06 to a decrease of $0.09. Although consumers 
will be spending less on fluid milk products, consumption is projected 
to remain relatively unchanged.
    International Trade. Adopting the final decision is not expected to 
have a significant impact on domestic butter and nonfat dry milk prices 
and therefore, little change in international trade is expected. 
International trade of raw milk and fluid milk products between the 
United States, Mexico, and Canada should be unaffected. However, the 
increase in the Class II price could negatively affect the Mexican 
market for those products.

Other Alternatives

    Although implementation of the consolidated orders with either the 
Option 1B or Option 1A price surface would still result in less than a 
projected one percent change in overall Federal order and U.S. prices, 
cash receipts, and marketings, these two alternatives do not promote 
market efficiencies, equity or program objectives as well as the 
provisions adopted and would not result in the most preferable 
allocation of resources over time. A brief review of the impacts that 
were projected to occur with the implementation of these two 
alternatives are:
    Producers. In general, Option 1B would have reduced producer income 
in total and would have reduced the proportion of the Class I value 
represented in Federal order pools. Mainly producers located in the 
Upper Midwest and Florida areas would have benefitted while producers 
throughout the rest of the U.S. would have been negatively impacted. 
The all-milk price for all Federal order markets combined was expected 
to average $0.10 per hundredweight lower than the baseline during the 
years of 2000-2005. The average all-milk price was projected to 
increase in 10 current markets from $0.06 to $0.42 per hundredweight 
and decrease in 23 markets from $0.01 to $0.61 during this time period. 
This would have resulted in changing the gross cash receipts on an 
individual order basis during this period ranging from an annual 
average decrease of $48.4 million to an increase of $38.5 million. 
Overall, gross cash receipts would have averaged $128.4 million less 
than currently received.
    Under Option 1A the all-milk price for all Federal order markets 
combined was expected to average $0.03 per hundredweight higher than 
the baseline during the years of 2000-2005. The average all-milk price 
was projected to increase in 15 current markets from $0.01 to $0.34 per 
hundredweight and decrease in 18 markets from $0.01 to $0.66. These 
changes would have resulted in changing the gross cash receipts on an 
individual order basis during this period ranging from an annual 
average decrease of $10.3 million to an increase of $48.4 million. 
Overall, gross cash receipts would have averaged $104.9 million higher 
than currently received.
    Processors. Since Option 1B would have lowered the Class I 
differentials by a weighted average of $0.69 per hundredweight, the 
all-market average Class I price charged to fluid handlers would have 
declined by $0.49 per hundredweight when compared to the baseline 
during the years of 2000-2005. Lower Class I prices would have been 
expected to increase sales of fluid milk within the Federal order 
system by an annual average of 106.7 million pounds, representing less 
than a one percent increase. Similar responses would have occurred 
throughout the U.S. Fluid processors would have benefitted from lower 
fluid milk prices and increased fluid milk sales.
    Option 1A would have increased Class I differentials by a weighted 
average of $0.04 per hundredweight resulting in the all-market average 
Class I price charged to fluid handlers increasing by $0.08 per 
hundredweight when compared to the baseline during the years of 2000-
2005. Since the impact of the increased Class I prices would have 
resulted in an insignificant decrease in fluid milk consumption within 
the Federal order system, a decrease of 16.6 million pounds, and within 
the U.S., a decrease of 14.9 million pounds, this option would have 
little expected overall effect on processors or manufacturers of dairy 
products.
    Consumers. Since adoption of Option 1B was projected to result in a 
decrease in the average Class I price for the period 2000-2005, it was 
expected that retail prices would decrease an average of $0.04 per 
gallon. On an individual order basis the changes in the average retail 
price per gallon would have ranged from an increase of $0.03 to a 
decrease of $0.12. As a result of the overall price decrease, consumers 
would have spent less on fluid milk products while increasing 
consumption. The increase in fluid consumption was estimated to be less 
than one percent.
    Since adoption of Option 1A was projected to result in an increase 
in the average Class I price for the period of the years 2000-2005, it 
was expected to minimally increase retail prices an average of $0.01 
per gallon. On an individual order basis the changes in the average 
retail price per gallon would have ranged from an increase of $0.05 to 
a decrease of $0.01. As a result of the price increase, consumers would 
have spent slightly more on fluid milk products and purchased about the 
same amount of milk for fluid use.
    International Trade. Options 1B or 1A were not expected to have a 
significant impact on domestic butter and nonfat dry milk prices and 
therefore, little change in international trade would have resulted. 
International trade of raw milk and fluid milk products between the 
United States, Mexico, and Canada would have been unaffected.
    In response to the final decision, the Food and Nutrition Service 
updated the analysis on the impacts of Federal Order reform provisions 
on Food and Nutrition Service programs, participants, and administering 
institutions. The updated report analyzes the potential impacts of the 
milk order reform pricing provisions contained in the final decision on 
the Food Stamp Program, the Women, Infants, and Children Program, and 
the National School Lunch and Breakfast Programs. The report also 
analyzes impacts of adopting either of the alternative Class I price 
structure options. The report indicates that adoption of the final 
decision provisions, as well as either of the alternatives considered, 
will have minimal economic impact on these programs. This report is 
included in the final RIA appendix.
    The impacts of the provisions adopted in the final decision or 
either of the alternatives considered are minimal when compared to the 
total marketings and revenue generated in the dairy industry both on a 
national and Federal order basis. However, neither of the alternative 
options considered would appear to improve market efficiencies or 
equity as well as adopting the provisions contained in the final 
decision. Based on the analyses completed, the final decision 
regulations have been tailored to impose the least burden on society 
while meeting regulatory objectives. In doing so, these regulations 
will replace current regulations and will not duplicate any current 
regulations that may exist.

Civil Rights Impact Analysis Executive Summary

    Pursuant to Departmental Regulation (DR) 4300-4, a Civil Rights 
Impact Analysis (CRIA) reviews the final

[[Page 16034]]

decision regarding reforms to the Federal Milk Marketing Order program 
to identify any provisions within the final decision with actual or 
potential adverse effects for minorities, women, and persons with 
disabilities.
    The CRIA includes descriptions of (1) the purpose of performing a 
CRIA; (2) the civil rights policy of the U.S. Department of Agriculture 
(USDA); and (3) basics of the Federal milk marketing order program are 
provided for background information. The civil rights impact analysis 
of Federal Order Reform meets the requirements prescribed by DR 4300-4. 
As part of the analysis, the extensive outreach efforts of USDA through 
the entire reform process and after the final decision is published are 
highlighted. Additionally, statistical detail is provided of the 
characteristics of the dairy producer and general populations located 
within the current and consolidated marketing areas.
    The analysis discloses no potential for affecting dairy farmers 
with specific characteristics differently than the general population 
of dairy farmers. All producers, regardless of race, national origin, 
or disability choosing to deliver milk to a Federal order regulated 
handler will receive the minimum blend price.
    Copies of the Civil Rights Impact Analysis can be obtained from 
Dairy Programs at (202) 720-4392; any Market Administrator office; or 
via the Internet at http://www.ams.usda.gov/dairy/.

The Regulatory Flexibility Act and the Effects on Small Businesses

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), the Agricultural Marketing 
Service (AMS) has considered the economic impact of the rule on small 
entities and has prepared this final regulatory flexibility analysis. 
The Regulatory Flexibility Act provides, in summary, that when 
preparing such analysis an agency shall address: The need for and 
objectives of the rule; summary of the significant issues raised in 
public comments, agency assessment of the issues raised, and changes 
made to the proposed rule based on these issues; the kind and number of 
small entities affected; the recordkeeping, reporting, and other 
requirements; and steps taken to minimize the economic impact on small 
entities.
    This regulatory action is in accordance with section 143 of the 
Federal Agriculture Improvement and Reform Act of 1996, 7 U.S.C. 7253, 
(the Farm Bill) which required the Secretary of Agriculture (Secretary) 
to consolidate the existing 31 Federal milk marketing orders, as 
authorized by the Agricultural Marketing Agreement Act of 1937 (AMAA), 
into between 10 and 14 orders. The Farm Bill further provided that the 
Secretary may address related issues such as the use of utilization 
rates and multiple basing points for the pricing of fluid milk and the 
use of uniform multiple component pricing when developing one or more 
basic prices for manufacturing milk. The Secretary was also directed to 
designate the State of California as a Federal milk order if California 
dairy producers petition for and approve such an order. Finally, the 
Farm Bill specified that the Department of Agriculture use informal 
rulemaking to implement these reforms.
    The Farm Bill required that a proposed rule be published by April 
4, 1998, and all reforms of the Federal milk order program be completed 
by April 4, 1999. However, the Omnibus Consolidated and Emergency 
Supplemental Appropriations Bill, passed in October 1998, extended the 
time frame for implementing Federal milk order reform amendments from 
April 4, 1999, to October 1, 1999. The extension specified that the 
final decision, defined as the final rule for purposes of this 
legislation, be issued between February 1 and April 4, 1999, with the 
new amendments becoming effective on October 1, 1999. The legislation 
also provides that California has from the date of issuance of the 
final decision until September 30, 1999, to become a separate Federal 
milk marketing order.
    The final decision sets forth the consolidation of the current 31 
Federal milk orders into 11 orders. Several issues related to the 
consolidation of Federal milk orders are also addressed. The final 
decision contains a replacement for the Class I price structure and the 
basic formula price. These changes set the stage for increasing 
efficiencies in supplying the milk needs of Class I markets and address 
concerns that the BFP is no longer a statistically significant measure 
of the value of manufacturing milk. The final decision also changes the 
classification of milk by (1) establishing Class IV provisions which 
would include milk used to produce nonfat dry milk, butter, and other 
dry milk powders; (2) reclassifying eggnog; and (3) making other minor 
classification changes. These changes recognize the position of butter 
and milk powders as residual products that balance the supply of milk 
with overall demand, and equalize the cost of competing products. 
Finally, this final decision expands part 1000 to include provisions 
that are identical within each consolidated order to assist in 
simplifying the regulations. These provisions include the definitions 
of route disposition, plant, distributing plant, supply plant, nonpool 
plant, handler, other source milk, fluid milk product, fluid cream 
product, cooperative association, and commercial food processing 
establishment. In addition, the milk classification section, pricing 
provisions, and some of the provisions relating to payments have been 
included in the General Provisions. These changes adhere with the 
efforts of the National Performance Review--Regulatory Reform 
Initiative to simplify, modify, and eliminate unnecessary repetition of 
regulations. Unique regional issues or marketing conditions have been 
considered and included in each market's order provisions.
    The purpose of the Regulatory Flexibility Act is to fit regulatory 
actions to the scale of business subject to the actions in order that 
small businesses are not unduly or disproportionately burdened. To 
accomplish this purpose, it first is necessary to define a small 
business. According to the Small Business Administration's definition 
of a ``small business,'' a dairy farm is a ``small business'' if it has 
an annual gross revenue of less than $500,000 and a handler 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.
    Based on 1996 data, USDA identified approximately 80,000 of the 
83,000 dairy producers (farmers) that had their milk pooled under a 
Federal order as small businesses. Thus, small businesses represent 
approximately 96 percent of the producers in the United States. By 1997 
the total number of dairy producers that had their milk pooled under a 
Federal order had declined to about 79,000. It is estimated that nearly 
76,000 are small businesses.
    During 1997, 78,590 dairy farmers delivered over 105.2 billion 
pounds of milk to handlers regulated under the milk orders. This volume 
represents 68 percent of all milk marketed in the U.S.

[[Page 16035]]

and 70 percent of the milk of bottling quality (Grade A) sold in the 
country. The value of the milk delivered to Federal milk order handlers 
at minimum order blend prices was nearly $14.0 billion. Producer 
deliveries of milk used in Class I products (fluid milk products) 
totaled 44.9 billion pounds-- 42.7 percent of total Federal order 
producer deliveries. More than 200 million Americans reside in Federal 
order marketing areas--77 percent of the total U.S. population.
    On the processing side, there are over 1,200 individual plants 
associated with Federal orders, and of these plants, approximately 700 
qualify as ``small businesses'' representing about 55 percent of the 
total. During October 1997, there were more than 485 fully regulated 
handlers (306 distributing plants of which 111 were small businesses 
and nearly 180 supply plants of which about 50 percent were small 
businesses), 51 partially regulated handlers of which 28 were small 
businesses and 111 producer-handlers of which all were considered small 
businesses for purposes of this final RFA, submitting reports under the 
Federal milk marketing order program.
    The Federal milk order program is designed to set forth the terms 
of trade between buyers and sellers of fluid milk. A Federal order 
enforces the minimum price that processors (handlers) in a given 
marketing area must pay producers for milk according to how it is 
utilized. A Federal order further requires that the payments for milk 
be pooled and paid to individual dairy producers or cooperative 
associations on the basis of a uniform or average price. It is 
important to note that a Federal milk order, including the pricing and 
all other provisions, only becomes effective after approval, through a 
referendum, by dairy producers associated with the order.
    Development of this final decision began with the premise that no 
additional burdens should be placed on the industry as a result of 
Federal order consolidation and reform. As a step in accomplishing the 
goal of imposing no additional regulatory burdens, a review of the 
current reporting requirements was completed pursuant to the Paperwork 
Reduction Act of 1995 (44 U.S.C. Chapter 35). In light of this review, 
it was determined that this final decision would have little impact on 
reporting, recordkeeping, or other compliance requirements because 
these would remain almost identical to the current Federal order 
program. No new forms are required; however, some additional reporting 
will be necessary in the orders that are adopting multiple component 
pricing if the current orders do not contain these provisions. Overall, 
there would be slight change in the burdens placed on the dairy 
industry.
    There are two principal reporting forms for handlers to complete 
each month that are needed to administer the Federal milk marketing 
orders. The forms are used to establish the quantity of milk used and 
received by handlers, the pooling status of the handler, the class-use 
of the milk used by the handler, the butterfat content and amounts of 
other components of the milk. This information is used to compute the 
monthly uniform price paid to producers in each of the markets. 
Handlers in the marketing areas adopting multiple component pricing 
will be required to complete additional information regarding the 
components of the milk and to assure that proper payments are made to 
producers. This information is necessary to establish the values of 
milk on the basis of milk components and to assure that producers are 
paid correctly. Many handlers already collect and report this 
information.
    This rule does not involve additional information collection that 
requires clearance by the Office of Management and Budget beyond the 
currently approved information collection. The primary sources of data 
used to complete the forms are routinely used in most business 
transactions. Forms require only a minimal amount of information which 
can be supplied without data processing equipment or a trained 
statistical staff. Thus, the information collection and reporting 
burden is relatively small. Requiring the same reports for all handlers 
does not significantly disadvantage any handler that is smaller than 
the industry average.
    New territory, or pockets of unregulated territory within and 
between current order areas has been included in the consolidated 
marketing areas where such expansion will not have the effect of fully 
regulating plants that are not now regulated. The addition of these 
areas benefits regulated handlers by eliminating the necessity of 
reporting sales outside the Federal order marketing area for the 
purpose of determining pool qualification. Where such areas can be 
added to a consolidated area without having the effect of causing the 
regulation of any currently-unregulated handler, they are added.
    Handlers not currently fully regulated under Federal orders may 
become regulated for two main reasons: first, in the process of 
consolidating marketing areas, some handlers who currently are 
partially regulated may become fully regulated because their sales in 
the combined marketing areas meet the pooling standards of a 
consolidated order area. Second, a previously unregulated area in New 
York, Vermont, New Hampshire and Massachusetts was added on the basis 
of supporting information. As a result, previously unregulated handlers 
would become fully regulated. Because of these two reasons, 11 
additional plants are expected to become fully regulated under the 
program. Of these 11 plants, it is estimated that 5 are small 
businesses that would need to comply with the reporting, recordkeeping, 
and compliance requirements. The completion of these reports will 
require a person knowledgeable about the receipt and utilization of 
milk and milk products handled at the plant. This most likely will be a 
person already on the payroll of the business such as a bookkeeper, 
controller or plant manager. The completion of the necessary reporting, 
recordkeeping, and compliance requirements does not require any highly 
specialized skills and should not require the addition of personnel to 
complete. In fact, much of the information that handlers report to the 
market administrator is readily available from normally maintained 
business records, and as such, the burden on handlers to complete these 
recordkeeping and reporting requirements is minimal. In addition, 
assistance in completing forms is readily available from market 
administrator offices. A description of the forms and a complete 
Paperwork Reduction Act analysis follows this section.
    No other burdens are expected to fall upon the dairy industry as a 
result of overlapping Federal rules. The regulations contained in this 
final decision do not duplicate, overlap or conflict with any existing 
Federal rules.

Public Comments

    More than 1,000 comments were received from interested parties that 
specifically stated or documented they were small businesses. However, 
this number may not be fully representative of the number of small 
businesses that actually submitted comments because a majority of 
commenters did not indicate their size. Of the comments submitted, the 
majority were received from dairy producers. The comments from the 
producers primarily addressed the issues of Class I pricing and 
consolidation.
    A few comments were received that specifically addressed the 
initial regulatory flexibility analysis (IRFA).

[[Page 16036]]

These comments also addressed the issues of Class I pricing and 
consolidation and further addressed the issue of producer-handler 
regulation. The Small Business Administration submitted views 
specifically addressing exempt plant status and requesting further 
analysis of the impact of consolidation on previously unregulated 
entities, if possible.
    Nearly all of the 1,000 comments addressed Class I pricing and 
discussed the impact of Option 1A or Option 1B on dairy producers' 
income. A majority of these comments supported Option 1A because it 
would maintain the revenue necessary to stay in business. Many 
commenters opposing Option 1B argued that the Class I differential 
decreases that would occur under this option would result in financial 
losses that would force many dairy farmers out of business. Comments 
filed by service providers such as feed and implement stores that 
claimed to be small businesses commented on the negative impact lower 
prices received by dairy producers had on surrounding community 
businesses. One commenter supporting Option 1A further stated that in 
order to comply with the purposes and objectives of the Regulatory 
Flexibility Act, as stated in the IRFA, a Class I price structure that 
avoids a burdensome financial impact on dairy farmers must be adopted.
    About 200 of the comments received from declared small businesses 
addressed consolidation issues. These comments focused on the impact of 
including or excluding currently-unregulated areas. A majority of the 
comments focused on the Northeast order and the inclusion or exclusion 
of the currently-unregulated territories in New York, Pennsylvania, and 
Maryland. Comments supporting the inclusion of currently-unregulated 
territory discussed the need to include this territory to prevent 
inequitable, unfair and disorderly marketing conditions. One supporting 
commenter noted that the expansion into unregulated areas would result 
in more small businesses becoming subject to Federal order regulation 
but the commenter did not believe that it would unduly impact their 
ability to compete. Commenters opposing the inclusion of currently-
unregulated Pennsylvania territory argued that producer returns would 
decline if handlers in this area were subject to Federal order 
regulations.
    A few comments were received addressing the extent of regulation 
applied to producer-handlers. One commenter, a small business producer-
handler, indicated that the combination of new definitions and 
classification of milk provisions will result in its regulation. The 
commenter argued that this effect is contrary to the IRFA that stated 
``no additional regulatory burdens should be placed on the industry'' 
and to the intent of the proposed rule that stated the changes were not 
intended to fully regulate any producer-handler that is currently 
exempt from regulation. Other commenters suggested that producer-
handlers should not be exempt from regulation if their route 
disposition of Class I products at wholesale exceeds 500,000 pounds per 
month or if they have retail sales other than at a retail establishment 
located on the premises of the producer-handler's plant. They argued 
that producer-handlers with route disposition above this limit cannot 
be considered small businesses and should be subject to regulation.
    After reviewing the public comments filed by small businesses in 
combination with updated marketing data and information and updated 
analyses, changes were made to the provisions contained in the proposed 
rule. Not all of the changes requested by small businesses were 
feasible but when changes were beneficial to small businesses without 
affecting the objectives of the rule, they were incorporated. The 
changes made to the proposed rule, based in part on small business 
comments, are discussed below by issue.

Consolidation

    The proposed rule advanced 11 consolidated Federal milk marketing 
orders. The marketing areas of these orders were expanded to include 
currently-unregulated areas if this did not result in the regulation of 
any currently-unregulated handlers or was not an area in which handlers 
are subject to minimum Class I pricing provisions under State 
regulations. After reviewing the issue in light of the public comments 
and updating the initial analysis based on more recent marketing data, 
11 consolidated orders are adopted in the final decision, the same 
number as proposed in the January 21, 1998, rule, but with significant 
modifications being made to the marketing areas of the proposed 
Northeast and Western orders, and minor modifications to the marketing 
areas of the proposed Southeast, Mideast, Upper Midwest and Central 
orders. The final decision continues to omit currently-unregulated 
areas specified in the January 21st proposed rule and also omits 
currently-unregulated areas that comprise a significant distribution 
area for currently-unregulated handlers, some of which were proposed to 
be included in consolidated areas.
    Numerous comments were received from small businesses supporting 
the inclusion of currently-nonregulated areas in the Northeast order. 
However, after considering the requirements of the Farm Bill, the 
consolidation of the existing orders does not necessitate expansion of 
the consolidated orders into unregulated areas or areas in which 
handlers are subject to minimum Class I pricing under State regulation, 
especially when the states' Class I prices exceed or equal those that 
would be established under Federal milk order regulation. Such 
regulation could have the effect of reducing returns to producers 
already included under State regulation without significantly affecting 
prices paid by handlers who compete with Federally-regulated handlers.
    Two changes made to the prior proposed rule as a result of comments 
submitted by small businesses related to the exclusion of territory in 
the consolidated marketing areas. These changes occurred in the Mideast 
and Central orders. The changes ensure that two currently-unregulated 
handlers maintain this status.
    One change occurred in the Mideast order. Based on a comment 
received from Toft Dairy, Incorporated (Toft Dairy), a small business 
dairy processor, and Sandusky County Milk Producers Association, a 
dairy cooperative representing dairy farmers classified as small 
businesses, one partial and three entire counties in north Central Ohio 
are excluded from the Mideast marketing area. These areas are currently 
unregulated. The proposed rule had suggested including this currently-
unregulated territory in the Mideast marketing area which would have 
resulted in the regulation of Toft Dairy. Since the intent of the 
consolidating marketing orders was not to cause the regulation of any 
currently-unregulated handler, these areas have been removed from the 
marketing area of the Mideast order. Toft Dairy will remain an 
unregulated processor unless its sales area changes significantly.
    Another change occurred in the Central order. Based on a comment 
received from Central Dairy, Incorporated (Central Dairy), a small 
business dairy processor, six currently-unregulated counties in 
northeast Missouri that were proposed to be included in the Central 
order are excluded from the marketing area. These areas are currently 
unregulated. Central Dairy opposed inclusion of these six counties 
because the handler plans to expand its distribution into this

[[Page 16037]]

area. Again, since the intent of consolidating marketing orders was not 
to cause the regulation of any currently-unregulated handler these 
areas have been removed from the marketing area of the Central order.

Producer-Handlers

    Another change to the proposed rule resulting from public comments 
involves producer-handlers. Since the intent of the proposed rule was 
not to increase regulation to any currently-unregulated producer-
handlers, minor modifications have been made to the classification of 
milk provisions applicable to all orders and to the producer-handler 
definition in certain individual orders.
    A comment submitted by Promised Land Dairy, a producer-handler 
defined as a small business, stated that the change in the 
classification of milk provisions combined with other order changes 
would result in their regulation. Promised Land Dairy argues that the 
addition of the words ``or acquired for distribution'' in 
Sec. 1000.44(a)(3)(iv) would force milk delivered by a producer-handler 
to any store associated with a regulated handler to be sold at no more 
than the Class III price because it would be considered a receipt from 
a producer-handler. Promised Land Dairy argued that this would force 
producer-handlers to become fully regulated. In addition, they argued 
that changes made to the Southwest order's producer-handler definition 
are not warranted and would further result in the regulation of 
Promised Land Dairy.
    The changes in the proposed rule were not intended to fully 
regulate any producer-handler that is currently exempt from regulation. 
Producer-handlers have been exempt from the pricing and pooling 
provisions of the orders for several reasons. First, the care and 
management of the dairy farm and other resources necessary for own-farm 
production and the management and operation of the processing are the 
personal enterprise and risk of the owner. Second, typically producer-
handlers are small businesses that operate in a self-sufficient manner. 
Finally, producer-handlers do not have an advantage as either producers 
or handlers so long as they are responsible for balancing their fluid 
milk needs and cannot transfer balancing costs to other market 
participants.
    While the provisions objected to by Promise Land Dairy would not 
directly regulate this entity, they could have a very serious negative 
economic impact on its continued operations as a producer-handler. 
Because it is still the intent of the Department to allow currently-
unregulated producer-handlers to maintain this status, changes have 
been made to Sec. 1000.44(a)(3)(iv) in the general provisions by 
removing the words ``or acquired for distribution'' and re-adding these 
words to Sec. 1124.44, and changes have been made to the individual 
order definitions of producer-handlers. Hence, no changes are made in 
the final decision to regulate a producer-handler that is currently 
exempt from regulation.
    Additional comments submitted by small businesses regarding 
producer-handlers advocated implementing a limitation on the exemption 
of producer-handlers based on size. The commenters suggested that the 
producer-handler exemption should be limited to those whose Class I 
route disposition is 500,000 pounds or less, or whose entire Class I 
disposition of fluid milk is made as retail sales from a retail 
establishment located on the premises of the producer-handler's 
processing plant.
    Since the intent of the final decision is not to regulate any 
currently-unregulated producer-handlers, these requests have been 
denied. A review of October 1997 producer-handler route disposition 
data indicates that if a 500,000 pound Class I route disposition limit 
were implemented, 20 producer-handlers out of 111 producer-handlers, 
would become regulated. The Department's reasons for exempting 
producer-handlers as discussed previously have not changed and the 
intent of this rule is not to make changes to regulate currently-
unregulated producer-handlers regardless of size. Consequently, these 
suggested changes have not been included in the final decision.

Class I Price Structure

    Another change to the proposed rule, resulting in part from the 
public comments received, involves the Class I price structure. In the 
proposed rule the Department advanced two main price options--1A and 
1B. The Department indicated a preference for Option 1B because it was 
more market-oriented. However, the Department recognized in the 
proposed rule that Option 1B would result in lower Class I prices and 
lower blend prices which would have a significant economic impact on 
small businesses, particularly producers. To lessen the impact, three 
phase-in program options were proposed to be adopted in conjunction 
with Option 1B. The objective of the phase-in programs was to provide 
dairy producers and processors the opportunity to adjust marketing 
practices to adapt to more market-determined Class I prices.
    A majority of the public comments received from small businesses 
supported Option 1A. Many of the commenters opposing Option 1B 
indicated that the price levels established under this price structure 
would be significantly lower than present levels, and as a result, 
they--primarily dairy producers--would be forced out of business. Of 
the commenters supporting Option 1B, few supported the adoption of a 
phase-in program.
    Option 1B was preferred by the Department because it would move the 
dairy industry into a more market-determined pricing system. 
Establishing a national Class I price structure based on results from 
the U.S. Dairy Sector Simulator model,11 developed and 
administered by Cornell University, may increase market efficiencies in 
the dairy industry and lowering the differentials would allow marketing 
conditions to have a greater impact on actual Class I prices paid to 
producers who service the Class I market. The Department recognized 
that this would impact small businesses, both producer and processors, 
because less of the actual value of Class I milk would be regulated. In 
the proposed rule the Department stated the following:
---------------------------------------------------------------------------

    \11\ The U.S. Dairy Sector Simulator model is used to evaluate 
the geographic or ``spatial'' value of milk and milk components 
across the U.S. under the assumption of globally efficient markets. 
A more detailed description of the model is contained in the 
decision.

    ``Smaller, less efficient producers would likely have a greater 
responsibility to bargain with processors for over-order premiums 
that adequately cover their costs. With processors less likely to 
face similar raw product costs, less efficient small processors may 
have to negotiate and/or sustain over-order price levels necessary 
to attract and maintain a sufficient supply of milk. Large 
businesses, both producers and processors, may be in a better 
---------------------------------------------------------------------------
competitive position to do this.'' (63 FR 4912)

    After reviewing the public comments and updating marketing data and 
analyses of Option 1A and Option 1B, the Department adopted a Class I 
price structure that provides greater structural efficiencies in the 
assembly and shipment of milk and dairy products. The adopted Class I 
pricing structure establishes a price surface that utilizes USDSS model 
results adjusted for all known plant locations and establishes 
differential levels that will result in prices that generate sufficient 
revenue to assure an adequate supply of milk. The differential levels 
will better maintain equity by raising the level 40 cents per 
hundredweight higher than the level proposed in Option 1B. The higher 
differential level reduces the likelihood

[[Page 16038]]

of class-price inversions, where the Class I prices are below the 
manufacturing milk prices for the month. Updated analysis conducted by 
the Interagency Dairy Analysis Team in the final Regulatory Impact 
Analysis 12 indicates that increasing the differential level 
lessens the economic impact of moving toward more market-orientation on 
small businesses.
---------------------------------------------------------------------------

    \12\ Copies of the Regulatory Impact Analysis can be obtained 
from Dairy Programs at (202) 720-4392, any Market Administrator 
office, or via the Internet at http://www.ams.usda.gov/dairy.
---------------------------------------------------------------------------

Exempt Plant Limits

    The Office of the Chief Counsel for Advocacy (Office of Advocacy) 
of the U.S. Small Business Administration submitted views on the IRFA 
pursuant to its authority under the Regulatory Flexibility Act, 5 
U.S.C. 601, as amended by the Small Business Regulatory Enforcement 
Fairness Act, Pub. L. 104-121, 110 Stat. 866 (1996). With regard to the 
impact of the order consolidation and pricing formulae, the Office of 
Advocacy stated that these issues should be left to the regulated 
community and the Department. The Office of Advocacy did comment that a 
system that ``best resembles the free market and imposes the least 
burden on the industry would be the best alternative.''
    The Office of Advocacy requested an explanation of how the 150,000 
pound handler exemption was derived and a determination of whether this 
exemption could be increased. They questioned whether a greater number 
of small entities would benefit from an increase in the limit. The 
Office of Advocacy further requested additional analysis on the impact 
of the consolidation of orders on previously unregulated entities, if 
possible.
    The 150,000 pound handler exemption was determined after reviewing 
provisions currently contained in the Federal milk marketing orders. 
The 150,000 pound exemption was the highest level currently utilized, 
with some orders containing no such exemption. A review of the impact 
of this exemption level on distributing plants that were fully 
regulated in October 1997 indicated that 15 plants, 14 of which are 
small businesses, would become exempt from regulation based on this 
provision. In addition, five partially-regulated plants, four of which 
are small businesses, would also become exempt. No public comments were 
received addressing this issue.
    Federal milk order regulations must balance the interests of small 
business dairy producers versus small business dairy processors. 
Although only processors are regulated under Federal milk orders, 
producers receive benefits from the regulations. Thus, whenever dairy 
processors are exempt from Federal order regulations they are not 
required to pay dairy producers minimum Federal order prices. Exempting 
processors from regulation directly impacts dairy producers.
    Based on October 1997 data, a review of the impacts of increasing 
the exemption levels on processors was completed. As expected, 
increasing the level would allow additional processors to become 
exempt. In October 1997, 54 handlers had route disposition equal to or 
less than 150,000 pounds. An additional 57 handlers had route 
disposition between 150,000 to 1,000,000 pounds and 327 handlers had 
route disposition greater than 1 million pounds.
    Although it may appear that increasing the exemption level would 
not result in exempting many additional plants, these plants receive 
milk from a significant number of producers, a majority of whom are 
small businesses. In addition, contrary to the intent of benefitting 
small businesses by increasing the exemption level, more handlers that 
are considered large businesses could become exempt from regulation. 
Implementing the 150,000 pound level results in two large businesses 
currently regulated (one fully-regulated and one partially-regulated) 
becoming exempt plants. When more large businesses become exempt it not 
only impacts producers, but also impacts other regulated handlers.
    In an attempt to maintain a balance between the interests of both 
small handlers and small dairy producers, the 150,000 pound exemption 
is maintained. Based on previous experience, the exemption of plants of 
this size poses no economic threat to the order's regulated handlers.

Minimization of Significant Economic Impacts on Small Businesses

    The Department developed the final decision aware of the impacts of 
its adoption on small businesses, both dairy producers and processors. 
In the final decision, the Department has minimized the significant 
economic impacts of these regulations on small entities to the fullest 
extent reasonably possible while adhering to the stated objectives. The 
Department reviewed the regulatory and financial burdens resulting from 
these regulations and determined, to the fullest extent possible, the 
impact on small businesses' abilities to compete in the market place. 
The Department reviewed the regulations from both the small producer 
and small processor perspectives attempting to maintain a balance 
between these competing interests.
    The Farm Bill mandated that the current 31 orders be consolidated 
into between 10 to 14 orders. The Farm Bill also specified that other 
issues could be addressed. Eleven orders are adopted in the final 
decision as well as a new Class I price structure, a basic formula 
price replacement, classification of milk provisions, and the 
establishment of identical provisions in all orders where possible. The 
objectives of the final decision are (1) to comply with the 
requirements of the Farm Bill and (2) to make other changes in order 
provisions consistent with the goals and requirements of the AMAA. The 
focus of these changes is to enhance the efficiencies of fluid milk 
markets while maintaining equity among processors of fluid milk selling 
in marketing order areas and among dairy producers supplying the areas' 
fluid demands.
    Federal milk order regulations do not disparately apply to small 
and large businesses. If a handler is regulated under a Federal milk 
order, the provisions of that order apply the same to all handlers 
regardless of size. Likewise, if a producer's milk is associated with a 
Federal order pool, the same pricing and payment provisions will be 
utilized for all producers regardless of size. This final decision 
addresses several issues and adopts provisions that will continue to 
apply equally to all businesses, both large and small. The provisions 
adopted herein attempt to reduce the economic impact of Federal milk 
order regulations on small businesses to the most reasonable extent 
possible.
    After reviewing submitted comments and updating marketing data and 
analyses, changes were made to the provisions contained in the proposed 
rule. The IRFA discussed the projected impacts of the primary 
components of the proposed rule on small entities. These included 
consolidation, basic formula price, Class I price structure, and 
classification. Because Federal order provisions are interrelated, it 
was difficult to determine the overall impact of each component on 
small entities because the proposed rule contained two pricing options. 
To the fullest extent possible, such estimations were set forth in the 
proposed rule.
    Below is a description of the primary components contained in the 
final decision that were discussed in the IRFA. For comparison 
purposes, impacts resulting from each component

[[Page 16039]]

are briefly discussed. Because this rule establishes the specific 
provisions to be contained in Federal milk marketing orders, analysis 
of the impacts of the consolidated orders on small businesses is 
provided.

Consolidation

    The IRFA discussed three order consolidation options: (1) The 
consolidated marketing areas suggested in the December 1996 Initial 
Preliminary Report on Order Consolidation; (2) the consolidated 
marketing areas suggested in the May 1997 Revised Preliminary Report on 
Order Consolidation; and (3) the consolidated marketing areas suggested 
in the proposed rule. Determining the specific economic impacts of 
marketing area consolidation on handlers, producers, and consumers is 
difficult. The IRFA detailed the assumptions utilized to quantify the 
economic effects of consolidation. The IRFA included an analysis of 
each of the three consolidation options on the weighted average use 
value to determine the potential impacts of each option on producers. 
The IRFA also included projections regarding the number of handlers 
that would be regulated under the consolidation options and the number 
of these handlers that are small businesses.
    The consolidation of orders adopted in the final decision is a 
result of the examination and analysis of more recent marketing data in 
combination with the comments received on the proposed rule. This 
resulted in modifying significantly from the proposed rule the 
marketing areas of the Northeast and Western orders, and in making 
minor modifications to the marketing areas of the proposed Southeast, 
Mideast, Upper Midwest and Central orders. The consolidated orders 
adopted in the final decision are as follows (* denotes changes made 
from the proposed rule):
    *1. NORTHEAST--current marketing areas of the New England, New 
York-New Jersey and Middle Atlantic Federal milk orders, with the 
addition of: the contiguous unregulated areas of New Hampshire, 
northern New York and Vermont; and the non-Federally regulated portions 
of Massachusetts. *The Western New York State order area (ten entire 
and 5 partial western New York counties) proposed to be included in the 
expanded Northeast order area has been omitted.
    2. APPALACHIAN--Current marketing areas of the Carolina and 
Louisville-Lexington-Evansville (minus Logan County, Kentucky) Federal 
milk orders plus the marketing area of the former Tennessee Valley 
order, with the addition of 21 currently-unregulated counties in 
Indiana and Kentucky.
    3. FLORIDA--current marketing areas of the Upper Florida, Tampa 
Bay, and Southeastern Florida Federal milk orders.
    *4. SOUTHEAST--current marketing area of the Southeast Federal milk 
order, plus 1 county from the Louisville-Lexington-Evansville Federal 
milk order marketing area; plus 11 northwest Arkansas counties and 22 
entire Missouri counties that currently are part of the Southwest 
Plains marketing area; plus 6 Missouri counties that currently are part 
of the Southern Illinois-Eastern Missouri marketing area; plus 16 
currently unregulated southeast Missouri counties (including 4 that 
were part of the former Paducah marketing area); plus 20 currently-
unregulated Kentucky counties (including 5 from the former Paducah 
marketing area).
    *A partial Missouri county that has been part of the Southwest 
Plains marketing area will become completely unregulated.
    *5. MIDEAST--current marketing areas of the Ohio Valley, Eastern 
Ohio-Western Pennsylvania, Southern Michigan and Indiana Federal milk 
orders, plus Zone 2 of the Michigan Upper Peninsula Federal milk order, 
and most currently-unregulated counties in Michigan, Indiana and Ohio. 
*One partial and 3 entire counties in north central Ohio are left 
unregulated, as they represent the distribution area of a currently-
partially regulated distributing plant (Toft Dairy in Sandusky, Ohio).
    *6. UPPER MIDWEST--current marketing areas of the Chicago Regional, 
Upper Midwest, Zones I and I(a) of the Michigan Upper Peninsula Federal 
milk orders, and unregulated portions of Wisconsin. *The Iowa Federal 
order marketing area portion of one Illinois county is added to the 
consolidated Upper Midwest marketing area and the Chicago Regional 
portion of another Illinois county is removed and added to the 
consolidated Central area.
    *7. CENTRAL--current marketing areas of the Southern Illinois-
Eastern Missouri, Central Illinois, Greater Kansas City, Southwest 
Plains, Eastern Colorado, Nebraska-Western Iowa, Eastern South Dakota, 
Iowa (* less the portion of an Illinois county that will become part of 
the consolidated Upper Midwest area) and *Western Colorado Federal milk 
orders, * plus the portion of an Illinois county currently in the 
Chicago Regional Federal order area, minus 11 northwest Arkansas 
counties and 1 partial and 22 entire Missouri counties that are part of 
the current Southwest Plains marketing area, minus 6 Missouri counties 
that are part of the current Southern Illinois-Eastern Missouri 
marketing area, plus 54 currently-unregulated counties in Kansas, 
Missouri, Illinois, Iowa, Nebraska and Colorado, plus 8 counties in 
central Missouri *(six fewer than in the proposed rule) that are not 
considered to be part of the distribution area of an unregulated 
handler in central Missouri, *plus 7 currently unregulated Colorado 
counties located between the current Western and Eastern Colorado order 
areas.
    8. SOUTHWEST--current marketing areas of Texas and New Mexico-West 
Texas Federal milk orders, with the addition of two currently-
unregulated northeast Texas counties and 47 currently-unregulated 
counties in southwest Texas.
    9. ARIZONA-LAS VEGAS--current marketing area of Central Arizona, 
plus the Clark County, Nevada, portion of the current Great Basin 
marketing area, plus eight currently-unregulated Arizona counties.
    *10. WESTERN--current marketing areas of the Southwestern Idaho-
Eastern Oregon and Great Basin Federal milk orders, minus Clark County, 
Nevada. *The Western Colorado order area, proposed to be included in 
the Western order area, is instead included in the consolidated Central 
order.
    11. PACIFIC NORTHWEST--current marketing area of the Pacific 
Northwest Federal milk order plus 1 currently-unregulated county in 
Oregon.
    The consolidated orders presented herein reflect the most 
appropriate boundaries for the purpose of implementing the requirements 
of the Farm Bill. These orders attempt to avoid extending regulation to 
handlers whose primary sales areas are outside current Federal order 
marketing areas and who are not subject to Federal order regulation. 
These orders also minimize the regulatory burden placed on handlers.
    Based on October 1997 data, it is projected that 306 distributing 
plants will be fully regulated and 32 distributing plants will be 
exempt. The number of fully-regulated small businesses will be 111. The 
number of fully-regulated small businesses is down from 164, a 32 
percent decline from the proposed rule. This is mainly a result from 
either large business acquisitions of these small businesses or because 
they have gone out of business. Two small businesses that are currently 
unregulated will become regulated and, as mentioned previously, 14 
fully regulated and four partially-regulated small businesses will 
become exempt.

[[Page 16040]]

Basic Formula Price

    The IRFA reviewed the basic formula price replacement options 
considered. These options included pricing components based on their 
value in manufactured products which was proposed and is adopted in the 
final decision, economic formulas, futures markets, cost of production, 
competitive pay pricing, and pricing differentials only.
    The rule closely follows the pricing plan described in the proposed 
rule by replacing the current basic formula price (BFP) with a multiple 
component pricing system that derives component values from surveyed 
prices of manufactured dairy products. The adopted pricing system 
determines butterfat prices for milk used in Class II, Class III and 
Class IV products from a butter price; protein and other solids prices 
for milk used in Class III products from cheese and whey prices; and 
nonfat solids prices for milk used in Class II and Class IV products 
from nonfat dry milk product prices. The specific formulas used to 
calculate the prices are described in complete detail in the final 
decision.
    All market participants, both large and small, would be affected by 
the BFP replacement in the same manner. There would be no uneven impact 
on market participants on the basis of size. However, the existence of 
minimum order pricing serves to assure that large handlers pay no less 
for their milk than smaller entities, and that small producers receive 
at least the same minimum uniform price for the milk or components of 
milk they produce as large producers. Consumers can be assured that the 
prices generally charged for dairy products are prices that reflect, as 
closely as possible, the forces of supply and demand in the market.

Impact of Multiple Component Pricing Provisions on Small Entities

    As set forth in the proposed rule, seven of the 11 orders adopted 
in the final decision provide for milk to be paid for on the basis of 
its components--multiple component pricing (MCP).
    Five of the seven MCP orders also provide for milk values to be 
adjusted according to the somatic cell count of producer milk. The 
equipment needed for testing milk for its component content can be very 
expensive to purchase, and requires highly-skilled personnel to 
maintain and operate. The cost of infra-red analyzers ranges from just 
under $100,000 to $200,000. The infra-red machines that are used by 
most laboratories would test for total solids and somatic cells at the 
same time the butterfat and protein tests are done.
    No new report forms are needed under multiple component pricing; 
however, some additional reporting is necessary to enable handlers' 
values of milk to be determined on the basis of components, and to 
assure that producers are paid correctly. For the market administrators 
to compute the producer price differential, handlers would need to 
supply additional information on their currently-required monthly 
reports of receipts and utilization. In addition to the product pounds 
and butterfat currently reported, handlers would be required to report 
pounds of protein, pounds of other solids, and, in 5 of the orders, 
somatic cell information. This data would be required from each handler 
for all producer receipts, including milk diverted by the handler, 
receipts from cooperatives as 9(c) handlers (that is, the cooperative 
acts as a handler); and, in some cases, receipts of bulk milk received 
by transfer or diversion.
    Since producers would be receiving payments based on the component 
levels of their milk, the payroll reports that handlers supply to 
producers must reflect the basis for such payment. Therefore the 
handler would be required to supply the producer not only with the 
information currently supplied, but also, (a) the pounds of butterfat, 
the pounds of protein, and the pounds of other solids contained in the 
producer's milk, as well as the producer's average somatic cell count, 
and (b) the minimum rates that are required for payment for each 
pricing factor and, if a different rate is paid, the effective rate 
also. Many handlers already report this additional information. It 
should be noted that handlers already are required to report 
information relative to pounds of production, butterfat and rates of 
payment for butterfat and hundredweight of milk to the appropriate 
Market Administrator.
    Of over 74,000 producers whose milk was pooled in December 1996 
under 23 of the current orders that would be part of consolidated 
orders providing for multiple component pricing, the milk of 52,500 of 
these producers was pooled under 13 current orders that have MCP. 
Handlers in these markets already have incurred the initial costs of 
testing milk for its component content, and have made the needed 
transition to reporting the component contents of milk receipts on 
their handler reports to the market administrators, and on their 
reports of what they have paid producers.
    Of the remaining 21,750 producers who would be affected by MCP 
provisions under a Federal order (including an estimated 20,650 
producers qualifying as small businesses), the milk of approximately 
13,000, or 60 percent, currently is received by handlers who test or 
have the capability of testing for multiple components and, in many 
cases, somatic cells. Many of these handlers also report component 
results to the producers with their payments. Almost all of the 
producers whose milk currently is not being tested or paid for on the 
basis of components are located in the New England and New York-New 
Jersey marketing areas, which would be consolidated with the Middle 
Atlantic area into the Northeast order.
    Accommodation has been made to ameliorate handlers' expenses of 
testing producer milk for component content. As component pricing plans 
have been adopted under a number of the present Federal milk orders 
since 1988, the component testing needed to implement these pricing 
plans has been performed by the market administrators responsible for 
the administration of the orders involved for handlers who have not 
been equipped to make all of the determinations required under the 
amended orders. It has been made clear in the decisions under which 
these plans have been adopted that handlers who would find it unduly 
burdensome to obtain the equipment and personnel needed to accomplish 
the required testing may rely on the market administrators to verify or 
establish the tests under which producers are paid. As noted above, 
however, many handlers not now subject to MCP provisions under Federal 
orders have nevertheless already undertaken multiple component testing 
and payment programs.

Class I Price Structure

    The IRFA discussed two price structure options--location-specific 
differentials (Option 1A) and relative-value specific differentials 
(Option 1B). The IRFA set forth the projected impacts that these two 
price structures would have on producers and processors.
    The price structure adopted in this final decision resulted from an 
examination and review of more recent marketing data in combination 
with the comments received on the proposed rule. As discussed 
previously, the Department adopted a Class I price structure that 
provides greater structural efficiencies in the assembly and shipment 
of milk and dairy products. The adopted Class I pricing structure 
establishes a price surface that utilizes

[[Page 16041]]

USDSS model results adjusted for all known plant locations and 
establishes differential levels that will result in prices that 
generate sufficient revenue to assure an adequate supply of milk. The 
differential levels will better maintain equity by raising the level 40 
cents per hundredweight higher than the level proposed in Option 1B. 
The higher differential level reduces the likelihood of class-price 
inversions, where the Class I prices are below the manufacturing milk 
prices for the month. Updated analysis conducted by the Interagency 
Dairy Analysis Team in the final Regulatory Impact Analysis 
13 indicates that increasing the differential level lessens 
the economic impact of moving toward more market-orientation on small 
businesses.
---------------------------------------------------------------------------

    \13\ Copies of the Regulatory Impact Analysis can be obtained 
from Dairy Programs at (202) 720-4392, any Market Administrator 
office, or via the Internet at http://www.ams.usda.gov/dairy.
---------------------------------------------------------------------------

    The adopted Class I price structure reduces Class I differentials 
from current levels in 17 markets ranging from $0.04 per hundredweight 
in the Ohio Valley order to $1.18 per hundredweight in the Eastern 
Colorado order. Option 1B would have reduced differentials from current 
levels in 29 markets ranging from $0.01 in Central Illinois order to 
$1.58 in the Eastern Colorado order. The adopted Class I price 
structure will increase Class I differentials in 14 markets ranging 
from $0.08 in the Greater Kansas City order to $0.57 in the 
Southeastern Florida order and leaves two orders unchanged. Option 1B 
would have increased Class I differentials in only two markets--$0.15 
in Chicago Regional and $0.17 in Southeastern Florida--and would have 
left two orders unchanged. Option 1A would have increased differentials 
in 21 markets ranging from $0.01 per hundredweight in New England, New 
York-New Jersey, and Unregulated New York and New England to $0.50 in 
the Upper Midwest order, lowered differentials in seven markets from 
$0.04 in Ohio Valley to $0.18 in Eastern Colorado, and left four 
markets unchanged.
    Although the adopted Class I price structure will result in price 
changes that affect both large and small entities, this option best 
meets the objectives of the AMAA. The adopted Class I price structure 
recognizes that there are limitations in the extent that the 
marketplace can be relied upon to establish prices to producers that 
are equitable and reasonable given marketing conditions. Similarly, it 
recognizes that handlers will be assured a higher degree of price 
equity. The adopted Class I price structure best provides the 
incentives necessary for increased efficiency in the organization and 
distribution of the milk supply and dairy products.

Classification Provisions

    The IRFA discussed the classification of milk provisions contained 
in the proposed rule. The IRFA concluded that the classification of 
milk provisions would not have a significant economic impact on a 
substantial number of small entities. With two primary exceptions, 
these changes are adopted in the final decision. The two exceptions 
are: (1) Leaving cream cheese as a Class III product as currently 
classified, and (2) leaving the fluid milk product exclusion standard 
for products packaged in ``all-metal, hermetically-sealed containers'' 
as currently classified. In addition, other minor changes have been 
made including revising the shrinkage provisions to more closely 
resemble current provisions, re-adding the provision for milk that is 
dumped or used for animal feed, and classifying inventory of fluid milk 
products and fluid cream products in bulk form in Class IV. One 
additional change, as previously discussed in the comment section, was 
made to ensure that producer-handlers that are not currently regulated 
by the Federal order program will maintain this status. The provisions 
improve reporting and accounting procedures for handlers and provide 
for greater market efficiencies.

Conclusion

    A review of the impacts on small entities of consolidating the 
current Federal milk orders into 11 orders in conjunction with the 
basic formula price replacement, classification provisions, and the 
three different Class I price structure options, indicates that the 
provisions set forth in the final decision adhere to the mandates of 
the Farm Bill, and provides more market efficiencies while minimizing 
the impact of these regulations on small entities. Since the Federal 
order program serves to benefit dairy producers by regulating dairy 
processors through classified pricing, provisions must be established 
that maintain a balance between the interests of small dairy producers 
and processors. The provisions contained in the final decision best 
maintain this balance.
    The adoption of the consolidated orders and the provisions 
contained therein, including the adopted Class I price structure, will 
affect some small entities. Producers located in the western, 
southwestern, and northeastern areas may not fare as well as producers 
in other parts of the country when comparing the all-milk prices and 
cash receipts from milk marketings to current baseline projections. 
These producers represent approximately one-third of the total 
producers associated with Federal orders. Of these producers, about 30 
percent are considered small businesses. When compared to the baseline, 
over a 6-year period from the years of 2000-2005, the all-milk price 
for all Federal orders is expected to decrease an average of $0.02 per 
hundredweight. Changes in the all-market price on an individual order 
basis is projected to range from a decrease of $0.50 per hundredweight 
to an increase of $0.52 per hundredweight. Cash receipts are expected 
to increase by an estimated $222.3 million primarily because of changes 
in transportation payments and the pooling of additional milk. After 
adjusting for these changes, cash receipts are projected to decline 
from the baseline an average of $2.5 million during the 6-year period. 
With the baseline cash receipts averaging $16,944.5 million this 
represents a very small reduction.
    Since the final decision is projected to have minor effects on 
where milk is produced, little impact is expected on processors or 
manufacturers of dairy products. A majority of the fully-regulated 
processors associated with Federal orders will benefit from a decrease 
in Class I prices. About 209 processors, 74 of which are small 
businesses, would experience decreases ranging from $0.04 to $1.18 per 
hundredweight. About 69 processors, 22 of which are small businesses, 
located primarily in the Midwest and Florida areas, would experience 
Class I price increases ranging from $0.08 to $0.57 per hundredweight. 
About 28 processors, 14 of which are small businesses, would experience 
no change in Class I prices.
    Implementing the consolidated orders with the modified Option 1B 
price structure would have a significant impact on many small entities, 
both producers and processors. Producers located everywhere except the 
Midwest and Florida regions would have been negatively impacted. When 
compared to the baseline, over a 6-year period from the years of 2000-
2005, the all-milk price for all Federal orders was projected to 
annually average $0.09 per hundredweight lower, with individual order 
changes ranging from -$0.61 per hundredweight to $0.42 per 
hundredweight. Cash receipts were expected to annually average over 
$100 million less than the baseline, a .01 percent decrease.

[[Page 16042]]

    Most fully-regulated fluid processors would have benefitted from 
the decrease in Class I differentials. Lower differentials would have 
reduced Class I prices in 29 of the current markets from between $0.01 
to $1.58 per hundredweight. Two markets would have had increases of 
$0.15 and $0.17 per hundredweight in Class I prices. When compared to 
the baseline, the Class I price for all Federal orders was projected to 
average $0.49 per hundredweight lower over a 6-year period from the 
years of 2000-2005. Lower Class I prices would have been expected to 
increase U.S. sales of fluid milk by 98.8 million pounds annually. Most 
fluid processors would have benefitted from the lower fluid milk prices 
and increased fluid milk sales.
    Although most fluid processors would have benefitted from the 
consolidation of orders with the modified Option 1B price surface, only 
about one-third of the fully-regulated plants are small businesses and 
these plants may have been negatively impacted. With less of the actual 
value of fluid milk represented by the minimum prices established by 
Federal orders, more emphasis would have been placed on processors' and 
producers' abilities to negotiate and/or sustain over-order prices that 
might be necessary to maintain an adequate supply of milk. This would 
have resulted in less handler equity which could have placed small 
processors at a disadvantage in competing for a supply of milk.
    Adoption of this option would have resulted in large fluid 
processors benefitting from the regulations at the expense of more than 
50 percent of the total producers who would have experienced price 
decreases. Additionally, small processors would not have been assured 
equity in competing with large businesses for a milk supply. Hence, the 
Department determined the impact of consolidating orders with the 
modified Option 1B price structure would have had a more burdensome 
financial impact on a significant number of small businesses.
    Implementing the consolidated orders with the Option 1A price 
structure would have minimal overall impact on small businesses. When 
compared to the baseline, the all-milk price for all Federal orders was 
projected to average $0.03 per hundredweight higher, with individual 
order changes ranging from -$0.66 per hundredweight to $0.34 per 
hundredweight over a 6-year period from the years of 2000-2005. Cash 
receipts were expected to average over $482.1 million more than the 
baseline, a .02 percent increase. Nearly 50 percent of the producers 
would have benefitted from this modest increase.
    Since this option is projected to have minor effects on where milk 
is produced, little impact would have been expected on processors or 
manufacturers of dairy products. Option 1A would have increased Class I 
differentials by an average of $0.04 per hundredweight resulting in the 
all-market average Class I price charged to fluid handlers increasing 
by $0.08 per hundredweight when compared to the baseline during the 
years of 2000-2005. Processors would have experienced a Class I price 
increase in 21 of the current orders ranging from $0.01 to $0.50 per 
hundredweight, affecting nearly 190 fully-regulated processors of which 
about one-third are small businesses. Since the impact of the increased 
Class I prices would have resulted in an insignificant decrease in 
fluid milk consumption within the Federal order system, a decrease of 
17.1 million pounds, and within the U.S., a decrease of 14.9 million 
pounds, this option would have little expected effect on processors or 
manufacturers of dairy products.
    Implementing the consolidated orders with the Option 1A price 
structure would likely have minimized the financial impact of Federal 
milk orders on small entities. However, this option does not facilitate 
the movement towards a more efficient system of supplying fluid milk to 
meet market demands within the Federal order regulatory program. 
Although this option minimizes the impact of regulations on small 
businesses, it does not best meet the desired outcomes and objectives 
of the final decision.
    The provisions adopted in the final decision best fulfill the 
requirements of the AMAA while minimizing the regulatory burdens on 
small businesses. The consolidated orders, with the adopted Class I 
price structure and other provisions, ensures that the Federal order 
program will continue to establish and maintain market stability and 
orderly marketing conditions for milk. The adopted provisions will 
further provide that milk prices are established at levels high enough 
to generate sufficient revenue for producers to maintain adequate 
supplies of milk while providing equity to handlers. The provisions 
contained in the final decision do not unduly or disproportionately 
burden small businesses.

Paperwork Reduction Act of 1995

    The information collection requirements contained in this decision 
previously were approved by the Office of Management and Budget (OMB) 
pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35) 
under OMB control number 0581-0032, through September 30, 2001.
    The amendments set forth in the final decision do not contain 
additional information collections that require clearance by the OMB 
under the provisions of 44 U.S.C. Chapter 35. Following is a general 
description of the reporting and recordkeeping requirements, reasons 
for these requirements and an estimate of the annual burden on the 
dairy industry.
    Title: Report Forms Under Federal Milk Orders (From Milk Handlers 
and Milk Marketing Cooperatives).
    OMB Control Number: 0581-0032.
    Expiration Date of Approval: September 30, 2001.
    Type of Request: Extension and revision of a currently approved 
information collection.
    Abstract: Federal Milk Marketing Order regulations authorized under 
the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 
601-674), require milk handlers to report in detail the receipt and 
utilization of milk and milk products handled at each of their plants 
that are regulated by a Federal Order. The data are needed to 
administer the classified pricing system and related requirements of 
each Federal Order.
    Rulemaking amendments to the orders must be approved in referenda 
conducted by the Secretary.
    The terms of each of the current milk marketing orders are found at 
7 CFR parts 1001-1199; the terms of each of the proposed orders in this 
document are found at 7 CFR parts 1001-1135. The authority for 
requiring reports is found at 8c(5) and (7) and 8d of the Act. The 
current authority for requiring records to be kept is found in the 
general provisions at 7 CFR part 1000.5. In the final decision, this 
authority is found in the general provisions at 7 CFR part 1000.27. The 
Act also provides for milk marketing agreements, but there are none in 
effect.
    A Federal milk marketing order is a regulation issued by the 
Secretary of Agriculture that places certain requirements on the 
handling of milk in the area it covers. It requires that handlers of 
milk for a marketing area pay not less than certain minimum class 
prices according to how the milk is used. These prices are established 
under an order on the basis of evidence concerning the supply and 
demand conditions for milk in the market. A milk order requires that 
payments for milk be pooled and paid to individual farmers or 
cooperative associations of

[[Page 16043]]

farmers on the basis of a uniform or average price. Thus, all eligible 
farmers (producers) share in the market wide use-values of milk by 
regulated handlers.
    The Report of Receipts and Utilization and the Producer Payroll 
Report are completed by regulated milk handlers and milk marketing 
cooperatives and are the principal reporting forms needed to administer 
Federal milk marketing orders.
    The orders also provide for the public dissemination of market 
statistics and other information for the benefit of producers, 
handlers, and consumers. Each milk order is administered by a market 
administrator who is an agent of the Secretary of Agriculture. Part of 
the market administrator's duties are to prescribe reports required of 
each handler, and to assure that handlers properly account for milk and 
milk products, and that such handlers pay producers and associations of 
producers according to the provisions of the order. The market 
administrator employs a staff that verifies handlers' reports by 
examining records to determine that the required payments are made to 
producers. Most reports required from handlers are submitted monthly to 
the market administrator. Confidentiality of information collection is 
assured through section 608(d) of the Act, which imposes substantial 
penalties on anyone violating these confidentiality requirements.
    The forms used by the market administrators are required by the 
respective milk orders that are authorized by the Act. The forms are 
authorized either in the general provisions (Part 1000) or in the 
sections of the respective orders. The forms are used to establish the 
quantity of milk received by handlers, the pooling status of handlers, 
the class-use of the milk used by the handler and the butterfat content 
and amounts of other components of the milk.
    The frequency of performing these recordkeeping and reporting 
duties varies according to the form; the frequency ranges from ``on 
occasion'' to ``annually'' but ``monthly'' is perhaps most common. In 
general, most of the information that handlers report to the market 
administrator is readily available from normally maintained business 
records. Thus, the burden on handlers to complete these recordkeeping 
and reporting requirements is expected to be minimal. In addition, 
assistance in completing forms is readily available from market 
administrator offices.
    Regarding the use of improved information technology to reduce the 
reporting and recordkeeping burden, the information requested is the 
minimum necessary to carry out the program. Since the type of 
information required to be collected and the certification and 
reporting of that information is required, no other alternative to the 
mode of information collection has been found. However, where possible, 
reported information is accepted using computer tapes or diskettes as 
alternatives to submitting the requested information on these report 
forms. Comments were requested to help assess the number of handlers 
using computers, word processors and other electronic equipment to 
create and store documents, as well as the extent to which the Internet 
is used to exchange information.
    We are confident that the information we collect does not duplicate 
information already available. Dairy Programs has an ongoing 
relationship with many organizations in the dairy industry that also 
respond to other governmental agencies. Thus, we are aware of the 
reports dairy industry organizations are submitting to other government 
agencies.
    Information collection requirements have been reduced to the 
minimum requirements of the orders, thus minimizing the burden on all 
handlers--those considered to be small as well as large entities. Forms 
require only a minimal amount of information which can be supplied 
without data processing equipment or a trained statistical staff. The 
primary source of data used to complete the forms are routinely used in 
all business transactions. Thus, the information collection and 
reporting burden is relatively small. Requiring the same reporting 
requirements for all handlers does not significantly disadvantage any 
handler that is smaller than industry average.
    If the collection of this information were conducted less 
frequently, data needed to keep the Secretary informed concerning 
industry operations would not be available. Timing and frequency of the 
various reports are such to meet the needs of the industry and yet 
minimize the burden of the reporting public.
    The collection of the required information is conducted in a manner 
consistent with guidelines in 5 CFR 1320.6. The orders require that the 
market administrator compute monthly minimum prices to producers based 
on monthly information. Without monthly information, the market 
administrator, for example, would not have the information to compute 
each monthly price, nor to know if handlers were paying producers on 
dates prescribed in the order, such as the partial payment for milk 
received the first 15 days of the month and the final payment which is 
payable after the end of the month. The Act imposes penalties for order 
violations, such as the failure to pay producers not later than 
prescribed dates. The orders require payments to and from the producer-
settlement fund to be made monthly. Also, class prices are based on the 
monthly Basic Formula price series.

Annual Reporting and Recordkeeping Burden

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.87 hours per response.
    Respondents: Milk Handlers and Milk Marketing Cooperatives.
    Estimated Number of Respondents: 772.
    Estimated Number of Responses per Respondent: 35.
    Estimated Total Annual Burden on Respondents: 23,858 hours.
    Estimated annual cost to respondents for report preparation: 
$276,514 (23,858 hours at $11.59 per hour). Although hourly rates vary 
among handlers in various localities, the wage paid to clerical workers 
engaged in report preparation is estimated to be comparable to about a 
grade GS-7, step 1.
    It is important to note that the burden being reported is an 
estimate of the amount of time that would be required of current 
program participants.
    It is expected that the final decision should have little impact on 
the reporting and recordkeeping burden on handlers regulated under the 
Federal milk marketing order program. In fact, as a result of the 
consolidation of Federal orders from 31 to 11 as proposed, an overall 
reduction in reporting and recordkeeping requirements may occur due to 
greater uniformity in forms used and fewer ``special'' forms that 
currently apply to one or a few orders. There should also be a 
reduction in the burden on handlers that currently file reports for 
individual orders that are being consolidated.
    Non-substantial changes would be necessary on the required reports 
and records to correctly identify the new Federal market order (e.g. 
the current--and separate--reports for the Upper Florida, Tampa Bay and 
Southeastern Florida marketing areas would be combined into one report 
for the Florida marketing area).

[[Page 16044]]

Request for Public Input on Analyses

    Comments on the Executive Order 12866 analysis, the initial 
regulatory flexibility analysis, and the paperwork reduction analysis 
were requested in the proposed rule, which was published in the Federal 
Register on January 30, 1998. Specifically, interested parties were 
invited to submit comments on the regulatory and informational impacts 
of this proposed rule on small businesses. More than 1,000 comments 
were received from interested parties that specifically stated or 
documented they were small businesses. However, this number may not be 
fully representative of the number of small businesses that actually 
submitted comments because a majority of commenters did not indicate 
their size. A few comments specifically addressed the initial 
regulatory flexibility analysis (IRFA), the Executive Order 12866, and 
the Paperwork Reduction Analysis. These comments have been considered 
and addressed above.

Preliminary Statement

    The material issues in this rule relate to:

1. Consolidation of marketing areas.
2. Basic formula price replacement and other class price issues.
3. Class I pricing structure.
4. Classification of milk and related issues.
5. Provisions applicable to all orders.
6. Regional issues:
    a. Northeast Region.
    b. Southeast Region.
    c. Midwest Region.
    d. Western Region.
7. Miscellaneous and administrative matters.
    a. Consolidation of the marketing service, administrative expense, 
and producer-settlement funds.
    b. Consolidation of the transportation credit balancing funds.
    c. General findings.

II. Discussion of Material Issues and Amendments to the Orders

    A discussion and explanation of the material issues and 
determinations contained in this rule are as follows:

1. Consolidation of Marketing Areas

    Subtitle D, Chapter 1 of the 1996 Farm Bill, entitled 
``Consolidation and Reform of Federal Milk Marketing Orders,'' 
requires, among other things, that the Federal milk marketing orders be 
limited to not less than 10 and not more than 14. Nearly 1,300 public 
comments received in response to the proposed rule addressed the 
subject of order consolidation. Preceding the proposed rule, two 
preliminary reports on order consolidation were issued by the 
Agricultural Marketing Service's Dairy Division, in December 1996 and 
May 1997. The proposed rule, issued in January 1998, included 
consideration of public comments received in response to these 
preliminary reports.
    The 1996 Farm Bill specifically provides for the inclusion of 
California as a separate Federal milk order, but the provision is 
contingent upon petition and approval by California producers. The 
Omnibus Consolidated and Emergency Supplemental Appropriations Bill, 
passed in October 1998, extended the time for implementing Federal milk 
order reform amendments from April 4, 1999 to October 1, 1999. The 
legislation provides that California has from the date of issuance of 
this final decision until September 30, 1999, to become a separate 
Federal milk order. This additional time is intended to allow 
California dairy interests the opportunity review this final decision 
to determine whether a Federal milk order for California, consistent 
with the provisions adopted for the consolidated orders, would best 
meet their milk marketing regulatory needs.
    Over 150 comments were received that addressed the issue of a 
Federal milk order for California, with approximately 120 of them being 
a form letter advocating a California Federal milk order. These 
comments, and a number of additional individual comments, came 
primarily from commenters outside California who expressed a need for 
California and Federal order prices for milk used in manufactured 
products to be in closer alignment to eliminate California 
manufacturers' perceived competitive advantage in product prices.
    Interest in a Federal milk order has been expressed by some 
California producers, but for the most part California commenters 
expressed a desire to have a chance to study and comment on this final 
decision before deciding whether to pursue a proposal for a California 
Federal order.
    The preliminary reports, the proposed rule, and this final decision 
concerning order consolidation were prepared using data gathered about 
receipts and distribution of fluid milk products by all known 
distributing plants located in the 47 contiguous states, not including 
the State of California. Data describing the sources and disposition of 
fluid milk products for the month of October 1995 were used to compile 
the initial Preliminary Report. In response to comments and questions 
about certain marketing area boundaries and changes in marketing 
conditions in some of the markets after publication of the initial 
Preliminary Report, data concerning those markets was updated to 
January 1997, and more detailed information was gathered regarding the 
geographic distribution of route sales by individual handlers and their 
specific sources of producer milk. The updated and more detailed data 
were used in re-examining the appropriate boundaries of the initially-
suggested Northeast, Appalachian, Southeast, Mideast, Central, and 
Western marketing areas for the Revised Preliminary Report on Order 
Consolidation. The Revised Preliminary Report, in turn, was modified on 
the basis of comments received for development of the proposed rule.
    Nearly 1,300 comments filed in response to the proposed rule had 
some applicability to the topic of order consolidation. Approximately 
750 of these comments were received as 6 form letters, one of which 
(filed by approximately 120 commenters) advocated a national marketing 
area map comprised of 10 order areas covering all of the contiguous 48 
states. The other form letters advocated the addition of currently-
unregulated area to the Northeast area. Another 350 comments also 
addressed the desirability of adding unregulated areas to the proposed 
consolidated marketing areas (primarily the Northeast), with only about 
55 of these being opposed to the inclusion of unregulated areas.
    The comments specifically applicable to each of the consolidated 
marketing areas are described in the sections dealing with the 
individual consolidated areas.
    In combination with consideration of the comments received, data 
similar to that gathered for October 1995 were compiled for October 
1997 to determine whether the consolidated marketing areas delineated 
in the proposed rule continued to represent the most appropriate 
boundaries for the purpose of implementing the requirements of the 1996 
Farm Bill.
    The October 1997 data allowed a ``snapshot'' of the marketing 
patterns of fluid milk processors for that month. The regulatory status 
of distributing plants for October 1997 is known, and the regulatory 
status of each plant could be projected on the basis of the plant's 
receipts and dispositions, and where its milk was distributed. The 
information in the sections entitled ``Distributing Plants'' within the 
description of each marketing area are based on the October data, as 
are the lists of plants and pool plant status following the 
consolidation portion of this decision. It should be

[[Page 16045]]

understood that the regulatory status of any plant can change whenever 
its operations or areas of distribution change.
    The result of the examination and analysis of the more recent data 
in combination with the comments on the proposed rule was to modify 
significantly from the proposed rule the marketing areas of the 
proposed Northeast and Western orders, and to make very minor 
modifications to the marketing areas of the proposed Southeast, 
Mideast, Upper Midwest and Central orders.
    As in the case of data referring to the operations of less than 
three handlers or producers in the preliminary reports and proposed 
rule, some of the data used to determine the consolidated areas is 
restricted from use by the public because it refers to individual fluid 
milk distributing plants and the origins of producer milk supply for 
those plants. However, the basis for the marketing area boundaries is 
described as specifically as possible without divulging such 
proprietary information.
    The same seven primary criteria as were used in the two preliminary 
reports and the proposed rule were used to determine which markets 
exhibit a sufficient degree of association in terms of sales, 
procurement, and structural relationships to warrant consolidation. The 
criteria are as follows:
    1. Overlapping route disposition. The movement of packaged milk 
between Federal orders indicates that plants from more than one Federal 
order are in competition with each other for Class I sales. In 
addition, a degree of overlap that results in the regulatory status of 
plants shifting between orders creates disorderly conditions in 
changing price relationships between competing handlers and neighboring 
producers. This criterion is considered to be the most important.
    2. Overlapping areas of milk supply. This criterion applies 
principally to areas in which major proportions of the milk supply are 
shared between more than one order. The competitive factors affecting 
the cost of a handler's milk supply are influenced by the location of 
the supply. The pooling of milk produced within the same procurement 
area under the same order facilitates the uniform pricing of producer 
milk. Consideration of the criterion of overlapping procurement areas 
does not mean that all areas having overlapping areas of milk 
procurement should be consolidated. An area that supplies a minor 
proportion of an adjoining area's milk supply with a minor proportion 
of its own total milk production while handlers located in the area are 
engaged in minimal competition with handlers located in the adjoining 
area likely does not have a strong enough association with the 
adjoining area to require consolidation.
    For a number of the consolidated areas it would be very difficult, 
if not impossible, to find a boundary across which significant 
quantities of milk are not procured for other marketing areas. In such 
cases, analysis was done to determine where the minimal amount of route 
disposition overlap between areas occurred, and the criterion of 
overlapping route disposition generally was given greater weight than 
overlapping areas of milk supply. Some analysis also was done to 
determine whether milk pooled on adjacent markets reflects actual 
movements of milk between markets, or whether the variations in amounts 
pooled under a given order may indicate that some milk is pooled to 
take advantage of price differences rather than because it is needed 
for Class I use in the other market.
    3. Number of handlers within a market. Formation of larger-size 
markets is a stabilizing factor. Shifts of milk and/or plants between 
markets becomes less of a disruptive factor in larger markets. Also, 
the existence of Federal order markets with handlers too few in number 
to allow meaningful statistics to be published without disclosing 
proprietary information should be avoided.
    4. Natural boundaries. Natural boundaries and barriers such as 
mountains and deserts often inhibit the movement of milk between areas, 
and generally reflect a lack of population (limiting the range of the 
consumption area) and lack of milk production. Therefore, they have an 
effect on the placement of marketing area boundaries. In addition, for 
the purposes of market consolidation, large unregulated areas and 
political boundaries also are considered a type of natural barrier.
    5. Cooperative association service areas. While not one of the 
first criteria used to determine marketing areas, cooperative 
membership often may be an indication of market association. Therefore, 
data concerning cooperative membership can provide additional support 
for combining certain marketing areas.
    6. Features or regulatory provisions common to existing orders. 
Markets that already have similar regulatory provisions that recognize 
similar marketing conditions may have a head start on the consolidation 
process. With calculation of the basic formula price replacement on the 
basis of components, however, this criterion becomes less important. 
The consolidation of markets having different payment plans will be 
more dependent on whether the basic formula component pricing plan is 
appropriate for a given consolidated market, or whether it would be 
more appropriate to adopt a pricing plan using hundredweight pricing 
derived from component prices.
    7. Milk utilization in common dairy products. Utilization of milk 
in similar manufactured products (cheese vs. butter-powder) was also 
considered to be an important criterion in determining how to 
consolidate the existing orders.

Comments on Consolidation Criteria

    Most of the comments relative to order consolidation criteria were 
submitted prior to publication of the proposed rule. It was the overall 
opinion of the commenters that overlapping route disposition and milk 
procurement are the most important criteria to consider in the 
consolidation process. In addition, Class I use percentages and 
regulation on the basis of handler location were noted as important 
criteria to consider. To some extent, the consolidated marketing areas 
included in this final decision do combine markets with similar Class I 
utilization rates rather than markets that would result in Class I use 
percentages being more uniform between markets. This result occurs 
because adjoining markets, where most of the sales and procurement 
competition takes place between handlers regulated under different 
orders, tend to have similar utilization rates rather than because the 
criterion is one that should be used to determine appropriate 
consolidations. Also, Class I utilization rates are a function of how 
much milk is pooled on an order with a given amount of Class I use. 
Differences in rates, to the extent they result in differences in blend 
prices paid to producers, provide an incentive for milk to move from 
markets with lower Class I utilization percentages to markets with 
higher Class I use.
    Regulation of processors on the basis of their location rather than 
their sales areas has largely been incorporated in the consolidated 
orders by a provision that would pool a handler under the order for the 
area in which the handler is located unless more than 50 percent of the 
handler's Class I route dispositions are distributed in another order 
area. This provision should help to assure that the order under which a 
distributing plant is pooled will not change from month to month, and 
that a plant operator is subject to the same provisions, such as 
producer pay prices, as are its primary competitors.

[[Page 16046]]

    The consolidated orders also include provisions that lock plants 
processing primarily ultra-high temperature (UHT) or extended shelf-
life milk into regulation under the order for the area in which the 
plant is located. Such plants often have widely dispersed route sales 
into a number of order areas, with sporadic deliveries to different 
areas. Without some type of lock-in provision, such a plant may be 
pooled in several different orders in as many months. At the same time, 
the plant's milk supply generally is procured from a given group of 
producers located in the same area as the UHT (or extended shelf-life) 
plant. Having the plant pooled under a succession of different orders 
with widely varying blend prices creates a disorderly condition for the 
producers involved.
    On the basis of the distributing plant pooling standards included 
for all eleven orders in this final decision, there are three non UHT 
pool distributing plants that would have more sales in an order area 
other than the one in which they are regulated. Two of these plants are 
the Superbrand Dairy Products distributing plant in Greenville, South 
Carolina, and the Kroger Dairy distributing plant in Winchester, 
Kentucky, both located in the Appalachian order, but which likely will 
qualify for pooling under the Southeast and Mideast orders. In 
addition, the Hiland Dairy plant in Fayetteville, Arkansas, in the 
Southeast consolidated area, likely will qualify for pooling under the 
Central order. In cases in which these plants compete almost entirely 
for a producer milk supply in the area in which they are located, lock-
in provisions are incorporated to assure that the plant is pooled where 
located for the purpose of competitive equity.
    Some changes in regulatory status are expected to occur because of 
the addition of regulated area (in the Northeast), the consolidation of 
marketing areas, changes in pooling standards, and changes in the 
definitions of types of plants. The expected changes are based on data 
collected for October 1997 and may differ in some respects at the time 
the consolidated orders go into effect.
    The regulatory status of three Vermont handlers is expected to 
change from partially regulated to fully regulated because a 
significant percentage of their sales is in areas that will be added to 
the Northeast consolidated marketing area, and a partially-regulated 
New York handler is expected to meet the pooling standards because of 
the consolidation of marketing areas. Two other currently partially 
regulated handlers, one in New York and one in Vermont, are expected to 
become fully regulated because the pooling provisions of the 
consolidated order will be more like those of all the other orders than 
is currently the case in the New York-New Jersey order. Two plants that 
currently are fully regulated on the basis of the ``grandfather'' 
clause of the New York-New Jersey order will become partially regulated 
when this provision ceases to exist.
    In the consolidated Appalachian marketing area, two distributing 
plants, one currently unregulated and one partially regulated, would 
become fully regulated as a result of including the marketing area of 
the Tennessee Valley order, terminated in October 1997. These plants 
both were fully regulated under the Tennessee Valley order, and lost 
their regulatory status as a result of the termination.
    A plant currently partially regulated under the Southeast order 
would become fully regulated as a result of ``locking in'' to 
regulation plants that distribute primarily UHT or extended shelf-life 
products. Another Southeast distributing plant, currently fully 
regulated, would become partially regulated because of failure to meet 
the consolidated order's pooling standards.
    Two distributing plants that currently are partially regulated 
under the Chicago Regional order would become fully regulated under the 
consolidated Upper Midwest order because of a change in the definition 
of receipts that are used in the calculation of percentage of total 
receipts used in route disposition for the determination of pool 
status.
    Three plants, one in each of the consolidated Upper Midwest, 
Central, and Pacific Northwest marketing areas, would change regulatory 
status as depicted in the attached list of distributing plants and 
regulatory status. These plants are distributing plants that are listed 
as being fully regulated in October 1997 and becoming either partially 
regulated or exempt under the consolidated orders. These plants, having 
small amounts of route dispositions, actually were pooled on the basis 
of their performance as supply plants or as part of supply plant units. 
It is unknown whether they will continue to qualify as pool supply 
plants, but will not meet the pool distributing plant standards of the 
consolidated orders.
    In the Pacific Northwest, the Oregon and Washington State prison 
systems both operate fluid processing plants that have route 
distribution in commercial channels, competing with regulated handlers. 
These plants are not currently fully regulated. Under the consolidated 
order, one of the plants will be partially regulated only with respect 
to its commercial sales, and the other will be exempt on the basis of 
size.
    Several comments advocated that all of a state's territory should 
be included in one Federal order to assure that all producers in a 
state are paid on an equitable basis, or to make it easier to maintain 
state statistical data. One of the primary reasons for Federal milk 
orders is that milk marketing occurs readily across state boundaries, 
making state milk marketing regulation more difficult to enforce. It is 
important that Federal milk marketing areas continue to recognize the 
free interstate movement of milk to and from milk plants. There are 
cases where natural boundaries such as mountains or rivers may result 
in part of a state having a closer marketing relationship with an 
adjoining state than with other areas of the same state.
    Although the Revised Preliminary Report suggested that several 
currently non-Federally regulated areas be added to some consolidated 
marketing areas, the proposed rule omitted areas in which handlers are 
subject to minimum Class I pricing under State regulation unless the 
affected handlers or States requested inclusion. This final decision 
continues to omit such areas, and also omits currently-unregulated 
areas that comprise a significant distribution area for currently-
unregulated handlers, some of which were proposed to be included in 
consolidated areas.
    Considering the requirements of the 1996 Farm Bill, consolidation 
of the existing orders does not necessitate expansion of the 
consolidated orders into unregulated areas or areas in which handlers 
are subject to minimum Class I pricing under State regulation, 
especially when the states' Class I prices exceed or equal those that 
would be established under Federal milk order regulation. Such 
regulation could have the effect of reducing returns to producers 
already included under State regulation without significantly affecting 
prices paid by handlers who compete with Federally-regulated handlers.
    However, there are numerous counties and portions of counties 
located within and between Federal order marketing areas that have not 
been included in the defined order areas during the course of the more 
than 60 years the program has developed. In some cases, these small 
areas were left unregulated many years ago to maintain the unregulated 
status of a small handler. In others, these areas probably formed a 
``buffer'' between separate

[[Page 16047]]

smaller order areas and were not incorporated when the smaller orders 
were merged. Some of these areas form ``buffer'' zones today between 
current order areas that will be consolidated in the course of this 
process. These areas should be included in the defined consolidated 
marketing areas if their inclusion would not have the effect of 
regulating any unregulated handlers who currently distribute milk in 
these areas. The issue of whether to regulate currently-unregulated 
areas is discussed in more detail with regard to the individual 
consolidated marketing areas in the sections of this decision dealing 
with those areas, especially the Northeast area.
    The occurrence of partial counties in marketing area definitions 
should be minimized for the purpose of simplifying handlers' reporting 
burden. The continued existence of these unregulated areas, partially 
regulated counties, and counties split between marketing areas serves 
only to complicate the reporting of route dispositions outside the 
marketing area by regulated distributing plant handlers for the purpose 
of determining pool qualifications and increase the costs of 
administering the orders.
    In order to avoid extending Federal regulation to handlers whose 
primary sales areas are outside current Federal order marketing areas 
and who currently are not subject to Federal order regulation, it has 
been determined that the appropriate in-area Class I disposition 
percentage portion of the pool distributing plant definition is 25 
percent for all orders. Discussion of this provision is included in the 
section of this decision dealing with identical provisions. The 25-
percent level of in-area sales will assure that currently-regulated 
handlers retain their pool status. At the same time, increasing from 
current levels the percentage of in-area sales required for pool status 
under the consolidated orders will allow State-regulated and most other 
non-Federally regulated handlers to operate at their current level of 
sales within Federal order areas without being subject to full Federal 
order regulation.

Cornell University Study

    In addition to AMS' analysis of the receipt and distribution data 
in the development of this decision, researchers at Cornell University 
also provided input on potential consolidated marketing areas early in 
the Federal order reform process. This input was part of Cornell's 
partnership agreement with AMS to provide alternative analyses on 
Federal order reform issues. These researchers used an economic model 
(the Cornell U.S. Dairy Sector Simulator, or USDSS), to determine 10-14 
optimal marketing areas. Cornell's first options for 10-14 marketing 
areas were presented at an October 1996 invitational workshop for dairy 
economists and policy analysts held in Atlanta, Georgia. Based on USDSS 
model results, these options would result in minimum cost flows of milk 
using the known concentrations of milk production and population, 
without considering the location of milk plants. The marketing area 
maps that were circulated using these first results were those 
referenced by interested persons who cited the Cornell results in their 
comments on the Preliminary Reports on Order Consolidation and on the 
proposed rule.
    A second set of options was presented by Cornell researchers in 
spring 1997. These options were generated with a further-developed 
USDSS model. In updating the model, the researchers enhanced the inputs 
to its model as a means of better reflecting the actual structure of 
the national market for fluid milk products. These model updates 
allowed for determination of the minimum cost flows of: milk, 
intermediate and final products from producers to plants; from plants 
to plants; and from plants to consumers on the basis of the locations 
of milk supplies, dairy product processing plants, and consumers. The 
enhanced model is intended to provide for geographic market definition 
on the basis of a resulting set of optimal, efficient simulated flows 
of milk and dairy products between locations.
    Although the USDSS model considers important factors such as milk 
supply and demand locations and transportation constraints in 
determining the optimal consolidated marketing areas, it aggregates 
processing locations, sometimes at locations that are not 
representative of where substantial volumes of milk are processed. In 
addition, the model does not consider several important factors such as 
large areas that are not Federally regulated and certain economic 
factors which influence the movement of milk.
    AMS is unaware of any other analyses performed to determine or 
suggest consolidated marketing areas.
    As noted before, AMS' analysis focused initially on distributing 
plant receipts and distribution information for October 1995, updated 
as needed for further analysis during development of the proposed rule. 
Equivalent data was gathered for October 1997 to assure that the 
consolidated marketing areas continue to represent actual marketing 
relationships between the current order areas, with more current 
information used as needed for further analysis. The data gathered by 
the Dairy Division from Federal Milk Market Administrators reflects 
actual movements of milk, both from production areas to processing 
plants, and from processing plants to consumption areas. This final 
decision considers this data, the seven criteria described fully above, 
and information provided by the USDSS model analysis.
    The consolidated marketing area options presented by Cornell are 
not adopted because the USDSS model does not adequately reflect issues 
or factors that strongly affect which current marketing areas are most 
closely related. For this reason, this decision is based on data 
reflecting actual distribution and procurement by fluid milk processing 
plants.

Marketing Areas

    Following are maps of the current marketing areas and the 11 
consolidated marketing areas, followed by brief descriptions of the 
marketing areas (with those modified from the Proposed Rule, and the 
modifications, marked by*) and the major reasons for consolidation. A 
more detailed description of each consolidated order follows this 
summary.
    At the end of the Order Consolidation portion of this decision is 
appended a list of distributing plants associated with each 
consolidated marketing area, with each plant's expected regulatory 
status, determined on the basis of data describing the plants' 
operations during October 1997.

BILLING CODE 3410-02-P

[[Page 16048]]

[GRAPHIC] [TIFF OMITTED] TP02AP99.000



[[Page 16049]]

[GRAPHIC] [TIFF OMITTED] TP02AP99.001


BILLING CODE 3410-02-C

[[Page 16050]]

Eleven Consolidated Marketing Areas

    *1. NORTHEAST--current marketing areas of the New England, New 
York-New Jersey and Middle Atlantic Federal milk orders, with the 
addition of: the contiguous unregulated areas of New Hampshire, 
northern New York and Vermont; and the non-Federally regulated portions 
of Massachusetts. *The Western New York State order area (ten entire 
and 5 partial western New York counties) proposed to be included in the 
expanded Northeast order area has been omitted. The handlers who would 
be added to those currently fully regulated under the three separate 
orders either have a sufficient percentage of their route disposition 
within the consolidated marketing area to meet the pooling requirements 
or are located in the area to be added.
    Reasons for consolidation include the existence of overlapping 
sales and procurement areas between New England and New York-New Jersey 
and between New York-New Jersey and Middle Atlantic. An important 
measure of association is evidenced by industry efforts to study and 
pursue consolidation of the three Federal orders prior to the 1996 Farm 
Bill.
    2. APPALACHIAN--Current marketing areas of the Carolina and 
Louisville-Lexington-Evansville (minus Logan County, Kentucky) Federal 
milk orders plus the marketing area of the former Tennessee Valley 
order, with the addition of 21 currently-unregulated counties in 
Indiana and Kentucky.
    Overlapping sales and procurement areas between these marketing 
areas are major factors for this consolidation.
    3. FLORIDA--current marketing areas of the Upper Florida, Tampa 
Bay, and Southeastern Florida Federal milk orders.
    Natural boundary limitations and overlapping sales and procurement 
areas among the three orders are major reasons for consolidation, as 
well as a measure of association evidenced by cooperative association 
proposals to consolidate these three marketing areas. Further, the 
cooperative associations in this area have worked together for a number 
of years to accommodate needed movements of milk between the three 
Florida Federal orders.
    *4. SOUTHEAST--current marketing area of the Southeast Federal milk 
order, plus 1 county from the Louisville-Lexington-Evansville Federal 
milk order marketing area; plus 11 northwest Arkansas counties and 22 
entire Missouri counties that currently are part of the Southwest 
Plains marketing area; plus 6 Missouri counties that currently are part 
of the Southern Illinois-Eastern Missouri marketing area; plus 16 
currently unregulated southeast Missouri counties (including 4 that 
were part of the former Paducah marketing area); plus 20 currently-
unregulated Kentucky counties (including 5 from the former Paducah 
marketing area).
    *A partial Missouri county that has been part of the Southwest 
Plains marketing area will become completely unregulated to minimize 
the reporting complications caused by partially regulated counties.
    Major reasons for this consolidation include sales and procurement 
area overlaps between the Southeast order and these counties.
    *5. MIDEAST--current marketing areas of the Ohio Valley, Eastern 
Ohio-Western Pennsylvania, Southern Michigan and Indiana Federal milk 
orders, plus Zone 2 of the Michigan Upper Peninsula Federal milk order, 
and most currently-unregulated counties in Michigan, Indiana and Ohio. 
*One partial and 3 entire counties in north central Ohio are left 
unregulated, since they represent the distribution area of a currently-
partially regulated distributing plant (Toft Dairy in Sandusky, Ohio).
    Major criteria for this consolidation include the overlap of fluid 
sales in the Ohio Valley marketing area by handlers from the other 
areas to be consolidated. With the consolidation, most route 
disposition by handlers located within the Mideast order would be 
within the marketing area. Also, nearly all milk produced within the 
area would be pooled under the consolidated order. The portion of the 
Michigan Upper Peninsula marketing area included in the Mideast 
consolidated area has sales and milk procurement areas in common with 
the Southern Michigan area and has minimal association with the western 
end of the current Michigan Upper Peninsula marketing area.
    *6. UPPER MIDWEST--current marketing areas of the Chicago Regional, 
Upper Midwest, Zones I and I(a) of the Michigan Upper Peninsula Federal 
milk orders, and unregulated portions of Wisconsin. *The Iowa Federal 
order marketing area portion of one Illinois county, in which Chicago 
Regional handlers have the preponderance of sales, is added to the 
consolidated Upper Midwest marketing area, and the Chicago Regional 
portion of another Illinois county, in which Iowa order handlers have 
the preponderance of sales, is removed and added to the consolidated 
Central area. These changes will reduce overlapping route disposition 
between the two consolidated orders and reduce the incidence of partial 
counties in marketing areas.
    Major consolidation criteria include an overlapping procurement 
area between the Chicago Regional and Upper Midwest orders and 
overlapping procurement and route disposition area between the western 
end of the Michigan Upper Peninsula order and the Chicago Regional 
order. A number of the same cooperative associations market member milk 
throughout the consolidated area.
    *7. CENTRAL--current marketing areas of the Southern Illinois-
Eastern Missouri, Central Illinois, Greater Kansas City, Southwest 
Plains, Eastern Colorado, Nebraska-Western Iowa, Eastern South Dakota, 
Iowa (* less the portion of an Illinois county that will become part of 
the consolidated Upper Midwest area) and *Western Colorado Federal milk 
orders, * plus the portion of an Illinois county currently in the 
Chicago Regional Federal order area, minus 11 northwest Arkansas 
counties and 1 partial and 22 entire Missouri counties that are part of 
the current Southwest Plains marketing area, minus 6 Missouri counties 
that are part of the current Southern Illinois-Eastern Missouri 
marketing area, plus 54 currently-unregulated counties in Kansas, 
Missouri, Illinois, Iowa, Nebraska and Colorado, plus 8 counties in 
central Missouri *(six fewer than in the proposed rule) that are not 
considered to be part of the distribution area of an unregulated 
handler in central Missouri, *plus 7 currently unregulated Colorado 
counties located between the current Western and Eastern Colorado order 
areas.
    This configuration would leave 31 unregulated counties in central 
Missouri that are intended to delineate the distribution area of 
Central Dairy at Jefferson City, Missouri, which has limited 
distribution in Federal order territory.
    Major criteria on which this consolidation is based include 
overlapping route disposition and procurement between the current 
orders. The consolidation would result in a concentration of both the 
sales and supplies of milk within the consolidated marketing area. The 
consolidation would combine several relatively small orders and provide 
for the release of market data without revealing proprietary 
information. In addition, many of the producers in these areas share 
membership in several common cooperatives. The Western Colorado area 
has become more closely associated with the Eastern Colorado area than 
with the Great Basin area since issuance of the proposed rule.

[[Page 16051]]

    8. SOUTHWEST--current marketing areas of Texas and New Mexico-West 
Texas Federal milk orders, with the addition of two currently-
unregulated northeast Texas counties and 47 currently-unregulated 
counties in southwest Texas.
    Major criteria supporting this consolidation include sales and 
procurement area overlaps and common cooperative association membership 
between the Texas and New Mexico-West Texas marketing areas, and 
similar marketing concerns with respect to trade with Mexico for both 
orders. Addition of the currently-unregulated Texas counties will 
result in the regulation of no additional handlers, and will reduce 
handlers' recordkeeping and reporting burden and the market 
administrator's administrative costs.
    9. ARIZONA-LAS VEGAS--current marketing area of Central Arizona, 
plus the Clark County, Nevada, portion of the current Great Basin 
marketing area, plus eight currently-unregulated Arizona counties.
    The major criterion on which the consolidation is based is sales 
overlap between the sole Las Vegas, Nevada, handler and handlers 
regulated under the Central Arizona order in both Clark County, Nevada, 
and unregulated portions of northern Arizona. The Grand Canyon and 
sparsely populated areas in the northwest part of Arizona, and the 
sparsely populated desert region of eastern Arizona constitute natural 
barriers between this and adjacent marketing areas. In addition, the 
most significant relationship between this area and any other is 
represented by the substantial volumes of bulk and packaged milk 
exchanged between the Arizona-Las Vegas area and Southern California.
    *10. WESTERN--current marketing areas of the Southwestern Idaho-
Eastern Oregon and Great Basin Federal milk orders, minus Clark County, 
Nevada. *The Western Colorado order area, proposed to be included in 
the Western order area, is instead included in the consolidated Central 
order. The major criteria on which the consolidation is based include 
overlapping sales between Southwestern Idaho-Eastern Oregon and Great 
Basin, as well as a significant overlap in procurement for the two 
orders in five Idaho counties. The two orders also have similar 
multiple component pricing plans and most of the milk used in nonfluid 
products under both orders is used in cheese.
    Collection of detailed data for individual handlers indicates that 
the strength of earlier relationships between the former Great Basin 
and Lake Mead orders that justified their 1988 merger have dwindled 
significantly, with the Las Vegas area now more closely related to a 
combination of southern California and Central Arizona handlers.
    11. PACIFIC NORTHWEST--current marketing area of the Pacific 
Northwest Federal milk order plus 1 currently-unregulated county in 
Oregon. The degree of association with other marketing areas is 
insufficient to warrant consolidation.
=======================================================================

   Table 1.--Market Information: Population, Utilization, Producer Milk and Weighted Average Utilization Value
                                     (WAUV) in Consolidated Marketing Areas
----------------------------------------------------------------------------------------------------------------
                                                                      Class I
                     Market                        Population 1    utilization 2   Producer milk  WAUV 2 3  (per
                                                    (millions)       (percent)     2 (1000 lbs.)       cwt)
----------------------------------------------------------------------------------------------------------------
Northeast.......................................            49.0            48.6       1,962,335          $13.97
Appalachian.....................................            17.3            85.0         410,372           13.35
Florida.........................................            14.1            90.6         217,952           15.69
Southeast.......................................            26.9            85.6         482,499           13.60
Mideast.........................................            31.0            58.9       1,040,112           13.42
Upper Midwest...................................            18.5            24.1       1,597,232           12.94
Central.........................................            21.5            50.1         868,443           13.29
Southwest.......................................            21.3            53.4         649,872           13.97
Arizona-Las Vegas...............................             5.7            46.3         195,943           13.84
Western.........................................             3.2            32.5         304,129           13.14
Pacific Northwest...............................             9.0            35.6         539,987           13.33
                                                 ---------------------------------------------------------------
    Total.......................................           217.5             N/A       7,756,390             N/A
----------------------------------------------------------------------------------------------------------------
1 Based on July 1, 1997 estimates.
2 Based on October 1997 information, for plants which would be fully regulated under assumptions used in this
  decision.
3 Not a blend price--shown solely for the purpose of showing impact of consolidation on utilization.


                 Table 2.--Market Information: Number of Plants in Consolidated Marketing Areas
----------------------------------------------------------------------------------------------------------------
                                                               Distributing plants 1
                                                 ------------------------------------------------  Manufacturing
                     Market                            Fully                         FR small       and supply
                                                  regulated (FR)      Exempt2       businesses       plants 3
----------------------------------------------------------------------------------------------------------------
Northeast.......................................              64               9              31              95
Appalachian.....................................              25               3               4              13
Florida.........................................              12               1               2               4
Southeast.......................................              36               1               3              37
Mideast.........................................              51               4              27              59
Upper Midwest...................................              27               3              13             301
Central.........................................              35               3               7              84
Southwest.......................................              21               2               5              17
Arizona-Las Vegas...............................               5               1               2               3
Western.........................................              11               1               5              18
Pacific Northwest...............................              19               4              12              27
                                                 ---------------------------------------------------------------

[[Page 16052]]

 
    Total.......................................             306              32             111             669
----------------------------------------------------------------------------------------------------------------
1 Based on October 1997 information. Excludes: (1) out-of-business plants through December 1998; and (2) new
  plants since October 1997.
2 Exempt based on size (less than 150,000 lbs. route distribution per month).
3 Based on May 1997 information.

Descriptions of Consolidated Marketing Areas

    Each of the consolidated order areas is described in the text 
following this introduction. The criteria which were used to determine 
which areas should be consolidated are explained. For each consolidated 
area, the following information is included:
    Geography. The political units (states, counties, and portions of 
counties) included in each area, the topography, and the climatic 
conditions are described for the purpose of delineating the territory 
to be incorporated in each consolidated marketing area and describing 
its characteristics pertaining to milk production and consumption. This 
information was derived principally from Microsoft 
Encarta 96 Encyclopedia, and augmented by several U.S. 
atlases.
    Population. The total population of each area and its distribution 
within the area is included for the purpose of identifying where milk 
is consumed. July 1, 1997, population estimates were obtained from 
``CO-97-1 Estimates of the Population of Counties,'' Population 
Estimates Program, Population Division of the U.S. Bureau of the 
Census.
    Metropolitan Statistical Area (MSA) information is provided by the 
United States Office of Management and Budget (OMB), which defines 
metropolitan areas according to published standards that are applied to 
Census Bureau data. To be described as an MSA, an area (one or more 
counties) must include at least one city with 50,000 or more 
inhabitants, or a Census Bureau-defined urbanized area (of at least 
50,000 inhabitants) and a total metropolitan population of at least 
100,000 (75,000 in New England). Areas with more than 1 million 
population may be described as ``consolidated metropolitan statistical 
areas'' (CMSAs) made up of component parts designated as primary 
metropolitan statistical areas (PMSAs). For purposes of the marketing 
area descriptions in this decision, the term ``MSA'' also includes 
CMSAs and PMSAs.
    Per capita consumption. Available data pertaining to per capita 
consumption is discussed to help describe how much milk is needed to 
supply the fluid needs of the population of each marketing area. Per 
capita consumption numbers were estimated by state using data from a 
report on ``Per Capita Sales of Fluid Milk Products in Federal Order 
Markets,'' published in the December 1992 issue of Federal Milk Order 
Market Statistics, 391, issued May 1993. This data 
was the most recent available.
    Production. A description of the amount and sources of milk 
production for the market is included for the purpose of identifying 
the supply area for each consolidated marketing area. Production data 
by state and county for each Federal milk order was compiled from 
information collected by the offices administering the current Federal 
milk orders (market administrators' offices). For most of the 
consolidated marketing areas, production data has been updated to 
October 1997. For several of the consolidated areas, however, October 
1997 data is difficult to compile and, when compared with previously 
published statistics, may yield confidential information. For these 
areas, the data cited in the proposed rule has been used to describe 
the sources of milk for the consolidated market.
    Distributing plants. For each marketing area the number and types 
of distributing plants expected to be associated with each marketing 
area are included, with the locations of plants by population centers, 
to identify where milk must be delivered. This information was 
collected by market administrators' offices. The expected regulatory 
status was determined on the basis of each plant's receipts and route 
distribution of fluid milk during October 1997. Changes in plant 
operations or distribution patterns could change the expected status.
    Utilization. The utilization percentages of the current individual 
orders and the effect of consolidation on the consolidated orders are 
described for each marketing area, with an estimate of the effect of 
consolidation on each current individual order's blend price. The 
current utilization data is published each month for each Federal milk 
order market. Pool data was used to calculate the effects of 
consolidation on utilization.
    Other plants. The presence of manufacturing and supply plants in 
and near the consolidated order areas, and the products processed at 
these plants, are described for each consolidated area. This 
information was collected by market administrators' offices for May 
1997, and has been changed from the proposed rule only where changes 
from the proposed marketing areas have occurred.
    Cooperative Associations. The number of cooperative associations 
pooling member milk under each of the current individual orders 
included in each consolidated area, and the number that pool milk in 
more than one of the areas is identified. This information was obtained 
from market administrators' offices, updated to December 1997 from the 
proposed rule. For purposes of the consolidation discussion, the four 
cooperative associations that combined to create Dairy Farmers of 
America (DFA) are considered to be a single organization.
    Criteria for Consolidation. The extent to which the criteria used 
in identifying markets to be consolidated are supported by the 
marketing conditions present in each of the consolidated areas is 
discussed.
    Discussion of comments and alternatives. Comments filed in response 
to the consolidation section of the proposed rule and alternatives 
considered are summarized and discussed for each consolidated area.

Northeast

    The consolidated Northeast marketing area is comprised of the 
current New England, New York-New Jersey, and Middle Atlantic Federal 
milk order marketing areas (Orders 1, 2, and 4), with currently-
unregulated areas in northern New York, Vermont and New Hampshire 
added. The entire areas of the States of Connecticut (8 counties), 
Delaware (3 counties), Massachusetts (14 counties), New Hampshire (10 
counties), New Jersey (21 counties),

[[Page 16053]]

Rhode Island (5 counties), and Vermont (14 counties) are contained 
within the consolidated Northeast order area. In addition, the District 
of Columbia, 21 counties and the City of Baltimore in Maryland, 41 
complete and 3 partial counties and the 5 boroughs of New York City in 
New York, the 15 Pennsylvania counties currently included in the Middle 
Atlantic marketing area, and 4 counties and 5 cities in Virginia are 
included in the consolidated order. There are 156 complete and 3 
partial counties and 8 cities, including the District of Columbia, in 
the consolidated Northeast marketing area.
    The Western New York State order area, proposed to be included in 
the consolidated Northeast area, is not included at the request of the 
business entity that would be most affected by its inclusion because 
the currently-unregulated portions of Pennsylvania are not included.

Geography

    The Northeast marketing area extends from the Canadian border on 
the north, south to northern Virginia, eastern Maryland and Delaware, 
with its eastern edge along the western border of Maine at the northern 
end of the marketing area, and along the Atlantic Ocean for the 
remainder. The total northeast-southwest extent of the marketing area 
is approximately 600 miles. The marketing area extends westward to Lake 
Ontario in New York State (about 350 miles east to west), goes only as 
far west as the northern part of New Jersey (about 60 miles), and 
expands westward again across the eastern half of southern 
Pennsylvania, taking in a small part of northeast Virginia, eastern 
Maryland, and Delaware (about 230 miles east to west). There is a large 
State-regulated area in Pennsylvania just to the west of the Northeast 
marketing area; and most of the State of Virginia to the south of the 
marketing area also is regulated under a State order. The consolidated 
Northeast marketing area is contiguous to no other consolidated 
marketing areas, but parts of it, in south central New York State and 
south central Pennsylvania, are very close to the consolidated Mideast 
area.
    The northern and northwestern parts of the Northeast area are large 
areas of coniferous forests that are somewhat mountainous. To the south 
and southeast of the forested areas are areas where dairy farming 
predominates as the primary type of agriculture. In fact, for 4 of the 
10 states that are located in the Northeast marketing area (New 
Hampshire, New York, Pennsylvania and Vermont) dairy products were the 
number 1 agricultural commodity in terms of cash receipts during 1996. 
Principally along the Atlantic coastline is a flatter area where other 
agricultural activities, including greenhouse and nursery, fruit, truck 
and mixed farming, take place. A near-continuous strip along the east 
coast of the area, from northeast Massachusetts southwest to the 
Baltimore area, is a major industrial area and is heavily populated.

Population

    According to July 1, 1997, population estimates, the total 
population in the consolidated Northeast marketing area is 49 million. 
The area is very densely populated, especially along a coastal strip 
extending from Boston, Massachusetts, in the northeast to Washington, 
D.C., in the southwest. In this consolidated marketing area of 
approximately 160 counties, 106 are included within Metropolitan 
Statistical Areas (MSAs). The 20 Metropolitan Statistical Areas in the 
consolidated Northeast marketing area account for 93.7 percent of the 
total market area population.
    Almost sixty percent of the marketing area population is located in 
6 interconnected MSAs in 48 counties, extending from central New Jersey 
to southern New Hampshire. The six MSAs are: Springfield, 
Massachusetts; Boston-Worcester-Lawrence, Massachusetts/New Hampshire/
Maine/Connecticut; Providence-Fall River-Warwick, Rhode Island/
Massachusetts; New London-Norwich, Connecticut/Rhode Island; Hartford, 
Connecticut; and New York-Northern New Jersey-Long Island, New York/New 
Jersey/Connecticut/Pennsylvania. The population in this northeastern 
portion of the marketing area is concentrated most heavily at its 
northern and southern ends--the New York City area has a population of 
approximately 20 million, and the Boston area's population is 
approximately 5.5 million. Two of the other MSAs, Hartford and 
Providence, each have over 1 million population. Although each of these 
six MSAs is described as a separate area in the population data, many 
of the counties involved are divided between separate MSAs.
    Just southwest of the New York City MSA is the Philadelphia-
Wilmington-Atlantic City, Pennsylvania/New Jersey/Delaware/Maryland 
MSA, with a population of 6 million. Some counties of these two MSAs 
are adjacent. Southwest of the Philadelphia MSA and separated from it 
by only one county is the Washington, DC/Baltimore, Maryland/northern 
Virginia MSA, with a population in the consolidated marketing area of 
6.8 million.
    Of the 12 other MSAs in the consolidated marketing area, 6 are 
located in New York State, with an average population of nearly 400,000 
each. Two are located in Pennsylvania, with populations of .6 and .45 
million. One MSA in Vermont, 1 in Delaware, and 2 in Massachusetts have 
average populations of 163,000.

Fluid Per Capita Consumption

    Fluid per capita consumption estimates vary within the Northeast 
from 16.7 pounds per month in the more southern parts of the region to 
20 pounds per month in New England. These rates would result in a 
weighted average of 18 pounds per month, and an estimated total fluid 
milk consumption rate of 882 million pounds per month for the Northeast 
marketing area. Approximately 752 million pounds of this fluid milk 
consumption would be required along the heavily-populated coastal area 
extending from northeast Massachusetts southwest through Washington, 
D.C. and northern Virginia. Handlers who would have been fully 
regulated under the consolidated Northeast order during October 1997 
distributed 828.1 million pounds within the consolidated marketing 
area. October 1997 sales within the marketing area by handlers that 
would be regulated by other orders totaled 6.2 million pounds, and 
sales by handlers who would have been partially regulated were 18.9 
million pounds. Sales in the marketing area by exempt and government 
plants, and by producer-handlers totaled 6.6 million pounds.

Milk Production

    In October 1997, nearly 19,000 producers from 13 states pooled 1.9 
billion pounds of milk on the three orders comprising the consolidated 
Northeast order. With the addition of several currently-unregulated 
handlers, it is probable that approximately 2 billion pounds of milk 
per month will be pooled under the Northeast order.
    Eleven of the 13 states supplying milk to the three Federal order 
pools are at least partly in the marketing area, and 84 percent of the 
producer milk pooled under the three orders in October 1997 came from 
just 3 states--New York (41.5 percent), Pennsylvania (32.2 percent), 
and Vermont (10.3 percent). Over 10 million pounds of milk was produced 
in each of fifty-one counties: 1 county in northeast Connecticut, 3 in 
the most northwestern of the Maryland portion of the marketing area, 30 
spread over most of New York, 1 on the western edge of

[[Page 16054]]

northern Virginia, and 16 in southeast to south central Pennsylvania 
and in the eastern part of the northern tier of Pennsylvania counties, 
with an additional Pennsylvania county, Lancaster, accounting for over 
150 million pounds of milk. Over seventy percent of the markets' total 
producer milk was produced within the consolidated marketing area.
    Less than one-third of the milk production for the consolidated 
market was produced within 100 miles of the heavily populated coastal 
corridor. Although the Northeast area contains two out of the top five 
milk-producing states in the U.S. (New York and Pennsylvania), the 
population of the marketing area is nearly 20 million more than the 
next most-populated consolidated area (the Mideast area, with 31 
million people). The Northeast, therefore, is a very significant milk 
production area with a very high demand for fluid milk and dairy 
products.

Distributing Plants

    Using distributing plant lists included in the proposed rule, with 
the pooling standards at 25 percent of route dispositions as in-area 
sales, and updated for known plant closures through December 1998, 141 
distributing plants would be expected to be associated with the 
Northeast marketing area. On the basis of data collected for October 
1997, the plants associated would include 64 fully regulated 
distributing plants (58 currently fully regulated, 5 currently 
partially regulated, and 1 currently unregulated), 15 partially 
regulated (2 currently fully regulated and 13 currently partially 
regulated). Nine exempt plants having less than 150,000 pounds of total 
route disposition per month (3 currently fully regulated, 2 currently 
partially regulated, 2 currently exempt based on size, and 2 currently 
unregulated) and 47 producer-handlers (45 currently producer-handlers, 
1 currently partially regulated, and 1 currently unregulated) would 
have been associated with the market during October 1997. Three 
handlers who currently are exempt based on institutional status would 
continue to be exempt on the same basis, and 3 handlers located in the 
Western New York order area who would have been fully regulated under 
the proposed rule would continue to be unregulated under any Federal 
order.
    Since October 1997, 14 distributing plants (3 in New York, 2 in 
each of the States of Massachusetts, Maryland, New Jersey, Pennsylvania 
and Vermont, and 1 in Connecticut), have gone out of business.
    Less than half (60) of the Northeast distributing plants which were 
identified as being in business as of December 1998 were located in the 
6 Northeast MSAs that have over a million people each. This number 
includes 31 of the pool distributing plants. Under the consolidated 
order, it is anticipated that there would be 5 pool distributing plants 
in the Boston-Worcester-Lawrence area, 6 in the Philadelphia-
Wilmington-Atlantic City area, and 11 in the New York-Northern New 
Jersey-Long Island area. The Hartford, Connecticut, area would have 2 
pool distributing plants, Providence-Fall River-Warwick would have 3, 
and the Washington-Baltimore area would have 4 pool distributing 
plants.
    Of the remaining 81 distributing plants, 14 pool distributing 
plants were located in other MSAs as follows: 8 in New York; 4 in 
Pennsylvania; and 2 in Massachusetts. Sixty-seven distributing plants, 
including 19 pool distributing plants, were not located in MSAs.

Utilization

    According to October 1997 pool statistics for handlers who would be 
fully regulated under this Northeast order, the Class I utilization 
percentages for the New England, New York-New Jersey, and Middle 
Atlantic markets were 52, 45, and 53 percent, respectively. Based on 
calculated weighted average use values for (1) the current order with 
current use of milk, and (2) the current order with projected use of 
milk in the consolidated Northeast order, the potential impact of this 
decision on producers who supply the current market areas is estimated 
to be: New England, a 9-cent per cwt decrease (from $14.09 to $14.00); 
New York-New Jersey, a 8-cent per cwt increase (from $13.91 to $13.99); 
and Middle Atlantic, a 10-cent per cwt decrease (from $14.00 to 
$13.90). The weighted average use value for the consolidated Northeast 
order market is estimated to be $13.97 per cwt. For October 1997, 
combined Class I utilization for Orders 1, 2 and 4 was 47.7 percent 
based on 917.3 million pounds of producer milk used in Class I out of 
1.922 billion total producer milk pounds.
    The Northeast area is one of two consolidated marketing areas that 
would have a significantly higher-than-average percentage of its milk 
used in Class II. Currently, all three of the orders have Class II 
utilization between 15 and 25 percent. When the markets are combined 
the average for the consolidated market will be approximately 18 
percent.

Other Plants

    Located within the consolidated Northeast marketing area during May 
1997 were 95 supply or manufacturing plants: 13 in Vermont (4 in the 
Burlington area), 1 in New Hampshire and 10 in Massachusetts (all in 
the Boston-Worcester-Lawrence area), 1 in Rhode Island (in the 
Providence-Fall River-Warwick area), 7 in Connecticut (3 in the 
Hartford area and 4 in the New York-Northern New Jersey-Long Island 
area), 12 in New Jersey (all in the New York-Northern New Jersey-Long 
Island area), 2 in Delaware (one in the Philadelphia-Wilmington-
Atlantic City area), 7 in Maryland (four in the Washington-Baltimore 
area), 13 in Pennsylvania (5 in the Philadelphia-Wilmington-Atlantic 
City area), and 29 in New York (9 in the New York-Northern New Jersey-
Long Island area).
    Fifteen of the 95 plants are pool plants. Of these pool plants, 7 
are manufacturing plants--5 manufacture primarily powder, 1 
manufactures primarily cheese and 1 manufactures primarily other 
products. There are 8 pool supply plants--1 has no primary product, but 
ships only to distributing plants; 5 are supply plants that manufacture 
primarily Class II products, and 2 supply plants manufacture primarily 
cheese. Of the remaining 80 nonpool plants in the Northeast marketing 
area, 73 are manufacturing plants--37 manufacture primarily Class II 
products, 1 manufactures primarily butter, 33 manufacture primarily 
cheese and 2 manufacture primarily other products. Seven of the 
remaining nonpool plants are supply plants--2 are supply plants that 
manufacture primarily Class II products and 5 are supply plants that 
manufacture primarily cheese.
    There are also six supply or manufacturing plants in the 
unregulated area of New York--one in the unregulated county of 
Chautauqua, one in the unregulated portion of Cattaraugus County, two 
in the unregulated portion of Allegany County, and two in the 
unregulated portion of Steuben County. Two are pool supply plants--one 
manufactures primarily Class II products and the other manufactures 
primarily cheese. The remaining four are nonpool manufacturing plants--
three manufacture primarily cheese and one manufactures primarily Class 
II products.

[[Page 16055]]

Cooperative Associations

    During December 1997, 76 cooperative associations pooled their 
members' milk on the three Northeast orders. Three of the cooperatives 
pooled milk on all three orders, 3 pooled milk on both the New England 
and New York-New Jersey orders, and 3 others pooled milk on both the 
New York-New Jersey and Middle Atlantic orders. The 9 cooperative 
associations that pooled milk on more than one of the Northeast orders 
represented 72.6 percent of cooperative milk pooled under the 3 orders 
and 55 percent of the total milk. Seventy-six percent of the milk 
pooled in the Northeast is cooperative association milk, with 80 
percent of Federal Order 1 milk, 68.4 percent of Federal Order 2 milk, 
and 87 percent of Federal Order 4 milk pooled by cooperatives.
    The 5 cooperatives that market milk only under Order 1 account for 
26.7 percent of the milk marketed under that order by cooperative 
associations, and 21.3 percent of total milk marketed under Order 1. In 
Order 2, only 40.4 percent of cooperative association milk is marketed 
by the 59 co-ops that market milk only under Order 2. Milk marketed by 
these cooperatives represents 27.6 percent of the total milk pooled for 
December 1997. Three cooperative associations that marketed milk only 
on the Order 4 portion of the Northeast order marketed 8.2 percent of 
the milk marketed by cooperatives under this order. This amount of milk 
represented 7.2 percent of total milk pooled under Order 4 in December 
1997.

Criteria for Consolidation

    The current New England, New York-New Jersey, and Middle Atlantic 
Federal milk order marketing areas (Orders 1, 2, and 4) should be 
consolidated because of the interrelationship between Orders 1 and 2 
and between Orders 2 and 4 regarding route disposition and milk supply. 
Eighty percent of fluid milk disposition by handlers who would be fully 
regulated under the consolidated order is distributed within the 
consolidated marketing area. Fully regulated handlers account for 96 
percent of the fluid milk products distributed within the consolidated 
marketing area. The utilization of the three markets is similar, and 
several cooperative associations market their members' milk in all 
three markets. The three markets are surrounded by State-regulated and 
unregulated areas to the west and south, the Atlantic ocean to the 
east, and Canada to the north. The adjoining Maine State milk order 
also serves as somewhat of a barrier to milk marketing in the northeast 
by limiting the association of non-Maine milk with the Maine pool.
    The merger of these markets has been previously proposed by 
interested parties. A committee comprised chiefly of Northeast region 
cooperatives was formed over three years ago to study a merger of the 
three Federal orders. In support of a Northeast consolidation, the 
committee and other interested parties, including handlers and 
regulatory agencies, have noted: overlapping sales and procurement 
areas; a trend toward consolidation of cooperative processors and 
handlers in the region (leaving the remaining handlers with larger 
distributing areas and volumes); and regulation of plants by an order 
in which they are not located. The proponents of consolidation have 
indicated that consolidation would tend to solve some of the presently 
existing inequities and would lead to greater efficiency for handlers 
and order administration.

Discussion of Comments and Alternatives

    Prior to issuance of the proposed rule, alternatives to the 
consolidation of the order areas included in the Northeast marketing 
area that were considered included the addition of all currently 
unregulated and State-regulated area adjoining the Order 1, 2 and 4 
marketing areas. These considerations included Pennsylvania Milk 
Marketing Board (PMMB) Areas 2, 3, and 6, some or all of the non-
Federally regulated part of the State of Virginia, the unregulated 
areas of West Virginia and Maryland, the Western New York State order 
area and northern New York, northern Vermont and New Hampshire, pockets 
of unregulated area in Massachusetts, and the State of Maine. The 
proposed rule would have included in the consolidated Northeast 
marketing area the unregulated areas of Vermont, New Hampshire, 
Massachusetts, northern New York, and the Western New York State order 
area.
    Nearly 1,150 comments that dealt to some extent with the 
consolidation of the Northeast order area were received in response to 
the proposed rule. Approximately 125 of these comments favored adoption 
of a national marketing area map that would include all U.S. territory 
in the 48 contiguous states in one of ten Federal order areas. Over 950 
comments favored the expansion of the Northeast area into all of 
Pennsylvania, with more than 600 of these comments also favoring 
expansion into some combination of the unregulated areas of New York, 
Maryland, West Virginia, Vermont, Massachusetts, New Hampshire, and 
Maine. More than 50 commenters urged the continued omission of 
Pennsylvania Milk Marketing Board Areas 2, 3, and 6 from any of the 
consolidated Federal order areas.
    Most of the comments supporting expansion of the Northeast 
consolidated marketing area into non-federally regulated areas, 
especially Pennsylvania, argued that handlers in the non-federally 
regulated areas compete for milk supplies in the same milksheds and for 
fluid milk sales in the same markets as Federally-regulated handlers, 
with the surrounding federal order pool(s) carrying the necessary 
reserve milk supplies for the Class I sales distributed by non-
regulated handlers. In addition, the comments argued that dairy farmers 
whose milk is priced in individual handler pools at primarily-fluid 
handlers under PMMB regulation have a competitive advantage over 
neighboring producers whose milk is included in marketwide pools that 
blend the cost of balancing milk supplies for fluid use with returns 
from the fluid market.
    Nearly 60 comments, many from Pennsylvania dairy farmers, opposed 
expansion of the consolidated Northeast order area into Pennsylvania. 
Comments stated that the PMMB individual handler pools result in 
greater returns to producers, and producer returns would decline if 
handlers are required to pay the additional fluid value into the 
marketwide pool to subsidize cheese/powder plants.
    As stated in the introduction to the consolidation discussion, 
consolidation of the existing orders does not necessitate expansion of 
the consolidated orders into currently-unregulated areas, especially if 
such expansion would result in the regulation of currently-unregulated 
handlers. Handlers located in PMMB areas 2, 3, and 6 are regulated 
under the State of Pennsylvania if they do not have enough sales in any 
Federal order area to meet an order's pooling standards. These PMMB 
handlers are subject to minimum Class I pricing, sometimes at price 
levels that exceed those that would be established under Federal milk 
order regulation. When such plants do meet Federal order pooling 
standards, the State of Pennsylvania continues to enforce some of its 
regulations in addition to Federal order regulations. Inclusion of the 
Pennsylvania-regulated handlers in the consolidated marketing area 
would have little effect on handlers' costs of Class I milk (or might 
reduce them), and would reduce returns to a few producers. In

[[Page 16056]]

view of these considerations, it appears that stable and orderly 
marketing conditions can be maintained without extending full Federal 
regulation to State-regulated handlers.
    There are significant differences between PMMB regulation and 
Federal order regulation that make it difficult to determine whether 
PMMB regulation gives State-regulated handlers a cost advantage over 
Federally-regulated plants distributing milk in the same areas. Some of 
the differences between PMMB and Federal order regulation are: (1) The 
number of classes of use (two versus four); (2) the location at which 
milk is priced (where it is distributed for sale to consumers versus 
where it is received from producers for processing); (3) individual 
handler pooling versus marketwide pooling; and (4) State regulatory 
treatment of milk sold in interstate commerce, including milk 
distributed outside the State and received from outside the State. In 
addition to creating different costs among similarly-located State- and 
Federally-regulated handlers, PMMB regulation may result in different 
costs between similarly-located PMMB-regulated handlers. However, since 
the main focus of this rulemaking process has been to consolidate 
existing Federal marketing areas, it would be more appropriate to 
consider this issue of marketing area expansion in Pennsylvania at a 
future time.
    Maine has been and continues to be excluded from Federal order 
regulation. Three comments, two from New York State Dairy Foods and one 
from Crowley Foods, Inc., a fluid milk processor with distributing 
plants regulated under the New York-New Jersey and New England orders, 
suggested including Maine in the consolidated Northeast order on the 
basis that Maine regulation depends on balancing seasonal reserves on 
the New England order, and that the inclusion of Maine would allow 
similarly situated handlers equal opportunities. Five comments 
supported Maine's exclusion from Federal orders because of its 
geographic separation from other areas, its long history of successful 
milk marketing regulation, and the limited impact of its pricing system 
on other regulated areas.
    There appears to be little reason to add the State of Maine to the 
consolidated Northeast order area. Maine handlers with significant 
distribution in the Federal order areas can be and are pooled under 
Federal orders, limiting the extent of any competitive advantage. 
Inclusion of Maine-regulated handlers in the consolidated marketing 
area would have little effect on handlers' costs of Class I milk (or 
might reduce them), and would reduce returns to a few producers. When 
not pooled under Federal orders, Maine handlers are subject to minimum 
prices paid for milk, and producers are assured minimum prices in 
payment for milk. There is no compelling reason to extend Federal order 
regulation to encompass this State-regulated marketing area.
    The Western New York State order area, proposed to be added to the 
consolidated Northeast area because the persons regulated under that 
order had so requested, is not included. Upstate Milk Producers 
Cooperative (Upstate), the entity that would be most affected by the 
inclusion of this area, had supported its addition prior to issuance of 
the proposed rule. Because the proposed rule failed to include the 
State-regulated Pennsylvania areas in the consolidated Northeast area, 
however, Upstate determined that it would be faced with unfair 
competition from PMMB-regulated handlers and requested that the Western 
New York order area be left out of the consolidated Northeast order 
area.
    All of the comments received that dealt with the inclusion of 
unregulated area in the States of Massachusetts, New Hampshire, and 
Vermont and the currently-unregulated northern area of New York State 
in the consolidated Northeast order area supported the addition of this 
area. According to the comments, inclusion of the currently unregulated 
areas will assure that distributing plant operators that currently are 
fully regulated would be placed on an equal competitive footing with 
handlers currently unregulated, while having no negative effect on the 
producers who would be affected. Inclusion of these currently 
unregulated areas would lighten handlers' reporting burden and the 
market administrator's administrative burden in keeping separate data 
on sales in this small unregulated area. The number of handlers who 
would be affected by these additions is minimal, and the additions 
would enhance the efficiency of Federal order administration while 
easing the reporting burden of regulated handlers.
    In addition to the northern portions of New Hampshire, Vermont, and 
New York, and the small area of Massachusetts, the offshore 
Massachusetts counties of Dukes and Nantucket are added to the 
marketing area. The only entity currently operating in those counties 
(a producer-handler on Martha's Vineyard) would be exempt from the 
pooling and pricing provisions of the order by virtue of its status as 
a producer-handler and by having fewer than 150,000 pounds of route 
disposition per month. Mainland handlers distributing milk in these two 
counties would find their reporting burden eased if these counties 
become part of the marketing area.

Appalachian

    The consolidated Appalachian marketing area is comprised of the 
current Carolina (Order 5) and Louisville-Lexington-Evansville (Order 
46) marketing areas (less one Kentucky county that is included in the 
consolidated Southeast marketing area) as well as 64 counties and 2 
cities formerly comprising the marketing area of the Tennessee Valley 
Federal Order (Order 11), terminated in October 1997, and currently-
unregulated counties in Indiana and Kentucky. There are 297 counties 
and 2 cities in this consolidated marketing area. This area remains 
unchanged from the proposed rule.

Geography

    The Appalachian market is described geographically as follows: 7 
unregulated Georgia counties (formerly part of Order 11), 20 Indiana 
counties (17 currently in Order 46 and 3 currently unregulated), 81 
Kentucky counties (47 currently in Order 46, 16 formerly part of Order 
11, and 18 currently unregulated), all North Carolina and South 
Carolina counties (100 and 46, respectively, and all currently in Order 
5), 33 Tennessee counties (formerly part of Order 11), 8 counties and 2 
cities in Virginia (formerly part of Order 11), and 2 West Virginia 
counties (formerly part of Order 11).
    The consolidated Appalachian market reaches from the Atlantic 
coastline westward to southern Indiana and western Kentucky's border 
with Illinois. It is surrounded by Illinois on the west, Indiana, 
northeastern Kentucky, West Virginia and Virginia to the north, the 
Atlantic Ocean on the east, and Georgia, Alabama, western Tennessee and 
southwestern Kentucky to the south. Measuring the extreme dimensions, 
this market extends about 625 miles from its northwest corner in 
Indiana to its southeastern corner on the South Carolina-Georgia 
border, about 300 miles south-to-north from the South Carolina-Georgia 
border to the North Carolina-Virginia border, about 500 miles west-to-
east from the Appalachian-Southeast markets' border in Tennessee to 
eastern North Carolina, and about 375 miles west-to-east from the 
Illinois-Indiana border to West Virginia and Virginia.
    The Appalachian market is contiguous to 3 other consolidated

[[Page 16057]]

marketing areas: the Southeast area to the southwest and south, the 
Central area to the west and the Mideast area to the north. Unregulated 
counties in West Virginia and State-regulated area in Virginia also 
border this market to the north. North and South Carolina have almost 
500 miles of coastline on the Atlantic Ocean.
    In terms of physical geography, similarities exist across the 
states or areas included in this market. Southern Indiana and central 
Kentucky are in the Interior Low Plateau region where valleys and steep 
hillsides are typical. In this market, the Appalachian or Cumberland 
and Alleghany Plateaus are found in West Virginia, Virginia, Kentucky, 
Tennessee and northwestern Georgia on the western edge of the 
Appalachian Mountains. Eastern Tennessee and both western North and 
South Carolina are in the Blue Ridge region, which is part of the 
Appalachian Mountain range. Moving eastward toward the Atlantic Ocean, 
the central part of the Carolinas are in the Piedmont Plateau, with the 
Atlantic Coastal Plain covering approximately the remaining eastern 
half of both these states.
    Climatic types in this region vary somewhat. Humid subtropical 
climates are typical in most of North and South Carolina, as well as 
Virginia (which is affected by elevation differences) and southern 
Indiana. Humid continental climates are typical for northwestern 
Georgia, western North and South Carolina and southern West Virginia. 
Temperate climates are common in eastern Tennessee and central 
Kentucky.
    Much of the consolidated Appalachian area does not provide a 
hospitable climate or topography for dairy farming. As an agricultural 
pursuit, dairy farming is far down the list in the area, accounting for 
an average of less than five percent of all receipts from farm 
commodities for the states involved. Crops such as tobacco, corn and 
soybeans, and other livestock commodities such as cattle/calves, 
turkeys and broiler chickens are more prevalent in this region.

Population

    According to July 1, 1997, population estimates, the total 
population in the Appalachian marketing area is 17.3 million. There are 
24 Metropolitan Statistical Areas (MSAs) within the consolidated 
marketing area, containing 62.3 percent of the area's population. The 
largest 17 contain 57 percent of the population of the market. 
Charlotte, North Carolina, is the largest MSA in the marketing area 
with a population of 1.35 million. Charlotte is located near the South 
Carolina border about at the mid point of the North and South Carolina 
border, and about 250 miles west of the Atlantic coast. Less than 100 
miles to the north lies the second-largest MSA of Greensboro-Winston-
Salem-High Point, North Carolina, with a population of 1.15 million. 
About 50 miles east of Greensboro is the third-largest MSA, Raleigh-
Durham-Chapel Hill, with 1.05 million people. The Raleigh MSA abuts the 
Greensboro MSA. An additional four North Carolina MSAs are among the 
largest of the 17 MSAs containing 57 percent of the population of the 
consolidated marketing area, for a combined population of one million. 
North Carolina is the most populous state in the consolidated marketing 
area with 7.4 million; over sixty percent of the population of North 
Carolina is located in these seven MSAs.
    South Carolina is the second-most populous state in the 
consolidated area, with 3.8 million people. The Carolinas contain 
nearly two-thirds of the consolidated market's population. Greenville 
is the largest MSA in the state with a population of 905,000. 
Greenville is located in the northwest corner of the state. Charleston, 
the second-largest MSA in South Carolina, with over half a million 
people, is approximately at the midpoint of South Carolina's coast.
    The Tennessee portion of the consolidated Appalachian market has a 
population of 2 million, with three MSA's that are included in the 
largest 17 in the market. These three areas contain 1.6 million, or 
just under 80 percent of the population in that part of Tennessee that 
is included in the Appalachian marketing area. The largest Tennessee 
MSA is Knoxville, which is in the eastern end of Tennessee near North 
Carolina. Six counties make up the Knoxville MSA with a combined 
population of 650,000. The Johnson City-Kingsport-Bristol area, the 
second-largest Tennessee MSA, is located in the northeastern tip of 
Tennessee along the Virginia and North Carolina border, and contains 
460,000 people. Chattanooga, the third-largest MSA in Tennessee, is 
located on the Tennessee-Georgia border, and has a population of 
447,000. The three MSAs run northeast to southwest just west of the 
North Carolina border.
    The Kentucky portion of the consolidated Appalachian market 
contains 2.7 million people. There are two MSAs within the state that 
are included in the largest 17 in the market. The largest is 
Louisville, which lies on the border with Indiana and has a population 
of one million. Lexington, the second-largest Kentucky MSA, is located 
in the center of the state and has just under half a million people. 
Generally, the Kentucky counties in the Appalachian marketing area are 
not heavily populated. Only two have populations over 100,000. They are 
Jefferson county, where Louisville is located, and Fayette county, home 
to Lexington.
    Indiana counties in the Appalachian market have a population of .8 
million. Only Vanderburgh county has a population over 100,000. 
Evansville, the only MSA in the portion of Indiana included in the 
Appalachian market, is in Vanderburgh county. Evansville's MSA contains 
289,000 and is located on the Indiana-Kentucky border, near the 
Illinois state line.
    There are seven Georgia counties within the consolidated 
Appalachian marketing area, with a total population of .3 million. 
Three of them, Catoosa, Dade, and Walker, are part of the Chattanooga 
MSA. These three counties have a combined population of 124,000. The 10 
Virginia counties in the Appalachian market have a population of .3 
million. Three of the counties, Scott, Washington and Bristol City, are 
part of the Johnson City-Kingsport-Bristol MSA. The two West Virginia 
counties within the Appalachian market have a total population of .1 
million.

Fluid Per Capita Consumption

    Estimates of fluid per capita consumption within the consolidated 
Appalachian marketing area vary from 15.8 per month for South Carolina 
to 20.4 pounds per month for Indiana. Use of 17 pounds per month as a 
weighted average results in an estimated 294 million pounds of fluid 
milk consumption for the Appalachian marketing area. Appalachian 
handlers' route disposition within the area during October 1997 totaled 
283 million pounds, with another 21 million distributed by other order 
plants, partially regulated plants, and plants exempt both for reasons 
of both size and institutional status.

Milk Production

    Milk production data for the Appalachian consolidated order area 
has not been updated from December 1996 to October 1997 as have the 
data for most of the other consolidated order areas. The Tennessee 
Valley order was terminated October 1997. As a result, on the basis of 
10 percent of receipts distributed within the Southeast order area, 
three of the Tennessee Valley-regulated handlers became pool plants 
under the Southeast order. Consequently, milk production data for

[[Page 16058]]

the consolidated Appalachian and Southeast orders based on October 1997 
pool data would not be representative of the milk that would be pooled 
on those consolidated orders. Available information indicates that the 
sources of milk for the consolidated Appalachian market have not 
changed in any significant way from the December 1996 data.
    In December 1996, over 4,000 producers from 359 counties in 15 
states pooled 443.3 million pounds of producer milk on Orders 5, 11 and 
46. Approximately 71 percent of the milk pooled on the three orders was 
produced within the proposed consolidated marketing area.
    North and South Carolina are the only States that are located 
entirely within the consolidated marketing area, and provided nearly 
all of their producers' milk to Order 5 (encompassing the entire States 
of North and South Carolina), with 103.7 and 34 million pounds, 
respectively. Neither of these states produces enough milk to meet even 
the fluid milk requirements of its population. Kentucky producers 
pooled 101.1 million pounds on the three orders, with 89 percent 
produced within the consolidated marketing area. Tennessee producers 
pooled 69.9 million pounds on the three orders, principally on Order 
11, with 84 percent produced within the consolidated marketing area. 
Although Virginia is primarily outside the marketing area, producers 
from 40 Virginia counties supplied 68.5 million pounds of milk for the 
Tennessee Valley and Carolina order markets in December 1996. Georgia 
producers pooled 27.6 million pounds and Indiana producers pooled 21 
million pounds in December, with the balance of the milk pooled on the 
three orders originating in Alabama, Connecticut, Illinois, Maryland, 
Massachusetts, New Mexico, Pennsylvania, and West Virginia.
    Thirty-four counties each supplied over 3 million pounds of milk to 
the three markets consolidated in this area. One such county was 
located in New Mexico, and another in Pennsylvania. Eight were located 
in Kentucky, south and southwest of Lexington, and southeast of 
Louisville. Eleven were located in North Carolina west of the Raleigh-
Durham area, with all but one located near Greensboro, Winston-Salem, 
Asheville, Charlotte or Durham. Of the two South Carolina counties that 
supplied over 3 million pounds each, one was located northwest of 
Columbia, and the other northwest of Charleston. The five Tennessee 
counties that pooled over 3 million pounds of milk on the three orders 
are located in northeast and southeast Tennessee; two in the Johnson 
City-Kingsport-Bristol area and three southwest of Knoxville. Only one 
of the six counties in Virginia that supplied over 3 million pounds to 
Orders 5 and 11 is located within the marketing area. Five of the six 
are located in southwest Virginia, with the other in the northwest part 
of the State.

Distributing Plants

    Using distributing plant lists included in the proposed rule, with 
the pooling standards adjusted to 25 percent of route dispositions as 
in-area sales and updated for known plant closures through December 
1998, 31 distributing plants would be expected to be associated with 
the Appalachian marketing area, including 25 fully regulated 
distributing plants (23 currently fully regulated, 1 currently 
partially regulated, and 1 currently unregulated), 2 partially 
regulated (both currently partially regulated), 3 exempt plants, on the 
basis of having less than 150,000 pounds of total route disposition per 
month (2 currently fully regulated and 1 currently unregulated), and 1 
government agency plant (currently a government agency plant).
    Four of the 31 distributing plants expected to be associated with 
the consolidated area are located in Virginia, with only one located 
within the marketing area. The plant in the marketing area currently is 
fully regulated and is expected to remain so, and one of the other 
Virginia plants, currently partially regulated, also is expected to be 
fully regulated. The other two Virginia plants, both currently 
partially regulated, are expected to remain in that status. Since 
October 1997, 2 distributing plants in the marketing area have gone out 
of business.
    Under the consolidated Appalachian order, there would be 18 
distributing plants in the largest Appalachian MSAs having distributing 
plants. There would be 3 pool distributing plants in the Greensboro-
Winston-Salem-High Point area. The Charleston area would have 2 pool 
distributing plants. The Johnson City-Kingsport-Bristol, Tennessee, 
area would have 2 pool distributing plants. The Greenville-Spartanburg-
Anderson, South Carolina, area would have 2 pool distributing plants. 
The Knoxville area would have 1 pool distributing plant and 1 exempt 
plant, with less than 150,000 pounds of total route disposition per 
month. The Charlotte, Chattanooga, Lexington, Louisville, and 
Evansville areas would each have 1 pool distributing plant. The 
Raleigh-Durham area would have one government agency plant and one 
plant exempt on the basis of size.
    Of the remaining 13 distributing plants associated with the market, 
one pool plant would be located in a North Carolina MSA and one pool 
plant would be located in a South Carolina MSA. The eleven remaining 
distributing plants, eight of which are expected to be pool plants, 
would not be located in MSAs. Three (2 pool, 1 exempt) would be in 
North Carolina, and 3 would be in Virginia (1 pool and 2 partially 
regulated). Three plants in Kentucky, 1 in Indiana, and 1 in Tennessee 
are expected to be pool plants.
    The 25 plants expected to be fully regulated under the Appalachian 
order had distribution totaling 365 million pounds in October 1997, 
with 78 percent within the consolidated marketing area.
    A South Carolina plant included above in the description of fully 
regulated distributing plants--Superbrand Dairy Products, Inc., in 
Greenville (about 140 miles northeast of Atlanta)-- has a greater 
proportion of its sales in the Southeast market than in the Appalachian 
market. This plant currently is locked into regulation under the 
Carolina order based on its need to procure a milk supply in the 
Carolina order, although it has greater route disposition in the 
Southeast. This lock-in is included in the Appalachian order 
provisions.

Utilization

    As in the case of milk production data, October 1997 data for the 
three markets consolidated in the Appalachian order are not available 
because of the termination that month of the Tennessee Valley order. 
Instead of using October 1995 data from the proposed rule, however, 
September 1997 data is used as representative for this section.
    According to September 1997 pool statistics for handlers who would 
be fully regulated under this Appalachian order, the Class I 
utilization percentages for the Carolina and Louisville-Lexington-
Evansville markets and the former Tennessee Valley market were 86, 80, 
and 87 percent, respectively. Based on calculated weighted average use 
values for (1) the current order with current use of milk, and (2) the 
current order with projected use of milk in the consolidated 
Appalachian order, the potential impact of this decision on producers 
who supply the current market areas is estimated to be: Carolina, 
unchanged (from $13.59); Louisville-Lexington-Evansville, a 3-cent per 
cwt increase (from $12.73 to $12.76); and Tennessee Valley, a 6-cent

[[Page 16059]]

per cwt decrease (from $13.38 to $13.32). The weighted average use 
value for the consolidated Appalachian order market is estimated to be 
$13.35 per cwt. For September 1997, combined Class I utilization for 
Orders 5, 11 and 46 was 85.0 percent based on 349.0 million pounds of 
producer milk used in Class I out of 410.4 million total producer milk 
pounds pooled.

Other Plants

    Also located within the consolidated Appalachian marketing area 
during May 1997 were 13 supply or manufacturing plants: 4 in Kentucky 
(1 in the Louisville area), 5 in North Carolina (1 in the Charlotte-
Gastonia-Rock Hill area and one in the Greensboro-Winston-Salem-High 
Point area), 1 in Tennessee, and 3 nonpool cheese plants in Indiana (1 
in the Lexington area and one in the Louisville area). Three of the 13 
plants are pool plants, or have a ``pool side.'' Two of the three pool 
plants (one in Kentucky and the one in Tennessee) are ``split plants,'' 
that is, one side of a plant is a manufacturing facility, and the other 
side receives and ships Grade A milk, and accounting is done 
separately. Of these pool plants, the pool sides of the 2 split plants 
have no primary product, shipping only to distributing plants. The 
nonpool side of one of these plants manufactures cheese, while the 
nonpool side of the other manufactures powder. The other pool plant is 
a supply plant that manufactures primarily Class II products. Of the 
other nonpool plants in the Appalachian marketing area, 5 manufacture 
primarily cheese and 5 manufacture primarily Class II products.

Cooperative Associations

    Using September 1997 cooperative association information for the 
former Tennessee Valley order area and December 1997 information for 
the Carolina and Louisville-Lexington-Evansville (Order 46) orders, it 
can be estimated that approximately 75 percent of the milk in the 
consolidated Appalachian area was supplied by 12 cooperatives. 
Dairymen's Marketing Cooperative, Inc., and cooperative associations 
that merged to form Dairy Farmers of America supplied nearly half of 
the milk pooled on all three markets during these months. Carolina-
Virginia Milk Producers Association, Inc., supplied approximately 20 
percent of the milk pooled on both the Carolina and Tennessee Valley 
markets.
    Five cooperative associations supplied 16 percent of the milk 
pooled under the Carolina order in December 1997, but supplied no milk 
to the other two markets. Three of these cooperatives pooled no milk on 
any other Federal order market, while one also pooled milk on the two 
Ohio orders, the New York-New Jersey order, and the Middle Atlantic 
order. In addition to the Carolina order, the fifth cooperative pooled 
the milk of Texas producers on the Texas, Southern Illinois-Eastern 
Missouri, Chicago, and Southeast orders.
    In addition to the 55 percent of the September 1997 Tennessee 
Valley milk supply from cooperative associations pooling milk on the 
other two Appalachian markets, one cooperative that also pooled milk on 
the Southeast order in December 1997 supplied approximately 15 percent 
of the milk pooled on the Tennessee Valley order.
    Three cooperative associations that supplied less than 2 percent of 
the milk pooled under Order 46 did not supply milk to either the 
Carolina or Tennessee Valley markets.

Criteria for Consolidation

    Overlapping route disposition and procurement are the primary 
criteria on which this consolidation is based. There is a stronger 
relationship between the three marketing areas involved than between 
any one of them and any other marketing area on the basis of both 
criteria. Route dispositions within the Appalachian area by handlers 
who would be regulated under this order account for 93 percent of the 
total fluid milk products distributed in the area. The primary sources 
of the remaining 7 percent are four other consolidated order areas, 
with no more than 3 percent distributed by any of the four. Handlers to 
be regulated under the Appalachian order distributed nearly 80 percent 
of their route dispositions within the marketing area.
    Over two-thirds of the milk supply for the Appalachian market is 
produced within the marketing area, with a large part of the rest of 
the milk supply coming from unregulated areas to the north (Virginia 
and Pennsylvania). The Appalachian order area supplies a significant 
minority of the milk supply for the Southeast market, but in October 
1997 this amount was less than the amount supplied to the Southeast 
area from the Southwest area. In addition, a large proportion of the 
milk produced in the Appalachian order area that was pooled on the 
Southeast order in October 1997 was received at plants that formerly 
were pooled under the terminated Tennessee Valley order, and will be 
pooled under the consolidated Appalachian order. There is also common 
cooperative association affiliation between the markets.

Discussion of Comments and Alternatives

    Prior to issuance of the proposed rule, alternatives that were 
considered included combining all of the current Florida, Carolina, 
Tennessee Valley and Southeast order areas, consolidating the Southeast 
and proposed Appalachian areas, and including all of the State of 
Kentucky in one order, specifically the Southeast. These alternative 
consolidations were examined at length and were found to have less 
overlap in sales and procurement than the Appalachian marketing area.
    Thirteen comments that pertained specifically to the proposed 
Appalachian area were filed by 12 commenters in response to the 
proposed rule. Six of these comments supported the consolidation of the 
Appalachian marketing area as described in the proposed rule, including 
comments filed by several affected dairy farmers, the North Carolina 
Department of Agriculture, the North Carolina Dairy Producers 
Association, and a comment filed on behalf of Piedmont Milk Sales, 
Inc., Hunter Farms, Land O'Sun Dairies and Milkco, Inc. This last 
comment stated that the Appalachian and Southeast areas should not be 
combined because a separate milk order area should exist between the 
consolidated Northeast and Southeast order areas. The comment argued 
that existence of the Appalachian area would be expected to result in 
blend price differences between and among the Northeast, Mideast, 
Appalachian, Southeast and Florida orders such that milk supplies will 
move South and East as needed.
    Seven comments supported the combination of the Appalachian and 
Southeast areas, or at least the inclusion of more territory in the 
Appalachian area. The Kentucky Farm Bureau Federation urged that all 
Kentucky counties and the proposed Appalachian area be combined with 
the Southeast. The comment stated that this further consolidation would 
make milk utilization rates more similar across the order, would 
facilitate and encourage milk flow to deficit areas and minimize any 
negative price impacts on producers. According to the Carolina-Virginia 
Milk Producers Association, the existence of separate Southeast and 
Appalachian order areas could result in disorderly marketing conditions 
on the eastern side of the proposed Southeast order area. Comments 
filed by Trauth Dairy urged the inclusion of the northern areas of 
Kentucky, including the Newport, Kentucky, area containing Louis Trauth 
Dairy, Inc., in the

[[Page 16060]]

proposed Appalachian area rather then in the proposed Mideast area.
    A comment filed by DFA supported the inclusion of Charleston, West 
Virginia, and areas of West Virginia south of Charleston, as well as 
the Ohio counties surrounding Cincinnati and the northern counties of 
Kentucky, in the Appalachian market rather than the Mideast market to 
promote orderly marketing of milk. The DFA comment stated that adequate 
milk supplies do not exist in close proximity to processors in the 
greater Cincinnati, Ohio, and Charleston, West Virginia, markets, and 
that an economic incentive must be provided to assure a milk supply to 
those processors. A second DFA comment recommended that the Southeast 
and Appalachian order areas be combined because the primary 
supplemental milk supply for both areas is in more western states 
(Texas, New Mexico and Missouri). The comment stated that it is likely 
that these supplemental supplies would be likely to be associated with 
the Southeast order because of its greater proximity, and eastern 
Southeast milk would be ``stair-stepped'' across to the Appalachian 
order to reduce hauling costs. According to DFA, during the market's 
flush production month, the Appalachian order would not bear the burden 
of surplus milk since the distant surplus milk would be associated with 
the Southeast order in addition to the eastern Southeast milk supplies 
that also would be associated with the Southeast order to avoid 
inefficient milk movements, resulting in a disproportionate burden of 
surplus milk pooled on the Southeast order.
    For the month of October 1997, a month when some supplemental 
supplies usually are required for short markets, nearly one-quarter of 
the producer milk pooled on the current Southeast order originated in 
the States of Missouri, New Mexico, and Texas. For the same month, just 
over 1 percent of the producer milk pooled on the Louisville-Lexington-
Evansville and Carolina orders was produced in those more western 
States. It is clear that the western milk is a much more important 
source of supply for the Southeast area than for the Appalachian area, 
and that the magnitude of this difference is an indication of how much 
these two consolidated markets differ. The ability to pool surplus milk 
on the Southeast order is directly related to the addition of the 
southern Missouri/northwest Arkansas area to the Southeast marketing 
area, an addition that was strongly urged by DFA. Concerns about the 
ability of handlers in the eastern part of the Southeast area to 
attract a supply of milk could be addressed more appropriately by the 
inclusion of transportation credits in the Southeast order than by 
consolidation with the Appalachian area.
    A dairy farmer in West Virginia urged that the State of West 
Virginia be added to the Appalachian order area because milk usage for 
Class I milk and cost of production would then become similar to the 
other states in the Appalachian area. Another dairy farmer referred to 
a comment filed earlier to include Maryland in the Appalachian area 
instead of the Northeast.
    As discussed in the proposed rule, consolidating the Carolina and 
Tennessee Valley markets with the Southeast does not represent the most 
appropriate consolidation option because of the minor degree of 
overlapping route disposition and producer milk between these areas. 
That conclusion continued to be supported by data gathered for 
distributing plants for October 1997.
    The northern Kentucky/southern Ohio and West Virginia area was 
examined in painstaking detail with updated data to determine whether 
or where this area could be divided to reflect handlers' sales areas 
and supply procurement areas better than in the proposed rule. No 
support for such a modification to the proposed rule could be found. 
Only one Appalachian handler has significant route disposition within 
the Ohio Valley order area, while a very small volume of Class I sales 
moves from the Ohio Valley area into the Order 46 area. There is even 
less overlap between either West Virginia or Maryland and the 
Appalachian area, and no justification for changing the marketing area 
of either of these States.

Florida

    The consolidated Florida marketing area is comprised of the three 
current Federal order marketing areas contained wholly in the state of 
Florida: Upper Florida (Order 6), Tampa Bay (Order 12) and Southeastern 
Florida (Order 13). There are 63 counties in this consolidated area (40 
in Order 6, 13 in Order 12, and 10 in Order 13). This area remains 
unchanged from the proposed rule.

Geography

    The consolidated Florida marketing area is described geographically 
as all counties in the State of Florida, with the exception of the four 
westernmost counties in the Florida Panhandle. This marketing area is a 
large peninsula, ranging from about 140 miles in width in the north to 
about 50 miles in width in the south, that extends south from the 
southeast U.S. about 400 miles between the Atlantic Ocean and the Gulf 
of Mexico. Also included in the Florida market is approximately 150 
miles of the Panhandle, a narrow strip of land extending west along the 
Gulf of Mexico from the northern part of the peninsula. The water 
surrounding most of Florida's peninsula constitutes a natural boundary, 
as east-to-west travel is limited.
    Almost all of Florida has a humid subtropical climate. The southern 
end of the state and the islands south of the peninsula have a tropical 
wet and dry climate. In general, the state's climate can and does 
affect levels of milk production negatively. Seasonal variation in 
production for this market typically is greater than for most other 
U.S. regions. The importance of dairy farming as an agricultural 
pursuit in Florida is relatively minor (7 percent of total receipts 
from agricultural commodities), with several crops contributing more 
total receipts to the State's income. However, no livestock commodity 
is as important in Florida as dairy farming.

Population

    According to July 1, 1997, population estimates, the total 
population in the consolidated Florida marketing area is 14.1 million. 
Ninety-three percent of the population of the marketing area is located 
in Metropolitan Statistical Areas (MSAs). The two largest MSAs are 
Miami-Fort Lauderdale (Miami) on the eastern side of the southern end 
of the peninsula, and Tampa-St. Petersburg-Clearwater (Tampa) midway on 
the western side of the peninsula. Broward and Dade Counties comprise 
the Miami population center (currently in Order 13) with a population 
of 3.5 million. The Tampa population center (currently in Order 12) is 
comprised of Hernando, Hillsborough, Pasco and Pinellas counties with a 
population of 2.2 million. The six counties in these two population 
centers represent about 41 percent of the total marketing area 
population.

Fluid Per Capita Consumption

    Florida customarily is considered a deficit milk production state. 
For much of the year, milk needs to be imported from other states in 
order to meet the demand for fluid consumption. Based on the population 
figure of 14.1 million and an estimated per capita fluid milk 
consumption rate of 17 pounds of fluid milk per month, total fluid milk 
consumption in the Florida marketing area is estimated at 239.7 million 
pounds per month.

[[Page 16061]]

    During October 1997, 216 million pounds of milk were disposed of in 
the consolidated marketing area by all Florida distributing plants 
expected to be fully regulated under the Florida order. Other order 
plants had route disposition within Florida of 14.2 million pounds. 
Another 1.3 million pounds of milk was distributed within the 
consolidated area by partially regulated handlers, producer-handlers, 
and exempt plants. The discrepancy between the actual total route 
disposition of 231.5 million pounds and the estimated consumption level 
of 239.7 million pounds may be explained by the older than average 
population in Florida.

Milk Production

    In October 1997, 175.8 million pounds of milk produced in Florida 
were pooled in four Federal orders; 98.5 percent of this milk was 
pooled on the three current Florida orders. About 340 producers located 
in Florida (96 percent of all Florida producers having association with 
Federal orders) had producer milk pooled on at least one of the three 
Florida markets. A small number of Florida producers had producer milk 
associated with Order 7, while more than 100 Georgia producers had 
producer milk associated with the Florida markets. Additionally, 44.7 
million pounds of Georgia milk was pooled on the three Florida markets; 
89 percent of this milk went to Order 12.
    There are 40 counties in Florida that pooled milk in at least one 
of the three current Florida orders. Eight of these counties produced 
66.5 percent of the milk pooled.
    Three counties (Gilchrist, Lafayette and Suwannee, about 75 miles 
west of Jacksonville) had 42.3 million pounds of producer milk. For 
these three counties, 72.6 percent of the October 1997 producer milk 
was pooled on the Tampa Bay order, which is located approximately 150 
miles southeast of the counties.
    Nearly 90 percent of Clay County's producer milk was pooled in 
Order 6. This county is in the Jacksonville MSA, which is the largest 
population center in Order 6.
    Twenty-two and one-half million pounds of producer milk came from 
Hillsborough, Highlands, and Manatee Counties, all part of the Order 12 
market. However, 64 percent of this milk was pooled on Order 13, with 
the rest pooled on Order 12.
    Okeechobee County, located in the Order 13 marketing area about 125 
miles northwest of the Miami area, is by far the largest milk producing 
county in Florida. The county had 43.8 million pounds of producer milk 
in October 1997, almost all of which was pooled on Order 13.

Distributing Plants

    Using plant lists included in the proposed rule, with pooling 
standards adjusted to 25 percent of route dispositions as in-area 
sales, updated for known plant closures through December 1998, 12 
plants would be expected to be fully regulated under the consolidated 
Florida market. Four of these plants are located in the Miami MSA and 
three in the Tampa MSA. Three plants are located in mid-Florida, one in 
the Orlando area and two in the Lakeland-Winter Haven area. Two more 
are located in northeast Florida: one in the Jacksonville area, and one 
in Daytona Beach. One plant in the Tampa MSA, currently fully 
regulated, would be exempt on the basis of size. One partially 
regulated plant in the Jacksonville area would be expected to continue 
its partially regulated status, and one producer-handler is not located 
within an MSA.
    Slightly less than two-thirds of the consolidated market's 
population is contained in the MSAs where fully regulated plants are 
located.

Utilization

    According to October 1997 pool statistics for handlers who would be 
fully regulated under this Florida order, the Class I utilization 
percentages for the Upper Florida, Tampa Bay, and Southeastern Florida 
markets were 91, 88, and 94 percent, respectively. Based on calculated 
weighted average use values for (1) the current order with current use 
of milk, and (2) the current order with projected use of milk in the 
consolidated Florida order, the potential impact of this rule on 
producers who supply the current market areas is estimated to be: Upper 
Florida, a 4-cent per cwt decrease (from $15.39 to $15.35); Tampa Bay, 
a 8-cent per cwt increase (from $15.54 to $15.62); and Southeastern 
Florida, a 13-cent per cwt decrease (from $16.03 to $15.90). The 
weighted average use value for the consolidated Florida order market is 
estimated to be $15.69 per cwt. For October 1997, combined Class I 
utilization for the three Florida markets was 90.6 percent based on 
197.5 million pounds of producer milk used in Class I out of 218.0 
million total producer milk pounds.

Other Plants

    Also located within the Florida marketing area during May 1997 were 
four supply or manufacturing plants, three of which are not associated 
with the current markets' pools. Three ice cream plants are located in 
the Tampa area and one pool supply plant is in the Jacksonville area.

Cooperative Associations

    In December 1997, three cooperatives marketed milk in the Florida 
markets, representing nearly 100 percent of the milk marketed. 
Effective October 1, 1998, Florida Dairy Farmers Association, which 
marketed milk under all three Florida orders, and Tampa Independent 
Dairy Farmers' Association, Inc., which marketed milk only under the 
Tampa Bay order, merged to create Southeast Milk, Inc. The December 
1997 production marketed by these two cooperatives in all three Florida 
orders comprised 93 percent of the producer milk associated with the 
three markets. Dairy Farmers of America, Inc. (DFA), members marketed 
nearly 7 percent of producer milk associated with the three Florida 
orders on the Tampa Bay and Southeastern Florida pools.

Criteria for Consolidation

    The consolidated Florida market should encompass the current 
marketing areas of the Upper Florida, Tampa Bay and Southeastern 
Florida Federal milk orders. Natural boundary limitations and 
overlapping sales and procurement areas among the three orders are 
major reasons for consolidation, as well as a measure of association 
evidenced by cooperative association proposals to consolidate these 
three marketing areas. Further, the cooperative associations in this 
area have worked together for a number of years to accommodate needed 
movements of milk between the three Florida Federal orders, and into 
and out of the area.

Discussion of Comments and Alternatives

    Prior to the issuance of the proposed rule, the inclusion of other 
Federal order marketing areas with the consolidated Florida area was 
considered because of the existence of some overlap of sales, 
procurement of producer milk, and dispositions of surplus milk. 
However, because of the closeness of the relationship between the 
current Florida markets and the lack of significant overlap of sales or 
production with other order areas no basis was seen for expanding the 
consolidation any further.
    Only three comments were received that pertained specifically to 
the consolidated Florida area. These comments, filed by the three 
cooperative associations with

[[Page 16062]]

membership in the consolidated Florida marketing area, supported the 
consolidation of the current three Florida order areas without any 
additional territory.

Southeast

    The consolidated Southeast marketing area is comprised of the 
current Southeast (Order 7) marketing area, portions of the current 
Southwest Plains (Order 106) marketing area in northwest Arkansas and 
southern Missouri, and six southeastern Missouri counties from the 
current Southern Illinois-Eastern Missouri (Order 32) marketing area. 
Also included are 16 currently unregulated Missouri counties, 21 
currently unregulated Kentucky counties, and 1 Kentucky county that 
currently is part of the Louisville-Lexington-Evansville (Order 46) 
marketing area. There are 572 counties in this consolidated area. A 
partial county in Missouri that was proposed to be included in the 
Southeast area has been omitted.

Geography

    The Southeast market is described geographically as follows: all 
counties or parishes in Alabama, Arkansas, Louisiana, and Mississippi 
(67, 75, 64, and 82 counties, respectively), 4 in Florida, 152 in 
Georgia, 44 in Missouri, 62 in Tennessee and 22 in Kentucky (one--Logan 
County--currently is in Order 46, and 21 currently are unregulated). Of 
these 21 counties, 14 were part of the former Paducah, Kentucky (Order 
99) marketing area. Eleven Arkansas and 22 Missouri counties are part 
of the current Order 106 marketing area. Six Missouri counties are part 
of the current Order 32 marketing area. Sixteen southeastern Missouri 
counties currently are unregulated (4 of these were part of the former 
Paducah Federal milk order). A partial Missouri county that was 
proposed to be part of the Southeast area is omitted for the purpose 
reducing the incidence of partially regulated counties.
    The Southeast market spans the southeastern area of the United 
States from the Gulf of Mexico and the Alabama/Georgia-Florida border 
north to central Missouri, Kentucky, Tennessee, and South Carolina, and 
from the Atlantic Ocean west to Texas, Oklahoma, and Kansas. Measuring 
the extreme dimensions, this market extends about 575 miles north to 
south from central Missouri to southern Louisiana and 750 miles west to 
east from Louisiana's border with Texas to the Atlantic Ocean coast in 
southern Georgia.
    The Southeast marketing area is contiguous to 4 other consolidated 
marketing areas: Florida to the southeast, the Southwest to the west, 
the Central to the northwest and the Appalachian to the northeast and 
east. Georgia's coastline on the Atlantic Ocean is about 100 miles in 
length, while western Florida, Alabama, Mississippi, and Louisiana 
extend about 600 miles along the Gulf of Mexico coastline. Also 
contiguous to the current Southeast market are currently unregulated 
counties in Texas, Missouri, Kentucky (and as of October 1, 1997, the 
Tennessee Valley [Order 11] marketing area). The consolidated marketing 
areas would encompass all of these counties in the Southwest, Central, 
Appalachian or Southeast marketing areas, with some currently-
unregulated counties in central Missouri remaining unregulated under 
this proposal.
    In terms of physical geography, the Southeast region is generally 
flat or gently rolling low-lying land. Relatively higher elevations 
which might potentially form natural barriers or obstruct easy 
transportation exist in northwest Arkansas and northeast Georgia.
    Moving from the south to the north of the Southeast market, 
climates range from humid subtropical in coastal areas to warm and 
humid or humid continental to temperate in Tennessee and Kentucky. 
Warm, humid summers and mild winters are typical in the Southeast. 
These types of climates can severely limit the production level of 
dairy herds in the summer.

Population

    According to July 1, 1997, population estimates, the total 
population in the consolidated Southeast marketing area is 26.9 
million. The 42 Metropolitan Statistical Areas (MSAs) in the market 
account for 62.3 percent of the total marketing area population. Almost 
half of the Southeast population is located in the 17 most populous 
MSAs. Eight MSAs have populations greater than 500,000 each; their 
total population is about 36 percent of the Southeast population. 
Because of the large number of MSAs in the Southeast market and also 
because no large (i.e., greater than 500,000) population centers are 
added to this market, only those areas with populations greater than 
500,000 are described in greater detail.
    Over 25 percent of the Southeast market's population is located in 
Georgia, the most populous of the Southeast market states, with 7.2 
million people. Almost half of Georgia's population is concentrated in 
the Atlanta MSA, located about 60 miles south of the Southeast-
Appalachian marketing area boundary in the northwest portion of the 
state. Atlanta is the largest city in the Southeast market with a 
population of 3.6 million.
    With 4.3 million people, Alabama is the Southeast market area's 
third most populous state. Birmingham and Mobile, the state's two 
largest MSA regions, are among the top eight in population in the 
Southeast. The Birmingham area has a population of about 900,000 and 
ranks 5th in size among all Southeast area MSAs. Birmingham is located 
about 150 miles west of Atlanta in north central Alabama. The Mobile 
area is a Gulf of Mexico port city in southwestern Alabama. With a 
population of 527,000, Mobile is the 8th largest population center in 
the Southeast market area.
    Louisiana is the second most populated state in the Southeast 
market area with 4.4 million people. Two of the Southeast's 8 largest 
MSAs are located in Louisiana--New Orleans, the second largest MSA with 
1.3 million people and Baton Rouge, the 6th largest MSA with almost .6 
million people. New Orleans is located in the state's ``toe'' in 
southeastern Louisiana. Baton Rouge also is located in Louisiana's 
``toe,'' about 80 miles west of New Orleans.
    Arkansas has a total population of 2.5 million--2 million from the 
current Southeast marketing area and an additional 500,000 from the 
Arkansas portion of the Southwest Plains marketing area. The Little 
Rock-North Little Rock, Arkansas (Little Rock) MSA, in the center of 
Arkansas, has the 7th largest population concentration in the Southeast 
market area with 552,000.
    The portion of Tennessee in the Southeast marketing area is the 
fourth most populated with 3.4 million people and is home to the third 
and fourth largest MSAs in the Southeast. The Nashville area, with a 
population of 1.1 million, is located in central Tennessee. The 
Memphis, Tennessee/Arkansas/Mississippi MSA, also with a population of 
1.1 million, is located near these three states' borders.
    Other states or portions of states in the Southeast marketing area 
do not have MSAs with greater than 500,000 population. Mississippi, the 
Southeast's 5th most populous state, has a total population of 2.7 
million. The Missouri, Florida, and Kentucky counties in the Southeast 
market have populations of 1.3 million, 602,000 and 529,000, 
respectively.

Fluid Per Capita Consumption

    Fluid per capita consumption estimates vary throughout the 
Southeast

[[Page 16063]]

market from a low of 16 pounds of fluid milk per month in Mississippi 
to a high of 19 pounds in Arkansas and Kentucky. Multiplying the 
individual states' consumption rates by their population results in an 
estimated fluid milk consumption rate of 468 million pounds of fluid 
milk per month for the Southeast marketing area.
    Route distribution in the consolidated Southeast area by handlers 
expected to be regulated under the consolidated Southeast order 
(including the 3 Arkansas and Missouri plants) equaled 380 million 
pounds within the Southeast marketing area in October 1997. Other fluid 
milk dispositions in the consolidated Southeast marketing area came 
from plants expected to be regulated under other orders (66.7 million 
pounds) and from partially regulated, exempt and producer-handler 
plants (2 million pounds).

Milk Production

    Milk production data for the Southeast consolidated order area have 
not been updated from January 1997 to October 1997 as have the data for 
most of the other consolidated order areas. As a result of terminating 
the Tennessee Valley order as of October 1997, three of the Tennessee 
Valley-regulated handlers became pool plants under the Southeast order, 
on the basis of having at least 10% of their sales in the Southeast 
order marketing area. These handlers will become regulated under the 
consolidated Appalachian order when the consolidated orders become 
effective. Consequently, milk production data for the consolidated 
Southeast order area based on October 1997 pool data would not be 
representative of the consolidated Southeast market. Available 
information indicates that the sources of milk for the consolidated 
Southeast market have not changed significantly from the January 1997 
data.
    In January 1997, 4,180 producers from 388 counties pooled 477.4 
million pounds of producer milk on the current Southeast market. Over 
85 percent of the Southeast's producer milk came from Southeast market 
area counties. Of the 388 counties, 19 pooled over 5 million pounds 
each, accounting for 39 percent of Order 7's producer milk. Of these 19 
counties, 2 Texas counties are located outside the Southeast marketing 
area. Because of the large number of counties, only the locations for 
those top 19 production counties are described in greater detail. 
However, the volume of producer milk, number of producers (farms) and 
number of counties is provided for each state within the market area.
    Almost 73 million pounds of milk were pooled on the Southeast 
market from 581 producers in 28 Louisiana parishes in January 1997. Top 
production parishes are Tangipahoa, Washington and St. Helena, all 
located in the state's ``toe,'' north of New Orleans and northeast of 
Baton Rouge, each bordering Mississippi. Another high production area 
is centered on De Soto Parish in northwestern Louisiana. These four 
parishes account for over 62 million pounds of producer milk, with 76 
percent coming from Tangipahoa and Washington parishes.
    Almost 67 million pounds of milk were pooled on the Southeast 
market from 331 producers in 68 Georgia counties in January 1997. Of 
this volume, 64 million came from 312 producers in 64 Georgia counties 
in the Order 7 marketing area. The balance is associated with Georgia 
producers located in the marketing area of the former Order 11 
(Tennessee Valley). Top production counties are Putnam, Morgan and 
Macon, which pooled 27 million pounds of producer milk on Order 7.
    About 65 million pounds of milk were pooled on the Southeast market 
from 580 producers in 46 Tennessee counties in January 1997. Of this 
volume, 62 million came from 562 producers in 42 Tennessee counties in 
the Order 7 marketing area. The balance is associated with Tennessee 
producers located in the marketing area of the former Federal Order 11. 
Two high production counties in the state are Marshall and Lincoln, 
located in south central Tennessee. These counties contributed over 12 
million pounds of producer milk to the Order 7 pool in January 1997.
    About 61 million pounds of milk were pooled on the Southeast market 
from 443 producers in 48 Mississippi counties in January 1997. Top 
production counties are Walthall and Pike, in southern Mississippi on 
the state's border with Louisiana. These two counties adjoin the heavy 
milk production area in Louisiana. The counties contributed 15 million 
pounds of producer milk to the Order 7 pool in January 1997.
    About 32 million pounds of milk were pooled on the Southeast market 
from 408 producers in 19 Kentucky counties in January 1997. 
Additionally, 116 producers in 15 of these counties pooled almost 9 
million pounds of producer milk on Orders 11 and 46 (Louisville-
Lexington-Evansville). Two counties, Barren and Monroe, contributed 
over 13 million pounds of producer milk. These contiguous counties are 
in south central Kentucky about 80 miles northeast of Nashville, 
Tennessee.
    Four Missouri counties--Wright, Texas, Laclede and Howell--pooled 
33 million pounds of producer milk on Order 7. All of these counties 
currently are located in the Order 106 (Southwest Plains) marketing 
area in southern Missouri.
    Other Southeast marketing area states or areas contribute producer 
milk to the Southeast marketwide pool. About 37 million pounds of milk 
were pooled on the Southeast market from 205 producers in 51 Alabama 
counties, and 25 million pounds were pooled from 343 producers in 39 
Arkansas counties. Sixteen Florida producers from 6 counties (2 in the 
Southeast market area) pooled 3.5 million pounds on Order 7 in January 
1997.
    In January 1997, Order 7 producer milk also originated in Missouri 
counties not included in the Southeast marketing area, Texas, New 
Mexico, Indiana and Oklahoma. Large amounts of milk from Missouri (21 
million pounds in addition to the 33 million described previously) and 
Texas (46 million pounds--20 million from Hopkins and Erath Counties) 
were associated with the Order 7 pool.

Distributing Plants

    Using distributing plant lists included in the proposed rule, with 
the pooling standards adjusted to 25 percent of route disposition as 
in-area sales, updated for known plant closures through December 1998, 
48 distributing plants located in the consolidated Southeast marketing 
area would be expected to be associated with the Southeast market 
(including the added territory in northwestern Arkansas and southern 
Missouri). These plants include 36 fully regulated distributing plants, 
3 of which are currently regulated under the Southwest Plains order and 
one of which is currently partially regulated. In addition, it is 
expected that 3 plants would be partially regulated (one of which 
currently is fully regulated and two of which are partially regulated), 
and 7 plants that are, and are expected to be, exempt--1 on the basis 
of size and 6 on the basis of institutional status. An additional 
currently regulated plant is expected to be exempt on the basis of 
institutional status. Of the 36 fully regulated plants, 16 are located 
in the largest eight MSA regions. One distributing plant located in the 
consolidated Appalachian marketing area that has more than half of its 
route disposition within the Southeast marketing area would be locked 
into regulation under the Appalachian order.

[[Page 16064]]

    Since October 1997, it is known that 2 pool distributing plants 
have gone out of business. One of these plants was located in Louisiana 
and the other in Missouri.
    Of the 48 distributing plants, Georgia has 9; Louisiana, 10; 
Mississippi, 6; Alabama, 8; Arkansas, 6; Tennessee, 5; Missouri, 2; and 
Kentucky, 2. No distributing plants are located in the Florida counties 
included in the Southeast market area.
    In Georgia, three pool distributing plants and one producer-handler 
are located in the Atlanta area, with 3 others elsewhere in the State. 
Georgia also has 1 partially regulated handler and 1 government agency 
(state prison) plant.
    Eight of Louisiana's 10 distributing plants currently are and would 
continue to be fully regulated (pool plants) in this consolidated 
marketing area. Four of these 8 are located in either the New Orleans 
or Baton Rouge areas (2 in each). Four other pool distributing plants 
are located in Louisiana. The remaining two plants are affiliated with 
educational institutions.
    Four of Mississippi's 6 currently operational distributing plants 
would be fully regulated pool plants in the Southeast market. Two 
educational institutions also have plants.
    Seven of Alabama's distributing plants are fully regulated. One is 
located in the Birmingham area and 2 are located in the Mobile area. Of 
the remaining four, 2 are in northern Alabama, one is in central 
Alabama, and one is in the state's southeastern corner.
    Four of Arkansas' 6 currently operational distributing plants are 
fully regulated; two are in the Little Rock area, and the other 2 are 
located in northwest Arkansas. Also located within Arkansas are 2 
exempt distributing plants--one on the basis of size and one that is a 
state prison plant. Four of Tennessee's 5 distributing plants are, and 
are expected to be, fully regulated. Three of the 4 are located in the 
Nashville area and one fully regulated plant and one partially 
regulated plant are located in the Memphis area.
    Two distributing plants that would be fully regulated under the 
Southeast market are located in the currently unregulated Kentucky 
counties that are added to this marketing area. One is located in 
Fulton in the southwest corner of Kentucky on the Tennessee border, and 
the other about 30 miles east of Fulton.
    Two Missouri distributing plants are located in the consolidated 
Southeast area. One is a pool plant located in Springfield, and the 
other a plant exempt on the basis of institutional status located just 
south of the Springfield MSA.

Utilization

    As in the case of milk production data, October 1997 data for the 
consolidated Southeast order are not used because of the termination 
that month of the Tennessee Valley order. Instead of using October 1995 
data from the proposed rule, however, September 1997 data is used as 
representative for this section.
    According to September 1997 pool statistics for handlers who are 
expected to be fully regulated under the Southeast order, the Class I 
utilization for the Southeast market was 84 percent. Based on 
calculated weighted average use values for (1) the current order with 
current use of milk, and (2) the current order with projected use of 
milk in the consolidated Southeast order, the potential impact of this 
rule on producers who supply the current market area is estimated to be 
a 3-cent per hundredweight increase (from $13.60 to $13.63).
    For September 1997, Class I utilization for the Southeast market 
was 83.9 percent based on 357.2 million pounds of producer milk used in 
Class I out of 426 million total producer milk pounds.

Other Plants

    Also located within the Southeast marketing area during May 1997 
were 37 supply or manufacturing plants: 1 in Kentucky, 5 in Alabama 
(including 1 in the Birmingham area), 5 in Arkansas (including 1 in the 
Little Rock area), 7 in Georgia (including 4 in the Atlanta area), 3 in 
Louisiana (including 1 in the Baton Rouge area), 11 in Missouri, 2 in 
Mississippi, and 3 in Tennessee (including 1 each in the Memphis and 
Nashville areas). Eight of the 37 plants are pool plants. Of these pool 
plants, 2 primarily ship to distributing plants, 3 manufacture cheese, 
1 manufactures Class II products, 1 manufactures powder and 1 primarily 
manufactures other products. Of the Southeast marketing area's 28 
nonpool plants, 13 manufacture primarily Class II products, 3 
manufacture cheese, 10 manufacture primarily other products, and 1 each 
manufacture primarily butter and cheese. One plant is a ``split 
plant,'' with one side serving as a manufacturing facility primarily 
for Class II products, while the other side receives and ships Grade A 
milk.

Cooperative Associations

    In December 1997, thirteen cooperative associations, including 3 of 
those that merged to become Dairy Farmers of America (DFA), represented 
members marketing 73 percent of the milk pooled on the Southeast 
market.
    This number of cooperative associations is more than twice the 
number (six) that pooled milk on the Southeast order in December 1995. 
Of those six, National Farmers Organization (NFO) ceased marketing milk 
in the Southeast. Milk Marketing, Inc., headquartered in Strongsville, 
Ohio, and one of the cooperatives that formed DFA, marketed a small 
amount of milk in the Southeast in December 1997, and two cooperatives 
began marketing milk after December 1995. In addition, 5 cooperative 
associations representing Texas and New Mexico producers pooled milk on 
the Southeast order in December 1997.
    The DFA cooperatives represented 71 percent of co-op milk and 52 
percent of the total milk supply pooled under the Southeast order 
during December 1997. For the same month, Carolina-Virginia Milk 
Producers Association, Inc., represented 9 percent of the milk pooled 
by cooperative associations; the two new cooperatives pooled 8 percent 
of co-op milk; and the five Texas/New Mexico cooperatives pooled 7 
percent.

Criteria for Consolidation

    Retention of the Southeast marketing area as a single area is based 
on overlapping route dispositions within the marketing area to a 
greater extent than with other marketing areas. Procurement of producer 
milk also overlaps between states within the market. There is also a 
seasonal need for milk from outside the marketing area. However, the 
amount of supplemental seasonal supplies is not as great as the amount 
of milk that is actually pooled under the order from distant areas. 
There is common cooperative association membership within the marketing 
area.
    As noted in the proposed rule, the addition of northwest Arkansas 
and southern Missouri to the marketing area is primarily in response to 
comments received during the public comment period.

Discussion of Comments and Alternatives

    Prior to issuance of the proposed rule, alternatives that were 
considered included incorporating all of the State of Kentucky in the 
Southeast area, dividing the Southeast area on the state line between 
Mississippi and Alabama, combining the Florida, Carolina, Tennessee 
Valley and Southeast order areas, and adding the eastern part of the 
Texas order area to the Southeast. These

[[Page 16065]]

alternatives were analyzed in detail for the proposed rule and 
determined not to result in a configuration of marketing areas as 
appropriate as those proposed for reasons discussed in the proposed 
rule.
    Seven comments filed in response to the proposed rule specifically 
addressed the consolidated Southeast marketing area. A comment filed on 
behalf of Piedmont Milk Sales, Inc., Hunter Farms, Land O'Sun, and 
Milkco, Inc., supported and endorsed the portion of the proposed rule 
that would maintain separate order areas for the Southeast and 
Appalachian areas. Comments filed by DFA and by Carolina-Virginia Milk 
Producers Association favored combining the proposed Southeast and 
Appalachian order areas. In addition, the Kentucky Farm Bureau 
Federation urged that all Kentucky counties and the proposed 
Appalachian order be combined with the Southeast. The comment stated 
that such a configuration would make milk utilization rates more 
similar across the order, would facilitate and encourage milk to flow 
to deficit areas and minimize any negative price impacts on producers. 
These comments were considered in the discussion of comments and 
alternatives under the Appalachian area.
    Comments from Carolina-Virginia Milk Producers Association and 
Missouri Farm Bureau Federation support the inclusion, as proposed, of 
southern Missouri/northwest Arkansas in the Southeast marketing area. 
The Carolina-Virginia Milk Producers' comment noted that this area is a 
crucial part of the supply area for the southeast region, and that the 
exclusion of the area from the consolidated Southeast order area could 
have a detrimental impact on the over-order premium structure of that 
area. The comment stated that the correction of producer blend prices 
and creation of a unified marketing area in that part of the southeast 
region is justified. With regard to southern Missouri, a representative 
of the Subcommittee on Livestock of the U.S. House of Representatives 
Committee on Agriculture supported adding southeastern Missouri to the 
Southeast order area, as proposed. A comment filed by Barber Pure Milk 
Company opposed adding northwest Arkansas/southern Missouri to the 
Southeast marketing area on the basis of the minimal overlapping route 
disposition and potential of diluting the Southeast pool.
    A substantial share of the milk production from the portions of 
Missouri and Arkansas that are added to the Southeast marketing area is 
pooled under the Southeast order, and this milk represents a 
substantial share of the total milk production that is pooled under the 
Southeast market.
    Route disposition by distributing plants located within this area 
would become in-area dispositions from Southeast pool distributing 
plants. More than half of the dispositions from the three plants that 
would become Southeast pool distributing plants would be within the 
consolidated Southeast marketing area.

Mideast

    The consolidated Mideast marketing area is comprised of the current 
Ohio Valley (Order 33), Eastern Ohio-Western Pennsylvania (Order 36), 
Southern Michigan (Order 40), part of the Michigan Upper Peninsula 
(Order 44), and Indiana (Order 49) marketing areas plus 6 currently 
unregulated Indiana counties, 2 whole and 3 partial currently 
unregulated Michigan counties, and 3 whole and 2 partial currently 
unregulated Ohio counties. There would be 301 whole and 1 partial 
county in this consolidated area. Three whole and one partial 
currently-unregulated Ohio counties that were proposed to be part of 
the Mideast area are not included.

Geography

    The Mideast market is described geographically as follows:
    Indiana--72 counties (64 currently in Order 49, 2 currently in 
Order 33, and 6 currently unregulated on the western edge of the State, 
just south of the northwest corner) Kentucky--18 counties (all 
currently in Order 33).
    Michigan--77 counties. Two whole and 3 partial counties currently 
are unregulated. The rest of the area currently is included in Orders 
40, 44, 49, and 33. Of the total 83 Michigan counties, only 6 in the 
western end of the Upper Peninsula are not included in the consolidated 
Mideast marketing area.
    Ohio--84 whole and 1 partial county. Three whole and 2 partial 
counties to be included currently are unregulated. All of the State 
currently is included in Orders 33 and 36, except for 3 partial and 6 
whole counties.
    Pennsylvania--12 whole and 2 partial counties, currently in the 
Order 36 area.
    West Virginia--37 counties; 20 currently in Order 33, 17 currently 
in Order 36.
    The consolidated Mideast marketing area lies directly south of the 
Great Lakes, with the State of Michigan enclosed on the east and west 
sides by Lakes Huron and Michigan. On the eastern border of the 
marketing area, between the Mideast and Northeast marketing areas, is 
Pennsylvania State-regulated territory and the Allegheny and 
Appalachian Mountains. On the northeast border is the Western New York 
State order area.
    The east-to-west distance across the consolidated marketing area is 
approximately 450 miles, from locations on the eastern edge of the area 
in western Pennsylvania to the border of Indiana and Illinois. 
Northwest to southeast, from Marquette, Michigan, in the Upper 
Peninsula to the northeast area of Kentucky in the marketing area is 
just over 800 miles. From the northern tip of lower Michigan to 
southern Indiana the more direct north-south distance is 530 miles.
    The consolidated Mideast marketing area is contiguous to 3 other 
consolidated marketing areas. The consolidated Central marketing area 
would provide the western border of the Mideast marketing area along 
the Indiana-Illinois border, and the consolidated Appalachian area 
would provide the southern boundary. The western end of Michigan's 
Upper Peninsula, part of the consolidated Upper Midwest area, would 
adjoin the Mideast portion of the Upper Peninsula.
    In terms of physical geography, most of the consolidated Mideast 
marketing area is at low elevations, and relatively flat. The climate 
and topography are favorable to milk production, with dairy being the 
number one agricultural commodity in terms of financial receipts in the 
State of Michigan in 1996. Dairy also ranks high in terms of financial 
receipts in the rest of the area; 3rd in Ohio and West Virginia, and 
5th in Indiana.

Population

    According to July 1, 1997, population estimates, the total 
population in the consolidated marketing area is 31 million. The 34 
MSAs in the consolidated Mideast marketing area include 79.8 percent of 
the area's population. Over 55 percent of the area's population is 
contained in the 8 most populous MSAs, which each have over 950,000 
people. Two-thirds of the population is located in the states of 
Michigan and Ohio.
    The Mideast area's largest and 7th largest of the 34 MSAs are 
located in Michigan. Detroit-Ann Arbor-Flint, with 5.4 million 
population, is the largest MSA, and is located in the southeast portion 
of the state between Lakes Huron and Erie. Grand Rapids-Muskegon-
Holland is the 7th largest Mideast MSA, is located approximately 150 
miles west-northwest of Detroit, and has a population of 1 million. 
These two

[[Page 16066]]

MSAs contain two-thirds of the population of Michigan. There are 5 
other MSAs in Michigan. Two have approximately 450,000 population each, 
one has approximately 400,000 population, and the other two average 
approximately 160,000 apiece. Eighty-four percent of the population of 
Michigan is located in these 7 MSAs, all in the lower half of southern 
Michigan.
    Four of the 8 largest Mideast MSAs are located in the State of 
Ohio. These are: (1) Cleveland-Akron, the second-largest, with a 
population of 2.9 million, located on Lake Erie in northwestern Ohio; 
(2) Cincinnati-Hamilton, OH-KY-IN, the 4th largest, with a population 
of 1.9 million, located in the southwest corner of Ohio; (3) Columbus, 
the 6th largest, with a population of 1.5 million, located 
approximately midway between Cincinnati and Cleveland; and (4) Dayton, 
the 8th largest, with a population of .95 million.
    There are 6 additional MSAs in Ohio, 2 with populations of 
approximately .6 million each, 1 with a population of .4 million, and 3 
that average just over 150,000 each. Eighty-two percent of the 
population of Ohio is located in MSAs, most in the northern part of the 
State.
    The third-largest MSA in the Mideast area is Pittsburgh, 
Pennsylvania, with a population of 2.4 million. Pittsburgh is 127 miles 
southeast of Cleveland. There are two smaller MSAs in the Pennsylvania 
portion of the consolidated Mideast marketing area, having an average 
population of about 200,000 each. Eighty-seven percent of the 
population of the Pennsylvania portion of the Mideast area is located 
in MSAs.
    Indianapolis, Indiana, is the 5th largest MSA in the consolidated 
Mideast marketing area, with a population of 1.5 million. Indiana 
contains 9 additional MSAs, 2 with populations of .5 and .6 million, 
and 7 others that average 155,000 population. All but 2 of the 9 
smaller MSAs are located north of Indianapolis. Seventy-four percent of 
the population of the portion of Indiana that is in the consolidated 
Mideast area is located in MSAs.
    The portion of West Virginia that is within the consolidated 
Mideast area contains 4 MSAs, 3 of which are located on the West 
Virginia-Ohio border, along the Ohio River. The population of these 
MSAs averages just over 200,000. Forty-five percent of the population 
of the West Virginia portion of the consolidated Mideast area is 
located in MSAs.

Fluid Per Capita Consumption.

    Estimates of fluid per capita consumption within the consolidated 
Mideast area vary from 18.75 pounds per month for Michigan to 20.4 
pounds per month for Indiana. Use of 19 pounds per month as a weighted 
average results in an estimated 589 million pounds of fluid milk 
consumption for the Mideast marketing area. Mideast handlers' route 
disposition within the area during October 1997 totaled 544 million 
pounds, with another 36 million distributed by 23 handlers fully 
regulated under other orders. An additional 4.5 million pounds was 
distributed by partially regulated handlers, producer-handlers, and 
handlers that would be exempt under this rule on the basis of each 
having less than 150,000 pounds of route disposition per month.

Milk Production

    In October 1997, nearly 11,000 producers from 335 counties in 12 
states pooled 1 billion pounds of milk on Federal Orders 33, 36, 40, 44 
and 49. Over 90 percent of this producer milk came from Mideast 
marketing area counties. The States of Indiana, Michigan, Ohio and 
Pennsylvania supplied 95 percent of the milk (13%, 39.6%, 30.6% and 
11.9%, respectively), with 90 percent coming from counties that would 
be in the consolidated Mideast area. Just over two-thirds of the milk 
pooled under these orders was produced in Michigan and Ohio counties 
located within the consolidated marketing area.
    Other states pooling milk on the orders consolidated in the Mideast 
area were Illinois (0.5%), Iowa (0.1%), Kentucky (0.1%), Maryland 
(0.4%), New York (2.7%), Virginia (0.1%), West Virginia (1.0%), and 
Wisconsin (0.1%). These states contributed a total of 4.9 percent of 
the milk pooled on the 5 orders.
    Sixty-two of the counties that had production pooled under the five 
current orders supplied more than 5 million pounds of milk each during 
October 1997. Six of the counties were in northern and northeast 
Indiana, over 100 miles from Indianapolis; 11 were in western 
Pennsylvania--7 of them within 100 miles of Pittsburgh, and the others, 
including those with the most production (10-22 million pounds), in the 
northwest corner of the state, within 100 miles of Cleveland, Ohio. 
Twenty-eight Michigan counties pooled more than 5 million pounds each 
under the 5 orders, including 14 counties with more than 10 million 
pounds and 4 counties with more than 20 million pounds. All of these 
counties are located within 110 miles of Detroit or Grand Rapids, the 
two largest MSAs in Michigan. The heaviest milk production area of Ohio 
is the northeast quadrant of the State and within 50 miles of the 
Akron-Cleveland MSA, including 5 counties supplying over 10 million 
pounds each during October 1997, and 1 county pooling over 40 million 
pounds. A smaller production area in Ohio is located in the central 
portion of the western edge of the State within 80 miles of the Dayton 
MSA, and includes two counties with over 10 million pounds production 
and 1 county with over 20 million. The only population centers of the 
marketing area that do not appear to have adequate supplies of nearby 
milk are Indianapolis and Cincinnati, in the southern portion of the 
area.

Distributing Plants

    Using distributing plant lists included in the proposed rule, with 
the pooling standards adjusted to 25 percent of route disposition as 
in-area sales, updated for known plant closures through January 1998, 
72 distributing plants would be expected to be associated with the 
Mideast marketing area, including 51 fully regulated distributing 
plants (all currently fully regulated), 4 partially regulated (all 
currently partially regulated), 4 exempt plants that would have less 
than 150,000 pounds of total route disposition per month (all currently 
fully regulated), and 13 producer-handlers (all currently producer-
handlers). Since October 1997, 5 distributing plants (1 fully regulated 
plant in Indiana and 1 in Michigan; 2 partially regulated plants in 
Pennsylvania; and a producer-handler in Pennsylvania), have gone out of 
business.
    There would be 40 distributing plants in the 8 Mideast MSA's that 
each have over a million people (including Dayton-Springfield which has 
.95 million). Twenty-seven of these plants would be pool plants--5 in 
the Pittsburgh area, 6 in the Detroit area, 4 in the Cleveland area, 3 
each in the Grand Rapids, Indianapolis and Cincinnati areas, 2 in 
Columbus and 1 in Dayton. Nine of the plants in the large MSA areas 
would be producer-handlers, 3 would be exempt on the basis of having 
less than 150,000 pounds of milk per month in Class I route 
dispositions, and 1 would be partially regulated.
    Of the remaining 29 distributing plants located in the marketing 
area, 18 would be located in other MSA's as follows: 5 pool plants and 
1 producer-handler in Ohio; 4 pool plants in Indiana; 4 pool plants in 
Michigan; 2 pool plants in Pennsylvania; 1 pool plant in Kentucky; and 
1 pool plant in

[[Page 16067]]

West Virginia. The ten remaining distributing plants located in the 
marketing area would not be located in MSA's. Three of these pool 
plants and 2 producer-handlers would be located in Michigan; 2 pool 
plants and 1 plant exempt on the basis of size would be located in 
Ohio; 2 pool plants would be located in Indiana; and 1 producer-handler 
would be located in West Virginia.
    There are 3 distributing plants that would be outside the marketing 
area. These would be 1 partially regulated plant in Pennsylvania, and 1 
in Virginia. In addition, a small pocket of unregulated area within 
Ohio would contain one partially regulated plant.
    The in-area route disposition standard, proposed to be 30 percent 
of route dispositions, will instead be 25 percent--the same percentage 
as in other consolidated orders. This percentage should not result in 
the full regulation of any handler not currently fully regulated unless 
they increase sales in the marketing area.

Utilization

    According to October 1997 pool statistics for handlers who would be 
fully regulated under this Mideast order, the Class I utilization 
percentages for the Ohio Valley, Eastern Ohio-Western Pennsylvania, 
Southern Michigan, Michigan Upper Peninsula, and Indiana markets were 
58, 58, 55, 89, and 70 percent, respectively. Based on calculated 
weighted average use values for (1) the current order with current use 
of milk, and (2) the current order with projected use of milk in the 
consolidated Mideast order, the potential impact of this consolidation 
on producers who supply the current market areas is estimated to be: 
Ohio Valley, a 4-cent per cwt increase (from $13.46 to $13.50); Eastern 
Ohio-Western Pennsylvania, a 4-cent per cwt decrease (from $13.51 to 
$13.47); Southern Michigan, a 6-cent per cwt increase (from $13.27 to 
$13.33); Michigan Upper Peninsula, a 25-cent per cwt decrease (from 
$13.34 to $13.09); and Indiana, a 11-cent per cwt decrease (from $13.52 
to $13.41). The large decrease for Michigan Upper Peninsula is a result 
of changing from its current individual handler pool provisions to a 
marketwide pool (very little reserve milk is pooled under Order 44--
instead, it is pooled on the Southern Michigan order). For October 
1997, combined Class I utilization for Orders 33, 36, 40, 44 and 49 was 
58.7 percent based on 601.6 million pounds of producer milk used in 
Class I out of 1.025 billion total producer milk pounds pooled. The 
weighted average use value for the consolidated Mideast market is 
estimated to be $13.42 per hundredweight.
    The Mideast is one of two consolidated marketing areas that has a 
significantly higher-than-average percentage of its milk used in Class 
II. Currently, the Southern Michigan, Ohio Valley and Indiana markets 
have Class II utilization over 20 percent. When the markets are 
combined the average for the consolidated market will be just under 20 
percent.

Other Plants

    Also located within the Mideast marketing area during May 1997 were 
59 supply or manufacturing plants: 1 in Charleston, West Virginia, 4 in 
Pennsylvania, 18 in Michigan, 9 in Indiana and 27 in Ohio. Nine of the 
59 plants are pool plants. Of these pool plants, 6 are supply plants--1 
manufactures primarily Class II products, 3 manufacture primarily 
powder, and 2 have no primary product, only shipping to distributing 
plants. Three pool plants are manufacturing plants, manufacturing 
primarily cheese. Of the 50 nonpool plants in the Mideast marketing 
area, one is a supply plant that manufactures primarily cheese. The 
other 49 nonpool plants are manufacturing plants. In this area of high 
Class II use, 28 of the nonpool plants manufacture primarily Class II 
products. In addition, 1 manufactures primarily butter, 1 manufactures 
primarily powder, 27 manufacture primarily cheese, and 2 manufacture 
primarily other products.
    There are also two manufacturing plants in the currently-
unregulated area of Ohio--a nonpool plant that manufactures primarily 
Class II products in the unregulated county of Erie, Ohio and a nonpool 
plant that manufactures primarily cheese in the unregulated area of 
Sandusky, Ohio.

Cooperative Associations

    In December 1997, 20 cooperative associations pooled member milk 
under the 5 orders to be consolidated (considering Milk Marketing, 
Inc., and Mid-America Dairymen, Inc., as one entity--DFA). Two of the 
cooperatives pooled milk on the four principal orders, 3 cooperatives 
had member milk pooled on 3 of the principal orders, 3 cooperatives 
pooled milk on 2 of the principal orders, and 12 of the cooperatives 
pooled milk on only one of the orders. The percentage of cooperative 
member milk pooled on each of the orders varied from 44 percent under 
Order 36 to 86.5 percent under Order 40. Of the total milk pooled on 
the 5 orders in December 1997, 68 percent was marketed by cooperative 
associations.

Criteria for Consolidation

    Overlapping route disposition, overlapping production areas, 
natural boundaries, and multiple component pricing are all criteria 
that support the consolidation of these current order areas into a 
consolidated Mideast marketing area. Handlers who would be fully 
regulated under the consolidated order distribute approximately 90 
percent of their route dispositions within the consolidated marketing 
area, and 93 percent of the milk distributed within the marketing area 
is from handlers who would be regulated under the order.
    Many of the counties from which milk was pooled on the individual 
orders supplied milk to three or four of those orders. For instance, 
milk from a number of the same Michigan counties was pooled on the Ohio 
Valley, Indiana and Southern Michigan orders; milk from several of the 
same Indiana counties was pooled on the Ohio Valley, Southern Michigan 
and Indiana counties; and milk from some of the same Ohio counties was 
pooled on the Ohio Valley, Indiana, and Southern Michigan orders.
    The Great Lakes serve as natural boundaries on the northern edge of 
the area and on the eastern and western sides of Michigan, as do the 
mountains in central Pennsylvania. All of the orders involved in the 
consolidated Mideast area contain multiple component pricing 
provisions. Instead of the Southern Michigan component pricing plan, 
proposed for the consolidated Mideast order in the proposed rule, the 
same component pricing provisions adopted for the other consolidated 
orders have been incorporated in the Mideast order.

Discussion of Comments and Alternatives

    Prior to issuance of the proposed rule, alternatives to the 
consolidation of the Ohio Valley, Eastern Ohio-Western Pennsylvania, 
Southern Michigan, Indiana, and partial Michigan Upper Peninsula 
marketing areas that were considered included the addition of 
Pennsylvania Milk Marketing Board (PMMB) Area 6 to the consolidated 
Mideast area, with some consideration being given to the addition of 
currently-unregulated areas of Maryland and West Virginia, and moving 
the southern part of Ohio and part of West Virginia to the Appalachian 
order area.
    Ten comments that pertained specifically to the consolidated 
Mideast marketing area were filed by 8

[[Page 16068]]

commenters in response to the proposed rule. Three of the comments, 
from Michigan Milk Producers Association, United Dairy, Inc., and DFA, 
plus a very large number of comments that did not specifically mention 
the Mideast area, addressed the inclusion of unregulated areas in 
consolidated Federal order areas. The DFA comment included the 
signatures of 600 producers to a ``Petition to Eliminate all 
Unregulated Market Areas in Pennsylvania.'' Although the large number 
of comments that did not specifically mention the Mideast area were 
unclear about exactly what additional area should be added to the 
marketing area, they appeared to favor the addition of PMMB Area 6, 
with perhaps some western Maryland and West Virginia territory, to the 
eastern edge of the Mideast area.
    As stated in the introduction to the consolidation discussion, 
consolidation of the existing orders does not necessitate expansion of 
the consolidated orders into currently-unregulated areas, especially if 
such expansion would result in the regulation of currently-unregulated 
handlers. Therefore, PMMB Area 6 and the unregulated portions of 
Maryland and West Virginia should not be added to the consolidated 
Mideast order area.
    Two comments from DFA recommended including Charleston, West 
Virginia, and areas of West Virginia south of Charleston, as well as 
the Ohio counties surrounding Cincinnati and the northern counties of 
Kentucky, in the Appalachian market to help provide an economic 
incentive through the expected higher blend prices to producers to 
supply milk to the plants in that area. A comment by Trauth Dairy in 
Newport, Kentucky, also urged the inclusion of the northern areas of 
Kentucky in the Appalachian area instead of the Mideast area. These 
comments are addressed in the description of comments and alternatives 
considered for the Appalachian order area.
    Schneider's Dairy suggested that a pass-through provision similar 
to that of the current New York-New Jersey order be incorporated in the 
Mideast order to assure that regulated handlers distributing fluid milk 
products in unregulated areas where they compete with unregulated 
handlers are not disadvantaged. As discussed in the section of this 
decision dealing with Northeast regional issues, Class I prices are 
determined by the need to attract milk supplies to the location of the 
processing plant, and not by where the fluid products are distributed. 
Therefore, a pass-through provision is not incorporated in either the 
Northeast order or this order.
    Independent Cooperative Milk Producers Association and Schneider's 
Dairy supported the consolidation of order areas to form the Mideast 
area as proposed.

Upper Midwest

    The consolidated Upper Midwest marketing area is comprised of the 
current Upper Midwest (Order 68) and Chicago Regional (Order 30) 
marketing areas, with the addition of the western portion of the 
Michigan Upper Peninsula (Order 44) marketing area. There are 204 
counties in this consolidated area. One partial Illinois county 
proposed to be part of the Central order area has been added to this 
area, and another partial Illinois county proposed to be part of this 
area has been changed to the Central order area.

Geography

    The consolidated Upper Midwest marketing area is described 
geographically as follows: 15 counties in Illinois (all currently in 
Order 30), 6 counties in Iowa (all currently in Order 68), 6 counties 
in Michigan (all currently in Zones I and IA of Order 44), 83 counties 
in Minnesota (all currently in Order 68), 16 counties in North Dakota 
(all currently in Order 68), 8 counties in South Dakota (all currently 
in Order 68), and 70 counties in Wisconsin (43 currently in Order 30, 
20 currently in Order 68, and 7 currently unregulated). This market is 
about 600 miles east to west and about the same distance north to 
south.
    The area described above is contiguous to the consolidated Central 
market to the south, a small corner of the consolidated Mideast market 
to the southeast, and the eastern portion of Michigan's Upper 
Peninsula, also part of the consolidated Mideast market, to the 
northeast. North of the Upper Midwest market is Lake Superior and the 
Canadian border, and west of the market is a large sparsely-populated 
and unregulated area. Most of the eastern border of the marketing area 
is Lake Michigan.
    The consolidated Upper Midwest marketing area is generally low-
lying, with some local differences in elevation in Wisconsin and the 
upper peninsula of Michigan. Natural vegetation in the western part of 
the area is tall-grass prairie, with the eastern two-thirds of the 
northern portion being broadleaf forest, coniferous forest, and mixed 
broadleaf and coniferous forest. Annual precipitation averages 30-35 
inches per year. Most of the area experiences summer temperatures that 
average about 75 degrees; the northern and western portions average 
winter temperatures are in the low 'teens, while the southern and more 
eastern portions experience average winter temperatures in the 20's. 
The far western part of the market predominantly grows mixed field 
crops, with cattle and soybeans more to the southwest. Both Minnesota 
and Wisconsin are included in the top five milk-producing states, and 
dairy is the number 1 agricultural enterprise in Wisconsin, generating 
over half of the State's income derived from agricultural commodities.

Population

    According to July 1, 1997, population estimates, the total 
population of the consolidated Upper Midwest marketing area is 
approximately 18.5 million. Using Metropolitan Statistical Areas 
(MSAs), there are 3 population centers over 1 million. The Chicago-
Gary-Kenosha area, primarily in northeastern Illinois, is the largest, 
with a 7.9 million population in the marketing area. The Minneapolis-
St. Paul area, located mostly in Minnesota, is next with 2.8 million; 
and the third-largest MSA is Milwaukee-Racine, Wisconsin, with a 
population of 1.6 million. The Chicago area is located in the southeast 
corner of the marketing area, on the west side of the southern end of 
Lake Michigan, with Milwaukee approximately 85 miles north, also along 
Lake Michigan. Minneapolis is located 400 miles northwest of Chicago, 
along the Minnesota-Wisconsin border.
    Approximately two-thirds of the population of the consolidated 
marketing area is within the three largest MSAs, with 81 percent of the 
population contained within the area's 17 MSA's (with the 14 smaller 
MSAs averaging 196,000 population).
    Sixty percent of the population of the market is concentrated in 
the Illinois and southeast Wisconsin portion of the marketing area. In 
Wisconsin, nearly 90 percent of the population is located in the 
southern two-thirds of the state, and in Minnesota 85 percent of the 
population is in the southern half of the state.

Fluid Per Capita Consumption

    Based on the population figure of 18.5 million and an estimated per 
capita fluid milk consumption rate of 20 pounds of fluid milk per 
month, total fluid milk consumption in the consolidated Upper Midwest 
marketing area is estimated at 370 million pounds per month. Plants 
that would be fully regulated distributing plants under the Upper 
Midwest order had route

[[Page 16069]]

disposition within the market of 343 million pounds in October 1997. 
Handlers fully regulated under other Federal orders distributed 43 
million pounds in the consolidated marketing area during October 1997, 
while partially regulated plants distributed 1.7 million pounds. 
Producer-handlers and exempt plants operating in the combined marketing 
areas during this month had a combined route disposition of less than 
.5 million pounds.

Milk Production

    In October 1997, 2.4 billion pounds of milk were associated with 
the Chicago Regional and Upper Midwest markets, but only 1.6 billion 
pounds of milk were pooled because of class price relationships. The 
2.4 billion pounds were produced by 27,250 producers located in 13 
states from Tennessee to Minnesota, and from New Mexico to Michigan. 
However, over 93 percent of the producer milk was produced within the 
consolidated marketing area, and 91.4 percent was produced within the 
states of Wisconsin and Minnesota. As with population density and milk 
plant density, most milk production in Minnesota and Wisconsin occurs 
in the southern parts of these states. Over 85 percent of Wisconsin 
milk associated with the combined Chicago Regional-Upper Midwest orders 
in October 1997 was produced in the southern two-thirds of the State, 
while 84 percent of the Minnesota milk associated with the two orders 
was produced in the southern half of Minnesota.
    Fifty-two counties, 10 in Iowa, 15 in Minnesota, and 27 in 
Wisconsin supplied milk to both the current Chicago Regional and Upper 
Midwest orders during October 1997. The largest part of the common 
production area is in Wisconsin, where 27 counties supply 25 percent of 
the milk associated with Order 30, and 30 percent of the milk 
associated with Order 68. When data for the 52 counties is combined, 26 
percent of the Chicago Regional market and 42 percent of the Upper 
Midwest market is supplied by this common production area.

Distributing Plants

    Using distributing plant lists included in the proposed rule, with 
the pooling standards adjusted to 25 percent of route disposition as 
in-area sales, updated for known plant closures through December 1998, 
35 distributing plants would be expected to be associated with the 
Upper Midwest marketing area, including 27 fully regulated distributing 
plants (2 currently partially regulated and 25 currently pool plants), 
4 partially regulated (3 currently partially regulated and 1 currently 
fully regulated), 1 producer-handler, and 3 exempt plants, based on 
distributing less than 150,000 pounds of total route disposition per 
month (1 new, 1 currently partially regulated, and 1 currently 
unregulated). Since October 1997, one pool distributing plant and one 
partially regulated plant have gone out of business.
    There would be 6 distributing plants in the Chicago area (5 pool 
plants and 1 exempt plant). The Milwaukee-Racine area would have 2 pool 
distributing plants. There would be 7 distributing plants in the 
Minneapolis-St. Paul area (6 pool plants and 1 partially regulated 
plant). Of the remaining 20 distributing plants, 16 are located in 
other MSAs as follows: 4 pool plants in Minnesota, 2 pool plants and 2 
partially regulated plants in North Dakota, 1 pool plant in Illinois, 
and 5 pool plants, 1 partially regulated plant, and 1 exempt plant in 
Wisconsin. Four of the remaining distributing plants are not located in 
MSAs: 1 pool plant and 1 exempt plant in Minnesota, 1 producer-handler 
in Wisconsin and 1 pool plant in Michigan.

Utilization

    According to October 1997 pool statistics for handlers who would be 
fully regulated under this Upper Midwest order, the Class I utilization 
percentages for the Chicago Regional and Upper Midwest were 29 and 19 
percent, respectively. Based on calculated weighted average use values 
for (1) the current order with current use of milk, and (2) the current 
order with projected use of milk in the consolidated Upper Midwest 
order, the potential impact of this consolidation on producers who 
supply the current market areas is estimated to be: Chicago Regional, a 
3-cent per cwt decrease (from $12.98 to $12.95), and Upper Midwest, a 
2-cent per cwt increase (from $12.89 to $12.91). The weighted average 
use value for the consolidated Upper Midwest market, based on October 
1997 data, is estimated to be $12.94 per hundredweight. However, a 
substantial amount of milk was omitted from both pools for October 1997 
because of unusual class price relationships. Annual Class I 
utilization percentages may be considered more representative for these 
markets. For the year 1997, the annual Class I utilization percentage 
for the Chicago Regional market was 21.5, with 18.7 for the Upper 
Midwest. The Class I use percentage for the entire Michigan Upper 
Peninsula market, which has a individual handler pool and represents a 
very small portion of the producer milk that would be expected to be 
pooled under the consolidated Upper Midwest order, was 89 percent. It 
is estimated that the Class I use percentage for the consolidated order 
would be in the neighborhood of 20 percent.

Other Plants

    Located within the consolidated Upper Midwest marketing area during 
May 1997 were 301 supply or manufacturing plants: 1 in South Dakota, 3 
in Iowa, 28 in Illinois (12 in the Chicago area), 39 in Minnesota (over 
three-quarters of which are located in the southeastern quarter of the 
State), and 230 in Wisconsin (over 90 percent of which are scattered 
throughout the southern three-quarters of the state). One hundred five 
of the plants are pool plants, or have a ``pool side.'' Eighty-five of 
the 105 pool plants (1 in Iowa, 4 in Illinois, 16 in Minnesota and 64 
in Wisconsin) are ``split plants;'' that is, one side of a plant is a 
manufacturing facility and the other side receives and ships Grade A 
milk, and accounting is done separately. In most cases, the nonpool 
portion of such a plant is a manufacturing operation, primarily cheese-
making. Most of the other pool plants are pool supply plants, located 
primarily in Wisconsin, that ship milk to pool distributing plants.
    The 196 nonpool plants in the consolidated Upper Midwest marketing 
area are manufacturing plants--103 manufacture primarily cheese, 16 
manufacture primarily Class II products, 15 manufacture primarily 
butter, 23 manufacture primarily milk powders, and 39 manufacture 
primarily other products.
    Also associated with the Upper Midwest order, but not within the 
marketing area, are 2 pool supply plants and 6 manufacturing plants (3 
manufacturing primarily cheese, 2 making Class II products, and 1 
butter plant) in North Dakota.

Cooperative Associations

    In December 1997, 67 cooperative associations pooled member milk on 
the Chicago Regional and Upper Midwest orders, providing 99 percent of 
the milk pooled under each of the two orders. Nine of the cooperatives 
marketed milk in both orders, accounting for nearly half of the milk 
pooled in the Upper Midwest (and 42.9 percent of the cooperative member 
milk), and 66.8 percent of the milk pooled in the Chicago Regional 
market (67.5 percent of total cooperative member milk). In the two 
markets, 16 cooperatives pooled milk only under Order 30, and 42

[[Page 16070]]

cooperatives pooled milk only under Order 68.

Criteria for Consolidation

    As in the proposed rule, the Chicago Regional, Upper Midwest, and 
the western end of the Michigan Upper Peninsula marketing areas should 
be combined into a consolidated Upper Midwest Federal order marketing 
area. Although these areas do not have a considerable degree of 
overlapping fluid milk disposition, they do have an extensive 
overlapping procurement area. Handlers regulated under the Chicago 
Regional and Upper Midwest markets (the predominant markets in this 
consolidation) distribute milk into markets further south, and 
approximately 10 percent of the fluid milk distributed within the 
consolidated area is distributed by handlers regulated under other 
orders. However, these other orders are more closely related to markets 
to the south than to the consolidated Upper Midwest order area. On that 
basis, it is more appropriate to include them in other consolidated 
marketing areas.
    Other aspects of the consolidation also fit the criteria set forth. 
The consolidated Upper Midwest area is bounded on three sides by Lakes 
Michigan and Superior, the international border with Canada, and a 
large unregulated area. A significant portion of both the Chicago 
Regional and Upper Midwest markets' milk is supplied by the same 
cooperative associations. The two predominant markets have identical 
multiple component pricing plans, and both have large reserves of milk 
that normally is used in manufactured products, primarily cheese. 
Approximately 90 percent of the milk used in manufacturing in these 
markets is used to make cheese. The amount of cheese manufactured from 
milk pooled under these milk orders is enough to supply a population 3 
times greater than that of the consolidated marketing area. Fluid milk 
handlers in both markets must compete with cheese manufacturers for a 
milk supply, and marketing order provisions for both markets must 
provide for attracting an adequate supply of milk for fluid use.

Discussion of Comments and Alternatives

    Prior to issuance of the proposed rule, alternatives to the 
consolidation of the order areas included in the Upper Midwest 
marketing area that were considered included combining the Iowa, 
Nebraska-Western Iowa, and Eastern South Dakota order areas with those 
of the Chicago Regional and Upper Midwest areas in a consolidated Upper 
Midwest order. Also considered was a consolidation of even more 
marketing areas (up to 10; including Indiana, Illinois, parts of 
Kentucky, Missouri, and Kansas) that would increase the population and 
Class I use of the consolidated Upper Midwest area.
    Over 160 comments received in response to the proposed rule 
concerned the proposed consolidated Upper Midwest marketing area. 
Nearly 140 of these comments (including approximately 120 form letters) 
supported a consolidation of 10 marketing areas for the purpose of 
increasing the Class I utilization of the consolidated Upper Midwest 
order area to a level closer to the U.S. national average or, at the 
very least, including the Iowa, Eastern South Dakota, and Nebraska-
Western Iowa marketing areas in the consolidated Upper Midwest area.
    No justification on the basis of the criteria of overlapping sales 
and procurement areas could be found for any increase in a consolidated 
marketing area that would be comprised of the Chicago Regional and 
Upper Midwest order areas beyond the addition of the Iowa, Eastern 
South Dakota, and Nebraska-Western Iowa marketing areas. The collection 
of more detailed data concerning the overlap in route disposition and 
milk procurement showed clearly that those three areas are more closely 
related to markets to the south than to the north, with approximately 
85 percent of the total fluid milk distributed by handlers regulated 
under the three orders disposed of in the consolidated Central market.
    The numerous markets recommended by upper midwest producer groups 
to be consolidated with the Chicago Regional and Upper Midwest order 
areas have very little distribution or procurement overlap with those 
areas, aside from occasional need for reserve milk supplies. When 
reserve supplies are needed by the other markets, upper midwest milk 
can be, and is, pooled on the more southern markets and shares in their 
pools. The potential gain of adding areas recommended by upper midwest 
producer groups would be much less than the loss to producers whose 
milk is pooled under orders to be consolidated in the Central, Mideast 
and Appalachian marketing areas.
    Approximately 10 comments, including some from cooperative 
associations representing large numbers of producers, advocated the 
addition of the northeast portion of the Iowa marketing area to the 
consolidated Upper Midwest area based on the extensive overlap of 
producers, Class I sales, and geographic similarities between that area 
and the adjoining consolidated Upper Midwest area. An equivalent number 
of comments, most from Iowa interests, argued that the consolidated 
Upper Midwest order should remain as proposed. This issue is more fully 
discussed in the ``Comments and Alternatives'' section of the 
description of the Central order area, as is the assignment to 
consolidated areas of 3 counties, each in its entirety, that currently 
are split between orders.
    One comment advocated the addition of the Gary, Indiana, area to 
the consolidated Upper Midwest area instead of the Mideast area on the 
basis that Gary, Indiana, is part of the greater Chicago market. This 
portion of the current Indiana order area historically has been part of 
the Indiana marketing area, and there is no data supporting its 
separation from that area. The single pool distributing plant located 
in Gary has ceased to process milk. Any distribution in the Gary area 
acquired by Chicago handlers as a result will be pooled as Class I use 
under the consolidated Upper Midwest order.
    Based on the considerations of the most recent data available, 
comments received, and the stated consolidation criteria, limiting the 
extent of the consolidated Upper Midwest marketing area to the areas of 
the current Chicago Regional and Upper Midwest marketing areas, with 
the addition of the western part of the Michigan Upper Peninsula 
marketing area, represents the most appropriate marketing area 
configuration for the north central area of the U.S.

Central

    The consolidated Central order marketing area merges the current 9 
Federal order marketing areas of Central Illinois, most of Southern 
Illinois-Eastern Missouri, most of Southwest Plains, Greater Kansas 
City, Iowa, Eastern South Dakota, Nebraska-Western Iowa, Western 
Colorado, and Eastern Colorado (Federal orders 50, 32, 106, 64, 79, 76, 
65, 134, and 137, respectively). Moving to the consolidated Southeast 
marketing area are 6 Missouri counties currently in Federal order 32 
and, from Order 106, 11 northwest Arkansas counties and 22 southern 
Missouri counties. Order 106 counties in Kansas and Oklahoma remain in 
the Central market. In addition, some counties in Colorado, Illinois, 
Iowa, Kansas, Missouri and Nebraska that currently are not part of any 
order area are included in the consolidated Central market. There are 
543 counties and the City of St. Louis,

[[Page 16071]]

Missouri, in this consolidated area. The marketing area has changed 
from the proposed rule by the addition of the Western Colorado 
marketing area and seven currently-unregulated Colorado counties, the 
elimination of 6 currently-unregulated Missouri counties, the addition 
of two partial counties and the deletion of one partial county for the 
purpose of eliminating the inclusion of partial counties.

Geography

    The consolidated Central marketing area would include the following 
territory:
    Colorado--44 counties, including the 30 Colorado counties currently 
in the Eastern Colorado marketing area and the 4 Colorado counties in 
the Western Colorado marketing area. Ten currently-unregulated 
counties, 3 in the southeast corner of the state between the Eastern 
Colorado and Southwest Plains marketing areas, and 7 in the central 
part of the State between the Eastern Colorado and Western Colorado 
marketing areas, are added.
    Illinois--87 counties, including the 5 of the 6 counties currently 
in the Iowa marketing area (of the 2 partial Illinois counties in the 
Iowa marketing area, all of Whiteside and none of Jo Daviess are 
included in the Central area), the 19 counties currently in the Central 
Illinois marketing area, the 49 counties currently in the Southern 
Illinois-Eastern Missouri marketing area and 8 currently-unregulated 
adjacent counties in southern Illinois, and 6 currently-unregulated 
counties in western Illinois located between the current Central 
Illinois and Southern Illinois-Eastern Missouri order areas and the 
Mississippi River.
    Iowa--93 counties, including the 68 counties currently in the Iowa 
marketing area, the 17 counties currently in the Nebraska-Western Iowa 
marketing area, the 1 county currently in the Eastern South Dakota 
marketing area, 6 currently unregulated counties in the northwestern 
part of Iowa, and 1 currently unregulated county in the southeastern 
corner of Iowa.
    Kansas--the entire State (105 counties).
    Minnesota--the 4 southwestern Minnesota counties that currently are 
in the Eastern South Dakota marketing area.
    Missouri--39 counties and 1 city, including 6 of the counties and 1 
city that currently are in the Southern Illinois-Eastern Missouri 
marketing area, the 20 counties that currently are in the Greater 
Kansas City marketing area, the 5 counties that currently are in the 
Iowa marketing area; and 8 currently-unregulated counties distributed 
around the center area proposed to remain unregulated.
    Nebraska--66 counties in the southern and eastern parts of 
Nebraska; omitting the 11 counties in the panhandle that currently are 
part of the Nebraska-Western Iowa marketing area, and adding 5 
currently-unregulated counties in the southwest corner of the State 
between the Nebraska-Western Iowa and Eastern Colorado marketing areas 
and 3 currently-unregulated counties in the southeast corner of the 
State between the Nebraska-Western Iowa and Greater Kansas City 
marketing areas.
    Oklahoma--the entire State (77 counties).
    South Dakota--the 26 eastern South Dakota counties (including the 
portion of Union County that currently is in the Nebraska-Western Iowa 
marketing area) that currently are in the Eastern South Dakota 
marketing area.
    Wisconsin--the 2 southwest Wisconsin counties that currently are in 
the Iowa marketing area.
    The consolidated Central marketing area is adjacent to the 
consolidated Upper Midwest order area on the north and northeast, the 
consolidated Mideast and Appalachian areas on the east, and the 
northwest corner of the Southeast order area and the consolidated 
Southwest area on the south and the consolidated Western order area on 
the west. The area north of approximately the western half of the 
consolidated Central area also is unregulated. The north-south distance 
covered by the area is approximately 800 miles, from Watertown, South 
Dakota, to Ardmore, Oklahoma. The east-west extent of the area, from 
the Indiana-Illinois border to the Colorado/Utah border, is 
approximately 1,200 miles.
    Geographically, the Central marketing area includes a wide range of 
topography and climate types, ranging from the Colorado Plateau and the 
Rocky Mountains in the west to the central section of the Mississippi 
River Valley toward the eastern part of the area. Precipitation ranges 
from less than 15 inches per year in Denver, Colorado, to more than 30 
inches at St. Louis, Missouri. Most of the area experiences fairly hot 
summer temperatures, while winter temperatures vary somewhat more than 
summer, with colder winter temperatures occurring in the northern and 
western parts of the Central area. The natural vegetation ranges from 
desert and desert scrub in western Colorado through coniferous forest 
in the Rocky Mountains to short grass prairie in eastern Colorado 
through tall grass prairie in eastern South Dakota, Nebraska, Kansas 
and Oklahoma, and much of Illinois; to broadleaf forest on both sides 
of the Mississippi River.

Population

    According to July 1, 1997, population estimates, the total 
population in the consolidated Central marketing area is approximately 
21.5 million. Using Metropolitan Statistical Areas (MSAs), there are 
four population centers over 1 million. The St. Louis, Missouri/
Illinois, area is the largest, with over 2.6 million population, and 
the Denver-Boulder-Greeley, Colorado, area is next with approximately 
2.3 million. Kansas City, Missouri/Kansas, has a population of 1.7 
million, and Oklahoma City, Oklahoma, is just over 1 million. 
Approximately thirty-five percent of the population of the consolidated 
marketing area is within these four largest MSAs, with nearly two-
thirds of the population contained within the area's 32 MSA's (with the 
28 smaller MSAs averaging 228,559 population). The Colorado portion of 
the marketing area has 91.3 percent of its population concentrated in 5 
MSA's. The Missouri portion has 94.4 percent concentrated in 3 MSA's.

Fluid Per Capita Consumption

    Based on the population figure of 21.5 million and a per capita 
fluid milk consumption rate of 19 pounds of fluid milk per month (a 
weighted average based on state populations in the marketing area and 
fluid per capita consumption estimates for each state), total fluid 
milk consumption in the consolidated Central marketing area would be 
approximately 408.5 million pounds per month. Plants that would be 
fully regulated distributing plants in the Central order had route 
disposition within the nine marketing areas included in the 
consolidated Central area of 366 million in October 1997. It is likely 
that most of the milk distributed within formerly unregulated areas by 
Central order handlers would be distributed within the consolidated 
Central marketing area. The 11 producer-handlers and 3 exempt plants 
operating in the Central market during October 1997 had a combined in-
area route disposition of 3 million pounds, partially regulated plants 
distributed 2 million pounds in the marketing area, and plants that are 
expected to be fully regulated under other consolidated orders 
distributed 59 million pounds in the Central marketing area during 
October 1997.

Milk Production

    In October 1997, 996.7 million pounds of milk were associated with 
the

[[Page 16072]]

orders consolidated in the Central market (including all of the milk 
pooled under Orders 32 and 106). However, because of class price 
relationships in the Iowa and Nebraska-Western Iowa markets, only 893.2 
million pounds of the milk was pooled. The 996.7 million pounds were 
produced by 9,900 producers located in 17 states from Idaho to 
Kentucky, and from Texas to Minnesota. Three-quarters of the milk 
associated with the Central market was produced within the consolidated 
marketing area. The states contributing the most producer milk were, in 
descending order of volume, Iowa, Colorado, Missouri, Kansas, Illinois 
and Oklahoma. However, 68 percent of the Missouri producer milk came 
from farms in counties which are included in the consolidated Southeast 
marketing area. These 6 States accounted for 71 percent of the producer 
milk associated with the nine current orders to be consolidated. All of 
the states having substantial portions of their areas in the 
consolidated Central market contribute producer milk to at least two of 
the current nine individual orders, with five of the states (Iowa, 
Kansas, Minnesota, Missouri, and Nebraska) supplying milk to five of 
the order areas each.

Distributing Plants

    Using distributing plant lists included in the proposed rule and 
the pooling standards adjusted to 25 percent of route dispositions as 
in-area sales, updated for known plant closures through December 1998, 
57 distributing plants would be expected to be associated with the 
Central marketing area, including 35 fully regulated distributing 
plants (all currently pool plants), 1 partially regulated (currently 
partially regulated), 3 plants exempt on the basis of size (currently 
pool plants but have less than 150,000 pounds of total route 
disposition per month), 13 producer-handlers (all currently producer-
handlers), 1 unregulated plant (located in the unregulated central 
portion of Missouri), and 4 government agency plants (all currently 
government agency plants). Since October 1997, it is known that 1 pool 
distributing plant (in Illinois) and 1 partially regulated plant (in 
Wyoming) have gone out of business.
    There would be 10 distributing plants in the Denver area (7 pool 
plants and 3 producer-handlers). The Kansas City area would have 1 pool 
distributing plant. The St. Louis area would have 6 distributing plants 
(4 pool plants, 1 exempt plant, and one producer-handler). There would 
be 1 pool distributing plant and 2 producer-handlers in the Oklahoma 
City area. Of the remaining 37 distributing plants, 19 are located in 
other MSAs as follows: 1 pool plant, 1 exempt plant (on the basis of 
size) and 1 producer-handler in Colorado; 1 pool plant in Illinois; 4 
pool plants, 1 producer-handler and 1 exempt plant in Iowa; 1 pool 
plant in Kansas; 3 pool plants in Nebraska; 1 pool plant and 1 
producer-handler in Oklahoma; 1 pool plant and 1 partially regulated 
plant in South Dakota, and 1 pool plant in Wyoming.
    Eighteen of the remaining distributing plants are not located in 
MSAs. They are: 1 pool plant and 1 government agency plant in Colorado; 
4 pool plants and 1 government agency plant in Illinois; 1 pool plant 
and 1 producer-handler in Iowa; 1 pool plant and 1 government agency 
plant in Kansas; 1 unregulated and 2 producer-handlers in Missouri; 1 
producer-handler in Nebraska; 2 pool plants in Oklahoma; and 1 
government agency plant in South Dakota.

Utilization

    According to October 1997 pool statistics for handlers who would be 
fully regulated under this Central order, the Class I utilization 
percentages for the individual markets ranged from 38 percent for the 
Southwest Plains market to 87 percent for the Central Illinois market. 
Class I (and Class II) receipts and utilization data for Iowa and the 
combination of Greater Kansas City and Eastern South Dakota markets are 
restricted to protect the confidentiality of individual handler 
information. Data for Eastern Colorado and Western Colorado markets are 
combined in order to mask restricted data. Combined utilization for the 
nine markets would result in a Class I percentage of 50 percent.
    Based on calculated weighted average use values for (1) the current 
order with current use of milk, and (2) the current order with 
projected use of milk in the consolidated Central order, the potential 
impact of this consolidation on producers who supply the current market 
areas is estimated to be: Southern Illinois-Eastern Missouri, a 27-cent 
per cwt decrease (from $13.49 to $13.22); Central Illinois, a 50-cent 
per cwt decrease (from $13.56 to $13.06); Greater Kansas City, a 69-
cent per cwt decrease (from $13.91 to $13.22); Nebraska-Western Iowa, a 
10-cent decrease (from $13.23 to $13.13); Eastern South Dakota, a 32-
cent decrease (from $13.33 to $13.01); Iowa, a 5-cent decrease (from 
$13.08 to $13.03); Southwest Plains, a 70-cent increase (from $12.94 to 
$13.64); Western Colorado, a 65-cent decrease (from $13.88 to $13.23); 
and Eastern Colorado, an 11-cent decrease (from $13.70 to $13.59). The 
weighted average use value for the consolidated Central order market is 
estimated to be $13.29 per cwt.

Other Plants

    Located within the Central marketing area during May 1997 were 84 
supply or manufacturing plants: 8 in Colorado (4 in the Denver area), 
15 in Illinois (2 in the Decatur area), 23 in Iowa (2 in the Des Moines 
area and 1 in the Dubuque area), 6 in Kansas, 7 in Missouri (5 in the 
St. Louis area), 7 in Nebraska, 7 in South Dakota (1 in the Sioux Falls 
area), 4 in Oklahoma (1 in the Tulsa area), and 7 in Wisconsin. Twenty-
two of the 84 plants are pool plants, or have a ``pool side.'' Twelve 
of the 22 pool plants (6 in Iowa, 1 in Nebraska, 2 in South Dakota, and 
3 in Wisconsin) are ``split plants;'' that is, one side of a plant is a 
manufacturing facility, and the other side receives and ships Grade A 
milk, and accounting is done separately. In most cases, the nonpool 
portion of such a plant is a manufacturing peration, primarily cheese-
making. Of the pool plants, 8 have no primary product, but are only 
shipping to distributing plants, and 6 are pooled manufacturing plants.
    Of the 62 nonpool plants in the consolidated Central marketing 
area, 59 are manufacturing plants--24 are plants that manufacture 
primarily Class II products, 3 manufacture primarily butter, 6 
manufacture primarily powder, 25 manufacture primarily cheese, and 1 
manufactures primarily other products.
    Also associated with the consolidated Central order, but not within 
the marketing area, are 2 nonpool cheese plants and a nonpool supply 
plant located in South Dakota.

Cooperative Associations

    Twenty-five cooperative associations pooled milk in December 1997 
under the nine orders consolidated in the Central market. Of these 
cooperatives, 1 pooled milk under 7 of the orders, 5 cooperatives 
associated producer milk with 3 orders each, and 2 others pooled milk 
under 2 orders each. Seventeen of the 25 cooperatives pooled milk under 
only one order, and for 10 of these organizations that was the Iowa 
order.
    The percentage of cooperative milk pooled under the eight orders 
was 95, with a range of 80.7 percent cooperative milk under the 
Southwest Plains order to 100 percent cooperative member milk under the 
Central Illinois, Greater Kansas City and Eastern South Dakota orders.

Criteria for Consolidation

    Most of the criteria used in determining the optimum consolidation

[[Page 16073]]

of order areas apply to the Central marketing area. The Federal order 
markets consolidated in the Central area are strongly related to each 
other through overlapping route disposition. The great majority of 
sales by handlers who would be regulated under the consolidated Central 
order are distributed within the marketing area, and the consolidated 
markets have a greater relationship in terms of overlapping sales areas 
than with any other markets. In addition, sales within the currently-
unregulated areas included in the consolidated Central area are 
overwhelmingly from handlers that would be pooled under the Central 
order. Inclusion of these areas would reduce handlers' burden of 
reporting out-of-area sales and take in pockets of currently-
unregulated counties that occur between the current order areas. As 
discussed above, the milk procurement areas for the consolidated 
markets also have a significant degree of overlap.
    The Western Colorado order is included because the more recent data 
collected for this final decision indicates that since the proposed 
rule the Western Colorado marketing area has developed a closer 
relationship with the Eastern Colorado market than with any other 
market, even across the Continental Divide. A benefit of combining 
Western Colorado with other markets is that it is a small market where 
data cannot be released without revealing confidential information 
unless combined with data pertaining to another marketing area. 
Consolidation of the area will allow publication of meaningful 
statistics without disclosing proprietary information. In addition, 
several comments supported the combination of the Western Colorado area 
with the consolidated Central market in view of the large negative 
effect of lower producer pay prices on the small number of producers 
involved if the Western Colorado area were consolidated with the 
Southwestern Idaho-Eastern Oregon and Great Basin marketing areas.
    Some of the currently-unregulated counties in western Illinois and 
central Missouri have been added to the Central marketing area. The 
omission from the marketing area of the counties in central Missouri 
that are not included in the consolidated Central marketing area are 
based on an estimation of the marketing area of Central Dairy, located 
in Jefferson City, Missouri. This handler has not been previously 
regulated. As discussed earlier, it is not the intent of this decision 
to include currently-unregulated area in the consolidated order areas 
where such inclusion would have the effect of regulating previously-
unregulated handlers.
    An additional benefit of the consolidation of these nine order 
areas is that data will be able to be made public without disclosing 
proprietary information. Four of the current Federal order markets 
(Central Illinois, Greater Kansas City, Eastern South Dakota, and 
Western Colorado) included in this consolidated area have too few pool 
plants to be able to publish market data without revealing confidential 
information. In addition to these three markets, the number of handlers 
regulated under each of the Nebraska-Western Iowa, Iowa and Eastern 
Colorado orders is in the single digits.

Discussion of Comments and Alternatives

    Prior to issuance of the proposed rule, alternatives to the 
consolidation of the order areas included in the Central marketing area 
that were considered included combining the Iowa, Nebraska-Western 
Iowa, and Eastern South Dakota order areas with those of the Chicago 
Regional and Upper Midwest areas in a consolidated Upper Midwest order. 
The collection of more detailed data concerning the overlap in route 
disposition and milk procurement showed clearly that these marketing 
areas are more closely related to markets to the south than to the 
north.
    Approximately 85 percent of the total fluid milk dispositions 
distributed by handlers regulated under the three order areas that were 
suggested to be included in the Central area in the initial Preliminary 
Report, and in the Upper Midwest area in the Revised Preliminary 
Report, are disposed of in the consolidated Central market. The 
disposition by other Central marketing area handlers within the 
consolidated Central area is somewhat greater than the proportion for 
the three more northern order areas.
    Also considered was the exclusion of 14 Nebraska counties, in 
addition to the 11 already excluded, from the Central marketing area to 
expand the unregulated area in which Gillette Dairy could distribute 
milk without becoming regulated. There was no data indicating that 
Gillette distributes milk in those counties. In the early stages of the 
study of appropriate order consolidation, it was assumed that the 
southern Missouri and northwest Arkansas portions of the Southwest 
Plains order area would remain with the rest of that area. This area 
was included with the consolidated Southeast order area in the proposed 
rule, and remains there.
    Eighteen comments that pertained specifically to the proposed 
Central marketing area were filed by 17 commenters in response to the 
proposed rule. Four of these comments advocated moving the Western 
Colorado order area from the consolidated Western order to the 
consolidated Central order. These comments expressed concern about the 
expected reduction in the blend price to Western Colorado producers 
under the Western order. An examination of updated data on route 
dispositions and bulk milk movements resulted in making this change 
which is explained in greater detail in the description of comments and 
alternatives under the section of this decision dealing with the 
Western area.
    A comment filed by the American Farm Bureau Federation recommended 
that the central area of Missouri that was proposed to be unregulated 
be included in the Central order area. A comment filed on behalf of 
Central Dairy, the handler who is located and distributes milk in the 
unregulated Missouri area opposed the addition of any presently 
unregulated territory to Federal order marketing areas, and 
specifically opposed the addition of six currently-unregulated 
northeast Missouri counties into which the handler expects to expand 
its distribution.
    There is no intention of causing the regulation of this handler. As 
discussed earlier with regard to the Northeast and Mideast marketing 
areas, consolidation of the existing orders does not necessitate 
expansion of the consolidated orders into currently-unregulated areas, 
especially if such expansion would result in the regulation of 
currently-unregulated handlers. At the same time, minimizing the extent 
of the unregulated counties in the middle of the consolidated marketing 
area would help to reduce the reporting burden on handlers in 
determining which route dispositions are inside, and which are outside 
the marketing area. The administrative burden of verifying such 
reporting also would be eliminated. Six currently-unregulated northeast 
Missouri counties that were proposed to be added to the Central order 
area have been removed on the basis of comments received from the 
Jefferson City handler, who indicated that regulation of the six 
counties may result in a change in the handler's regulatory status. No 
urgency on the part of regulated handlers having sales in the 
unregulated area to include that area in the consolidated order area 
was apparent from comments. In fact, none of the comments received from 
affected handlers advocated that the unregulated area be included in 
the consolidated area.

[[Page 16074]]

    A comment by Gillette Dairy, a handler located in Rapid City, South 
Dakota, in the former Black Hills Federal order area, supported 
excluding the 11 counties of the Nebraska panhandle, currently part of 
the Nebraska-Western Iowa order area, from the consolidated Central 
area. Gillette has some sales in this area and competes there with 
regulated handlers, but requested that the panhandle area be excluded 
to lessen Gillette's likelihood of becoming fully regulated under the 
Central order. This area was excluded in the proposed rule, and its 
exclusion was unopposed by any interested persons who filed comments 
before the deadline for doing so. Although Gillette's sales in the 
panhandle area do not represent an overwhelming majority of the total 
sales there, the volume of sales in this sparsely-populated area should 
not affect the competitive status of any regulated handlers. Therefore, 
the area will be excluded from the consolidated area as proposed.
    Several comments, from the Iowa Department of Agriculture, Wells' 
Dairy, and Anderson-Erickson Dairy, as well as Swiss Valley Farms, 
supported the inclusion of the Iowa order area in the consolidated 
Central area, stating that the attraction of a supply of milk for fluid 
needs requires such a consolidation.
    Comments were received on dividing the current Iowa marketing area 
by adding the eastern edge of the Iowa marketing area to the proposed 
consolidated Upper Midwest order. Such a division would result in the 
Swiss Valley Farms distributing plant in Dubuque, Iowa, qualifying as a 
pool plant under the consolidated Upper Midwest order (as it now does 
during some months under the current Chicago Regional order). The Swiss 
Valley plant comprises a large majority of the Iowa market sales in the 
Chicago Regional and Upper Midwest order areas, and the movement of a 
half-dozen counties would assure its pool status in the consolidated 
Upper Midwest order and its location in that order area.
    Comments by Lakeshore Federated Dairy Cooperative argued that the 
extensive overlap of producers, Class I sales, and geographic 
similarities between the northeast portion of the Iowa marketing area 
and the adjoining consolidated Upper Midwest area should be considered 
compelling reasons for making such a change. Lakeshore's comments were 
supported by Prairie Farms, Foremost Farms, and DFA. In addition, 
Grande Cheese Company, a Wisconsin cheesemaker, filed comments 
supporting Lakeshore's position.
    In its comments, Swiss Valley argued that the 2 southwest Wisconsin 
counties proposed to be included in the consolidated Central marketing 
area were removed from the Chicago Regional area and added to the Iowa 
area on the basis of a formal rulemaking proceeding in the late 1980's, 
at which time it was determined that the principal competition for 
fluid sales and milk supply in this area occurred between Iowa handlers 
rather than with Chicago Regional handlers. It is therefore Swiss 
Valley's position that the two counties should remain with the rest of 
the Iowa area, in the consolidated Central marketing area.
    On the basis of data gathered for this decision, the primary source 
of route disposition in Grant and Crawford Counties, Wisconsin, and 
Dubuque County, Iowa, is the Swiss Valley plant in Dubuque, and most of 
the rest of the milk distributed in these counties is from handlers 
regulated under the Chicago Regional order. The data also shows that 
the Dubuque plant procures most of its milk supply from counties that 
also supply milk to the Chicago Regional and Upper Midwest orders, as 
well as to other plants pooled under the Iowa order.
    One of the problems in this marketing area has been the ability of 
the Swiss Valley plant to choose the order under which it is regulated. 
As a result of differences between the current pool plant definitions 
of the two orders, Swiss Valley has been able to switch regulation 
between the Iowa and Chicago Regional orders as its price advantage 
shifted, and has done so frequently during 1997 and 1998. The pool 
plant definitions of the consolidated Upper Midwest and Central orders, 
which are very similar, will require that the Swiss Valley plant be 
regulated under the order for the area in which it has the greater 
volume of route disposition.
    If, under the consolidated orders, the Dubuque plant distributes a 
greater share of its sales in the consolidated Upper Midwest area than 
in the consolidated Central area, the plant will be pooled under the 
Upper Midwest order. The only appropriate change to be made to the 
current Iowa marketing area is to eliminate the partial counties from 
the marketing area definitions of the consolidated Central and Upper 
Midwest orders.
    The Illinois Counties of Jo Daviess and Whiteside currently are 
split between the Iowa and Chicago Regional order areas. More than half 
of the sales in Whiteside County are supplied by Iowa handlers 
(including Swiss Valley), so Whiteside County will be located entirely 
within the consolidated Central area. More than half of the sales in Jo 
Daviess County are supplied by Chicago Regional handlers (not including 
Swiss Valley), and that county will be located entirely within the 
consolidated Upper Midwest area. The Iowa County of Mitchell currently 
is located in the Upper Midwest area except for the City of Osage, 
which is defined as part of the current Iowa marketing area. All of 
Mitchell County will be included in the consolidated Upper Midwest 
area.
    After considering all comments and other relevant information, it 
is determined that the territory encompassed in the Central marketing 
area best meets the criteria used.

Southwest

    The consolidated Southwest marketing area is comprised of the 
current Texas (Order 126) and New Mexico-West Texas (Order 138) 
marketing areas as well as 49 currently unregulated Texas counties. 
There are 290 counties in this area. This area remains unchanged from 
the proposed rule.

Geography

    The consolidated Southwest market is described geographically as 
follows: three counties in Colorado (currently in Order 138), all New 
Mexico counties (33, currently in Order 138) and all 254 Texas counties 
(162 currently in Order 126, 43 currently in Order 138, and 49 
currently unregulated). Two currently unregulated counties are located 
in northeast Texas, while the remaining 47 are in southwest Texas.
    The Southwest market spans the south central area of the United 
States. It is surrounded by Arizona on the west, Colorado and Oklahoma 
on the north, Arkansas, Louisiana and the Gulf of Mexico in the 
northeast, east, and southeast, and Mexico to the south. Measuring the 
extreme dimensions, this market extends about 800 miles north to south 
from southern to northern Texas and about 875 miles east to west from 
Texas' border with Louisiana and Arkansas to New Mexico's border with 
Arizona.
    The Southwest market is contiguous to 3 consolidated marketing 
areas: Arizona-Las Vegas to the west, Central to the north and 
Southeast to the east. Unregulated counties in Colorado also form a 
relatively small border in the northwest corner of the market. Texas 
has over 350 miles of coastline on the Gulf of Mexico, while Texas and 
New Mexico share about 970 miles of boundary with northern Mexico.
    In terms of physical geography, diverse topographic relief exists 
in the

[[Page 16075]]

Southwest market area, particularly in New Mexico (ranging from deserts 
to high mountain ranges). Northwest New Mexico is part of the Colorado 
Plateau, an area of broad valleys and plains as well as deep canyons 
and mesas. The Rocky Mountains extend into the north central area of 
the state. The Basin and Range region, generally characterized by 
ranges or isolated mountains interspersed with valleys, desert basins 
or high plains, is located in central and southwestern New Mexico, as 
well as western Texas. The Great Plains cover the eastern third of New 
Mexico and extend through the Texas Panhandle in north Texas and much 
of central Texas. This area is characteristically dry and treeless and 
also encompasses Texas hill country and the Edwards Plateau. The Osage 
Plains covers the area in Texas from the Oklahoma-Texas border into the 
south central part of the state and the low and flat West Gulf Coastal 
Plain covers the eastern two-fifths of the state.
    Climates in this region also vary. The western part of the region, 
including New Mexico, southwest Texas and the Texas Panhandle, is semi-
arid to arid with wide ranges in both daily and annual temperatures. 
The southern tip of Texas and the Gulf coast are more humid and 
subtropical. For some of the area there are few agricultural uses other 
than dairy farming. Dairy products were the 2nd and 3rd highest 
revenue-producing agricultural commodities in New Mexico and Texas, 
respectively, in 1996, accounting for nearly one-third of agricultural 
receipts in New Mexico, but less than 10 percent in Texas.

Population

    According to July 1, 1997, population estimates, the total 
population in the consolidated marketing area is 21.3 million. The 26 
Metropolitan Statistical Areas (MSA) in the consolidated Southwest 
market account for 81.3 percent of the total market area population. 
About 55 percent of the Southwest population is located in the 4 most 
populous MSAs. Seven MSAs have populations greater than 500,000; their 
total population is 63.4 percent of the Southwest population. Because 
of the large number of MSAs in the Southwest market, only those areas 
with populations greater than 500,000 are described in detail.
    Almost 92 percent of the Southwest market's population is located 
in Texas, which has 19.5 million people. Twenty-three of the 26 
Southwest market MSAs are in Texas. About 66 percent of Texas' 
population is concentrated in 6 areas, which include the Southwest 
area's top 5 population centers: the Dallas-Fort Worth (Dallas) MSA in 
northeastern Texas, with a population of 4.7 million; the Houston-
Galveston-Brazoria (Houston) MSA in southeastern Texas near the Gulf of 
Mexico, with a population of 4.3 million; the San Antonio MSA in south 
central Texas, with a population of 1.5 million; the Austin-San Marcos 
(Austin) MSA in central Texas, with a population of 1 million; the El 
Paso MSA located in the far western corner of Texas on the Texas-New 
Mexico-Mexico border, with a population of 702,000; and the McAllen-
Pharr-Edinburg MSA located at the southern tip of Texas, with a 
population of 511,000.
    New Mexico's population is about 1.7 million. The remaining 3 of 
the 26 Southwest market MSAs are located in New Mexico. About 40 
percent of the state's population is located in the Albuquerque area, 
just northwest of central New Mexico.
    In the remainder of the Southwest marketing area, the 3 Colorado 
counties have a population of about 71,000.

Fluid Per Capita Consumption

    Estimates of fluid per capita consumption vary from 17.1 pounds of 
fluid milk per month per person in Texas to 17.5 in New Mexico to 18.8 
in Colorado. Multiplying the individual states' consumption rate by its 
population in the consolidated marketing area results in a fluid milk 
consumption rate of 364.5 million pounds of fluid milk per month for 
the consolidated Southwest marketing area.
    In October 1997, the fully regulated plants in Orders 126 and 138 
had route distribution totaling 342.5 million pounds. Ninety-eight 
percent, or 328 million pounds, was distributed within the consolidated 
Southwest marketing area. Handlers fully regulated under other Federal 
orders had about 21 million pounds of route distribution into the 
Southwest market area. Producer-handlers in the Southwest area 
distributed about 5 million pounds of route distribution in the 
Southwest marketing area in October 1997, while partially-regulated 
plants and plants that would be exempt on the basis of size distributed 
approximately .5 million pounds.

Production

    In October 1997, 1,570 producers from 144 counties in 5 states 
pooled 650 million pounds of producer milk on Orders 126 and 138. Over 
99 percent of this producer milk came from counties included in the 
consolidated Southwest marketing area. About 55 percent of the combined 
market's producer milk was provided by producers in six counties.
    About 455 million pounds of milk were pooled on either Order 126 or 
138 from 1,345 producers in 118 Texas counties in October 1997. Three 
Texas counties were among the top 6 in volume pooled: Erath (1st), 
Hopkins (4th) and Comanche (6th). Erath County--located about 75 miles 
west of Dallas--pooled 104.5 million pounds on Order 126 (and an 
additional 9 million pounds on 3 other Federal orders). Hopkins 
County--located about 50 miles east of Dallas--pooled 34 million pounds 
on Order 126 and another 15 million pounds on 4 other Federal orders. 
Contiguous to and lying southwest of Erath County, Comanche County 
pooled 33 million pounds on Order 126 and about .5 million pounds on 3 
other Federal orders.
    Of the 271 million pounds of milk pooled on either Order 126 or 138 
from 185 producers in 12 New Mexico counties, 69 percent was produced 
in the following three counties, all among the top 6 in volume pooled: 
Chaves (2nd), Dona Ana (3rd) and Roosevelt (5th). Chaves County--
located about 200 miles southeast of Albuquerque--pooled 92 million 
pounds on Orders 126 and 138 in October 1997 and an additional 28 
million pounds on 3 other Federal orders. Dona Ana County, located over 
200 miles south of Albuquerque, contiguous to El Paso County, TX, and 
the U.S.-Mexico border, pooled 61 million pounds of producer milk on 
Order 138. Contiguous to and lying northeast of Chaves County, 
Roosevelt County pooled 33 million pounds on Orders 126 and 138 and 
another 6.6 million on 4 other Federal orders.
    In October 1997, producer milk for Orders 126 and 138 also 
originated in one of the Colorado counties in the Southwest marketing 
area, and in counties in Arkansas and Oklahoma. However, the combined 
amount of producer milk pooled from these areas is less than 1 percent 
of the total producer milk pooled in these Orders.

Distributing Plants

    Using distributing plant lists included in the proposed rule, with 
the pooling standards adjusted to 25 percent of route disposition as 
in-area sales, updated for known plant closures through December 1998, 
31 distributing plants located in the consolidated Southwest marketing 
area would be expected to be associated with the Southwest market, 
including 21 fully regulated distributing plants, 2 partially 
regulated, 2 exempt and 6 producer-handlers. None of these plants' 
regulatory status is expected to change as a result of the 
consolidation process.

[[Page 16076]]

Of the 21 fully regulated plants, 17 are located in the top six MSA 
regions.
    Since October 1997, it is known that 3 plants (2 fully regulated 
and 1 producer-handler) have gone out of business. The fully regulated 
plants were located in El Paso, Texas, and in Albuquerque, New Mexico. 
The producer-handler was located in Hobbs, New Mexico.
    Of the 31 distributing plants that would be located in the 
consolidated Southwest marketing area, 24 are in Texas, and 7 are in 
New Mexico. Twenty of the Texas plants would be fully regulated. They 
are as follows: 6 in the Dallas area, 3 in the Houston area, 2 in the 
San Antonio area, 1 in the Austin area, and 2 in the El Paso area, and 
6 located throughout the state. One of the Texas distributing plants 
was associated with Order 30 (Chicago Regional) in October 1997, and is 
expected to be partially regulated in the Southwest market. Two 
producer-handlers are located in Texas, one in the El Paso area and the 
other in the central part of the state.
    Just over half of New Mexico's 7 distributing plants are located in 
the Albuquerque area. One fully regulated handler and 3 producer-
handlers are located in this population center. Of the remaining 3 
plants located in New Mexico, there are 2 plants that would be exempt 
on the basis of size (both located in central New Mexico) and 1 
producer-handler (located southeast of Albuquerque).

Utilization

    According to October 1997 pool statistics, the Class I utilization 
percentages for the Texas and New Mexico-West Texas markets were 56 and 
44 percent, respectively. Based on calculated weighted average use 
values for (1) the current order with current use of milk, and (2) the 
current order with projected use of milk in the consolidated Southwest 
order, the potential impact of this consolidation on producers who 
supply the current market areas is estimated to be: Texas, a 5-cent per 
cwt decrease (from $14.09 to $14.04), and New Mexico-West Texas, a 10-
cent per cwt increase (from $13.51 to $13.61). The weighted average use 
value for the consolidated Southwest order market is estimated to be 
$13.97 per cwt. For October 1997, combined Class I utilization for 
Orders 126 and 138 was 53.4 percent based on 347.0 million pounds of 
producer milk used in Class I out of 649.9 million total producer milk 
pounds.

Other Plants

    Located within the Southwest marketing area during May 1997 were 17 
manufacturing plants: 11 in Texas (2 in the Dallas MSA and 1 in the El 
Paso MSA) and six in New Mexico. Six of the 17 plants were pool plants. 
All of these pool plants were manufacturing plants--one manufactured 
primarily Class II products, two manufactured primarily powder, two 
manufactured primarily cheese and one manufactured primarily other 
products. Of the 11 nonpool plants in the Southwest marketing area, all 
were manufacturing plants--one manufactured primarily powder, four 
manufactured primarily cheese, one manufactured primarily other 
products and five manufactured primarily Class II products.

Cooperative Associations

    In December 1997, three cooperative associations marketed about 95 
percent of the milk pooled under both of the orders consolidated in the 
Southwest area: Dairy Farmers of America (DFA); and Select Milk 
Producers, Inc. (Select); and Elite Milk Producers, Inc. (Elite).

Criteria for Consolidation

    Nearly all of the route disposition by Order 126 and 138 handlers 
is distributed within the consolidated marketing area. In addition, 
nearly all of the milk that would be pooled under the consolidated 
order, based on October 1997 data, originates within the marketing 
area. Two cooperatives market the vast majority of milk within the 
consolidated area.

Discussion of Comments and Alternatives

    Prior to issuance of the proposed rule, alternatives to the 
consolidation of the Texas and New Mexico-West Texas order areas that 
were considered included the consolidation of east Texas with the 
Southeast area. This alternative consolidation was examined at length 
and found to have little overlap of either fluid milk product 
disposition or producer milk movements.
    Only one comment pertained specifically to the consolidated 
Southwest marketing area. This was a comment from DFA that discussed 
general support for the marketing areas proposed by USDA, with no 
objection to the Southwest marketing area, as proposed.

Arizona-Las Vegas

    The consolidated Arizona-Las Vegas marketing area is comprised of 
the current Central Arizona (Order 131) marketing area, one county in 
Nevada which currently is in the Great Basin (Order 139) marketing 
area, and currently unregulated counties in Arizona. There are 16 
counties in this consolidated marketing area. This area remains 
unchanged from the proposed rule.

Geography

    The Arizona-Las Vegas market is described geographically as 
follows: All counties (15) in Arizona (6 whole and 1 partial currently 
are part of Order 131, and 8 whole and 1 partial currently are 
unregulated) and Clark County, Nevada, which currently is part of the 
Great Basin marketing area. The market extends about 400 miles north to 
south from Arizona's border with Utah (and Nevada's southernmost 
county) to the U.S.-Mexico border. The market ranges from 300 to 375 
miles east to west from the Arizona-New Mexico border to the Arizona/
southern Nevada-California border.
    The Arizona-Las Vegas marketing area is contiguous to two other 
consolidated marketing areas, the Great Basin portion of the Western 
area to the north and the New Mexico-West Texas portion of the 
Southwest area to the east. California, which is not part of the 
Federal order system, lies to the west and Mexico is south of this 
marketing area.
    Arizona can be divided into three geographic regions--the Sonoran 
Desert, in the southwest; the Colorado Plateau, in the north; and the 
Mexican Highland, mainly in the central and southeastern parts of the 
state. With each of these regions, three distinct climatic zones exist: 
The Sonoran Desert is hot in the summer but can experience frost in the 
winter; the Colorado Plateau is hot and dry in the summer and cold and 
windy in the winter; and the Mexican Highland receives significant 
precipitation in both summer and winter. This region is cooler in both 
summer and winter than the Sonoran Desert region.
    These topographical and climatic conditions apparently are 
conducive to milk production. Dairy products represent one of the 
principal agricultural commodities (2nd and 3rd) in the States of 
Arizona and Nevada, respectively, representing 16.6 and 21.7 percent of 
total agricultural receipts of the two States in 1996.

Population

    Arizona is one the fastest-growing states in the United States. 
According to July 1, 1997, population estimates, the total population 
in the consolidated marketing area is 5.7 million. Using Metropolitan 
Statistical Areas (MSAs), the largest population center is the Phoenix-
Mesa (Phoenix) area, located in

[[Page 16077]]

central Arizona approximately 125 miles north of the U.S.-Mexico border 
in the Sonoran Desert region. About 250 miles to the northwest of 
Phoenix is the Las Vegas, Nevada, area, the second-largest population 
center in this marketing area. The Las Vegas MSA is comprised of three 
counties: Clark and Nye counties in Nevada and Mohave County in 
Arizona. Almost half of this market's population is in the Phoenix 
area, and over 70 percent is accounted for when Las Vegas is added.

Fluid Per Capita Consumption

    Based on the population figure of 5.7 million and an estimated per 
capita fluid milk consumption rate of 20 pounds of fluid milk per 
month, total fluid milk consumption in the Arizona-Las Vegas marketing 
area is estimated at 114 million pounds per month. In October 1997, 
plants that would have been fully regulated distributing plants in the 
Arizona-Las Vegas order had route disposition within the market of 
approximately 95 million pounds, representing 94 percent of their route 
disposition. Another 6.5 million pounds of milk was distributed in the 
consolidated marketing area by 2 handlers expected to be fully 
regulated under the consolidated Western Federal order and by 10 
California plants that are partially regulated under the Central 
Arizona and Great Basin orders.

Milk Production

    In October 1997, almost 196 million pounds of milk was pooled in 
the Central Arizona market, supplied by over 100 producers located in 
fewer than 10 counties in Arizona and California. Over 95 percent of 
the Central Arizona milk was produced within the marketing area. 
Further, over 90 percent of the producer milk produced within the Order 
131 area was produced in Maricopa County, Arizona, where Phoenix, this 
market's largest city, also is located. With 177 million pounds of 
producer milk for October 1997, Maricopa County produces almost twice 
the amount of milk required to meet the fluid milk needs of the entire 
marketing area. Arizona producers did not supply milk to any other 
Federal order; however, it is known that producer milk moves from both 
Arizona and Clark County, Nevada, to southern California. These figures 
do not reflect the producer milk associated with Anderson Dairy, the 
Las Vegas handler who has been pooled on Order 139. There is only one 
producer located in Clark County, Nevada. Anderson's milk supply comes 
from a cooperative association in southern California.

Distributing Plants

    Using distributing plant lists included in the proposed rule, with 
the pooling standards adjusted to 25 percent of route disposition as 
in-area sales, updated for known plant closures through December 1998, 
8 distributing plants would be expected to be associated with the 
consolidated Arizona-Las Vegas marketing area, including 5 fully 
regulated distributing plants (all currently pool plants), 1 exempt 
plant and 2 producer-handlers. There are 4 distributing plants in the 
Phoenix area (all pool plants). Located in the Las Vegas MSA are one 
pool plant and a producer-handler. Another producer-handler is located 
in the Yuma area and the exempt plant is located in a currently-
unregulated Arizona county, and has total route disposition of less 
than 150,000 pounds. All of the plants that are expected to be fully 
regulated under this consolidated order are located in areas that 
contain over 70 percent of the market's population.

Utilization

    According to October 1997 pool statistics, the Class I utilization 
for the Central Arizona market was 46 percent. Due to restricted 
information, this calculation excludes receipts for the Las Vegas 
handler who currently is regulated under Order 139, but would be 
regulated under this order. Because the degree of consolidation for 
this market is very minor, little change in the Class I utilization 
percentage, and thus little change in producer returns, is expected in 
the Arizona-Las Vegas area as a result of the consolidation. For 
October 1997, Class I utilization for the Central Arizona market was 
46.3 percent based on the use of 90.8 pounds of producer milk in Class 
I out of 195.9 total pounds of producer milk. The weighted average use 
value for the Arizona-Las Vegas market is estimated to be $13.84 per 
hundredweight.

Other Plants

    For May 1997, 3 supply or manufacturing plants were located within 
the Arizona-Las Vegas marketing area: 2 in Arizona (both in the Phoenix 
area) and 1 in Nevada (in the Las Vegas area). One Arizona plant was a 
pool plant operated by the cooperative, manufacturing primarily cheese, 
while the other plants were nonpool plants manufacturing primarily 
Class II products.

Cooperative Associations

    For December 1997, the only cooperative pooling milk under the 
Central Arizona order was United Dairymen of Arizona, which represented 
over 90 percent of the milk pooled under the Central Arizona order. 
Security Milk Producers Association, a cooperative based in California, 
supplies milk to the Las Vegas handler.

Criteria for Consolidation

    Market data indicate that there are sales into the Las Vegas area 
by Central Arizona pool plants, and sales by both Phoenix and Las Vegas 
handlers into the unregulated areas along the southern part of the 
Nevada-Arizona border. Rapid population growth in the area between the 
two areas has greatly increased competition between the handlers in 
Phoenix and Las Vegas. In addition, both areas exchange significant 
volumes of bulk and packaged milk with Southern California. At the same 
time, the strength of the earlier relationship between the Las Vegas 
area and Utah clearly has declined since the merger of the Lake Mead 
and Great Basin order areas in 1988, which was based on data compiled 
up to 1986.
    The Grand Canyon serves as a natural barrier in northwestern 
Arizona between this area and Great Basin. Although the actual 
consolidated order area extends to the Utah border, the portion of 
Arizona between the Grand Canyon and Utah is very sparsely populated, 
and is included in the consolidated marketing area primarily for the 
purpose of simplifying the marketing area description and easing 
handlers' burden of reporting out-of-area sales. The Colorado River 
forms much of the western boundary with California and Nevada. A north-
south strip along the eastern edge of Arizona constituting 
approximately 30 percent of the State's territory is very sparsely 
populated, containing just over 5 percent of the population of the 
consolidated marketing area. This lightly populated desert area can be 
seen as another form of natural barrier to the movement of bulk and 
packaged milk.

Discussion of Comments and Alternatives

    Prior to issuance of the proposed rule, alternatives to the 
consolidation of the Central Arizona marketing area and the southern 
Nevada portion of the Great Basin order area included retaining the Las 
Vegas area with the rest of the current Great Basin order area in the 
consolidated Western marketing area.
    Twelve comments that pertained specifically to the proposed 
Arizona-Las Vegas area were filed by 10 commenters in response to the 
proposed rule. Anderson Dairy in Las Vegas advocated that Clark County, 
Nevada, in which Las

[[Page 16078]]

Vegas is located, be left out of any consolidated marketing area to 
better enable Anderson to compete with milk distributed from California 
and from the Salt Lake City area. Two comments from the Nevada Dairy 
Commission, suggesting that prices could be set within the State, and 
from a U.S. Senator from Nevada, requested that Clark County be 
excluded from any Federal order marketing area. Security Milk Producers 
Association, a cooperative that supplies milk to Anderson, first filed 
a comment supporting the proposed Arizona-Las Vegas area, and then 
filed a later comment urging that if Clark County cannot be deregulated 
and California does not become a Federal order, Clark County should be 
reunited with the rest of the consolidated Western order area. A 
commenter in the southern Nevada dairy industry supported the 
cooperative's view.
    A comment from DFA suggested that the Great Basin marketing area be 
consolidated with the proposed Arizona-Las Vegas area rather than the 
proposed Western area, arguing that the price/utilization relationships 
of the Great Basin area are more similar to the Arizona-Las Vegas area 
than to the rest of the Western area. Darigold, Inc., urged that Las 
Vegas be reunited with Utah due to its proximity to the major 
production areas in Utah. Darigold suggested that if there is a linkage 
between the Phoenix and Las Vegas markets, those areas both should be 
included in the Western area.
    A comment filed by the American Farm Bureau Federation recommended 
that the consolidation of the Central Arizona and Clark County areas be 
reconsidered in favor of a return to the consolidation of the Central 
Arizona area with the Southwest area, suggested in the Initial 
Preliminary Report on Order Consolidation.
    A comment filed by the Dairy Institute of California supported the 
consolidation of the Las Vegas area with Arizona because such a 
combination would eliminate competitive distortions between these areas 
and California caused by the Las Vegas raw milk price levels. The Utah 
Farm Bureau stated that it does not oppose removing the Clark County, 
Nevada, area from the Great Basin order area and combining it with 
Arizona.
    An increase in sales by Central Arizona pool plants into the Las 
Vegas area, and increased sales by both Phoenix and Las Vegas handlers 
into the unregulated area of rapidly-increasing population along the 
southern part of the Nevada-Arizona border, are factors that have 
greatly increased overlapping route distribution in these two areas. 
Mohave County, Arizona (currently-unregulated), and Clark County, 
Nevada, are two of the fastest-growing areas in the United States in 
terms of population. These two counties adjoin each other in southern 
Nevada and northwestern Arizona, and both are increasing in population 
significantly faster than the growth rates for their states. From 1990 
to 1997, a period during which the population of the United States 
increased by 7.6 percent, the population of Arizona increased by 24.3 
percent, while Mohave County's population increased by 37.8 percent. 
Over the same period, Clark County, Nevada, experienced a population 
increase of 49.2 percent, while the Nevada population increased by 39.5 
percent. The rapidly-growing area between Phoenix and Las Vegas 
represents a growing market which can be expected to be served by both 
of the major population centers.
    Ninety-five percent of the route dispositions of handlers who would 
be regulated under this order were distributed within the consolidated 
marketing area in October 1997, and approximately the same percentage 
of route disposition within the marketing area was by handlers who 
would be regulated under this consolidated order. Similarly, over 95 
percent of the milk pooled under the current Central Arizona order is 
produced within the marketing area, and there is no indication of 
movements of producer milk between Utah and Nevada, as was the case 
when the Great Basin and Lake Mead orders were merged.
    In addition, both areas exchange significant volumes of bulk and 
packaged milk with Southern California, a relationship that does not 
pertain to any of the other areas in the region. The Las Vegas area's 
earlier relationship with southern Utah was based primarily on Utah as 
an important milk supply area for Las Vegas at the time of the merger 
of the Lake Mead and Great Basin order areas in 1988. That relationship 
clearly has ceased to exist. Therefore, the assertion by commenters 
that the Las Vegas, Nevada, area should continue to be included in the 
same marketing area with Utah or be unregulated does not reflect 
current marketing conditions.

Western

    The consolidated Western marketing area is comprised of the current 
Southwestern Idaho-Eastern Oregon (Order 135) and Great Basin (Order 
139) marketing areas, less one Nevada county (Clark) in Order 139 that 
is added to the Arizona-Las Vegas marketing area. There are 67 counties 
in this consolidated area. The Western Colorado (Order 134) marketing 
area, proposed to be part of the Western consolidated area, was changed 
to become part of the Central consolidated area.

Geography

    The Western market is described geographically as follows: 28 
counties in Idaho (18 currently in Order 135 and 10 in Order 139), 3 in 
eastern Nevada (all currently in Order 139), 5 in eastern Oregon (all 
currently in Order 135), all counties (29) in Utah (currently in Order 
139) and 2 in the southwest corner of Wyoming (currently in Order 139). 
Measuring the extreme dimensions, this market extends about 625 miles 
north to south from Oregon and Idaho to Utah's boundary with Arizona. 
This market's east-to-west dimension is approximately 550 miles from 
the westernmost edge in central/eastern Oregon to the easternmost edge 
of the Utah/Colorado border.
    The consolidated Western marketing area is contiguous to four of 
the consolidated marketing areas, the Pacific Northwest to the west and 
north of the Oregon portion of this market, Arizona-Las Vegas to the 
south, the Central market on the east, and the Southwest to the extreme 
southeast corner. Non-Federally regulated territory borders the Western 
market on the west-southwest (Nevada) and the north-northeast (Idaho 
and Wyoming).
    In terms of physical geography, the Western marketing area has 
several regions: The Columbia Plateau in southern Idaho and 
northeastern Nevada, characterized by fertile soils; the Great Basin in 
southeast Idaho, nearly all of Nevada and the western third of Utah, 
described by ranges and parallel valleys; and the Colorado Plateau in 
the eastern half of Utah, characterized by gorges. In general, the 
Western market is quite dry, with temperatures tending to be extreme 
and affected by elevation.

Population

    According to July 1, 1997, population estimates, the total 
population in the consolidated marketing area is 3.2 million. Using 
Metropolitan Statistical Areas (MSAs), the largest population center is 
the Salt Lake City-Ogden, Utah area (Salt Lake City). Salt Lake City is 
located in north central Utah. The Boise City, Idaho, area (Boise), the 
second largest population center in this marketing area, is located 
about 300 miles to the northwest of Salt Lake City. Provo-Orem, Utah, 
(Provo) the third largest population center, lies 40 miles

[[Page 16079]]

south of Salt Lake City. Forty percent of the market's population is in 
the Salt Lake City area, and over 60 percent is accounted for when 
Boise and Provo are added.

Fluid Per Capita Consumption

    Based on the population figure of 3.2 million and an estimated per 
capita fluid milk consumption rate of 23 pounds of fluid milk per 
month, total fluid milk consumption in the Western marketing area is 
estimated at 73.6 million pounds per month. Plants that would have been 
fully regulated distributing plants in the Western order had route 
disposition within the market of 74 million pounds in October 1997; 
approximately 80 percent of this total is from Order 139 pool plants. 
The 7 producer handlers operating during this month had a combined 
route disposition of 1.6 million pounds. Additionally, 1.1 million 
pounds of route disposition came from other order plants, with about .5 
million from partially regulated handlers and exempt plants.

Milk Production

    In October 1997, over 457 million pounds of milk was associated 
with the Great Basin and Southwestern Idaho-Eastern Oregon markets, but 
only 304 million pounds of this milk was pooled because of class price 
relationships. The 457 million pounds of milk were produced by 952 
dairy farmers located in 51 counties in California, Idaho, Nevada, 
Oregon, Utah and Wyoming. Over 95 percent of the milk associated with 
the market was produced within the marketing area. Four counties 
produced more than 50 percent of the milk available to be pooled. The 
three top producing counties in Idaho, Jerome, Gooding and Twin Falls 
counties, are all located in southwestern Idaho, about 130 miles 
southeast of Boise and 230 miles northwest of Salt Lake City. Jerome 
and Gooding counties each provided approximately twice as much milk as 
Twin Falls County, the third-largest county in terms of milk production 
in the Western market. The fourth-largest production county was Cache 
County in northeastern Utah, located about 80 miles north of Salt Lake 
City.
    The three Idaho counties, part of the marketing area of the current 
Southwestern Idaho-Eastern Oregon order, are the top three milk-
producing counties for Order 135 and among the top seven milk-producing 
counties for Order 139 in October 1997. Five counties in the current 
Southwestern Idaho-Eastern Oregon marketing area supplied one-quarter 
of the milk associated with the Great Basin order in October 1997.

Distributing Plants

    Using the distributing plant list included in the proposed rule, 
with the pooling standards adjusted to 25 percent of route disposition 
as in-area sales, updated for known plant closures through December 
1998, 25 distributing plants would be expected to be associated with 
the Western marketing area, including 11 fully regulated distributing 
plants (all currently pool plants), 2 partially regulated (currently 
partially regulated), 1 exempt plant based on size (currently a pool 
plant), 7 producer-handlers, and 4 exempt plants based on institutional 
status (all were exempt as defined under current federal orders). Since 
October 1997, it is known that 2 distributing plants (1 fully regulated 
and 1 exempt plant) in Utah and 1 producer-handler in Arizona have gone 
out of business.
    There would be 9 distributing plants in the Salt Lake City area (5 
pool plants, 2 producer-handlers and 2 exempt plants). The Boise area 
would have 2 pool distributing plants, the Provo area would have 1 
exempt plant and the Pocatello area would have 1 pool plant. The 
remaining 12 distributing plants are located in Idaho (4 plants: 2 
pool, 1 exempt, and 1 producer-handler), Nevada (1 partially regulated 
plant), and Utah (7 plants: 1 pool, 1 partial, 1 exempt, 4 producer-
handlers).
    Fully regulated distributing plants are located in MSAs containing 
about half of the consolidated market's population, including the 
Pocatello, Idaho, MSA, with 2.2 percent of this market's population.

Utilization

    According to October 1997 pool statistics, the Class I utilization 
percentages for the Southwestern Idaho-Eastern Oregon and Great Basin 
markets were 16 and 41 percent, respectively. Based on calculated 
weighted average use values for (1) the current order with current use 
of milk, and (2) the current order with projected use of milk in the 
consolidated Western order, the potential impact of this market 
consolidation on producers who supply the current market areas is 
estimated to be an 11-cent per cwt increase (from $12.92 to $13.03) for 
Southwestern Idaho-Eastern Oregon, and a 9-cent per cwt decrease (from 
$13.25 to $13.16) for Great Basin. The weighted average use value for 
the consolidated Western order market is estimated to be $13.14 per 
cwt. For October 1997, combined Class I utilization for Orders 135 and 
139 was 32.5 percent based on 98.8 million pounds of producer milk used 
in Class I out of 304.1 million total producer milk pounds.
    A substantial amount of milk was omitted from the Southwestern 
Idaho-Eastern Oregon pool for October because of unusual price 
relationships. The annual Class I utilization percentage may be 
considered more representative for this market. For the year 1997, the 
annual Class I utilization for Southwestern Idaho-Eastern Oregon was 
8.3 percent. It is estimated that the Class I use percentage for the 
consolidated market would be about 23 percent.

Other Plants

    Eighteen supply or manufacturing plants were located within the 
consolidated Western marketing area during May 1997: 8 in Idaho (3 in 
the Boise area), 9 in Utah (2 in the Salt Lake City area) and 1 in 
Wyoming. Two of the 18 plants were pool plants; both manufacture 
primarily cheese. Of the 16 nonpool plants, 12 manufacture primarily 
cheese and 5 manufacture primarily soft or Class II products (including 
ice cream). Of the 8 Idaho plants, all but one manufacture cheese, 
while of the 9 Utah plants, 6 manufacture cheese and 3 manufacture soft 
products.

Cooperative Associations

    For December 1997, four cooperatives representing 77 percent of the 
milk pooled under the two orders had membership in the consolidated 
Western marketing area. Western Dairymen Cooperative, Inc., a 
cooperative association that became part of Dairy Farmers of America, 
Inc., had membership in both the Southwestern Idaho-Eastern Oregon and 
Great Basin marketing areas. Magic Valley Quality Milk Producers, Inc., 
also had membership in Orders 135 and 139; Darigold Farms had 
membership in Order 135, and Security Milk Producers' Association had 
membership in Order 139.

Criteria for Consolidation

    The consolidated Western market is composed of the current 
marketing areas of the Southwestern Idaho-Eastern Oregon and Great 
Basin markets, minus the Clark County, Nevada, portion of the Great 
Basin area. Sales overlap exists between Southwestern Idaho-Eastern 
Oregon and Great Basin, as well as a significant overlap in procurement 
for the two orders in Idaho. The two orders also share similar multiple 
component pricing plans. The Western Colorado order, proposed for 
inclusion in the Western area, was shown on the basis of October 1997 
data to have developed a

[[Page 16080]]

closer relationship with the Eastern Colorado area than with the Great 
Basin order, and has been included in the consolidated Central area 
instead of the Western area.

Discussion of Comments and Alternatives

    Prior to issuance of the proposed rule, alternatives to the 
consolidation of the Southwestern Idaho-Eastern Oregon, Great Basin 
(minus Clark County, Nevada) and Western Colorado marketing areas that 
were considered included leaving the Southwestern Idaho-Eastern Oregon 
area as a separate order and consolidating the Great Basin market with 
the Central Arizona, Western Colorado, and Eastern Colorado marketing 
areas, leaving both the Southwestern Idaho-Eastern Oregon and Great 
Basin areas as separate order areas, and combining the Western Colorado 
area with the Eastern Colorado area and other areas to the east. These 
alternative consolidations were examined at length and found to be less 
appropriate than the marketing areas delineated in the proposed rule in 
terms of overlap of either fluid milk product disposition or producer 
milk movements.
    Fifteen comments that pertained specifically to the proposed 
Western marketing area were filed by 12 commenters in response to the 
proposed rule. Several of these comments objected to the separation of 
the Las Vegas area from the Great Basin portion of the Western area. 
These comments are addressed in the discussion of comments and 
alternatives considered for the consolidated Arizona-Las Vegas area.
    Comments filed by Dairy Farmers of America, Southern Foods Group, 
and a western Colorado dairy farmer advocated consolidating the Western 
Colorado order area with the consolidated Central area instead of the 
Western area. DFA's comment stated that the Western Colorado milkshed 
is more similar to the Central area than to the Western area. The 
comments filed by Southern Foods Group and the dairy farmer expressed 
concern about an expected reduction in the blend price paid to 
producers supplying the Western Colorado area.
    October 1997 data show an increased relationship between Western 
Colorado and Eastern Colorado, and reduced milk movements between 
Western Colorado and Great Basin. On the basis of the change in the 
relationships between Western Colorado and its two nearest neighbor 
order areas, the Western Colorado area should become part of the 
consolidated Central area instead of the Western area.
    Five Farm Bureau organizations (Michigan, Utah, Iowa, Ohio and 
American), a Pennsylvania producer and Dairy Farmers of America filed 
eight comments opposing the consolidation of the Southwestern Idaho-
Eastern Oregon order area with the Great Basin marketing area. One DFA 
comment suggested combining Utah with the Arizona-Las Vegas area 
instead of with Idaho. A primary basis for opposition to the 
consolidation is the disparity in the two regions' utilization of Class 
I fluid milk: The Southwestern Idaho-Eastern Oregon order has a very 
low percentage of Class I use, which varies from less than 10 percent 
to over 20 percent, while the Great Basin order's Class I use 
percentage is higher at about 35 percent. Commenters fear that the 
consolidation of these orders would result in lower returns to 
producers who currently are pooled under the Great Basin order. Most of 
the comments suggest that the Southwestern Idaho-Eastern Oregon 
marketing area should remain under a separate order.
    A major source of milk production for both the Southwestern Idaho-
Eastern Oregon and Great Basin orders is a 5-county area located within 
the Federal order 135 marketing area, supplying one-quarter of the milk 
pooled on the Great Basin order in October 1997. The Southwestern 
Idaho-Eastern Oregon area should be consolidated with some other order 
area because of the small number of handlers pooled under the order, 
and this close relationship with Great Basin makes that consolidation 
the only viable possibility.

Pacific Northwest

    The Pacific Northwest marketing area is comprised of the current 
Pacific Northwest (Order 124) marketing area and one currently-
unregulated county in southwest Oregon. There are 75 counties in this 
marketing area. This area remains unchanged from the proposed rule.

Geography

    The Pacific Northwest market is described geographically as 
follows: All counties (39) in Washington, 30 counties in Oregon (29 
currently are part of Order 124 and one, Curry County, is unregulated) 
and six counties in northwestern Idaho. The market extends about 490 
miles north-to-south from Washington's northern border with the 
Canadian province of British Columbia to Oregon's southern border with 
California and Nevada. East-to-west, the market ranges from about 450 
miles in the northern half of the market (covering territory from 
Washington's western boundary with the Pacific Ocean to the eastern 
border of Idaho with Montana) to about 250 miles in the southern half 
of the market (covering approximately two-thirds of Oregon from the 
state's western border with the Pacific Ocean to central Oregon).
    The Pacific Northwest marketing area is contiguous with the 
consolidated Western Federal order marketing area in eastern Oregon. 
The remainder of the marketing area is surrounded by currently non-
Federally regulated areas (California and northwestern Nevada to the 
south and Montana, Idaho, and one northeastern Oregon county to the 
east), political boundaries (Canada to the north), and the Pacific 
Ocean to the west.
    Along the Oregon and Washington coasts lies the Coast Range. The 
Cascade Range is located further inland in both states. Both ranges are 
north-south in direction, and the Cascade Range effectively divides 
both states into two distinct climates: a year-round mild, humid 
climate with abundant precipitation predominates in the western part of 
the states, and a dry climate with little precipitation but greater 
temperature extremes prevails east of the Cascade Range. The mild 
climate of the western portion results in longer growing seasons. The 
Columbia River flows south through eastern Washington, turns west, and 
becomes the western two-thirds of the border between Oregon and 
Washington. The portion of Idaho included in the Pacific Northwest 
marketing area is within the Rocky Mountains. This area has a generally 
continental climate with the higher elevations having long and severe 
winters.
    Much of the area is conducive to the production of milk and many 
other agricultural commodities. Although dairy products ranked 2nd 
among receipts of agricultural commodities in the State of Washington 
in 1996, and 4th in Oregon, they accounted for only 13.8 percent and 
7.9 percent, respectively, of such receipts. Apples (in Washington) and 
greenhouse/nursery, wheat, and cattle and calves (in Oregon) ranked 
ahead of dairy, accounting for 19.8 percent and 33.8 percent, 
respectively, of agricultural commodity receipts.

Population

    According to July 1, 1997, population estimates, the total 
population in the marketing area is 9 million. Seventy-seven percent of 
the marketing area population is located in Metropolitan Statistical 
Areas (MSAs). The two

[[Page 16081]]

largest MSAs are located on the western side of the Cascade Range. The 
Seattle-Tacoma-Bremerton (Seattle) area, with a population of 3.4 
million (37.6% of the marketing area population), is in northwestern 
Washington. Over seventy percent of the population of the State of 
Washington is located west of the Cascade Mountains, in the western 
third of the State. Another 14.5% of the State's population is 
contained in 3 MSA's east of the Cascades.
    The Portland-Salem (Portland) area in northwestern Oregon is 
located on the Oregon-Washington border, with Portland just south of 
the Columbia River. The population of this MSA is 2.1 million, or 23.6% 
of the marketing area population. Ninety percent of the population of 
Oregon is concentrated in the western one-third of the State, or in the 
western half of the Oregon portion of the marketing area.

Fluid Per Capita Consumption

    Based on the population figure of 9 million and an estimated per 
capita fluid milk consumption rate of 22 pounds of fluid milk per 
month, total fluid milk consumption in the Pacific Northwest marketing 
area is estimated at 198 million pounds per month. For October 1997, 
plants that would be fully regulated distributing plants under the 
Pacific Northwest order had route disposition within the market of 170 
million pounds. In addition, the 18 producer-handlers operating during 
this month had a combined route disposition of 18 million pounds. 
Additionally, slightly over 1 million pounds of route disposition (less 
than one percent of total route disposition in the marketing area) came 
from handlers outside the market. Because the handlers associated with 
this market are able to fulfill the market's Class I or fluid needs, 
and because of the somewhat geographic isolation of the market, 
maintaining the current Pacific Northwest order as a separate market is 
appropriate.

Milk Production

    In October 1997, the 540 million pounds of milk pooled in the 
Pacific Northwest market were produced by 1,211 producers located in 57 
counties in California, Idaho, Oregon, and Washington. Five counties 
produced 57 percent of the milk pooled. Four of these counties are in 
Washington State. They are Whatcom, Skagit, and Snohomish counties, 
which are less than 100 miles north of Seattle; and Yakima County, 
which is located in central Washington about 100 miles southeast of 
Seattle on the eastern side of the Cascade Range. The fifth county is 
in Oregon. It is Tillamook County, which borders the Pacific Ocean, 
about 60 miles west of the Portland area on the western side of the 
Coast Range.
    Less than two percent of the milk pooled in the Pacific Northwest 
was produced outside of the marketing area, in Idaho and California. 
The largest portion is from producers in two northern California 
counties who pooled nearly 6 million pounds of milk or 89.8 percent of 
the pooled milk produced outside the Pacific Northwest marketing area.

Distributing Plants

    Using distributing plant lists included in the proposed rule, with 
the pooling standards adjusted to 25 percent of route disposition as 
in-area sales, updated for known plant closures through December 1998, 
35 distributing plants would be expected to be associated with the 
Pacific Northwest market, including 19 fully regulated distributing 
plants (all currently fully regulated), 2 partially regulated plants, 4 
exempt plants (below 150,000 pounds in total route disposition), and 10 
producer-handlers. It is known that 3 distributing plants (all 
producer-handlers) have gone out of business since October 1997.
    There are 11 distributing plants within the Portland area, 
including 7 pool plants, 2 exempt plants and 2 producer-handlers. The 
Seattle/Tacoma MSAs have 4 pool plants, 1 partially regulated plant, 
and 4 producer-handlers. In addition to these two main population 
centers, the Spokane, Washington, MSA, located in the eastern area of 
the state near the Idaho border with a population of 405,000, has 2 
pool plants.
    Two smaller MSA's in western Oregon contain 2 pool plants, 1 
producer-handler, and 1 plant exempt on the basis of size. Of the 5 
distributing plants that would be operating in Oregon outside of MSAs, 
3 would be fully regulated, 1 partially regulated, and 1 exempt of the 
basis of size. All but one, in central Oregon, are located in western 
Oregon.
    One producer-handler is located in a northwest Washington MSA, and 
1 pool plant, 2 producer-handlers and 1 partially regulated plant are 
located in the southeast quadrant of the State of Washington outside 
any MSA.
    Since October 1997, three producer-handlers are known to have gone 
out of business, two in the State of Washington, and one in Oregon.
    Distributing plants fully regulated under the Pacific Northwest 
order are located in MSAs where 71 percent of the market's population 
is concentrated.

Utilization

    According to October 1997 pool statistics, the Class I utilization 
percentage for the Pacific Northwest market was 36 percent. Because 
this market is to remain separate, expected utilization changes due to 
the reform process result only from potential changes in plants' 
regulatory status; thus very little change in producer returns under 
the Pacific Northwest order is expected as a result of consolidation. 
For October 1997, Class I utilization for the Pacific Northwest market 
was 35.6 percent based on 192 million pounds of producer milk used in 
Class I out of 540 million total producer milk pounds. The weighted 
average use value for the Pacific Northwest market is estimated to be 
$13.33 per hundredweight.

Other Plants

    Located within the Pacific Northwest marketing area in May 1997 
were 27 supply or manufacturing plants; 12 in Oregon (5 in the Portland 
area), 15 in Washington (7 in the Seattle area) and none in Idaho. Two 
of the 27 plants (both in Oregon) were Order 124 pool supply plants, 
one of which manufactured primarily cheese, and the other nonfat dry 
milk. Of the 10 nonpool manufacturing plants located in Oregon, 8 
manufactured primarily Class II products (including ice cream), 1 
manufactured butter, and the other made cheese.
    The 15 manufacturing/supply plants located in the State of 
Washington were all nonpool plants. Three manufactured primarily Class 
II products, 3 manufactured primarily butter, 2 manufactured primarily 
powder, and 7 manufactured primarily cheese.

Cooperative Associations

    Five cooperative associations had members in the Pacific Northwest 
market in December 1997. Darigold Farms is the largest, and the only 
cooperative that had membership affiliated with another order (Order 
135) in December 1997. Other cooperatives in this market are Farmers 
Cooperative Creamery, Tillamook County Creamery Association, Northwest 
Independent Milk Producers Association, and Portland Independent Milk 
Producers Association. These five cooperatives pooled 85 percent of the 
total producer milk pooled under the Pacific Northwest order in 
December 1997.

Criteria for Consolidation

    The consolidated Pacific Northwest market adds one currently 
unregulated Oregon county to the Pacific Northwest milk order. The 
degree of association of

[[Page 16082]]

this market with other Federal order marketing areas is insufficient 
under any criteria to warrant consolidation with any other order areas.

Discussion of Comments and Alternatives

    Prior to issuance of the proposed rule, alternatives to the leaving 
the Pacific Northwest area as a separate order area that were 
considered included the consolidation of the current Pacific Northwest, 
Southwestern Idaho-Eastern Oregon and Great Basin order areas. Because 
there is virtually no relationship with regard to either overlapping 
route dispositions or overlapping milk procurement between the Pacific 
Northwest and Southwestern Idaho-Eastern Oregon milk marketing areas, 
and none at all with Great Basin, these alternatives were not pursued.
    Only two comments pertained specifically to the ``consolidated'' 
Pacific Northwest marketing area. Darigold Farms, Inc., commented that 
the Pacific Northwest marketing area should remain unchanged except for 
the addition of the one southwestern Oregon county proposed to be 
added. Darigold stated that the addition of this county would not cause 
the regulation of any plant. A comment filed by an individual from Utah 
stated that Idaho should be included in the Pacific Northwest area or 
be a separate order. As noted before, there is almost no relationship 
between the Pacific Northwest and Southwestern Idaho-Eastern Oregon 
marketing areas, and no basis for such a consolidation.

BILLING CODE 3410-02-P

                                      List of Plants and Regulatory Status
----------------------------------------------------------------------------------------------------------------
                                                                                        Order/       Expected
          Plant name                   City             State        October 1997     status \1\    status \1\
----------------------------------------------------------------------------------------------------------------
                                                    Northeast
----------------------------------------------------------------------------------------------------------------
ARMSTRONG, DAVID F. (SUNSET     WHITESBORO.......  NY              NY-NJ...........  1            1
 DAIRY).
ARRUDA, GEORGIANNA (ESTATE OF)  TIVERTON.........  RI              New England.....  4            4
BANGMA, LEONARD & DONALD......  UXBRIDGE.........  MA              New England.....  4            4
BECHTEL DAIRIES, INC..........  ROYERSFORD.......  PA              Mid Atlantic....  1            OOB 4/98
BOICE BROS. DAIRY (RICHARD P.   KINGSTON.........  NY              NY-NJ...........  1            1
 BOICE).
BRIGGS, ROBERT A..............  WEST MEDWAY......  MA              New England.....  4            4
BROOKSIDE DAIRY...............  FITCHBURG........  MA              New England.....  4            4
BYRNE DAIRY, INC..............  SYRACUSE.........  NY              NY-NJ...........  1            1
CAMPHILL VILLAGE..............  KIMBERTON........  PA              Mid Atlantic....  4            4
CHRISTIANSEN DAIRY CO., INC...  NO. PROVIDENCE...  RI              New England.....  1            1
CHROME DAIRY FARMS............  OXFORD...........  PA              Mid Atlantic....  1            1
CIENIEWICZ, JOSEPH............  BERLIN...........  CT              New England.....  4            4
CLINTON MILK CO...............  NEWARK...........  NJ              NY-NJ...........  1            OOB 10/98
CLOVER FARMS DAIRY COMPANY....  READING..........  PA              NY-NJ...........  1            1
CLOVERLAND/GREEN SPRING DAIRY.  BALTIMORE........  MD              Mid Atlantic....  1            1
CLOVERLAND/GREEN SPRING DAIRY.  BALTIMORE........  MD              Mid Atlantic....  1            OOB 2/98
COOPER'S HILLTOP DAIRY FARM...  ROCHDALE.........  MA              New England.....  4            4
CORNELL UNIVERSITY............  ITHACA...........  NY              ................  6A           6B
CRESCENT RIDGE DAIRY, INC.....  SHARON...........  MA              New England.....  4            4
CROWLEY FOODS, INC............  ALBANY...........  NY              NY-NJ...........  1            1
CROWLEY FOODS, INC............  BINGHAMTON.......  NY              NY-NJ...........  1            1
CROWLEY FOODS, INC............  CONCORD..........  NH              New England.....  1            1
CUMBERLAND DAIRY, INC.........  BRIDGETON........  NJ              Mid Atlantic....  2            2
CUMBERLAND FARMS, INC.........  CANTON...........  MA              New England.....  1            OOB 8/98
DAIRY MAID DAIRY, INC.........  FREDERICK........  MD              Mid Atlantic....  1            1
DUNAJSKI DAIRY, INC...........  PEABODY..........  MA              New England.....  4            4
DUTCH VALLEY FOOD CO., INC....  SUNBURY..........  PA              Mid Atlantic....  1            1
DUTCH WAY FARM MARKET.........  MYERSTOWN........  PA              Mid Atlantic....  4            4
EDWARDS, CHARLES & KURT &       GLOVERSVILLE.....  NY              NY-NJ...........  4            4
 KEITH (MODEL DAIRY FARM).
ELMHURST DAIRY, INC...........  JAMAICA..........  NY              NY-NJ...........  1            1
EMBASSY DAIRY, INC............  WALDORF..........  MD              Mid Atlantic....  1            OOB 3/98
EMMONS WILLOW BROOK FARM, INC.  PEMBERTON........  NJ              Mid Atlantic....  4            4
FAIRDALE FARMS, INC...........  BENNINGTON.......  VT              New England.....  2            1
FARMLAND DAIRIES, INC. &/OR     WALLINGTON.......  NJ              NY-NJ...........  1            1
 FAIRDALE MILK COMPANY, INC.
FISH FAMILY FARM, INC.........  BOLTON...........  CT              New England.....  4            4
FLINT, PETER..................  CHELSEA..........  VT              New England.....  1            1
FREDDY HILL FARM DAIRY........  LANSDALE.........  PA              Mid Atlantic....  4            4
FRIENDSHIP DAIRIES, INC.......  FRIENDSHIP.......  NY              NY-NJ...........  1            2
GARELICK FARMS, INC. WAS:       EAST GREENBUSH...  NY              NY-NJ...........  1            1
 CUMBERLAND FARMS, INC.
GARELICK FARMS, INC. WAS:       FLORENCE.........  NJ              NY-NJ...........  1            1
 CUMBERLAND FARMS, INC.
GARELICK FARMS, INC...........  FRANKLIN.........  MA              New England.....  1            1
GIANT FOOD, INC...............  LANDOVER.........  MD              Mid Atlantic....  1            1
GRANT'S DAIRY, INC............  BANGOR...........  ME              New England.....  2            2
GRATERFORD STATE..............  GRATERFORD.......  PA              Mid Atlantic....  6A           6B
GUERS DY., INC................  POTTSVILLE.......  PA              Mid Atlantic....  2            2
GUIDA-SEIBERT DAIRY CO........  NEW BRITAIN......  CT              New England.....  1            1
HALO FARM, INC................  TRENTON..........  NJ              Mid Atlantic....  1            1
HARRISBURG DAIRIES............  HARRISBURG.......  PA              Mid Atlantic....  1            1

[[Page 16083]]

 
HATCH, HOWARD.................  N. HAVERHILL.....  NH              New England.....  1            1
HATCHLAND DAIRY...............  N. HAVERHILL.....  NH              New England.....  4            4
HERITAGE'S DAIRY, INC.........  THOROFARE........  NJ              Mid Atlantic....  1            OOB 5/98
HERMANY FARMS, INC............  BRONX............  NY              NY-NJ...........  1            1
HIGHLAWN FARM.................  LEE..............  MA              ................  5            3B
HILL FARM OF VERMONT..........  PLAINFIELD.......  VT              ................  5            3B
HILLCREST DAIRY, INC. (MICHAEL  MORAVIA..........  NY              NY-NJ...........  4            4
 J. JANAS).
HINE, FREDRICK DBA: FIELD VIEW  ORANGE...........  CT              New England.....  4            4
 DAIRY FARM.
HOGAN, FRANCIS J. & ANDREW J.   HUDSON FALLS.....  NY              NY-NJ...........  4            OOB 5/97
 & SEAN P.--HOGAN'S DAIRY.
HOMESTEAD DAIRIES, INC........  MASSENA..........  NY              ................  5            OOB 6/98
HOOVER DAIRY..................  SANBORN..........  NY              ................  5            5
HY POINT DAIRY FARMS, INC.....  WILMINGTON.......  DE              Mid Atlantic....  1            1
H.E.A., INC...................  CRANSTON.........  RI              New England.....  1            1
H.P. HOOD, INC................  AGAWAM...........  MA              New England.....  1            1
H.P. HOOD, INC. WAS: BOOTH      BARRE............  VT              New England.....  2            1
 BROTHERS DAIRY, INC.
H.P. HOOD, INC................  BURLINGTON.......  VT              New England.....  2            OOB 10/97
H.P. HOOD, INC................  NEWINGTON........  CT              New England.....  2            2
H.P. HOOD, INC................  ONEIDA...........  NY              NY-NJ...........  2            1
H.P. HOOD, INC................  PORTLAND.........  ME              New England.....  1            1
KEMPS FOODS, INC..............  LANCASTER........  PA              Mid Atlantic....  1            1
KOLB'S FARM STORE.............  SPRING CITY......  PA              Mid Atlantic....  4            4
KREIDER DAIRY FARMS, INC......  MANHEIM..........  PA              NY-NJ...........  2            4
KRISCO FARMS, INC.............  CAMPBELL HALL....  NY              NY-NJ...........  4            OOB 5/98
LAPP VALLEY FARM..............  NEW HOLLAND......  PA              Mid Atlantic....  4            4
LEESBURG STATE PRISON FARM....  LEESBURG.........  NJ              Mid Atlantic....  6A           6B
LEONARD, STEWART J............  NORWALK..........  CT              New England.....  1            1
LEWES DAIRY, INC..............  LEWES............  DE              Mid Atlantic....  1            1
LEWIS COUNTY DAIRY CORP.......  LOWVILLE.........  NY              NY-NJ...........  1            1
LONGACRE'S MODERN DAIRY, INC..  BARTO............  PA              NY-NJ...........  1            1
MANINO, ROSE (DARI-DELL)......  FRANKFORT........  NY              NY-NJ...........  2            3B
MAPLE HILL FARMS, INC.........  BLOOMFIELD.......  CT              New England.....  1            OOB 9/97
MAPLEHOFE DAIRY, INC..........  QUARRYVILLE......  PA              Mid Atlantic....  4            4
MARCUS DAIRY, INC.............  DANBURY..........  CT              NY-NJ...........  1            1
MCNAMARA, PATRICK.............  WEST LEBANON.....  NH              New England.....  4            4
MEADOW BROOK FARMS, INC.......  POTTSTOWN........  PA              Mid Atlantic....  1            1
MERCERS DAIRY, INC............  BOONVILLE........  NY              NY-NJ...........  2            3B
BMERRYMEAD FARM...............  LANSDALE.........  PA              Mid Atlantic....  4            4
MOHAWK DAIRY (Z & R CORP.)....  AMSTERDAM........  NY              NY-NJ...........  1            1
MONUMENT FARMS, INC...........  MIDDLEBURY.......  VT              ................  5            1
MOUNT WACHUSETT DAIRY, INC....  W. BOYLSTON......  MA              New England.....  1            OOB 12/98
MOUNTAINSIDE FARMS, INC.......  ROXBURY..........  NY              NY-NJ...........  1            1
MUNROE, A B DAIRY, INC........  EAST PROVIDENCE..  RI              New England.....  1            1
NEW ENGLAND DAIRIES, INC......  HARTFORD.........  CT              New England.....  1            1
NICASTRO FARMS, INC. DBA:       FRANKFORT........  NY              NY-NJ...........  4            4
 RIVERSIDE FARMS.
NICHOLS, DAVID................  CHESTERFIELD.....  MA              New England.....  4            4
NIP N TUCK FARMS..............  VINEYARD HAVEN...  MA              ................  5            4
OAK TREE FARM DAIRY, INC......  EAST NORTHPORT...  NY              NY-NJ...........  1            1
OAKHURST DAIRY................  PORTLAND.........  ME              New England.....  2            2
OREGON DAIRY FARM MKT.........  LITITZ...........  PA              Mid Atlantic....  4            4
PARMALAT WELSH FARMS, INC.      LONG VALLEY......  NJ              NY-NJ...........  1            1
 WAS: WELSH FARMS, INC.
PARMALAT WEST DAIRIES, INC....  SPRING CITY......  PA              Mid Atlantic....  2            OOB 5/97
PEACEFUL MEADOWS ICE CREAM,     WHITMAN..........  MA              New England.....  4            4
 INC.
PEARSON, ROBERT L.............  WEST MILLBURY....  MA              New England.....  4            4
PEDRO, JOSEPH.................  FALL RIVER.......  MA              New England.....  4            4
PENNVIEW FARMS................  PERKASIE.........  PA              Mid Atlantic....  4            4
PERRYDELL FARMS...............  YORK.............  PA              Mid Atlantic....  4            4
PINE VIEW ACRES, INC..........  LANCASTER........  PA              Mid Atlantic....  4            4
PIONEER DAIRY, INC............  SOUTHWICK........  MA              New England.....  1            1
POTOMAC FARMS DAIRY, INC......  CUMBERLAND.......  MD              Mid Atlantic....  2            2
PULEO'S DAIRY.................  SALEM............  MA              New England.....  1            3B
QUALITY MILK, INC.............  WARE.............  MA              New England.....  1            3B
QUEENSBORO FARM PRODUCTS,INC..  CANASTOTA........  NY              NY-NJ...........  1            2
READINGTON FARMS, INC.........  WHITEHOUSE.......  NJ              NY-NJ...........  1            1
READY FOODS, INC..............  PHILADELPHIA.....  PA              Mid Atlantic....  2            3B
RICHARDSON FARMS, INC.........  MIDDLETON........  MA              New England.....  4            4
RICHARDSONS G. H. DAIRY.......  DRACUT...........  MA              New England.....  3A           3B

[[Page 16084]]

 
RICHFOOD DAIRY................  RICHMOND.........  VA              Mid Atlantic....  1            1
RIDGE VIEW FARMS..............  ELIZABETHTOWN....  PA              Mid Atlantic....  4            4
RITCHEY'S DAIRY...............  MARTINSBURG......  PA              Mid Atlantic....  2            2
RONNYBROOK FARM DAIRY, INC....  ANCRAMDALE.......  NY              NY-NJ...........  4            4
ROSENBERGER'S DAIRY, INC......  HATFIELD.........  PA              Mid Atlantic....  1            1
RUDOLPH STEINER EDUCATION &     GHENT............  NY              NY-NJ...........  4            4
 FARMING ASSOC., INC.
RUTTER BROS. DAIRY, INC.......  YORK.............  PA              Mid Atlantic....  1            1
SALEM VALLEY FARMS, INC.......  SALEM............  CT              New England.....  4            4
SARATOGA DAIRY, INC.            SARATOGA SPRINGS.  NY              NY-NJ...........  1            1
 (STEWART'S PROCESSING CORP.).
SCHNEIDER/VALLEY FARMS, INC...  WILLIAMSPORT.....  PA              NY-NJ...........  2            2
SEWARD DAIRY, INC.............  RUTLAND..........  VT              New England.....  2            OOB 8/98
SHAW FARM DAIRY, INC..........  DRACUT...........  MA              New England.....  4            4
STEARNS, WILLARD J. & SONS,     STORRS...........  CT              New England.....  4            4
 INC.
STOP & SHOP COMPANIES, INC....  READVILLE........  MA              New England.....  1            1
SULOMAN'S MILK................  GILBERTSVILLE....  PA              Mid Atlantic....  4            4
SUNNYDALE FARMS, INC..........  BROOKLYN NY......  ..............  NY-NJ...........  1            1
SYNAKOWSKI WALTER J (VALLEY     REMSEN...........  NY              NY-NJ...........  4            4
 SIDE FARM).
TANNER BROS. DAIRY............  WARMINSTER.......  PA              Mid Atlantic....  4            4
THOMAS, ORIN & SONS, INC......  RUTLAND..........  VT              New England.....  2            1
TRINITY FARM..................  ENFIELD..........  CT              New England.....  4            4
TURKEY HILL DAIRY, INC........  CONESTOGA........  PA              Mid Atlantic....  1            1
TURNER'S DAIRY, INC...........  SALEM............  NH              New England.....  1            1
TUSCAN DAIRY FARMS, INC.......  FRASER...........  NY              NY-NJ...........  2            2
TUSCAN DAIRY FARMS, INC.......  UNION............  NJ              NY-NJ...........  1            1
TUSCAN/LEHIGH DAIRIES, LP WAS:  LANSDALE.........  PA              Mid Atlantic....  1            1
 LEHIGH VALLEY DAIRIES, INC.
TUSCAN/LEHIGH DAIRIES, LP WAS:  SCHUYLKILL HAVEN.  PA              NY-NJ...........  2            2
 LEHIGH VALLEY DAIRIES, INC.
UPSTATE MILK COOPERATIVES, INC  BUFFALO..........  NY              NY-NJ...........  2            1
UPSTATE MILK COOPERATIVES, INC  JAMESTOWN........  NY              ................  5            5
UPSTATE MILK COOPERATIVES, INC  ROCHESTER........  NY              NY-NJ...........  2            2
VALLEY OF VIRGINIA COOP. DBA    MT. CRAWFORD.....  VA              Mid Atlantic....  2            2
 SHENANDOAH'S PRIDE.
VALLEY OF VIRGINIA COOP. DBA    SPRINGFIELD......  VA              Mid Atlantic....  1            1
 SHENANDOAH'S PRIDE.
VAN WIE, CHARLES F.             CLARKSVILLE......  NY              NY-NJ...........  4            4
 (MEADOWBROOK FARMS DAIRY).
WALSH, WILLIAM................  SIMSBURY.........  CT              New England.....  4            4
WAWA DAIRY FARMS..............  WAWA.............  PA              Mid Atlantic....  1            1
WAY-HAR FARMS.................  BERNVILLE........  PA              NY-NJ...........  3A           3B
WENDTS DAIRY DIV NIAGARA CO...  NIAGARA FALLS....  NY              ................  5            5
WENGERTS DAIRY, INC...........  LEBANON..........  PA              Mid Atlantic....  1            1
WEST LYNN CREAMERY, INC.......  LYNN.............  MA              New England.....  1            1
WHITTIER CREAMERY COMPANY, INC  SHREWSBURY.......  MA              New England.....  1            1
WINSOR, S. B. DAIRY, INC......  JOHNSTON.........  RI              New England.....  1            3B
WRIGHT'S DAIRY FARM, INC......  NORTH SMITHFIELD.  RI              New England.....  4            4
----------------------------------------------------------------------------------------------------------------
                                                   Appalachian
----------------------------------------------------------------------------------------------------------------
BROADACRE DAIRIES.............  POWELL...........  TN              ................  5            1
CAROLINA DAIRIES..............  KINSTON..........  NC              Carolina........  1            OOB 5/98
COBURG DAIRY, INC.............  N. CHARLESTON....  SC              Carolina........  1            1
DAIRY FRESH, LP...............  WINSTON-SALEM....  NC              Carolina........  1            1
DEAN MILK CO..................  LOUISVILLE.......  KY              Louis-Lex-Evans.  1            1
FLAV-O-RICH, INC..............  BRISTOL..........  VA              Carolina........  2            1
FLAV-O-RICH, INC..............  FLORENCE.........  SC              Carolina........  1            1
FLAV-O-RICH, INC..............  LONDON...........  KY              Louis-Lex-Evans.  1            1
FLAV-O-RICH, INC..............  WILKESBORO.......  NC              Carolina........  1            1
GOLDEN GALLON, INC............  CHATTANOOGA......  TN              Southeast.......  1            1
HOOSIER DAIRY, INC. WAS:        HOLLAND..........  IN              Louis-Lex-Evans.  1            1
 HOLLAND DAIRIES, INC.
HUNTER FARMS..................  CHARLOTTE........  NC              Carolina........  1            1
HUNTER FARMS..................  HIGHPOINT........  NC              Carolina........  1            1
IDEAL AMERICAN DAIRY..........  EVANSVILLE.......  IN              Louis-Lex-Evans.  1            1
JACKSON DAIRY.................  DUNN.............  NC              Carolina........  1            3B
JERSEY RIDGE DAIRY, INC.......  KNOXVILLE........  TN              ................  5            3B
LAND-O-SUN DAIRIES, INC.......  KINGSPORT........  TN              Carolina........  1            1
LAND-O-SUN DAIRIES, INC.......  PORTSMOUTH.......  VA              Carolina........  2            2
LAND-O-SUN DAIRIES, INC.......  SPARTANBURG......  SC              Carolina........  1            1

[[Page 16085]]

 
MAOLA MILK & ICE CREAM CO.....  NEW BERN.........  NC              Carolina........  1            1
MAPLEVIEW FARMS...............  HILLSBORO........  NC              Carolina........  1            3B
MARVA MAID DAIRY..............  NEWPORT NEWS.....  VA              Carolina........  2            2
MAYFIELD DAIRY FARMS, INC.....  ATHENS...........  TN              Southeast.......  1            1
MILKCO, INC...................  ASHEVILLE........  NC              Carolina........  1            1
NORTH CAROLINA ST. UNIV.......  RALEIGH..........  NC              Carolina........  6A           6B
PEELER JERSEY FARMS, INC......  GAFFNEY..........  SC              Carolina........  1            OOB 10/98
REGIS MILK CO.................  CHARLESTON.......  SC              Carolina........  1            1
SOUTHERN BELLE DAIRY, INC.....  SOMERSET.........  KY              Southeast.......  1            1
SUPERBRAND DY. PRODS., INC....  GREENVILLE.......  SC              Carolina........  1            1
SUPERBRAND DAIRY, INC.........  HIGHPOINT........  NC              Carolina........  1            1
U C MILK CO...................  MADISONVILLE.....  KY              Louis-Lex-Evans.  1            1
WESTOVER DAIRIES..............  LYNCHBURG........  VA              Carolina........  1            1
WINCHESTER FARMS DAIRY........  WINCHESTER.......  KY              Louis-Lex-Evans.  1            1
----------------------------------------------------------------------------------------------------------------
                                                     Florida
----------------------------------------------------------------------------------------------------------------
BORDEN, INC. (TRI-STATE DAIRY)  MIAMI............  FL              Southeast         1            OOB 4/97
                                                                    Florida.
FARM STORES, INC. (REW JB       MIAMI............  FL              Southeast         1            OOB 10/98
 DAIRY PLANT ASSOCIATES dba                                         Florida.
 FARM STORES).
GOLDEN FLEECE DAIRY...........  LECANTO..........  FL              Tampa Bay.......  4            4
GUSTAFSON'S DAIRY, INC........  GREEN COVE.......  FL              Upper Florida...  1            1
M&B DAIRY PRODUCTS, INC.......  TAMPA............  FL              Tampa Bay.......  1            3B
MCARTHUR DAIRY, INC...........  MIAMI............  FL              Southeast         1            1
                                                                    Florida.
PUBLIX SUPER MKTS., INC.......  DEERFIELD BEACH..  FL              Southeast         1            1
                                                                    Florida.
PUBLIX SUPER MKTS., INC.......  LAKELAND.........  FL              Tampa Bay.......  1            1
RYAN FOODS COMPANY, WAS:        JACKSONVILLE.....  FL              Southeast.......  2            2
 LONGLIFE DAIRY PRODUCTS, INC.
SUPERBRAND DAIRY PRODUCTS, INC  MIAMI............  FL              Southeast         1            1
                                                                    Florida.
SUPERBRAND DAIRY PRODUCTS, INC  PLANT CITY.......  FL              Tampa Bay.......  1            1
T.G. LEE FOODS, INC., WAS:      ORANGE CITY......  FL              Upper Florida...  1            1
 LIFE STYLE/DIV TG LEE FOODS.
T.G. LEE FOODS, INC...........  ORLANDO..........  FL              Tampa Bay.......  1            1
VELDA FARMS, INC..............  MIAMI............  FL              Southeastern      1            1
                                                                    Florida.
VELDA FARMS, INC..............  ST. PETERSBURG...  FL              Tampa Bay.......  1            1
VELDA FARMS, INC..............  WINTER HAVEN.....  FL              Tampa Bay.......  1            1
WIGGINS DAIRY PRODUCTS, INC...  PLANT CITY.......  FL              Tampa Bay.......  1            1
----------------------------------------------------------------------------------------------------------------
                                                    Southeast
----------------------------------------------------------------------------------------------------------------
ALCORN STATE UNIVERSITY.......  LORMAN...........  MS              Southeast.......  6A           6B
ARKANSAS DEPT. OF CORREC......  GRADY............  AR              Southeast.......  6A           6B
AVENT'S DAIRY NC..............  OXFORD...........  MS              Southeast.......  1            1
BARBER PURE MILK CO...........  BIRMINGHAM.......  AL              Southeast.......  1            1
BARBER PURE MILK CO...........  MOBILE...........  AL              Southeast.......  1            1
BARBER PURE MILK CO...........  MONTGOMERY.......  AL              Southeast.......  1            1
BARBE'S DAIRY, INC............  WESTWEGO.........  LA              Southeast.......  1            1
BORDEN, INC...................  BATON ROUGE......  LA              Southeast.......  1            OOB 10/98
BORDEN MILK PRODUCTS, LLC.....  LAFAYETTE........  LA              Southeast.......  1            1
BORDEN MILK PRODUCTS, LLC.....  MONROE...........  LA              Southeast.......  1            1
BROWNS VELVET DAIRY PRODUCTS    NEW ORLEANS......  LA              Southeast.......  1            1
 (SOUTHERN FOODS GROUP, LP).
CENTENNIAL FARMS DAIRY, INC...  ATLANTA..........  GA              Southeast.......  1            1
COLLEGE OF THE OZARKS.........  POINT LOOKOUT....  MO              Southwest Plains  1            6B
COUNTRY DELITE FARMS, INC.....  NASHVILLE........  TN              Southeast.......  1            1
DAIRY FRESH CORP..............  BAKER............  LA              Southeast.......  1            1
DAIRY FRESH CORP..............  COWARTS..........  AL              Southeast.......  1            1
DAIRY FRESH CORP..............  HATTIESBURG......  MS              Southeast.......  1            1
DAIRY FRESH CORP..............  PRICHARD.........  AL              Southeast.......  1            1
DASI PRODUCTS, INC............  DECATUR..........  AL              Southeast.......  2            2
ETOWAH MAID DAIRIES, INC......  CANTON...........  GA              Southeast.......  4            4
FLAV-O-RICH, INC..............  CANTON...........  MS              Southeast.......  1            1
FOREMOST DAIRY, INC...........  SHREVEPORT.......  LA              Southeast.......  1            1
GEORGIA STATE PRISON..........  REIDSVILLE.......  GA              Southeast.......  6A           6B
GOLD STAR DAIRY...............  LITTLE ROCK......  AR              Southeast.......  1            1
HERITAGE FARMS DAIRY..........  MURFREESBORO.....  TN              Southeast.......  1            1
HILAND DAIRY CO...............  FAYETTEVILLE.....  AR              Southwest Plains  1            1
HILAND DAIRY CO...............  FORT SMITH.......  AR              Southwest Plains  1            1
HILAND DAIRY CO...............  SPRINGFIELD......  MO              Southwest Plains  1            1
HUMPHREY DAIRY................  HOT SPRINGS......  AR              Southeast.......  3A           3B
KINNETT DAIRIES, INC..........  COLUMBUS.........  GA              Southeast.......  1            1

[[Page 16086]]

 
KLEINPETER DAIRY, INC.........  BATON ROUGE......  LA              Southeast.......  1            1
LOUISIANA STATE PENITENTIARY..  ANGOLA...........  LA              Southeast.......  ...........  OOB 12/95
LOUISIANA TECH................  RUSTON...........  LA              Southeast.......  6A           6B
LUVEL DAIRY PRODUCTS, INC.....  KOSCIUSKO........  MS              Southeast.......  1            1
MAYFIELD DAIRY................  BRASELTON........  GA              Southeast.......  1            1
MEADOW GOLD DAIRIES, INC.       HUNTSVILLE.......  AL              Southeast.......  1            1
 (SOUTHERN FOODS GROUP, LP).
MID-AMERICA DAIRYMEN, INC.....  LEBANON..........  MO              Southwest Plains  1            OOB 8/98
MISSISSIPPI STATE UNIVERSITY..  MISS. STATE......  MS              Southeast.......  6A           6B
NEW ATLANTA DAIRIES, INC......  ATLANTA..........  GA              Southeast.......  1            1
PEELER JERSEY FARMS, INC......  ATHENS...........  GA              Southeast.......  1            1
PUBLIX SUPERMARKETS, INC......  LAWRENCEVILLE....  GA              Southeast.......  1            1
PURITY DAIRIES, INC...........  NASHVILLE........  TN              Southeast.......  1            1
RYAN FOODS COMPANY............  MURRAY...........  KY              Southeast.......  2            1
SAVANNAH MANUFACTURING          SAVANNAH.........  GA              Southeast.......  2            2
 COMPANY--A HERSHEY FOODS
 COMPANY.
SOUTHERN UNIVERSITY...........  BATON ROUGE......  LA              Southeast.......  6A           6B
SUPERBRAND DY. PRODS., INC....  HAMMOND..........  LA              Southeast.......  1            1
SUPERBRAND DY. PRODUCTS, INC..  MONTGOMERY.......  AL              Southeast.......  1            1
TURNER HOLDINGS, LLC..........  COVINGTON........  TN              Southeast.......  1            2
TURNER HOLDINGS, LLC..........  FULTON...........  KY              Southeast.......  1            1
TURNER HOLDINGS, LLC WAS:       LITTLE ROCK......  AR              Southeast.......  1            1
 COLEMAN DAIRY, INC.
TURNER HOLDINGS, LLC WAS:       MEMPHIS..........  TN              Southeast.......  1            1
 FOREST HILL DAIRY.
----------------------------------------------------------------------------------------------------------------
                                                     Mideast
----------------------------------------------------------------------------------------------------------------
ARPS DAIRY, INC...............  DEFIANCE.........  OH              Ohio Valley.....  1            1
BAREMAN DAIRY, INC............  HOLLAND..........  MI              Southern          1            1
                                                                    Michigan.
BARKER'S FARM DAIRY, INC......  PECKS MILL.......  WV              Ohio Valley.....  4            4
BROUGHTON FOODS CO............  MARIETTA.........  OH              Ohio Valley.....  1            1
BRUNTON DAIRY.................  ALIQUIPPA........  PA              E Ohio-W Penn...  4            4
BURGER DAIRY CO...............  NEW PARIS........  IN              Indiana.........  1            1
BURGER, C.F., CREAMERY, INC...  DETROIT..........  MI              Southern          2            2
                                                                    Michigan.
CALDER BROTHERS DAIRY.........  LINCOLN PARK.....  MI              Southern          1            1
                                                                    Michigan.
COLTERYAHN DAIRY, INC.........  PITTSBURGH.......  PA              E Ohio-W Penn...  1            1
CON-SUN FOOD INDUSTRIES, INC..  ELYRIA...........  OH              E Ohio-W Penn...  1            1
COOK'S FARM DAIRY, INC........  ORTONVILLE.......  MI              Southern          4            4
                                                                    Michigan.
COUNTRY DAIRY.................  NEW ERA..........  MI              Southern          4            4
                                                                    Michigan.
COUNTY FRESH, INC.............  GRAND RAPIDS.....  MI              Southern          1            1
                                                                    Michigan.
CROOKED CREEK FARM DAIRY......  ROMEO............  MI              Southern          4            4
                                                                    Michigan.
DEAN DAIRY PRODUCTS CO........  SHARPSVILLE......  PA              E Ohio-W Penn...  1            1
DEAN FOODS COMPANY............  ROCHESTER........  IN              Indiana.........  1            1
DIXIE DAIRY CO................  GARY.............  IN              Indiana.........  1            OOB 4/98
EASTSIDE JERSEY DAIRY, INC....  ANDERSON.........  IN              Indiana.........  1            1
ELMVIEW DAIRY.................  COLUMBUS.........  PA              E Ohio-W Penn...  4            OOB 1/97
EMBEST, INC...................  LIVONIA..........  MI              Southern          1            1
                                                                    Michigan.
FIKE, R BRUCE & SONS DAIRY....  UNIONTOWN........  PA              E Ohio-W Penn...  1            1
FISHER'S DAIRY, R.V. FISHER...  PORTERSVILLE.....  PA              E Ohio-W Penn...  4            4
FLEMINGS DAIRY................  UTICA............  OH              Ohio Valley.....  1            1
GALLIKER DAIRY CO.............  JOHNSTOWN........  PA              E Ohio-W Penn...  2            2
GLEN EDEN FARM-DIANNE TEETS...  ROCHESTER........  PA              E Ohio-W Penn...  4            OOB 11/98
GOSHEN DAIRY COMPANY..........  NEW PHILADELPHIA.  OH              E Ohio-W Penn...  1            1
GREEN VALE FARM...............  COOPERSVILLE.....  MI              Southern          4            4
                                                                    Michigan.
GREEN VALLEY DAIRY............  GEORGETOWN.......  PA              E Ohio-W Penn...  1            3B
GUERNSEY FARMS DAIRY..........  NORTHVILLE.......  MI              Southern          1            1
                                                                    Michigan.
HARTZLER FAMILY DAIRY.........  WOOSTER..........  OH              E Ohio-W Penn...  1            3B
HILLSIDE DAIRY CO.............  CLEVELAND HGHTS..  OH              E Ohio-W Penn...  1            1
HUTTER FARM DAIRY.............  MT. PLEASANT.....  PA              E Ohio-W Penn...  4            4
INVERNESS DAIRY, INC..........  CHEBOYGAN........  MI              Michigan U P....  1            1
JACKSON FARMS.................  NEW SALEM........  PA              E Ohio-W Penn...  4            4
JILBERT DAIRY, INC............  MARQUETTE........  MI              Michigan U P....  1            1
JOHNSON'S DAIRY, INC..........  ASHLAND..........  KY              Ohio Valley.....  1            OOB 5/97
KERBER'S DAIRY................  N. HUNTINGDON....  PA              E Ohio-W Penn...  1            3B
KROGER COMPANY, THE...........  INDIANAPOLIS.....  IN              Indiana.........  1            1
LANSING DAIRY, INC (MELODY      LANSING..........  MI              Southern          1            1
 FARMS, INC.).                                                      Michigan.
LIBERTY DAIRY CO..............  EVART............  MI              Southern          1            1
                                                                    Michigan.
LONDON'S FARM DAIRY, INC......  PORT HURON.......  MI              Southern          1            1
                                                                    Michigan.
MAPLEHURST FARMS, INC.........  INDIANAPOLIS.....  IN              Indiana.........  1            1
MARBURGER FARM DAIRY, INC.....  EVANS CITY.......  PA              E Ohio-W Penn...  1            1

[[Page 16087]]

 
MCDONALD DAIRY COMPANY........  FLINT............  MI              Southern          1            1
                                                                    Michigan.
MCMAHONS DAIRY, INC...........  ALTOONA..........  PA              ................  5            OOB
MEADOW BROOK DAIRY............  ERIE.............  PA              E Ohio-W Penn...  1            1
MEYER H & SONS DAIRY..........  CINCINNATI.......  OH              Ohio Valley.....  1            1
MICHIGAN DAIRY................  LIVONIA..........  MI              Southern          1            1
                                                                    Michigan.
ALBERT MIHALY & SON DAIRY.....  LOWELLVILLE......  OH              E Ohio-W Penn...  4            4
OBERLIN FARMS DAIRY, INC......  CLEVELAND........  OH              E Ohio-W Penn...  1            1
OSBORN DAIRY..................  SAULT STE MARIE..  MI              Michigan U P....  4            4
PLEASANT VIEW DAIRY CORP......  HIGHLAND.........  IN              Indiana.........  1            1
PRAIRIE FARMS DAIRY, INC......  FT. WAYNE........  IN              Indiana.........  1            1
PRAIRIE FARMS DAIRY, INC WAS:   GALESBURG........  MI              Southern          1            1
 ROELOF DAIRY.                                                      Michigan.
QUALITY CREAMERY, INC.........  COMSTOCK PARK....  MI              Southern          1            OOB 7/98
                                                                    Michigan.
QUALITY DAIRY CO B.T.U........  LANSING..........  MI              Southern          1            1
                                                                    Michigan.
REITER DAIRY CO...............  SPRINGFIELD......  OH              Ohio Valley.....  1            1
REITER DAIRY, INC.............  AKRON............  OH              E Ohio-W Penn...  1            1
SANI DAIRY....................  JOHNSTOWN........  PA              E Ohio-W Penn...  2            OOB 1/99
SCHENKEL'S ALL-STAR DAIRY, INC  HUNTINGTON.......  IN              Indiana.........  1            1
SCHIEVER FARM DAIRY...........  HARMONY..........  PA              E Ohio-W Penn...  1            3B
SCHNEIDERS DAIRY, INC.........  PITTSBURGH.......  PA              E Ohio-W Penn...  1            1
SMITH DAIRY PRODUCTS CO.......  ORRVILLE.........  OH              Ohio Valley.....  1            1
SMITH DAIRY PRODUCTS CO.......  RICHMOND.........  IN              Ohio Valley.....  1            1
STERLING MILK CO..............  WAUSEON..........  OH              Ohio Valley.....  1            1
SUPERIOR DAIRIES, INC.........  SAGINAW..........  MI              Southern          1            1
                                                                    Michigan.
SUPERIOR DAIRY, INC...........  CANTON...........  OH              E Ohio-W Penn...  1            1
TAMARACK FARMS................  NEWARK...........  OH              Ohio Valley.....  1            1
TAYLOR MILK CO., INC..........  AMBRIDGE.........  PA              E Ohio-W Penn...  2            OOB 11/98
THE SPRINGHOUSE...............  EIGHTY FOUR......  PA              E Ohio-W Penn...  4            4
TOFT DAIRY INC................  SANDUSKY.........  OH              Ohio Valley.....  2            2
TOLEDO MILK PROCESSING, INC.    MAUMEE...........  OH              Ohio Valley.....  1            1
 (COUNTRY FRESH OF OHIO).
TRAUTH, LOUIS DAIRY...........  NEWPORT..........  KY              Ohio Valley.....  1            1
TURNER DAIRY FARMS, INC.......  PITTSBURGH.......  PA              E Ohio-W Penn...  1            1
UNITED DAIRY FARMERS..........  CINCINNATI.......  OH              Ohio Valley.....  1            1
UNITED DAIRY, INC.............  CHARLESTON.......  WV              Ohio Valley.....  1            1
UNITED DAIRY, INC.............  MARTINS FERRY....  OH              E Ohio-W Penn...  1            1
VALLEY RICH DAIRY.............  ROANOKE..........  VA              Ohio Valley.....  2            2
WHITE KNIGHT PACKAGING CORP.    WYOMING..........  MI              Southern          1            1
 (PARMA-  LAT WHITE KNIGHT                                          Michigan.
 PKG. CORP.).
YOUNG'S JERSEY DAIRY, INC.....  YELLOW SPRINGS...  OH              Ohio Valley.....  4            4
----------------------------------------------------------------------------------------------------------------
                                                  Upper Midwest
----------------------------------------------------------------------------------------------------------------
AYSTA DAIRY, INC..............  VIRGINIA.........  MN              Upper Midwest...  1            1
CASS-CLAY CREAMERY, INC.......  FARGO............  ND              Upper Midwest...  1            1
CASS-CLAY CREAMERY, INC.......  GRAND FORKS......  ND              Upper Midwest...  1            1
CASS-CLAY CREAMERY, INC.......  MANDAN...........  ND              Upper Midwest...  2            2
CENTRAL MINNESOTA.............  SAUK CENTRE......  MN              Upper Midwest...  1            1
COUNTRY LAKE FOODS, INC. (LAND  BISMARCK.........  ND              Upper Midwest...  2            2
 O'LAKES, INC.).
COUNTRY LAKE FOODS, INC. (LAND  THIEF RIVER FALLS  MN              Upper Midwest...  1            1
 O'LAKES, INC.).
COUNTRY LAKE FOODS, INC. (LAND  WOODBURY.........  MN              Upper Midwest...  1            1
 O'LAKES, INC.).
DEAN FOODS CO.................  HARVARD..........  IL              Chicago Regional  1            1
DEAN FOODS CO.................  HUNTLEY..........  IL              Chicago Regional  1            1
FOREMOST FARMS USA............  DEPERE...........  WI              Chicago Regional  1            1
FOREMOST FARMS USA............  WAUKESHA.........  WI              Chicago Regional  1            1
FOREMOST FARMS USA............  WAUSAU...........  WI              Chicago Regional  1            1
FRANKLIN FOODS................  DULUTH...........  MN              Upper Midwest...  1            1
HANSENS DAIRY, INC............  GREEN BAY........  WI              Chicago Regional  2            OOB 1/99
HASTINGS COOPERATIVE..........  HASTINGS.........  MN              Upper Midwest...  1            1
KOHLER MIX SPECIALTIES, INC...  WHITE BEAR LAKE..  MN              Upper Midwest...  2            2
KWIK TRIP DAIRY...............  LA CROSSE........  WI              Chicago Regional  1            1
LAMERS DAIRY, INC.............  KIMBERLY.........  WI              Chicago Regional  2            1
LIFEWAY FOODS, INC............  SKOKIE...........  IL              Chicago Regional  2            1
MARIGOLD FOODS, INC...........  CEDARBURG........  WI              Chicago Regional  1            1
MARIGOLD FOODS, INC...........  MINNEAPOLIS......  MN              Upper Midwest...  1            1
MARIGOLD FOODS, INC...........  ROCHESTER........  MN              Upper Midwest...  1            1
MEYER BROTHERS DAIRY..........  WAYZATA..........  MN              Upper Midwest...  1            1
MOM'S DAIRY...................  GIBBON...........  MN              Upper Midwest...  2            3B

[[Page 16088]]

 
MULLER-PINEHURST, INC.........  ROCKFORD.........  IL              Chicago Regional  1            1
NORTH BRANCH DAIRY, INC.......  NORTH BRANCH.....  MN              Upper Midwest...  1            OOB 7/98
OAK GROVE DAIRY...............  NORWOOD..........  MN              Upper Midwest...  1            1
OBERWEIS DAIRY, INC...........  AURORA...........  IL              Chicago Regional  1            1
POLLARD DAIRY, INC............  NORWAY...........  MI              Michigan U P....  1            1
SCHROEDER MILK CO., INC.......  ST PAUL..........  MN              Upper Midwest...  1            1
STAR SPECIALTY FOODS, INC.      MADISON..........  WI              Chicago Regional  1            2
 (MORNING-  STAR FOODS, INC.).
SWISS VALLEY FARMS CO.........  CHICAGO..........  IL              Chicago Regional  1            1
TETZNER DAIRY.................  WASHBURN.........  WI              Upper Midwest...  4            4
UNITED WORLD IMPORTS..........  CHICAGO..........  IL              Chicago Regional  2            3B
VERIFINE DAIRY PRODUCTS CO....  SHEBOYGAN........  WI              Chicago Regional  1            1
WEBERS, INC...................  MARSHFIELD.......  WI              ................  5            3B
----------------------------------------------------------------------------------------------------------------
                                                     Central
----------------------------------------------------------------------------------------------------------------
ALBERS DAIRY..................  BARTELSO.........  IL              S Ill-E Missouri  2            4
ANDERSON-ERICKSON DAIRY CO....  DES MOINES.......  IA              Iowa............  1            1
W.H. BRAUM, INC...............  TUTTLE...........  OK              Southwest Plains  1            1
CENTRAL DAIRY & ICE CREAM.....  JEFFERSON CITY...  MO              ................  5            5
CHESTER DAIRY CO..............  CHESTER..........  IL              S Ill-E Missouri  1            1
DAIRY GOLD FOODS CO...........  CHEYENNE.........  WY              Eastern Colorado  1            1
DEPT. OF CORRECTIONS..........  CANON CITY.......  CO              Eastern Colorado  4            6B
DILLON DAIRY CO...............  DENVER...........  CO              Eastern Colorado  1            1
ELDON MOSS....................  IOWA CITY........  IA              Iowa............  4            4
FARM FRESH DAIRY, INC.........  CHANDLER.........  OK              Southwest Plains  1            1
GALESBURG CORR. CENTER........  GALESBURG........  IL              Central Illinois  6A           6B
GILLETTE DAIRY OF BLACK HILLS.  RAPID CITY.......  SD              ................  2            2
GRAFF DAIRY, LLC..............  GRAND JUNCTION...  CO              Western Colorado  1            3B
GRAVES DAIRY..................  BELLVUE..........  CO              Eastern Colorado  4            4
HILAND DAIRY CO...............  NORMAN...........  OK              Southwest Plains  1            1
HILAND DAIRY CO...............  WICHITA..........  KS              Southwest Plains  1            1
JACKSON ICE CREAM CO..........  HUTCHINSON.......  KS              Southwest Plains  1            1
KANSAS STATE UNIV.............  MANHATTAN........  KS              Greater Kansas    6A           6B
                                                                    City.
KARL'S FARM DAIRY, INC........  NORTH GLENN......  CO              Eastern Colorado  4            4
LAESCH DAIRY CO...............  BLOOMINGTON......  IL              S Ill-E Missouri  1            OOB 6/98
LAND O'LAKES, INC. FLUID DAIRY  SIOUX FALLS......  SD              E South Dakota..  1            1
 DIVISION.
LAND-O-SUN DAIRIES, INC.......  O'FALLON.........  IL              S Ill-E Missouri  1            1
LENZ DAIRY....................  PRAIRIE HOME.....  MO              Greater Kansas    4            4
                                                                    City.
LONGMONT DAIRY FARM...........  LONGMONT.........  CO              Eastern Colorado  4            4
LOWELL-PAUL DAIRY, INC........  GREELEY..........  CO              Eastern Colorado  4            4
MARTIN DAIRY, INC.............  HUMANSVILLE......  MO              S Ill-E Missouri  2            4
MEADOW GOLD DAIRIES, INC......  DELTA............  CO              Western Colorado  1            1
MEADOW GOLD DAIRIES, INC......  ENGLEWOOD........  CO              Eastern Colorado  1            1
MEADOW GOLD DAIRIES, INC......  GREELEY..........  CO              Eastern Colorado  1            1
MEADOW GOLD DAIRIES, INC......  LINCOLN..........  NE              Nebraska-W Iowa.  1            1
MEADOW GOLD DAIRIES, INC......  TULSA............  OK              Southwest Plains  1            1
MID-STATES DAIRY COMPANY......  HAZELWOOD........  MO              S Ill-E Missouri  1            1
PATKE FARM DAIRY..............  WASHINGTON.......  MO              S Ill-E Missouri  1            3B
PEVELY DAIRY CO...............  ST LOUIS.........  MO              S Ill-E Missouri  1            1
PRAIRIE FARM DAIRIES, INC.....  CARLINVILLE......  IL              S Ill-E Missouri  1            1
PRAIRIE FARMS DAIRY, INC......  GRANITE CITY.....  IL              S Ill-E Missouri  1            1
PRAIRIE FARMS DAIRY, INC......  OLNEY............  IL              S Ill-E Missouri  1            1
PRAIRIE FARMS DAIRY, INC......  PEORIA...........  IL              Central Illinois  1            1
PRAIRIE FARMS DAIRY, INC......  QUINCY...........  IL              S Ill-E Missouri  1            1
RADIANCE DAIRY................  FAIRFIELD........  IA              Iowa............  4            4
ROBERTS DAIRY CO..............  DES MOINES.......  IA              Iowa............  1            1
ROBERTS DAIRY CO..............  IOWA CITY........  IA              Iowa............  1            1
ROBERTS DAIRY CO..............  KANSAS CITY......  MO              Greater Kansas    1            1
                                                                    City.
ROBERTS DAIRY CO..............  OMAHA............  NE              Nebraska-W Iowa.  1            1
ROBINSON DAIRY, INC...........  DENVER...........  CO              Eastern Colorado  1            1
ROYAL CREST DAIRY, INC........  DENVER...........  CO              Eastern Colorado  1            1
SAFEWAY STORES, INC...........  DENVER...........  CO              Eastern Colorado  1            1
SCHRANT ROADSIDE DAIRY          WINSIDE..........  NE              Nebraska-W Iowa.  4            4
 (ROADSIDE DAIRY).
SHOENBERG FARMS, INC. DBA FARM  ARVADA...........  CO              Eastern Colorado  1            1
 FRESH, INC.
SINTON DAIRY FOODS CO., LLC...  COLORADO SPRINGS.  CO              Eastern Colorado  1            1
SOUTH DAKOTA STATE UNIV.......  BROOKINGS........  SD              E South Dakota..  6A           6B
STAR DAIRY, INC...............  MULHALL..........  OK              Southwest Plains  (\2\)        4
SWAN BROS. DAIRY, INC.........  CLAREMORE........  OK              Southwest Plains  4            4

[[Page 16089]]

 
SWISS VALLEY FARMS CO.........  CEDAR RAPIDS.....  IA              Chicago Regional  1            3B
SWISS VALLEY FARMS CO.........  DUBUQUE..........  IA              Chicago Regional  1            1
WELLS DAIRY, INC..............  LE MARS..........  IA              Nebraska-W Iowa.  1            1
WELLS DAIRY, INC..............  OMAHA............  NE              Nebraska-W Iowa.  1            1
WESTERN DAIRYMEN COOP, INC....  RIVERTON.........  WY              Eastern Colorado  2            OOB 11/97
WILD'S BROTHER'S DAIRY........  EL RENO..........  OK              Southwest Plains  4            4
----------------------------------------------------------------------------------------------------------------
                                                    Southwest
----------------------------------------------------------------------------------------------------------------
BELL DAIRY PRODUCTS, INC......  LUBBOCK..........  TX              New Mex-W Texas.  1            1
CREAMLAND DAIRIES.............  ALBUQUERQUE......  NM              New Mex-W Texas.  1            1
DAVID'S SUPERMARKETS, INC.....  GRANDVIEW........  TX              Texas...........  1            1
FARMERS DAIRIES...............  EL PASO..........  TX              New Mex-W Texas.  1            1
HOBBS DRIVE IN DAIRY..........  HOBBS............  NM              New Mex-W Texas.  4            OOB 8/98
HYGEIA DAIRY..................  CORPUS CHRISTI...  TX              Texas...........  1            1
H. E. BUTTS GROCERY CO........  HOUSTON..........  TX              Texas...........  1            1
H. E. BUTTS GROCERY CO........  SAN ANTONIO......  TX              Texas...........  1            1
LAND O' PINES.................  LUFKIN...........  TX              Texas...........  1            OOB 3/97
LANE'S DAIRY..................  EL PASO..........  TX              New Mex-W Texas.  4            4
LILLY DAIRY PRODUCTS, INC.....  BYRAN............  TX              Texas...........  1            1
LOS LUNAS DAIRY...............  ALBUQUERQUE......  NM              New Mex-W Texas.  4            4
MICKEY'S DRIVE IN DAIRY.......  ALBUQUERQUE......  NM              New Mex-W Texas.  4            4
MIDWEST MIX CO................  SULPHUR SPRINGS..  TX              Texas...........  2            2
MILK PRODUCTS, LLC WAS:         ALBUQUERQUE......  NM              New Mex-W Texas.  1            OOB 6/98
 BORDEN, INC.
MILK PRODUCTS, LLC WAS:         AUSTIN...........  TX              Texas...........  1            1
 BORDEN, INC.
MILK PRODUCTS, LLC WAS:         CONROE...........  TX              Texas...........  1            1
 BORDEN, INC.
MILK PRODUCTS, LLC WAS:         DALLAS...........  TX              Texas...........  1            1
 BORDEN, INC.
MILK PRODUCTS, LLC WAS:         EL PASO..........  TX              New Mex-W Texas.  1            OOB 7/87
 BORDEN, INC.
MORNINGSTAR SPECIALTY.........  SULPHUR SPRINGS..  TX              Texas...........  2            2
MOUNTAIN GOLD DAIRY...........  CARRIZOZO........  NM              New Mex-W Texas.  3A           3B
NATURE'S DAIRY, INC...........  ROSWELL..........  NM              New Mex-W Texas.  4            4
OAK FARMS DAIRIES.............  DALLAS...........  TX              Texas...........  1            1
OAK FARMS DAIRIES.............  HOUSTON..........  TX              Texas...........  1            1
OAK FARMS DAIRIES.............  SAN ANTONIO......  TX              Texas...........  1            1
OAK FARMS DAIRIES WAS: PURE     WACO.............  TX              Texas...........  1            1
 MILK COMPANY.
PLAINS CREAMERY...............  AMARILLO.........  TX              New Mex-W Texas.  1            1
PRICES CREAMERY, INC..........  EL PASO..........  TX              New Mex-W Texas.  1            1
PROMISED LAND DAIRY...........  FLORESVILLE......  TX              Texas...........  4            4
RANCHO LAS LAGUNAS............  SANTA FE.........  NM              New Mex-W Texas.  3A           3B
RASBAND DAIRY.................  ALBUQUERQUE......  NM              New Mex-W Texas.  4            4
SCHEPPS DAIRY, INC............  DALLAS...........  TX              Texas...........  1            1
SOUTHWEST DAIRY...............  TYLER............  TX              Texas...........  1            1
SUPERBRAND DAIRY PRODS, INC...  FT WORTH.........  TX              Texas...........  1            1
VANDERVOORTS DAIRY............  FT WORTH.........  TX              Texas...........  1            1
----------------------------------------------------------------------------------------------------------------
                                                Arizona-Las Vegas
----------------------------------------------------------------------------------------------------------------
ANDERSON DAIRY, INC...........  LAS VEGAS........  NV              Great Basin.....  1            1
GOLDEN WEST DAIRIES...........  WELLTON..........  AZ              Central Arizona.  4            OOB 9/98
HETTINGA, HEIN & ELLEN........  YUMA.............  AZ              Central Arizona.  4            4
JACKSON & COMPANY.............  PHOENIX..........  AZ              Central Arizona.  1            1
MEADOWWAYNE DAIRY.............  COLORADO CITY....  AZ              Central Arizona.  5            4
SAFEWAY STORES, INC...........  TEMPE............  AZ              Central Arizona.  1            1
SHAMROCK FOODS COMPANY........  PHOENIX..........  AZ              Central Arizona.  1            1
SMITH'S FOOD & DRUG CENTERS,    TOLLESON.........  AZ              Central Arizona.  1            1
 INC.
SUNRISE DAIRY.................  TAYLOR...........  AZ              ................  5            3B
----------------------------------------------------------------------------------------------------------------
                                                     Western
----------------------------------------------------------------------------------------------------------------
BRIGHAM YOUNG UNIVERSITY......  PROVO............  UT              Great Basin.....  6A           6B
BROWN DAIRY, INC..............  HOYTSVILLE.......  UT              Great Basin.....  4            4
CHURCH OF JESUS CHRIST OF       SALT LAKE CITY...  UT              Great Basin.....  6A           6B
 LATTER-DAY SAINTS.
COUNTRY BOY DAIRY.............  OGDEN............  UT              Great Basin.....  4            4
CREAM O'WEBER DAIRY, INC......  SALT LAKE CITY...  UT              Great Basin.....  1            1
DARIGOLD, INC.................  BOISE............  ID              SW Idaho-E        1            1
                                                                    Oregon.
FALCONHURST DAIRY, INC........  BUHL.............  ID              Great Basin.....  1            1
FARM FRESH....................  SALEM............  UT              Great Basin.....  1            OOB 8/98
GOSSNER FOODS, INC............  LOGAN............  UT              Great Basin.....  1            1
IDEAL DAIRY, INC..............  RICHFIELD........  UT              Great Basin.....  4            4

[[Page 16090]]

 
JOHNNY'S DAIRY................  SOUTH WEBER......  UT              Great Basin.....  4            4
JONES DAIRY & HEALTH FOODS....  TAYLORSVILLE.....  UT              Great Basin.....  3A           OOB 12/98
KDK, INC......................  DRAPER...........  UT              Great Basin.....  1            1
MEADOW GOLD DAIRIES, INC......  BOISE............  ID              SW Idaho-E        1            1
                                                                    Oregon.
MEADOW GOLD DAIRIES, INC......  POCATELLO........  ID              Great Basin.....  1            1
MEADOW GOLD DAIRIES, INC......  SALT LAKE CITY...  UT              Great Basin.....  1            1
MODEL DAIRY...................  RENO.............  NV              Great Basin.....  2            2
REED'S DAIRY, INC.............  IDAHO FALLS......  ID              Great Basin.....  4            4
ROSEHILL DAIRY................  MORGAN...........  UT              Great Basin.....  4            4
SLADES DAIRY WAS: DALE BARKER.  MOUNT PLEASANT...  UT              Great Basin.....  4            4
SMITH FOOD & DRUG CENTERS, INC  LAYTON...........  UT              Great Basin.....  1            1
SMITH'S DAIRY.................  BUHL.............  ID              SW Idaho-E        1            3B
                                                                    Oregon.
STOKER WHOLESALE, INC.........  BURLEY...........  ID              SW Idaho-E        1            1
                                                                    Oregon.
UTAH STATE PRISON.............  DRAPER...........  UT              Great Basin.....  6A           6B
UTAH STATE UNIVERSITY.........  LOGAN............  UT              Great Basin.....  3A           6B
WESTERN QUALITY FOOD PRODUCTS.  CEDAR CITY.......  UT              Great Basin.....  2            2
WINDER DAIRY..................  SALT LAKE CITY...  UT              Great Basin.....  1            1
                                                Pacific Northwest
----------------------------------------------------------------------------------------------------------------
ALLISON HARDY.................  ELMA.............  WA              Pacific           4            OOB 5/98
                                                                    Northwest.
ALPENROSE DAIRY...............  PORTLAND.........  OR              Pacific           1            1
                                                                    Northwest.
ANDERSEN DAIRY, INC...........  BATTLE GROUND....  WA              Pacific           1            1
                                                                    Northwest.
BRANDSMA, EDWARD & AILEEN.....  LYNDEN...........  WA              Pacific           4            4
                                                                    Northwest.
CURLY'S DAIRY, INC............  SALEM............  OR              Pacific           1            1
                                                                    Northwest.
DARIGOLD, INC.................  MEDFORD..........  OR              Pacific           1            1
                                                                    Northwest.
DARIGOLD, INC.................  PORTLAND.........  OR              Pacific           1            1
                                                                    Northwest.
DARIGOLD, INC.................  SEATTLE..........  WA              Pacific           1            1
                                                                    Northwest.
DE JONG, WALTER...............  MONROE...........  WA              Pacific           4            OOB 8/98
                                                                    Northwest.
EBERHARD CREAMERY, INC........  REDMOND..........  OR              Pacific           1            1
                                                                    Northwest.
ECHO SPRING DAIRY, INC........  EUGENE...........  OR              Pacific           1            1
                                                                    Northwest.
EVERGREEN DAIRY, INC. (WEIKS).  OLYMPIA..........  WA              Pacific           4            OOB 5/96
                                                                    Northwest.
FAITH DAIRY, INC..............  TACOMA...........  WA              Pacific           4            4
                                                                    Northwest.
FRED MEYER, INC...............  PORTLAND.........  OR              Pacific           1            1
                                                                    Northwest.
GILBERT, GERALD, ET AL........  OTHELLO..........  WA              Pacific           4            4
                                                                    Northwest.
GRAAFSTRA DAIRY, INC..........  ARLINGTON........  WA              Pacific           4            4
                                                                    Northwest.
HARVEY, MIKE..................  VANCOUVER........  WA              Pacific           4            4
                                                                    Northwest.
INLAND NORTHWEST DAIRIES, LLC.  SPOKANE..........  WA              Pacific           1            1
                                                                    Northwest.
KROPF, ROY....................  HALSEY...........  OR              Pacific           4            OOB 9/98
                                                                    Northwest.
LOCHMEAD FARMS, INC...........  JUNCTION CITY....  OR              Pacific           4            4
                                                                    Northwest.
MALLORIE'S DAIRY, INC.........  SILVERTON........  OR              Pacific           4            4
                                                                    Northwest.
PACIFIC FOODS OF OREGON, INC..  CLACKAMAS........  OR              Pacific           1            3B
                                                                    Northwest.
SAFEWAY 85, INC...............  MOSES LAKE.......  WA              Pacific           1            1
                                                                    Northwest.
SAFEWAY STORES, INC...........  BELLEVUE.........  WA              Pacific           1            1
                                                                    Northwest.
SAFEWAY STORES, INC...........  CLACKAMAS........  OR              Pacific           1            1
                                                                    Northwest.
SMITH BROTHERS FARMS, INC.....  KENT.............  WA              Pacific           4            4
                                                                    Northwest.
SPRINGFIELD CREAMERY..........  EUGENE...........  OR              ................  3A           3B
STATE OF OREGON DEPARTMENT OF   SALEM............  OR              Pacific           2            3B
 CORRECTIONS.                                                       Northwest.
STATE OF WASHINGTON DEPARTMENT  MONROE...........  WA              Pacific           4            2
 OF CORRECTIONS.                                                    Northwest.
STRATTON, WARD................  PULLMAN..........  WA              Pacific           4            4
                                                                    Northwest.
SUNSHINE DAIRY, INC...........  PORTLAND.........  OR              Pacific           1            1
                                                                    Northwest.
TILLAMOOK COUNTY CREAMERY ASSN  TILLAMOOK........  OR              Pacific           1            2
                                                                    Northwest.
UMPQUA DAIRY PRODUCTS CO., INC  ROSEBURG.........  OR              Pacific           1            1
                                                                    Northwest.
VENN, WILLIAM (TIMOTHY & SUSAN  NORTH BEND.......  WA              Pacific           4            4
 BERNDT).                                                           Northwest.
VITAMILK DAIRY, INC...........  SEATTLE..........  WA              Pacific           1            1
                                                                    Northwest.
WAGNER, PAUL B. & SHARON......  PORT ORFORD......  OR              ................  5            3B
WILCOX DAIRY FARMS, LLC.......  CHENEY...........  WA              Pacific           1            1
                                                                    Northwest.
WILCOX DAIRY FARMS, LLC.......  ROY..............  WA              Pacific           1            1
                                                                    Northwest.
WINEGAR, GARY & MARGO.........  ELLENSBURG.......  WA              Pacific           1            OOB 7/97
                                                                    Northwest.
PALMER ZOTTOLA DBA VALLEY OF    GRANTS PASS......  OR              Pacific           1            1
 THE ROGUE DAIRY.                                                   Northwest.
----------------------------------------------------------------------------------------------------------------
\1\ Distributing plant status (as determined from October 1997 Data):
1: Pool.
2: Partially Regulated.
3: Exempt based on size:
A. As defined under current federal orders.
B. As defined under proposed rule; with route disposition less than 150,000 lbs. per month.
4: Producer-Handler.
5: UNREGULATED.
6: Exempt based on institutional status:

[[Page 16091]]

 
A. As defined under current Federal orders.
B. As defined under proposed orders (Government, university, and charitable).
\2\ New--No data for October 1997: Information not included in analysis.

2. Basic Formula Price Replacement and Other Class Price Issues

    This rule closely follows the pricing plan described in the 
proposed rule by replacing the current basic formula price (BFP) with a 
multiple component pricing system that derives component values from 
surveyed prices of manufactured dairy products. The adopted pricing 
system determines butterfat prices for milk used in Class II, Class III 
and Class IV products from a butter price; protein and other solids 
prices for milk used in Class III products from cheese and whey prices; 
and nonfat solids prices for milk used in Class II and Class IV 
products from nonfat dry milk product prices.
    The calculation of the Class I skim milk and butterfat prices for 
each order, determined in the proposed rule by computing a six month 
declining average of the higher of the Class III or Class IV skim milk 
prices for the second preceding month and adding a fixed Class I 
differential to the result, has been changed to reflect more closely 
the value of milk used in manufacturing. The Class I skim price for a 
month will be determined by adding the fixed Class I differential for 
each order to the higher of a Class III or IV skim value, calculated 
from product prices reported by NASS for the most recent two-week 
period for which prices are available on the 23rd day of the previous 
month. Similarly, the Class I butterfat price will be calculated by 
adding the fixed Class I differential divided by 100 to a butterfat 
value computed by using product prices for the same two-week period.
    The price of Class II skim milk for a month will be computed by the 
sum of a Class IV skim price per hundredweight, calculated from product 
prices reported by NASS for the most recent two-week period for which 
prices are available on the 23rd day of the previous month, and the 70-
cent Class II differential. The Class II butterfat price will be 
determined from the NASS-reported butter price, as in Classes III and 
IV, plus .7 cents per pound to incorporate the Class II differential. 
This price will be announced on the 5th day of the month and apply to 
butterfat in Class II during the previous month.
    A table showing current and re-calculated prices for the period 
1994 through 1997 appears at the end of this discussion of the BFP 
replacement. The basis for re-calculating the prices is described later 
in this discussion.
    Provisions for Federal milk orders regulating the handling of milk 
in areas for which a multiple component pricing system has not been 
adopted will maintain a hundredweight skim/butterfat pricing system 
instead of the component pricing plan. The hundredweight prices will be 
determined by using the component price formulas contained in this 
decision to compute corresponding hundredweight prices using standard 
component levels.

Background

    The proposed rule described in some detail the development in the 
early 1960's of the Minnesota-Wisconsin manufacturing grade milk price 
series (M-W) as a means of identifying a price determined by supply and 
demand for milk used in manufactured dairy products. Also described 
were the developments that have made the M-W less representative of the 
value of milk used in manufactured products. The two primary trends 
making the M-W less representative over the last four decades are the 
declining volume of Grade B (manufacturing grade) milk and the 
declining numbers of plants from which payments could be reported to 
update the base month price.
    The problem of the declining number of plants from which payments 
could be reported to update the base month M-W survey of two months 
previous was addressed in 1995 by using an updating formula that uses 
changes from the base month to the next month in prices paid for 
butter, nonfat dry milk, and cheese. However, the problem of using a 
declining volume of Grade B milk to accurately represent the value of 
milk used for manufacturing was not solved with the implementation of 
the current BFP. The decision based on the basic formula price hearing 
recognized that ``the adoption of the base month M-W price, or any 
Grade B milk series, is only a short term solution, since the amount of 
Grade B milk production is expected to continue declining.''

Process

    The Basic Formula Price Replacement Committee was one of several 
committees formed to deal with specific issues involved in 
restructuring the Federal milk order system pursuant to the 1996 Farm 
Bill. The Committee established goals and criteria for a new BFP, 
hosted a July 1996 public forum on dairy price discovery techniques in 
Madison, Wisconsin, and considered over 1,600 comments submitted by 
interested persons relative to the basic formula price in response to 
the May 1996 invitation to comment on Federal Order restructuring. The 
Committee conducted extensive study and analysis, worked with a 
University Study Committee (USC) commissioned to conduct objective 
analysis of the performance of numerous alternatives to the current 
basic formula price, and issued a preliminary report on BFP replacement 
in April 1997. The Committee studied the comments responding to the 
preliminary report, as well as those received earlier, in the 
development of the BFP replacement portion of the proposed rule, which 
was published in January 1998.
    The goals and criteria to be met by a replacement for the basic 
formula price were discussed in detail in the proposed rule. Briefly, 
the goals are: (a) Meet the supply and demand criteria set forth in the 
Agricultural Marketing Agreement Act of 1937 (the Act), (b) not deviate 
greatly from the general level of the current BFP, and (c) demonstrate 
the ability to change in reaction to changes in supply and demand.
    The criteria established to evaluate the various alternatives were: 
(a) Stability and predictability; (b) simplicity, uniformity, and 
transparency; (c) sound economics-- e.g., consistency with market 
conditions; and (d) reduced regulation.

Comments

    Of the more than 1,600 comments received relative to the basic 
formula price in response to the May 1996 invitation to comment on 
Federal Order restructuring, most favored one or more of five 
categories of alternatives to the current BFP. These five alternatives 
were: Economic formulas, futures markets, cost of production, 
competitive pay price, and product price and component formulas. In 
addition, numerous comments were received relative to the use of 
National Cheese Exchange prices in particular and exchange prices in 
general in the determination of a basic formula price.
    After publication of the proposed rule in January 1998, nearly 600 
comments were received relating to some aspect of the basic formula 
price replacement. Approximately 450 of these comments were form 
letters or very general in nature. For the most part, comments that 
related specifically to the proposal

[[Page 16092]]

supported the use of product price formulas and the use of surveyed 
product prices to calculate component prices in determining the value 
of milk. Many of the comments, however, suggested modifications to the 
proposed rule. These comments are addressed in the discussion of each 
of the individual topics involved in these pricing issues.
    The only alternative previously considered that retained 
considerable support from producer organizations was a competitive pay 
price. In addition, many individual producer comments continued to 
advocate cost of production or a floor for the BFP ranging from $14.50 
to $18.00. Some producers also suggested letting the market determine 
prices, and a few suggested supply management to ensure that farmers 
receive fair milk prices. One processor opposed product price formulas, 
suggesting that futures are the preferred tool used by markets to 
manage risk. Several producers supported basing producer prices on 
retail prices, while a state senator from Wisconsin suggested paying 
producers on the quality and quantity of their milk.
    As noted in the proposed rule, the reason the USC dropped cost of 
production from consideration was that cost of production represents 
only the supply side of the market, ignoring factors underlying demand 
or changes in demand for milk and milk products.

Competitive Pay Price

    Although some producer groups submitted comments on the proposed 
rule that continued to support use of a competitive pay price for 
determining the BFP replacement, a number of these comments stated that 
the pricing proposal contained in the proposed rule was one they could 
support. Other commenters continued to express the view that a 
competitive pay price is the best indicator of the national supply and 
demand for milk and that continuing to use such a price would provide a 
simple, economically defensible method of calculating the true value of 
milk used in manufactured dairy products.
    Several proponents suggested including a competitive pay price for 
Grade A milk, with some adjustments, as a way to improve the size and 
representativeness of the competitive pay price.
    As described in the proposed rule, a competitive pay price to be 
used as a BFP must represent the result of open market negotiation 
between dairy farmers (or their cooperatives) and milk processors. 
Competition requires sufficient numbers of buyers and sellers so that 
no one participant or group of participants can unduly influence the 
price. In addition, the price cannot be a Federal- or State-regulated 
price, such as the price for Grade A milk currently priced under 
Federal milk orders.
    Identification of a competitive pay price in today's dairy 
industry, where 70 percent of the milk is currently covered under 
Federal milk marketing orders, appears to be an unsurmountable 
challenge. After accounting for state regulations, only about two 
percent of Grade A milk is unregulated, and it is unlikely that even 
this small amount of milk is not affected by regulated prices. Only 
about five percent of the total milk marketed in the U.S. is Grade B or 
unregulated, and 42 percent of that milk is located in Minnesota and 
Wisconsin. The remainder is scattered among 23 states in amounts too 
small and delivered to too few processing plants to generate a 
competitive pay price. In areas where alternative markets exist, the 
price for unregulated milk likely is not below the price paid for 
regulated milk, since producers would prefer to sell their milk to 
regulated handlers to receive the higher regulated price. Thus, 
unregulated handlers are compelled to meet the regulated price in order 
to attract sufficient supplies of milk. The circular result is that the 
regulated price ultimately becomes the competitive price. This process 
does not lead to a representative competitive pay price for milk.
    The concept of a competitive pay price has appeal from the 
standpoint of sound economics. However, serious concerns must be raised 
about the degree of competition reflected in a price based on the 
declining volume of Grade B milk produced and purchased, or the 
introduction of Grade A milk that, even if unregulated, is 
significantly influenced by minimum order prices and therefore suspect 
as a ``competitive'' price.
    The proposed rule contained a description of a BFP Replacement 
Committee attempt to determine a competitive pay price series that 
included nine states' pay prices for Grade A milk used in 
manufacturing, with the prices adjusted for protein content, 
performance premiums, over-order premiums, and hauling subsidies. The 
nine states accounted for approximately 75% of the Grade A milk used 
for manufacturing in the U.S.
    The reduced price level that resulted from the study was explained 
in terms of currently effective pay prices in the states included in 
the survey and the heavier weighting of milk used in butter/powder 
production than in the current BFP. In addition to the negative aspects 
of the reduced price level and the uncertainty of being able to 
identify prices paid to producers that are not influenced by regulated 
prices, the USC analysis found that two competitive pay price series 
that passed the USC's level one criteria were questionable in their 
ability to reflect the manufactured milk market. Neither performed well 
when tested using the level two criteria and therefore were dropped 
from further consideration.

Product Price Formulas and Component Pricing

    Most comments filed in response to the proposed rule supported 
adoption of the use of product price formulas to derive multiple 
component prices for most markets as a viable market-oriented 
alternative to the current basic formula price. Favorable comments 
expressed the opinion that a price determined from the national 
finished product markets more accurately reflects the value of milk for 
manufacturing than other methods of determining a milk price. The price 
handlers can afford to pay for milk is determined by the price for 
which the finished product can be sold. Therefore, a pricing system 
that translates finished product prices to a price for raw milk results 
in a representative raw milk price for both producers and handlers. 
Component pricing, with prices determined for butterfat, protein, 
nonfat solids, and ``other solids'' (solids other than protein), can 
best be accomplished through product price formulas, to reflect the 
value of each component in finished product prices. The product price 
formulas adopted in this rule are relatively easy to use and 
understand, and the value of milk may be computed on an on-going basis 
by everyone in the dairy industry by following commodity markets.
    Because milk used in manufactured products obtains its value from 
the components of milk, it is the components that should be priced; 
particularly butterfat and protein, and to a lesser extent the other 
solids contained in the milk.
    Opposition to product price formulas was directed primarily at the 
need for establishing product yields and make allowances in determining 
a milk price or component prices. Opponents expressed the view that 
yields and make allowances would not reflect actual processing yields 
and costs in manufacturing plants, and therefore would not yield an 
accurate price for milk. Opponents further explained that when yields 
and make allowances are determined, they would be difficult to adjust 
and would not react to changes

[[Page 16093]]

in manufacturing conditions. Opponents also argued that when an 
incorrect make allowance is established, plants are guaranteed a 
return, or profit, to the detriment of dairy farmers. Some comments 
even described the make allowance as an unfair charge paid by dairy 
farmers to processors to have their milk made into products. Other 
opponents explained that an incorrect yield or make allowance may force 
payment for milk at a level that would not allow a return to the 
manufacturing plant.
    The USC tested several product price formulas, including a one-
class multiple component pricing formula and a set of formulas similar 
to the formulas recommended in this decision. Based on the results of 
the USC analysis measured against several criteria, the multiple 
component pricing formulas had the best overall performance of any of 
the alternatives considered.

Commodity Prices

    As recommended in the proposed rule and contained in this final 
decision, commodity prices determined by surveys conducted by the 
USDA's National Agricultural Statistics Service (NASS) will be used in 
the formulas that replace the BFP. A considerable number of comments 
were received concerning the use of commodity prices in determining 
prices for milk used in manufactured dairy products. Most of those 
commenting supported use of a price survey, but many commenters urged 
that participation be mandatory and reported prices audited, with the 
survey enlarged to include plants representing the entire nation so 
that the prices are truly representative.
    Proponents of the NASS surveys explained that the NASS data is 
unbiased and would yield accurate representative prices of the products 
that are being marketed. Several comments contained specific 
recommendations for product categories to be surveyed to obtain the 
most accurate representative result.
    NASS data traditionally have been collected via a survey with 
voluntary participation. The price information in the current cheese 
price survey, like most NASS data, is not audited. NASS applies various 
statistical techniques and cross-checking with other sources to provide 
the most reliable information available.
    At the present time there appears to be no need for the suggested 
changes to the proposed surveys. The scope of the surveys that have 
been undertaken by NASS, and their geographic representation, appears 
to be comprehensive. Unless there is some indication that the prices 
gathered by the survey process are not representative, the very 
significant increase in regulation required to audit those prices and 
the steps that would need to be taken to make participation mandatory 
would be excessive and are not anticipated to be undertaken at this 
time.
    Several alternatives to a NASS price survey were considered. There 
is a weekly cash butter contract trading on the Chicago Mercantile 
Exchange (CME). This contract is currently used to establish the 
butterfat differential and butterfat price in all federal milk orders. 
This price series has been criticized due to the ``thinness'' of 
trading. Dairy Market News (DMN) publishes regional wholesale butter 
prices. However, since DMN price series cover cash or short-term 
contract transactions, they may not be representative of the 
predominant long-term contracts. Criticism of cheese exchange trading, 
including inaccurate representation of cheese prices and accusations of 
market manipulation, reached the point that the National Cheese 
Exchange (NCE) discontinued trading, and cash trading of cheese moved 
to the CME. The CME also has received some criticism for thinness of 
trading.
    There is very limited exchange trading of nonfat dry milk. Other 
alternatives to a NASS survey for nonfat dry milk and dry whey are 
limited to prices published by Dairy Market News (DMN). The prices 
reported by DMN are generally considered to be representative of the 
dry product markets. However, the prices are reported as a range. A 
simple average of the prices is used to compute a monthly price and may 
not reflect the weighted average price at which the product moved. The 
DMN prices are not intended to establish prices but are provided for 
market information.
    The NASS ``Dairy Products Prices'' reports wholesale cheese prices 
which are used to compute the current BFP. The NASS survey requests 
prices for cheddar cheese. The instructions for the survey specify what 
should and should not be included in the reported prices. The 
instructions state that a sale occurs when a transaction is completed, 
cheese is ``shipped out'', or title transfer occurs. Prices for cheddar 
cheese only are to be reported f.o.b. the processing plant/storage 
center. Prices should be for ``bare'' or ``naked'' cheese with only the 
minimum packaging required for 40-pound blocks. Processors are asked to 
include all sales transactions of 40-pound blocks and barrel cheese 4-
30 days old, the total volume sold, the total dollars received, or 
price per pound, and the moisture content of barrel cheese when it is 
sold. Intra-company sales, forward pricing sales, resales, 
transportation charges, clearing charges, and block cheese that will be 
aged should not be included.
    At the time the proposed rule was published the NASS survey 
included prices for cheddar cheese only. Since publication of the 
proposed rule, NASS has begun surveys of Grade AA butter prices, dry 
whey prices, and nonfat dry milk prices. These surveys incorporate 
input from the dairy industry on appropriate types of products, 
packaging, and package sizes to be included for the purpose of 
obtaining unbiased representative prices. A sale is considered to occur 
when a transaction is completed, the product is shipped out or title 
transfer occurs. In addition, all prices are f.o.b. the processing 
plant/storage center, with the processor reporting total volume sold 
and total dollars received or price per pound.
    Butter prices are for USDA Grade AA butter with 80 percent 
butterfat, salted, fresh or ``storage,'' in 25-kilogram and 68-pound 
boxes. Processors are instructed not to include transportation charges, 
unsalted butter, Grade A butter, intra-company sales, forward pricing 
sales, and resales.
    Nonfat dry milk prices are for USDA Extra Grade or USPH Grade A 
non-fortified dry milk in 25-kilogram bags, 50-pound bags, or 
``totes,'' and tanker sales. Several commenters suggested excluding 
nonfat dry milk processed with high heat treatment since such product 
is a higher-cost specialty product, making its price unrepresentative 
of the nonfat dry milk market. As a result of the comments, it was 
determined that only low and medium heat process nonfat dry milk should 
be included in the price survey. The instructions inform processors to 
exclude transportation charges, sales of product more than 180 days 
old, instant nonfat dry milk, dry buttermilk, intra-company sales, 
forward pricing sales, and resales.
    Dry whey prices are for USDA Extra Grade edible nonhygroscopic dry 
whey in 25-kilogram bags, 50-pound bags, ``totes,'' and tanker sales. 
As is the case with the other commodities, transportation charges, 
intra-company sales, forward pricing sales, and resales are to be 
excluded as well as sales of product more than 180 days old.
    Several comments expressed concern about the ``circularity'' of 
survey pricing that could be caused by including sales whose price is 
based on previous survey information. According to this view, NASS-
reported prices would cease to reflect market supply and demand, with

[[Page 16094]]

market prices reflecting NASS-reported prices instead. These comments 
stated that the current pricing system relies on the market (in the 
form of the base month M-W survey) to correct survey results.
    Under any method of discovering prices, whether those paid to 
producers or those paid for manufactured dairy products, prices 
currently known will be used as one of the determinants of prices for 
the following period. Under the current pricing system, it is 
inconceivable that handlers paying Grade B producers for their milk 
used in manufactured products do not consider the most recently 
announced prices as a starting point for determining what prices to pay 
their producers. When butter and cheese prices are determined at an 
exchange, both buyers and sellers use the exchange prices in arriving 
at the prices at which products will move. Ultimately, prices move in 
response to supply and demand conditions in the marketplace.

Basic Formula Price Replacement

    Application of the BFP and USC Committees' criteria for BFP 
replacement to the various BFP alternatives and consideration of 
comments received in response to the proposed rule resulted in the 
determination that the component pricing product price formulas 
contained in this final rule best meet the stated goals and criteria 
for the replacement of the BFP.
    A BFP based on commodity prices is subject to the same problems of 
stability as the underlying commodity prices. For the most part product 
price formulas do not reduce the volatility in producer milk prices.
    Product price formulas are relatively simple to compute and 
understand, and may be applied uniformly, or on a regional basis, 
accommodating differences in yields or make allowances. Product prices 
established in a relatively free and open interaction between supply 
and demand directly translate the value of the finished products to the 
value of milk and its components. Therefore, they have a sound economic 
underpinning.
    Product price formulas can require increased data collection, 
particularly if industry insists that data used in the formulas be 
audited.
    The predictability of prices computed from product price formulas 
should be reasonably good, or at least no worse than predictability of 
the underlying commodity prices. Short run predictability may improve 
since all information needed to compute prices is reported on an 
ongoing basis. This contrasts with the present BFP computation in which 
the base month Minnesota-Wisconsin price is not reported until the 
actual basic formula price is announced.
    Product price formulas are transparent, since the information to 
compute the price is available, and the effect of a change in commodity 
prices or one of the other factors may be observed and quantified.
    This final rule replaces the current BFP with a multiple component 
pricing (MCP) system which will determine butterfat, protein, and other 
solids prices for milk used in Class III products and butterfat and 
nonfat solids prices for milk used in Class IV products.
    Numerous comments were received, primarily before issuance of the 
proposed rule, concerning whether the revised orders should keep Class 
III-A (i.e. a four class market) or whether all hard manufactured 
products should be priced in Class III. The opposition to Class III-A 
centered around two issues: (1) The integrity of the classified pricing 
system, and (2) the perception that a butter/nonfat dry milk class 
would reduce producer pay prices. The supply/demand for butter and 
nonfat dry milk is sufficiently different from the supply/demand for 
cheese to justify separate classification and pricing. In addition, the 
decision to use the higher of the Class III or Class IV price for 
determining the Class I price, and base the Class II price on the Class 
IV price, should more accurately reflect the value of these different 
categories of use.
    Changes in the cheese market have a major impact on the dairy 
industry. The cheese industry has evolved from cheese production being 
a means of surplus milk storage and removal to a competitive consumer 
demand-driven industry. More milk is used in cheese production 
nationally than is used in Class I. The nonfat dry milk industry is now 
one which balances surplus milk storage and removals. This category is 
also evolving, with increasing commercial uses for nonfat dry milk, and 
dry milk products formulated for specific needs. Increasing quantities 
of nonfat dry milk are being produced for use in other dairy products 
and the food and pharmaceutical industries.
    The separation of manufacturing milk into two classes will assure 
that shifts in demand for any one manufactured product will not lower 
the prices for milk used in all other classifications, including Class 
I prices. Recent milk price increases have been attributed to increased 
cheese values. Many people expect that per capita cheese consumption 
will continue to grow. However, some warn of impending market 
saturation as more cheese plant capacity materializes and consumer 
tastes and preferences change. Cheese consumption patterns are based on 
many factors outside the dairy industry's control. Health concerns 
relating to changing demographics, changes in pizza consumption and 
income growth, as well as retail and wholesale inventory decisions, 
etc., will impact consumption and prices. A recent report by the Food 
and Agricultural Policy Research Institute noted that ``anything that 
results in demand weakness for cheese will likely result in a markedly 
different outlook for the entire dairy sector.'' The adopted pricing 
system will allow other manufactured products (i.e. Class IV) to move 
Class I prices, helping to reduce the volatility in milk prices.
    Over the last six years cheese prices, and to a lesser extent 
butter prices, have shown considerable fluctuation while the nonfat dry 
milk price remained relatively stable. Price changes for these finished 
products are indicative of varying supply/demand situations over time. 
The stable nonfat dry milk prices and the butter prices prior to the 
fall of 1995 were a reflection of large stocks being carried in storage 
and flat demand. Prices for nonfat dry milk and butter became more 
volatile once government inventories were depleted and were no longer a 
factor in stabilizing prices. Butter prices increased during May and 
June of 1997 in response to demand for cream, while both cheese and 
nonfat dry milk prices remained relatively flat. These differences in 
price movements indicate separate supply and demand balances for 
different manufactured dairy products.
    Research cited in the proposed rule supports the conclusion that 
the different supply and demand characteristics for the cheese and 
butter/nonfat dry milk market segments warrant separate classification 
and prices. This pricing plan will allow the market-clearing price 
level of each of these manufactured products to be achieved independent 
of the other products. As a result, dairy farmers will be paid a price 
which is more representative of the level at which the market values 
their milk in its different uses.
    The importance of using minimum prices that are market-clearing for 
milk used to make cheese and butter/nonfat dry milk cannot be 
overstated. The prices for milk used in these products must reflect 
supply and demand, and must not exceed a level that would require 
handlers to pay more for milk

[[Page 16095]]

than needed to clear the market and make a profit.
    The current BFP serves two functions: (1) A fixed differential is 
added to the current BFP to establish the Class I and Class II prices 
for the second succeeding month; and (2) the current BFP serves as the 
Class III price. In some Federal milk orders, a seasonal adjuster is 
added to the BFP to determine the Class III price. The BFP replacement 
will function in a similar fashion, using component prices. Class IV 
(butter and dry milk products) will be priced on a butterfat and nonfat 
solids basis. Class III (hard cheese) will be priced on a butterfat, 
protein, and other solids basis. The price of butterfat will be the 
same in Class III and Class IV. Class II will use the same butterfat 
price as Class III and Class IV with an adjustment to reflect the 
addition of the Class II differential. Payments to producers under MCP 
will be based on butterfat, protein, and other solids contained in the 
producers' milk, in addition to the producer price differential. Most 
Federal milk orders with MCP will also contain an adjustment to 
producer pay prices for the somatic cell counts of producers' milk.
    The producer price differential reflects the collective value of 
participation in the marketwide pool. Primarily, it represents the 
producer's pro rata share of the additional value of Class I and Class 
II use in the market. The butterfat, protein, and other solids prices 
are component prices based on the value of the use of milk in 
manufacturing.
    The Class I price will consist of a Class I butterfat price and a 
Class I skim milk price. As modified from the proposed rule, the Class 
I butterfat price will be determined by adding a fixed Class I 
differential divided by 100 to an advanced butterfat price computed 
using product prices for the most recent two-week period for which 
prices are available on the 23rd day of the month and will apply to the 
following month. The Class I skim milk price will be determined by 
adding the fixed Class I differential for each order to the higher of 
an advanced Class III or IV skim milk price, calculated by using 
product prices for the same two-week period. The calculation of Class I 
prices will be the same for both MCP and non-MCP markets.
    Announcement of Class I butterfat and skim milk prices in advance 
eliminates current problems caused by calculating the butterfat 
differential after the month for which it is effective. Handlers will 
have true advance Class I pricing. There will be three different 
butterfat prices each month (Class I, Class II, and other classes) but 
no butterfat differential. The separate Class I butterfat price should 
present no administrative or verification problems since Class I 
butterfat testing and reporting currently exists.
    The prices for butterfat, protein, and other solids used in Class 
III will be computed as follows:

Butterfat price = ((NASS AA Butter survey price--0.114)/0.82)
Protein price = ((NASS cheese survey price--0.1702)  x  1.405) + 
((((NASS cheese survey price--0.1702)  x  1.582)--butterfat price)  x  
1.28)
Other solids price = ((NASS dry whey survey price--.137)/0.968).

    For milk used in Class IV products the butterfat price is the same 
as the Class III butterfat price, while the nonfat solids price will be 
computed as follows:

Nonfat solids price = ((NASS nonfat dry milk survey price--0.137)/
1.02).

    This system of pricing best fits the three established goals and 
criteria, discussed previously, for a replacement to the BFP.
    The first goal, that a replacement for the basic formula price meet 
the supply/demand criteria set forth in the Act, may be the most 
difficult to evaluate definitively since the Act specifically mentions 
minimum prices to producers. The BFP, as part of a classified pricing 
system, does contribute to minimum prices to producers. However, the 
basic formula price does not need to be set at a level to ``assure an 
adequate supply of wholesome milk'' since the BFP makes up only a 
portion of the minimum price paid to farmers. The minimum price to 
farmers is a weighted average of the value of all of the milk in the 
market place, of which the BFP is a part. The BFP replacement meets the 
supply and demand criteria for milk used in butter/nonfat dry milk and 
cheese even though the component prices are established from finished 
product commodity prices. The commodity prices are based on a 
competitive marketplace and reflect the supply and demand for those 
products (Class III and Class IV) that utilize approximately 50% of the 
Grade A milk supply.
    The supply and demand for Grade A milk is not limited to one 
category of products. The same milk may be used for fluid or soft 
manufactured products as well as the Class III and Class IV products 
used to determine the BFP. As a result, the minimum prices established 
for Class III and Class IV reflect supply and demand for the milk used 
in all products.
    In several comments received in response to the proposed rule, 
commenters expressed the view that the proposed product price formulas 
did not meet the requirements of the Act, and that an updated 
competitive pay price resembling the current BFP would be the 
appropriate replacement for the current BFP. For a price to be 
competitively established there must be a large number of willing 
buyers and sellers. The current base month price is established from a 
survey of pay prices for Grade B or manufacturing grade milk in 
Minnesota and Wisconsin. Whether prices paid for Grade B milk are 
representative of the value of Grade A milk is debatable. In addition, 
the volume of Grade B milk involved represents a declining production 
base from which to gather pay prices, and the number of plants buying 
manufacturing grade milk is continuing to decline, with many plants 
refusing to buy manufacturing grade milk even when they need milk and 
Grade A milk is more expensive. In other situations the manufacturing 
grade milk is procured because the seller of the milk is a member of 
the cooperative purchasing the milk and the cooperative will not deny 
market access to its member. Such a situation clearly is not 
competitive.
    The Act stipulates that the price of feeds and the availability of 
feeds be taken into account in the determination of milk prices. This 
requirement currently is fulfilled by the BFP. If the price of feed 
increases the quantity of milk produced would be reduced due to lower 
profit margins. As the milk supply declines, plants buying 
manufacturing milk would pay a higher price to maintain an adequate 
supply of milk to meet their needs. As the resulting farm profit 
margins increase, so should the supply of milk. Likewise, the reverse 
would occur if the price of feed declines. The price of feed is not 
directly included in the determination of the price for milk, but 
rather causes a situation in which the price of milk may increase or 
decrease. A change in feed prices may not necessarily result in a 
change in milk prices. For instance, if the price of feed increases but 
the demand for cheese declines, the milk price may not increase since 
milk plants would need less milk and therefore would not bid the price 
up in response to lower milk supplies.
    The pricing system contained in this decision will function in the 
same manner as the current pricing system by accounting for changes in 
feed costs and feed supplies indirectly. The product price formulas 
adopted in this rule should reflect accurately the market values of the 
products made from producer milk used in manufacturing. As feed costs 
increase with a resulting

[[Page 16096]]

decline in production, commodity prices would increase as a result of 
manufacturers attempting to secure enough milk to meet their needs. 
Such increases in commodity prices would mean higher prices for milk. 
The opposite would be true if feed costs were declining. Additionally, 
since Federal order prices are minimum prices, handlers may increase 
their pay prices in response to changing supply/demand conditions even 
when Federal order prices do not increase.
    The second goal for a BFP replacement is that it should not deviate 
greatly from the price level of the current BFP. In effect, prices 
established by the current BFP formula in the past were used as a 
benchmark to compare how well the product price formulas adopted in 
this decision tracked the supply and demand conditions exhibited by the 
BFP. Several comparisons of the basic formula price replacement were 
made to the current BFP to determine whether the price computation 
formulas result in a price level for milk used in manufactured products 
that is reasonably close to the current BFP. It must be recognized that 
after the initial implementation of the revised prices, supply and 
demand factors will interact to adjust the actual price level to 
reflect the market for milk used in manufactured dairy products.
    Protein, butterfat, and other solids values were combined to 
compute a Class III hundredweight price using standard factors of 3.1 
for protein and 5.9 for other solids contained in skim milk, and 3.5 
for butterfat. The resulting price averaged $0.47 or 3.7 percent below 
the current BFP for the 60-month period of January 1994 through 
December 1998. The Class IV hundredweight price, computed from the 
butterfat price times 3.5 and the nonfat solids price using a standard 
factor of 9 for nonfat solids contained in skim milk, averaged $0.50 or 
3.9 percent below the current BFP during the same period. The 
replacement Class III and Class IV prices were both highly correlated 
with the current basic formula price. The Class III price had a .981 
correlation coefficient while the Class IV price had a .744 correlation 
coefficient.
    The above comparisons are based on applying the component pricing 
formulas to commodity prices that were in effect during the period 
examined. Therefore, price level comparisons can only provide an 
indication of how the BFP replacement prices may have behaved. The 
current BFP has been responding to changing market conditions, while 
the replacement formulas are applied to historic data which has 
exhibited changes over time in response to existing price levels, 
rather than marketing conditions that would have occurred under the BFP 
replacement. Additionally, the current BFP may have a greater tendency 
to reflect supply and demand conditions in Minnesota and Wisconsin 
rather than national supply/demand conditions. The formulas in this 
decision use national commodity price series, thereby reflecting the 
national supply and demand for dairy products and the national demand 
for milk.
    The basic formula price replacement also meets the third primary 
goal. The formulas have the ability to respond to supply/demand 
changes. The Class III and Class IV prices should respond appropriately 
since the formulas use NASS-surveyed commodity prices that reflect 
national supply and demand for these commodities.
    Overall, the BFP replacement formulas (for Class III and Class IV) 
meet the established criteria necessary for a BFP replacement. The 
formulas are relatively simple to use and can be applied uniformly. The 
formulas are transparent and the Class III and Class IV formulas meet 
the sound economics criterion.
    In the near term, the use of NASS survey prices may reduce the 
ability to predict Federal order class prices since there is a limited 
history of using NASS survey prices. Predictability should improve over 
time as the relationship between the survey prices and easily-tracked 
exchange prices becomes apparent to industry observers.
    The formulas used in the basic formula price replacement likely 
will result in prices that are less stable than the current BFP. Unlike 
the current BFP, in which commodity updates are used to adjust the 
producer pay price survey, changes in product prices will be the sole 
determinants of changes in component prices. Past observation of 
competitive pay prices and commodity prices indicates that generally 
competitive pay prices do not move as quickly as commodity prices. 
Since the current BFP is based primarily on the base month survey 
price, the commodity-driven price series adopted in this rule will 
react more quickly to changes in the commodity markets than the current 
BFP reacts.

Make Allowances

    Use of an economic engineering approach to determine appropriate 
make allowances was investigated. Neither the time nor the resources 
are available to construct models for determining appropriate make 
allowances at this time. As an alternative, various sources were used 
to determine appropriate make allowances for the basic formula price 
replacement. Research by Stephenson and Novakovic of Cornell University 
indicates that results obtained by using an economic engineering 
approach can be comparable to a survey of plants. Resources may need to 
be devoted to developing an economic engineering model, a survey, or a 
combination of the two.
    The make allowances contained in the proposed rule were developed 
primarily from make allowance studies conducted at and published by 
Cornell University and an analysis of manufacturing plant size in 
relationship to the data contained in the Cornell studies. Audited cost 
of production data published by the California Department of Food and 
Agriculture was also used in determining a reasonable level of make 
allowances.
    The proposed rule make allowances used in computing the component 
prices for Class III and Class IV resulted in per hundredweight prices 
which did not deviate greatly on average from the current BFP over the 
period analyzed, one of the criteria for a basic formula price 
replacement. During the September 1991 through May 1997 period on which 
the analysis in the proposed rule was based, the proposed Class III 
price level would have averaged $0.26 per hundredweight above the 
current BFP, with Class IV prices averaging $0.22 per hundredweight 
below.
    Nearly all comments received relating to make allowances asserted 
that the proposed rule allowances were understated. Both handler and 
producer interests argued that failure to cover processors' costs of 
converting milk to finished products results in a disincentive to 
produce finished dairy products. They expressed concern that the 
disincentive would discourage investment in the manufacturing sector, 
leading to reduced manufacturing capacity and reduced outlets for 
producers' milk. A few commenters stated that make allowances should 
cover the costs of only the most efficient processors, and others 
objected to the inclusion of any make allowances, which they 
characterized as a charge against producers to pay processors for 
processing milk.
    Producers objected to the inclusion of manufacturing allowances for 
milk processors while no allowance is made for producers to recognize 
any fixed recovery of the cost of producing milk. The current pricing 
system, using the BFP, also does not assure producers a fixed rate of 
return. However, because

[[Page 16097]]

the BFP is based on a competitive pay price of what manufacturers pay 
dairy farmers for milk, the manufacturers' make allowance has, in 
effect, been deducted from prices received from the sale of 
manufactured products before the pay prices are reported. Therefore the 
differences between the current pricing system using the BFP and the 
pricing system contained in this decision with respect to make 
allowances deals with the level and stability of make allowances rather 
than their existence.
    National Milk Producers Federation (NMPF) supported use of a survey 
of dairy product manufacturing costs that has been conducted by the 
Rural Cooperative Business Service (RCBS), with some modifications, to 
establish Federal order make allowances. Many other comments supported 
the NMPF position. NMPF suggested adding a marketing cost allowance of 
$0.015 per pound of product to the manufacturing costs. NMPF explained 
that the addition of the marketing allowance was necessary since the 
NASS price data that will be used in the formulas includes the 
marketing costs covered by the $0.015.
    The RCBS survey contains data for six cheese plants, six nonfat dry 
milk plants and five butter plants. In addition, the survey results 
include manufacturing data from three dry whey plants. The plants 
included in the survey represent a wide geographic representation of 
the United States. Given the limited number of plants involved in the 
study, however, regional information is unavailable. The survey results 
also represent a range of packaging types which can affect the final 
make allowance.
    International Dairy Foods Association (IDFA) suggested that make 
allowances be determined by computing weighted averages of the results 
of the RCBS survey and the California audited make allowances. IDFA 
also included a $0.015 marketing cost adjustment as well as adjusting 
the RCBS make allowance to incorporate the same return on investment 
that is included in the California make allowance. IDFA and numerous 
other commenters explained that a return on investment is necessary for 
manufacturers to continue to invest in plants and equipment.
    A number of comments were filed urging that make allowances be 
determined by auditing manufacturing plants in the same manner 
practiced by the State of California. Proponents explained that 
California has had long and successful experience with auditing make 
allowances and that a similar procedure could and should be implemented 
in Federal orders.
    At this time the use of the RCBS study and the California data are 
deemed to be adequate for determining the initial make allowances 
contained in this decision. Several problems exist with auditing make 
allowances. First, the Federal milk order system currently is not 
equipped to handle the type of audits necessary for determining 
appropriate make allowances. An increase in market administrator 
administrative fees would be required to acquire and train auditors to 
conduct the make allowance audits, since these audits would have to be 
done in addition to the current audit program. Since most Class III and 
Class IV manufacturing is done in plants that currently are 
unregulated, authority to audit these plants to obtain make allowance 
data would need to be obtained. In addition, the industry may request a 
hearing on an expedited basis and present relevant data to justify 
changing make allowances. Therefore, there is no current plan to begin 
auditing manufacturing plants for the purpose of obtaining make 
allowance data.
    The level of the make allowances included in this decision is based 
on input by all sectors of the dairy industry. If the make allowances 
are established at too low a level, manufacturers will fail to invest 
in plants and equipment, and reduced production capacity will result. 
If the make allowances are established at too high a level there will 
be unwarranted incentive to increase capacity above the needs of the 
industry, leading to overcapacity and resulting losses to 
manufacturers. Either scenario would not be in the best interest of the 
dairy industry. Manufacturing plant operators who find the level of 
make allowances inadequate compared to their actual costs also have the 
alternative to not participate in a Federal order marketwide pool.
    Most commenters agreed with NMPF and IDFA that the make allowances 
proposed to be used for the butterfat and nonfat solids prices were too 
low, and the resulting prices too high. NMPF suggested that a make 
allowance of $.1327 per pound of butter (plus the $.0015 marketing 
cost, or $.1342) would be appropriate for use in the butterfat price 
calculation, and IDFA favored a make allowance of $.114, compared to 
the proposed make allowance of $.079. Several commenters suggested use 
of California make allowances.
    The formula for determining the butterfat price for butterfat used 
in Class III and Class IV products will be computed using the following 
formula:

Butterfat price = ((NASS AA Butter survey price-0.114)/82).

    The make allowance of $0.114 per pound of butter is determined by 
adding to the RCBS survey make allowance a marketing cost of $0.015 and 
a return on investment of $.0068, which is the same return on 
investment included with the California butter processing cost. The 
RCBS make allowance included packaging costs for print butter; 
therefore, $0.0175 was deducted from the make allowance to adjust for 
the difference between print and bulk butter packaging. The California 
butter processing cost was also adjusted by the $0.015 marketing cost. 
A weighted average make allowance was then computed using the adjusted 
RCBS make allowance and pounds of butter contained in the RCBS survey 
and the adjusted California butter processing cost and the pounds of 
butter represented by the California butter plant audit. The resulting 
make allowance of $0.114 is $0.035 greater than the $0.079 make 
allowance contained in the proposed rule. An increase in the butter 
price formula make allowance will allow plants to recover a larger 
percentage of the costs of producing butter than under the proposed 
rule.
    Comments on the computation of a nonfat solids price included 
suggestions by NMPF that the nonfat dry milk make allowance level 
should be $.1245 plus the $.0015 marketing cost, or $.126, and by IDFA 
that $.137 would be an appropriate level, compared to the $.125 used in 
the proposed rule. Several other commenters favored the California make 
allowance, suggesting something in the $.135-$.14 per pound range for 
nonfat dry milk.
    The formula for computing the nonfat solids prices for milk used in 
Class IV will be as follows:

Nonfat solids price = ((NASS nonfat dry milk survey price-0.137)/1.02).

    As in the case of computing the butterfat make allowance, the 
nonfat solids make allowance is a weighted average of the RCBS survey 
and the California processing costs. A marketing cost of $0.015 and a 
return on investment of $0.0159 was added to the RCBS survey while the 
$0.015 marketing cost was added to the California price. The resulting 
make allowance of $0.137 per pound of nonfat dry milk is $0.012 more 
than the proposed rule make allowance of $0.125. The resulting increase 
in the make allowance will allow plants to recover a larger percentage 
of the cost of

[[Page 16098]]

producing nonfat dry milk than they would have using the make allowance 
included in the proposed rule.
    In addition to revising the make allowance for computing the nonfat 
solids price, the yield factor is also adjusted. In the proposed rule a 
yield factor of .96 was used in the nonfat solids formula. The .96 was 
intended to represent the 96 pounds of solids in 100 pounds of nonfat 
dry milk. Most parties, including IDFA and NMPF, commented that the .96 
was inappropriate and that a factor of 1.02 was more appropriate. Since 
buttermilk powder is also a product of manufacturing butter and nonfat 
dry milk, its value needs to be addressed. Because the proposed rule 
did not account for the yield of buttermilk, the .96 factor was 
appropriate. However, failing to account for buttermilk powder resulted 
in overstating the nonfat solids price since the pounds of nonfat 
solids were understated. Use of the 1.02 factor allows the nonfat 
solids contained in nonfat dry milk and buttermilk powder to be 
accounted for, and the value of all nonfat solids to be accurately 
reflected in the nonfat solids price.
    The results of the revisions made to the butterfat and nonfat 
solids formulas yield a Class IV hundredweight price that would have 
averaged four cents below the current Class III-A price and fourteen 
cents above the California 4a price over the period of January 1994 
through December 1998. These results address the major concern of many 
of the comments that the Class IV prices in the proposed rule were too 
far out of alignment with California 4a prices for Federal order plants 
to be competitive. The more important criteria of reflecting supply and 
demand is also met by the revised formulas. Research by Knutson, 
Anderson, Awokuse, and Siebert showed that the formulas contained in 
the proposed rule outperformed the current basic formula price in 
reflecting supply and demand. Under the revised formulas the level of 
prices will be changed, but not their relationship to supply and 
demand.
    Nearly all comments on the cheese make allowance proposed for use 
in computation of the protein price described the proposed $ .127 make 
allowance as too low, resulting in a too-high protein price. NMPF 
supported use of the RCBS survey results ($ .1421), which were somewhat 
higher than the proposal. IDFA supported using an average of the RCBS 
survey and California make allowances, which generally are higher still 
($ .152). A number of other commenters argued that the proposed cheese 
make allowance would cover the cost of making none of the cheese made 
in California. The Dairy Institute of California advocated make 
allowances of at least $.17 for blocks and $.14 for barrels.
    Many commenters insisted that barrel cheddar cheese prices should 
be included in a weighted average with block cheddar prices since much 
more barrel cheese is produced than block cheese. NMPF urged that the 
barrel price not be included because barrels don't have uniform 
composition, and because the use of such prices would have the effect 
of unnecessarily reducing prices to producers. Other commenters 
suggested that if barrel prices are included, they should be increased 
by 3 cents per pound to make up for the difference in packaging costs. 
Still other commenters argued that all varieties of cheese should be 
included in the NASS price survey to assure that all cheese value is 
captured.
    The formula for computing the protein price for milk used in Class 
III is as follows:

Protein price = ((NASS cheese survey price - 0.1702)  x  1.405) + 
((((NASS cheese survey price - 0.1702)  x  1.582) - butterfat price) 
x  1.28)

    The NASS cheese survey price will be determined by adding three 
cents to the moisture-adjusted barrel price and then computing a 
weighted average price using the block cheese price and the adjusted 
barrel price times the pounds of each cheese type in the NASS survey 
and dividing by the total pounds of block and barrel cheese in the NASS 
survey. Including both block and barrel cheese in the price computation 
increases the sample size by about 150 percent, giving a better 
representation of the cheese market. Since the make allowance of 
$0.1702 is for block cheese, the barrel cheese price must be adjusted 
to account for the difference in cost for making block versus barrel 
cheese. The three cents that is added to the barrel cheese price is 
generally considered to be the industry standard cost difference 
between processing barrel cheese and processing block cheese.
    The make allowance used in computing the protein price, $0.1702, 
was established by computing a weighted average make allowance using 
the RCBS survey and the California processing costs. The RCBS survey 
was adjusted by adding a marketing cost of $0.015 and a return on 
investment of $0.0104 for a total of $0.1540 while the California 
processing costs were increased by a marketing cost of $0.015 for a 
total of $0.1855. The weighted average was then computed by multiplying 
the pounds of cheese represented in each study by the respective 
prices. The resulting total was divided by the total pounds of cheese 
represented by the studies.
    The factors used in the formulas for computing component prices are 
determined by the quantity of the component in the commodity, except 
for protein, for which the Van Slyke yield formula is used. In the 
protein formula, the 1.405 and 1.582 are yield factors derived from the 
Van Slyke cheese yield formula. Both the 1.405 and 1.582 factors are 
determined by calculating the change in cheese yield if an additional 
tenth of a pound of protein or butterfat is contained in the milk, 
holding everything else constant.
    The proposed rule used a 1.32 factor times the cheese price for use 
in computing the protein price. The change to a factor of 1.405 
reflects the use of true protein as the basis for payments for protein 
rather than using a measurement of ``total nitrogen'' for the protein 
content of milk. The resulting protein price will be for a pound of 
``true protein.''
    Total nitrogen protein content and true protein content both result 
from chemical (Kjeldahl) testing methods approved for determining the 
protein content of dairy products by the Association of Official 
Analytical Chemists. When expressing protein based on total nitrogen, 
the protein percentage is over-stated by the amount of non-protein 
nitrogen (which has little or no effect on dairy product yields) 
present in the milk. Therefore, when milk is priced on the basis of its 
true protein content rather than its content of protein measured by 
total nitrogen, the price per pound of protein should be higher.
    Currently, nearly all testing of milk for payment purposes is 
performed using infrared electronic testing equipment. At the wave-
length filter at which protein is measured, only true protein is 
detectable. To calibrate for total nitrogen a bias factor has to be 
used to compensate for the non-protein nitrogen. It is also likely that 
the level of non-protein nitrogen will vary in every set of calibration 
samples, creating more problems in accurately calibrating electronic 
infrared instruments. Calibration for the true protein content of milk 
is more accurate than the calibration for total nitrogen protein. 
Because the accuracy of testing for true protein is higher than for 
total nitrogen protein, which has relatively little value, Federal milk 
orders should price milk on the basis of its true protein content 
rather than its total nitrogen protein content.

[[Page 16099]]

    Comments on the proposed rule included discussion of the proposal 
to incorporate the difference in butterfat value between cheese and 
butter within the protein price. NMPF suggested that the .90 factor 
that results in a 1.582 multiplier should, instead, be .91 and result 
in a 1.60 multiplier because that factor more closely reflects the 
current retention of butterfat in cheddar cheese manufacturing. The 
IDFA comment argued that using the 1.60 multiplier would increase an 
already-high protein price. Another comment urged that the Grade A 
butter price be used instead of the AA price, because the value of 
butterfat in cheese shouldn't be increased over its value in butter. 
Further, the comment argued that the additional value of butterfat in 
cheese is added by the cheesemakers, and shouldn't be used to increase 
prices to producers.
    Since Class III includes other types of cheese, such as mozzarella 
that has a lower fat retention than cheddar cheese, increasing the 
value attributed to that retention is not appropriate. Increasing the 
protein price for all milk used in Class III based on only a portion of 
the products included in Class III would put the other Class III 
products at a competitive disadvantage. Calculation of a minimum price 
will enable handlers to adjust prices paid to producers to account for 
additional value above the minimum Federal order prices. Therefore, the 
1.582 factor will be used in the protein price formula contained in 
this decision.
    Since Class III and Class IV use the same butterfat price, 
accounting for the difference in value of butterfat in cheese versus 
the value of butterfat in butter is necessary. This difference in value 
is included with the protein price calculation as a means of 
quantifying the amount by which the value of butterfat in cheese varies 
from the value of butterfat in butter. Attributing the additional value 
to protein is possible because it is the casein in protein that forms 
the molecular matrix that retains the butterfat in cheese. Without 
enough protein in milk to retain the butterfat in cheese, the butterfat 
would have a lower value in whey butter in most months. The ratio of 
butterfat to protein, 1:1.28, is calculated from the protein and 
butterfat yield factors of 1.405 and 1.582.
    An alternative to incorporating the butterfat value in cheese with 
the protein price is to compute a separate butterfat price for Class 
III. This would be a relatively simple formula to compute. However, 
having multiple butterfat prices would require full plant 
accountability of components in all manufacturing plants. The resulting 
increased accounting, reporting, and administrative costs were 
determined to not be warranted when viewed against the small gain from 
having an additional butterfat price.
    Use of the protein price formula adopted in this decision will 
increase the protein price by approximately 15 cents per pound when 
compared with calculating the protein price on the basis of total 
nitrogen protein. However, the increase is almost entirely negated by 
the lower content of true protein than of total nitrogen protein in 
milk. On a hundredweight basis, the change to true protein results in 
an increase to the Class III price of an average of 2 cents when 
compared to the formula using total nitrogen protein.
    Use of true protein instead of total nitrogen protein for 
determining payments to producers should have a minimal impact on 
producer revenues. Producers with relatively high levels of non-protein 
nitrogen in their milk could see a slight drop in their revenue derived 
from the protein content of their milk.
    In addition to changing the coefficients in the protein price 
formula to adjust for the use of true protein, the fixed protein and 
other solids values used in computing a per hundredweight Class III 
price must be adjusted. Accordingly, the Class III price will be 
computed by multiplying the butterfat price by 3.5 and adding the 
result of multiplying .965 times the sum of 3.1 times the protein price 
and 5.9 times the other solids price.
    In comments filed in response to the proposed rule, NMPF suggested 
a $.1575 whey make allowance plus the $.0015 marketing cost, for 
$.1590, rather than the $.10 proposed. IDFA argued that a $.171 make 
allowance would be more appropriate. Wisconsin Cheesemakers indicated 
that the Class III price should not include a value for whey, as it 
frequently represents a cost to manufacturers. The Dairy Institute of 
California agreed that a whey factor should not be included, but that 
if it is, the yield factor (divisor) should be .98 (instead of .968).
    The formula used for computing the other solids price is:

Other solids price = ((NASS dry whey survey price-.137)/0.968).

    The determination of the $0.137 make allowances was based on 
several factors. Whereas the other make allowances were based on a 
weighted average of the RCBS study and California make allowances, the 
other solids make allowance is based primarily on the Cornell study of 
dry whey and whey protein concentrate make allowances. The Cornell 
study was used since California does not audit dry whey manufacturing 
costs and the RCBS survey has very limited data on dry whey 
manufacturing costs. The data on dry whey in the RCBS study expresses 
the costs on a per pound of cheese basis rather than on a per pound of 
dry whey basis. The $0.137 figure is slightly above the average cost of 
the model plants in the Cornell study and the same as was used for 
nonfat solids.
    A value for other solids is included in Class III to assure that 
the Class III price reflects most of the value of milk used in Class 
III products. In the Federal milk orders currently pricing three 
components, the other solids price is determined by subtracting the 
value of butterfat and protein from the BFP. In this final rule the 
other solids price is established independently of the butterfat and 
protein price. Even though there is not a market for other solids as 
such, the dry whey price was determined to be the best indicator of 
value for other solids and provides a method of accounting for and 
distributing the value in Class III milk that is not accounted for in 
the protein and butterfat components. Other potential price series that 
could be used to determine the value of other solids were whey protein 
concentrate and lactose. Under present market conditions, dry whey 
offers more market activity with less specialization than either whey 
protein concentrate or lactose, and therefore constitutes a better 
price series for determining a minimum Federal order price. Comments 
filed by several parties supported the use of dry whey for the 
determination of the other solids price. The 0.968 factor in the 
formula represents the pounds of solids contained in a pound of dry 
whey.
    Since the make allowances are applied on a component basis rather 
than on a hundredweight of milk basis comparisons to traditional make 
allowances may be difficult. Also, a make allowance that may seem 
reasonable when applied to a component may be seen as inappropriate 
when combined with the other components in the finished product. To 
evaluate the make allowances on a per hundredweight basis the Class III 
and Class IV milk prices were compared to the value of cheese and 
butter/powder using the CCC yield factors. These results were compared 
to the same calculation using the current BFP and the CCC yield 
factors. A comparison over time between the current level of class 
prices paid for producer milk and the value of

[[Page 16100]]

the manufactured products made from that price class of milk shows a 
reasonably stable difference between the two levels. This difference is 
the implied make allowance.
    The implied make allowance for butter/powder using the current BFP 
for the period January 1994 through July 1998 was $0.83 per 
hundredweight, while the implied make allowance for butter/powder 
versus the Class III-A price was $1.37 per hundredweight. The implied 
make allowance calculated for the Class IV price, based on historical 
prices, would have been $1.41 per hundredweight. With the implied make 
allowance for the Class IV price being only $0.04 from the actual 
implied Class III-A make allowance, the butter make allowance and the 
nonfat dry milk make allowance, in combination, appear to approximate 
the current implied make allowance.
    Determination of the make allowance for Class III is more difficult 
than for Class IV, in which butterfat and skim solids make two unique 
finished products. In cheese manufacture, most of the butterfat remains 
in the cheese with most of the protein, and a portion of the protein, 
butterfat and remaining nonfat solids are contained in the whey, which 
can be made into various products. The combination of the butterfat, 
protein, and other solids make allowances resulted in an implied make 
allowance of $2.72 for Class III (cheese) compared to the implied make 
allowance of $2.21 for the current BFP. Even though the implied make 
allowance using the Class III formulas in this decision is greater than 
the current implied make allowance it is appropriate since the CCC 
formula is basically a cheddar cheese yield formula whereas Class III 
contains multiple varieties of cheese and certain other products. A 
slightly larger make allowance in Class III will not place makers of 
products that have significantly different cost structures than cheddar 
cheese at a competitive disadvantage when participating in Federal 
orders relative to handlers who do not participate in the Federal 
orders.
    Changes in make allowances will affect component prices and per 
hundredweight milk values. A one-cent per pound change in the butter 
make allowance will affect the butterfat price in the opposite 
direction by $0.0122 per pound. This would be $0.0427 per hundredweight 
for milk at 3.5 percent butterfat. The butterfat price also is used in 
the computation of the protein price. The protein price will change 
inversely to the butter make allowance by $0.0146 per pound or $0.046 
per hundredweight for milk with 3.15 percent protein. A positive make 
allowance change for nonfat dry milk will result in a decline in the 
nonfat solids price. A one-cent change in the nonfat dry milk make 
allowance will result in a $0.0098 per pound or $0.0882 per 
hundredweight opposite change in the nonfat solids price. A one-cent 
change in the protein make allowance will cause an opposite change in 
the protein price by $0.0322 per pound or $0.1014 per hundredweight for 
milk with 3.15 percent protein. Finally, a one-cent change in the other 
solids (dry whey) make allowance will change the other solids price by 
$0.0103 per pound or $0.0567 per hundredweight in the opposite 
direction.
    This pricing system eliminates the need for regional yields based 
on regional differences in milk composition. The value of milk will be 
adjusted automatically based on the level of components contained in 
the milk in each order even though the component prices are the same 
nationally. This automatic adjustment means that handlers will pay the 
same price per pound of component but may have differing per 
hundredweight values based on the milk component levels, creating 
equity in the minimum cost of milk used for manufacturing purposes.
    Several comments were received suggesting that regional BFP 
replacement prices be used rather than a national BFP replacement. The 
commenters explained that cheese, butter, and nonfat dry milk have 
different values in different regions of the country, and that the 
Cornell study described a price surface for milk used in manufactured 
products across the United States. Therefore, they concluded, the 
replacement BFP also should be determined regionally.
    This decision replaces the current BFP with a national Class III 
price and a national Class IV price. Although there may be some 
justification for regional pricing, there are two principal reasons for 
using national pricing. First, pricing milk on the basis of the pounds 
of components contained in the milk eliminates some of the regional 
differences in milk prices. Second, regional commodity price data, and 
for that matter regional competitive pay price data, are unavailable. 
Resulting attempts to estimate regional differences, with the ensuing 
regional differences of opinion, would yield minimal benefits.
    An analysis of the basic formula price replacement requires several 
assumptions. Historical commodity price surveys are not available for 
all of the commodities. Prices used as substitutes for historical price 
survey data in this analysis include a cheese price computed by 
comparing the current NASS cheese price series to the comparable NCE/
CME price series for the purpose of determining a historical protein 
price. The NCE/CME series was then adjusted by means of a regression 
analysis to reflect the differences between the NASS prices and the 
exchanges. The resulting price series simulates the use of the NASS 
series for the time period studied. For the butter price, the data from 
the ``BFP Committee Commodity Price Study'' was compared to the CME 
Grade AA cash butter price series. The CME Grade AA price series was 
then adjusted accordingly to make it more comparable with the Committee 
Price Study. Available survey prices used were nonfat dry milk prices 
and dry whey prices, both of which are published monthly by NASS in 
``Dairy Products''. While a nonfat dry milk price and dry whey price 
are published in ``Dairy Products'' at the beginning of each month for 
the second previous month, the new weekly NASS survey discussed earlier 
is necessary to determine prices on a more current basis.
    One of the initial requirements of a basic formula price 
replacement, based on the assumption that the national supply and 
demand for manufacturing milk as reflected in the current BFP is in 
relatively good balance, is that the price level not deviate greatly 
from the current basic formula price. The examples contained in the 
proposed rule resulted in the Class III portion of the BFP replacement 
averaging $0.45 per hundredweight above the current Class III price, 
and the Class IV portion of the BFP replacement averaging $0.13 per 
hundredweight above the current Class III price, both for the 48-month 
period January 1994 through December 1997.
    In addition to comparing the Class III and Class IV price series to 
the current BFP, the Class III price was also compared to the 
California 4b price, while the Class IV price was compared to the Class 
III-A price and to the California 4a price. Comparisons to the 
California prices are included because many commenters expressed the 
view that the proposed rule resulted in prices that put plants 
regulated by Federal orders at a competitive disadvantage to California 
plants and that alignment with California pricing was essential. Most 
commenters did not express the view that Federal order prices should 
equal California prices, but that Federal order prices should be in 
alignment, i.e. ``reasonably close''. For comparison purposes all 
prices are expressed on a

[[Page 16101]]

per hundredweight basis with 3.5 percent butterfat. The Class III price 
was determined by using 3.1 pounds of protein and 5.9 pounds of other 
solids in 100 pounds of skim milk. To compute a 3.5 percent 
hundredweight price the skim milk value was multiplied by .965 and 
added to the butterfat price that was multiplied by 3.5. The same 
procedure was used for the Class IV price, with 9 pounds of nonfat 
solids in a hundred pounds of skim milk.
    For the period January 1994 through December 1998, the Class III 
price averaged $0.47 below the current BFP and $0.20 above the 
California 4b price, while the Class IV price averaged $0.50 cents 
below the current BFP, $.04 cents below the current Class III-A price, 
and $0.15 above the California 4a price.
    In addition to comparing the value differences between the Class 
III and Class IV prices and the current BFP, it is important to compare 
the relationship in price movements between the Class III and Class IV 
prices and the current basic formula price. Correlation coefficients 
were computed to statistically test the relationships between the Class 
III and Class IV prices, the current basic formula price, and the 
California prices. The correlation coefficient between the Class III 
price and the current basic formula price is above .98 while the 
correlation coefficient between the Class IV price and the current 
basic formula price is approximately .74. The correlation between the 
Class IV price and the current Class III-A price is .99. The 
correlations between the Class III and Class IV prices and California 
prices are also quite high, with the Class III price and the California 
4b price having a correlation coefficient of .97 while the Class IV 
price and the California 4a price show a correlation coefficient of 
.99. These relationships are expected since the current basic formula 
price is weighted more heavily on milk used for the manufacture of 
cheese than on the value of milk used in the manufacture of butter and 
nonfat dry milk.
    The Class III and Class IV formulas are computed from product 
prices representing the use of milk in each class. That is, the Class 
III price is derived from the value of cheese while the Class IV price 
is derived from the value of butter and nonfat dry milk. Therefore the 
Class III and Class IV prices can be expected to vary significantly 
from the current BFP in individual months, reflecting the economic 
(supply and demand) conditions for cheese, butter, and nonfat dry milk. 
This situation is particularly true of the Class IV price. For example, 
during 1993 and 1994 the price of butter and nonfat dry milk was 
relatively low and stable compared to the price of cheese. The degree 
of variability of individual months' prices from the average for the 
year is expressed by a standard deviation. A lower standard deviation 
indicates that individual observations (in this case, monthly product 
prices) vary less from the mean than would be indicated by higher 
standard deviations. These statistical descriptions indicate the 
difference in variability of prices between butter/powder and cheese in 
1993 and 1994.
    During 1994 the Class IV price would have averaged $10.26 with a 
standard deviation of $0.11, compared to the 1994 BFP average of $12.00 
with a standard deviation of $0.57, and the average Class III price of 
$11.47 with a standard deviation of $0.69. For 1998, when the economic 
conditions for butter and nonfat dry milk had changed and prices became 
more volatile, the Class IV price would have averaged $14.79 with a 
standard deviation of $2.13 versus the 1998 BFP average of $14.20 with 
a standard deviation of $1.97, and the Class III average price 
calculation of $13.84 with a standard deviation of $2.14.
    The Class III and Class IV prices clearly reflect the value of the 
milk used in the respective manufactured products, whereas the current 
basic formula price reflects primarily the value of milk used to 
manufacture cheese in a particular region of the U.S. (Minnesota and 
Wisconsin).

Class I

    As in the proposed rule and currently, the basic formula price 
replacement will act as a mover for the Class I price in addition to 
establishing prices for milk used in Class III and Class IV. Also as 
proposed, the Class I value will be separated into two parts: skim milk 
and butterfat. However, instead of the proposed six-month declining 
average of the higher of each month's Class III and Class IV skim and 
butterfat prices, the Class I price mover will be determined by the 
most recent manufacturing product prices available. The advanced price 
aspect of the Class I price mover will also be shortened from the 
current and proposed timing of the Class I price announcement. Both the 
Class I skim and butterfat components will be announced on the 23rd day 
of the preceding month using advance pricing factors based on product 
prices for the most recent two weeks. The Class II skim milk price will 
be announced similarly. This change from the proposed rule is being 
made to respond to numerous handler comments on the proposed rule and 
to address class price inversion that occurred during the second half 
of 1998.
    Comments relating to replacement of the BFP as a Class I price 
mover that were filed before issuance of the proposed rule ranged from 
favoring continuation of the current system to establishment of the 
Class I price independently of the basic formula price(s) for milk used 
in manufactured products. One comment suggested eliminating the basic 
formula price and pooling only the Class I and Class II differentials. 
These comments were fully considered in the proposed rule.
    Numerous comments received in response to the proposed rule favored 
advance pricing of Class I skim and butterfat separately. However, a 
number of commenters expressed concern that use of the higher of the 
Class III or Class IV prices in the calculation of the Class I price 
mover would result in undue enhancement of Class I prices. The most 
controversial aspect of the Class I price mover proposal was the use of 
a 6-month declining average. Many of the comments received concerning 
the Class I mover expressed the view that the Class I price must be 
closely and directly linked to the manufacturing price in the same 
manner that occurs currently. Commenters expressed the view that the 
current system, two-month advance pricing, closely links the 
manufacturing value of milk to Class I and therefore gives appropriate 
price signals to producers. They opposed the six-month declining 
average on the basis that the delay in linkage with the Class I price 
would be too long and that Class I pricing would be counter cyclical. 
Some who opposed the time lag built into the 6-month declining average 
suggested that a 3-month average would do as well at attaining some 
stability without as much ``de-linking.''
    Several commenters opposed building less volatility into Class I 
prices than into manufacturing class prices. Among the reasons given 
were that added stability for Class I would mean greater volatility in 
prices for manufactured products, and that added stability would favor 
producers in high Class I markets.
    Other comments on the proposed rule supported variations of a 12-
month rolling average Class I price mover, some with seasonal 
adjustments. A number of comments favored the stability of the longer-
term basis for Class I prices. One graph submitted shows a very close 
relationship between the 6-month declining average mover and the 
current BFP.

[[Page 16102]]

    There are several conflicting issues that must be balanced when 
establishing the Class I price mover. First, the retail demand for 
Class I milk is independent of the demand for manufactured dairy 
products. Second, the raw material used in both Class I products and 
manufactured dairy products is the same and therefore the separate uses 
must compete for the given supply of milk. Third, the elasticity of 
demand for the various dairy products is significantly different, 
creating different consumer responses to the changing prices for 
various dairy products. The Federal milk orders have attempted to 
address these issues through classified pricing. This system allows a 
higher price to be applied to milk used for Class I uses due to 
inelastic demand for Class I products. This higher price also allows 
Class I uses of milk to compete for the raw milk supply against 
manufactured dairy products. At the same time, marketers of Class I 
products support some degree of forward pricing, requiring processors 
of Class I products to know the Class I price in advance.
    Most of those commenting on the proposed rule and the Department 
perceive the need to reflect changes in the prices for milk used in 
manufactured products in the price of milk used in fluid products. 
Since Class I handlers must compete with manufacturing plants for a 
supply of milk, the Class I price must be related to the price of milk 
used for manufacturing.
    It is apparent from the price patterns of a large part of 1998 that 
the current two-month lag between manufacturing and fluid pricing does 
not establish as close a relationship between the two price levels as 
is desirable. Indeed, from an analysis of the differences between 
prices generated by a six-month declining average and the current 
pricing system, it is clear that the current two-month lag does not 
accomplish any closer relationship between manufacturing and fluid 
prices than would the six-month declining average.
    When manufactured dairy product prices are relatively stable the 
advance pricing of Class I milk works quite well. However, since 1988 
the volatility in the manufactured dairy product market has caused 
problems with the advance pricing of Class I milk. The first problem is 
readily evident in class price relationships during the latter part of 
1998. The frequent occurrence of price inversions during that period 
indicates that some alteration to both the proposed and current methods 
of computing and announcing Class I prices may be necessary. Class 
price inversion occurs when a markets's regulated price for milk used 
in manufacturing exceeds the Class I (fluid) milk price in a given 
month, and causes serious competitive inequities among dairy farmers 
and regulated handlers. Advanced pricing of Class I milk actually 
causes this situation when manufactured product prices are increasing 
rapidly.
    Since the Class I price is announced in advance, in a rapidly 
changing market the Class I price may not reflect the value needed to 
compete for the necessary raw milk supply or the Class I price may be 
overvalued relative to the raw milk price. Undervaluing Class I milk is 
a particular problem since it reduces producers' pay prices at a time 
when the producers should be receiving a positive price signal. As an 
example, in July 1998 the Class I price in every Federal order market 
except one was below the Class III price. Although July is not a period 
of very high Class I demand, it is a time when Class I demand is 
starting to increase in some regions relative to total milk production. 
At this same time producers in these regions received lower pay prices. 
Many Federal milk orders also experienced a Class I price below the 
Class III price in August as a result of two-month advance pricing of 
Class I. Demand for Class I milk increases substantially in August. 
While producer prices rose in August, the increase would have been 
larger had Class I prices been based on more current Class III prices. 
Under these pricing relationships, the Class I handler may have a more 
difficult time acquiring milk as the minimum Federal order Class I 
price puts the handler at a disadvantage to handlers demanding milk for 
manufacturing purposes. Since Class I handlers must compete with 
manufacturing plants for a supply of milk, the Class I price must be 
related to the price of milk for manufacturing.
    Another problem inherent in the current method of announcing Class 
I prices in advance is that the price for milk established in advance 
is for milk containing 3.5 percent butterfat. The current system does 
not determine the price of butterfat in advance, therefore the Class I 
handler does not know the value of milk at butterfat contents other 
than 3.5, until the butterfat differential is announced in the month 
following sale of the processed product. Under this final decision, 
Class I handlers will have advanced price information for both the skim 
and butterfat portions of the Class I price.
    The purpose of the minimum Class I differential is to generate 
enough revenue to assure that the fluid market is adequately supplied. 
As a result of advance pricing, the effective Class I differential--
that is, the actual difference between the Class I and manufacturing 
use prices in a month--is not the same as the Class I differential 
stated in an order. While the effective Class I differential varies 
monthly, it generally has remained positive. Recent increased 
volatility in the manufactured product markets has resulted in more 
instances in which the effective Class I differential has been 
negative, especially in markets with low minimum Class I differentials.
    In the past when price inversions have occurred, the industry has 
contended with them by taking a loss on the milk that had to be pooled 
because of commitments to the Class I market, and by choosing not to 
pool large volumes of milk that normally would have been associated 
with Federal milk order pools. When the effective Class I differential 
is negative, it places fluid milk processors and dairy farmers or 
cooperatives who service the Class I market at a competitive 
disadvantage relative to those who service the manufacturing milk 
market.
    Milk used in Class I in Federal order markets must be pooled, but 
milk for manufacturing is pooled voluntarily and will not be pooled if 
the returns from manufacturing exceed the blend price of the marketwide 
pool. Thus, an inequitable situation has developed where milk for 
manufacturing is pooled only when associating it with a marketwide pool 
increases returns.
    Illustrative of the worsening class price inversion problem are the 
growing volumes of milk that, while normally associated with Federal 
milk orders, are not being pooled due to price inversion problems. When 
the Class II, III, and/or III-A prices are higher than a handler's 
blend price adjusted for location, it becomes disadvantageous for 
handlers processing soft and hard manufactured products to pool milk. 
That is, instead of drawing money out of the pool, they have to pay 
money into the pool. In 1995, the volume of milk not pooled due to 
class price inversion was 5.3 billion pounds. In 1997, nearly 7.8 
billion pounds were not pooled for this reason. In 1998, 14.1 billion 
pounds were not pooled due to class price inversions. During each of 
five of the seven months of June through December 1998, the volume of 
milk not pooled exceeded 2 billion pounds. In July 1998, class price 
inversion occurred in all Federal order markets except Southeastern 
Florida, and in 19 markets some milk was not pooled due to class price 
inversion.
    Since volatility in the manufactured product markets is expected to

[[Page 16103]]

continue, the Class I price mover developed as part of this Federal 
milk order reform process should address this disorderly marketing 
situation.
    The advanced pricing procedure provided in this final decision 
results in a Class I price that is based on a more recent manufacturing 
use price, thus reducing (but not eliminating) the time lag that 
contributes to class price inversion. For example, the January 1999 
Class I price for each market would be announced on December 23, 1998 
and would be based on product prices reported on December 10 and 17. 
(The prices reported on these dates are for the weeks ending December 4 
and 11.) Under the current procedure, the January Class I price was 
announced on December 3, 1998 and was based on product prices reported 
for weeks ending November 6, 13, 20, and 27.
    While the advance pricing procedure in this decision reduces the 
time period of advance notice by about 18 days, the reduction in 
advance notice of Class I and II prices should not add significant risk 
or burden to handlers. The pricing formulas are based solely on product 
prices which are announced weekly; therefore, handlers can update 
formulas on a weekly basis to estimate what the Class I price will be 
before the price is announced. Also, as more NASS product price survey 
observations become available, basis differences from earlier traded/
issued product price surveys such as those from the Chicago Mercantile 
Exchange or Dairy Market News will be more predictable and, therefore, 
should provide for more accurate predictions of future price levels. In 
addition, futures markets have been established for the four dairy 
products in the NASS price surveys. While trading to date in these 
contracts has not been large, interest in these markets may increase as 
the industry learns to use them as effective hedges to the component 
values determined under this final decision. These markets also will 
assist handlers in estimating the Class I price.
    Using the current two-month advance pricing system, but 
substituting for the current BFP the higher of the Class III or IV 
prices as defined under this rule, markets with a Class I differential 
of $1.60 per hundredweight or less would have faced a price inversion 
in four of the last seven months of 1998. The range of the price 
inversion would have been $.21 to $1.49. In a fifth month, price 
inversion would have occurred at a Class I differential of $1.49 or 
lower. In September 1998, price inversion would have occurred in all 
Federal order markets except Florida. However, using the shortened 
advance period adopted in this decision, for markets with a Class I 
differential of $1.60 per cwt., price inversion would have occurred in 
only two of the last seven months of 1998. The range of the price 
inversion would have been $.02 to $.86. The shortened period of advance 
pricing reduces both the occurrences and level of price inversion.
    To further illustrate that the advance pricing procedure in this 
final decision provides a Class I price level that is less likely to be 
below the manufacturing use price, the following analysis was done. 
Averages of the 1998 NASS product prices for the current month, the 
second preceding month, and the two-week period available on the 23rd 
of the preceding month were computed and compared. For all four 
products, the preceding month two-week average provided a better 
estimate of the current month average than did the average for the 
second preceding month. Looking at the Cheddar cheese price series, the 
two-week preceding month price was $.03 closer to the current month on 
a simple average basis, and $.04 closer on an absolute average basis. 
This means that using preceding month two-week average Cheddar cheese 
price would result in a Class III skim milk price that would be about 
$.40 per cwt. closer to the following month's Class III skim milk price 
than if the second preceding month's price is used.
    As stated earlier, advance pricing affects the function of the 
minimum Class I differential. The advance pricing procedure in this 
decision reduces the difference between the manufacturing use price 
used to establish the Class I price and the manufacturing use price in 
the current month. This procedure will result in an effective Class I 
differential that would be closer to the Class I differential stated in 
each order. Thus, reducing the time lag of the Class I pricing advance 
improves the functionality of the minimum Class I differential.
    Comments filed by some southern interests indicated that stability 
in pricing in the southeast U.S. should incorporate seasonal price 
incentive programs as a necessary part of adequately supplying the 
fluid markets of the southeast. According to the commenters, such a 
program would encourage balancing production with fluid milk demand. 
The comments state that because such a pricing plan would be revenue 
neutral, it would allow for more price stability and more reliable 
price signals than is currently available for producers in high Class I 
utilization areas.
    Addition of seasonal adjustments for marketing areas would disrupt 
the uniformity in pricing between marketing areas that is a goal of 
this pricing plan. The seasonal patterns of milk production and 
consumption are not the same between regions, and it would be 
difficult, if not impossible, to attempt to work out seasonal pricing 
as a part of the BFP replacement.
    As discussed previously, the price link between Class I use and 
Grade A milk used to manufacture Class III and Class IV products should 
be maintained since Grade A milk can be used for fluid uses as well as 
for manufacturing uses. Because handlers compete for the same milk for 
different uses, Class I prices should exceed Class III and Class IV 
prices to assure an adequate supply of milk for fluid use. Federal milk 
orders traditionally have viewed fluid use as having a higher value 
than manufacturing use. The replacement Class I price mover reflects 
this philosophy by using the higher of the Class III or Class IV price 
for computing the Class I price.
    In some markets the use of a simple or even weighted average of the 
various manufacturing values may inhibit the ability of Class I 
handlers to procure milk supplies in competition with those plants that 
make the higher-valued of the manufactured products. Use of the higher 
of the Class III or Class IV price will make it more difficult to draw 
milk away from Class I uses for manufacturing. For example, if the 
Class IV price were used as the Class I price mover there would be 
months in which the Class III price would be more than two dollars 
above the Class IV price. As a result, the Class I differential would 
have to be well over two dollars for the Class I price to remain above 
the Class III price. If the Class III price is used as the Class I 
price mover, the reverse situation of having the Class IV price well 
above the Class III price would result in the same problem. The 
potential of having a Class III or IV price in excess of the Class I 
price is not entirely eliminated by using the higher of the Class III 
or Class IV price because of the advance Class I pricing feature. 
However, reducing the time period for which Class I pricing is advanced 
should reduce the potential considerably, allowing Class I handlers to 
compete more effectively with manufacturing plants for fluid milk.

Class II

    Under this final decision, the value of Class II skim milk will be 
computed by multiplying the hundredweight of producer skim milk 
allocated to Class II by the sum of an advanced Class IV skim price, 
calculated from nonfat dry milk product prices reported by NASS

[[Page 16104]]

for the most recent two-week period for which prices are available on 
the 23rd day of the preceding month, and the 70-cent Class II 
differential. The price used for valuing Class II butterfat will be the 
current month's butterfat price determined from the NASS-reported 
butter price, as in Classes III and IV, plus .7 cents per pound to 
incorporate the Class II differential.
    Generally, the source of inputs alternative to producer milk for 
the manufacture of Class II products is dry milk products and butterfat 
that otherwise would be used in butter. Basing the price of milk used 
to make Class II products on these alternative ingredients should help 
considerably to remedy a situation in which it is perceived that a 
separate product class for dry milk (Class III-A) has resulted in a 
competitive advantage over producer milk used to produce Class II 
products. The 70-cent differential between the Class IV and Class II 
skim milk prices is an estimate of the cost of drying condensed milk 
and re-wetting the solids to be used in Class II products. One 
commenter suggested that there should be a $1.00 difference between 
Class IV and Class II.
    Comments filed in response to the proposed rule generally supported 
basing the Class II price on the Class IV price. However, many 
commenters, including operators of plants manufacturing food products, 
argued that the proposed $0.70 differential is too high. In many cases 
they stated that the cost for rehydration is substantially lower than 
$0.70, if the nonfat dry milk is rehydrated at all.
    Only a small portion of the $0.70 differential is intended to 
represent the cost of rehydration. The majority of the $0.70, $0.57, 
represents the cost of drying condensed milk. Comments filed by Kraft, 
Inc., stated that the cost of using nonfat dry milk (NFDM) in Class II 
is 0-3 cents per pound. At a rate of 9 pounds of NFDM per hundredweight 
of skim milk, this cost could represent as much as 27 cents per 
hundredweight. When added to the 57-cent cost of drying condensed milk, 
the 70-cent differential appears to be justified. It should be noted 
that the cost to purchase or manufacture NFDM for use in Class II 
products would include not only the cost of milk at the Class IV price, 
but the cost of making NFDM (in excess of $1.20 per hundredweight of 
skim milk when the make allowance for a pound of NFDM is multiplied by 
the yield).
    Many of the commenters suggested that a rate of $0.30 is 
appropriate since that is what is used currently in the Federal orders. 
The current Class II differential, $0.30, was established by a national 
hearing conducted in 1991. At that hearing proponents of a $0.30 Class 
II differential explained that the average difference between Class II 
prices and Class III prices over a recent time period had averaged 
$0.30. The $0.30 difference was not based on the actual cost 
differences between existing classes of milk.
    The Class II price level determined under this final rule should 
not, on average, be higher than its predecessor. The concern of 
commenters that the level of the proposed Class II price would be 
excessive should be mitigated somewhat by the reduction in the level of 
the Class IV formula adopted in this rule. For the period January 1994 
through December 1998, the Class II price as determined in this final 
rule averaged $0.01 higher than the current Class II price. There is a 
very large variation from year to year in the differences between the 
current and adopted Class II prices. In 1994, the current Class II 
price averaged $1.50 more than the Class II price calculated according 
to this decision. For 1998, however, with butter prices at record 
levels, the Class II price computed from butter and powder prices 
averaged $1.58 higher than the current Class II price. These price 
differences illustrate the result of pricing Class II milk on the basis 
of manufactured ingredients instead of on the basis of cheese.
    Many of the comments received concerning the Class II price opposed 
the proposal to price Class II on a current basis rather than on an 
advance basis as is currently the case. The commenters argued that 
since Class II products are sold on an advance basis similar to Class I 
products the continuation of advance pricing of Class II is essential. 
Other commenters expressed the view that the skim portion of Class II 
could be forward priced but butterfat should be priced on a current 
basis since competing uses for butterfat such as cheese and butter 
would be priced on a current basis. Class II products high in 
butterfat, such as ice cream, could be placed at a competitive 
disadvantage in procuring butterfat if the current month's butterfat 
prices are substantially different than the advanced priced butterfat 
price.
    The Class II price adopted under this rule will result in forward 
pricing the skim milk portion of Class II while pricing butterfat on a 
current basis. Butterfat used in Class II products competes on a 
current-month basis with butterfat for used in cheese and butter, and 
its price should be determined on the basis of the same month's values. 
Forward pricing of skim milk will, of course, eliminate some of the 
desired direct linkage between the nonfat solids price in Class II and 
the nonfat solids price in Class IV. However, especially with the 
shortened period of advanced pricing, in most cases the linkage should 
remain close enough so that the Class II differential does not 
encourage the drying of milk for Class II uses just to receive a price 
advantage. This alignment also should reduce perceived problems in the 
use of nonfat dry milk to make Class II products. Tying the Class II 
price to the Class IV price by this fixed differential, even with 
advanced pricing for Class II skim, should reduce the incentive to 
produce nonfat dry milk for use in Class II products.

Quality Adjustments

    This final decision provides for the adjustment of producer 
payments for the somatic cell count of producers' milk under most 
orders using multiple component pricing. Payments made by handlers for 
milk used in Class II, Class III, and Class IV also will be adjusted on 
the basis of the somatic cell count of the milk.
    A somatic cell count (SCC) adjustment is appropriate for several 
reasons. First, SCCs are not only an indicator of general milk quality, 
but also are an indicator of the potential yield of milk in cheese and 
other products that require casein for their structure and body. 
Research has shown a direct link between increased SCCs and decreased 
cheese yields.
    Second, many producers currently are subject to some type of 
multiple component pricing plan or quality premium program that adjusts 
their pay prices for somatic cell levels even if the order in which 
their milk is pooled does not incorporate such adjustments. Although 
many producers' returns are affected by the SCC of the milk, there is 
little, if any, oversight of the testing for somatic cells if the order 
does not include pricing adjustments. Fair and accurate testing can be 
assured by incorporating multiple component pricing and somatic cell 
adjustments into Federal orders.
    The somatic cell adjustment will apply on a hundredweight basis and 
be computed by subtracting the SCC (in thousands) from 350 and 
multiplying the result by the product of .0005 times the monthly 
average cheese price used to compute the protein price. This level of 
adjustment has worked well in orders currently containing somatic cell 
adjustments, and is supported by data and research contained in Federal 
milk order hearing records.

[[Page 16105]]

    There was not a great deal of agreement on how to determine which 
orders should provide for SCC adjustments. Some commenters favored 
their inclusion in all markets and some favored a SCC adjustment on all 
milk priced under multiple component pricing. NMPF favored SCC 
adjustments for regions that want them. A Northeast producer group 
argued that the limited effect of SCCs on Class II and Class IV uses 
makes them unsuitable for use as an adjustment factor for milk in the 
Northeast. One fluid milk handler opposed their application to Class I 
use, while several others opposed excluding Class I milk from using 
somatic cell count as a cost component because such an adjustment could 
result in fluid handlers receiving lower-quality milk.
    The application of somatic cell adjustments will be limited to 
orders providing for multiple component pricing, since the detrimental 
economic effect of somatic cells has been shown to occur principally 
with respect to the protein component of milk. SCCs unquestionably do 
have detrimental effects on the flavor and keeping quality of fluid 
milk products, and undoubtedly on other dairy products as well, but the 
economic quantification of those effects is not part of the information 
available for this decision. There are three order areas in which 
producer sentiment is opposed to the inclusion of SCC adjustments, and 
these adjustments are not adopted for the three orders. In the case of 
the Pacific Northwest and Western consolidated orders, most producers 
already are covered under very effective SCC payment programs, and the 
average SCC in these markets is less than 250,000 (below the neutral 
level for SCC value adjustments). There would seem to be little reason 
to require additional SCC programs for these orders. In addition, the 
Northeast order does not contain a SCC adjustment. Comments filed by 
Northeast interested persons argued that the predominant use of milk 
for manufacturing in that area is nonfat dry milk and butter, and that 
yields of these products are not affected by SCCs. A somatic cell value 
adjustment is not, therefore, included in the Northeast order.
    As in the proposed rule, for the orders containing a somatic cell 
adjustment provision the adjustment will be applied to milk used in 
Classes II, III and IV for handler billings, and to all producer milk 
for payment to producers. This application of a SCC adjustment has 
worked well in the orders currently providing for it, and should result 
in no additional marketing, testing or accounting requirements in those 
orders. At least some portions of most of the consolidated orders for 
which the SCC adjustment is provided already contain such provisions.
    Several comments suggested including a maximum count of 25,000 
psychrotrophic bacteria as a criterion for payment of positive SCC 
adjustments. Even though there may be a valid reason for including 
psychrotrophic bacteria for payment purposes, bacteria counts will not 
be included with this decision. Somatic cell counts are the only 
quality adjustments in this final decision. The issue of whether to 
include psychrotropic bacteria as a payment criteria is better left to 
a Federal order hearing that specifically addresses the issue. In 
contrast to a somatic cell adjustment, which already is contained in 
many of the orders with multiple component pricing, none of the orders 
currently provide for adjustments for bacteria counts.

Application of the Replacement Basic Formula Price(s)

    Under this final rule, producers in most Federal order markets will 
be paid on a multiple component basis since the basic formula price 
replacement is based on individual milk component prices. Producers 
will be paid for the pounds of butterfat, pounds of protein, pounds of 
other solids, a per hundredweight price known as the producer price 
differential, and a per hundredweight somatic cell adjustment. The 
producer price differential returns to producers their pro rata share 
of the proceeds of the classified pricing system. The butterfat, 
protein, and other solids prices paid to producers will be the same as 
the prices for those components announced for Class III use regardless 
of the utilization of the milk. Handler obligations and producer 
payments under the Federal orders that do not provide for component 
pricing will be based on hundredweight prices computed from these 
component prices.
    Although several comments supported the proposal that multiple 
component pricing (MCP) be applied only to milk used in Classes II, III 
and IV, several comments from the Southwest area argued that it should 
be applied to all milk or not adopted at all. National Farmers 
Organization (NFO) also favored the adoption of component pricing for 
all classes of milk, and other comments favored the adoption of MCP for 
all Federal milk orders.
    Several New York comments stated that MCP would not benefit 
producers, would serve only to impose higher costs on handlers, and 
shouldn't be adopted for the Northeast. Michigan Milk Producers 
expressed concern that the adjustment of protein value to reflect the 
effect of additional butterfat in cheese would increase costs in the 
Mideast because of the high percentage of milk used in (lowfat) Italian 
and Swiss cheese in that market, and requested that the Mideast market 
provide for the same kind of MCP pricing currently used in the Southern 
Michigan market.
    All Federal orders outside of the three southeast orders with 
relatively high Class I use (Appalachian, Florida and Southeast) and 
Arizona-Las Vegas should contain the same component pricing plan. The 
affected orders have a large portion of their milk used in manufactured 
products, and the components in that milk that determine the yield of 
product available for handlers to sell are the most appropriate basis 
for determining its value. At the same time, there is no indication 
that MCP should apply to Class I milk, and it is difficult to justify 
pricing fluid milk on an MCP basis in terms of the economic value of 
components in those products.
    Although the proposed rule included provisions for the Mideast 
order that would continue elements of the current Southern Michigan MCP 
plan, further study supports the conclusion that there is no benefit to 
establishing a component pricing plan under one order that differs 
significantly from the rest of the consolidated orders. This issue is 
discussed more thoroughly in the Mideast section of this decision.
    All of the Federal milk orders will require changes to accommodate 
replacement of the current BFP with the multiple component pricing plan 
or with its hundredweight price equivalent. There will no longer be a 
butterfat differential under any order, but butterfat prices. The same 
butterfat price will be used for butterfat in Class II (with an 
addition of .7 cents per pound to reflect the Class II differential), 
Class III, and Class IV, while a separate butterfat price, announced in 
advance, will apply to butterfat used in Class I.
    For purposes of allocation of producer receipts the assumption will 
be made that the total nonfat solids, protein and other (nonfat) solids 
cannot be separated easily from skim milk. These nonfat solids will 
therefore be allocated proportionately with the skim milk based on the 
percentage of protein and other solids in the skim milk received from 
producers.
    For the Market Administrator to compute the producer price 
differential, handlers will need to supply additional information on 
their monthly reports of receipts and utilization. Handlers that are 
filing reports in orders that currently

[[Page 16106]]

have multiple component pricing and a somatic cell adjustment will see 
little or no change in their reporting requirements. Under orders that 
are adopting component pricing for the first time, the pounds of 
protein, the pounds of other solids, and somatic cell information will 
be needed in addition to the product pounds and the butterfat currently 
reported. This data will be required from each handler for all producer 
receipts, including milk diverted by the handler, receipts from 
cooperatives as 9(c) handlers and, in some cases, receipts of bulk milk 
received by transfer or diversion.
    Payments by handlers to cooperative associations for Class I milk 
will be calculated on the basis of the hundredweight of Class I skim 
milk times the Class I skim price plus the pounds of Class I butterfat 
times the Class I butterfat price. Payment for Class II milk will be 
determined on the basis of the Class II pounds of nonfat solids times 
the Class II nonfat solids price (or, in non-MCP orders, the Class II 
skim milk price times the hundredweight of Class II skim milk), and the 
pounds of butterfat in Class II times the Class II butterfat price. The 
Class II nonfat solids price is computed by dividing the Class II skim 
milk price by 9. Class III milk will be paid for based on the pounds of 
protein in Class III times the protein price, the pounds of other 
solids in Class III times the other solids price, and the pounds of 
butterfat in Class III times the butterfat price. The pounds of nonfat 
solids in Class IV times the nonfat solids price, and the pounds of 
butterfat in Class IV times the butterfat price will be used to 
calculate obligations for Class IV milk. Milk used in Classes III and 
IV in orders that do not include MCP will be paid for on the basis of 
the butterfat price per pound and the applicable skim milk price per 
hundredweight. The appropriate somatic cell adjustment will apply to 
milk in Class II, Class III, and Class IV.
    The Class I value of milk to handlers will be calculated by 
multiplying the hundredweight of producer skim milk in Class I times 
the Class I skim price plus the pounds of Class I butterfat times the 
Class I butterfat price. Class II milk value will be computed on the 
basis of the Class II nonfat solids price times the pounds of total 
nonfat solids in skim milk allocated to Class II and the pounds of 
butterfat in Class II times the Class II butterfat price. Class III 
milk value will be computed based on the pounds of protein in Class III 
times the protein price, the pounds of other solids in Class III times 
the other solids price, and the pounds of butterfat in Class III times 
the butterfat price. The pounds of nonfat solids in Class IV times the 
nonfat solids price, and the pounds of butterfat in Class IV times the 
butterfat price will comprise the value of Class IV producer milk. Milk 
used in Classes III and IV in orders that do not include MCP will be 
paid for on the basis of the butterfat price per pound and the 
applicable skim milk price per hundredweight. Also included will be the 
appropriate somatic cell adjustment applied to milk in Class II, Class 
III, and Class IV, the value of overage, the value of inventory 
reclassification, the value of other source receipts and receipts from 
unregulated supply plants allocated to Class I, and the value of 
handler location adjustments.
    For each marketwide pool using MCP, a producer price differential 
price per hundredweight will be computed that will represent producers' 
shares of the value of the pool. The total value of milk to handlers in 
excess of the value of producer protein, other nonfat solids and 
butterfat at the applicable component prices will be determined by 
dividing that value by the hundredweight of milk in the pool. For 
orders without MCP, the value of milk to handlers will be divided by 
the hundredweight of producer milk to compute a uniform price per 
hundredweight to producers.
    The handler's obligation to the producer settlement fund under MCP 
orders will be determined by subtracting from the handler's value of 
milk the following values: (a) The total pounds of producer milk times 
the producer price differential adjusted for location, (b) the total 
pounds of butterfat times the butterfat price, (c) the total pounds of 
protein times the protein price, (d) the total pounds of other solids 
times the other solids price, (e) the total value of the somatic cell 
adjustments to producers' milk, and (f) the value of other source milk 
in Class I at the producer price differential with any applicable 
location adjustment at the plant from which the milk was shipped 
deducted from the handler's value of milk. In orders without MCP, 
handler obligations will be computed by subtracting the value of 
producer milk at the uniform price per hundredweight from the value of 
milk to the handler.
    Payments to producers traditionally have been made in two payments, 
a partial payment based, in most cases, on the prior month's Class III 
price and a final payment at the uniform price to producers. This 
traditional payment system will continue, with any exceptions for local 
marketing practices noted in the regional discussions. The partial 
payment will be paid on a per hundredweight basis with the price 
equaling the combined value of the skim and butterfat prices for the 
lowest-priced class in the previous month. By computing the partial 
payment on a hundredweight basis, confusion about the use of partial 
month component test averages will be eliminated and handler's partial 
payroll processing costs should not be affected. Final payments to 
producers and for 9(c) milk will be based on: (a) the hundredweight of 
milk times the producer price differential adjusted for location, (b) 
the pounds of protein times the protein price, (c) the pounds of other 
solids times the other solids price, (d) the pounds of butterfat times 
the butterfat price, and (e) the somatic cell adjustment rate times the 
hundredweight of milk.
    Since producers will be receiving payments based on the component 
levels of their milk, the payroll reports that handlers supply to 
producers and to the Market Administrator must reflect the basis for 
such payment. Therefore the handler will be required to supply the 
producer not only with the information currently supplied, but also: 
(a) The pounds of butterfat, protein, and other solids in the 
producer's milk, as well as the average somatic cell count of the 
producer's milk, and (b) the minimum rates that are required for 
payment for each pricing factor and, if a different rate is paid, the 
effective rate also. The requirement that payment factors be reported 
to producers when producers are paid currently exists in all of the 
orders. Addition of the component information is purely a conforming 
change. Administration of these provisions should not be changed from 
current practices.
    With advance pricing of Class I and the inherent instability of the 
commodity markets there may be occasions when the computation of the 
producer price differential results in a value of zero or below. The 
orders should contain no provision to prevent the producer price 
differential from being a negative value.
    The following tables contain the prices computed based on the 
formulas and data series described in this final decision for the 
period of January 1994 through December 1998. The prices are shown for 
information purposes only. These prices result from the strict 
application of the formulas to prior marketing situations. These prices 
should not be interpreted as prices that would have actually occurred 
throughout the data period because industry participants likely would 
have reacted differently to the price levels that would have resulted 
from the

[[Page 16107]]

revised pricing plan than they reacted to the actual price levels.

BILLING CODE 3410-02-P

               Actual Class Prices and Final Decision Class Prices and Class I Price Mover,* by Month, January 1994 Through December 1998
                                                                   [Dollars per cwt.]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Basic     Final class
                        Year and month                           formula      I price    Final class  Class III-A  Final class    Class II   Final class
                                                                  price       mover *     III price      price       IV price      price       II price
--------------------------------------------------------------------------------------------------------------------------------------------------------
                             1994
 
January......................................................       $12.41       $11.72       $11.49       $10.22       $10.22       $13.25       $11.05
February.....................................................        12.41        11.73        11.64        10.23        10.19        12.26        10.90
March........................................................        12.77        12.02        12.33        10.32        10.33        12.61        11.01
April........................................................        12.99        12.90        12.89        10.34        10.41        13.19        11.10
May..........................................................        11.51        12.15        11.05        10.24        10.17        13.88        11.06
June.........................................................        11.25        10.56        10.37        10.09        10.10        12.18        10.72
July.........................................................        11.41        11.10        10.90        10.13        10.18        10.35        10.80
August.......................................................        11.73        11.63        11.06        10.38        10.42        11.84        11.03
September....................................................        12.04        11.84        11.76        10.35        10.32        12.95        10.93
October......................................................        12.29        11.92        11.74        10.36        10.31        12.15        10.90
November.....................................................        11.86        11.80        11.49        10.40        10.36        12.53        11.01
December.....................................................        11.38        10.91        10.88        10.17        10.16        12.24        10.87
Average......................................................        12.00        11.69        11.47        10.27        10.26        12.45        10.95
 
                             1995
 
January......................................................        11.35        10.64        10.66        10.06        10.07        11.02        10.71
February.....................................................        11.79        11.19        11.33        10.12        10.23        11.35        10.85
March........................................................        11.89        11.59        11.49        10.22        10.25        12.20        10.85
April........................................................        11.16        11.07        11.08        10.27        10.28        12.09        10.89
May..........................................................        11.12        10.74        10.55        10.21        10.29        12.19        10.89
June.........................................................        11.42        10.78        10.56        10.37        10.36        11.46        11.04
July.........................................................        11.23        11.10        10.64        10.61        10.60        11.42        11.23
August.......................................................        11.55        11.00        10.88        10.82        10.94        11.72        11.52
September....................................................        12.08        12.51        12.37        10.90        10.89        11.53        11.52
October......................................................        12.61        12.93        12.69        11.66        11.46        11.85        12.09
November.....................................................        12.87        13.19        12.96        12.40        11.95        12.38        12.52
December.....................................................        12.91        13.34        12.84        11.24        11.13        12.91        11.61
Average......................................................        11.83        11.67        11.50        10.74        10.70        11.84        11.31
 
                             1996
 
January......................................................        12.73        12.82        12.32        11.16        11.15        13.17        11.84
February.....................................................        12.59        12.62        12.37        10.39        10.70        13.21        11.63
March........................................................        12.70        12.66        12.52        10.32        10.49        13.03        11.17
April........................................................        13.09        12.84        13.15        10.52        10.65        12.89        11.29
May..........................................................        13.77        13.68        13.12        11.90        11.74        13.00        12.12
June.........................................................        13.92        14.28        13.31        15.12        14.25        13.39        14.07
July.........................................................        14.49        15.41        13.41        16.01        15.32        14.07        15.95
August.......................................................        14.94        15.32        14.02        15.82        15.44        14.22        16.35
September....................................................        15.37        15.74        15.17        15.85        16.09        14.79        15.89
October......................................................        14.13        15.28        13.54        14.94        14.82        15.24        15.62
November.....................................................        11.61        12.33        11.33        12.18        12.10        15.67        13.03
December.....................................................        11.34        11.06        10.68        11.75        11.76        14.43        12.67
Average......................................................        13.39        13.67        12.91        13.00        12.88        13.93        13.47
 
                             1997
 
January......................................................        11.94        11.62        11.05        11.50        11.68        11.91        12.52
February.....................................................        12.46        11.95        11.56        12.36        12.34        11.64        13.02
March........................................................        12.49        12.74        11.55        12.78        12.80        12.24        13.33
April........................................................        11.44        12.65        11.23        12.10        12.13        12.76        12.87
May..........................................................        10.70        11.20        10.23        11.56        11.58        12.79        12.53
June.........................................................        10.74        11.95         9.96        12.22        12.06        11.74        12.77
July.........................................................        10.86        11.98        10.13        12.06        11.93        11.00        12.54
August.......................................................        12.07        11.97        11.50        11.88        11.91        11.04        12.63
September....................................................        12.79        12.42        12.32        11.87        11.83        11.16        12.55
October......................................................        12.83        12.76        12.54        13.50        13.29        12.37        13.98
November.....................................................        12.96        13.80        12.59        14.01        13.86        13.09        14.56
December.....................................................        13.29        13.81        12.55        12.46        12.72        13.13        13.43
Average......................................................        12.05        12.40        11.43        12.36        12.34        12.07        13.06
 
                             1998
 
January......................................................        13.25        12.76        12.51        12.04        12.29        13.26        13.02
February.....................................................        13.32        13.03        12.87        12.89        13.07        13.59        13.78
March........................................................        12.81        12.75        12.50        12.67        12.79        13.55        13.49

[[Page 16108]]

 
April........................................................        12.01        12.69        11.50        12.88        12.90        13.62        13.59
May..........................................................        10.88        13.27        10.65        13.96        13.54        13.11        14.24
June.........................................................        13.10        14.20        12.65        15.38        14.89        12.31        15.54
July.........................................................        14.77        15.35        14.12        15.59        15.62        11.18        16.15
August.......................................................        14.99        16.25        14.21        16.52        16.38        13.40        16.96
September....................................................        15.10        18.32        14.66        19.81        18.71        15.07        19.28
October......................................................        16.04        18.06        16.05        18.13        18.19        15.29        18.67
November.....................................................        16.84        16.82        16.90        14.87        15.71        15.40        16.39
December.....................................................        17.34        17.44        17.51        13.48        13.39        16.34        13.98
Average......................................................        14.20        15.08        13.84        14.85        14.79        13.84        15.42
60-Month Avg.................................................        12.70        12.90        12.23        12.24        12.20        12.83        12.84
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Developed for informational purposes only. Advanced skim milk and butterfat prices will be used to calculate Class I price for succeeding month.

BILLING CODE 3410-02-M

3. Class I Pricing Structure

    This decision adopts a Class I pricing structure that provides 
incentives for greater structural efficiencies in the assembly and 
shipment of milk and dairy products. In conjunction with other reforms 
discussed in this decision, the adopted Class I price structure 
provides the necessary changes needed to improve milk pricing in the 
consolidated markets. The adopted Class I pricing structure results 
from additional quantitative and qualitative analyses of Option 1A and 
Option 1B that were presented in the proposed rule issued January 21, 
1998 (the PR), consideration of public comments received to these 
options, and the legislative requirements of the AMAA. The adopted 
Class I pricing structure utilizes USDSS model results adjusted for all 
known plant locations and establishes differential levels that will 
generate sufficient revenue to assure an adequate supply of milk while 
maintaining equity among handlers in the minimum prices they pay for 
milk bought from dairy farmers.

Background

    Although not required by the 1996 Farm Bill, the legislation 
provided authorization for the Secretary to review the Class I price 
structure as part of the consolidation of the orders including the 
consideration of utilization rates and multiple basing points for 
developing a pricing system. In any event, the consolidation of orders 
requires the review of the pricing system because historically, Class I 
pricing provisions, as well as other Federal order provisions, have 
been reviewed primarily on an individual market basis. The reform 
effort provides the opportunity to consider and establish a nationally 
coordinated Class I pricing surface that uses location adjustments to 
the differential levels to price milk for fluid use in every county in 
the United States.
    The PR provided an extensive review of 7 options that were 
developed and considered. After qualitative and/or quantitative 
analysis, all but Option 1A and Option 1B were preliminarily eliminated 
for various stated reasons. Nonetheless, the PR invited comments on any 
of the seven pricing options or any other pricing ideas. Also, the 
Department indicated a preference for Option 1B for a number of 
reasons. Nearly all of the public comments received in response to the 
PR on Class I price structure focused on the relative merits of Option 
1A and Option 1B. No persuasive comments were received to cause the 
Department to further consider the other five options.

The USDSS Model

    Option 1A and Option 1B were based to a significant degree on the 
U.S. Dairy Sector Simulator Model (USDSS). The USDSS was used to 
evaluate the geographic or ``spatial'' value of milk and milk 
components across the U.S. Using 240 supply locations, 334 consumption 
locations, 622 dairy processing plant locations, 5 product groups, 2 
milk components (fat and solids-not-fat) and transportation and 
distribution costs among all locations, USDSS determines economic 
efficient location values for milk and milk components. The model 
initially used data from May and October 1995, and for this decision 
used updated data from May and October 1997.
    The supply and consumption of milk used by the model are aggregated 
to geographic points--consumption points and supply points--to simplify 
a very complex problem. The production of milk and the consumption of 
dairy products are fixed at the various supply and consumption points 
used by the model. Plant locations were restricted to those presently 
processing products but plant processing locations were not constrained 
with respect to the volume processed. Processing costs were assumed to 
be uniform between locations and across plant volumes (no economies of 
scale). Therefore, the model allowed processing to move among available 
locations to find the least cost solution in terms of assembly from 
supply points through distribution to consumption points.
    Transportation costs in the model include costs of raw milk 
assembly, interplant bulk shipment, and the cost of hauling finished 
products. Transportation costs among regions reflected not only 
distance traveled, but also differences in wage rates and State highway 
weight limit restrictions. While assembly costs and interplant bulk 
shipments were calculated using a linear cost function, the finished 
product functions were non-linear. In fact, finished product hauling 
costs (e.g., packaged milk) fell below raw milk assembly and hauling 
costs on an equivalent unit basis in many cases at distances more than 
900 miles. Previous spatial modeling had assumed constantly higher 
finished product transportation costs versus raw milk assembly and 
shipping costs for all distances. The updated model results were based 
on transportation cost analyses, particularly the reduction in 
distribution costs for finished products resulting in distribution 
costs for these products on par with bulk milk assembly and hauling 
costs.

[[Page 16109]]

    The output from the USDSS model provided information as to optimal 
processing locations and volumes at those locations, milk assembly, and 
intermediate and finished product distribution flows. It represented a 
least cost, or ``most efficient'' organization of the industry. 
Importantly for the research, the model provided the marginal values 
(i.e., the value of one more unit) of milk at each location. These 
values, technically known as shadow prices, are indicative of values 
that are consistent with the optimized solution. A shadow price on one 
unit of milk at any processing location can be interpreted as follows: 
If the processor at a particular location had one more unit of milk, 
the entire pattern of milk assembly, and product transportation could 
be reorganized in such a way that marketing costs, equal to the shadow 
price, could be saved. This notion of marginal value is consistent with 
economic theory on how prices are determined in a competitive market.
    The significance of the shadow value in terms of milk price 
regulation may be stated: If the regulated price, or cost of milk, is 
arbitrarily set higher than the shadow price at a particular processing 
location, a lower cost solution could be found by processing more milk 
at another location. This would imply higher transportation costs for 
either raw milk assembly, finished product distribution, or both. Such 
a result clearly leads to a higher cost, less efficient system. It is 
also contrary to what is generally thought of as the ``orderly 
marketing'' of milk which is a fundamental reason for the existence and 
goal of Federal milk marketing orders.
    It should be stressed that the calculated shadow prices of the 
model output provide information regarding the relationship of the 
prices among geographic locations. They do not provide guidance 
regarding the overall level of Class I prices or differential values. 
That is, the model does not help us understand whether the Class I 
differential should arrive at a Class I price of $14 in Minneapolis and 
$15 in New York City, or $15 in Minneapolis and $16 in New York City. 
However, it does tell us that the resulting Class I price difference 
between the two locations should be about one dollar.
    A positive aspect of the USDSS model is the degree of detail 
available in the output. This detail is achieved through the careful 
assembly of spatially disaggregated data. However, it should be 
remembered that by its construction, the USDSS is a ``model'' and thus 
a simplification of a complex dairy industry. That notwithstanding, the 
USDSS model does provide an objective and quantitative guidepost from 
which to compare current federal order differentials and in considering 
possible alternatives.
    Several factors were considered in selecting a replacement for the 
current 14 Class I price structure that served to form the 
criteria used to examine options. First, a Class I price structure must 
be considered from a national, as well as a local or regional, 
perspective. Many comments from industry addressed Class I pricing 
issues from a local or regional perspective in the development of 
options presented in the PR. These comments provided valuable 
information about particular markets but generally did not consider the 
feasibility or impact of a local or regional issue on a national basis. 
While remaining mindful of local and regional concerns, USDA has also 
evaluated alternative Class I pricing structures from a national 
perspective, as should be expected, given the national concerns 
expressed about milk pricing.
---------------------------------------------------------------------------

    \14\ Any references to the ``current'' system of Class I prices 
or the ``current'' price structure are to be interpreted as those 
established in or after the final decision based on the 1990 
national hearing issued March 5, 1993 (58 FR 12634).
---------------------------------------------------------------------------

    Second, a Class I price structure must recognize the location value 
of milk. Results from the USDSS model confirm that milk has value at 
location. As described earlier, the model provided shadow prices 
reflecting the relative values of milk and milk components at 
geographic locations. While the model shadow prices did not suggest 
Class I differentials for specific locations, they do provide a means 
to evaluate price relationships among locations.
    Third, a Class I price structure must recognize all uses of milk. 
The classified pricing system contained in the Federal milk order 
program values milk for fluid use higher than milk used for soft or 
hard manufactured products. The higher Class I price encourages all 
milk to be used first to satisfy Class I needs. At the point where the 
cost of moving milk from an alternate location for Class I use is equal 
to the cost to supply milk for manufactured products, demand for 
manufactured products influences a market's ability to procure milk for 
Class I needs. Thus, all uses of milk must be considered when 
evaluating a national Class I pricing structure.
    Finally, a Class I price structure must meet the requirements of 
the AMAA. The broad tenet of the AMAA is to establish and maintain 
orderly marketing conditions. For the Federal milk order program, this 
is achieved primarily through classified pricing and pooling. With 
regard to pricing, it is recognized that the objective of the AMAA is 
to stabilize the marketplace with minimum prices, not to set market 
prices. The pricing criterion of the AMAA, section 608c(18), requires 
prices that are reflective of economic conditions affecting supply and 
demand for milk and its products. In this regard, consideration was 
given to whether the proposed prices would generate sufficient revenue 
for producers necessary to maintain an adequate supply of milk. Equally 
important, the prices need to provide equity to handlers with regard to 
raw product costs as required by section 608c(5) of the AMAA.

Evaluation Criteria

    In evaluating the final Class I pricing options, nine performance 
criteria, based upon regulatory objectives and requirements of the 
AMAA, were again used as they were in the PR. The evaluation criteria 
are divided into two categories, objective and administrative. The 
objective criteria are as follows:
    1. Ensure an adequate supply of milk for fluid use. Class I price 
levels need to provide a sufficient price signal to maintain an 
adequate supply of milk for fluid use. This supply level can be 
achieved through either the movement of milk to where it is needed, 
increased production, or some combination of both.
    2. Recognize quality (Grade A) value of milk. Grade A milk is 
required for fluid use. Additional costs of obtaining and maintaining 
Grade A status need to be reflected in Class I prices.
    3. Provide appropriate market signals. A Class I price should send 
timely signals to the market regarding supply/demand conditions.
    4. Recognize value of milk at location. Basic economic theory, 
validated by actual market observations and University-based research, 
affirms that milk for Class I use has a different value at different 
locations. This value needs to be reflected in the Class I price in 
order for the system to recognize and resemble the market rather than 
interfere with the market.
    5. Facilitate orderly marketing with coordinated system of prices. 
A system of Class I prices needs to be coordinated on a national level. 
Appropriate levels of prices will provide alignment both within and 
among marketing areas. This coordination is necessary for the efficient 
and orderly marketing of milk.
    6. Recognize handler equity with regard to raw product costs. 
Appropriate levels of Class I prices provide known and visible prices 
at all locations thereby ensuring that handlers

[[Page 16110]]

are able to compete for available milk supplies on an equitable basis.
    Three administrative criteria are identified and described as 
follows:
    1. Minimize regulatory burden. The Class I price structure should 
not significantly increase the burden on handlers, particularly small 
businesses. This would include increased reporting requirements and 
record keeping, as well as possible increases in administrative 
assessments should Market Administrators be required to manage a more 
complex regulatory system.
    2. Minimize impact on small businesses. The Class I price should be 
set at a level that does not disadvantage small businesses in 
competition with large businesses.
    3. Provide long-term viability. The Class I price structure should 
be expected to operate for an extended time period without major 
modifications.
    The nine evaluation criteria listed above are used to qualitatively 
evaluate each of the options. Each option is evaluated based on how the 
option performed compared to the current system, either better than, 
worse than, or the same as, for each performance criterion. The results 
of the qualitative analysis provided a preliminary framework for 
quantitative analysis using a multi-regional model developed by the 
Economic Research Service (ERS) of the Department.
    As previously indicated, Option 2--Relative Use Differentials, 
Option 3A--Flat Differentials, Option 3B--Modified Flat Differentials, 
Option 4--Demand-Based Differentials, and Option 5--Decoupled Baseline 
Class I Prices with Adjustors, were eliminated from further 
consideration. They were eliminated for various reasons including 
failure to adhere to AMAA requirements, the likelihood of creating 
disorderly marketing conditions, and impacts on small businesses. A 
discussion of the five eliminated options, including the evaluation 
against the criteria and/or quantitative analysis were described in 
detail in the PR.

The Final Options

    Three options formed the basis for final consideration and are 
described below. All options present national Class I pricing 
structures developed utilizing the USDSS model. The options continue to 
vary in their reliance and application of the USDSS model but all 
remain based on economic principles contained within the model. These 
options include Option 1A, a modified Option 1B, and the adopted Class 
I pricing structure.
Option 1A: Location-Specific Differentials
    Option 1A establishes a $1.60 per hundredweight fixed differential 
for three surplus zones (Upper Midwest, West, and Southwest) within a 
nine-zone national price surface, and for the other six zones, an added 
component that reflects regional differences in the value of fluid and 
manufacturing milk. This option emphasized current supply and demand 
conditions with the USDSS model output.
    Some minor changes were made to the Option 1A differential levels 
presented in the PR. The changes only involved adjusting certain county 
specific differentials to provide for more appropriate price alignment 
in several counties in the northeast, seven counties in Florida, and 
one county in North Carolina. Other than these minor changes, Option 1A 
is the same as published in the PR.
Modified Option 1B: Relative Value-Specific Differentials
    This option continues to establish Class I differentials based on a 
relationship between prices and geographic location as indicated by the 
USDSS model, but uses more current data. Modifications were made to 
Option 1B with respect to how adjusted Class I differentials were 
established for each county in the United States. This modified version 
of Option 1B continues to establish differential levels by setting and 
equating the relative value-specific differential of $1.20 per 
hundredweight in Minneapolis, Minnesota. The Option 1B differentials in 
the PR relied on an algorithm to set location adjusted differentials in 
every county. The modified Option 1B price surface takes into full 
account all known plant locations as was done in the development of 
Option 1A. This approach ensures that all plants similarly located 
would have similar prices.

The Adopted Class I Price Structure

    The adopted Class I pricing structure establishes a price surface 
that also utilizes USDSS model results adjusted for all known plant 
locations and establishes differential levels that will result in 
prices that generate sufficient revenue to assure an adequate supply of 
milk. The differential levels will better maintain equity by raising 
the level 40 cents per hundredweight higher than the level proposed in 
Option 1B and in modified Option 1B. The higher differential level 
reduces the likelihood of class-price inversions, where the Class I 
prices are below the manufacturing milk prices for the month.

The USDA Multi-Regional Dairy Sector Model

    Option 1A, modified Option 1B and the adopted Class I pricing 
structure were evaluated qualitatively against the evaluation criteria 
and quantitatively utilizing the USDA multi-regional dairy sector 
model. This model was developed to answer some very specific questions 
about possible changes in the dairy sector, particularly changes being 
considered in milk marketing orders. The main focus of the model's 
development and use was to quantitatively examine the impacts of the 
changes under consideration in the classified pricing of milk and dairy 
products in the milk order system on an order-by-order and regional 
basis, and for other areas of the country not currently a part of the 
milk order system.
    The multi-regional model establishes a baseline consistent with the 
USDA official baseline projections for the dairy sector. It assumes 36 
regions. These include: 32 Federal Milk Marketing Order areas 
(including Tennessee Valley that was terminated on October 1, 1997) and 
four non-Federally regulated areas (California, Other Unregulated 
Western Counties, Unregulated Northern New York and New England and 
Other Unregulated Eastern Counties) and projects baseline information 
through the year 2005. The demarcation between the unregulated Western 
and Eastern counties follows a line extending north to south on the 
eastern State borders of North Dakota, South Dakota, Nebraska, Kansas, 
Oklahoma and Texas.
    The model baseline also assumes that the Class III price would be 
the Basic Formula Price (BFP), the Class II price would be the BFP plus 
30 cents, each region's Class I price would be the BFP plus the current 
Class I differential and the Class III-a price would continue. All 
other changes to milk order provisions together with the three price 
surface alternatives are presented as changes from the baseline over 
the period of the years 2000 through 2005. Each of the alternatives 
include the impact of consolidation into 11 regional markets and moving 
to wholesale product price formulas in setting the class prices.
    From its baseline, the model has the ability to quantify the 
impacts of pricing changes in the consolidated regions and in 
estimating how the end use of milk may be expected to change with the 
changes in how the order program will price milk. The model can 
generate long-term supply, demand, and price

[[Page 16111]]

projections that are consistent with the USDA official baseline 
projections.
    The model estimates regional milk production based estimates of 
milk-per-cow and number-of-cows for the 36 defined areas. The milk cow 
inventory and milk-per-cow estimates for each area is based upon 
reported state data. Changes in the inventory of cow numbers and 
output-per-cow for each region are related to regional farm milk prices 
and feed costs, and past regional net returns to dairy farmers (a 
measure of profitability). Milk marketings in the region are in direct 
relationship to milk production in the region.
    Once the volume of regional milk marketings is determined, 
marketings are distributed to seven uses: bottled whole milk, bottled 
low-fat milk, soft manufactured dairy products, American cheese, other 
cheese, butter, and nonfat dry milk. Each of the seven uses has a 
retail demand equation. Generally, the demand for the specific product 
is a function of per capita income, the retail price or the Consumer 
Price Index (CPI) of the product, and the price or CPI of a substitute 
product (e.g. margarine for butter).
    Demands for raw milk for use in fluid milk products and soft 
manufactured dairy products have priority in the model and such demands 
are filled regionally from the region's raw milk supply before the 
national demands of the hard manufactured product markets are met. The 
Class I and Class II uses of milk in each region are based upon 
differences in prices and population by region. A CPI for fluid milk 
and other dairy products are estimated for each region based upon a 
margin mark-up equation and the region's Class I and Class II prices. 
These values are used to estimate regional per capita use, and when 
multiplied by projected population for each region, determine the 
amount of milk allocated to Class I and Class II uses.
    The sum of each region's raw milk supply less the milk used in 
Class I and Class II results in a measure of the national manufacturing 
milk supply. The model solves for equilibrium in supply and demand by 
solving for wholesale prices of cheese, butter, and nonfat dry milk 
that equate the supply and demand in the hard manufactured dairy 
product markets. The hard manufactured product markets, the Class I 
markets, the Class II markets, and the farm level raw milk supply are 
linked through price equations that relate the changes in wholesale 
product prices to changes in prices for milk used in Class I, Class II, 
Class III, Class III-a (or Class IV) and the farm level all-milk price.
    A Class III and Class III-a (or Class IV) price is calculated from 
the model's estimates of wholesale cheese, butter, and nonfat dry milk 
prices; and these Class III and Class III-a (or Class IV) prices are 
used to predict Class I and Class II prices. Changes in Class I and 
Class II prices affect demand for Class I and Class II products and the 
amount of milk available nationally for cheese, butter, and nonfat dry 
milk production. Likewise, the amount of milk used in each class in 
each region and the regional class prices affect the farm level all-
milk price and the supply of raw milk in the region and therefore the 
amount of milk available nationally for cheese, butter, and nonfat dry 
milk production. The model iterates until an equilibrium is achieved 
for the year in the wholesale product markets and then advances to the 
next year.
    A brief summary of the quantitative impacts of each alternative 
price surface is included with the qualitative analysis presented 
below. A detailed description of the USDA multi-regional dairy model, 
as well as a complete discussion of the impacts of the pricing 
alternatives are contained in the Final RIA.
Option 1A: Location-Specific Differentials
    Option 1A would establish a nationally coordinated system of 
location-specific Class I differentials reflecting the relative 
economic value of milk by location. An important feature of the option 
is the location adjustments that geographically align minimum Class I 
milk prices paid by fluid milk processors nationwide regardless of the 
defined milk marketing area boundaries or order pooling provisions. A 
basic premise of Option 1A is that the value of milk varies according 
to location across the United States.
    Compared to the modified Option 1B and the adopted Class I price 
structure, this option tends to most reflect the current Class I 
pricing surface. Although extremely similar to the current Class I 
price surface, there are distinct differences. Option 1A would 
establish a nationally coordinated price surface that uses location 
adjustments to adjust the price of milk for fluid use for every county 
of the United States.
    Under Option 1A, Class I differentials are the lowest in 
geographical areas evidencing the largest supplies of milk relative to 
local/regional fluid milk needs. The differentials become progressively 
higher as they move from these areas to markets with less production 
relative to demand for fluid milk. Nine differential zones provide the 
basis for establishing the price structure. These zones were 
established based on results of the USDSS model, knowledge of current 
supply and demand conditions, and recognition of other marketing 
conditions such as fluid versus manufacturing markets, urban versus 
rural areas, and surplus versus deficit markets.
    Class I differentials under this option range from a low of $1.60 
per hundredweight in the lowest valued zones of the Upper Midwest, 
Southwest, and West, where there are abundant supplies of milk in 
excess of fluid milk use, to a high of $4.30 per hundredweight in 
Florida, where there are deficit supplies of milk for fluid use.
    Analysis Based on Evaluation Criteria. Option 1A performs equal to 
or better than the current Class I system in each of the evaluation 
criteria. This is largely explained by the adjustments, improvements, 
and fine-tuning made to the current system of Class I differentials 
Option 1A was evaluated against the objective criteria as follows:
    1. Ensure an adequate supply of milk for fluid use. Option 1A 
performs essentially the same as the current price structure in 
ensuring an adequate supply of milk for fluid use. Option 1A changes 
current differential levels in some regions to more accurately reflect 
current milk supply-demand conditions. Option 1A will have minimal 
impacts on farm level milk prices and should ensure adequate supplies 
of milk for fluid use.
    2. Recognize quality (Grade A) value of milk. Option 1A recognizes 
the quality value (Grade A) of milk through the addition of a 
differential that begins at $1.60 per hundredweight in the base zone.
    3. Provide appropriate market signals. Option 1A adjusts and 
refines the existing Class I price structure to provide appropriate 
market signals. In some geographical areas, Class I differentials would 
be increased. These changes indicate that current Class I differential 
levels are not high enough to attract adequate supplies of milk to the 
applicable fluid milk markets. In certain other areas, Class I 
differentials would be lowered, indicating that they exceed levels 
necessary to adequately supply the associated markets with their fluid 
milk needs.
    4. Recognize value of milk at location. The spatial values of milk 
reflected in Option 1A recognize the value of milk at location more 
accurately than the current system for two principal considerations. 
First, in structuring the differentials in Option 1A, the effect of 
current Class I differential levels on milk supplies, demand, and dairy 
farmer returns regionally during the past decade were considered. 
Second, the

[[Page 16112]]

relative values of milk and milk components at geographic locations 
throughout the United States from the USDSS model results were 
considered.
    5. Facilitate orderly marketing with coordinated system of prices. 
Option 1A provides a comprehensive national pricing surface for Class I 
milk that establishes a value for Class I milk in every county. Thus 
the price any processor would pay for milk would be the same regardless 
of which order the processor is regulated under. As such, Option 1A is 
an improvement over the current price structure which evolved in a 
piecemeal fashion. Additionally, the Class I differentials and location 
adjustments in Option 1A would facilitate more efficient and orderly 
marketing of milk for fluid use through the nationwide coordination of 
prices when compared to the current system.
    6. Recognize handler equity with regard to raw product costs. Class 
I differentials proposed under Option 1A are consistent with the 
inherent economic value of milk at location. The coordination and 
alignment of prices, based upon cost differences and current marketing 
conditions, better ensures handlers of equity in competing for 
available milk supplies.
    Option 1A was evaluated against the objective criteria as follows:
    1. Minimize regulatory burden. Option 1A would not change the 
regulatory burden of the Federal order program. Option 1A would not 
result in increased reporting, record keeping, compliance, or 
administrative costs to handlers.
    2. Minimize impact on small businesses. In regions where more of 
the actual value of fluid milk would be reflected in the differentials 
than is currently reflected, small businesses may have a marginal 
improvement in their relative competitive bargaining position vis-a-vis 
large businesses. This is based on the concept that large businesses 
(producers, cooperatives or handlers) are better able to negotiate 
premiums above minimum order prices due to advantages attained from 
their size. Overall, this option is not expected to materially impact 
small businesses differently than the current price structure.
    3. Provide long-term viability. To the extent the location adjusted 
Class I differentials under Option 1A will correct instances of price 
misalignment and more accurately reflect the economic value of milk by 
location, the long-term viability of Option 1A is expected to exceed 
that of the current price structure.
    Because the USDSS model only determines the relative value 
differences for fluid milk between location, it could not be used for 
determining an appropriate differential level. Option 1A utilizes $1.60 
per hundredweight as the minimum differential level. A complete 
explanation of the factors that developed and explain this differential 
level was set forth in the PR. In summary of those reasons, the $1.60 
per hundredweight differential level is used in Option 1A because it 
would ensure a sufficient supply of milk for fluid uses in the most 
surplus regions.
    Option 1A will have little impact on small businesses, either 
producers and processors. In certain situations, it may improve a small 
business' competitive marketing position as compared to current levels. 
Because the $1.60 base zone differential includes a competitive factor 
as discussed previously, more of the actual value of fluid milk will be 
reflected in the minimum Federal order price. This may decrease the 
level of the over-order value that must be negotiated between 
processors and producers. Doing this would provide small businesses 
with a more equitable competitive position.
    Quantitative analysis of Option 1A using the USDA multi-regional 
model evaluated the various impacts of this pricing option. Overall, 
the magnitude of price and income changes under Option 1A is relatively 
small when compared to the baseline. Option 1A results in an 8-cent 
increase in the average Class I price for all current Federal orders. 
Further details of the impact of these Class I price changes, and 
others, that are based on the USDA model results are available in the 
final Regulatory Impact Analysis (RIA).
Modified Option 1B--Relative Value-Specific Differentials
    Modified Option 1B would also establish a nationally coordinated 
system of Class I differentials and adjustments that recognizes several 
low pricing areas. Modified Option 1B more directly applies the USDSS 
model's optimal solution in developing the Class I price structure.
    The modified Option 1B differentials differ from those published in 
the PR. The differences are explained largely by a more complete 
consideration of all known plant locations. The Option 1B differential 
values published in the PR relied on an algorithm to establish 
differential levels for those counties that were not part of the 
optimal solution. However, all plant locations need to be considered 
for setting prices at these locations and prices must be aligned 
between locations. This has been done in modified Option 1B and results 
in a ``zoned'' structure of relative price differences that are 
aligned.

Modified 1B Differential Level

    As pointed out in the Option 1A discussion, the USDSS model only 
provided information regarding relative differences in prices between 
geographic locations and offers no information for determining the 
level of Class I differentials used in setting Class I prices. The same 
is true for modified Option 1B. Modified Option 1B relies much more 
directly on the geographic price relationship results of the USDSS 
model in defining the structure and relative differences represented in 
its differential schedule for all locations.
    While modified Option 1A establishes a $1.70 Class I differential 
at Minneapolis, adjusted from a minimum level of $1.60 (the lowest 
differential level at any location in Option 1A), modified Option 1B 
sets a Class I differential at Minneapolis at the current level of 
$1.20 per hundredweight. It is important to note that any modified 
Option 1B zone could be discussed as the ``starting'' point 
differential. This decision only refers to and references Minneapolis 
at the $1.20 level for illustrative purposes since it provides a degree 
of continuity in how Option 1B was presented and discussed in the PR.
    Because Option 1B was expected to result in a significant change to 
the industry in both the pricing surface and the level of Class I 
differentials, it was proposed in the PR in conjunction with three 
alternative transitional phase-in programs. However, none of the phase-
in programs received public support.
    The final RIA statement provides the full measure of the USDA 
multi-regional model analysis of this option. In short, modified Option 
1B is rejected because the differential levels it would set would 
result in minimum prices that would not generate sufficient revenue to 
assure an adequate milk supply. Additionally, for markets with lower 
differential levels, there is a greater potential for class-price 
inversions that would increase the likelihood of disorderly marketing 
conditions.

The Adopted Class I Price Structure

    The adopted Class I pricing structure results from additional 
quantitative and qualitative analyses of Option 1A and Option 1B, 
consideration of public comments received to these options, and the 
legislative requirements of the AMAA. The adopted Class I pricing 
structure utilizes USDSS model results adjusted for all known plant 
locations and establishes differential levels that will generate 
sufficient revenue to

[[Page 16113]]

assure an adequate supply of milk and better maintain equity among 
handlers by raising the level 40 cents per hundredweight higher than 
the level used in modified Option 1B.
    The Class I differential level was set by determining the 
differential level that results in prices which will generate 
sufficient revenue to bring forth an adequate supply of milk throughout 
the Federal order system. As in both Option 1A and modified Option 1B, 
the adopted Class I pricing structure adds a differential value to the 
basic formula price in setting Class I milk prices. Additionally, it is 
set at a level that minimizes the likelihood of class-price inversions, 
discussed in the BFP section of this decision. The $1.60 Class I 
differential level (at Minneapolis) achieves these objectives for a 
nationally coordinated Class I pricing structure.
    Increasing the differential level by 40 cents per hundredweight at 
all locations does diminish the reliance on the marketplace and over-
order premiums in establishing market prices inherent in modified 
Option 1B. However, the adopted Class I pricing structure retains the 
more efficient pricing structure that offers increased cost savings in 
the organization of the nation's milk supply and in the transportation 
of milk and dairy products.
    The adopted Class I pricing structure moves the dairy industry into 
a better organized and aligned pricing system while continuing to 
assure orderly marketing conditions for producers and handlers. 
Restructuring the relative-value differential relationships at the 
level specified will, among other things, generate sufficient revenue 
in the national system of Federal orders to bring forth an adequate 
supply of milk. The higher level will also minimize instances of class-
price inversions. The location adjusted differentials established for 
each county are set forth in the Class I Price Structure Maps, and in 
the General Provisions Sec. 1000.52. The following table sets forth the 
location adjusted differentials at selected cities.

 Comparative Class I Differentials at Selected Cities Under the Adopted
                         Class I Price Structure
                       [Dollars per hundredweight]
------------------------------------------------------------------------
              City                  Current      Adopted     Difference
------------------------------------------------------------------------
New York City, NY...............         3.14         2.50        (0.64)
Charlotte, NC...................         3.08         2.55        (0.53)
Atlanta, GA.....................         3.08         2.90        (0.18)
Tampa, FL.......................         3.88         4.20         0.32
Cleveland, OH...................         2.00         2.00         0.00
Kansas City, MO.................         1.92         1.90        (0.02)
Minneapolis, MN.................         1.20         1.60         0.40
Chicago, IL.....................         1.40         1.95         0.55
Dallas, TX......................         3.16         2.10        (1.06)
Salt Lake City, UT..............         1.90         1.50        (0.40)
Phoenix, AZ.....................         2.52         1.55        (0.97)
Seattle, WA.....................         1.90         1.45        (0.45)
------------------------------------------------------------------------

    The adopted Class I pricing structure was evaluated against the 
objective criteria as follows:
    1. Ensure an adequate supply of milk for fluid use. The adopted 
Class I pricing structure establishes lower differentials than current 
levels in many of the proposed markets. Because the differential level 
is higher than under modified Option 1B, the adopted Class I pricing 
structure relies less on the use of over-order premiums as the method 
to attract adequate milk supplies for fluid purposes. While over-order 
premiums will remain useful for allowing the market to find the final 
value of Class I milk, the higher-level differentials of the adopted 
Class I pricing structure will better serve to ensure that the minimum 
prices set by the orders will attract an adequate supply of milk for 
fluid use.
    2. Recognize quality (Grade A) value of milk. As with Option 1A and 
modified Option 1B, the adopted Class I pricing structure similarly 
recognizes the quality (Grade A) value of milk through the use of a 
differential added to the basic formula price.
    3. Provide appropriate market signals. The adopted Class I pricing 
structure provides appropriate market signals in all markets even 
though the adopted Class I pricing structure lowers differentials in 
some markets. Over-order pricing will likely function in most, if not 
all markets, even with the higher-level differentials. However, the 
higher differential level better ensures that the minimum prices 
established under the orders will generate a sufficient supply of milk 
and better ensures equitable minimum prices among regulated handlers 
than does modified Option 1B. Additionally, because class-price 
inversions are mitigated, more appropriate price signals are provided 
to the marketplace.
    4. Recognize value of milk at location. The adopted Class I pricing 
structure appropriately recognizes the value of milk at location. It is 
based on the location value of milk as determined by the May 1997 
results of the USDSS model. It also aligns the relative-value 
differences while adhering to spatial-value differences determined by 
the model giving full consideration to all plant locations. Thus, in 
utilizing the model results that determine the most efficient spatial 
value of milk for fluid use to establish the price surface, the adopted 
Class I pricing structure should perform better than the current 
system.
    5. Facilitate orderly marketing with coordinated system of prices. 
The adopted Class I pricing structure establishes a coordinated system 
of differentials with appropriate location adjustments. Like the other 
two options, a comprehensive national pricing surface has been 
developed that establishes a value for Class I milk in every county. As 
a result, a processor's regulated price will be the same regardless of 
the order regulating it.
    6. Recognize handler equity with regard to raw product costs. With 
the 40-cent per hundredweight increase in the differential level, 
processor equity is better maintained under the adopted Class I pricing 
structure. With price increases or decreases in some areas, the markets 
will need to adapt to the new pricing structure. While it is not the 
intent of the Federal order system to set market prices, the reflection 
of a larger portion of the price under regulation provided by the 
adopted Class I pricing structure, better assures handlers a reasonable 
degree of equity with regard to raw product costs.
    The adopted Class I pricing structure was evaluated against the 
administrative criteria as follows:

[[Page 16114]]

    1. Minimize regulatory burden. The adopted Class I pricing 
structure would not change the regulatory burden of the Federal order 
program in terms of reporting, recordkeeping, compliance, and 
administrative costs to handlers.
    2. Minimize impact on small businesses. Under the adopted Class I 
pricing structure, a fuller measure of the Class I value needed to 
attract adequate milk supplies will come from regulated prices. 
Reliance on over-order payments negotiated outside the Federal order 
system is diminished, but continues to be recognized as in either the 
current system or in Option 1A. As a result, it is likely that small 
handlers who might have been disadvantaged by the original Option 1B 
will not be under this modified version.
    Federal order Class I prices are mandatory and affect processors in 
a specific area equally as minimum enforced price levels. Since more of 
the actual value of Class I milk is represented in regulated prices, 
the potential for large handlers to have an advantage over small 
handlers is mitigated in competing for a supply of milk under the 
adopted Class I pricing structure. Large processors often have 
advantages related to economies of scale and may be able to temporarily 
inflate over-order prices they are willing to pay until they have 
forced smaller businesses out of business who could not afford to pay 
higher prices.
    Additionally, with higher differentials and resulting higher 
producer blend prices, the balance of market power between producers 
and processors is better maintained. Producers will not need to 
negotiate with processors to obtain a better price for their milk to 
the extent that would have been expected under modified Option 1B. 
Small dairy farmers have less production volume, and typically have 
higher per hundredweight production costs. Hence, small producers who 
are less able to negotiate for prices that may be higher than the 
Federal order minimum price will be better served under the adopted 
Class I pricing structure. When too much reliance is placed on the use 
of over-order premiums (as in modified Option 1B), it is likely that 
dairy farmers defined as small businesses would benefit less from the 
regulation of milk marketing.
    Small businesses may be impacted under the adopted Class I pricing 
structure as adjustments are made in response to the new pricing 
structure. However, to the extent that small producers may not be able 
to bargain with processors for over-order premiums to adequately cover 
their costs, the increased differential level in the adopted Class I 
pricing structure minimizes this potential outcome. The inability of 
small processors to compete with large processors at price levels above 
Federal order minimums is similarly eased.
    3. Provide long-term viability. The adopted Class I pricing 
structure provides for a more efficient pricing structure. This option 
is an alternative from the current way the Federal order program has 
approached Class I pricing. Historically the Class I price established 
under Federal orders represented the minimum value of Class I milk in 
the marketplace based on the cost of maintaining Grade A milk and 
associated marketing costs together with the cost of alternative milk 
supplies. The adopted Class I pricing structure provides the 
opportunity for increased marketing efficiencies by promoting a more 
optimal organization in the assembly and distribution of milk products 
while establishing prices that will assure an adequate milk supply. In 
this way, it is expected to have long-term viability.
    Quantitative analysis of the adopted Class I pricing structure 
using the USDA multi-regional model evaluated the various impacts of 
this pricing option. The evaluation assumed the eleven market order 
consolidation, four classes of milk use, and the BFP replacement 
presented earlier in this decision. Class I differentials are reduced 
from current levels in about half of the marketing orders. The 
reductions range from 4 cents per hundredweight in the Ohio Valley 
order to as much as $1.18 per hundredweight in the Eastern Colorado 
order. The Class I differential for the Eastern Ohio-Western 
Pennsylvania order would be unchanged. For the other markets, the Class 
I differential is increased, ranging from 8 cents per hundredweight in 
the Greater Kansas City order, to 57 cents in the Southeastern Florida 
order.
    Under the adopted Class I pricing structure, six current milk 
orders would have Class I differentials lower than the differential 
established at Minneapolis. This gives explicit recognition that these 
other areas have adequate milk supplies to satisfy Class I demands at 
lower costs. For areas needing supplemental supplies of milk for fluid 
use, the Class I differentials are reflective of transportation costs 
from the closest alternative supply area.
    According to the USDA model analysis, the adopted Class I pricing 
structure differential level would increase order marketings over the 
six-year analytical period of the years 2000-2005 when compared to the 
baseline. Raising the differential, in conjunction with shortening the 
advance pricing notice of Class I prices by 18 days as discussed in the 
BFP section of this decision, minimizes class-price inversions. The 
rise in the all-milk price in the first year of implementation is 
expected to stimulate additional milk production in the milk order 
system. This additional milk production results primarily from Class I 
prices being established by using the expected higher Class IV prices 
in the year 2000. Over the six-year analytical period, the annual all-
milk price is expected to drop by about two cents per hundredweight, 
but the annual average of marketings in the entire milk order system is 
expected to increase by about 8.3 million pounds when compared to the 
baseline. This increase in marketings is largely explained by the 
pooling of milk that was not pooled in recent years because of class-
price inversions.
    The USDA analytical model suggests that annual cash receipts, or 
revenue, for producers under the adopted Class I pricing structure will 
increase in many markets when compared to the baseline. The marketing 
areas expected to have the largest average annual increases in producer 
revenue include the following orders: Chicago Regional--$43.1 million, 
New York-New Jersey--$18.7 million, Iowa--$17.5 million, Southern 
Michigan--$14.1 million, and Tampa Bay--$12.2 million. Other markets 
would be expected to have lower estimated annual cash receipts over a 
six-year analytical period of the years 2000-2005 from the baseline. 
The marketing orders with the largest reductions include: Texas (-$39.7 
million), Middle Atlantic (-$39.5 million), Eastern Colorado (-$11.4 
million), Southwest Plains (-$11.3 million) and Central Arizona (-$10.4 
million).
    The USDA analytical model suggests that as the adopted Class I 
pricing structure results in lower Class I prices in many markets, the 
average annual impact on retail prices to the consumer for fluid milk 
will be about 2 cents per gallon less, on average, over the six-year 
period of the years 2000-2005 when compared to the baseline. From a 
national perspective, this translates into consumer savings of about 
$79 million for fluid milk products annually. Sales of manufactured 
dairy products over the same time period are expected to decrease 
somewhat, but expenditures for these products will be higher.
    While only summarized here, the complete USDA multi-regional model 
analysis of Options 1A, modified Option 1B and the adopted Class I 
pricing

[[Page 16115]]

structure are included in the final RIA statement.

Comparison of Option 1A and the Adopted Class I Price Structure

    Option 1A and the adopted Class I pricing structure have 
similarities but rely on differing methods in constructing a nationally 
coordinated Class I price structure. Both recognize that milk has a 
location value. Both utilized the USDSS model results to establish the 
price surface. Both establish Class I prices by adding a fixed 
differential to the implied value of milk used in manufacturing. Both 
establish a price surface that assigns a price to every county in the 
United States and would assure that a price at any particular location 
will not vary depending upon the marketing order under which the milk 
is pooled.
    Although similar in the above respects, they also differ. First, 
they differ in the method of determining the level of the Class I 
differential. Option 1A relies on finding that Class I differentials 
would be established at a level that more fully reflects the additional 
value of Class I milk in the most surplus regions. The adopted Class I 
pricing structure relies on the finding that the national system of 
milk order needs to result in prices that will generate sufficient 
revenue to bring forth an adequate milk supply.
    Secondly, they differ in how the price surface should be 
established regardless of the level. Option 1A provides for the 
alignment of resulting Class I prices by evaluating the cost of 
alternative supplies based upon the current Class I differential 
structure. This results in a surface that is smoother and flows 
primarily from north to south and west to east. However, the adopted 
Class I pricing structure relies on a cost minimization model to 
provide for a more efficient organization and structure in milk supply 
and distribution. Thus, it results in more limited relative price 
differences and in a price surface that is flatter.
    Thirdly, they differ in their reliance on the USDSS model results. 
Option 1A recognizes the value associated with the model results but 
relies on knowledge of specific marketing conditions and practices to 
make adjustments to existing differentials. The adopted Class I pricing 
structure, on the other hand, relies more directly on the USDSS model 
results that indicate the optimal spatial values for fluid milk which 
serve to promote market efficiencies, and implements this structure to 
encourage market efficiency within the dairy industry.

Public Comments

    The majority of comments received in response to the PR dealt with 
the Class I price structure. In all, 4,217 comments were received on 
this issue. Of this number, 3,579 comments indicated support for the 
adoption of Option 1A and 436 comments supported the adoption of Option 
1B. Some support USDA of both Class I pricing options called for 
changes in each of the Option's details. No comments were received that 
supported any sort of transition programs suggested in adopting Option 
1B. Some comments, while supporting Option 1B in its general theme, 
proposed adopting Option 1A initially and phasing in the adoption of 
Option 1B over an extended time period.
    It is clear from the comments received that there is broad-based 
support for adopting Option 1A. These commenters explained what they 
thought were and should be the most important goals of the milk 
marketing order program, the pricing policies and features that it 
should contain to achieve these goals, and their view of the 
legislative requirements that must be incorporated into milk orders. 
Such was similarly expressed in explaining both the support for, and 
opposition to, Option 1B.
    Supporters for Option 1A generally saw it as the best Class I 
pricing option that would properly reflect the fullest measure of the 
AMAA's articulated goals and requirements. These supporters expressed 
the limitations of relying too much on the free market in setting milk 
prices. For example, supporters of Option 1A indicated that milk 
marketing orders exist because dairy farmers are at a distinct 
disadvantage in their marketing relationship with handlers who buy 
their milk. They cited the characteristics of milk--that it is highly 
perishable, bulky, is produced daily and must be marketed nearly as 
often, and is expensive to transport--as making it a unique commodity. 
Unlike other commodities, grains for example, milk cannot be withheld 
from the market in the hope for a better price, nor can it be shipped 
long distances in search of a higher price because transportation costs 
quickly erode the benefits of a higher price. Dairy farmers don't even 
know the price they will receive for their milk in advance of having to 
ship to market, they noted.
    Also, supporters of Option 1A were of the opinion that marketing 
conditions faced by dairy farmers today are fundamentally no different 
than they were when the order program first began. They point out that 
even though there are fewer and larger dairy farms with greater milk 
production, the number of plants at which to sell milk are fewer than 
when the order program first began. Implicit in this relationship, they 
said, is the degree of uneven market power that handlers have over 
producers. One commenter noted that the ratio of dairy farmers to milk 
plants today has increased threefold since 1960, an indicator of the 
growth in the concentration of market power among handlers. Even the 
prominence of dairy farmer cooperatives over the years has had little 
significant impact on the relative bargaining power of dairy farmers, 
noted many commenters. While these organizations have served with 
varying degrees of success in negotiating for higher milk prices for 
their members, they said, cooperatives do not and cannot have the 
ability to significantly impact prices because no entity can control or 
limit the supply of milk to the marketplace. Because dairy farmers face 
such a skewed marketing situation, most commenters view milk marketing 
orders as the only practicable tool to assure farmers receive a fair 
price for their milk.
    Supporters of Option 1A indicated that because of the continuing 
marketing situation they face, no basis exists for concluding that more 
emphasis should be placed on a dairy farmer's ability to negotiate 
prices with handlers. According to these commenters, relying too much 
on the marketplace would only provide the incentive for producers to 
needlessly compete with each other to supply the higher-valued fluid 
market. Those that are successful might receive more for their milk 
than those who could not, but to this end, there is no guarantee that 
all handlers would pay the same price for milk. Nor is there a 
guarantee that handlers would share the higher-valued use of milk 
equitably with those producers. This, they said, results in disorderly 
marketing conditions and the pitting of farmer against farmer in 
unnecessary and destructive price competition. It was these conditions, 
they note, that led to creation of milk orders and justified the 
marketwide pooling and minimum pricing provisions contained in milk 
orders today. Only Option 1A, say its supporters, best establishes the 
proper value of milk that, together with classified pricing and 
marketwide pooling, assures the highest degree of equity for both 
producers and handlers.
    Supporters of Option 1A agreed and recognized that it is important 
to have a Class I pricing structure that is national and more 
reflective of

[[Page 16116]]

marketing conditions for milk. Some commenters were of the opinion that 
the geographic pattern of milk production can be expected to remain as 
it is today. They noted further that Option 1A gives explicit 
recognition to more than a single reserve supply area in the country, 
and that Option 1A would assign the lowest differential in each of 
these reserve supply areas, what many supporters of Option 1A viewed as 
significant pricing reform.
    Option 1A supporters also thought that the USDSS model served as an 
excellent tool in developing a Class I price structure. However, they 
also recognized the limitations of relying too much on this analytical 
model because it does not bring into consideration all of the other 
necessary judgements and factors that cannot be included in a model. 
For example, many commenters pointed out that while Option 1A used the 
USDSS model as a guide, it cannot be relied upon for making adjustments 
to conform with known relationships between and among geographic and 
actual plant locations. Further, said supporters of Option 1A, the 
model is static, and cannot estimate the dynamics of changes that may 
result in supply and demand conditions over time.
    In summary, Option 1A supporters indicated Option 1A best assures 
the continuation of dairy farmers receiving a fair price for their 
milk. Processors, they also pointed out, would not see a significant 
change in their ability to compete for a milk supply since most of the 
value of fluid milk would be contained in the regulated minimum price. 
They concluded that any changes to milk orders that would diminish 
these outcomes would be harmful to the dairy industry and to the public 
interest.
    Opponents to Option 1A view it as maintaining too much of the 
status quo and not addressing the reform needed in Class I pricing. The 
opponents of Option 1A also view the current Class I pricing structure 
as seriously flawed. In their view, the current system relies on 
recognizing the Upper Midwest region as the reserve supply of milk for 
the country when this is no longer the case. They see Option 1A as 
largely maintaining this viewpoint.
    Opponents to Option 1A and the current Class I pricing structure 
are of the opinion that today's differential levels and Option 1A 
differential levels are too high, or at least higher than necessary to 
attract adequate milk supplies in many areas. Because Class I 
differentials are too high, they said, improper economic incentives 
exist in many areas for increased milk production--in fact 
overproduction--beyond what is needed to meet Class I demand. When this 
happens, opponents to the current system and Option 1A said, all 
producers nationally are negatively impacted because the overproduced 
milk supply drives down prices for milk used in manufactured dairy 
products which compete in a national market. They noted this is 
especially injurious to dairy farmers in markets where most of the milk 
produced is used in manufactured dairy products.
    Adding to this, the opponents of the current Class I pricing system 
and Option 1A are also of the opinion that technology is available 
today to meet the supplemental milk needs of any milk-deficit area. Not 
only do they think that higher-than-necessary Class I differentials 
result in artificially-induced overproduction, they also believe that 
resulting high Class I prices may be reducing fluid milk consumption by 
consumers. They are of the opinion that it is more appropriate and 
efficient to attract milk to meet fluid demands by compensating those 
who incur the cost of shipping milk from surplus areas rather than 
paying a high price to local producers in milk-deficit areas to bring 
forth a sufficient supply of local milk to meet fluid demands.
    Supporters of Option 1B indicated support for the more market-
oriented theme reflected in this Class I pricing option. These 
supporters commented that Option 1B will allow milk prices to respond 
more appropriately to changing supply and demand conditions. Because of 
this, they said, the milk order program will become more market-
oriented. The overall pricing structure offered in Option 1B, they say, 
flattens the resulting level of Class I prices throughout a larger 
portion of the country, thereby providing more of a level playing field 
for producers everywhere.
    Supporters of Option 1B view the increased market-oriented theme as 
the proper direction in which to bring the Class I pricing structure as 
the milk order program is reformed. Not only is it consistent, in their 
view, with the reform mandates established by Congress in enacting the 
1996 Farm Bill, the movement to a more market-oriented milk order 
program will provide incentives for private sector innovations that 
will benefit dairy farmers and consumers.
    Supporters of Option 1B take a fundamentally different view than 
supporters of Option 1A on the appropriate level of the Class I 
differential. Supporters of Option 1A are of the opinion that Class I 
differential levels should be set high enough to assure the least 
amount of price inequity among handlers and should also be at levels 
high enough to not lower returns to producers. However, the supporters 
of Option 1B think that Class I differential levels should be set at 
minimum levels that will allow the effective price for milk to be much 
more determined by the marketplace. In this way, they said, milk 
production and prices would respond more effectively to changing supply 
and demand conditions. By taking this approach, they say, Option 1B 
Class I differential levels will provide a sufficient degree of the 
structure needed for producers and handlers, while reducing market 
distortions that result from regulation-induced prices that 
discriminate against producers, especially in the Upper Midwest region.
    As mentioned above, supporters of Option 1B called for certain 
modifications. The most significant change included the lowering of the 
Class I differential level for Minneapolis, Minnesota. These commenters 
offered a $1.08 per hundredweight Class I differential level for this 
location. They based this recommendation on their own study and survey 
of prevailing conditions in the Minneapolis area. This proposal is 
consistent with their view that Class I differential levels should be 
set at minimum levels. This level included, they said, premiums above 
the Upper Midwest's order blend price, quantity and quality premiums, 
and hauling subsidies. From this level, all other differential levels 
should be set and adjusted.
    These commenters also cited the USDSS model's limitation in 
determining the proper alignment of Class I differential levels, a 
similar criticism voiced by Option 1A supporters. These commenters are 
also of the opinion that, due to more than 60 years of Federal 
regulation, the relative value differences implied in the model results 
were too much like existing value differences than would be the case in 
an unregulated market. They indicated that the USDSS model's optimal 
solution values should be used conservatively as maximums in setting 
relative geographic differences to the Class I pricing structure. Some 
commenters suggested that because the model establishes geographic 
values for all milk uses, a bias results toward higher Class I values 
relative to manufacturing values in many markets.
    Opponents to Option 1B did not like the idea of making the milk 
order program more market-oriented by reducing Class I differentials in 
setting Class I milk prices. If this is done, say Option 1B opponents, 
a cascading series

[[Page 16117]]

of events will result that seem not only contrary to why marketing 
orders exist, but will return the dairy industry to the marketing 
situations that led to their establishment. Most important, they said, 
Option 1B would result in, and in fact calls for, the altering of 
current supply and demand conditions for milk. These commenters are of 
the opinion that the Department should not act to cause changes in 
either prices or marketing conditions. Additionally, they are also of 
the opinion that it was not the intent of Congress to have milk order 
reform result in either an increase or decrease in returns to dairy 
farmers.
    Opponents of Option 1B were of the opinion that too much reliance 
was placed on directly applying the USDSS model results as the Class I 
pricing structure, and that inappropriate reliance was also placed on 
the role of over-order premiums in achieving a more market-oriented 
pricing plan for the milk order program. Opponents argued that today's 
over-order premiums are directly tied to the differential levels and 
the alignment of Class I prices established under the existing orders. 
Additionally noted, current and consolidated markets have, and will 
continue to have, different circumstances that will disproportionately 
affect the ability of producers to negotiate over-order premiums, 
especially in those markets where Class I differentials are lowered 
most from current levels.
    Because Option 1B calls for reductions from current differential 
levels nearly everywhere, they observed, less of a minimum order price 
is assured to producers. In those markets where minimum order Class I 
prices are reduced the most, a greater burden is placed on producers 
and handlers in negotiating actual prices relative to those orders 
where price levels are not as affected, they said. In other words, 
noted one commenter, producers in milk-deficit areas would have Class I 
differentials reduced the most and would be required to be much more 
market-oriented than producers in milk-surplus area where the 
differential level is maintained or increased. One commenter noted, 
that once over-order premiums are established, they can easily collapse 
because no one has the ability to control or limit milk production or 
the flow of milk to market. Very small additional volumes of milk to a 
market can destroy over-order premiums, this commenter added. On the 
producer side of relying too much on over-order premiums, they said, 
prices received would be much less equitably shared and uniform, and 
would tend to force dairy farmers to engage in ruinous price 
competition in seeking Class I outlets. On the handler side, they 
noted, order prices will not be high enough to bring forth that mix of 
local and distant milk supplies to meet Class I needs. Related to this, 
some commenters noted that the relative differences in prices that 
would be set under Option 1B would not provide enough of a price 
difference to cause milk to move from surplus to deficit areas as would 
be provided in Option 1A. Relying too much on over-order premiums will 
benefit large handlers to the competitive disadvantage of small 
handlers, they said. Because actual milk prices paid by handlers would 
increasingly be determined outside of the order's minimum pricing 
provisions, they concluded, handlers would be much less assured of the 
price their competitors are paying for milk.

Conclusion

    Milk is a unique agricultural commodity and faces unique marketing 
circumstances. It is highly perishable, is produced daily and therefore 
needs to be marketed in a very committed and continuous production-and-
marketing cycle. These characteristics, together with the fact that 
there are many more dairy farmers than milk buyers, presents the 
opportunity for marketing problems to occur that can be disruptive and 
destructive to dairy farmers. This sort of marketing situation places 
producers at a marketing disadvantage relative to handlers, and without 
some government involvement, equitable terms of trade between these two 
entities can be difficult to achieve. These unique features of milk and 
the marketing situation faced by dairy farmers were noted in public 
comments and are reflected in the legislation authorizing milk 
marketing orders. Milk marketing orders, using the tools of classified 
pricing and marketwide pooling, can significantly mitigate the 
undesirable effects of this marketing situation and still satisfy the 
public interest by having an adequate supply of milk at reasonable 
prices.
    As noted in public comments, the structure of today's dairy 
industry, characterized by many dairy farmers and relatively few 
buyers, is basically the same as it was when the milk order program 
first began. No dairy farmer, dairy farmer cooperative or bargaining 
organization can effectively serve to either control milk production or 
limit the supply of milk to the marketplace to achieve a measure of 
reasonable price certainty. This can, from time-to-time, be achieved 
but such instances are generally short-lived and cannot be relied upon 
for serving the public's interest in having a sustainable, stable and 
reliable milk supply at reasonable prices.
    It is clear from the many public comments received that dairy 
farmers are largely content with the current way the Federal milk order 
program has approached Class I milk pricing, both in its structure and 
the degree to which it is has returned equitable prices to producers 
and handlers. But some changes are needed to assure that this program 
remains viable to serve the needs of the dairy industry and the public 
well into the 21st century.
    The need to reform the milk order program is clearly and uniformly 
recognized by industry participants and the public. To this end, most 
producers and handler entities are of the opinion that the reform 
effort should result in limited change in the prices that are 
established under the orders, and that any changes to the system be 
governed by a minimum of change in the prices and the terms of trade 
between producers and handlers. Other producer and handler entities are 
of the opinion that the ``traditional'' methods of Class I milk pricing 
are seriously flawed, resulting in a program that has become viewed as 
economically discriminatory to dairy farmers in certain regions of the 
country and is institutionally resistant to change. The public too, 
expects that the program should be operated in a manner that will 
provide and promote efficiency and offer the potential for a less 
expensive milk supply.
    It is the Class I pricing structure that provides additional 
revenue above the basic value for milk to producers. Because of this, 
Class I pricing is often viewed as the cornerstone of the milk order 
program's pricing policy. This is so because the Class I fluid use of 
milk commands the highest-valued use in the marketplace and is the 
preferred outlet for milk by producers. It is also this use of milk 
that has the greatest effect on determining the location value of all 
milk and in determining the differences in blend prices that are 
received by producers.
    Because milk value varies by location, it is appropriate, in using 
a classified pricing plan, to establish Class I prices that reflect 
these location value differences. Supporters of Option 1A and Option 1B 
agree this is best accomplished with a system of Class I differentials 
that properly links and aligns milk value. In evaluating how best to 
accomplish this, it is also important to recognize the significant 
changes that have taken place within the dairy industry since the full 
measure of Class I pricing was last undertaken at a 43-day national 
hearing in 1990.

[[Page 16118]]

    Today, and as evidenced in the hearing record of 1990, there was 
general satisfaction with the way Class I milk pricing was developed 
and employed in a system of orders that had evolved over nearly 60 
years. The record of that hearing evidenced that technological and 
structural changes were underway, but the record did not contain 
sufficient evidence for changes at that time. The Upper Midwest region 
of the country can no longer be considered the single reserve supply of 
milk that the country can rely upon for a supply of milk to meet fluid 
needs in deficit areas. In fact, the reform effort has clearly revealed 
that there are several reserve supply areas, and the Class I pricing 
structure changes adopted are reflective of this change. Other issues--
technological factors, improved assembly and distribution systems 
allowing for sales competition of ever-larger geographic areas, the 
growing importance of milk value based on the value of its components--
all speak to the need for reforming the Federal order system.
    The PR preliminarily narrowed the Class I pricing structure to two 
options. Both have similarities and differences that have been 
discussed in detail. The adopted Class I pricing structure will work in 
conjunction with other reforms to milk order provisions, especially the 
more transparent product price formulas and the reduced amount of 
advance notice for Class I and Class II prices. Taken as a whole, the 
package of reforms retain the features that are desired and needed to 
achieve the goals of the AMAA articulated by Option 1A supporters while 
also providing the appropriate changes needed to obtain greater 
economic efficiency and equity--an objective voiced by supporters of 
Option 1B. The adopted class I pricing structure will establish Class I 
milk prices that will result in a sufficient supply of milk for the 
national system of reformed and consolidated milk orders.
    The adopted Class I pricing structure recognizes and addresses the 
concerns of Option 1A supporters in their view of the limitations of 
relying on the marketplace in establishing milk prices to producers 
that are equitable and reasonable given the marketing situation they 
face. Similarly, the adopted Class I pricing structure recognizes that 
handlers will be assured a higher degree of minimum price equity. As 
importantly, the adopted Class I pricing structure provides the 
necessary structural reform needed in the dairy industry. The adopted 
structure provides the incentives necessary for increased efficiency in 
the organization and distribution of the milk supply and dairy products 
that is not offered by the price structure of Option 1A.
    As discussed earlier, it is important and appropriate that the 
Class I price structure recognize all uses of milk. The classified 
pricing system of the Federal milk order program will continue to value 
fluid milk in the highest-priced class. The higher-priced 
classification encourages all milk to first satisfy Class I needs and 
the adopted Class I pricing structure accomplishes this. Additionally, 
it continues to consider the cost of moving milk from an alternate 
location for Class I use, a consideration important to both Option 1A 
and Option 1B supporters. This is reflected in its aligned structure, 
recognizing that in supplying milk for manufactured products, demand 
for manufactured products influences a market's ability to procure milk 
for Class I needs. In this way, the adopted Class I pricing structure 
appropriately considers all uses of milk as a national Class I pricing 
structure.
    Finally, the adopted Class I pricing structure meets the 
requirements of the AMAA. The broad tenet of the AMAA is to establish 
and maintain marketing stability and orderly marketing conditions for 
milk. The Federal milk order program will continue to achieve these 
goals primarily through classified pricing and marketwide pooling. As 
to pricing requirements, the AMAA objective to stabilize the 
marketplace with minimum prices and not set market prices is also 
achieved. As a national Class I pricing structure, it specifically 
addresses, and adequately sets, appropriate Class I differential levels 
that will result in milk prices that are high enough to generate 
sufficient revenue for producers so that an adequate supply of milk can 
be maintained while continuing to provide equity to handlers.

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4. Classification of Milk and Related Issues

    The Federal milk order system should continue to contain uniform 
classification provisions, but with some modification. The proposed 
modifications are consistent with the Agricultural Marketing Agreement 
Act of 1937, which requires that milk must be classified ``in 
accordance with the form in which or the purpose for which it is 
used.''
    The uniform provisions contained in this final decision provide for 
4 classes of use. They are similar to the uniform classification 
provisions contained in the proposed rule, but with some modifications. 
In particular, cream cheese has been moved from Class II to Class III, 
and the proposed fluid milk product exclusion for products packaged in 
``all-metal, hermetically-sealed containers'' has been changed back to 
the present standard: ``formulas especially prepared for infant feeding 
or dietary use (meal replacement) that are packaged in hermetically-
sealed containers.''
    In addition to these changes, the proposed shrinkage provisions 
have been revised to more closely resemble the provisions that are now 
in the orders, and the provision for milk that is dumped or used for 
animal feed has been added back to the orders, but has been moved from 
Class III to a new paragraph, Sec. 1000.40(e), which specifies other 
uses of milk that are to be priced at the ``lowest class price for the 
month,'' be it I, II, III, or IV. Milk that is lost in an accident, 
flood, or fire (i.e., Sec. 1000.40(c)(3) in the proposed rule published 
on January 30, 1998, at 63 FR 4972) has been combined with milk that is 
dumped or used for animal feed in the new paragraph (e). Finally, the 
classification for inventory of fluid milk products and fluid cream 
products in bulk form has been moved from Class III to Class IV.
    Changes in the proposed rule that have been carried forward to this 
final decision include the reclassification of eggnog from Class II to 
Class I, the formation of a new Class IV which includes milk used to 
produce butter and any milk product in dried form, and elimination of 
the term filled milk from the orders.
    In addition to changes in the class uses of milk, this final 
decision modifies the definitions of fluid milk and commercial food 
processing establishment. Also, this decision contains modified 
administrative rules related to the classification of milk. These 
include rules for classifying skim milk and butterfat that is 
transferred or diverted between plants, general rules pertaining to the 
classification of producer milk (including the determination of 
shrinkage and overage), rules describing how to allocate a handler's 
receipts of skim milk and butterfat to the handler's utilization of 
such receipts, and provisions concerning the market administrator's 
reports and announcements concerning classification. The classification 
and classification-related provisions have been restructured, in part, 
to standardize and simplify the regulatory program.
    Further details concerning these changes are explained in the 
following discussion.

4a. Fluid Milk Product (Sec. 1000.15)

    The new orders contain a modified fluid milk product definition in 
Sec. 1000.15. The changes to the fluid milk product definition include 
eliminating the term filled milk, including eggnog in the list of 
specified fluid milk products, and revising the word buttermilk to read 
cultured buttermilk. The revised fluid milk product definition reads 
``any milk products in fluid or frozen form containing less than 9 
percent butterfat and more than 6.5% nonfat milk solids that are 
intended to be used as beverages. Such products include, but are not 
limited to, milk, skim milk, lowfat milk, milk drinks, eggnog, and 
cultured buttermilk, including any such beverage products that are 
flavored, cultured, modified with added nonfat milk solids, sterilized, 
concentrated (to not more than 50% total milk solids), or 
reconstituted.''
    The term ``buttermilk,'' as used in the fluid milk product 
definition, is changed to read ``cultured buttermilk.'' The revised 
term clearly distinguishes the ``beverage'' buttermilk product from the 
buttermilk byproduct which is produced from a continuous churning 
operation.
    The fluid milk product definition also is modified to exclude 
``filled milk'' and to include eggnog in its list of products. Although 
it is apparent that eggnog is a beverage milk product and clearly meets 
many of the criteria for being considered a fluid milk product, it is 
not now included in the list of products identified as fluid milk 
products. The addition of eggnog to the list of fluid milk products 
results in a change of the product's classification from a Class II 
product to a Class I product. The elimination of the term ``filled 
milk'' from the fluid milk product definition is discussed later.
    In the proposed rule, certain changes were proposed for section 
15(b)(1) of the fluid milk product definition. Currently, this section 
exempts from the fluid milk product definition ``formulas especially 
prepared for infant feeding or dietary use that are packaged in 
hermetically-sealed containers.'' As contained in the proposed rule, 
this exemption would have applied to ``formulas especially prepared for 
infant feeding or meal replacement'--without regard to the type of 
container--and ``any products packaged in all-metal, hermetically-
sealed containers.'' These changes were not widely supported and have 
been dropped because they could result in reclassifying certain fluid 
milk products from Class I to Class II. The language in this final 
decision is identical to Section 15(b)(1) of the present orders.

4b. Fluid Cream Product (Sec. 1000.16)

    No change has been made to the fluid cream product definition. The 
current definition is uniform under all the orders and should be used 
in the newly merged orders. There were no comments supporting a change 
in this provision.

4c. Filled Milk

    The definition of filled milk has been eliminated from all milk 
orders and the term has been removed from the fluid milk product 
definition and other provisions within the orders. Filled milk is a 
product that contains a combination of nonmilk fat or oil with skim 
milk (whether fresh, cultured, reconstituted, or modified by the 
addition of nonfat milk solids). Filled milk was first produced and 
marketed in the 1960s. In 1968, the orders were amended to provide a 
definition of filled milk. Currently, there is little or no filled milk 
being produced under Federal orders. The term filled milk is used 18 
times in each of the milk orders. It serves little purpose today except 
to complicate and lengthen the regulatory language. For this reason, 
any reference to filled milk has been removed from all orders.
    The form of filled milk and purpose for which it is used are the 
same as the form and purpose for which whole milk is used. Filled milk 
is marketed by handlers in the same types of packages and in the same 
trade channels as whole milk, and is mainly intended to be used as a 
beverage substitute for milk. Whether made from vegetable fat and fresh 
or reconstituted skim milk, or any combination thereof, the resulting 
product resembles whole milk in appearance. Therefore, any filled milk 
produced and marketed in the future will be classified as a Class I 
product under the revised fluid milk product definition.

[[Page 16123]]

    No letters were received commenting on this change.

4d. Commercial Food Processing Establishment (Sec. 1000.19)

    The definition of commercial food processing establishment (CFPE) 
has been revised by removing the filled milk reference, for the reasons 
previously discussed, and by removing the word ``bulk'' from the 
definition. The removal of the word ``bulk'' will allow a CFPE to 
receive fluid milk products and fluid cream products for Class II use 
in certain sized packages as well as in bulk.
    Presently, the CFPE definition prohibits the receipt of fluid milk 
products for Class II use in relatively small pre-measured packages 
that might reduce the CFPE's production costs. While packaged fluid 
milk products should be permitted to be transferred to a CFPE in any 
size, only those products that are shipped in larger-than-consumer-
sized packages (i.e., larger than one gallon) should be eligible for a 
Class II classification. If milk is received in gallon containers or 
smaller, the milk should be priced as Class I milk since there is no 
way of guaranteeing that such products will not be sold for fluid use. 
Permitting milk in any sized container to be sold to a CFPE for Class 
II use if the container had a special label, such as ``for commercial 
food processing use only,'' was considered, but such a provision would 
be impractical and it would be prohibitively expensive for a handler to 
prepare specially labeled products for small accounts. The current 
restriction barring a CFPE from having any disposition of fluid milk 
products other than those in consumer-sized packages (one gallon or 
less) should be retained under the new orders.
    These two restrictions are based upon practical considerations. The 
integrity of the classified pricing system would be much more difficult 
to maintain if the market administrator were forced to audit every CFPE 
on a regular basis. By prohibiting the sale of fluid milk products in 
consumer-sized packages to a CFPE for anything but Class I use, there 
would be less need to regularly audit CFPE's to be sure that such 
products are not being sold to the public. Similarly, since packaged 
fluid milk products in containers larger than one gallon are rarely, if 
ever, found in retail outlets, it is unlikely that such products will 
be sold for fluid use. By restricting fluid milk product disposition by 
CFPE's to packaged products not larger than one gallon in size, there 
is reasonable assurance that milk priced as Class II will not be 
disposed of as fluid milk sold by the glass from a bulk dispenser.
    There were no comment letters that addressed these recommendations 
in response to the proposed rule.

4e. Classes of Utilization (Sec. 1000.40)

    Historically, the fluid or beverage uses of milk have been 
classified in the highest-priced class (Class I), and soft or spoonable 
products, those from which some of the moisture has been removed, have 
been classified in the intermediate class of milk (Class II). The final 
decision issued on February 5, 1993 (58 FR 12634) provided 3 uniform 
classes of milk for all orders. Classes I and II continued the 
traditional classification of milk, while the lowest-priced class 
(Class III) contained the hard, storable products. In a final decision 
that became effective December 1993, a fourth class--Class III-A 
(actually a sub-section of Class III)--was established for most orders 
for milk used to produce nonfat dry milk.
    This final decision continues to provide a Class I classification 
for milk used for fluid and beverage use, with certain exceptions for 
formulas especially prepared for infant feeding or dietary use in 
hermetically-sealed containers and products with less than 6.5 percent 
nonfat milk solids. Soft or spoonable products, most soft cheeses, and 
milk that is used in the manufacture of other food products or 
sweetened condensed milk will continue to be classified as Class II. 
Class III will continue to apply to milk used in hard cheeses, cream 
cheese, and other spreadable cheese, but will no longer apply to 
butter. Finally, the new Class IV applies to all skim milk and 
butterfat used to produce butter or any milk product in dried form. 
Class IV will also apply to bulk milk that is in inventory at the end 
of the month.
    A new paragraph (e) has been added to Sec. 1000.40 that classifies 
other uses of milk that are priced at the ``lowest-priced class'' for 
the month.
    Under the pricing formulas proposed for the new orders, it is not 
certain whether the Class III price or the Class IV price will be the 
lowest class price for the month. In view of this price uncertainty, a 
new paragraph has been added to Sec. 1000.40 to guarantee that milk 
that is lost in an accident, dumped, or used for livestock feed is 
accounted for at the month's lowest class price.
    Comments filed regarding the number of classes of utilization for 
the proposed merged orders varied from supporters of one class, which 
would eliminate all manufacturing classes, to supporters of 5 classes 
of milk. Comments concerning the addition of an export class were also 
received. However, a large majority of the comments on this issue 
supported 4 classes of utilization as proposed.

4f. Class I Milk

    In this final decision, Class I milk includes all skim milk and 
butterfat contained in milk products that are intended to be consumed 
in fluid form as beverages, with certain exceptions. These exceptions 
include plain or sweetened evaporated or condensed milk, milk that is 
used in formulas especially prepared for infant feeding or meal 
replacement if such products are packaged in hermetically-sealed 
containers, and any product that contains by weight less than 6.5 
percent nonfat milk solids.
    Under this final decision, eggnog will join lowfat eggnog as a 
Class I product. Class I products are generally classified on the basis 
of their fluid form and intended use. Eggnog, a highly seasonal 
product, is clearly intended to be consumed as a beverage. Since this 
product is manufactured, packaged and distributed to the consumer as a 
drinkable beverage, it should be classified as a Class I product. 
Comments received regarding the reclassification of eggnog were 
generally in support of its reclassification into Class I, although a 
few handlers submitted comments opposing this change, arguing that it 
would increase the cost of eggnog and, therefore, reduce consumer 
demand for this product.
    Class I Used-to-Produce. In order to simplify the accountability 
for milk products classified as Class I that may contain nonmilk 
ingredients and/or previously processed and priced skim milk and 
butterfat, the proposed rule recommended adding a ``used-to-produce'' 
category to Class I. The proposed rule stated that the used-to-produce 
accountability method would preclude the need to develop and maintain 
nonstandard conversion factors and non-milk credits (i.e., salt, 
flavoring, stabilizers) for milk product accountability and would 
improve the accuracy of handler reporting and minimize audit 
corrections without sacrificing any statistical information, pricing 
considerations, or classification criteria.
    Several comment letters were received arguing that the proposed 
Class I used-to-produce category would not simplify the accounting 
system but instead would complicate it. No comments were received 
endorsing this proposal.
    Our analysis of the proposed Class I used-to-produce category 
generally supports those who argued against it. If there were no need 
to follow a pool

[[Page 16124]]

distributing plant's route disposition to its ultimate source to 
determine under which order the plant would be regulated, it would be 
possible to simplify accounting by adopting a Class I used-to-produce 
category. However, with the pooling standards adopted in this final 
decision, the proposed used-to-produce category would simply require 
dual accounting with no offsetting benefit. Accordingly, the Class I 
used-to-produce proposal has been dropped from this final decision.

4g. Class II, III, and IV Milk

    The classification of milk used in Class II, III, and IV uses and 
products is essentially the same as contained in the proposed rule with 
a few exceptions.
    First, cream cheese is moved from Class II to Class III, where it 
has been for many years.
    Second, fluid milk products and bulk fluid cream products in 
inventory at the end of the month have been moved from Class III to 
Class IV.
    Third, the skim milk equivalent of nonfat solids used to modify a 
fluid milk product that has not been accounted for in Class I has been 
moved from Class III to Class IV.
    Fourth, the proposed Class II classification for any fluid product 
in an ``all-metal, hermetically-sealed container'' is changed to what 
is now in the orders: i.e., ``formulas especially prepared for infant 
feeding or dietary use (meal replacement) that are packaged in 
hermetically-sealed containers''.
    Finally, the surplus classification for milk that is dumped or used 
for animal feed is added back to the orders, but, as described earlier, 
it has been placed in a new paragraph (e) of Sec. 1000.40 which prices 
milk in the lowest-priced class for the month. For the same reasons 
cited previously, milk which is lost in a fire, flood, or accident also 
has been moved from Class III to the ``other uses'' class.
    Under the proposed rule, the classification of cream cheese would 
have been changed from Class III to Class II. The rationale for this 
change was that the milk used in Class II products is used to process 
or manufacture products for which handlers know a consumer demand 
exists and that such products are neither as perishable as fluid 
products nor perform a balancing function for the market, as do butter, 
powder, and the hard cheeses.
    This proposal was not well received by a large majority of the 
handlers and producer organizations that commented on it. The 
International Dairy Foods Association argued that the pricing of milk 
used for cream cheese under California's state order is below the 
Federal order Class II or III price and moving cream cheese from Class 
III to Class II would create a huge competitive disadvantage for milk 
used in cream cheese under Federal milk orders. The National Milk 
Producers Federation, Dairy Farmers of America, and numerous individual 
handlers repeated essentially the same argument.
    Some comments addressed the classification of cottage cheese and 
ricotta cheese, in addition to cream cheese. A national manufacturer of 
cheese argued that milk used in cottage cheese and ricotta cheese 
should be reclassified from Class II to Class III. The handler stated 
that due to falling demand for cottage cheese, it should be placed with 
other cheeses in Class III. Another cottage cheese manufacturer made 
the same suggestion. Several comment letters also pointed out that 
ricotta cheese was priced under California's Class 4-b, giving 
California processors an advantage over processors making ricotta from 
milk priced under Federal milk orders. While these comments may have 
some merit, we believe that more information is needed before these 
changes can be considered.
    Ending inventory of fluid milk products and fluid cream products in 
bulk form should be moved to Class IV. Since the Class IV price is 
expected to be the lowest class price in the long run, it is logical to 
classify ending inventory in Class IV. Also, paragraph (c)(4) of 
Sec. 1000.40, should be moved from Class III to Class IV. This 
paragraph prices the skim milk equivalent of nonfat milk solids used to 
modify a fluid milk product. With the inclusion of a Class IV 
classification for all products in dried form, the nonfat milk solids 
used to modify a fluid milk product should be priced as Class IV, 
together with other dried products, rather than Class III.
    Products lost by a handler in a fire, flood, or vehicular accident 
and products that are dumped or used for animal feed have been moved 
from Class III to a new paragraph (Sec. 1000.40(e)) which would price 
skim milk and butterfat in such uses at the lowest class price for the 
month. Under the pricing formulas proposed for the new orders, the 
Class III price or Class IV price is likely to be the lowest class 
price for the month, but it is possible under some orders that the 
Class I or II price could be the lowest class price for the month if 
component values were increasing rapidly. In view of this price 
uncertainty, a new paragraph has been added to Sec. 1000.40 to 
guarantee that milk that is lost in an accident, dumped, or used for 
livestock feed is accounted for at the month's lowest class price.
    As previously noted, formulas especially prepared for infant 
feeding or dietary use (meal replacement) that are packaged in 
hermetically-sealed containers should continue to be classified as 
Class II products. Although the proposed rule suggested a modification 
of this exemption, there was insufficient support to move forward with 
this suggestion. Accordingly, no change was made from the language that 
is now in the orders.
    The treatment of buttermilk should remain unchanged from the 
proposed rule. No comments were received in opposition to the proposed 
distinction between buttermilk for drinking purposes and buttermilk for 
baking purposes. As set forth in the proposed rule, drinking buttermilk 
would have to be labeled as ``cultured buttermilk'' while buttermilk 
for baking must contain food starch in excess of 2% of the total solids 
in the product and the product must be labeled to indicate the food 
starch content.
    The proposal to account for all Class II products on a used-to-
produce basis was unopposed. Accordingly, this accounting method, which 
now applies to all Class II products, except for some fluid cream 
products, is extended to the remaining Class II products that are 
currently accounted for on a disposition basis.
    As noted above, a large majority of the comment letters supported 
the 4 classes of utilization as set forth in the proposed rule, 
including the separate Class IV for butter and milk products in dried 
form. Therefore, no change has been made to Class IV in this final 
decision except for the addition of the items already discussed.
    Several commenters reiterated requests made prior to the proposed 
rule to reclassify bulk sweetened condensed milk from Class II to Class 
IV. The commenters explained that sweetened condensed milk is primarily 
used in commercial food processing establishments and in the 
confections industry and that it is interchangeable with powdered milk 
products and sugar in ingredient markets for processed foods and candy. 
They argued that manufacturers of sweetened condensed milk are 
currently at a competitive disadvantage with manufacturers of nonfat 
dry milk and urged that the 2 products be classified identically. 
According to one commenter, the Galloway Company, the current system of 
classification places sweetened condensed milk at a significant 
disadvantage and has virtually

[[Page 16125]]

destroyed the market for sweetened condensed milk.
    Hershey Foods Corporation filed a comment letter objecting to the 
difference in classification for fresh milk used to make chocolate 
compared to fresh milk used to make powder that is used to make 
chocolate. Specifically, Hershey argued that the Class II 
classification for fresh milk used to make chocolate, compared to the 
Class IV classification for milk used to make powder that is 
subsequently used in chocolate violates the Act because such milk 
starts out in the same form and is used for the same purpose.
    Hershey explained that whole milk, sugar, cocoa butter, and 
chocolate liquor are used to make ``chocolate crumb,'' which is further 
processed to make chocolate. According to Hershey, the chocolate crumb 
has a moisture content of only 1 percent, which means that if a 
manufacturer receives fresh whole milk, it must remove 99 percent of 
the water from it in order for the milk to perform its function in the 
chocolate. An alternative to starting with whole milk and drying it is 
to purchase whole milk powder and mix it with the sugar, cocoa butter, 
and chocolate liquor to make the chocolate crumb.
    Hershey argues that maintaining the current disparate 
classifications for fresh milk used to make chocolate and fresh milk 
that is first dried and then used to make chocolate, in combination 
with the proposed 70-cent Class II differential, will pressure 
manufacturers to change their manufacturing processes and formulas, 
reduce the use of fresh milk and increase the use of milk powders, 
reduce milk solids in product formulas, replace milk solids with lower 
cost alternatives, and might even influence the location of chocolate 
manufacturing plants. Hershey also notes that the State of California 
does not discriminate between manufacturers of chocolate, but instead 
prices all milk used to manufacture chocolate in the same class whether 
the chocolate manufacturer begins its process with fluid milk, 
sweetened condensed milk, evaporated milk, nonfat dry milk, or whole 
milk powder.
    Galloway and Hershey conclude that there is no justification for 
pricing milk used to make sweetened condensed milk or chocolate crumb 
in a higher class than milk used to produce powdered milk. However, 
Galloway states, if sweetened condensed milk is kept in a class higher 
than powder, the differential for that class should be no more than 30 
cents per hundredweight.
    Bulk sweetened condensed milk/skim milk is used as an intermediate 
product in ice cream, candy, and other manufactured products. However, 
these manufactured products can also be made from powdered milk. When 
powder prices are low relative to the Class II price, there is an 
economic incentive for powder to be substituted for bulk sweetened 
condensed milk. As a result, there must be an economic relationship 
between the Class II price and the cost of using alternative dry or 
concentrated products to make Class II products. Under current pricing 
provisions, the Class II price can be excessive relative to using 
nonfat dry milk since the Class II price is a measure of the value of 
milk in cheese (the Class III price) plus a differential.
    Conceptually, we do not believe that the value of milk used in 
demand-driven products like chocolate and sweetened condensed milk that 
is used in food products is the same as milk that is sometimes made 
into powder for lack of any other use. The major point of the ability 
to substitute among forms of milk, sweetened condensed milk, and nonfat 
dry milk in certain uses is that there is a fixed relationship between 
the Class II and Class IV price. The appropriate price relationship is 
discussed in the Class II pricing section of this decision.
    In the proposed rule, no allowance was provided for dumped milk or 
milk used for animal feed, and a Class III classification was 
recommended for milk lost in a fire, flood, or accident. Many handlers 
and the National Milk Producers Federation objected to the removal of 
the Class III classification for milk that is dumped or used as animal 
feed.
    On the basis of the comments filed on this issue, a surplus use has 
been established for milk that is dumped or used as animal feed. The 
price applicable to such use will be the lowest class price for the 
month.

4h. Shrinkage and Overage

    Shrinkage is experienced by handlers in milk processing operations 
and in the receipt of farm bulk tank milk at receiving stations and 
processing plants. Milk is unavoidably lost as it remains in pipe 
lines, adheres to tanker walls and/or other plant equipment, and is 
washed away in the cleaning operations. In addition, unexpected losses, 
including spillage or leaking packages, also contribute to shrinkage.
    In the proposed rule, we proposed a pro rata assignment of 
shrinkage based on a handler's utilization. In other words, each 
handler's shrinkage would have been classified according to the 
handler's use of milk that was not lost in transit or processing. We 
believed that the adoption of such a provision would have simplified 
both order language and accounting procedures, and we thought that it 
would be acceptable to handlers because, although in some cases it 
increased their costs slightly, the change applied equally to everyone.
    There were very few comment letters that supported the proposal and 
an overwhelming number of comments urging us to keep the current 
provision. Many of the opponents were high Class I utilization handlers 
who complained that the proposed change would reclassify their 
shrinkage from Class III to Class I, increasing their costs for this 
lost milk.
    It was not only handlers that disliked the proposed shrinkage 
provision. Several producer organizations, including Dairy Farmers of 
America and the National Milk Producers Federation, also voiced their 
opposition to the proposal. Most of the comment letters urged us to 
retain the key features of the present shrinkage provision, but there 
were comments suggesting a simpler provision.
    Based on the comments received, this final decision retains, in 
large part, the present method of calculating shrinkage allowances and 
pricing shrinkage, but with certain modifications. Just as in the 
current provisions, there are specified allowances for shrinkage. The 
major difference is that shrinkage is not automatically assigned to a 
specified class, as it is now, but rather is assigned to the ``lowest-
priced class.'' This change was made to conform with the new 4-class 
pricing system and, more importantly, to recognize that there is no 
fixed relationship between class prices because of the different 
formulas used to compute them. For example, because the formulas for 
Class III and IV prices are not directly related, it cannot be known in 
advance which class price will be lowest. Since the relationship 
between class prices will vary from one month to the next, under the 
provision adopted here shrinkage may be priced in Class III one month 
and in Class IV the next. It is necessary to price shrinkage in the 
lowest-priced class to avoid the situation where a cheese plant, for 
example, would have to pay more for its shrinkage than it would for 
milk used in cheese. Such would be the case if shrinkage was always 
priced in Class IV and the Class IV price exceeded the Class III price. 
Pricing shrinkage in the lowest-priced class prevents this problem.
    As noted, the current shrinkage allowances has been retained in the 
revised provision. Thus, a pool plant operator would receive a lowest-
priced class shrinkage allowance based on 2

[[Page 16126]]

percent of the total quantity of milk physically received at the plant 
directly from producers' farms on the basis of farm weights and tests, 
plus 1.5 percent of bulk milk received on a basis other than farm 
weights and tests, and minus 1.5 percent of the quantity of bulk milk 
transferred to other plants, excluding concentrated milk transferred to 
another plant for an agreed-upon use other than Class I. A cooperative 
association handler that delivers milk to pool plants on a basis other 
than farm weights and tests would receive a shrinkage allowance of .5 
percent of the total quantity of milk picked up at producers' farms. 
Shrinkage in excess of these allowances will be assigned in series 
starting with Class I to the extent of available utilization.
    The shrinkage provision adopted for the new orders contains 
language to accommodate shrinkage associated with ``concentrated 
milk.'' Prior to the 1993 classification decision, condensed milk, 
which is made for use in ice cream and other manufactured products, was 
not a fluid milk product. Hence, it was not addressed by the shrinkage 
provision. This changed after the decision, however, when condensed 
milk became a fluid milk product. In making this change to the fluid 
milk product definition, certain conforming changes that should have 
been made in the shrinkage provisions were overlooked. The current 
proceeding involving all Federal orders has been the first opportunity 
to rectify this oversight. During the interim period, the unique 
problem associated with condensed milk has been handled 
administratively. Thus, the new language added to the shrinkage 
provision does not represent a change from the way the rules have been 
administered but merely codifies them.
    Some plants receive milk from producers, condense (i.e., 
concentrate) the milk into a product that contains not more than 50 
percent total milk solids, and then transfer this product on an agreed-
upon basis to another plant for use in some product other than a fluid 
milk product (e.g., ice cream). In this case, the first plant should 
retain the full 2 percent shrinkage allowance because it incurs 
processing shrinkage in the course of concentrating--i.e., most likely 
condensing--the milk. The plant purchasing this concentrated (i.e., 
condensed) milk should get no shrinkage allowance on this milk since 
the designated use of this milk is for non-fluid use. Accordingly, the 
value of any shrinkage incurred in further processing this concentrated 
milk would not be much less than its use value.
    As noted elsewhere in this decision, a recent development in milk 
processing is the use of on-farm filtering equipment (e.g., reverse 
osmosis or ultra-filtration) to concentrate milk before it is shipped 
to a plant for use in a variety of milk products. Although this milk 
falls under the same broad ``concentrated milk'' category as condensed 
milk, it is actually a very different product which can conceivably be 
used for fluid use as well as in a manufactured product such as cheese 
or ice cream. Thus, language is needed in the shrinkage provision to 
differentiate this type of concentrated milk from condensed milk. We 
have accommodated these 2 types of concentrated milk by allowing the 
shipping and receiving handlers to agree on the use of this milk. 
Accordingly, if a handler receives concentrated milk from another plant 
by agreement for use in Class II, III, or IV, the receiving handler 
will get no shrinkage on this milk. If no such agreement is specified, 
however, the receiving handler will get the 1.5 percent shrinkage 
allowance, just as would be the case for unconcentrated milk that was 
received from another plant.
    For example, milk may be concentrated at a plant by using reverse 
osmosis or ultra-filtration techniques and then be transferred to a 2nd 
plant for use in a fluid milk product. In such case, the milk will not 
be transferred by agreement for other than Class I use, but instead 
will be allocated to use at the 2nd plant receiving this concentrated 
milk. In this instance, it is appropriate to treat this milk just like 
unconcentrated milk that is received at a plant and then transferred to 
a 2nd plant. Thus, the first plant will initially get a 2 percent 
shrinkage allowance for the milk received from producers, but will be 
required to subtract 1.5 percent from the 2 percent when the milk, even 
though concentrated, is transferred to the 2nd plant. The 2nd plant 
will get a shrinkage allowance based on 1.5 percent of the 
reconstituted volume of the concentrated milk. In other words, for 
accounting purposes the water that was initially removed from the milk 
will be added back to the concentrated milk before computing the 1.5 
percent shrinkage allowance for the 2nd plant.
    In the example above, the concentrated milk will likely be from a 
farm plant which concentrates its milk before shipping it using either 
reverse osmosis (RO) or ultra-filtration (UF). As explained in the 
uniform provision discussion in this final decision, milk from a single 
farm with RO or UF equipment will be treated as producer milk of the 
first pool plant receiving this milk. However, when the milk of 2 or 
more producers is commingled on a farm with RO or UF equipment, that 
farm will be treated as a plant and the dairy farmer owning or leasing 
the farm will be the responsible handler for all of the milk processed 
that month.
    The shrinkage provision in this final decision differs from the 
current shrinkage provisions in one other respect. At the present time, 
when a manufacturing facility that has absolutely no Class I 
utilization has ``excess shrinkage'' (i.e., shrinkage that exceeds its 
2 percent shrinkage allowance) the excess shrinkage is assigned to 
Class I even though the plant has no Class I utilization. Thus, the 
milk that is ``lost'' by the plant is actually priced higher than the 
milk that is ``used'' by the plant.
    Under the proposed provision, such excess shrinkage would be 
assigned to whatever utilization the plant has, starting with Class I. 
In the case of a cheese plant that has no utilization other than Class 
III, the excess shrinkage would be assigned to Class III.
    After shrinkage is assigned pursuant to Sec. 1000.43(b) of the 
proposed orders, it will be added to a handler's reported utilization 
to arrive at the ``gross utilization in each class.'' The gross 
utilization in each class will then be carried over to Sec. 1000.44, 
where it will be used to allocate the handler's receipts to its gross 
utilization of such receipts.
    Overage occurs when the reported utilization of producer milk 
exceeds the reported quantity of producer milk received. Overage, as 
well as shrinkage, can occur for a number of reasons but is usually the 
result of record-keeping and measurement errors.
    As set forth in the proposed rule, overage would have been 
classified by being prorated to a handler's reported utilization. It 
then would have been subtracted from the handler's reported utilization 
to arrive at the gross utilization in each class which would have been 
used to allocate a handler's receipts in Sec. 1000.44.
    No comments were received specifically focusing on the proposed 
treatment of overage, undoubtedly because the proration of overage does 
not have the same financial impact as the proration of shrinkage. 
Nevertheless, in conjunction with the change in the treatment of 
shrinkage, the treatment of overage also should remain the same as it 
is now in the orders. Accordingly, in this final decision, overage is 
classified in Sec. 1000.44(a)(11) by subtracting the excess pounds of 
skim milk and butterfat from each class, beginning with Class IV. This 
treatment is identical to the way overage is classified under the 
present orders in section

[[Page 16127]]

44(a)(14), except for the fact that now--since there is no Class IV--
the allocation begins with Class III.

4i. Classification of Transfers and Diversions (Sec. 1000.42)

    Certain changes have been made to the classification of transfers 
and diversions section of the orders to simplify and clarify order 
language. The changes discussed in this final decision are virtually 
identical to those contained in the proposed rule, except for minor 
corrections and conforming changes necessitated by other changes in 
order provisions. There were very few comments pertaining to this 
section of the proposed rule. Those that were received supported the 
changes proposed.
    At the present time, in many orders if any milk that is diverted 
from one order to another for requested Class II or III use is assigned 
to Class I, the dairy farmer who shipped that milk is defined as a 
producer under the order receiving the milk with respect to that 
portion of the milk assigned to Class I. In other orders under similar 
conditions, the dairy farmer becomes a producer on the receiving order 
for all of the milk diverted even though only a portion of the milk was 
classified as Class I. When this type of adjustment is necessary, the 
diverting handler is informed by the market administrator's office that 
there is not enough Class II or III use remaining in the receiving 
plant to absorb all of the milk diverted. In such case, the diverting 
handler may pick which load or loads of diverted milk will become 
producer milk under the receiving order.
    Since the orders are not precisely clear on how inter-order 
diverted milk should be handled, some modification is needed in the 
order language. Under most orders, and as provided in this final 
decision, milk may be diverted from one order to another for a 
requested use other than Class I. However, if there is not enough Class 
II, III, or IV utilization in the receiving plant to be assigned to the 
diverted milk, some milk may have to be assigned to Class I. When this 
happens, the practical administrative problems involve determining 
which milk of which dairy farmers and which loads of milk will be 
shifted as producer milk from one order to another.
    Market administrators should be given some flexibility to handle 
these administrative problems on a market-by-market and case-by-case 
basis. As a practical matter, most milk diverted between orders is 
diverted by cooperative associations that reblend proceeds to their 
members. In most cases, it makes little difference to a cooperative 
association whether a dairy farmer is a producer on one order or 
another order; any differences in blend prices between the orders will 
be washed out in the reblending process. In the case of milk of 
nonmember producers that is diverted between orders, however, 
differences could arise in a producer's net proceeds for the month 
depending upon how much milk was pooled in each order. Therefore, these 
situations should be handled in such a way as to be least disruptive to 
individual dairy farmers.
    A market administrator does not know until handlers' reports have 
been received that some portion of milk reported as diverted to another 
order cannot be absorbed by the amount of non-Class I utilization in 
the receiving order's plant. In such case, the diverting handler should 
be given the option of designating the entire load of diverted milk as 
producer milk at the plant physically receiving the milk. 
Alternatively, if the diverting handler wishes, it may designate which 
dairy farmers on the diverted load of milk will be designated as 
producers under the order physically receiving the milk. As a last 
resort, the market administrator will prorate the portion of diverted 
milk among all the dairy farmers whose milk was received from the 
diverting handler on the last day of the month, then the second-to-last 
day, and continuing in that fashion until the diverted milk that is in 
excess of Class II, III, and IV use has been assigned as producer milk 
under the receiving order.
    A conforming change that should be made in each order relates to 
milk that is transferred or diverted for Class II or III use. 
Presently, milk may be transferred or diverted on a requested Class II 
or III basis. However, with 4 classes of utilization in the new orders, 
milk could be diverted for requested Class IV use also. Rather than 
specifying ``Class II, III, or IV,'' however, the orders should simply 
state ``other than Class I'' to accommodate a system of more than 3 
classes. This language is simpler, shorter, and accomplishes the same 
end.
    To simplify and clarify the classification of transfers and 
diversions of bulk fluid milk products and bulk fluid cream products 
from a pool plant to a nonpool plant, which are classified by assigning 
the nonpool plant's utilization to its receipts, the phrase, 
``excluding the milk equivalent of both nonfat milk solids and 
concentrated milk used in the plant during the month,'' has been added 
in Sec. 1000.42(d)(2)(i). This language will help to clarify the steps 
to be followed in verifying the utilization of bulk fluid milk and 
cream at the nonpool plant. It has been added to ensure administrative 
consistency and does not represent a change in the application of this 
provision.
    In Sec. 1000.42(d)(2)(vi), the allocation process for bulk fluid 
milk transferred from pool plants to nonpool plants is modified such 
that any remaining unassigned receipts of bulk fluid products be 
assigned, pro rata among such plants, to the extent possible first to 
any remaining Class I utilization and then to all other utilization, in 
sequence beginning with the lowest class at the nonpool plant. This 
change returns the order language to the assignment sequence that was 
adopted in the Uniform Classification Decision of 1974. Receipts from 
pool plants should not be given preference by assigning such milk to 
the available Class II use before assigning receipts from dairy farmers 
who constitute the regular source of milk for such nonpool plant. 
Generally, milk transferred or diverted from pool plants to nonpool 
plants is surplus milk and would be used in storable manufactured 
products, such as nonfat dry milk and butter. By assigning transferred 
or diverted milk to a nonpool plant's Class II utilization first, the 
pool plant operator is forced to account for this milk at the Class II 
price, even though the nonfat dry milk or other surplus product that 
was made with the milk is of a lesser value. This process will prevent 
the assignment of receipts at a higher utilization than the actual 
utilization.
    Receipts of bulk fluid cream products at nonpool plants from pool 
plants and plants regulated under other Federal orders, similarly, will 
be assigned to the lowest class utilization first. Generally, a plant 
operator will use its regular source of supply in the highest valued 
uses before using alternative supplies. Thus, if a nonpool plant 
receives cream from a pool plant or a plant regulated under another 
Federal order, it is likely that the regulated plants were trying to 
dispose of their excess cream. The nonpool plant receiving the cream 
will most likely use it for manufacturing purposes; therefore, it 
should be assigned to the lowest class first. The priority given to 
regular source supplies is recognized and the provision modified to 
reflect this.

4j. General Classification Rules (Sec. 1000.43)

    For classification purposes, the milk of a cooperative bulk tank 
handler--i.e., a ``9(c) handler''--that is delivered to a pool plant 
will be treated as ``producer milk'' of the pool plant operator. This

[[Page 16128]]

change will shorten and simplify the allocation section.
    The computation and classification of shrinkage and overage have 
been added to this section. This will eliminate Section 41, the section 
previously used for this purpose. Also, the last paragraph of Section 
43 has been removed because milk for Class IV use now would be 
classified in Section 44 of the orders.
    No comments were received pertaining to this section.

4k. Classification of Producer Milk (Sec. 1000.44)

    A handler may receive milk from a producer, a cooperative 
association acting as a handler on bulk tank milk, by transfer from 
another pool plant, or from ``other sources'' such as nonpool plants, 
partially regulated plants, and plants that are regulated under other 
orders. Because of this diversity in sources of receipt, it is 
necessary in a milk order to go through an allocation sequence to 
determine which source of milk gets priority to a particular class of 
utilization and to determine how producer milk was used. In some 
orders, this allocation sequence is done on a system-wide basis; in 
others, it is done for each plant receiving producer milk.
    Section 44 is one of the most complicated and difficult-to-
understand sections in a milk order. Consequently, an attempt has been 
made to simplify and shorten it. Part of this task was made easier by 
proposed changes to other sections (e.g., elimination of filled milk, 
elimination of individual handler pools, and modification of the 
treatment of inter-order transfers and diversions).
    All orders are not now uniform in the classification of producer 
milk. For example, some orders (e.g., Chicago Regional) provide for 
system allocation while others allocate receipts on a plant-by-plant 
basis for a multiple plant handler.
    Under the consolidated orders, milk will be allocated on a plant-
by-plant basis, as modified to reflect other changes proposed herein. 
The system allocation method that is found in some orders is based upon 
a set of marketing conditions concerning the locations of handlers' 
plants and the market's available milk supply in relation to those 
plants. These provisions were intended to stop abuses that occurred 
when milk was transferred from one market to another. Rather than 
permit an inter-order transfer to be assigned at a handler's high Class 
I utilization plant, while the handler's producer milk was assigned to 
lower use value at another of its plants, the system allocation 
provisions assigned the transfers on the basis of the handler's 
utilization at all plants combined. The objective was to prevent more 
distant other order milk from being assigned to Class I use at the 
expense of producers who were located nearer to the city markets and 
who represented the normal source of supply for the markets' fluid milk 
needs.
    The 11 new orders do not fit within the parameters of the classical 
model where a major consumption area is surrounded by production areas. 
The marketing areas proposed for the consolidated orders span several 
states and have a number of major population centers. They also have 
pockets of milk production that, in a number of cases, are in higher-
priced areas than some of the fluid milk plants within the marketing 
area. This milk may not be economically available to a fluid milk plant 
several hundred miles away. In fact, it may be that a plant near the 
periphery of a multi-state market may find its closest and cheapest 
source of supply from outside the market rather than from within the 
marketing area. Accordingly, the system allocation rules are not 
supported by current marketing conditions. Therefore, all orders have 
been modified to allocate milk only on a plant-by-plant basis rather 
than on a system basis.
    Another change that has been made in the allocation section 
concerns the ``98/2'' rule. At the present time, only 98 percent of the 
packaged fluid milk products transferred between orders is allocated to 
Class I; the remaining 2 percent is allocated to Class III. This 
provision, originating from the June 19, 1964, ``compensatory payment'' 
decision, was adopted to provide an allowance for ``route returns.'' 
According to that decision, ``it is reasonable to expect some route 
returns will be associated with inter-market transfers just as there 
are in connection with milk locally processed in the receiving market . 
. . a small allowance of 2 percent for such returns, which must fall 
into surplus use, should be included to avoid such over-assignment in 
Class I.'' (29 FR 9120).
    This final decision classifies route returns based upon the use of 
such returns. If route returns are used for animal feed, an ``other 
use'' classification is provided and such milk is priced at the lowest 
class price for the month. If route returns are used to make another 
product, such as cottage cheese for example, the milk would be 
reclassified as Class II. This classification not only applies to 
packaged products made from producer milk, but also includes packaged 
products that were received from other plants, distributed on routes, 
and then returned to the last plant of receipt.
    A handler transferring packaged fluid milk products to another 
handler's plant may incur some lost product en route to the buying 
handler's plant. In such case, the transferring handler may report such 
product as route returns and account for the milk used in such product 
at the lowest class price.
    In view of the reclassification for route returns for either 
handler involved in an inter-order transfer who reports such returns, 
subject to market administrator verification, it is not necessary to 
classify interorder transfers of fluid milk products at 98 percent 
Class I and 2 percent Class III because this rule overcompensates 
handlers for route returns and unfairly reduces income to producers. 
For these reasons, the ``98/2'' rule has been eliminated.
    In addition to the changes discussed above, Section 44 has been 
shortened and simplified by removing unnecessary references that serve 
to confuse the language rather than make it easier to understand. Where 
possible, simpler language has been used to replace lengthy section 
references.
    No comments were received supporting or opposing these 
recommendations.

4l. Conforming Changes to Other Sections (Secs. ----.14, ----.41, and 
----.60).

    Paragraph (b) of the other source milk definition has been removed 
to reflect the fact that all packaged fluid cream products now would be 
accounted for on a used-to-produce basis. Also, as previously noted, 
the simpler and shorter treatment for shrinkage shortens the existing 
shrinkage provision to the point where it is no longer necessary to 
keep a separate section for it. Therefore, a separate section for 
shrinkage is eliminated and the revised contents of that section are 
now incorporated as a new paragraph (b) in Sec. 1000.43. Finally, 
conforming changes have been made to Sec. ----.60 (Handler's value of 
milk for computing the uniform price) to reflect the elimination of 
filled milk from the order, and to reflect changes in references due to 
other modifications such as the changes in the treatment of shrinkage 
and overage.

4m. Organic milk

    During the development stage of the order reform process, a 
proposal was received from Horizon Foods to exempt organic milk from 
pricing and pooling under Federal milk orders.
    In 1990, Congress passed, and the President signed into law, the 
Organic Food Production Act of 1990 (7 U.S.C.

[[Page 16129]]

6501 et seq.), establishing the first Federal standards for organic 
food products. A proposed rule was issued on December 5, 1997, and 
published in the Federal Register on December 16, 1997 (62 FR 65849), 
to implement the National Organic Program.
    Organic dairy products can now be found in many, if not most, major 
grocery chains in metropolitan areas. The retail price of organic dairy 
products is well above non-organic products. In addition to carrying 
organic milk, many supermarkets now also carry organic yogurt, sour 
cream, butter, and other organic dairy products. All of these products 
are priced well above their non-organic counterparts.
    Processors of organic milk have asked for exemption from Federal 
regulation. In a May 20, 1997, letter to the Department, Horizon Foods 
argued that (1) organic milk is a different commodity; (2) the market 
for organic dairy products is a niche market; and (3) Federal order 
regulation of organic milk is contrary to the intent of the Organic 
Foods Production Act because it does not ``facilitate interstate 
commerce in fresh and processed food that is organically produced.'' 
Horizon's proposed solution was to exempt organic milk from the 
producer milk definition if the milk is produced on a certified organic 
farm and if the broker pays the producer at least 110% of the month's 
Class I price for such milk.
    The proposal to exempt organic milk from Federal order pricing is 
denied for several reasons. First, contrary to the assertions of 
Horizon Foods that all organic milk is priced at 110% of the Class I 
price, regardless of how the milk is used, there is evidence that some 
organic milk has been pooled and priced as non-organic milk under some 
orders, including the Chicago Regional and Southern Michigan orders, 
for example. Second, although the retail price of organic milk is well 
above non-organic milk, we believe that organic milk competes with the 
regulated market and, therefore, also must be fully regulated. Third, 
if Congress wished to exempt organic milk from Federal milk order 
regulation, they could have done so either in the Organic Foods 
Production Act or in the 1996 Federal Agricultural Improvement and 
Reform Act; but they did not. Fourth, there is no indication that all 
processors of organic milk price their receipts the same way as Horizon 
Foods. Even if they did, however, the one class/one price system 
currently used by Horizon could be a temporary phenomenon due to the 
rapidly expanding market for organic products. The day may come when 
the organic market becomes saturated and milk in excess of fluid needs 
must be disposed of at competitive prices. If and when this happens, it 
is likely that some form of classified pricing will be implemented. 
Finally, the Act provides for classifying and pricing milk on the basis 
of its form and use. As a result, different costs that may be 
associated with producing organic milk or other types of milk are not 
relevant. For these reasons, it would be inappropriate at this time to 
exempt organic milk from pooling or to provide any other type of 
special treatment for it under the guise of Federal order reform.
    No comments were filed concerning this issue with the exception of 
Horizon Foods, which continued to support its proposal.

4n. Allocation of Location Adjustment Credits

    A provision that is now common to most orders has not been carried 
forward to the consolidated orders. This provision, which allocates 
location adjustment credits that are applied to transfers of bulk fluid 
milk products between pool plants, is commonly found in Section 52 of 
most current orders (See, for example, Secs. 1001.53(h), 1007.52(b), 
1030.52(c), or 1079.52(d)).
    Under most orders, intra market shipments of milk between handlers 
are assigned to Class I use, unless both handlers agree on a lower 
classification. Milk that is assigned to Class I use is priced at the 
receiving plant subject to a location adjustment credit that may apply 
if it is demonstrated that such milk is actually needed for Class I 
use. If the credit is applied, the milk is priced at the transferring 
plant. This assignment of location adjustment credits is intended to 
prevent the use of pool proceeds to pay the hauling cost for the 
transfer of bulk milk between pool plants when the intended use of the 
milk is for other than Class I use.
    To carry out this concept, the provision typically assigns a pool 
distributing plant's Class I use first to its milk receipts directly 
from producers, then to bulk milk received from a cooperative bulk tank 
handler, then to milk received by diversion from another pool plant, 
and then to packaged fluid milk products received from other pool 
plants. The remaining Class I use in the distributing plant is then 
assigned to bulk milk received by transfer from other pool plants. In 
some orders, this remaining Class I use is assigned pro rata to all of 
the pool plants from which bulk milk was obtained. In other orders, the 
remaining Class I milk is first assigned to pool plants with the same 
Class I price and then, in sequence, to pool plants with progressively 
lower Class I prices.
    This final decision is based on the premise that Class I milk does 
not have the same value at every location. For this reason, Class I 
differentials have been established for each order with location 
adjustments that result in establishing a unified Class I price 
structure that applies to every county and city in the contiguous 48 
states. Given this approach, it is no longer appropriate to classify a 
bulk movement of milk as Class I milk in one section of the order and 
then in another section of the order depart from the principle of 
pricing such Class I milk at the plant where it was physically 
received.
    In actual practice, a distributing plant does not receive a fixed 
amount of milk each day of the week. Some days are heavy bottling days 
when more milk is needed for Class I use. On such days, a distributing 
plant may not be able to obtain enough local milk to meet its Class I 
needs and may have to import plant milk from more distant locations. At 
the end of the month, however, when the allocation of location 
adjustment credits takes place, it may appear that there was more than 
enough local milk to meet the distributing plant's fluid needs, even 
though this was not the case when recapped on a daily basis. 
Nevertheless, the allocation provision allocates location adjustment 
credits based on monthly volumes of milk, not daily volumes, so the 
supply plant could be in a position where it receives no Class I 
location adjustment credit even though the milk was indeed shipped for 
Class I use.
    Some of the new orders have transportation credit provisions that 
provide for hauling credits on bulk milk received by transfer from a 
plant regulated under another Federal order and assigned to Class I use 
at the receiving plant. To arrive at the classification of such milk, 
the milk is assigned to the lower of the receiving plant's or the 
receiving market's Class I utilization. When milk is purchased in this 
manner, the transportation cost of the milk assigned to Class I is 
absorbed, for the most part, by the transportation credit that is 
provided for the handler purchasing the milk without regard to whether 
milk could have been purchased from a closer source of supply.
    Finally, the current application of the provision in question can 
result in a situation where there is more incentive to receive bulk 
milk transferred from a plant regulated under another Federal order 
than from a plant regulated under the same order, whether or not any 
other transportation credits are

[[Page 16130]]

involved. Should this occur, it can result in a transfer of Class I 
sales to the transferring plant's Federal order market.
    For all of the reasons cited above, the allocation of location 
adjustment credits has been removed from the orders. Several comment 
letters were received supporting this change; none were received in 
opposition to it.

5. Provisions Applicable to All Orders

    In addition to the terms and conditions of milk orders previously 
described, there are a number of other provisions common to all milk 
orders that describe and define those persons and plants affected by 
the regulatory plan of the program. Different marketing conditions in 
the consolidated areas, together with institutional factors, do not 
lend themselves to an entirely uniform set of provisions for all 
orders. Consequently, in each of the consolidated orders there are 
provisions that are unique to each order.
    This part of the final decision discusses the nature of these 
common order provisions, their purpose, and whether or not a provision 
can be uniformly applied to all orders. When a provision does not lend 
itself to uniform application, it is discussed in subsequent sections 
of this final rule together with the provisions unique to each of the 
individual orders.
    To the extent that provisions can be uniformly applicable for all 
of the consolidated orders, they are included in Part 1000, the General 
Provisions of Federal Milk Marketing Orders which are, by reference, 
already a part of each milk order. Thus, as provided here, the General 
Provisions include the definitions of route disposition, plant, 
distributing plant, supply plant, nonpool plant, handler, other source 
milk, fluid milk product, fluid cream product, cooperative association, 
and commercial food processing establishment. In addition, the General 
Provisions include the milk classification section of the order, 
pricing provisions, and some of the provisions relating to payments. 
These additions to the General Provisions should make milk order 
provisions more understandable to the general public by removing the 
differences that now exist and by consolidating uniform provisions in 
one place. Thus, an interested person would only have to read one 
``nonpool plant'' section, for instance, to understand how that term is 
applied to all orders. By contrast, at the present time, ``nonpool 
plant'' is defined in every order and there are slight differences in 
the definition from one order to the next.
    No comments to the proposed rule were received with regard to most 
of the provisions discussed in this section. To the extent that there 
were comments, they are specifically discussed below. Most of the 
provisions in the proposed rule are adopted without substantive change. 
Any substantive changes are specifically discussed below.

The Concept of Pooling Milk Proceeds

    All Federal milk orders today, save one, provide for the marketwide 
pooling of milk proceeds among all producers supplying the market. The 
one exception to this form of pooling is found in the Michigan Upper 
Peninsula market, where individual handler pooling has been used.
    Marketwide sharing of the classified use value of milk among all 
producers in a market is one of the most important features of a 
Federal milk marketing order. It ensures that all producers supplying 
handlers in a marketing area receive the same uniform price for their 
milk, regardless of how their milk is used. This method of pooling is 
widely supported by the dairy industry and has been universally adopted 
for the 11 consolidated orders.
    There were a number of proposals and public comments considered in 
determining how Federal milk orders should pool milk and which 
producers should be eligible to have their milk pooled in the 
consolidated orders. Many of these comments advocated a policy of 
liberal pooling, thereby allowing the greatest number of dairy farmers 
to share in the economic benefits that arise from the classified 
pricing of milk.
    A number of comments supported identical pooling provisions in all 
orders, but others stated that pooling provisions should reflect the 
unique and prevailing supply and demand conditions in each marketing 
area. Fundamental to most pooling proposals and comments was the notion 
that the pooling of producer milk should be performance-oriented in 
meeting the needs of the fluid market. This, of course, is logical 
since a purpose of the Federal milk order program is to ensure an 
adequate supply of milk for fluid use.
    A suggestion for ``open pooling,'' where milk can be pooled 
anywhere, has not been adopted, principally because open pooling 
provides no reasonable assurance that milk will be made available in 
satisfying the fluid needs of a market. Proposals to create and fund 
``stand-by'' pools are similarly rejected for the same reason.
    The pooling provisions for the consolidated orders provide a 
reasonable balance between encouraging handlers to supply milk for 
fluid use and ensuring orderly marketing by providing a reasonable 
means for producers within a common marketing area to establish an 
association with the fluid market. Obviously, matching these goals to 
the very disparate marketing conditions found in different parts of the 
country requires customized provisions to meet the needs of each 
market. For example, in the Florida marketing area, where close to 90 
percent of the milk in the pool will be used for fluid use, pooling 
standards will require a high degree of association with the fluid 
market and will permit a relatively small amount of milk to be sent to 
manufacturing plants for use in lower-valued products. In the Upper 
Midwest market, on the other hand, a relatively small percentage of 
milk will be needed for fluid use. Accordingly, under the pooling 
standards for that order smaller amounts of milk will be required to be 
delivered to fluid milk plants and larger amounts of milk will be 
permitted to be sent to manufacturing plants for use in storable 
products such as butter, nonfat dry milk, and hard cheese. The specific 
pooling provisions adopted for each order are discussed in detail in 
the sections of this document pertaining to each of the consolidated 
orders.

Route Disposition

    Route disposition is a measure of fluid milk sales in commercial 
channels. It is defined to mean the amount of milk delivered by a 
distributing plant to a retail or wholesale outlet (except a plant), 
either directly or through any distribution facility (including 
disposition from a plant store, vendor or vending machine), of a fluid 
milk product in consumer-type packages or dispenser units that is 
classified as Class I milk.
    The route disposition definition adopted here differs from the 
definition contained in some current orders. Presently, the route 
disposition definition of several orders makes reference to plant 
movements of packaged fluid milk products between distributing plants 
with respect to determining if such transfers should be considered 
``route disposition'' of the transferring plant or the receiving plant. 
As provided here, however, this issue is addressed in section 7(a) of 
the pool plant section, which essentially treats such transfers as if 
they were route disposition.

Plant

    A plant definition is included in all orders to specify what 
constitutes an operating entity for pricing and regulatory purposes. As 
provided in

[[Page 16131]]

Sec. 1000.4 of the General Provisions, a plant is the land, buildings, 
facilities, and equipment constituting a single operating unit or 
establishment at which milk or milk products are received, processed, 
or packaged. This is meant to encompass all departments, including 
those where milk products are stored, such as a cooler. The plant 
definition does not include a physically separate facility without 
stationary storage tanks that is used only as a reload point for 
transferring bulk milk from one tank to another, or a physically 
separate facility that is used only as a distribution point for storing 
packaged fluid milk products in transit for route disposition.
    To account for regional differences and practices in transporting 
milk, some of the consolidated orders provide for the use of reload 
points for transporting bulk milk that do not have stationary storage 
tanks.

Farm-Separated Milk

    With the advent of new technology for on-farm separation of milk 
into its components, some additional regulatory language has been added 
to the plant definition to specify who is the responsible handler for 
the milk or milk components leaving the farm and how these components 
will be classified and priced. This determination will be based, in 
part, on whether the farm processing facility is a plant.
    Ultrafiltration (UF) is a membrane process that transfers water and 
low-molecular weight compounds through a membrane while retaining 
suspended solids, colloids, and large organic molecules. It selectively 
fractionates some milk solids components and selectively concentrates 
other solids components of milk.
    When a UF membrane is used, water, lactose, uncomplexed minerals 
and other low-molecular-weight organic compounds pass through the 
membrane. For example, if unaltered milk containing 3.5 percent fat, 
3.1 percent protein, and 4.9 percent lactose is run through a UF 
membrane until half of the original volume is eliminated, the remaining 
product not passing through the membrane (i.e., retentate) will contain 
all of the fat and protein but only half of the lactose. The permeate 
(i.e., that part of the original milk that does pass through the 
membrane) will contain water, lactose, non-protein nitrogen, and about 
one-sixth of the minerals.
    Reverse osmosis (RO) is also a membrane process, but the membranes 
have much smaller pores than UF membranes, allowing only the water to 
pass through. The end product essentially is concentrated milk.
    At the present time, both reverse osmosis and ultrafiltration 
systems are being utilized on some farms, principally large farms in 
the southwestern United States. The product shipped from these farms 
(i.e., the retentate) currently is sent to processing plants for use in 
manufactured products but it could be used in a range of milk products.
    The retentate received from a farm with a UF or RO system will be 
treated as producer milk at the pool plant at which the milk is 
physically received or, if the retentate is shipped to a nonpool plant, 
as producer milk diverted to a nonpool plant. In either case, the milk 
or milk components will be priced at the pool plant or nonpool plant 
where the milk is physically received.
    To be considered a farm and a producer, as opposed to a plant and a 
handler, an RO or UF unit must be under the same ownership as the farm 
on which it is located and only milk from that farm or other farms 
under the same ownership may be processed through the unit. The 
producer operating the unit shall be responsible for providing records 
of the daily weights of the milk going through the unit. Also, the 
producer must provide samples for each load of milk going through the 
unit and must furnish the receiving plant with a manifest on each load 
of retentate showing the scale weight along with samples of the 
retentate. Finally, the producer operating the RO or UF unit must 
maintain records of all transactions which must be available to the 
Market Administrator upon request. If the producer does not meet these 
recordkeeping and reporting requirements, the unit will be considered 
to be a plant.
    RO and UF retentate will be considered to be producer milk at the 
plant which receives it. The pounds of RO and UF retentate received 
will be priced according to the skim-equivalent pounds of such milk. 
The skim-equivalent pounds for RO retentate will be determined by 
dividing the solids-not-fat pounds in the retentate by the average 
producer solids-not-fat in the skim portion of the producer milk used 
in the product. The butterfat pounds would then be added to this number 
to arrive at the product skim-equivalent pounds.
    In computing the fluid equivalent of UF retentate, the fluid 
equivalent factor should be computed by dividing the true protein test 
in the skim milk portion of the retentate by the true protein test in 
the skim milk portion of the producer milk used in the product. Adding 
the butterfat pounds to this computation will yield the product 
equivalent pounds.
    In addition to having UF and RO equipment, some farms today may 
have a separator to separate skim milk from cream before they leave the 
farm. Rules are also established for this type of operation.
    Skim milk and cream going through a farm separator also should be 
treated as producer milk if received at a pool plant or diverted to a 
nonpool plant. The producer will be required to obtain scale weights 
and tests on each load of skim and cream shipped along with samples of 
each. The same ownership, recordkeeping, sampling and reporting 
requirements that apply to RO and UF units will also be applicable.
    In formulating a policy for the treatment of RO and UF retentate, 
it is important to recognize that the milk produced on a farm with RO 
or UF equipment is fully available to meet the needs of the fluid 
market, either before or after passing through such units. Therefore, 
there should be no question concerning the propriety of pooling this 
milk along with other producers' milk.
    At this writing, the Food and Drug Administration (FDA) has not yet 
decided whether UF retentate can be reconstituted and sold as fluid 
milk. However, FDA has approved the use of UF retentate in certain 
cheese products on a trial basis. Therefore, before receiving UF 
retentate for use in any product, handlers should be certain that such 
use has been approved by the FDA.

Distributing Plant

    A distributing plant is defined as a plant that is approved by a 
duly constituted regulatory agency to handle Grade A milk and at which 
fluid milk products are processed or packaged and from which there is 
route disposition or transfers of packaged fluid milk products to other 
plants. This definition, and the following supply plant definition, are 
essentially the same as those found in present orders, except for minor 
changes made to conform with the pool plant provisions adopted for the 
consolidated orders.

Supply Plant

    A supply plant is a regular or reserve supplier of bulk milk for 
the fluid market that helps to coordinate the supply of milk with the 
demand for milk in a market. As defined in this decision, a supply 
plant is a plant approved by a duly constituted regulatory agency for 
the handling of Grade A milk that receives milk directly from dairy 
farmers and transfers or diverts fluid milk products to other

[[Page 16132]]

plants or manufactures dairy products on its premises.

Pool Plant

    The pool plant definition of each order describes those plants 
which receive milk that shares in the marketwide pool. It provides 
standards to identify those plants engaged in serving the fluid needs 
of the marketing area. Pool plants serve the fluid market to a degree 
that warrants their producers sharing in the added value that derives 
from the classified pricing of milk. While the pool plant definition in 
every consolidated order provides for a set of common principles, the 
standards applicable to pool plants differ among the consolidated 
orders, reflecting the fact that marketing conditions vary across the 
country. The goal in drafting pooling standards is to ensure both an 
adequate supply of milk for fluid use and orderly marketing by allowing 
all milk in a marketing area the opportunity to serve the fluid market 
and thereby share in the pool.
    There are 2 performance standards applicable to pool distributing 
plants in the consolidated orders. The first standard, which varies 
among orders, requires a distributing plant to have a minimum Class I 
utilization. Since route disposition includes only Class I milk, the 
specific standard is a measure of a distributing plant's route 
disposition as a percent of its total receipts of fluid milk products. 
This standard is generally directly related to the market's Class I 
utilization. Accordingly, in the higher Class I utilization markets in 
the Southeast, the overall route disposition standard is 50 percent. In 
a market such as the Upper Midwest, on the other hand, where Class I 
utilization will be much lower, the overall route disposition standard 
is only 15 percent. The specific standards for each consolidated order 
are discussed in Section 6 of this decision.
    One change common to all orders from the proposed rule to this 
final decision is the substitution of ``total receipts of fluid milk 
products'' for ``receipts of bulk fluid milk products'' in computing 
the total and in-area disposition for a distributing plant. This change 
was made to achieve consistency in accounting for packaged receipts at 
a distributing plant that are subsequently disposed of as route 
disposition or transferred to another plant. Since all such disposition 
will count towards meeting an order's specified pooling standards, 
receipts of such products from another plant also should be counted as 
part of the plant's receipts.
    Once it is determined that a distributing plant is sufficiently 
associated with the fluid market to share in the pool, a second 
standard determines if the plant is sufficiently associated with a 
particular market to share in the pool applicable to that market. The 
``in-area'' standard adopted for the consolidated orders requires that 
a distributing plant have 25 percent of its route disposition within a 
marketing area before it can be fully regulated by the order covering 
that marketing area.
    The 15 percent in-area standard in the proposed rule has been 
changed to 25 percent for all orders to reflect the larger, merged 
marketing areas that are adopted. This change should not affect the 
regulatory status of any current distributing plant.
    At the present time, some orders describe the in-area route 
disposition standard as a percent of plant receipts, while in other 
orders it is described as a percent of route disposition. For the new 
orders, the in-area standard for all orders is expressed as a percent 
of total route disposition. This methodology will ensure that the in-
area route disposition standard never exceeds the total route 
disposition standard, a situation that is now possible under the terms 
of the present Upper Midwest order. For most orders, this change will 
make little difference and should not result in regulating any plant 
that is now unregulated.
    Under the consolidated orders, a distributing plant that has sales 
in more than one Federal order marketing area will be regulated, for 
the most part, under the order in which it has the most sales. There 
are certain exceptions to this rule, however, particularly in the 3 
Southeast orders, where the shifting of plants among markets has 
created disorderly marketing conditions in recent times. In the 
Florida, Southeast, and Appalachia orders, a distributing plant that is 
located within the marketing area and that meets the order's pooling 
standards will be regulated under that order even though it might have 
more route disposition in some other marketing area.
    When the regulation of a plant does shift from one order to 
another, the shift will only occur after the plant has had greater 
sales in such other market for 3 consecutive months. This provision 
will provide some stability to avoid the frequent shifting of 
regulation between orders.
    To facilitate proper administration and accounting, all orders 
currently provide that packaged fluid milk products transferred from 
one handler to another be treated as inter-handler transfers, with each 
transaction properly identified and specifically reported to affected 
market administrators. This should continue in the consolidated orders. 
However, for the single purpose of qualifying a plant as a pool 
distributing plant, the pool distributing plant definition has been 
modified to treat transfers of packaged fluid milk products to other 
plants as if they were route disposition of the transferring plant for 
the purpose of identifying the plant's association with the fluid 
market. This is necessary to preclude a plant from becoming partially 
regulated if the plant shipped significant quantities of packaged fluid 
milk products to another distributing plant. A conforming change has 
been made to the distributing plant definition in Sec. 1000.5 to 
reflect this change.
    A special pool distributing plant provision (i.e., Section 7(b) of 
the consolidated orders) has been adopted for distributing plants that 
distribute ultra-pasteurized or aseptically-processed fluid milk 
products. Such plants must be located in the marketing area and must 
process a certain percentage of their milk receipts into ultra-
pasteurized or aseptically-processed fluid milk products during the 
month. The minimum percentage used for each order in Section 7(b) is 
equal to the total route disposition percentage required in Section 
7(a) of the order for distributing plants processing standard shelf-
life fluid milk products. However, unlike the standards for a 7(a) 
plant, there is no route disposition standard for a 7(b) plant to meet.
    Plants specializing in ultra-pasteurized or aseptically-processed 
fluid milk products tend to have erratic processing and distribution 
patterns reflecting the long-life nature of the product they process. 
In some months, they may process fluid milk products but have little or 
no route disposition because the products are stored in inventory. In 
addition, these plants often have much wider distribution patterns than 
do other distributing plants and, under current orders, frequently 
shift regulation from one order to another. This shifting regulation is 
disruptive to the producers and/or cooperatives supplying these plants 
and is an additional regulatory burden to the plant operator.
    To provide regulatory stability for these plants, they will be 
treated as a fully regulated plant if they process a minimum percent of 
their milk receipts into ultra-pasteurized or aseptically-processed 
fluid milk products during the month. Having met this standard, which 
varies among orders, they will not shift regulation to another order 
simply because they have more route disposition in such other order's

[[Page 16133]]

marketing area. In fact, they need not have any route disposition in 
the order in which they are located to remain regulated. However, if 
they do not meet the processing standard of the order in which they are 
located but do meet the 7(a) standards for a distributing plant under 
one or more other orders, they will become regulated under the order in 
which they have the most route disposition. If they continue to qualify 
for pool status on this basis, they may be subject to regulatory shifts 
depending upon the pattern of their route disposition.

Pool Supply Plant

    Performance standards for pool supply plants are designed to 
attract an adequate supply of milk to meet the demands for fluid milk 
in a market. Pool supply plants move milk to pool distributing plants 
that service the marketing area.
    The pool supply plant definition, like the distributing plant 
definition, does not lend itself to uniform application in all 
consolidated orders. Consequently, pool supply plant performance 
standards should be established according to regional needs. The 
specific standards adopted in each order are described in section 7(c) 
of each new order and are explained in more detail in the regional 
discussions of this document.
    In most current orders, a pool supply plant does not include any 
portion of a plant that is not approved for handling Grade A milk and 
that is physically separated from a portion of the plant that has such 
approval. Some inspection agencies render only one type of approval for 
an operation. To accommodate those areas where split operations are 
permitted, some of the consolidated orders provide for a physically 
separated portion of the plant as a ``nonpool plant.''
Pooling Options
Unit Pooling
    Unit pooling allows 2 or more plants located in the marketing area 
and operated by the same handler to qualify for pool status as a unit 
by meeting the total and in-area route disposition standard as if they 
were a single pool distributing plant. To qualify as a unit, at least 
one of the plants in the unit--i.e., the primary plant-- must qualify 
as a pool distributing plant on its own standing and the other plants 
in the unit must process only Class I or Class II milk products.
    Unit pooling serves to accommodate and provide a flexible 
regulatory approach in addressing the specialization of plant 
operations. It also minimizes unintended regulatory effects that may 
cause the uneconomical and inefficient movement of milk for the sole 
purpose of retaining pool status. However, some conditions need to be 
satisfied for unit pooling. The ``other'' plant(s) of the pool unit--
i.e., the plants that would not qualify for pool status as a single 
plant--must be located in an equivalent or a lower price zone than the 
primary pool distributing plant. This condition is required to assure 
that the transportation of milk for Class II uses will not be 
subsidized through the marketwide pool and to assure pricing equity to 
all handlers processing Class II products that do not use unit pooling. 
Unit pooling status must be requested in writing and approved by the 
market administrator for its proper implementation and administration.

System Pooling

    Supply plants and reserve supply plants provide a benefit to the 
market because they are required to meet certain performance standards 
in supplying the needs of the fluid market. They also serve to balance 
the market. Because handlers often operate more than one supply plant 
within the market, some of the merged orders allow a single proprietary 
handler or one or more cooperative associations to combine their plants 
into systems for the purpose of meeting the order's performance 
standards for pooling. Under system pooling, 2 or more plants in a 
system can qualify for pool status by meeting the applicable 
performance standards in the same manner as a single plant. However, 
not all plants in a system of supply plants must transfer or divert 
milk to a distributing plant. In recognition of this fact, the supply 
plant definition in Sec. 1000.6 has been modified to conform with this 
provision.

Adjustment of Pooling Standards

    The consolidated orders provide the market administrator with 
authority to adjust shipping standards for supply plants, reserve 
supply plants, balancing plants, and supply plant units if he/she finds 
that such revision is necessary to encourage needed shipments or to 
prevent uneconomic shipments of milk. A finding by the market 
administrator that adjustments are warranted would follow an 
investigation conducted on the market administrator's own initiative or 
at the request of interested parties. Before making a finding that 
revisions are warranted, the market administrator would notify 
interested parties of this possibility and invite data, views, and 
arguments. If the market administrator determines that a revision is 
warranted, he/she shall provide written notification to interested 
parties of such revision at least one day before the revision goes into 
effect.
    This provision allows the market administrator to respond promptly 
to changes in local marketing conditions and should result in better 
service to the dairy industry and to the public. The authority given to 
the market administrator to make needed adjustments in the manner 
specified is commensurate with the authorities already delegated by the 
Secretary to the market administrator.
    As provided in the proposed rule, the market administrator would 
have had the authority to adjust pooling standards for distributing 
plants as well as supply plants. However, such authority has not been 
provided in any of the current marketing orders except for the 
Southeast, and in that market it has never been needed. Consequently, 
it was concluded that any changes that may need to be made to pool 
distributing plant standards can best be handled through normal 
amendatory and suspension procedures.

Treatment of Concentrated Milk

    An issue related to pooling that should be clarified with the 
issuance of new orders is the treatment of concentrated milk that is 
shipped between plants.
    Prior to the 1993 classification decision, condensed milk was not 
defined as a fluid milk product. Accordingly, when condensed milk was 
shipped from a supply plant to a distributing plant it was not counted 
as a qualifying shipment for the purpose of determining the pool status 
of the supply plant. By the same token, when a distributing plant 
received a shipment of condensed milk from another plant, the condensed 
milk was excluded from the distributing plant's receipts for the 
purpose of computing the pool plant status of the distributing plant.
    In the 1993 classification decision, condensed milk was redefined 
as concentrated milk 15 and was included in the fluid milk 
product definition. An unintended consequence of this change was that 
certain plants which had never been pool plants before suddenly became 
pool plants because of their shipments of condensed milk, and

[[Page 16134]]

certain distributing plants that had been pool plants suddenly found 
themselves unable to qualify as pool plants because their receipts of 
``fluid milk products'' were enlarged to include their condensed milk 
receipts. When handlers complained about these unforseen and 
unexplained changes, it was decided administratively to continue the 
previous treatment for condensed milk until the orders could be 
amended.
---------------------------------------------------------------------------

    \15\ As used in parts 1000 through 1135, the term concentrated 
milk means milk that contains not less than 25.5 percent, and not 
more than 50 percent, total milk solids. It may include milk that 
has been condensed or milk that has been filtered using such methods 
as reverse osmosis and ultra-filtration. Concentrated milk may be 
pasteurized and it may be homogenized.
---------------------------------------------------------------------------

    The consolidated orders should continue this special treatment for 
condensed milk. Although condensed milk conceivably may be 
reconstituted for fluid use, as a practical matter this is rarely, if 
ever, done. Sometimes, condensed milk is used to fortify fluid milk, 
but for the most part condensed milk is made to be used in ice cream 
mix or some other manufactured dairy product.
    When condensed milk is transferred from the plant of origin to a 
distributing plant in the same or another order, it is generally 
transferred, by agreement, for Class II or III use. Using this criteria 
as a distinguishing feature of this product, the pool supply plant 
provision of each order should exclude from qualifying shipments to 
distributing plants ``concentrated milk transferred, by agreement, for 
other than Class I use.'' By the same token, a distributing plant also 
should exclude from its receipts, for pooling purposes, ``concentrated 
milk received, by agreement, for other than Class I use.''
    Using this language will preserve the regulatory treatment that has 
applied to condensed milk for many years. At the same time, however, 
this language allows flexibility for different treatment in the case of 
concentrated milk that is not destined for Class II or III use.
    In recent years, there has been much greater use of filtering 
equipment to remove water from milk at the farm. This technology may be 
used to reduce hauling costs in shipping milk long distances for use as 
fluid milk products. Although this concentrated milk is not at present 
being used for fluid use, this situation may change in the future. For 
this reason, it is reasonable to provide some flexibility in handling 
this type of product for both shrinkage and pooling purposes. At this 
point in time, we believe that the best way to provide this flexibility 
is to allow the handlers involved in making and using this product to 
decide among themselves how it will be used and reported, knowing ahead 
of time the shrinkage and pooling implications involved with these 
decisions. Thus, if concentrated milk is purchased from another plant 
by agreement for other than Class I use, the buying handler understands 
that there will be no shrinkage allowance allowed on the milk. The 
buying handler also knows that the volume of concentrated milk received 
will not be counted as a plant receipt for the purpose of determining 
its pool status.
    A supply plant shipping concentrated milk for Class II use may or 
may not wish to be pooled under a Federal order. If the plant wished to 
be treated as a nonpool plant, concentrated milk could be transferred 
for Class II or III use by agreement with the receiving handler. In 
such case, the transfer of concentrated milk would not be counted as a 
qualifying shipment in meeting the pool supply plant shipping standards 
and the receipt of concentrated milk at the distributing plant would 
not be counted as part of the distributing plant's receipts for 
purposes of computing its total route disposition. Of course, the 
agreement to transfer milk for a pre-arranged use is contingent upon 
the receiving distributing plant having sufficient Class II or III 
utilization to absorb these receipts.
    On the other hand, if a supply plant making concentrated milk 
wished to qualify for pool status, it could simply transfer 
concentrated milk to a pool distributing plant without specifying its 
designated use. In such case, the shipment would count as a qualifying 
shipment for the purpose of meeting the order's pool supply plant 
shipping requirements provided that the distributing plant receiving 
the concentrated milk was a pool plant. Since the receipt of 
concentrated milk would be counted as part of the receiving 
distributing plant's receipts in determining the distributing plant's 
pool status under the order, the plant would have to have sufficient 
Class I sales to maintain its identity with the fluid market. If the 
distributing plant did not have sufficient Class I use to meet the 
order's pooling standards, it would not be qualified to have its 
receipts pooled under the order and, by extension, neither would the 
supply plant that shipped the concentrated milk to the distributing 
plant.
    This regulatory flexibility for concentrated milk should 
accommodate varied situations in the consolidated orders. It will 
follow the historical treatment for condensed milk but, at the same 
time, it will provide for new uses and treatment for other types of 
concentrated milk.

Nonpool Plant

    A definition is provided in all orders describing plants which 
receive, process or package milk, but which do not satisfy the 
standards for being a pool plant. While providing for such a definition 
may appear redundant, this provision is useful to more clearly define 
the extent of regulation applicable to plants.
    Nonpool plants should include a plant that is fully regulated under 
another Federal order, a producer-handler plant, a partially regulated 
distributing plant, an unregulated supply plant, and an exempt plant. 
The definitions for these nonpool plants are not materially different 
than those provided in the current orders with the possible exception 
of an ``exempt plant.''
    Certain plants are exempt from regulation under Federal milk 
orders. These plants fall into 4 categories: (1) Plants that are 
operated by a governmental agency which have no route disposition in 
commercial channels; (2) plants operated by a college or university 
that dispose of fluid milk products only through their own facilities 
with no route disposition in commercial channels; (3) plants from which 
the total route disposition is for individuals or institutions for 
charitable purposes without remuneration; and (4) plants that have 
route disposition of 150,000 pounds or less during the month. These 
types of plants have little impact on the regulated market and need not 
be regulated to ensure the integrity of the regulatory plan.
    A number of Federal orders exempt from regulation small 
distributing plants which, because of their size, do not significantly 
impact competitive relationships among handlers in the market. The 
level of route disposition required before an exempt plant becomes 
regulated varies in the current orders. As adopted for the merged 
orders, any plant with route disposition during the month of 150,000 
pounds or less would be exempt from regulation. This limit reflects the 
maximum amount of fluid milk products allowed by an exempt plant in any 
current Federal milk order and ensures that plants currently exempt 
from regulation will remain exempt.
    Many current Federal orders also provide regulatory exemption for a 
plant operated by a state or Federal governmental agency. For example, 
some states have dairy farm and plant operations that provide milk for 
their prison populations. As provided herein, regulatory exemption 
would be continued under the consolidated orders unless pool plant 
status is requested.
    Regulatory exemption also should apply to colleges, universities, 
and charitable institutions because these institutions generally handle 
fluid milk

[[Page 16135]]

products internally and have no impact in the mainstream commercial 
market. However, in the event that these entities distribute fluid milk 
through commercial channels, route sales by such entities, including 
government agencies, will be monitored to determine if Federal 
regulation should apply.
    The determination and verification of exempt plant status will, 
from time to time, necessitate the need for the market administrator to 
require reports and information deemed appropriate for the sole purpose 
of making this determination. Such authority is currently provided in 
orders and should continue.

Handler

    Federal milk orders regulate those persons who buy milk from dairy 
farmers. Such persons are called handlers under the order. These 
persons have a financial responsibility for payments to dairy farmers 
for milk in accordance with its classified use. They must file reports 
with the market administrator detailing their receipts and utilization 
of milk.
    The handler definition adopted for the consolidated orders includes 
the operator of a pool plant, a cooperative association that diverts 
milk to nonpool plants or delivers milk to pool plants for its account, 
and the operator of a ``nonpool plant,'' which would encompass a 
producer-handler, a partially regulated distributing plant, a plant 
fully regulated under another Federal order, an unregulated supply 
plant, and an exempt plant.
    In addition, ``third party'' organizations that are not otherwise 
regulated under provisions of an order are included in the handler 
definition. This category includes any person who engages in the 
business of receiving milk from any plant for resale and distribution 
to wholesale and retail outlets, brokers or others who negotiate the 
purchase or sale of fluid milk products or fluid cream products from or 
to any plant, and persons who, by purchase or direction, cause the milk 
of producers to be picked up at the farm and/or moved to a plant. Such 
intermediaries provide a service to the dairy industry. These persons 
are not, however, recognized or regulated as entities required to make 
minimum payments to producers. The expanded marketing chain brought 
about by such intermediaries has made it increasingly difficult for the 
market administrator to track the movement of milk from farms to 
consumers. The revised handler definition enables the market 
administrator to more readily identify those entities.

Producer-Handler

    It has been a long-standing policy to exempt from full regulation 
many of those entities that operate as both a producer and a handler. 
Generally, a producer-handler is any person who provides satisfactory 
proof to the market administrator that the care and management of the 
dairy farm and other resources necessary for own-farm production and 
the management and operation of the processing plant are the personal 
enterprise and risk of such person. A primary basis for exempting 
producer-handlers from the pricing and pooling provisions of a milk 
order is that these entities are customarily small businesses that 
operate essentially in a self-sufficient manner. Also, during the 
history of producer-handler exemption from full regulation there has 
been no demonstration that such entities have an advantage as either 
producers or handlers so long as they are responsible for balancing 
their fluid milk needs and cannot transfer balancing costs, including 
the cost of disposing of reserve milk supplies, to other market 
participants.
    The current orders have varying producer-handler definitions that 
address specific marketing conditions and circumstances. For example, 
they specify different limits on the amount of milk that producer-
handlers may purchase and retain their exempt status. Some 
modifications have been made to the producer-handler provisions in the 
consolidated orders for standardization. However, no changes have been 
made that would intentionally regulate a producer-handler that is 
currently exempt from regulation under their current operating 
procedures. Because the producer-handler provision is slightly 
different from one order to the next, the specific details regarding 
each definition are described in the regional discussions that follow. 
Any general provision in the proposed rule, such as the phrase ``or 
acquired for distribution'' in Sec. 1000.44(a)(3)(iv), that would have 
changed the status of a current producer-handler has been eliminated.
    Public comments were received regarding the extent of regulation 
that should apply to producer-handlers. The majority of public comments 
supported the status-quo regarding the regulatory treatment of 
producer-handlers, emphasizing that they should remain exempt from 
regulation in accordance with current order provisions and that the 
provisions should be regional in nature so as not to affect or change 
the current regulatory status of producer-handlers.
    One of the public comments received proposed that the exemption of 
producer-handlers from the regulatory plan of milk orders be 
eliminated. This proposal is denied. In the legislative actions taken 
by the Congress to amend the AMAA since 1965, the legislation has 
consistently and specifically exempted producer-handlers from 
regulation. The 1996 Farm Bill, unlike previous legislation, did not 
amend the AMAA and was silent on continuing to preserve the exemption 
of producer-handlers from regulation. However, past legislative history 
is replete with the specific intent of Congress to exempt producer-
handlers from regulation. If it had been the intent of Congress to 
remove the exemption, Congress would likely have spoken directly to the 
issue rather than through omission of language that had, for over 30 
years, specifically addressed the regulatory treatment of producer-
handlers.
    Since producer-handlers are intended to be exempt from most 
regulation, some means must be provided to determine and to verify 
producer-handler status. Accordingly, the market administrator is 
provided with the authority to require reports and other information 
deemed appropriate to determine that an entity satisfies the 
requirements for producer-handler status. Such authority is currently 
provided in the orders and should continue.

Producer

    Under all orders, producers are dairy farmers that supply the 
market with milk for fluid use or who are at least capable of doing so 
if necessary. Producers are eligible to share in the revenue that 
accrues from marketwide pooling of milk. The producer definitions of 
the individual orders are described under the regional discussions 
later in this document. Responding to regional needs, producer 
definitions will differ by order with respect to the degree of 
association that a dairy farmer must demonstrate with a market.
    A dairy farmer may not be considered a producer under more than one 
Federal milk order with respect to the same milk. If a dairy farmer's 
milk is diverted by a handler regulated under one Federal order to a 
plant regulated under another Federal order, and the milk is allocated 
at the receiving plant (by request of the diverting handler) to Class 
II, III or IV, the dairy farmer will maintain producer status in the 
original order from which milk was diverted.

[[Page 16136]]

    Since producer-handlers and exempt plants are specifically exempt 
from Federal order pricing provisions, the term producer should not 
include a producer-handler as defined in any Federal order. Likewise, 
the term producer should not apply to any person whose milk is 
delivered to an exempt plant, excluding producer milk diverted to such 
exempt plant. Some of the new orders (See Orders 1001, 1124, 1131, and 
1134) also exclude from producer status a dairy farmer whose milk is 
received at a nonpool plant as other than producer milk. The reasons 
for including this provision are explained in the regional discussions 
describing those orders.

Producer Milk

    The producer milk definition identifies the milk of producers which 
is eligible for inclusion in a particular marketwide pool. This 
definition is specific to each consolidated order, reflecting the fact 
that marketing conditions differ among regions.
    In general, the definition of producer milk for all consolidated 
orders continues to include the milk of a producer which is received at 
a pool plant or which is received by a cooperative association in its 
capacity as a handler. Most current orders consider milk to be 
``received'' when it is physically unloaded at the plant and the 
consolidated orders would continue that treatment.
    In order to promote the efficient handling of milk, all orders 
currently allow a handler to move producer milk, within certain 
specified limits, from a producer's farm to a plant other than the 
handler's own plant. This is referred to as a ``diversion'' of milk. 
Under the consolidated orders, the definition of producer milk allows 
unlimited diversions to other pool plants, thereby providing maximum 
flexibility in efficiently supplying the fluid market.
    Under some orders, unlimited diversions to nonpool plants would 
also be allowed once a dairy farmer has become associated with a 
particular order. Under other orders, however, a producer would be 
required to ``touch base'' at a pool plant one or more times each month 
and, in addition, aggregate diversion limits may be applied to a 
handlers' total diversions. The specific touch base and diversion 
limits are described in the regional discussions pertaining to each 
order.
    Even for orders without any diversion limits, there is a practical 
limit to how much milk may be diverted from a pool plant because of the 
pooling standards that must be met. For a pool supply plant, for 
example, there is a standard computed by dividing the amount of milk 
shipped to distributing plants by a plant's total receipts. As provided 
in the orders, ``receipts'' include milk that is physically received at 
the plant as well as diverted to nonpool plants. This inclusion of 
diverted milk in a plant's receipts automatically limits the amount of 
milk that may be diverted by those plants. Thus, the maximum quantity 
of milk that such plants would be able to divert and still maintain 
their pool plant status would be 100 percent less the pool plant 
shipping standards for the month.
    This treatment of diverted milk will mitigate the need for 
suspending order diversion limitations, an action that is quite common 
in some of the current orders. Unlimited diversions for many of the new 
orders will allow for maximum efficiency in balancing the market's milk 
supply. The market administrator's ability to adjust shipping 
percentages for pool supply plants, pool reserve supply plants, and 
balancing plants will ensure that an adequate supply of milk is 
available for the fluid market without the imposition of diversion 
limits.
    While a one-time producer ``touch base'' standard and virtually 
unlimited diversions are appropriate for most of the consolidated 
Federal orders, they are not appropriate for certain ``deficit'' 
markets in the Southeast. For these orders, touch base requirements and 
diversion limits provide another tool to ensure that an adequate supply 
of fluid milk is available to meet the markets' needs. The specific 
standards for these orders are discussed in the regional section of 
this document.
    In order to provide regulatory flexibility and marketing 
efficiencies, all of the new orders having diversion limits allow the 
market administrator to increase or decrease these limits on relatively 
short notice. This provision currently exists in some Federal orders 
and has proven to be a responsive, efficient, and effective way to deal 
with rapidly changing marketing conditions.

Cooperative Association

    All current orders provide a definition for dairy farmer 
cooperative associations that market milk on behalf of their dairy 
farmer members. Providing for a uniform definition of a cooperative 
association facilitates the administration of the various order 
provisions as they apply to such producer organizations and recognizes 
the unique standing granted to dairy farmer cooperatives under the 
Capper-Volstead Act. Dairy farmer cooperatives are responsible for 
marketing the majority of the milk supplied to regulated handlers under 
the Federal order system.
    As provided herein, a cooperative association means any cooperative 
marketing association of producers which the Secretary determines, 
after application for such recognition by the cooperative, is qualified 
as such under the provisions of the Act of Congress of February 18, 
1922, as amended, known as the ``Capper-Volstead Act''. Additionally, 
the new orders continue to require that a cooperative association have 
full authority in the sale of the milk of its members and that it be 
engaged in making collective sales or marketings of milk or milk 
products for its dairy farmer members.
    Several current orders provide a definition for a federation of 2 
or more cooperative associations. As adopted here, all consolidated 
orders recognize a federation of cooperatives as satisfying the 
cooperative definition for the purposes of determining milk payments 
and pooling. Individual cooperatives of a federation of cooperatives 
must also meet the criteria as set forth for individual cooperative 
associations and their federations as incorporated under state laws.

Handler Reports

    All current orders require handlers to submit monthly reports 
detailing the sources and uses of milk and milk products so that market 
average use values, or blend prices, can be determined and 
administered. Payroll reports and other reports required by the market 
administrator are also provided for in the orders. The order language 
for the consolidated orders is similar to that contained in current 
orders. The dates when reports are due in the market administrator's 
office differ slightly by order according to custom and industry 
practice.

Announcements by the Market Administrator

    In the course of administering the order, the market administrator 
is required to make several announcements each month with respect to 
classification, class prices and component prices, an ``equivalent 
price'' when necessary, and various producer prices. As adopted here, 
these provisions are uniform and are nearly identical to current order 
provisions, with the exception of section 62 (Announcement of producer 
prices), which differs to some extent among orders depending on the 
degree of component pricing used in the order.

[[Page 16137]]

Producer-Settlement Fund

    In all of the current and consolidated orders, handlers are 
required to pay minimum class prices for the milk received from 
producers. These proceeds are blended through the marketwide pool so 
that producers are returned a uniform, or blend, price for their milk. 
The mechanism for the equalization of a handler's use value of milk is 
the producer-settlement fund. It is established and administered by the 
market administrator for each order.
    The producer-settlement fund ensures that all handlers are able to 
return the market blend price to producers whose milk was pooled under 
the order. Payments into the producer-settlement fund are made each 
month by handlers whose total classified use value of milk exceeds the 
value of such milk calculated at the uniform price (or at component 
prices for those orders with component pricing). Similarly, payments 
out of the producer-settlement fund are made each month to any handler 
whose use value is below the value of milk at the uniform price or 
component prices, as the case may be. The transfer of funds enables 
handlers with a use value below the average for the market to pay their 
producers the same uniform price as handlers whose Class I utilization 
exceeds the market average. This provision is uniform for all 
consolidated orders.
    The consolidated orders vary with respect to dates for payments to 
the producer-settlement fund, due largely to industry practices and 
regional preferences. Each consolidated order provides for payment 
dates, and they are specific for each consolidated order.
    In view of the need to make timely payment to handlers from the 
producer-settlement fund, it is essential that money due the fund be 
received by the due date. Accordingly, under all of the new orders 
payment to the producer-settlement fund will be considered made upon 
receipt by the market administrator.
    The new orders specify that payment cannot be received on a 
nonbusiness day. Therefore, if the due date for a payment, including a 
payment to or from the producer-settlement fund, falls on a Saturday, 
Sunday, or national holiday, the payment would not be due until the 
next business day. This is specified in Sec. 1000.90 of the General 
Provisions.

Payments to Producers and Cooperative Associations

    The AMAA provides that handlers must pay to all producers and 
producer associations the uniform price. The existing orders generally 
allow proper deductions authorized by the producer in writing. Proper 
deductions are those that are unrelated to the minimum value of milk in 
the transaction between the producer and handler. Producer associations 
are allowed by the statue to ``reblend'' their payments to their 
producer members. The Capper Volstead Act and the AMAA make it clear 
that cooperative associations have a unique role in this regard.
    The payment provisions to producers and cooperatives for the 
consolidated orders vary with respect to payment frequency, timing, and 
amount. These differences are generally consistent with current order 
provisions and with industry practices and customs in each of the new 
marketing areas.
    Each of the new orders will require handlers to make at least one 
partial payment to producers in advance of the announcement of the 
applicable uniform prices. The Florida order will require 2 partial 
payments, mirroring the payment schedule now provided in the 3 separate 
Florida orders.
    The amount of the partial payment varies among the new orders, 
reflecting the anticipated uniform price. Thus, for example, in the 
Upper Midwest order, the partial payment rate for milk received during 
the first 15 days of the month will be not less than the lowest 
announced class price for the preceding month. By comparison, the 
partial payment for the Florida order for milk received during the 
first 15 days of the month will be at a rate that is not less than 85 
percent of the preceding month's uniform price, adjusted for plant 
location.
    The final payment for milk under the new orders will be required to 
be made so that it is received by producers no later than 2 days after 
the required pay-out date of monies from the producer-settlement fund.
    Cooperatives will be paid by handlers for bulk milk and skim milk 
on the terms described for individual producers except that payment 
will be due one day earlier. Providing for an earlier payment date for 
cooperative associations is warranted because it will permit the 
cooperative association the time needed to distribute payments to 
individual producer members. The cooperative payment language in each 
of the consolidated orders has been expanded to include bulk milk and 
skim sold by cooperatives from their pool plants as well as by 
cooperatives acting as handlers for milk delivered directly from 
producers' farms.
    When bulk milk is received by transfer from a cooperative's pool 
plant, a minimum payment should be required for such milk just as if it 
were producer milk received directly from producers' farms. Many, but 
not all, of the current orders have such a provision.
    For Class I bulk milk that is received from a cooperative's pool 
plant, the minimum Class I price level for such milk should be the 
price applicable at the location of the receiving handler's plant. In 
the case of such transfers, it is presumed that milk will move from 
lower-priced areas to higher-priced areas. Under these circumstances, 
part of the transportation cost in moving the milk is covered by the 
difference in the Class I prices at the receiving plant and shipping 
plant.
    Pricing Class I transfers at the receiving plant's location ensures 
that a handler would not have an incentive to receive more distant 
plant milk instead of closer milk directly from producers' farms. It 
also ensures that all similarly-located pool plants will pay the same 
minimum prices for their receipts regardless of whether the milk comes 
from another plant or directly from producers. Finally, it ensures that 
the handler receiving transferred milk pays at least a portion of the 
transportation cost to move the milk to its plant. Since transportation 
cost is likely to exceed the difference in prices between the 
transferor and transferee plants, the difference in cost will have to 
be made up through over-order premiums.
    All of the payment dates are receipt dates. Since payment cannot be 
received on a non-business day, payment dates that fall on a Saturday, 
Sunday, or national holiday will be delayed until the next business 
day. While this has the effect of delaying payment to cooperatives and 
producers, the delay is offset by the shift from ``date of payment'' to 
``date of payment receipt.''

Minimum Payments to Producers

    In a proceeding involving the current Carolina, Southeast, 
Louisville-Lexington-Evansville, and the former Tennessee Valley 
Federal milk orders (Orders 5, 7, 46, and 11, respectively), a proposal 
was made to clarify what constitutes a minimum payment to producers. 
The proposal was recommended by Hunter Farms (Hunter) and Milkco Inc. 
(Milkco), 2 handlers regulated under the current Carolina order. Under 
the proposal, a handler (except a cooperative acting in its capacity as 
a handler pursuant to paragraph 9(b) or 9(c)) may not reduce its 
obligations to producers or cooperatives by permitting producers or 
cooperatives to provide services which are the responsibility of the 
handler. According to the Hunter/Milkco proposal, such services 
include: (1)

[[Page 16138]]

Preparation of producer payroll; (2) conduct of screening tests of 
tanker loads of milk; and (3) any services for processing or marketing 
of raw milk or marketing of packaged milk by the handler.
    At the May 1996 hearing, representatives of Hunter and Milkco 
testified that both handlers receive milk from cooperative associations 
and Piedmont Milk Sales, a marketing agent handling the milk of non-
member producers. The Hunter representative explained that due to 
competitive marketing conditions in the Southeast in late 1994 and 
early 1995 handlers were able to purchase milk supplies at Federal 
order minimum prices without any over-order premiums being charged. As 
a result of the absence of over-order premiums, the representative 
stated, Hunter received underpayment notices from the market 
administrator on milk that it had received from Piedmont Milk Sales.
    Hunter argued that the problem of what constitutes a minimum 
payment to producers should be clarified to preclude another 
underpayment situation should premiums again disappear in the future. 
If this issue is not resolved, according to Hunter, it will suffer a 
loss of milk sales and its producers will receive lower prices. Hunter 
stated that the current policy is discriminatory and unfair and that 
everyone would benefit from a clarification of the rules defining 
Federal order minimum prices.
    Based on the testimony presented at the public hearing and comments 
received, the Department issued a final decision on July 16, 1998 (63 
FR 39039), denying the Hunter/Milkco proposal. However, the decision 
stated that this issue should be revisited as part of Federal order 
reform.
    In the proposed rule for Federal order reform, interested parties 
were invited to comment on this issue. Only one Federal order reform 
comment, besides Hunter/Milkco's, discussed this issue. This comment 
letter, filed by the same law firm that represents Hunter/Milkco, 
expressed sentiments nearly identical to those that have been expressed 
by Hunter/Milkco.
    Based on our review of these comments, we continue to believe that 
incorporation of Hunter/Milkco's proposed language in the consolidated 
Federal orders will not necessarily solve the handler equity problem 
but could create a host of additional problems. For the reasons stated 
in the aforementioned final decision, the proposal is again denied for 
the consolidated orders.

Payment Obligation of a Partially Regulated Distributing Plant

    All current and consolidated orders provide a method for 
determining the payment obligations due to producers by handlers that 
operate plants which are not fully regulated under any Federal order. 
These unregulated handlers are not required under the scope of Federal 
milk order regulation to account to dairy farmers for their milk at 
classified prices or to return a minimum uniform price to producers who 
have supplied the handler with milk. However, such handlers may sell 
fluid milk on routes in a regulated area in competition with handlers 
who are fully regulated. Therefore, the regulatory plan of Federal milk 
orders provides a minimum degree of regulation to all handlers who have 
routes sales in a regulated marketing area. This is necessary so that 
classified pricing and pooling provisions of an order can be 
maintained. It is also necessary so that orderly marketing conditions 
can be assured with respect to handlers being charged the classified 
value under an order for the milk they purchase from dairy farmers. 
Without this provision, milk prices in an order would not be uniform 
among handlers competing for sales in the marketing area, a milk 
pricing requirement of the AMAA.
    There are 3 regulatory options available to a partially regulated 
handler. First, the handler can purchase Class I milk that is priced 
under a Federal order in an amount equal to, or in excess of, 
quantities sold in the marketing area. Second, a payment may be made by 
the partially regulated handler into the producer-settlement fund of 
the regulated market at a rate equal to the difference between the 
Class I price and the uniform price of the regulated market. Finally, 
the operator of a partially regulated plant can demonstrate that the 
payment for its total supply of milk received from dairy farmers was 
equal to the amount which the partially regulated plant would have been 
required to pay if the plant had been fully regulated. This amount may 
be paid entirely to the dairy farmers that supplied the handler or in 
part to those dairy farmers with the balance paid into the producer-
settlement fund of the regulated market.
    The regulatory options described above and the payment option for 
reconstituted milk have worked well in the current orders and are 
continued uniformly in Sec. 1000.76 for the consolidated orders.

Adjustment of Accounts

    All current orders provide for the market administrator to adjust, 
based on verification of a handler's reports, books, records, or 
accounts, any amount due to or from the market administrator, or to a 
producer or a cooperative association. This provision is continued in 
the consolidated orders. The provision requires the market 
administrator to provide prompt notification to a handler of any amount 
so due and requires payment adjustment to be made on or before the next 
date for making payments as set forth in the provisions under which the 
error(s) occurred.

Charges on Overdue Accounts

    All current orders provide for an additional charge to handlers who 
fail to make required payments to the producer-settlement fund when 
due. Such payments include payments to the producer-settlement fund, 
payments to producers and cooperative associations, payments by a 
partially regulated distributing plant, assessments for order 
administration and marketing service, and certain other payment 
obligations in orders with specialized provisions such as 
transportation credits. This should continue to be provided for in the 
consolidated orders.
    In order to discourage late payments, a 1.0 percent charge per 
month is incorporated in the consolidated orders. This rate represents 
the mid-point in the range of charges by all orders presently. Overdue 
charges shall begin the day following the date an obligation was due. 
Any remaining amount due will be increased at the rate of 1.0 percent 
on the corresponding day of each month until the obligation is paid in 
full.
    All overdue charges would accrue to the administrative assessment 
fund. The late-payment charge is to be a penalty that is meant to 
induce compliance with the payment terms of the order. If late-payment 
charges for monies due on producer milk were to accrue to the balance 
owed to either producers, cooperatives or producers/cooperatives via 
the producer-settlement fund, it could result in such producers and 
cooperatives being less concerned whether they are paid on time. By 
placing late-payment charges in the administrative fund, however, 
cooperatives and producers would not be placed in a position where they 
would prefer to be paid several days late so that they would receive 
the late-payment charges (or increase the level of producer prices due 
to late payment fee accrual to the producer-settlement fund). This is 
of particular concern in

[[Page 16139]]

markets with a single dominant cooperative. Additionally, by having 
late-payment fees accrue to the administrative fund, monies are made 
available to enforce late-payment provisions that would otherwise have 
to be generated through handlers' administrative assessments.

Assessment for Order Administration

    The AMAA provides that the cost of order administration shall be 
financed by an assessment on handlers. Under the consolidated orders, a 
maximum rate of 5 cents per hundredweight is provided. This assessment 
would apply to all of a handler's receipts pooled under the order.

Deduction for Marketing Services

    As in most current orders, the consolidated orders provide for the 
furnishing of marketing services to producers for whom cooperative 
associations do not perform services. Such services include providing 
market information and establishing or verifying weights, samples, and 
tests of milk received from such producers. In accordance with the Act, 
a marketing services provision must benefit all nonmember producers 
under the order.
    The market administrator may contract with a qualified agent, 
including a cooperative association, to provide such services. The cost 
of such services should be borne by the producers for whom the services 
are provided. Accordingly, each handler will be required to deduct a 
maximum of 7 cents per hundredweight from amounts due each producer for 
whom a cooperative association is not providing such services. All 
amounts deducted must be paid to the market administrator not later 
than the due date for payments to the producer-settlement fund.

6a. Northeast Region

The Northeast Marketing Area

    The recommended consolidated Northeast order differs significantly 
from other consolidated orders. In addition to merging three existing 
Federal milk orders, the Northeast order also calls for expansion in 
the northern region of New York state, and all currently unregulated 
areas of the New England states (except Maine).
    While the current New England (Order 1) and Middle Atlantic (Order 
4) orders have similar provisions for adjusting producer blend prices 
in a manner identical to plant price adjustments for location, the 
current New York-New Jersey (Order 2) order employs a ``farm-point'' 
pricing method. This decision adopts a plant-point pricing methodology 
in the consolidated Northeast order. This method is used in every other 
current marketing area and in every consolidated marketing area. This 
represents a considerable change in how milk will be priced for those 
handlers and producers whose milk currently is priced under the 
provisions of the New York-New Jersey order.
    In addition to the different pricing provisions of the three 
existing orders, other important differences and related provisions 
need to be addressed in the Northeast regional order that will 
accomplish the goals of the AMAA. These include what is commonly 
referred to in the New York-New Jersey order as the ``pass through'' 
provision; the need for providing marketwide service payments in the 
form of cooperative service payments and balancing payments that 
currently exist in the New York-New Jersey order and do not exist in 
either the current New England or Middle Atlantic orders. Additionally, 
the three current northeast orders also provide for seasonal 
adjustments to the Class III and IIIA price.
    It is fair to observe that the current order most affected by the 
consolidation is the New York-New Jersey order. In addition to the 
differences already described, certain terms and provisions of the 
Northeast order are also different in how they are described and 
presented but are nevertheless consistent with existing provisions that 
accomplish the goals of the AMAA. This is less of an issue for those 
entities that are accustomed to the terminology of provisions used in 
the New England and Middle Atlantic orders. The following presents a 
discussion of the recommended order provisions and issues that are 
unique to the consolidated Northeast order.

Plant

    The plant definition for the consolidated Northeast order should 
differ from that of the other consolidated orders by allowing 
stationary storage tanks to be used as reload points. This exception to 
the plant definition is warranted for the consolidated Northeast order 
due to certain unique conditions that affect the ability of handlers 
and haulers to assemble milk in an efficient manner and subsequently 
transport it to a plant that actually processes milk into finished 
dairy products, including fluid milk products. This exception would not 
consider the reload point or facility as a point from which to price 
producer milk. Rather, milk once assembled would be shipped to a 
processing plant where it would be priced.
    A portion of the Northeast milk supply is derived from some 200 
small dairy farms located in Maine. Because much of this state is 
serviced by secondary and rural winding roads, the current New England 
order has provided for reload points as a workable solution to the 
inherent hauling difficulties in transporting relatively small loads of 
milk from the countryside to reload points and facilities with 
stationary storage tanks that do not serve as a pricing point. This 
should continue to be provided for in the consolidated Northeast order. 
Not to provide this accommodation would adversely affect a substantial 
number of small producers and the milk haulers that service them.

Pool Plant

    The pool distributing and pool supply plant definitions of the 
consolidated Northeast order use the standard order language format 
used in other orders, combined with performance standards that are 
adapted to marketing conditions in the Northeast.
    The pool distributing plant definition specifies that a pool 
distributing plant must have 25 percent or more of its total physical 
receipts of fluid milk distributed as route disposition and that at 
least 25 percent of route disposition be within the marketing area. The 
25 percent level of total receipts distributed on routes is reasonably 
high enough to establish a distributing plant's association with the 
fluid milk market. The in-area route distribution performance standard 
level of 25 percent is adopted because it tends to minimize changing 
the regulatory status of handlers from their current regulatory status 
by the Federal order program that may result from the consolidation of 
existing orders. The 25 percent in-area sales standard is also a 
reasonable measure for identifying a level at which a distributing 
plant is sufficiently associated with the marketing area.
    As already discussed, the consolidated Northeast order and other 
nearby consolidated marketing orders do not call for expansion to 
include certain currently unregulated areas. This includes areas in the 
states of New York, Pennsylvania, Virginia, and the entire state of 
Maine. Some distributing plants in these areas are not currently 
regulated, or are only partially regulated to the extent they have some 
Class I sales in regulated areas. A 25 percent in-area route 
distribution level will serve to ensure or minimize any changes in 
their current regulatory status under the Federal program that result 
from

[[Page 16140]]

consolidation of the three northeast marketing areas into a single new 
order.
    Unit pooling, wherein two or more plants operated by the same 
handler located in the marketing area can qualify for pooling as a unit 
by meeting the total and in-area route distribution requirements of a 
pool distributing plant, is included in the consolidated Northeast 
order. Providing for unit pooling provides a degree of regulatory 
flexibility for handlers by recognizing specialization of plant 
operations.
    Due primarily to positions offered by many of the major Northeast 
dairy cooperatives and their recommendations on appropriate pool supply 
plant performance requirements, the consolidated Northeast order supply 
plant performance requirements initially should be set to require that 
in the months of August and December, at least 10 percent of the total 
quantity of bulk milk that is received at a supply plant be shipped to 
distributing plants. For the months of September through November, such 
shipments by pool supply plants should be at least 20 percent. To the 
extent that a supply plant has met these performance requirements, no 
performance requirement is recommended for the months of January 
through July. However, a supply plant that has not met these 
performance requirements will need to meet a 10 percent performance 
requirement in each of the months of January through July in order to 
qualify as a pool supply plant.
    This decision also provides for a system of supply plants for the 
consolidated Northeast order. This provision allows two or more supply 
plants operated by the same handler, or by one or more cooperative 
associations to be qualified for pool plant status by meeting the 
shipping standards in the same manner as a single supply plant subject 
to certain conditions. These conditions include written notification to 
the market administrator of the plants that will be included in the 
system, how pool status of plants will be affected if individual plants 
are removed from the system, and provisions for adding plants to the 
system.

Producer-Handler

    The producer-handler definition for the consolidated Northeast 
order limits receipts to no more than 150,000 pounds of fluid milk 
products from handlers fully regulated under any Federal order. While 
the proposed rule addressed significant limitations on producer-
handlers with respect to how it distributes their milk, this decision 
removes such limitations. The intent of providing an appropriate 
producer-handler definition was to cause no change in the regulatory 
status of any known producer-handler currently in operation in the 
Northeast order region. However, the three orders being consolidated 
have significant differences in the extent of control a producer-
handler must retain over its distribution practices. The current Middle 
Atlantic region does not limit the distribution facilities that may be 
used by a producer-handler. Thus, any limitation with respect to 
distribution could either cause a current producer-handler to loose 
such status, or may cause the need for a producer-handler to modify its 
business practices. Therefore, the producer-handler definition adopted 
herein removes any restrictions on how it distributes its products.
    Also removed from the producer-handler definition is the provision 
that a producer-handler would not include any producer who also 
operates a distributing plant if it is requested that their dairy farm 
and plant be operated as separate entities. Removing this component of 
the producer-handler definition tends to strengthen the principle that 
producer-handlers rely primarily on their own farm production to bear 
the burden of balancing their fluid sales and to find outlets for their 
surplus production.

Producer

    The producer definition of the consolidated Northeast order defines 
and describes those dairy farmers who are properly associated with the 
Northeast marketing area and who will share in the benefits that accrue 
from the marketwide pooling of milk under the order.
    The producer definition establishes seasonal limitations for 
determining if a dairy farmer is considered to be a producer under the 
order. Basically, the order prohibits a dairy farmer from being a 
producer under the order during the flush production period if the 
dairy farmer did not supply the market during the months of relatively 
short production when milk supplies are needed most to meet fluid 
demands. Accordingly, the producer definition does not include dairy 
farmers whose milk during any month of December through June is 
received at a pool plant or by a cooperative association handler if the 
operator of the pool plant or the cooperative association caused the 
milk from such producer's farm to be delivered to any plant as other 
than producer milk as defined in the producer milk provision of the 
Northeast order, or any other Federal milk order during the same month, 
in either of the two preceding months, or during any of the months of 
July through November.
    Similarly, a dairy farmer would not be considered a producer under 
the order for any month of July through November if any milk of the 
dairy farmer is received at a pool plant or by a cooperative 
association handler if the pool plant operator or the cooperative 
association caused the dairy farmer's milk to be delivered to any plant 
as other than producer milk, as defined in this proposed order, or in 
any other Federal milk order during the same month.

Producer Milk

    The producer milk definition of the consolidated Northeast order 
follows the general structure and format of other consolidated orders. 
It differs from other consolidated orders in that it requires 
cooperative handlers to organize reports of producer receipts that 
originate outside of the states included in the marketing area, or the 
states of Maine or West Virginia, into reporting units with each unit 
separately reporting receipts.
    No diversion limits are established as they are in other 
consolidated orders. However, diversions are limited in functional 
terms. The maximum quantity of milk that a supply plant would be able 
to divert and still maintain pool plant status would be 100 percent 
minus the applicable shipping standard. This should provide for a 
maximum amount of flexibility in marketing milk in the most efficient 
manner to balance fluid milk needs.

Component Pricing

    The consolidated Northeast order will employ a component pricing 
plan in the classified pricing of milk under the order as previously 
discussed in the BFP section of this decision. This is consistent with 
positions taken and proposals offered by major cooperative groups in 
the Northeast who supply a large percentage of the milk needs of the 
market. However, on the basis of public comments, the consolidated 
Northeast order will not contain a somatic-cell adjustor.
    In response to the proposed rule, one major association 
representing primarily milk processors and dairy product manufacturers 
in New York expressed opposition to employing a multiple component 
pricing plan in the Northeast order. Their objection to its adoption is 
that it will be burdensome for handlers. This was expressed primarily 
as burdens associated with changing from farm-point pricing to plant-
point pricing of milk and changes that handlers would need to make for 
producer pay-roll purposes and in the

[[Page 16141]]

accounting software that they contend would entail considerable cost 
outlays. Also expressed in opposition to its adoption was that multiple 
component pricing does not favor fluid milk handlers, that it is 
designed primarily for high-solids producers and manufacturers, that it 
may result in manufacturers having to pay premiums to attract high-
solids milk, and that it rewards some producers while reducing pay 
prices to others.
    These objections are unpersuasive. Multiple component pricing is a 
method for determining, among other things, how producer milk will be 
priced under the order on a basis beyond just skim milk and butterfat. 
Components of milk have values that are recognized by the marketplace 
and producers have expressed the desire for having their pay prices 
adjusted according to such values. Nevertheless, it does not affect the 
total per hundredweight value of milk. Additionally, multiple component 
pricing does not either favor or disfavor fluid milk handlers as the 
multiple component pricing plan adopted for the Northeast order will 
continue to price Class I milk on the basis of skim milk and butterfat.
    It should be noted that there are many multiple component pricing 
plans operated by many handlers in the northeast region. The existence 
of such plans provides evidence that it is appropriate and reasonable 
to formalize a multiple component pricing plan for the consolidated 
Northeast marketing order, especially when there is strong support for 
it by producers. To the extent that there are so many similar plans, it 
should not be particularly burdensome for a one-time change by handlers 
in their accounting systems for determining producer payroll.

Farm-Point vs. Plant Point Pricing

    At issue in merging the three northeast marketing areas is the use 
of two distinct pricing methods for milk. The Middle Atlantic and New 
England marketing areas employ a system of plant-point pricing. This 
pricing method is also employed in every other marketing area in the 
Federal order system. Only the New York-New Jersey marketing area uses 
what is called ``farm-point'' pricing. This decision adopts plant-point 
pricing as the pricing method for the consolidated Northeast order.
    Plant-point pricing of milk that is pooled under an order prices 
milk f.o.b. the plant of first receipt. The cost of hauling from the 
farm to the plant is the responsibility of the producer. When the 
receiving handler is also the hauler, orders permit the handlers in 
making payments to each producer to deduct hauling costs up to the full 
amount authorized in writing by the producer.
    As originally employed in the New York-New Jersey order (Order 2), 
farm-point pricing establishes the price for milk by the zone (distance 
from market computed from the nearer of the basing points) of the 
township in which a producer's milkhouse is located. While termed 
``farm-point,'' farms are grouped by their township location because 
this is the nearest practicable proxy for actual farm location. In 
functional terms, when a handler picks up milk at a producer's farm, 
the handler takes title of the milk at the time and point of pickup. 
Accordingly, there were no adjustments in payments to producers to 
cover any part of the cost of pickup or hauling in moving milk to the 
handler's plant. Farm-point pricing fundamentally shifts the cost of 
transporting milk from the producer to the handler. Farm-point pricing 
has been in effect in Order 2 since 1961. While the fundamental concept 
of farm-point pricing has been retained with respect to its overall 
structure of mileage zones, other order provisions were adopted 
subsequent to its establishment and modified over time so that farm-
point pricing could remain viable while allowing handlers to charge 
some of the cost of hauling producers' milk to the plant of first 
receipt.
    In the decision that established farm-point pricing (25 FR 8610, 
Sept. 7, 1960), prevailing marketing conditions served to warrant this 
type of pricing system. At that time, the emergence of bulk-tank milk 
began to take on a degree of prominence in the milk supply of Order 2. 
Prior to the adoption of farm-point pricing (1959), about 8 percent of 
the producers had bulk tanks, accounting for at least 14 percent of the 
volume of milk associated with the market. About 92 percent of 
producers delivered their milk at their own expense directly to plants 
in 40 quart cans. Most of the milk can-delivered was from farms within 
a radius of not more than 15 miles from the plant. The milk of 
producers who had converted to bulk tanks, in some instances, was 
hauled more than 200 miles from farm to city plants, but the majority 
of bulk tank milk was moved much shorter distances to country receiving 
plants. The decision cited that in October, 1959, milk was received 
from 49,719 producers at 691 plants.
    When milk was delivered in cans to a handler's plant, the plant was 
the location at which milk was weighed, sampled for butterfat and 
quality, and where cans were washed. It was at the plant that milk was 
accepted or rejected. It was the place where milk was cooled and co-
mingled with other individual producer's milk. More importantly, it was 
the place where control of the milk passed from producer to the plant 
operator or from which the milk was moved by the plant to other plants 
for fluid or manufacturing uses. Minimum prices required by the order 
to be paid by handlers were adjusted for the location of the plant at 
which milk was received from dairy farmers.
    Bulk tank milk brought a set of new factors. When milk was 
transferred from a producer's bulk tank to the hauler, the point of 
transfer was also the point where several functions are performed. Milk 
in a producer's bulk tank has already been cooled, and therefore is not 
subject to the early delivery deadlines. The weight of milk was 
determined at the bulk tank, and samples were taken for butterfat and 
quality. It was also here that the individual producer's milk was 
rejected or accepted and lost its identity by being co-mingled with 
other milk.
    Numerous problems arose in regulating the handling of bulk tank 
milk in an order where pooling depended upon direct delivery from the 
farm to a pool plant and under which minimum class prices and the 
uniform prices to be paid to producers was reflective of the location 
of the plant where delivery was made:
    1. Administrative problems associated with bulk tank handling 
arose, particularly where and when milk was regarded to have been 
received. Bulk tank milk provided the opportunity to deliver milk to 
different plants, some pool and some nonpool. Where a given tank load 
of milk was unloaded if it went to two or more plants of the same or 
different handlers on the same day was difficult to determine.
    2. The incentive arose (because of the administrative difficulty of 
determining when and where milk was received) for handlers to behave in 
a way that would result in the maximum exclusion of milk from the pool 
for fluid use outside the marketing area.
    3. The incentive arose for the maximum inclusion in the pool of 
milk in fluid and manufacturing uses.
    4. The incentive and opportunity arose for handlers to select one 
of several plants for receipt of bulk tank milk, with or without 
manipulation of hauling charges. This distorted and impinged upon the 
effectiveness of the minimum price provisions of the order, especially 
in the case of relatively long hauls of bulk tank milk.
    The 1961 decision that established farm-point pricing provided 
eight scenarios that demonstrated how handlers behaved so as to 
minimize

[[Page 16142]]

their pricing obligations to producers. Most of the scenarios arose 
from the inability to determine when milk was received at a plant. In 
order to mitigate such circumstances, several things were done. 
Foremost was the establishment of farm-point pricing on the basis of 
bulk tank units and the designation of each bulk tank unit as either a 
pool or nonpool unit and defining the circumstances under which such 
designations could be changed.
    The pricing of milk at the farm eliminated the incentive for 
handlers to attempt to make it appear that the plant of receipt was 
other than the plant where milk is actually received and handled. It 
was made crystal clear that delivery and receipt of bulk milk takes 
place at the farm. Once acquired by the handler, the plant or plants to 
which the milk may be delivered depended on decision of the handler, 
not the producer. Under these circumstances, where the milk was 
actually used was not a factor to be reflected in the minimum producer 
price. The operator of the bulk tank unit was defined as the handler 
and the point of receipt of milk. This entity was responsible for 
establishing the unit, and it held the responsibility for reporting, 
accounting, pooling and paying producers. Additionally, the decision 
concluded that the price at which the farm bulk tank is accounted for 
to the pool should be the minimum class price adjusted for location of 
the farm, and that payments by handlers directly to producers be 
adjusted to reflect all location differentials based on where farms are 
located and where bulk tank milk was received.
    A proposal that would have allowed a tank truck service charge 
authorized by the producer but not in excess of 20 cents per 
hundredweight (cwt.), and establish that payments to cooperatives which 
serve as handlers operating a bulk tank unit should be at the price 
reflecting transportation and (the then existing) direct delivery 
differential applicable at the handler's plant where milk is delivered 
by the cooperative was not incorporated into the order. At that time, 
it was found that plant hauling charges averaged nearly 20 cents per 
cwt. This was offered as rationale for a negotiable 20 cent per cwt. 
charge by handlers for hauling. Arguments not withstanding, the 
underlying concepts embodied in farm-point pricing caused the 
Department to not allow for any hauling deduction by handlers.
    Shortly after the implementation of farm-point pricing, the need to 
amend the order to keep farm-point pricing viable arose. The first 
occurrence was in 1963. In the 1963 decision (28 FR 11956, Oct. 31, 
1963), it was noted that there had been significant changes in 
marketing conditions that arose from establishing farm-point pricing in 
1961. These included the reduction in premiums to bulk tank producers 
in general; the reluctance of proprietary handlers to receive bulk tank 
milk from individual producers because of the hauling costs they would 
incur; the differences in pricing can and bulk tank milk; and a 
slowdown in the trend of conversion from can milk to bulk tank milk. 
The 1963 decision, in acknowledgment of changing marketing conditions, 
incorporated an authorized 10-cent per cwt. charge for hauling under 
the Order, provided that producers authorized this maximum level in 
writing.
    In the 1963 decision, the Secretary found that allowing for a 
limited authorized service charge for hauling bulk tank milk at a 
maximum rate of 10 cents per cwt. was sufficient. This was largely 
based on the fact that handlers were not then charging for bulk tank 
pickup and hauling, but rather were paying premiums for bulk tank milk. 
Additionally, can-milk direct delivered by producers to plants was 
still very much the norm. While bulk tank milk was growing, it had not 
yet accounted for a majority of milk pooled on the order.
    This decision raised, for the first time with respect to farm-point 
pricing, the maintenance of orderly conditions and uniform pricing to 
handlers on all milk priced and pooled under the order. Because bulk 
tank milk is priced by township zone, (the best proxy for a farm's 
location) all farms in any particular township have the same value 
assigned to their milk. However, the decision found it necessary to 
reflect appropriate uniform pricing of bulk tank milk because it has 
differing values dependent on the accessibility and relative location 
of individual farms within the township. With this finding, it was 
determined that responsibility for hauling to the township pricing 
point should be borne by the producer with appropriate safeguards to 
protect the producer. Therefore, a maximum negotiable hauling charge 
from handlers of 10 cents per cwt. was brought under the order.
    By 1970, marketing conditions in the New York-New Jersey market had 
changed to the point where handlers were authorized to receive a full 
10-cent hauling credit for each cwt. of bulk tank milk which was 
disposed of for manufacturing uses. Additionally, the negotiable 10-
cent hauling charge to producers for a handler's cost offset 
established by the 1963 decision was retained. However, the 10-cent 
negotiable limit was limited to manufacturing milk. Can-milk at this 
time represented about 25 percent of the total amount of milk pooled in 
Order 2, with the balance being bulk tank milk.
    Proponents supporting this change to the order claimed, and the 
decision affirmed, that the manufacturing price for milk in Order 2 was 
not properly aligned with manufacturing class prices in adjacent 
Federal orders. In this decision (35 FR 15927, Oct. 9, 1970) the 
Secretary found that to the extent that Order 2 handlers had borne the 
transportation costs associated with the pickup and movement of bulk 
tank milk used in manufacturing from the farm to the plant, Order 2 
handler costs exceeded the price which handlers in adjacent order 
markets were required to pay for milk used in manufacturing. By 
adopting this transportation credit for handlers, there was no need to 
adopt other proposals that would have lowered the manufacturing price 
for milk under the other northeastern orders or lower the Class I price 
for milk in Order 2 as had been proposed.
    By 1977, some 16 years after the adoption of farm-point pricing, 
marketing conditions had changed again and the issue of providing for 
more equitable competition among handlers both within the Order 2 
market and between other orders took on primary importance. By this 
time, can-milk was about 3 percent of the market, with the balance 
represented by bulk tank milk, the near inverse of the marketing 
conditions prevailing in 1961. The transportation credit that had been 
established for handlers in the 1970 decision for manufacturing milk 
was now extended to all milk received by handlers. The transportation 
credit was increased to 15 cents per cwt., plus an additional 15-cent 
maximum negotiable credit above the ``automatic'' 15 cents because 
total average transportation costs were found to be about 30 cents per 
cwt. For reasons nearly identical to the 1963 and 1970 decisions, 
``formalizing'' the negotiable hauling charge was not adopted because 
of needed flexibility in accounting for milk movements from the farm to 
the township pricing point (42 FR 41582, Aug. 17, 1977). In that 
decision the Secretary also raised the direct delivery differential 
from 5 cents to 15 cents per cwt. in the 1-70 mile zone for can-milk 
delivered by farmers to plants within this zone, and changed the 
transportation adjustment rate from 1.2 cents per cwt. for each 10 
miles to 1.5 cents per cwt. for each 10-mile zone beyond the 201-210 
zone, and 1.8 cents

[[Page 16143]]

per cwt. for each 10-mile zone within the 201-210 mile zone.
    Cooperatives were of the strong opinion that the cost of milk 
assembly and transportation are the marketing costs of the handler and 
not producers. However, they also indicated that changes were warranted 
in the order because of the failure of neighboring markets to adopt 
farm-point pricing.
    Comparative examples of handler price inequities with respect to 
their cost of milk was amply demonstrated for both intra and inter 
market situations. With respect to inappropriate price alignment 
between orders, the competitive relationships between Order 2 and Order 
4 were closely examined. On intra-order movements of milk, it was shown 
that Class I handlers in New York City had a significantly lower 
procurement cost for direct-ship over bulk tank milk because bulk tank 
milk from ``distant'' supply plants had higher transfer and over-the-
road hauling costs. Supply plant milk at the city represented about 80 
percent of milk receipts at city plants. The inter-market situation 
demonstrated that handlers in Philadelphia accounted for milk at prices 
lower than New York handlers. Order 4 handlers were in a position to 
establish lower resale prices for fluid milk than their competitors in 
the New York market because the burden of increased hauling costs fell 
largely on Order 2 handlers. As in 1970, other proposals were denied in 
light of adopting the 15-cent hauling credit for handlers. These other 
proposals included lowering Class I and the manufacturing price for 
milk in the order by 15 cents per cwt.
    By 1981, bulk tank milk accounted for nearly the entire milk supply 
pooled on Order 2--about 99.6 percent. As the result of a hearing held 
in June 1980, in the final decision (FR 46 33008, June 25, 1981) the 
Secretary again amended the transportation credit provisions of the 
order. The 15 cents per cwt credit for handlers was retained; however, 
the 15-cent negotiable transportation service charge was modified to 
allow handlers to negotiate with producers for any farm-to-first plant 
hauling cost in excess of the 15-cent transportation credit, plus ``the 
amount that the class use value of the milk at the location of the 
plant of first receipt was in excess of its class use value at the 
location where milk was received in the bulk tank unit from which the 
milk was transferred.'' According to the 1981 decision, this amendment 
would adjust hauling allowances for handlers to more closely relate the 
location value of milk to the costs incurred in transporting milk from 
farms and country plants to distributing plants in the major 
consumption areas of the market. Additionally, the decision indicated 
that this change was necessary to reflect current marketing conditions 
and permit a more equitable competitive situation for regulated 
handlers, both on an intra market and inter market basis. The decision 
also applied a 15-cent direct delivery differential for bulk tank milk 
received at plants within 70 miles of New York City on the basis that a 
direct delivery differential is applicable to milk received in cans at 
a plant in the 1-70 mile zone.
    In the 1981 decision, the Secretary found that the majority of milk 
moved to distributing plants in 1979 from the 1-70 mile zone moved 
directly from farms. This accounted for about 58 percent of the milk in 
this zone with 48 percent being reloaded. Moreover, the decision found 
that Order 2 plants located in northern New Jersey received direct 
shipped milk as did handlers located in Order 4. Thus, inter market 
price alignment needed to be structured primarily on the basis of 
handlers obtaining direct shipped milk.
    A federation of cooperative associations representing Order 4 
producers proposed that Order 2 be amended to return to plant-point 
pricing, with the direct delivery differential being reduced to 10 
cents per cwt, and that the Class I differential at the base zone of 
Order 2 be increased from the $2.25 level then in effect, to $2.40. 
This federation of cooperatives believed that this ``package'' of order 
modifications would provide for proper price alignment between Order 2 
and Order 4. While the decision did apply different transportation 
rates at a rate of 1.8 cents per cwt. outside the base zone of the 
Order (201-210) and a rate of 2.2 cents per cwt. inside the base zone, 
it did not provide for a return to plant-point pricing.
    While the decision did not adopt plant point pricing, the decision 
did acknowledge that the amendments adopted tended to establish plant 
pricing with respect to the classified prices to handlers. However, 
farm-point pricing was retained with respect to how producers were 
paid. With this being the case, the basic substantive difference 
between the amendments and plant pricing is the impact on the movement 
of milk to higher-priced zones for manufacturing use. Under plant 
pricing, the minimum uniform price payable to producers applies at the 
location of the plant of first receipt and handlers receive a credit 
from the producer settlement fund at such uniform price. The decision 
also concluded that plant-point pricing for producers would provide a 
greater incentive to haul direct-shipped milk to city plants for 
manufacturing uses, since there would be a credit from the pool for the 
full amount by which the uniform price transportation differential at 
the city plant exceeds the transportation differential for the zone of 
the bulk tank unit. Adopting plant-point pricing for producers would 
have had the effect of encouraging milk to move long distances to city 
plants for manufacturing uses when transportation savings could be 
realized if such milk stayed nearer to manufacturing plants generally 
located in the milkshed.
    Farm-point pricing has undergone many evolutionary changes from its 
inception in 1961. The original rationale for farm-point pricing, free 
hauling and the administrative difficulty of determining when milk from 
bulk tank units was received seems far removed from present-day 
marketing conditions and the rationale for continuing it. There were a 
number of years that hearings were necessary to first recognize that 
the burden of transportation costs rested with handlers. This resulted 
in handlers being able to successfully argue that with this burden, it 
became much more difficult for the order to establish and maintain 
uniform prices to handlers as required by section 608(5)(c) of the 
AMAA. This is evidenced by the nature of the decisions of 1963, 1970, 
1977, and 1981. Much ``repair'' to other order provisions were also 
needed to retain farm-point pricing.
    Few comments were received in response to the recommended adoption 
of plant-point pricing by current Order 2 entities. One New Jersey 
entity thought that its elimination would eventually lead to increased 
hauling costs borne by producers. Another comment received from a trade 
organization representing fluid milk processors and dairy product 
manufacturers, thought that too much emphasis was placed on the ``free-
hauling'' to the detriment of other desirable features embodied in 
farm-point pricing. Most important was this entity's view that farm-
point pricing provides for increased flexibility and in providing for 
automatic incentives for the most efficient hauls of milk for/by 
handlers in assembling and moving milk while not affecting the price 
paid to dairy farmers.
    The arguments for retaining farm-point pricing are not persuasive 
in light of the detailed discussion on the entire life-cycle of its 
history discussed above. This is not to discount the importance of the 
certain desirable features of farm-point pricing that led to its 
adoption and that have been articulated over the

[[Page 16144]]

years for its retention in the New York-New Jersey marketing area. 
Nevertheless, farm-point pricing has outlived its intended purpose and 
the Secretary determines that it will not be retained in a consolidated 
Northeast order.

The Need for a Producer-Price Mechanism

    As discussed above, farm-point pricing for producers did provide 
some rational pricing incentives to promote efficiency within the Order 
2 marketing area. This can reasonably be summed up by concluding that 
farm-point pricing would not provide, as plant-point pricing would, 
incentives to haul direct-shipped milk to city plants for manufacturing 
uses, since there would not be a credit from the pool for the full 
amount by which a uniform price transportation differential at the city 
plant exceeds the transportation differential for the zone of the bulk 
tank unit. Adopting plant pricing would have had the effect of 
encouraging milk to move long distances to city plants for 
manufacturing uses when transportation savings could be realized if 
such milk stayed nearer to manufacturing plants generally located in 
the milkshed.
    In an effort to address the dairy industry structures that have 
evolved over the past four decades in the three current northeast 
marketing areas, efforts were undertaken by a major group of dairy 
farmer cooperatives in the northeast to address what the pricing 
implications are to producers and handlers as the region moves to a 
unified plant-point pricing method. This has resulted in a proposal by 
the Association of Dairy Cooperatives in the Northeast (ADCNE) that 
include St. Albans Cooperative Creamery, Inc., Land O'Lakes, Upstate 
Farms Cooperative, Inc., Agri-Mark, Inc., Dairy Farmers of America, 
Inc., Dairylea Cooperative Inc., and Maryland & Virginia Milk Producers 
Cooperative Association Inc. These dairy farmer cooperatives account 
for well over half of the milk that would be pooled and priced under 
the proposed consolidated Northeast order. Their proposal calls for 
establishing a producer differential structure that would ``overlay'' 
the Class I differential structure that would apply in the consolidated 
Northeast order.
    The structure proposed is a county-based plant-point price 
structure, providing for 14 zones that accommodate the need to reflect 
existing and longstanding competitive price relationships among plants, 
while integrating the farm and plant point pricing systems currently 
used in Orders 1, 2, and 4 and with currently state-regulated areas 
that fall outside of the proposed marketing area. Further, the ADCNE 
proposed prices at the major cities in the Northeast, including Boston, 
New York City, Philadelphia, Baltimore, and Washington, D.C., included 
specific Class I differential levels that are somewhat different from 
those presented in the Option 1A Class I price surface. For example, 
the recommended decision recommended a New York City Class I 
differential of $3.15, while ADCNE proposed $3.20. In general, the 
ADCNE proposal assumed that the Class I differential structure that 
would be adopted was Option 1A, which is the Class I pricing option 
they strongly support, and also is the Class I pricing option 
overwhelmingly supported in public comments received from interested 
parties from the northeast.
    With respect to a producer differential surface, the ADCNE proposed 
that a debit of 5 cents per cwt. be made to the blend price applicable 
at non-distributing plants in certain zones. The need for the debit, 
according to the ADCNE proposal, is to make deliveries to distributing 
plants somewhat more attractive to producers, while decreasing the 
amount by which manufacturing plants draw on the marketwide pool for 
transportation values, offering also that such a debit is economically 
justified and authorized by the AMAA. According to ADCNE, it is 
distributing plants that provide the revenue--in the form of Class I 
values--which form the blend price paid to producers. Deliveries to 
manufacturing plants do not contribute to increasing the value to the 
marketwide pool. The debit, according to ADCNE, is a reflection in part 
of the Order 2 system, which has priced some 50 percent of the milk in 
the northeast region, and which does not provide location-based 
transportation payments for movements from farms to manufacturing 
plants. The ADCNE proposal provides that deliveries to Class I plants 
are rewarded under this system with an additional 5-cent payment from 
the pool for the marketwide benefit conferred by a distributing plant's 
utilization.
    For the Western New York State order area, ADCNE also proposed a 
broad area in which a producer differential of $2.40 per cwt. to 
producers would be payable on deliveries of producer milk at all plant 
locations in this area. This portion of the price surface proposed by 
ADCNE purports to be reflective of the major historical movements of 
milk from east to west in the region which returned the eastern farm 
point price to dairy farmers under Order 2's farm-point price system, 
and that the Western New York State order has not had any location 
differentials, thereby establishing a ``flat'' price surface in the 
area. If those plants, for producer pricing purposes, were zoned lower 
in value reflecting the westerly and northerly distance from New York 
City or Philadelphia, ADCNE is of the view that the ability of both 
distributing and supply plants to attract an adequate supply of milk 
could be in jeopardy. Furthermore, the expectation that Class I 
utilization of the proposed Mideast order will be nearly 10 percent 
higher than the Class I utilization in the Northeast order was also 
offered in support of the ADCNE-proposed producer differential level in 
this area.
    The ADCNE proposal also recommended producer differential levels in 
areas that they believed should be included in either the consolidated 
Northeast order or the Mideast order. Additionally, the ADCNE proposal 
also addressed producer differential levels at other locations outside 
of the Northeast region.
    Additional supporting and amplifying comments were also provided by 
Dairylea. These comments supported the major themes offered in the 
ADCNE proposal for a producer differential overlay to Class I 
differential levels. Dairylea stated that moving directly to a plant-
point pricing method would accentuate ``existing inequities and market 
dysfunctions.'' Dairylea further commented that a plant-point 
differential schedule would maintain current inter-plant price 
differences in the current New England and Middle Atlantic orders, but 
would worsen them for New York manufacturing plants, many of which are 
cooperatively owned. Their view of the ADCNE pricing proposal was that 
it maintains economic incentives for milk to move to Class I 
distributing plants, would provide for more balanced procurement equity 
among competing manufacturing plants, maintains equitable producer 
pricing when milk is marketed by transporting it from a higher priced 
zone to a lower priced zone, and provides a structure that allows for 
adequate blend price levels in all areas of the Northeast milkshed.
    Dairylea further commented that under plant-point pricing, existing 
``near-in'' manufacturing plants (plants located in a relatively high 
differential location) would enjoy a procurement advantage relative to 
their competitors that are located in a lower-priced location. Dairylea 
recommended narrowing the price differences between manufacturing 
plants that compete for producer milk. To do this, Dairylea supported 
lowering producer differentials for manufacturing plants

[[Page 16145]]

that are located in high-valued locations and increasing those 
differentials at manufacturing plants in areas that have lower location 
values. Dairylea advocated the ADCNE proposal for a producer 
differential that is 5 cents lower than those of Class I plants when 
such plants are located in the same pricing zones. Dairylea's view of 
this design results in maintaining, or slightly increasing, producer 
differentials applicable at Class I plants and reducing those 
applicable at ``near-in'' manufacturing plants. At the same time, this 
would provide for increasing producer differentials at manufacturing 
plants in central, western, and northern New York. According to 
Dairylea, this producer pricing surface would present a more equitable 
marketing environment than strict plant-point pricing currently 
employed in Orders 1 and 4, while at the same time not threatening the 
viability of manufacturing plants in those areas of a consolidated 
Northeast marketing area.
    A major theme of Dairylea was its view that Federal milk orders and 
their provisions should foster an environment under which manufacturing 
plants are provided equal cost and procurement ability, and not 
disfavor such manufacturing plants located in high milk production 
areas where Class I differentials are lower. Dairylea also stated that 
the final rule of 1991 that realigned intra-order prices in Order 2 
resulted in harm to producers in northern and western New York. While 
it is not appropriate to specifically revisit this issue and decision 
here, official notice is taken of the final decision (55 FR 50934, 
December 11, 1990) that realigned Class I differentials in the three 
existing northeast marketing areas.
    Comments supporting the ADCNE proposal for a producer pricing 
surface were also offered by Upstate Farms Cooperative, Inc. The 
Upstate Farms views served to reiterate the major themes developed in 
the ADCNE proposal.
    Agri-Mark, a part of ADCNE, filed separate and dissenting views on 
the ADCNE proposal. Conceptually, Agri-Mark noted that plant and farm-
point pricing are different, but noted further that the differences are 
not always unfavorable. Agri-Mark submitted that under plant-point 
pricing, all producers shipping to the same plant receive the same 
minimum order blend price regardless of where their farm is located. 
Under farm-point pricing, farmers shipping to the same plant receive 
different prices under the order depending on where their farm is 
located. Farms closer to New York City, Agri-Mark noted, receive a 
higher price than farms farther from the city, even though their milk 
ends up in the same place.
    Agri-Mark noted that most manufacturing plants, especially cheese 
plants, were built in the northeast prior to the adoption of farm-point 
pricing and not in response to it. Rather, says Agri-Mark, these plants 
were built at their present locations because of their proximity to 
abundant milk supplies. The procurement problems for manufacturing 
plants that Order 2 entities alert us to did not arise in New England 
manufacturing plants under plant-point pricing even though these plants 
were located as far north as possible within the milkshed for New 
England.
    Simply put, Agri-Mark believes that rather than decreasing the 
differential between manufacturing plants and city distributing plants, 
an increase is justified. They are also of the opinion that 
manufacturing plants located far from higher-priced zones will maintain 
an advantage even with the adoption of strict plant-point pricing 
because this milk does not need to travel long distances to reach 
manufacturing plants. Agri-Mark indicates that the ADCNE proposal would 
cause Agri-Mark producers to receive lower prices that competitive 
price relationships do not warrant.
    The Agri-Mark view of Federal milk marketing orders differed 
substantially from the views expressed by Dairylea. Agri-Mark stated 
that the role of Federal milk marketing orders is to treat all 
producers equitably relative to how their milk is used and not to 
weaken price integrity by causing destructive competition among 
producers for sale to Class I outlets. This is best accomplished, 
according to Agri-Mark, with appropriate pooling requirements and Class 
I differentials to satisfy the Class I demands of the market. Agri-Mark 
fears that if the regulatory pricing plan gives a distributing plant an 
advantage over a cooperative manufacturing/balancing plant in the same 
zone, that plant can use this advantage for itself instead of passing 
it along to farmers to offset transporting their milk to market.
    Lastly, in their opposition to the ADCNE proposal, Agri-Mark noted 
that no manufacturing plant has been built in any city zone for 
decades, noting that the only significant plants in such areas for the 
northeast are older plants producing nonfat dry milk and butter and 
which serve to balance the Class I needs of city markets, concluding 
that such plants are there for common sense and efficiency reasons. In 
support of this observation, Agri-Mark noted that existing Class I 
differentials have not been adjusted to more fully account for 
increases in hauling costs.
    A producer pricing differential structure that differs from a Class 
I differential is denied. The issue before the Department is to 
minimize the impact of the change from farm-point to plant-point 
pricing on producers as part of adopting plant-point pricing for the 
new consolidated order. The change to plant-point pricing will affect 
approximately one-half of the producers in the consolidated marketing 
area and is a significant departure from historical methods of 
distributing the revenue that accrues from classified pricing to 
producers whose milk is pooled under the current New York-New Jersey 
order. Plants, however, will not experience significant change since 
plants currently regulated under Order 2 already account to the 
marketwide pool at the Class I location differential value. The issue 
then, tends to focus on how to pool and distribute the revenue as 
equitably as possible to producers. Of the few public comments that 
were received on this issue in response to the January 30, 1998, 
proposed rule, it was requested that this issue be reconsidered. 
However, no new or persuasive arguments were advanced that would cause 
a change in denying this proposal.
    Competitive equity between manufacturing plants is already ensured 
by the classified prices applicable to handlers who operate such 
plants. In fact, this decision adopts uniform Class III and Class IV 
prices that are applicable for all locations. The more appropriate 
issue this proposal seems to address is that manufacturing plants are 
often cooperatively owned. All entities, including cooperatives in 
their capacity as handlers, account to the marketwide pool at the 
manufacturing price for milk received at their plants. The price paid 
to producers is the blend price for all milk pooled on the market that 
was priced according to its use. Cooperatively owned manufacturing 
plants located in higher priced areas will pay a higher blend price to 
producers who deliver milk to that location provided they meet the 
performance requirements for being pooled, thereby demonstrating the 
appropriate degree of association with the market. In this regard, it 
is worthy to note that not all manufacturing plants in the high-valued 
zones in the New York marketing area are pool plants. Blend prices are 
adjusted everywhere according to the location value of the plant. 
Adjusting producer blend prices on the basis of whether or not milk was 
delivered to a distributing plant or to a

[[Page 16146]]

manufacturing plant seems to create a form of producer price 
discrimination that classified pricing and the mechanism of marketwide 
pooling and its related provisions attempt to mitigate. Such marketwide 
pooling provisions provide a degree of equity to producers in the form 
of a uniform blend price adjusted only for the location value on all 
milk pooled on the market. Classified pricing and marketwide pooling 
have served well to mitigate the price competition between producers 
seeking preferred higher-valued outlets for their milk, while at the 
same time ensuring handlers uniform prices, adjusted only for location, 
in the prices they pay for milk.

Marketwide Service Payments

    Cooperative Service Payments--Cooperative service payments, as part 
of a marketwide service payment provision for the consolidated 
Northeast order, should not be included in a consolidated Northeast 
order. As originally proposed by ADCNE, a 2-cent per cwt. payment would 
be made out of the marketwide pool to cooperatives and non-cooperative 
entities for funding information-gathering and services related to 
amending Federal milk marketing order provisions that would be of 
marketwide benefit. Cooperative service payments of this sort currently 
are provided for under terms of the New York-New Jersey order, but are 
not provided for in either the New England or Middle Atlantic orders. 
However, under the New York-New Jersey order, cooperative service 
payments are made only to qualified cooperatives that meet the 
conditions specified under the order and does not provide for such 
payments to non-cooperative entities. In comments provided in response 
to the proposed rule published on January 30, 1998, the ADCNE withdrew 
this component of their marketwide service payment proposal.
    Rationale offered in support of a cooperative service type payment 
to cooperatives and non-cooperative entities was based on recognizing 
that in a regulatory pool structure, private parties provide important 
services that are of benefit to everyone involved in the marketwide 
pool, including the promulgation, amendments to, and administration of 
the order. Not to provide a mechanism for the recovery of a portion of 
the expense involved in providing such services would disadvantage 
those incurring these expenses while everyone in the market benefits as 
a result of these services.
    Qualification criteria presented for entities eligible to receive 
this payment included a demonstration to the market administrator that 
it provides information with respect to market order prices and 
marketing conditions, that it has retained legal and economic staff or 
consulting personnel available to participate in marketing order 
amendatory proceedings, to consult with the market administrator with 
respect to marketing order issues, and that the entity pool at least 
2.5 percent of the order's total milk volume.
    There is not a compelling reason to adopt this sort of compensatory 
plan to reimburse those entities that incur these costs. Market 
administrators and their staffs make themselves available to meet with, 
discuss, and aid in formulating positions that reflect marketing 
conditions as a normal part of their duties. Additionally, there are 
numerous provisions in the order that require as a matter of course the 
issuance of reports, prices, and other information that affect all 
marketing order participants and that provide a service to the entities 
affected by the regulatory plan of the order. Finally, no other current 
or consolidated order provides for such cost compensation. Cooperative 
and proprietary handlers in the New England and Middle Atlantic 
marketing areas included in the consolidated Northeast order, as well 
as entities in all other marketing areas have not experienced or have 
demonstrated any of the harm or ``disadvantage'' that arises, or may 
arise, if such costs are not shared by the entire pool of producers in 
the marketing area. This decision can only assume that industry 
participants that have an interest in developing the promulgation and 
amendments to marketing orders would be willing to do so at their own 
expense. The positions and arguments offered are largely issues of the 
self-interest of entities. As such, self-interest may or may not be of 
marketwide benefit.
    Balancing Payments--A marketwide service payment plan which would 
compensate qualified handlers that perform market balancing should not 
be included in the consolidated Northeast order at this time.
    The original proposal for providing balancing payments from the 
marketwide pool was intended to reflect the additional costs that 
handlers incur in balancing the Class I needs of the market and 
clearing the market of temporary milk surpluses. According to the 
proponents, these balancing costs are not fully recoverable from Class 
I handlers; however, the benefit that results from this service being 
provided is a benefit of all producers in the market.
    Handlers that incur the costs would be those handlers that would 
receive partial cost reimbursement of 4 cents per cwt. Cooperatives 
would be eligible to form common marketing agencies or federations for 
purposes of qualifying for balancing payments. Such handlers would 
include those who: (1) Demonstrate ownership or operation of a 
balancing plant with the capacity to process a million pounds of milk 
per day into storable products such as cheese, butter, and nonfat dry 
milk and who also represent at least 2.5 percent of the total volume of 
milk pooled under the order; (2) have under contract, and the 
obligation to pool on a year-round basis, at least 8 percent of the 
market's milk volume; (3) own a balancing plant that must be made 
available to other handlers or cooperatives at the request of the 
market administrator; (4) qualify to provide pool producers with a 
temporary market for their milk for up to 30 days at the request of the 
market administrator; and (5) demonstrate to the market administrator 
that their utilization of milk in Class I uses is greater than the 
minimum shipments required for pool plant qualification under the 
order.
    ADCNE modified the above described original proposal for balancing 
payments. The modified proposal calls for a balancing payment of 6 
cents per cwt. and revised criteria for those entities eligible to 
receive balancing payments from the marketwide pool. As with their 
original proposal, they are of the opinion that a system of 
reimbursement is necessary to offset costs associated with absorbing, 
or balancing, the daily, weekly, and seasonal fluctuation in Class I 
demand in the market. Balancing payments would be made on qualifying 
pounds of pooled milk delivered to manufacturing milk plants. 
Additionally, this milk would be subject to a ``call'' by the market 
administrator during times when there is additional need for milk by 
distributing plants in the market.
    The modified proposal would provide balancing payments to any 
handler in any month in which the handler's deliveries of milk to 
distributing plants are greater than 20 percent but less than 65 
percent of its total pooled milk volume. According to ADCNE, the lower 
percentage requires handlers to maintain a constant, significant 
association with the Class I market and is higher than the level 
required by other handlers for pooling qualification. Additionally, the 
65 percent, says ADCNE, serves to limit participation to handlers with 
substantial quantities of reserve milk not dedicated to the Class I 
market. Qualifying deliveries would be determined on a ``net shipment'' 
basis to prevent the reshipment of milk

[[Page 16147]]

deliveries that would otherwise qualify for balancing payments. Payment 
would be made on the reserve volumes of milk. In the event that the 
market administrator issues a ``call'' for additional milk deliveries 
to distributing plants, the volume of milk delivered to non-
distributing plants in the prior month by handlers subject to the call 
would be used as a basis for requiring handlers to make additional 
shipments to distributing plants on a pro-rata basis. For example, if 
participating handlers in the prior month had delivered 100 million 
pounds of milk to non-distributing plants and the market needed 10 
million pounds of milk delivered to distributing plants, each handler 
subject to the call would be obligated to deliver an additional volume 
of milk to distributing plants equal to 10 percent of its deliveries to 
non-distributing plants in the prior month. ADCNE viewed their 
balancing payment provision as establishing a ``standby pool'' of milk 
among qualifying handlers who elect to participate. Participation in 
the pool would entitle the qualified handler to a payment of 6 cents 
per hundredweight, determined monthly, on the handler's deliveries to 
manufacturing plants, but would also obligate the handler to deliver 
additional quantities in the event of a ``call'' for up to one year 
after a balancing payment has been received.
    According to ADCNE, the costs involved with matching the demands of 
the Class I market with the total production of milk are costs which 
marketing handlers, proprietary and cooperative alike, must absorb. 
These costs are neither fully reflected in Class I prices, nor in over-
order handling charges and are not uniformly shared throughout the 
market, while the Class I value is shared equally within the marketwide 
pool, says ADCNE. The unique structural characteristics of the 
northeast's markets and the preponderance of producers delivering 
directly to proprietary Class I handlers on a regular basis, says 
ADCNE, prevents supplying handlers from recovering these costs from 
Class I handlers.
    According to the ADCNE, the proposed Northeast marketing area will 
comprise the largest Class I market in the Federal order system and 
also represent the largest pool in the country in terms of producer 
milk. According to ADCNE, monthly Class I sales will be approximately 
900 million pounds and will be more than 65 percent greater than the 
next largest consolidated order's Class I pool. ADCNE says this huge 
Class I market presents significant challenges to its suppliers with 
respect to balancing daily, weekly and seasonal needs and sets the 
Northeast order apart from other orders.
    The ADCNE offers additional justification for balancing payments, 
in part, by drawing on the example of other orders providing for 
marketwide service payments for offsetting the additional costs of 
moving milk from assembly areas and for plant-to-plant movements of 
milk. ADCNE notes that such payments from the marketwide pool are 
provided for in recognition of the marketwide benefit that accrues to 
all market participants when the costs of milk assembly and the 
movement of milk are shared by all producers.
    Other public comments similarly articulated the uniqueness of the 
current New York market and its role as part of the consolidated 
Northeast marketing area. One commenter observed that the Northeast 
marketing area, and New York in particular, is unique in terms of the 
mix of producers who are represented by cooperative membership and 
those that are not. According to this commenter, about 65 percent of 
the producers in New York are represented by cooperatives, while the 
remaining 35 percent are independent producers to the market. Further, 
noted this commenter, it has been cooperatives that have, since the 
1960's, taken over the role of balancing the Class I needs of the 
market by moving milk around on a daily basis between distributing and 
manufacturing plants. According to this commenter, such was and should 
continue to be an important factor to consider for the larger 
consolidated market that expects to need about two thirds of its milk 
supply balanced between an expected 45 percent Class I and about 20 
percent Class II utilization. This commenter was of the opinion that 
markets characterized by very high cooperative membership already 
spread the costs of balancing uniformly over a large pool of producers.
    All other public comments supported inclusion of balancing payments 
in the consolidated Northeast order. These comments similarly called 
attention to the unique structure of the Northeast marketing area, 
primarily in terms of the number of producers represented by 
cooperatives and the relatively high number of independent milk 
producers and the unequal costs that would be incurred by producers who 
incur the additional costs of balancing the fluid needs of the market. 
While there was specific recognition of the important role that 
cooperatives play in balancing the market, it was generally thought 
that if balancing payments would be provided for in the consolidated 
order, they should be made available to cooperative and proprietary 
handlers alike.
    The consolidated Northeast marketing area is expected to retain a 
unique feature of the existing New York-New Jersey marketing area--a 
relatively high percentage of producers who are not members of 
cooperatives. As of December 1997, the current New York-New Jersey 
market had about 68 percent of its milk and about 69 percent of its 
producers represented by cooperatives. In the consolidated Northeast 
marketing area, the expected amount of milk represented by cooperatives 
will increase to about 76 percent with about 75 percent of the number 
of producer represented by cooperatives. While the percent of milk 
volume and number of producers represented by cooperatives is growing, 
the volume of milk and number of independent producers remains 
significant. This is especially important given the role of 
cooperatives who operate manufacturing plants and who provide and incur 
the costs associated with balancing the Class I needs of the market. 
Without providing for some cost offset for balancing, about 26 percent 
of the milk and about 25 percent of the producers would not be sharing 
in the burden of balancing the market.
    The revised criteria presented by the ADCNE seem reasonable in 
determining which handlers would be eligible to receive balancing 
payments from the marketwide pool. The qualification standards for 
receiving balancing payments (to any handler that ships at least 20 
percent, but less than 65 percent of the total volume of milk pooled on 
the market to distributing plants) also seems reasonable in light of 
the order's pooling standards. Further, determining qualifying 
shipments on a ``net shipment'' basis is similarly a prudent safeguard 
to reasonably assure that milk is delivered into, and not shipped back 
out of distributing plants and supply plants for the sole purpose of 
qualifying for balancing payments. It also provides for ensuring a 
temporary market (up to 31 days) to any producers who would have lost 
their normal market outlet as a condition for eligibility in receiving 
balancing payments.
    However, the revised proposal would have payments made only on milk 
used in manufacturing products. In practice this would mean that 
handlers with the greatest volume of milk going to manufacturing plants 
would receive a larger share of balancing payments while at the same 
time would be required to provide the least additional Class I milk to 
the market. Observed

[[Page 16148]]

another way, the less commitment a handler has to the Class I market, 
the larger the balancing payments. Additionally, basing balancing 
payments criteria on only manufacturing milk seems to provide a 
disincentive to handlers in serving the Class I market needs because 
handlers that would provide additional Class I milk would lose 6 cents 
per cwt. Lastly, basing balancing payments on just manufacturing milk 
seems to provide an unwarranted monetary incentive to cause additional 
milk to associate with the marketwide pool for the sole purpose of 
receiving an additional 6 cents per cwt.
    In addition to the above concern on limiting balancing payments to 
manufacturing milk, the reasons for not recommending balancing payments 
for the consolidated Northeast order articulated in the proposed rule 
were not all sufficiently addressed. The proposed Northeast order 
consolidates two current orders, New England and the Middle Atlantic, 
that do not currently provide for balancing cost offsets to handlers 
for such purposes. These markets have not experienced any undue harm or 
disadvantage by not providing for this sort of cost offset. To the 
extent that further analysis on the need for balancing payments can 
rest upon the high percentage of independent milk that is expected to 
be represented in the consolidated Northeast order, such analysis does 
provide a legitimate and important factor in further considering the 
appropriateness of a balancing payment provision.
    The proposed rule also indicated that balancing payments should not 
be adopted because an appropriate class price has been provided for 
market clearing purposes--the Class IIIA price. It is a price that is 
applicable in all current northeast orders, and is continued in this 
decision as the Class IV price. While these two class prices are not 
the same, (as explained in the BFP section of this decision) they are 
conceptually similar in that handlers have been provided with a market 
clearing price and further compensation beyond this does not appear to 
be warranted.
    Lastly, the proposed rule indicated that the original 4-cent per 
cwt. balancing payment level was unexplained with respect to how 
adequately it tends to offset balancing costs. The same is also 
observed for the modified payment level of 6 cents per cwt. Subsequent 
to the publication of the proposed rule, public comments received in 
letters and from public forums and ``listening sessions'' did result in 
being able to extrapolate a single cooperative entity's cost for 
balancing, however, this measure may or may not be appropriate for 
characterizing or determining the proposed payment level.

The ``Pass-Through'' Provision

    Currently, the New York order provides for what is commonly 
referred to as the ``pass-through'' provision. The intent of this 
provision is to provide for a degree of competitive equity for handlers 
that must pay at least the order's Class I price for milk so that they 
can compete with handlers in unregulated areas that do not. This 
provision has been in place in the New York order since 1957 and is a 
part of how the order allocates and classifies milk. In functional 
terms, the pass-through provision removes the amount of milk 
distributed outside of the marketing area from the full Class I 
allocation provisions of the order, thereby providing a degree of price 
relief to handlers who compete with other handlers who are not held to 
the pricing provisions of the order in unregulated areas. Regulated New 
York handlers currently compete with unregulated handlers in the 
unregulated areas of Pennsylvania and other areas in the northeast 
region.
    The current provisions of the New England and Middle Atlantic 
orders do not have this provision although they too adjoin similar non-
Federally regulated areas. Handlers regulated by these two orders also 
compete with these same unregulated handlers for Class I sales. The 
merging and expansion of these three northeast orders continue to 
result in areas that adjoin the recommended Northeast order that would 
not be regulated.
    While there were proposals both for and against retaining a pass-
through provision in the consolidated order, the need for it was 
expressed on the basis of the extent to which the Northeast 
consolidated order would be expanded to include currently unregulated 
areas. Generally, handlers support continuing to provide for a pass-
through provision, and this position can only be considered reinforced 
given the limited degree of expansion of the consolidated Northeast 
order. If the entire Northeast region would fall under Federal milk 
order regulation, the need for the pass-through would be moot. These 
observations remain valid in light of the public comments received in 
response to the proposed rule published on January 30, 1998.
    The pass-through provision, notwithstanding the limited extent of 
marketing area expansion, or in light of few public comments supporting 
its continuation, is not included in the consolidated Northeast order 
for the same compelling reasons articulated in the proposed rule 
published on January 30, 1998. Class I prices charged to handlers that 
compete within the marketing area for fluid sales are determined by the 
location value of milk delivered to their plants. The Class I 
differential structure adopted in this decision recognizes the location 
value of milk for Class I uses and is designed to cause milk to be 
delivered to bottling plants to satisfy fluid demands. Accordingly, 
handlers located in high-valued pricing areas will be charged for the 
location value of Class I milk at their plant locations regardless of 
whether or not they compete with other handlers for fluid sales in 
areas where the location value of Class I milk at these plant locations 
are lower. This location value pricing principle is extended to 
handlers competing for sales with handlers who do not pay the same 
price for Class I milk in unregulated areas.

Seasonal Adjustments to the Class III and Class IV Prices

    The three northeast orders to be consolidated into a single 
Northeast order currently provide for a seasonal adjustor on Class III 
and Class IIIA milk prices. These provisions have been a part of these 
three orders for more than 30 years. Prior to the adoption of the 
Minnesota-Wisconsin (M-W) price series in the mid-1970's, these markets 
established the equivalent of the modern Class III price on the basis 
of what was known as the U.S. Average Manufacturing Grade Milk Price 
Series (U.S. Average Price Series).
    The U.S. Average Price Series was a competitive pay price series, 
but differed from the M-W in that it recorded price averages 
consistently below the M-W that was rapidly being adopted elsewhere in 
the country as the appropriate price for surplus uses of milk and used 
as a price mover for higher-valued class prices. Given the national 
marketplace in which surplus dairy products compete for sales, a 
mechanism was needed to align these two differing price series. 
Accordingly, seasonal adjustments to the Class III price were developed 
and made a part of these orders. These seasonal adjustors were found 
not only to be warranted for better price coordination between these 
two price series, but also served to encourage handlers to dispose of 
the maximum amount of milk in Class I uses.
    By the mid-1970's, the M-W was adopted to replace the U.S. Average 
Price Series and the seasonal adjustors

[[Page 16149]]

were retained. The reason for retaining these adjustments were to 
encourage handlers to make more milk readily available for fluid use in 
the short production months and to facilitate the orderly disposition 
of excess reserve milk supplies in flush production months. Although 
some regional price disparity was acknowledged to result from retaining 
these adjustments, they were nevertheless retained because there was no 
evidence that providing for such adjustment had led to any 
interregional problems in the marketing of the reserve milk supply.
    Agri-Mark, a major cooperative in the northeast, proposed that 
seasonal adjustments continue in the consolidated Northeast order. The 
main thrust of their proposal was that markets with relatively high 
Class I use create a burden on the manufacturing sector in their areas. 
They view seasonal adjustments as also assisting in sending the proper 
economic signal to manufacturers. This is important, according to Agri-
Mark, because the seasonal adjustment provides an economic 
``disincentive'' for Class III and Class IV manufacturers to use milk 
in the fall when less producer milk is available and additional 
supplies are needed for Class I uses.
    Seasonal adjustors to the Class III and Class IV prices are not 
incorporated into the provisions of the consolidated Northeast order. 
This decision provides a much more permanent replacement for the 
current BFP. Because Class III and Class IV product price formulas are 
incorporated in all consolidated orders, there is no compelling reason 
offered to contemplate continuing seasonal adjustments to Class III and 
Class IV prices. They are also not provided in orders that are expected 
to have Class I utilizations similar to that anticipated in the 
consolidated Northeast order and who similarly have important 
manufacturing activity.

6b. Southeast Region

    The 3 proposed orders for the Southeastern United States--Florida, 
Southeast, and Appalachian--are faced with a different set of marketing 
conditions than other orders. The Southeastern United States is one of 
the fastest growing areas of the country in terms of population growth 
and is the most deficit area in terms of milk production per capita. 
From 1988 to 1997, the population of the 12 Southeastern states rose 
from 57.9 million to 65.1 million.
    While population has been increasing in the Southeast, milk 
production in the 12 Southeast States (i.e., Alabama, Arkansas, 
Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, 
South Carolina, Tennessee, Virginia, and West Virginia) has been 
decreasing--from 15.4 billion pounds in 1988 to 13.6 billion pounds in 
1997. The net result of these opposite trends is a widening gap between 
the local supply of milk for fluid use and the demand for such milk. 
This is evident by the drop in per capita milk production for these 12 
states, from 265 pounds per capita in 1988 to 210 pounds per capita in 
1997.
    Unlike other parts of the country, the Southeast has few facilities 
for handling surplus milk. Consequently, surplus production during the 
months of January through June must, in some cases, be shipped hundreds 
of miles for processing at manufacturing plants generally to the north. 
For this reason, the provisions in these orders must be aimed at the 
twin goals of encouraging supplemental milk to move to these markets 
during the short production months--generally July through December--
and they must also discourage supplemental milk from moving to these 
markets when it is not needed in the flush production months--generally 
January through June--because such milk would simply displace local 
milk and increase the cost of disposing of such milk for surplus use.
    Very few comments were received with respect to the order 
provisions proposed for the Appalachian, Florida, and Southeast orders. 
Most of the comments that were received endorsed the proposed 
provisions. A few comment letters stated that seasonal pricing 
provisions should be included in the Southeast orders and a few comment 
letters suggested that the Class I price mover for the Southeast should 
be a 12-month moving average rather than the proposed 6-month moving 
average. These comments are discussed in the pricing sections of this 
final decision. Other comments received are discussed below.
    Transportation credits. As a result of the need to import milk to 
the Southeast from many areas outside the Southeast during certain 
months of the year, transportation credit provisions were incorporated 
in the Carolina, Southeast, Tennessee Valley, and Louisville-Lexington-
Evansville orders in August 1996. These provisions provide credits to 
handlers who incur additional costs to import supplemental milk for 
fluid use for markets during the short production months of July 
through December. The provisions restrict the use of credits by 
handlers to milk received from producers and plants located outside of 
the marketing areas. The credits are also restricted to milk received 
from producers who supply the markets only during the short season and 
are not applicable to milk of producers who supply the market 
throughout the year.
    Following the initial implementation of transportation credits in 
August 1996, the provisions were modified in a final decision issued on 
May 12, 1997. The amendments became effective on August 1, 1997.
    Transportation credit provisions are retained in the new Southeast 
and Appalachian orders but have not been included in the Florida order.
    Only a few comments filed in response to the proposed rule 
specifically addressed the issue of transportation credits. Two 
producers requested that transportation credits be removed from the 
orders because they have not performed as expected. A handler who 
supported transportation credits for the Southeast and Appalachian 
orders suggested that the provisions also be included in the Florida 
order.
    In the past 5 years, dairy cooperatives representing the large 
majority of producers in the Southeast have strongly supported 
transportation credit provisions for the Southeast and Appalachian 
orders because the provisions have been helpful in obtaining 
supplemental supplies of milk for fluid use and in sharing the costs 
associated with those supplemental supplies more equitably among all 
handlers in the market. They have not, however, been supported by the 2 
cooperative associations which supply the Florida market and there is 
no indication that such provisions are needed to more equitably share 
the costs of supplying that market with supplemental milk. There was no 
indication from the public comments that were received that these 
cooperative positions have changed.
    With the addition of northwest Arkansas and southern Missouri to 
the Southeast marketing area, milk from these 2 areas will be 
ineligible for transportation credits under the Southeast and 
Appalachian orders. This change in the application of the credits is 
consistent with the logic for incorporating these 2 areas in the 
Southeast marketing area. Specifically, northwest Arkansas and southern 
Missouri are regular sources of supply for handlers in the Southeast 
marketing area and, in addition, include plants that compete for sales 
with handlers regulated under the Southeast order. Accordingly, the 
producers in these 2 areas will share in the pool proceeds of the 
Southeast market. Of course, since

[[Page 16150]]

transportation credits are designed to attract supplemental milk to the 
market for fluid use from producers who are not regularly associated 
with the market, transportation credits should not apply to a farm or a 
plant in northwest Arkansas or that portion of southern Missouri that 
is to be included in the Southeast marketing area.
    Two other changes have been made in the transportation credit 
provisions of Orders 5 and 7. First, at the present time, if a dairy 
farmer is a producer under the order for more than 2 months of the 
January through June period and more than 50 percent of the dairy 
farmer's milk is received as producer milk under the order during those 
2 months, the dairy farmer's milk is ineligible for transportation 
credits during the following months of July through December. This rule 
should be modified.
    Experience with the transportation credit provision in the 
Southeast indicates that the months of January and June are transition 
months. In some years, supplemental milk is needed during those months, 
but in other years it is not. Indeed, it is for this reason that the 
market administrator has been given the authority to extend 
transportation credits to these months upon finding that the extension 
is necessary to assure the market of an adequate supply of milk for 
fluid use. When the market administrator makes a finding that January 
or June should be included in the transportation credit period, these 
months are excluded from the restriction of the orders, as described 
above. Sometimes, however, in these 2 months it is not apparent that 
supplemental milk will be needed until after the month begins. In this 
case, it is too late for the market administrator to include these 
months in the transportation credit period, but it is not too late for 
a cooperative association or handler needing supplemental milk from 
arranging for such milk to be brought into the market. The problem in 
doing so, however, is that without being very careful it is easy to 
disqualify a dairy farmer's milk for transportation credits by 
receiving producer milk from the dairy farmer for more than 2 months or 
by exceeding the 50 percent limit.
    In view of this problem, the months during which a dairy farmer may 
not be a producer have been changed from January through June to 
February through May. This will provide greater flexibility to receive 
supplemental milk when needed without disqualifying a dairy farmer's 
milk from transportation credits.
    The other change that has been made to the transportation credit 
provisions has to do with the computation of the credit with respect to 
milk shipped directly from producers' farms. At present, the market 
administrator must determine an origination point for this milk and 
once the point is determined ascertain what the Class I differential, 
adjusted for location, would be at that point. If the origination point 
is within a Federal order marketing area, the applicable Class I 
differential is the one that would apply at the origination point under 
the order regulating that area. However, if the origination point is in 
an unregulated county, a Class I differential, adjusted for location, 
is computed based upon the provisions of the order receiving the milk 
(i.e., at present Order 5, 7, or 46).
    The different methods now used to compute the Class I differential 
at the origination point for a load of milk occasionally leads to very 
different transportation credits for a load of milk originating within 
a Federal order marketing area compared to another load of milk that 
originates from a point just outside of that marketing area. At the 
time when the transportation credit provisions were adopted, there was 
not a better way of determining the Class I differential at an 
origination point outside of a marketing area because there was no 
single Class I pricing surface. Consequently, with 31 different orders, 
there were probably 31 different Class I differentials that would have 
applied in that unregulated county based on the location adjustments 
provided in the 31 different orders. Under the circumstances, it 
appeared to be most reasonable to use the Class I differential that 
would apply under the order receiving the milk.
    With the national Class I price surface adopted in this final 
decision, there is a single Class I differential for every county in 
the 48 states. Consequently, Sec. 1005.82(d)(3)(v) and 
Sec. 1007.82(d)(3)(v) have been changed to use the Class I differential 
specified in Sec. 1000.52 for purposes of determining the price to be 
used at the origination point of a load of milk shipped directly from 
producers' farms. This change will remove the large disparities that 
can now exist in computing transportation credits for similarly-located 
milk.
    One final change has been made in paragraph (d)(3)(i) of 
Secs. 1005.82 and 1007.82. At the present time, 2 methods are provided 
for determining the origination point for a load of supplemental milk 
directly from producers' farms. The origination point may be the city 
nearest to the farm of the last producer whose milk is on a tank truck. 
Alternatively, the hauler may stop at an independently-operated truck 
stop and obtain a weight certificate indicating the weight of the truck 
and its contents, the date and time of weighing, and the location of 
the truck stop.
    The latter option has never been used to establish an origination 
point during the life of this provision, perhaps because it is not cost 
effective to stop and weigh a load of milk. For this reason, it should 
be removed from the order.
    Pooling standards. Several comment letters from producers and 
producer organizations expressed support for the pooling provisions 
recommended in the proposed rule for the proposed southeast orders. The 
comments emphasized the necessity to incorporate strict performance 
standards in these orders. Commentors argued that such standards would 
ensure that the markets are adequately supplied throughout the year in 
an orderly manner and prevent opportunistic pooling which, they 
contend, would lower the blend prices to producers serving these 
markets throughout the year, thereby decreasing production in these 
already-deficit markets and forcing handlers to pay higher prices to 
obtain supplementary milk.
    The comments leading to the proposed rule and those submitted in 
response to it endorsed pooling standards at levels that are as strict 
or stricter than current regulations and emphasized that the 
southeastern milk marketing orders should provide pooling standards 
that reflect the deficit nature of these markets. These comments are 
embodied in the standards adopted for these orders.
    The pool plant provisions adopted for the Appalachian, Florida, and 
Southeast orders closely follow the provisions now contained in the 
southeast orders. These provisions are appropriate for the needs of 
these seasonally-deficit markets.
    Section 7(a) of each Federal milk order describes the pooling 
standards for a distributing plant. To qualify for pooling under each 
of the 3 orders, a distributing plant must have route disposition equal 
to at least 50 percent of the total fluid milk products physically 
received at the plant. In addition, at least 25 percent of the plant's 
receipts must be disposed of as route disposition in the marketing 
area. These standards will ensure that a distributing plant meeting 
them is closely associated with the fluid market and, therefore, should 
be part of the marketwide pool.
    At the present time, the Carolina order has a 15 percent in-area 
route disposition standard, while the

[[Page 16151]]

Southeast, Upper Florida, Tampa Bay, Southeastern Florida, and 
Louisville-Lexington-Evansville orders have a 10 percent standard. This 
level is raised to 25 percent under the merged orders. The reason for 
raising this standard to 25 percent is to better identify those plants 
which should be fully regulated under the larger, merged orders. With 
11 large markets, instead of 31 smaller markets, the higher 25 percent 
standard, which is uniform for all 11 markets, will better maintain the 
regulatory status of plants throughout the country. It will leave 
unregulated, or partially regulated, those plants which have only a 
small amount of their sales within a Federal order marketing area.
    Paragraph (b) of section 7 will accommodate the pooling of plants 
that specialize in extended shelf-life fluid milk products (i.e., 60-90 
days) requiring refrigeration. There are at least 3 such plants in the 
southeast markets: the Ryan Foods Company plants in Jacksonville, 
Florida, and Murray, Kentucky, and the Dasi Products plant in Decatur, 
Alabama.
    Unlike a typical distributing plant, a plant specializing in 
extended shelf-life products may have a more erratic processing 
schedule, reflecting the longer shelf life of the products packaged at 
the plant. Consequently, a plant's Class I utilization may vary 
considerably from month to month. In the past, such variability has 
resulted in shifting pool status for some of these plants from one 
order to another. In some months, the plant may have been partially 
regulated, even though all of the milk received at the plant was priced 
under the order. This type of regulatory instability is not conducive 
to orderly marketing. To provide greater regulatory stability for these 
plants, they should be fully regulated pool plants if they are located 
in the marketing area, have route disposition in the marketing area 
during the month, and process a majority of their milk receipts into 
fluid milk products. This provision will not guarantee that a plant 
qualifies as a fully-regulated pool plant every month; some months a 
plant may fail to process a ``majority'' of its milk receipts into 
fluid milk products. Nevertheless, the provision will guarantee that 
when a plant qualifies for pool plant status, it will be qualified 
under the same order all the time unless it fails to have any route 
disposition in the marketing area in which it is located.
    One change in section 7(a) and (b) of each order will help to 
stabilize the pool status of an extended shelf-life plant. At the 
present time in most orders, when packaged fluid milk products that are 
transferred from one plant to another plant are ultimately delivered 
from the 2nd plant to a retail or wholesale outlet, these sales are 
considered to be the route disposition of the 2nd plant. However, as 
adopted in this final decision, such transfers will be treated as route 
disposition from the 1st plant for the purpose of determining its pool 
status. Since some plants specializing in extended shelf-life products 
transfer such products between plants, this change will make it more 
likely that such plants will have route disposition in the marketing 
area.
    Almost all of the dairy product manufacturing plants in the 
Southeast are ``balancing plants'' operated by cooperative 
associations. These ``balancing plants'' qualify for pooling based upon 
the performance of the cooperative association, not upon shipments from 
the plant alone.
    A balancing plant may qualify for pool plant status based upon 
shipments directly from producers' farms as well as shipments from the 
plant. To qualify as a balancing plant, the plant must be located 
within the order's marketing area. This requirement ensures that milk 
pooled through the balancing plant is economically available to 
processors of fluid milk if needed. However, in the case of the 
Appalachian order only, a balancing plant also may be located in the 
State of Virginia. This provision has been in the Carolina order and 
should be continued in the Appalachian order. The performance standards 
for a balancing plant require that 60 percent of a cooperative's 
producer receipts be delivered to pool distributing plants every month 
of the year. This provision is identical under the 3 southeast orders.
    Each of the 3 orders also contains pooling standards for a supply 
plant. For the Appalachian and Southeast orders, a supply plant must 
ship at least 50 percent of the milk received during the month from 
dairy farmers and cooperative bulk tank handlers. The plant's receipts 
include milk that is diverted from the plant as well as milk physically 
received at the plant. In the case of the Florida order, the shipping 
percentage is slightly higher at 60 percent.
    Unlike supply plant provisions in other orders, the supply plant 
provisions in the 3 southeast orders do not recognize shipments 
directly from producers' farms as qualifying shipments for a supply 
plant. At the present time, there are no plants qualifying as ``pool 
supply plants'' under any of the southeast orders.
    Kraft Foods, Inc., submitted a comment in opposition to the supply 
plant provision proposed for the Southeast order, arguing that it 
should be permitted to pool its Bentonville, Arkansas, cheese plant 
based on milk diverted from this plant directly from producers' farms 
to pool distributing plants. Kraft argues that the proposed pool supply 
plant provision of Order 7 would require it to physically receive milk 
at its plant, reload it onto a truck, and ship it to pool distributing 
plants in order for the Bentonville plant to meet the supply plant 
shipping standards of Order 7.
    Currently, there are no pool supply plants on the Southeast, 
Appalachian, or Florida orders. When supplemental milk is needed for 
these markets, most of the milk comes directly from producers' farms, 
some of which can fill an over-the-road tank truck several times a day. 
With farms of this size, there is obviously no need to aggregate the 
milk from several farms at a supply plant.
    A primary mission of most cooperatives supplying the Southeast is 
to provide milk to handlers for fluid use and to dispose of milk when 
not needed for fluid use efficiently. The order provisions should 
accommodate and encourage efficient milk handling practices.
    The cooperative balancing plant provision is intended to allow 
cooperatives to supply the fluid market in the most efficient manner 
possible and also to process milk efficiently when such milk is not 
needed for fluid use. In the Southeast region, the dominant cooperative 
operates butter-powder plants in Kentucky and Louisiana and one cheese 
plant in Tennessee. Oftentimes during the year, these plants are 
completely idle when all available milk is needed for Class I and II 
use.
    In the Southeast, where fluid handlers are subject to relatively 
high Class I prices, order provisions should aid them in procuring milk 
supplies by providing stringent pooling standards. This will help to 
ensure that the Class I prices applicable to these handlers will serve 
their purpose in generating uniform prices that will attract milk for 
fluid use. The supply plant provisions proposed by Kraft are neither 
needed nor supported by the vast majority of participants in these 
markets and therefore are not adopted.
    It is not necessary to seasonally adjust the supply plant and 
balancing plant shipping requirements for the 3 southeast orders 
because the standards proposed are flexible enough to accommodate the 
disposal of surplus milk during the flush production season. In 
addition, each of the 3 orders contains a provision to allow the market

[[Page 16152]]

administrator to increase or decrease shipping requirements and other 
pooling standards by up to 10 percentage points. This provision also is 
included in the producer milk section of all 3 orders with respect to 
the percentage of milk that may be diverted and in the number of days 
that a producer's milk must be received at a pool plant.
    In addition to the provisions described above, each of the 
southeast orders contains a provision to allow unit pooling of 
distributing plants operated by the same handler. This provision has 
been in the Southeast order since 1995.
    Some distributing plants may meet the pooling standards of more 
than one order. Consequently, it is necessary to specify the rules for 
determining where a plant will be regulated. Under the southeast 
orders, if a plant meets the pooling standards of the order and is 
located in the order's respective marketing area, the plant will be 
regulated under that order even if it has greater sales in some other 
order's marketing area. This provision has evolved as a result of 
several price alignment problems in the Southeast involving a plant 
located in one marketing area but regulated under another order. In 
every such case, a plant's supply of milk was put in jeopardy as a 
result of a lower blend price under the order in which it became 
regulated based on its sales. Notwithstanding the merging of several of 
the smaller markets in the Southeast, this provision should be retained 
for the southeast orders to preclude a repetition of this problem. 
There was widespread support in comment letters for retention of this 
provision.
    In the case of a distributing plant that is not located within any 
order's marketing area, a different standard should apply. Since, in 
this case, it cannot be presumed with certainty that a plant is most 
closely associated with the market in which it is located, its 
association with a market should be determined based upon where it has 
the most sales.
    Producer-handler. The producer-handler provision for the 3 
southeast orders is very similar to the current provisions. There were 
no comments received in opposition to this provision.
    To qualify as a producer-handler, a dairy farmer would have to have 
route disposition in excess of 150,000 pounds per month; otherwise, the 
producer's plant would be exempt from regulation pursuant to a 
provision that has been uniformly adopted for all orders. In addition, 
a dairy farmer may receive no fluid milk products from sources other 
than his or her farm. Finally, the dairy farmer must provide proof 
satisfactory to the market administrator that the care and management 
of the dairy animals and other resources necessary to produce all Class 
I milk handled, and the processing and packaging operations, are his/
her own enterprise and are operated at his/her own risk.
    At the present time, there are fewer than 5 producer-handlers 
operating in the southeast markets. The status of these handlers 
occasionally fluctuates between being fully regulated plants in some 
months and producer-handlers in other months. None of these operations 
would lose their status as producer-handlers under the provision 
adopted for the new southeast orders.
    Producer/Producer milk. The producer and producer milk definitions 
adopted for the 3 southeast orders are nearly identical to the 
provisions now in the individual orders. These provisions define which 
dairy farmers are eligible to share in the proceeds of the marketwide 
pool.
    A producer is defined as a dairy farmer whose milk is received at a 
pool plant, diverted to a nonpool plant, or received by a cooperative 
association acting as a bulk tank handler. It excludes a producer-
handler, a dairy farmer whose milk is delivered to an exempt plant, or 
a dairy farmer whose milk is reported as diverted milk under the 
provisions of another Federal order.
    The diversion limits that are specified in the producer milk 
section of the new orders are slightly different among the 3 southeast 
orders. To qualify for diversion to a nonpool plant, a minimum amount 
of a producer's milk must be received at a pool plant during the month 
(i.e., this is called a ``touch-base'' requirement). Under the 
Appalachian order, 6 days'' production must be received at a pool plant 
during each of the months of July through December, and 2 days' 
production must be received at a pool plant during each of the other 
months of the year. Under the Southeast order, 10 days' production is 
required to be delivered to a pool plant during each of the months of 
July through December to qualify a producer's milk for diversion to a 
nonpool plant. During the months of January through June, 4 days' 
production is be required to be delivered to a pool plant.
    Under the proposed Florida order, which will have a higher Class I 
utilization and less need to divert milk, a producer is required to 
deliver at least 10 days' production to a pool plant during every month 
of the year in order to be eligible for diversion to a nonpool plant. 
These proposed standards are comparable to those required under the 
separate Florida orders.
    The total quantity of milk which may be diverted by a pool plant 
operator or cooperative association during the month also varies by 
market as well as by month. Under the Appalachian order, a pool plant 
operator or cooperative association is permitted to divert 25 percent 
of its producer milk during the months of July through November, 
January and February. During the months of December and March through 
June, the total diversion limit increases to 40 percent of producer 
milk receipts. In the Southeast order, a total diversion limit of 33 
percent is provided during the months of July through December, and 50 
percent during the other months. The diversion limits under the Florida 
order are 20 percent during the months of July through November, 25 
percent during the months of December through February, and 40 percent 
during all other months.
    The ``touch base'' requirements and gross diversion limits 
described above are adjustable by the market administrator to assure 
orderly marketing and/or efficient handling of milk in the marketing 
area. This procedure is described in Secs. 1005.13(d)(7), 
1006.13(d)(6), and 1007.13(d)(7).
    Although a ``dairy farmer for other markets'' provision was 
requested for the new orders by some producer organizations, it was 
opposed by others. This provision is not included in the 3 southeast 
orders at this time. Such a provision could restrict the free movement 
of milk as needed among markets. The proposed diversion limits and 
touch-base requirements in the southeast orders should preclude the 
association of milk with these markets when such milk is not needed at 
pool plants.
    Reports of receipts and utilization. To accommodate the payment 
schedule desired for the 3 southeast orders, the handler's report of 
receipts and utilization must be in the market administrator's office 
no later than the 7th day of the month. The producer payroll report 
will be required by the 20th day of the month. The information to be 
included in these proposed reports is essentially identical to the 
current order provisions.
    Payments for milk. The southeast orders provide uniform payment 
schedules for payments to and from the producer-settlement fund. 
Payment to the producer-settlement fund must be made by the 12th day of 
the month and payment from the producer-settlement fund must be made 
one day later.

[[Page 16153]]

    In the case of payments to producers and cooperative associations, 
the merged Florida order will maintain the longstanding 3-payment 
schedule that has been part of the present Florida orders for many 
years. The partial payments to producers under the new Florida order 
must be made on the 20th day of the month for milk received during the 
first 15 days of the month and on the 5th day of the following month 
for milk received during the remainder of the month. The rate of 
payment will be at not less than 85 percent of the preceding month's 
uniform price, adjusted for plant location and for proper deductions 
authorized in writing by the producer. The final payment for milk 
received during the previous month must be made on or before the 15th 
day of the month.
    The Appalachian and Southeast orders adopted here have identical 
payment schedules. The partial payment for milk received during the 
first 15 days of the month must be made on the 26th day of the month, 
and the rate of payment must be 90 percent of the preceding month's 
uniform price. The final payment must be received by the producer on or 
before the 14th day of the following month. The rate of final payment 
for all 3 orders is the preceding month's uniform price adjusted for 
butterfat, plant location, partial payments, marketing services, and 
proper deductions authorized in writing by the producer. Each order 
will require payment to a cooperative association to be made one day 
earlier than the payment to an individual producer.
    It should be noted that the payment dates described above may be 
delayed if the payment is due on a Saturday, Sunday, or national 
holiday. In such case, the payment will be due on the next day that the 
market administrator's office is open for business. This new rule is 
provided in Sec. 1000.90.

6c. Midwest Region

Upper Midwest Order

Pool Plant
    The pool distributing and pool supply plant definitions of the 
consolidated Upper Midwest order should use the standard order language 
used in other orders, adapted to marketing conditions in the Upper 
Midwest.
    The pool distributing plant definition specifies that for a plant 
to be a pool distributing plant, it must have 15 percent or more of its 
total receipts of fluid milk distributed as route disposition. This 
percentage is considerably lower than the percentage used in the 
Chicago Regional order, which varies from 30 percent to 45 percent 
depending on the month. However, the current Upper Midwest order uses a 
percentage based on the marketwide Class I percentage for the same 
month of the previous year. During ``normal'' months this percentage is 
approximately 15 percent. When some milk is held off the pool for 
economic reasons (primarily unusual price differences between classes), 
the percentage may vary considerably, ranging from the ``normal'' 15 
percent to over 50 percent.
    In addition to specifying the route disposition percentage at 15 
percent, the percentage would be calculated on the basis of the total 
receipts of fluid milk products physically received at the distributing 
plant. Currently both the Chicago Regional and Upper Midwest orders 
include milk diverted from the distributing plant in the total bulk 
receipts used to compute the route disposition percentage. Use of a 
constant percentage at approximately the market Class I percentage, and 
removing diverted milk from a distributing plant's receipts in 
determining its regulatory status, will reduce the current 
opportunities available to distributing plants to become partially 
regulated by manipulating their reported receipts and diversions of 
milk. In addition, the language adopted should eliminate month-to-month 
uncertainty caused by basing handlers' regulatory status on the 
market's fluctuating utilization percentage.
    The Identical Provisions Committee recommended that the in-area 
distribution criteria for pool distributing plants be 15 percent of 
total route disposition, and that percentage was included in the 
proposed rule. However, it was determined that a 25-percent standard 
for in-area sales would be appropriate for all markets to assure that 
handlers not already regulated would not become regulated solely 
because of order consolidation. The Committee explained that use of 
total route disposition rather than bulk receipts as the denominator 
would reduce opportunities for handlers to manipulate the manner in 
which they may report their operations to avoid regulation. Currently 
in the Chicago Regional and Upper Midwest orders the in-area route 
disposition standard (10 percent in Chicago Regional and 15 percent in 
Upper Midwest) is computed using the same basis (bulk receipts, 
including diversions) as is used to determine whether a plant meets the 
definition of a pool distributing plant.
    Provision is made for a single handler to form a unit of 
distributing plants and manufacturing plants, all of which must be 
located within the marketing area. The unit would have to meet the 
requirements for a pool distributing plant and at least one of the 
plants in the unit must meet the pool distributing plant requirements 
as a separate plant. Plants not meeting the pool distributing plant 
definition will be required to have disposition of packaged fluid milk 
products, packaged fluid cream products, or cottage cheese and other 
soft manufactured products of at least half of their receipts of Grade 
A bulk fluid milk products, including milk diverted by the plant 
operator.
    Manufacturing plants traditionally have been included in units with 
distributing plants because the manufacturing plants produced products 
such as packaged fluid cream, sour cream, and cottage cheese that are 
marketed in conjunction with bottled fluid milk products. In addition, 
some of these plants produce a limited quantity of fluid milk products. 
Handlers have argued that the operator of a free-standing manufacturing 
plant that manufactures these complementary products should be able to 
pool its milk supply for both (or for several) plants as if all of the 
products were made in the bottling plant.
    Both the Chicago Regional and Upper Midwest orders contain a 
provision for a distributing plant unit. Although the current Chicago 
Regional order does not specify the types of products that may be 
manufactured at plants in the unit, the Upper Midwest order does. It is 
reasonable to place restrictions on the types of products that are 
disposed of from the manufacturing plants in the unit, since these 
plants will receive the benefits reserved for pool distributing plants 
and shipments from supply plants to the plants in the unit will be 
considered in determining pool supply plant qualifications.
    A pool supply plant operator should ship as qualifying shipments at 
least 10 percent of the plant's receipts of milk from producers, 
including milk diverted by the handler, each month. As in the current 
Chicago Regional order, such shipments may be made to pool distributing 
plants, pool distributing plant units, plants of producer-handlers, 
partially regulated distributing plants, or distributing plants fully 
regulated by other Federal milk orders. The extent of shipments to 
partially regulated distributing plants to be used for qualification 
would be limited to the quantity classified as Class I. Qualifying 
shipments to distributing plants regulated by other Federal milk orders 
should be limited to the quantity shipped to pool distributing plants, 
and

[[Page 16154]]

may not be agreed-upon Class II, Class III or Class IV utilization. 
Shipments directly from farms to pool distributing plants and to plants 
contained in pool distributing plant units should be included as 
shipments that help to meet the percentage qualification standard.
    The 10 percent shipping requirement adopted in this decision is 
approximately 5 percentage points less than the anticipated Class I 
percentage for the consolidated Upper Midwest order. The 10 percent 
shipping standard is greater than the current individual supply plant 
shipping standard and equal to the maximum shipping percentage required 
of pool units during the qualifying period in the current Chicago 
Regional order. The standard under the current Upper Midwest order, 
which uses the Class I use percentage of the same month in the previous 
year as the supply plant shipping percentage, would exceed the adopted 
percentage. Also under the current Upper Midwest order, a reserve 
supply plant must ship 10 percent of its receipts to pool distributing 
plants during January through June, and the marketwide Class I 
percentage for the same months of the preceding year for the months of 
July through December.
    Several handlers, including a large cooperative association, a 
cheesemakers' organization, and a fluid milk handler, filed comments 
stating that the 10 percent shipping standard for supply plants is too 
high for this market with a Class I utilization percentage that rarely 
would exceed 20 percent.
    The 10-percent shipping percentage is below the estimated Class I 
percentage for the consolidated Upper Midwest order and should be 
appropriate, even in view of the fact that many distributing plants 
have a supply of milk from their own producers. In September 1997, 
approximately 27 percent of the milk pooled or received at distributing 
plants in the Chicago Regional order was pooled as producer milk with 
the distributing plant operators as the handlers, rather than as 
producer milk pooled by cooperatives and other handlers. The milk 
pooled by distributing plant handlers accounted for approximately 12 
percent of the total milk pooled in September 1997 (or approximately 5 
percent of the total milk that would have been pooled if all of the 
milk eligible to be pooled in September 1997 had been pooled). 
Approximately 7 percent of the Class I producer milk, or approximately 
2 percent of the total producer milk, pooled under the Upper Midwest 
order is pooled by distributing plant operators. The combination of the 
supply plant shipping percentage and the percentage of milk pooled 
directly by distributing plant handlers would appear sufficient to meet 
anticipated Class I needs in the consolidated Upper Midwest order. The 
10 percent supply plant shipping percentage also should be appropriate 
to avoid unnecessary and uneconomic shipments.
    It should be remembered that the provisions adopted in this 
decision will allow the market administrator to increase or decrease 
the required shipping percentage on a marketwide or selected area basis 
if deemed necessary to assure an adequate supply of milk to pool 
distributing plants or to prevent uneconomic shipments of milk. If the 
shipping percentage is increased by the market administrator, shipments 
made for the purpose of meeting the increased percentage may be made 
only to pool distributing plants or plants contained in pool 
distributing plant units.
    A comment filed by a cheesemakers' organization expressed concern 
about the potential competitive inequities of a provision enabling the 
market administrator to change the shipping percentage for a selected 
portion of the marketing area. This provision has existed in the 
current Upper Midwest order for some time without resulting in any 
controversy. The provision probably will be more useful with the 
considerable enlargement of the marketing area through consolidation. 
It may be more inequitable to require increased shipments from plants 
in, for instance, Grand Forks, North Dakota, to supply deficits in the 
Chicago area (700 miles distant) than it currently would be to require 
those plants to increase qualifying shipments so that distributing 
plants in the Twin Cities area (300 miles away) will be able to obtain 
needed supplies. It should be remembered that there are plentiful 
supplies of milk produced within 100-200 miles of any part of this 
marketing area. Certainly care will be taken to assure that handlers 
are not placed at significant competitive disadvantage.
    Groups of two or more supply plants will be allowed to form systems 
of supply plants for the purpose of meeting the shipping requirements, 
by shipping the same percentage as that required for individual pool 
supply plants that are not part of such a system. These pool supply 
plant systems may consist of plants of the same handler or more than 
one handler, and may contain both proprietary and cooperative handlers. 
The only requirement affecting an individual plant within the unit is 
that the plant must be physically located within the marketing area. 
This restriction is necessary to prevent distant plants from receiving 
the benefits of participating in the marketwide pool without having an 
actual association with the market.
    Several plants located outside the boundaries of the consolidated 
marketing area currently are included in supply plant units by a 
``grandfather clause'' in the Upper Midwest order. The order will 
provide that these plants may continue to be included in a supply plant 
system if they so desire as long as they maintain continuous pool plant 
status.
    Handlers may form supply plant systems by filing a written request 
by July 15, listing the plants to be in the system. Such a system will 
remain in effect from August 1 through July 31 of the following year. 
These dates deviate from those provided for other orders because of the 
difference in seasonal production variations between this and other 
orders. The handler or handlers establishing the system may also delete 
a plant from the system or dissolve the system by submitting a written 
request to the market administrator. Any plant deleted from a system, 
or plants that were part of a system that was discontinued, may not be 
part of a system until the following August.
    Provisions that allow handlers to add plants to a system under 
certain circumstances and to allow systems to reorganize in the event a 
plant changes ownership or in the event of a business failure by a 
handler are also incorporated in the order. A system failing to meet 
pooling standards will be allowed to drop plants from the system until 
the system does qualify. The handler responsible for assuring that the 
system qualifies must notify the market administrator of which plants 
are to be deleted from the system. If the handler does not notify the 
market administrator, the market administrator will exclude plants from 
the system beginning with the plant at the bottom of the list of plants 
submitted by the handler responsible for qualifying the system, and 
continuing up the list until the system qualifies.
    The provisions for supply plant systems are very similar to the 
provisions currently contained in both the Chicago Regional and Upper 
Midwest orders. Unlike the Chicago Regional and the Upper Midwest 
orders, however, this order does not contain a specific shipping 
requirement for individual plants within a supply plant system. In the 
current Chicago Regional order, pool supply plant systems have twice 
the percentage shipping standard of individual supply plants, with 
individual plants within the systems required to ship 47,000 pounds or 
three percent of their producer receipts,

[[Page 16155]]

whichever is less, in five of the six months of August through January. 
The current Upper Midwest order requires handlers with supply plants in 
a supply plant system to ship five percent of each handler's Grade A 
receipts, including milk diverted by the handler to nonpool plants, 
during one of the months of August through December.
    This decision does not provide for the category of supply plants 
referred to as reserve supply plants. Reserve supply plants ceased to 
be included in the Chicago Regional order in 1987, while the Upper 
Midwest continues to provide for them. With year-round shipping 
requirements, the unlimited ability of the market administrator to 
change shipping percentages both in level and in area, and the ability 
of supply plants to form systems, there is no compelling reason to have 
two categories of supply plants.
    A provision to allow plants to remain qualified for up to two 
consecutive months due to unavoidable circumstances, such as a natural 
disaster, fire, breakdown of equipment, or work stoppage is included in 
this decision. The provision is contained in the Chicago Regional order 
and has worked quite well in giving handlers some administrative relief 
in the face of certain unavoidable circumstances.
    Comments filed by a cooperative association and a fluid milk 
handler urged that the unit reporting, accounting and allocation 
provisions of the Chicago Regional order be retained in the 
consolidated order. This issue is considered and addressed in the 
Classification section of this decision.
Producer Milk
    The definition of producer milk determines which milk will be 
eligible to participate in the Federal order pool. This decision 
provides that milk received at a pool plant directly from producers or 
from a cooperative association acting as a handler should be eligible 
to be producer milk. Milk for which the operator of a pool plant is the 
handler that is delivered directly from the farm to another pool plant 
should also be considered producer milk. Under certain circumstances, 
milk delivered to a nonpool plant may also be considered producer milk. 
Milk delivered directly from a farm to a nonpool plant may be 
considered producer milk if at least one day's production is received 
at a pool plant during the dairy farmer's first month as a producer.
    In order to qualify as producer milk the milk pooled by a 
cooperative association acting as a handler described in 
Sec. 1030.9(c), the cooperative must deliver at least 10 percent of the 
milk for which it is the handler pursuant to Sec. 1030.9(c) to pool 
distributing plants, units of pool distributing plants, plants of 
producer-handlers, or partially regulated distributing plants. The 
shipments to partially regulated distributing plants are limited to the 
quantity classified as Class I. These are the same performance 
requirements that apply to supply plants, with the exception of the 
treatment of milk shipped direct from farms to distributing plants 
regulated under other orders. If such milk is allocated to Class I 
under the other order, it will become producer milk under that order. 
The same performance requirements that apply to supply plants apply to 
cooperative associations acting as handlers if the market administrator 
adjusts the shipping percentages.
    No significant differences in the treatment of milk received at 
pool plants are provided under this decision than under the current 
Chicago Regional or Upper Midwest orders. There are, however, several 
differences relating to diverted milk. This decision allows the 
operator of a pool plant to divert, or ship milk directly from the farm 
to another pool plant, the milk of producers for which it is the 
handler, and account for the milk as producer milk at the shipping 
plant. Allowing either a proprietary pool plant or a cooperative pool 
plant to divert milk to another pool plant is consistent with the 
Chicago Regional order. In the Upper Midwest order, milk that is 
received at a pool plant and for which a cooperative association is the 
handler is considered producer milk at the receiving plant. The Upper 
Midwest order specifies that a proprietary handler may divert milk to 
another pool plant and that such milk will be considered producer milk 
of the diverting proprietary handler. The language adopted under this 
decision leaves to the discretion of the cooperative association the 
option of diverting milk to another pool plant from its own pool plant 
or delivering the milk to the pool plant in its capacity as a handler 
of producer milk pursuant to Sec. 1030.9(c).
    The consolidated Upper Midwest order requires that a new producer 
or a producer who has broken association with the market have at least 
one day's production received at a pool plant during the first month in 
which the producer's milk is reported as producer milk. Currently the 
Chicago Regional order requires a new producer on the market or a 
producer who has broken association with the market to have at least 
one day's production received at the pool plant at which the milk is 
reported during the first month in which the producer's milk is 
considered to be producer milk eligible for diversion to a nonpool 
plant. In addition, at least one day's production of a producer's milk 
must be received at a pool plant in each of the months of August 
through January to be eligible for diversion to a nonpool plant. The 
current Upper Midwest order requires that a new producer or a producer 
who has broken association with the market be received at a pool plant 
prior to the milk being diverted to a nonpool plant.
    There is little or no justification for forcing producer milk to be 
received at a pool plant to maintain or prove association with the 
market. Supply plants and cooperatives will be required to ship a fixed 
percentage of their total milk supply, not just that portion received 
at their plants, to the fluid market. Since both cooperatives and 
proprietary handlers can move milk directly from the farm to the fluid 
market there is little reason to force milk into a pool plant solely 
for regulatory purposes. Certainly the extra cost to the handler of 
moving milk for regulatory purposes does not enhance economic 
efficiency or milk quality and in fact decreases economic efficiency 
and milk quality to the detriment of the entire market.
    This decision provides that producer milk be priced in the month in 
which it is delivered to the plant of first receipt, although the 
proposed rule would have priced milk in the month in which it is picked 
up at the farm. Some orders have allowed milk picked up on the last day 
of a month but delivered to a plant in the next month to be priced in 
the month in which it was picked up. A comment filed by Wisconsin 
Cheesemakers favored continuation of this regulatory treatment. For 
purposes of uniformity between the consolidated orders (which apply to 
many handlers, cooperative and proprietary, who operate in more than 
one order area) and clarity of plant accounting for milk received and 
used during each month all orders now will provide that producer milk 
is not received until it actually enters a plant.
    Under the consolidated order, as in the proposed rule, producer 
milk will be priced at the location of the plant at which the milk is 
physically unloaded into processing facilities or a storage tank. In 
the current Chicago Regional order milk is priced where milk is pumped 
within the confines of a plant. The adopted order language will 
eliminate the pricing of milk where it is pumped from truck to truck 
and price the milk where it is eventually unloaded

[[Page 16156]]

into processing facilities or a storage tank.
Location Adjustments and Transportation Credits
    To help move milk to the fluid market a transportation credit and 
an assembly/procurement credit for Class I milk are contained in the 
Upper Midwest order. The transportation credit will be computed by 
multiplying the hundredweight of milk contained in transfers of bulk 
fluid milk from pool plants to pool distributing plants and used in 
Class I by the value obtained by multiplying .0028 times the number of 
miles between the transferor plant and transferee plants with an offset 
for a positive difference between the Class I prices at the transferee 
and transferor plants. The transportation credit should be paid to the 
receiving handler, as the milk will be pooled at the location from 
which it is shipped and the credit will, to some extent, duplicate the 
function of the location adjustment in helping to cover the cost of 
moving it from supply plants to fluid milk handlers.
    The transportation credit is similar to the transportation credit 
currently contained in the Chicago Regional order. Both the 
transportation credit adopted in this decision and the current credit, 
which uses the same .0028 rate, are applied to Class I milk only. 
However, in the current Chicago Regional order the credit is based on 
110 percent of the Class I milk received at the pool distributing 
plant. The proposed rule would have provided that the transportation 
credit be paid to the shipping handler on the basis of Class I milk 
transferred to fluid milk plants.
    Several interested persons commented on the use of transportation 
credits and assembly credits in this consolidated order, with most 
favoring such provisions but disagreeing to some extent with their 
proposed application. There was disagreement between the comments on 
whether the credit should apply to the shipping or the receiving 
handler and whether it should apply to all Class I milk, both direct-
shipped and from plants, or just to milk transferred from plants and 
used in Class I. One commenter also stated that the proposed rate did 
not cover enough of the actual cost of moving milk.
    In the case of milk received at a distributing plant from a supply 
plant operated by a cooperative association, the order provides that a 
distributing plant pay the supply plant from which it receives milk at 
not less than the price applicable at the distributing plant. The 
shipping plant must account to the marketwide pool at the price 
applicable at the shipping plant, where the milk was first received. 
Payment of the distributing plant's Class I price for milk in Class I 
uses will assure that cooperative associations are being paid the order 
minimum price for such milk. The distributing plant, then, is 
responsible for the cost of getting the milk from the supply plant 
location to its own, with some assistance from the transportation 
credit to the extent that the calculated cost exceeds the difference in 
the Class I prices between the shipping and receiving plants.
    There must be some contribution from consumers to the cost of 
moving milk to deficit locations. However, incorporating the entire 
cost of hauling milk in the transportation credit could have the effect 
of encouraging handlers to procure milk from greater distances than 
necessary. If milk is moved from a higher-priced zone to a lower-priced 
zone (which may be necessary to obtain needed supplies of milk at 
outlying distributing plants), there will be no offset for differences 
in Class I prices between the shipping and receiving plants.
    Unlike the transportation credit, which is based on mileage and 
paid only on transfers of bulk milk to pool distributing plants, the 
assembly/procurement credit is paid at the rate of 8 cents per 
hundredweight of Class I milk transferred or diverted by a pool plant 
to a pool distributing plant. An assembly/ procurement credit also will 
be applied to milk received from producers and from cooperative 
associations acting as handlers pursuant to Sec. 1030.9(c) based on the 
pro rata share of producer milk delivered to a pool distributing plant 
and allocated to Class I.
    A comment filed by a cooperative association stated that assembly 
credits should not apply to distributing plants' own milk supplies, but 
only to milk obtained from supply plants or cooperatives. If such a 
change were made, distributing plant operators who have arranged for 
their own milk supplies would have an 8-cent disadvantage in procuring 
milk in comparison with their competitors who obtain milk only from 
supply plants and cooperatives.
    A transportation credit and procurement credit are incorporated in 
the order to assist handlers in supplying the Class I market. These 
transportation and procurement credits, to be paid on Class I milk only 
in combination with the Class I price surface discussed elsewhere in 
this final decision, will help handlers move milk to the fluid market 
by distributing the cost of supplying the fluid market to all market 
participants who share in the marketwide pool. Handlers and producers 
who supply the Class I market on a regular basis should not be expected 
to bear the entire cost of supplying the Class I market while handlers 
and producers who meet only the minimum requirements derive the 
benefits of marketwide pooling. Incorporation of a transportation 
credit and procurement credit on Class I milk in the marketwide pool 
will assure that at least some of the cost of supplying the Class I 
market is shared among all market participants.
Reporting and Payment Dates
    Comments filed by two handlers opposed changing the reporting dates 
for the consolidated order from the 10th to the 9th of the month 
following receipt and use of the milk. It should be apparent, 
especially to the cooperative association that filed this comment, that 
payment to producers cannot be determined until the marketwide pooling 
process is completed and minimum producer pay prices calculated. The 
earlier the pooling process can begin, the sooner producers can be 
paid. The reporting date of the 9th, adopted in this decision, is the 
latest date for filing handler reports in any of the consolidated 
orders. Two other orders specify the 9th, with one order requiring 
reporting on the 8th and the other seven orders specifying that handler 
reports be filed on or before the 7th of the following month. Because 
reporting should be somewhat more uniform among the Upper Midwest 
handlers after consolidation of the orders, their reporting burdens 
should be reduced accordingly. Further, technology certainly has 
improved the ability of all businesses to keep records and organize 
data for reporting purposes since the current reporting dates were 
established (over 35 years ago).
    Wisconsin Cheesemakers' comment opposed reducing the time lag 
between when producers deliver milk to handlers and when they are paid 
for that milk. The current dates for paying producers for the milk 
delivered in the first half of each month (the 3rd and 4th of the 
following month) under these two orders are among the latest, if not 
the latest, in the entire Federal milk order system. The date adopted 
in this decision, the 26th of the same month, is the same as in three 
other consolidated orders, later than in five of the other orders, and 
earlier than in two of the orders (none of which is later than the last 
day of the month). The date specified for final payment to producers 
ranks similarly. Producers need to be paid for the milk they've 
delivered several weeks before on as timely a basis

[[Page 16157]]

as possible. The adopted provisions will accomplish that goal.
Central Order
    Many of the provisions of the consolidated Central order are 
explained in the ``Identical Provisions'' portion of this decision, and 
need not be addressed here. The provisions that deviate somewhat from 
those adopted for other order areas are the provisions dealing with 
standards for determining the pool status of producers and handlers. An 
effort is made to explain significant differences between the pooling 
provisions of the 9 individual orders included in this consolidation 
and those of the consolidated order.
Pool Plant
    The Central pool distributing plant definition follows closely the 
provisions contained in most of the other consolidated orders. The 
provisions adopted would make no difference in the pool status of 
distributing plants currently pooled under the individual orders.
    Specifically, the percentage of a handler's total route disposition 
distributed within the marketing area that will result in the handler 
being fully regulated under the Central order is the same 25-percent 
standard adopted for all of the other 10 orders. The minimum percentage 
of a pool distributing plant's actual physical receipts of fluid milk 
products that would have to be distributed on routes is 25. Currently 
most of the orders included in the consolidated Central order include 
milk diverted from the distributing plant in the total bulk receipts 
used to compute the route disposition percentages.
    The consolidated Central order provides that a single handler be 
allowed to form a unit of distributing plants and Class II 
manufacturing plants, all of which must be located within the marketing 
area. The unit must meet the requirements for a pool distributing 
plant, and at least one of the plants in the unit is required to meet 
the pool distributing plant requirements as a separate plant. Plants in 
the unit that do not meet the pool distributing plant definition are 
required to have disposition of packaged fluid milk products, packaged 
fluid cream products, or cottage cheese and other Class II products of 
at least half of their receipts of Grade A bulk fluid milk products, 
including milk diverted by the plant operator.
    Class II manufacturing plants are included in units with 
distributing plants because the manufacturing plants produce products 
such as packaged fluid cream, sour cream, and cottage cheese that are 
marketed in conjunction with bottled fluid milk products. In addition, 
some of these plants produce a limited quantity of fluid milk products. 
Handlers have argued that the operator of a free-standing manufacturing 
plant that manufactures these complementary products should be able to 
pool its milk supply for both (or for several) plants as if all of the 
products were made in the bottling plant.
    The pool supply plant definition of the consolidated Central order 
contains provisions that assure continued pool qualification for any 
handlers or milk currently associated with the markets included in the 
consolidated Central market. The Iowa order contains no limit on the 
amount of direct-shipped milk that can be used to qualify a supply 
plant, and several of the other orders allow such deliveries to make up 
a portion of qualifying shipments. The consolidated order allows 
direct-shipped milk to be counted as pool qualifying shipments without 
limit.
    The Greater Kansas City, Nebraska-Western Iowa, Southern Illinois-
Eastern Missouri, and Southwest Plains orders contain cooperative 
balancing plant provisions, allowing cooperative-operated plants to be 
pooled if the cooperative delivers a given percentage of the milk for 
which it is the handler to pool distributing plants. The consolidated 
Central order also contains such a provision, including in the pool 
plant definition a plant operated by a cooperative association that 
supplies at least 35 percent of the milk for which it is the handler to 
pool distributing plants, either during the current month or for the 
immediately preceding 12-month period. The deliveries to pool 
distributing plants may include deliveries directly from the farms of 
producers for whom the co-op is the handler, as well as transfers from 
the cooperative's plant.
    Cooperative association ``balancing plants'' serve the market as 
the outlet of last resort. When surplus milk has no other place to go 
on weekends, holidays, or during months of surplus production, it moves 
to cooperative association ``balancing plants'' where it is 
manufactured into storable products. When production decreases, these 
plants operate at minimal capacity or may be shut down completely. 
Cooperative members assume the burden and cost of processing surplus 
milk through such plants.
    Most of the Central orders allow a period during which supply 
plants do not have to meet shipping percentages if they have done so 
for the months during which milk production levels are low and demand 
for fluid milk is high. The Iowa order has reduced shipping standards 
for such months. The order provisions adopted with this decision 
include a period during which supply plants that have served the needs 
of the market when milk supplies are tight are not required to meet 
shipping standards, but it is reduced from the 5-7 month period 
existing in the current orders to a 3-month period from May through 
July.
    The percentage of receipts as qualifying shipments to distributing 
plants currently ranges from 30 to 50 percent for these orders, with 
the Iowa percentage reduced to 20 for the months of December through 
August. The adopted shipping standards for pool supply plants under the 
consolidated Central order are 35 percent for the months of September 
through November and January and 25 percent for all other months, with 
plants meeting the percentage standard for the months of August through 
April being allowed to retain their pool status for the immediately 
following months of May through July.
    Groups of two or more supply plants are allowed to form systems of 
supply plants for the purpose of meeting the shipping requirements by 
shipping the same percentage as that required for individual pool 
supply plants that are not part of such a system. These pool supply 
plant systems may consist of plants of the same handler or more than 
one handler, and may contain both proprietary and cooperative handlers. 
The only requirement affecting each plant within the system is that the 
plant must be physically located within the marketing area. This 
restriction is necessary to prevent distant plants from receiving the 
benefits of participating in the marketwide pool without having an 
actual association with the market.
    As in the other consolidated orders, the market administrator will 
have the authority to increase or reduce the required shipping 
percentage as marketing conditions change for the purpose of assuring 
that an adequate supply of milk will be available for fluid use, or to 
assure that the order does not require handlers to undertake uneconomic 
movements of milk to maintain the pool status of their plants.
    In addition, as in the consolidated Upper Midwest order, the 
provisions adopted in this decision will allow the market administrator 
to increase or decrease the required shipping percentage on a selected 
area basis, as well as a marketwide basis, if deemed necessary to 
reflect needed milk movements within this geographically

[[Page 16158]]

extensive marketing area. This provision has existed in the current 
Upper Midwest order for some time without resulting in any controversy, 
and is expected to be useful in view of the considerable enlargement of 
the marketing area through consolidation. Care in using the provision 
must be exercised to avoid placing handlers in areas in which shipping 
percentages are temporarily increased or decreased at a competitive 
disadvantage or advantage to handlers in areas that have not been so 
affected. However, it would be more inequitable to require increased 
shipments from plants in, for instance, Eastern Colorado, to ship milk 
to plants in eastern Illinois to supply deficits in that portion of the 
marketing area.
Producer Milk
    The producer and producer milk provisions of the orders 
consolidated in the Central order are quite similar to each other and 
differ little from those to be incorporated in the other consolidated 
orders. The principal difference between some of the individual orders 
and the consolidated order is the limit on the percentage of a 
handler's pooled producer milk that may be diverted to nonpool plants. 
The percentage of a handler's milk that may be diverted to nonpool 
plants varies under the individual orders from 20 percent of milk 
received at pool plants during some months under the Eastern Colorado 
order to 70 percent for some months under the Nebraska-Western Iowa and 
Iowa orders. Most of the orders require each producer's milk to be 
received at a pool plant at least once each month. The consolidated 
Central order requires that a new producer or a producer who has broken 
association with the market have at least one day's production 
physically received as producer milk at a pool plant before the 
producer's milk is eligible to be diverted to nonpool plants.
    In order to assure that all of the milk that has been pooled under 
these orders continues to qualify for pooling, the diversion limit 
adopted for the Central order is 65 percent for the months of September 
through November and January, and 75 percent for the months of February 
through April and December. Allowable diversions for the months of May 
through July are unlimited. There is no requirement that each 
producer's milk be received at pool plants for a minimum number of days 
per month. At the same time, the market administrator is authorized to 
increase or reduce the diversion limit as needed to maintain orderly 
marketing and efficient handling of milk in the marketing area.
Multiple Component Pricing
    The reporting and payment provisions of the consolidated Central 
order include those common to other orders with multiple component 
pricing. These markets have a significant amount of milk used in 
manufactured products, and component pricing will enable producers to 
be paid according to the valuable components of their milk.
Mideast Order
    Many of the provisions of the order for the consolidated Mideast 
marketing area are explained in the ``Identical Provisions'' portion of 
this final decision, and need not be addressed here. The provisions 
that deviate somewhat from those provided for other order areas are the 
provisions dealing with standards for determining the pool status of 
producers and handlers. A significant change from the proposed rule is 
that the uniform multiple component pricing plan provided for the six 
other orders that use multiple component pricing is also incorporated 
into the Mideast order, in place of the proposed pricing plan that 
differed slightly from the one common to the other orders with multiple 
component pricing provisions. This change is discussed more fully later 
in this section of this decision.
    For the most part, pooling provisions have less effect on the 
current Michigan Upper Peninsula market than on the 4 other markets 
included in this consolidated order because Michigan Upper Peninsula is 
the only remaining individual handler pool in the current Federal order 
system. Therefore, pooling provisions are discussed in relation to the 
4 principal markets included in the consolidated Mideast order.
Pool Plant
    The Mideast pool distributing plant definition, in which the in-
area route disposition qualification was proposed to exceed that 
contained in most of the other proposed orders (30 percent instead of 
15 percent) to make less likely the full Federal regulation of three 
State-regulated plants, will instead use the same 25-percent standard 
of in-area route dispositions of receipts that is being provided in all 
of the other orders.
    Several comments opposed use of an in-area standard higher than 15 
percent, arguing that the standard in the Mideast area should not be 
higher than in other areas, and that handlers outside the market should 
be held to the ``current'' 15-percent standard. The adoption of a 
uniform 25-percent standard of in-area sales as a percentage of total 
route dispositions for all orders is discussed in the section of this 
decision dealing with Provisions Common to all Orders.
    As in the other consolidated orders, the total route disposition 
percentage will be calculated on the basis of the total receipts of 
fluid milk products physically received at the distributing plant. 
Currently all four of the larger orders to be included in the 
consolidated Mideast order include milk diverted from the distributing 
plant in the total receipts used to compute the total route disposition 
percentage.
    One comment urged that a pass-through provision similar to that in 
the current New York-New Jersey order (Order 2) be incorporated in the 
consolidated order to deal with the in-area route dispositions of 
handlers who do not meet the order's pooling requirements. Continuation 
of such a provision in Order 2 was considered and rejected in this 
decision, in the regional discussion of the Northeast order. There 
would be no valid basis for adopting such a provision in the Mideast 
order when it has been found not appropriate for use in the Northeast.
    To assure continued pool qualification for all of the handlers who 
currently are associated with the Mideast markets, the pool supply 
plant definition of the consolidated Mideast order provides for all of 
the types of supply plants that currently qualify for pooling under the 
4 principal orders. The Eastern Ohio-Western Pennsylvania pool plant 
provision includes a plant operated by a cooperative if the cooperative 
association delivers to distributing plants at least 35 percent of the 
milk for which it is the handler during the current month or over the 
preceding 12 months. The Southern Michigan order (Order 40) includes as 
pool supply plants: (a) A plant that has been a pool plant for 12 
consecutive months and has a marketing agreement with a cooperative 
association, and (b) a system of supply plants operated by one or more 
handlers. Order 40 also includes some shipments to other Federal order 
plants and partially regulated distributing plants, in addition to pool 
distributing plants, as qualifying shipments by supply plants.
    The percentage of receipts as qualifying shipments to distributing 
plants currently ranges from 30 to 40 percent for these orders, with 
direct deliveries from farms rather than plant transfers limited to 
half of the required deliveries under three of the orders. All four of 
the orders require performance of pooling standards by supply plants 
for the months of September through February, followed by a ``free 
ride'' period during which shipping

[[Page 16159]]

percentages need not be met by supply plants that met the shipping 
standards during the required period. The Indiana order contains a 
provision allowing the continued pooling of a plant that fails to meet 
pooling standards because of circumstances beyond the handler's 
control.
    The shipping standards adopted under this decision for pool supply 
plants are 30 percent for all months, with plants meeting the standard 
for the months of September through February being allowed to retain 
their pool status for the immediately following months of March through 
August. For the purpose of making the 30 percent level of shipping 
standard less burdensome, up to 90 percent of required shipments are 
allowed to be made directly from farms to distributing plants. The 
cooperative association plant defined as a pool plant in the Eastern 
Ohio-Western Pennsylvania order is retained, as are the supply plant 
provisions peculiar to the Southern Michigan order. These provisions 
reflect marketing conditions specific to these current areas, and will 
assure that plants currently qualified for pooling will retain such 
status.
Producer Milk
    The producer and producer milk provisions of the orders 
consolidated in the Mideast order are quite similar to and differ 
little from those incorporated in the other consolidated orders. The 
principal difference between some of the individual orders and the 
consolidated order would be the limit on the percentage of a handler's 
pooled producer milk that may be diverted to nonpool plants. The Ohio 
Valley, Indiana and Eastern Ohio-Western Pennsylvania orders all 
contain 50 percent diversion limits for the months of September through 
November, January and February and a 60 percent limit for the month of 
December, with no diversion limit for the months of March through 
August. The Southern Michigan order contains a 60-percent diversion 
limit for the months of September through February, with no limit for 
the months of March through August. In order to assure that all of the 
milk that has been pooled under these orders continues to qualify for 
pooling, the diversion limit adopted for the Mideast order is 60 
percent for the months of September through February, with no limit for 
the March through August period. At the same time, the market 
administrator is authorized to increase or reduce the diversion limit 
as needed to maintain orderly marketing and efficient handling of milk 
in the marketing area.
Multiple Component Pricing
    In a change from the proposed rule, the reporting and payment 
provisions of the consolidated Mideast order adopted in this decision 
now conform to those of the other consolidated orders that provide for 
multiple component pricing (MCP). The proposed rule would have 
incorporated a pricing plan similar to the current Southern Michigan 
MCP plan in the consolidated order instead of the MCP plan proposed for 
the other consolidated orders. The Southern Michigan MCP plan differs 
from that included in the other current MCP orders only by pricing 
``fluid carrier'' instead of ``other solids.''
    The Farm Bill authorizes adoption of a ``uniform'' multiple 
component pricing plan. As a result, the component pricing plan has 
been modified to be the same as the plan contained in other MCP orders. 
The differences between the adopted MCP plan and that originally 
proposed for the consolidated Mideast order are not significant. The 
same prices would be used to compute component values, the same protein 
and butterfat prices would be used, and the proposed ``fluid carrier'' 
price was derived directly from the ``other solids'' price. The Mideast 
order language is changed accordingly, and will result in very little 
difference in total payments, either by handlers or to producers whose 
milk is pooled under the differing provisions.
Somatic Cell Adjustment
    Michigan Milk Producers Association (MMPA), a large cooperative 
association in Michigan, opposed changing the present Southern Michigan 
(Order 40) somatic cell count (SCC) adjustment schedule to the 
adjustment schedule proposed uniformly for all of the MCP orders with 
SCC adjustments. Changing the current Michigan SCC adjustment schedule 
to the uniform schedule included in the proposed rule would have the 
effect of reducing (from the current Order 40 level) the positive value 
adjustments on milk containing less than 200,000 SCCs and reducing the 
negative value adjustments on milk containing more than 700,000 SCCs. 
Incorporating the proposed adjustment in all of the consolidated orders 
that have somatic cell adjustments will make for a more uniform system 
of pricing and may better reflect measurable differences in value.
Reporting and Payment Dates
    MMPA proposed that handler reports be submitted one day earlier (on 
the 6th instead of the 7th day after the end of each month) so that 
producers can be paid a day earlier. The cooperative also advocated 
that producers be paid with two partial payments instead of one (on the 
21st day of the month for the first 15 days' production and the 6th of 
the next month for the second half of the month's production instead of 
one partial payment on the 26th day of the month for the first 15 days' 
production, as proposed). Final payment for each month's milk would 
then be made no later than the 16th of the following month, instead of 
the 17th. The cooperative stated that reducing the time lag between 
delivering milk and being paid for it would better accommodate the cash 
flow requirements of modern larger dairy farms.
    The Southern Michigan order currently requires that handler reports 
be filed no later than the 5th of the next month, and that nonmember 
producers be paid on the 15th. These dates are very early compared to 
most other Federal orders. Two of the orders included in the 
consolidated Mideast order currently have a reporting date of the 8th 
and payment dates of the 18th.
    The dates included in the proposed rule and adopted in this 
decision represent an effort to find a middle ground between 
significant differences in the orders to be consolidated. The desire to 
accelerate payment to producers, both by increasing the number of 
partial payments and advancing the final payment date, is 
understandable. However, other interested parties in the consolidated 
area had no opportunity to indicate agreement with or opposition to 
such changes. These proposals would more properly be addressed in a 
formal rulemaking proceeding after this proceeding is completed.

6d. Western Region

    This final decision adopts four Federal milk orders (i.e., 
Southwest, Arizona-Las Vegas, Western, and Pacific Northwest orders) 
for the western region. A number of comments were received in response 
to the proposed rule. These comments are addressed below under the 
applicable order discussion.
    A number of changes have been made to the consolidated orders since 
the proposed rule. The significant changes that have been made to all 
or most of the consolidated orders are explained at the end of this 
regional discussion, whereas, those modifications that are unique to an 
individual order are discussed under the applicable order.

[[Page 16160]]

Southwest Order

    The consolidated Southwest marketing area is comprised principally 
of the current Texas and New Mexico-West Texas marketing areas. With 
regard to milk production and population (consumption), these areas are 
both in the process of change, but in different ways. Texas has one of 
the fastest-growing populations in the U.S., and until recently has 
been able to maintain milk production on a per capita basis. After a 
significant increase in milk production during the 1988-1994 period, 
Texas milk production has been declining somewhat, accompanied by the 
exit of approximately 29 percent of the State's Grade A dairy farmers. 
If the current trend continues, the Texas market could come to resemble 
more closely those of the Southeast portion of the U.S., relying 
significantly on more distant milk supplies to meet the market's Class 
I and II needs. This situation currently exists for the southern parts 
of Texas.
    The State of New Mexico has experienced relatively slow population 
growth, but dramatic increases in milk production--from 1.099 billion 
pounds in 1988 to an estimated 4.020 billion pounds in 1997. With the 
declining production in Texas, the New Mexico milk-shed will be drawn 
upon more often to supply Class I and II needs in the Texas demand 
centers, 500-600 miles distant. Procurement costs would be expected to 
increase dramatically. In light of these circumstances, provisions in 
the Southwest order must provide flexibility to cooperatives and 
handlers supplying the market to prevent inefficient movements of milk 
and unnecessary costs of operation incurred for the purpose of 
participating in the market-wide pool.
    Prior to enactment of the 1996 Farm Bill, cooperatives operating in 
the southwestern markets had determined that the two milk orders in the 
region were being operated as one and should be merged. Much discussion 
took place, and proposed order provisions were developed by the 
principal cooperatives involved. These comments, with numerous others, 
were considered in the development of this final decision for the 
Southwest marketing area.

Pooling standards

    Most of the pooling standards in the Texas and New Mexico-West 
Texas orders have been suspended for some time. The rapid expansion of 
milk production in the region during the late 1980's created a 
situation in which cooperatives and handlers operating in the region 
could not meet the provisions of the orders while pooling all of their 
milk supplies. For this reason, the pooling standards for the Southwest 
order have been relaxed.
    As adopted in this final decision, the pooling standards for a 
distributing plant require the plant to have route disposition equal to 
at least 25 percent of its fluid milk receipts at the plant during the 
month. In addition, at least 25 percent of the plant's route 
disposition must be in the marketing area.
    One partially regulated plant located in the Texas marketing area 
will become fully regulated under this provision. The plant has been 
partially regulated under the Texas order and, periodically, fully 
regulated under the Chicago Regional order. The lowering from 50 
percent to 25 percent of total route disposition for a pool 
distributing plant by the Southwest order will cause this plant to 
become fully regulated under the Southwest order and, thereby, 
alleviate the disorderly conditions caused by its shifts in regulation. 
There should be no change in the plant's costs, since their supply of 
milk comes from Southwest pool sources.
    The pool plant provisions of the Southwest order have been revised 
in this final decision. The modification provides for the pooling of 
plants that specialize in ultra-pasteurized or aseptically-processed 
fluid milk products. A detailed explanation of the changes is located 
at the end of the western regional discussion.
    There are no pool supply plants regulated under the present Texas 
and New Mexico-West Texas orders. Nevertheless, as recommended in the 
proposed rule and adopted in this final decision, provision is made for 
such an operation under the Southwest order. As proposed, to qualify as 
a pool plant, a supply plant must ship 50 percent or more of the total 
quantity of milk that is physically received during the month from 
dairy farmers and handlers described in Sec. 1000.9(c) to pool 
distributing plants. The supply plant provisions have been modified in 
this final decision to include milk that is diverted to other plants as 
well as milk physically received at the plant to allow for more 
efficient movement of milk to distributing plants when needed.
    A provision for the pooling of cooperative association balancing 
plants is also included in the consolidated order. A plant located 
within the marketing area that is operated by a cooperative association 
would qualify as a pool plant if pool plant status is requested for 
such plant by the cooperative association and during the month at least 
30 percent of the producer milk of members of such cooperative 
association is delivered directly from farms to pool distributing 
plants or is transferred to such plants as a fluid milk product from 
the cooperative's plant. The requirement that the plant be located in 
the marketing area ensures that milk pooled through the balancing plant 
is economically available to processors of fluid milk if needed.
    One comment was received regarding the proposed pooling standards 
for supply plants. Kraft Foods, Inc. (Kraft), stated that the Southwest 
order should adopt all the options and pooling efficiencies contained 
in Section 7 of the proposed Central marketing order. Kraft asserts 
that the two markets have virtually identical populations (21 million) 
and Class I utilization (48 percent-49 percent). In addition, the 
handler contends that the pool supply plant provisions of the Southwest 
order provide intra-market inequity among handlers in the Southwest 
market. Kraft indicated that a proprietary supply plant could qualify 
for pooling only by transferring 50 percent of milk physically received 
at the plant and noted that no farm to plant shipments are permitted to 
count towards qualifying. However, the handler stated, a plant in the 
marketing area operated by a cooperative association may make 
qualifying shipments directly from farms. The performance level, Kraft 
indicates, is 30 percent of all milk pooled by the cooperative.
    A primary mission of most cooperatives supplying the Southwest 
market is to provide milk to handlers for fluid use and to dispose of 
milk efficiently when not needed for fluid use. The order provisions 
should accommodate and encourage efficient milk handling practices. The 
cooperative balancing plant provision is intended to allow cooperatives 
to supply the fluid market in the most efficient manner possible and 
also to process milk efficiently when such milk is not needed for fluid 
use. Almost all of the dairy product manufacturing plants in the 
current Texas and New Mexico-West Texas marketing orders are operated 
by cooperatives.
    As stated in the proposed rule, the pooling provisions for the 
Southwest order are similar to the provisions in the present Texas and 
New Mexico-West Texas orders. The pool supply plant standards are 
consistent with and reflect the current marketing conditions of the 
consolidated Southwest order. The standards should ensure that milk of 
producers servicing the Class I needs of the market will be pooled. The 
provisions for a supply plant in this

[[Page 16161]]

final decision does not recognize shipments directly from producers' 
farms as qualifying shipments for a supply plant. However, there 
currently are no supply plants regulated under the Texas or New Mexico-
West Texas orders. Accordingly, the provisions should not place 
proprietary handlers at a competitive disadvantage and are appropriate 
to meet the needs of the market.
    It is not necessary to seasonally adjust the supply plant and 
balancing plant shipping requirements for the Southwest order because 
the standards proposed are flexible enough to accommodate the disposal 
of surplus milk during the flush production season. Also, this order, 
like the other new consolidated orders, contains a provision to allow 
the market administrator to increase or decrease these shipping 
requirements.
    In addition to the provisions described above, the Southwest order 
contains a provision to allow unit pooling of distributing plants 
operated by the same handler.

Producer-Handler

    The producer-handler provisions that were proposed have been 
revised in this final decision to be very similar to the provisions in 
the current Texas and New Mexico-West Texas orders. The revisions 
should assure that the status of current producer-handlers will be 
unchanged.

Producer Milk

    The current Texas and New Mexico-West Texas orders have provisions 
that require a producer's milk to be received at a pool plant, or touch 
base, before milk of the producer is eligible to be diverted. The 
proposed rule indicated that milk produced by producers located in the 
marketing area should be eligible for pooling without a particular 
percentage or number of days' production being required to be received 
at a pool plant. For producers located outside the marketing area the 
touch base provision of the proposed rule required that at least 15 
percent of the production of producers be delivered to pool plants 
during the month in order to be eligible for pooling. Based on comments 
and a review of the different touch base requirements for producers 
both in and out of the area, the provision in the final decision has 
been changed. The provision in the final decision will allow diversion 
of producer milk of a new producer, provided there is a delivery of at 
least 40,000 pounds or one day's milk production, which ever is less, 
to a pool plant during the month (rather than before diversions are 
allowed). This dual ``touch base'' standard has been developed to 
accommodate a market that is characterized by substantial differences 
in size among dairy farmers. The requirement that one day's production 
be delivered to a pool plant, is appropriate for many producers but is 
unreasonable for those who produce as much as seven tanker loads a day.
    The current Texas order allows an amount equal to one-third of the 
milk delivered to pool plants to be diverted (this provision is 
currently suspended), while the (currently suspended) New Mexico-West 
Texas provision allows 50 percent of a handler's total milk supply to 
be diverted. In addition, the current Texas order provisions base 
allowable diversions on deliveries to individual pool plants, greatly 
exacerbating the time and effort required to keep track of milk 
movements. In the proposed rule the provision set the limit on 
diversions of producer milk on the basis of at least 50 percent of the 
milk pooled by a handler being received at pool plants for the 
handler's entire milk supply to be pooled. The diversion limit in this 
final decision is continued at 50 percent of a handler's total milk 
supply. The total performance standard will allow handlers to meet 
diversion limits more easily with more efficient movements of milk. In 
addition, the increased percentage of allowable diversions will assure 
that all of the producers whose milk would qualify for pooling under 
either of the two orders being consolidated will continue to meet 
pooling qualifications. A provision to allow the market administrator 
to make adjustments is included in the producer milk section of the 
order with respect to the percentage of milk that may be diverted.
Multiple Component Pricing
    The reporting and payment provisions of the consolidated Southwest 
order in the final decision include those common to other orders with 
multiple component pricing. The multiple component pricing plan does 
include a somatic cell adjustment for milk used in Classes II, III, and 
IV. The current Texas and New Mexico-West Texas orders do not provide 
multiple component pricing. However, the proposed provisions that were 
developed by the cooperatives involved in discussions to merge the 
current orders did include a multiple component pricing plan. As stated 
above, those comments were considered in the development of this final 
decision.
    A comment was received from Leprino Foods Company (Leprino) 
regarding the inclusion of multiple component pricing in the 
consolidated Southwest order. Leprino strongly supports multiple 
component pricing for both handlers and producers and states that it 
has a direct interest in the consolidated Southwest order. Thus, there 
is support on both the producer, as represented by cooperative 
associations, and handler side of the Southwest dairy industry.
Transportation Credits for Surplus Milk
    The Texas order currently has a market-wide service payment 
provision that gives credits for hauling surplus milk located in 
certain zones in Texas to nonpool plants outside the State for use in 
manufactured products. The provision has not been included in the 
consolidated Southwest order language because of declining production 
and increasing balancing plant capacity in the affected areas of Texas.
Payment Provision
    The Texas order is one of only a few marketing orders that requires 
handlers to remit the full classified value during the month to the 
Market Administrator. In turn, the Market Administrator acts as a 
clearing house and forwards these proceeds on to the respective 
organizations. Interested persons have expressed an interest in 
retaining these provisions, not only for the proposed Southwest order, 
but for all other orders.
    The current Texas payment provision was found necessary because of 
problems encountered in assuring timely payments by pooled handlers. 
The provision has been in the Texas order since 1979, and the earlier 
payment problems have been remedied. Such a provision involves a rather 
large degree of regulatory intervention between milk processors and 
their suppliers that should be shown to be necessary to correct 
existing problems. There is no indication that such problems currently 
exist, or would exist in the absence of the provision. Nearly all of 
the milk that will be pooled under the consolidated Southwest order is 
produced by cooperative members and pooled by the cooperatives. These 
large, business-oriented organizations should be able to assure that 
they receive full payment for their members' milk in a timely manner. 
In addition, there are provisions in the General provisions (Part 1000) 
that provide for enforcement of late or under-payment charges at one 
percent per month of the amount due.
Arizona-Las Vegas Order
    Many of the provisions of the consolidated Arizona-Las Vegas order

[[Page 16162]]

are explained in the ``Identical Provisions'' portion of this final 
decision and need not be addressed here. Those provisions that deviate 
to some extent from the ``Identical Provisions'' are addressed in this 
discussion.
Pool Plant
    The pool distributing plant definition is similar to that contained 
in most of the other consolidated orders. The minimum percentage of a 
pool distributing plant's physical receipts of bulk fluid milk products 
that are disposed of as route disposition is 25 percent. The percentage 
of a handler's total route disposition into the marketing area that 
would result in a distributing plant becoming fully regulated under the 
Arizona-Las Vegas order is also 25 percent. While this definition 
differs slightly from the current order language, it provides 
uniformity with other consolidated orders and should result in no 
additional distributing plants being pooled under the Arizona-Las Vegas 
order or any change in the pool status of distributing plants currently 
pooled.
    The pool plant provisions of the Arizona-Las Vegas order have been 
revised in this final decision. The modification provides for the 
pooling of plants that specialize in ultra-pasteurized or aseptically-
processed fluid milk products. A detailed explanation of the changes is 
located at the end of the western regional discussion.
    The proposed pool supply plant definition would have required a 
supply plant to ship at least 50 percent of its physical receipts of 
milk from dairy farmers to pool distributing plants during the month in 
order to be a pool supply plant. In the proposed rule it was indicated 
that this definition would provide for easy, effective order 
administration and would result in no additional handlers being 
regulated under the order. The supply plant definition has been 
modified in this final decision to include milk that is diverted from 
the plant as well as milk physically received at the plant. There are 
currently no pool supply plants in the proposed marketing area.
    The current Central Arizona order permits a manufacturing plant 
located in the marketing area that is operated by a cooperative 
association to be a pool plant, provided that the cooperative ships at 
least 50 percent of its member milk to pool plants of other handlers 
during the current month or the previous 12-month period ending with 
the current month. This percentage requirement is currently suspended. 
The proposed order suggested reducing this percentage to 35 percent and 
authorizing the market administrator to increase or reduce the 
percentage in response to market conditions. The 35 percent and the 
authorization to make adjustments in the level is contained in this 
final decision. The reduced performance standard should enable the 
continued pooling of producer milk that currently is pooled without 
resulting in uneconomic handling or disorderly marketing. The Arizona-
Las Vegas order provides that a single handler be allowed to form a 
unit of distributing plants and Class II manufacturing plants provided 
each plant is located within the marketing area. The unit in total 
would be required to meet the requirements for a pool distributing 
plant and at least one of the plants in the unit would be required to 
meet the pool distributing plant definition individually. This 
provision would provide uniformity with other federal orders and would 
not change the status of any plants currently pooled. Class II 
manufacturing plants are included for unit pooling with distributing 
plants operated by the same handler because such plants produce 
products that are marketed in conjunction with fluid milk products.
    A provision permitting the market administrator to adjust the 
percentages specified in the pool plant definition will provide the 
flexibility to respond in a timely manner to changing marketing 
conditions without the need for a formal hearing process.
Producer-Handler
    The producer-handler provisions that were proposed have been 
revised in this final decision to be very similar to the provisions in 
the current Arizona order. The revisions should assure that the status 
of current producers-handlers will be unchanged.
Producer
    The consolidated order contains a dairy farmer for other markets 
definition. A producer could not be pooled under the Arizona-Las Vegas 
order unless all of the milk from the same farm was pooled under this 
or some other federal order or unless such non-pooled milk went to a 
plant with only Class III or Class IV utilization. This differs 
slightly from the current definition in the Central Arizona order. Such 
a provision is needed in the consolidated order to prevent dairy farms 
whose milk is regularly used for fluid disposition in other markets 
from pooling the surplus portion of their production under the Arizona-
Las Vegas order.
Producer Milk
    The percentage of a handler's pooled milk that may be diverted to 
nonpool plants is 50 percent in any month. The proposed rule 
recommended a diversion limit of 20 percent in any month. Currently, 
diversions under the Central Arizona order are limited to eight days' 
production of a producer during four months of the year, with unlimited 
diversions the remainder of the year. The recommended 20 percent 
diversion limit was suggested because it was thought that this would 
have resulted in the amount of milk eligible for diversion being 
approximately equivalent to eight days' production and would have been 
easier to administer than the current order provisions. In addition, 
the proposed rule stated that the 20 percent limit year round would 
have assured that pooled milk will have a close association with the 
market's fluid processing plants.
    Security Milk Producers Association (SMPA) expressed concern 
regarding the recommended 20 percent limit on the volume of a handler's 
pooled milk that may be diverted during any month. SMPA states that 
diversion requirements set at anything less than 50 percent would be 
financially detrimental to its producers. The cooperative requests that 
a limit be implemented that will not detract from the orderly flow of 
milk.
    Based on the comments received by SMPA and an reevaluation of the 
marketing conditions in the consolidated Arizona-Las Vegas order, and 
noting that eight days production is about 40 percent, this final 
decision adopts for the Arizona-Las Vegas order a diversion limit of 50 
percent for each month of the year. The 50 percent diversion limit year 
round is more flexible than the current order and the 20 percent limit 
recommended in the proposed rule and it would be easy to administer. In 
addition, the 50 percent diversion limit is consistent with the 
diversion limit included in the Southwest order, which is adjacent to 
the Arizona-Las Vegas Order. Thus, the 50 percent diversion limit each 
month should allow the Class I needs of the market to be met while 
ensuring the orderly disposition of milk. In addition, the market 
administrator will have the authority to adjust the diversion 
percentage.
Multiple Component Pricing
    The Arizona-Las Vegas order does not provide for multiple component 
pricing (MCP). There are six plants that are expected to be regulated 
under the consolidated order: five proprietary

[[Page 16163]]

distributing plants, and one manufacturing plant operated by a 
cooperative association. The Class I utilization for the order is 
expected to be less than 50 percent, a level that would, in some other 
orders, be an indication that component pricing would be appropriate. 
However, the Class I utilization at the five distributing plants is 
more than 80 percent. With the exception of the one cooperative 
balancing plant, the handlers to be regulated constitute predominantly 
a Class I market.
    Prior to the issuance of the proposed rule, there were no comments 
received in support of MCP for the Arizona-Las Vegas order. However, 
Schreiber Foods, Inc. (Schreiber), Leprino, and SMPA have indicated 
support for MCP in the consolidated order. Schreiber agrees with 
National Milk Producers Federation that MCP is important in some but 
not all orders, and the rule to adopt such a plan and quality 
adjustments to minimum prices should be based on the dairy industry's 
preference in each area. The handler asserts that its Class III 
utilization of over 50 percent of the milk from the Arizona-Las Vegas 
market is a strong indication for the need of MCP in the order.
    Leprino indicates that less than half of the milk in the proposed 
Arizona-Las Vegas order is used for Class I purposes. The handler 
argues that competitive inequities due to differences between fat-skim 
and MCP across manufacturers operating in different orders will become 
more significant as the manufacturing sector grows. It claims that the 
lack of MCP in the order will stimulate some disorderly marketing 
conditions as low component milk from New Mexico seeks higher revenue 
that will be available through the fat-skim pricing to the west. 
Additionally, SMPA strongly suggests that a system that prices the 
butterfat and protein components be incorporated in the order because 
it is in the best interest of producers.
    This final decision does not adopt MCP for the consolidated 
Arizona-Las Vegas order. The current Central Arizona order does not 
contain a multiple component pricing plan. The handlers proposed to be 
regulated under the consolidated order are currently all, with one 
exception, regulated under the current Central Arizona order. The 
manufacturing of milk in the consolidated order is anticipated to be 
done primarily by Schreiber, at a non-pool plant. Schreiber is almost 
totally supplied by United Dairymen of Arizona (UDA). Due to these 
marketing situations (i.e., one buyer and one seller), the 
implementation of MCP in the consolidated Arizona-Las Vegas order would 
only benefit some of the producers of the order. All of the producers 
in the marketing area would not share equitably. As stated in the 
proposed rule and explained above, the fluid nature of much of the 
market and the current marketing situations do not warrant MCP at this 
time.
Payment Obligation of a Partially Regulated Distributing Plant
    SMPA recommended a proposal designed to equalize Class I costs 
between California distributing plants and handlers fully regulated 
under the proposed Arizona-Las Vegas order. SMPA explained that the 
proposal is essentially a modification of the ``Wichita Option,'' which 
represents a reasonable method for computing a partially regulated 
distributing plant's obligation to the producer-settlement fund.
    The ``Wichita Option'' compares the amounts paid to producers for 
milk received by a nonpool distributing plant with the full class-use 
value of milk that would have applied if the plant were fully regulated 
under the order. To equalize the competitive positions of both fully 
regulated plants and those plants not regulated under an order, any 
amount by which the class-use value exceeds the value paid to producers 
is due to the producer-settlement fund or can be paid to the producers 
who supplied the handler. However, this option does not function 
appropriately to handle milk from plants regulated under a State order 
that provides for market-wide pooling. Thus, the modified ``Wichita 
Option'' includes payment provisions for any plant regulated under such 
a State-operated program.
    The current Great Basin order provides payment provisions for any 
handler operating a State-regulated distributing plant having route 
disposition in the Great Basin order. This provision has been 
incorporated in Section 76 of the General provisions in this final 
decision and is applicable to all orders.

Western Order

    Many of the provisions of the consolidated Western order are 
explained in the ``Identical Provisions'' portion of this final 
decision and need not be addressed here. Those provisions that differ 
from those explained in the ``Identical Provisions,'' or those 
currently contained in the orders to be consolidated, are discussed 
below.
Pool plant
    The pool distributing plant definition is similar to that contained 
in most of the other orders. The minimum percentage of a pool 
distributing plant's physical receipts of bulk fluid milk products that 
are disposed of as route disposition is 25 percent. The percentage of a 
handler's total route disposition distributed into the marketing area 
that would result in a distributing plant becoming fully regulated 
under the Western order is also 25 percent. While this definition 
differs slightly from the current language of the orders included in 
this consolidated Western order, it provides uniformity with other 
consolidated orders and should result in no additional distributing 
plants being pooled under the order or any change in the pool status of 
distributing plants currently pooled.
    The pool plant provisions of the Western order have been revised in 
this final decision. The modification to the pool plant definition 
provides for the pooling of plants that specialize in ultra-pasteurized 
or aseptically-processed fluid milk products. A detailed explanation of 
the changes is located at the end of the western regional discussion.
    The proposed pool supply plant definition would have required a 
supply plant operator to ship at least 35 percent of the milk pooled at 
the supply plant, either by transfer or diversion, to pool distributing 
plants during the month in order to qualify for pooling. The 35 percent 
level is included in the final decision. The percentage is slightly 
higher than that contained in the current Southwest Idaho-Eastern 
Oregon order and slightly lower than that contained in the current 
Great Basin order. This change should result in no milk that is 
currently associated with either of the two orders losing such 
association.
    The pool supply plant definition in the final decision includes 
provision for a March through August period during which a supply plant 
that has met the order's shipping percentages for the preceding months 
of September through February to be able to continue to be a pool plant 
without meeting the shipping standards. As with other consolidated 
orders, the market administrator will have the authority to increase or 
decrease the order's supply plant pooling standards as marketing 
conditions change.
    The Western order final decision contains a provision that would 
permit a manufacturing plant operated by a cooperative association and 
located in

[[Page 16164]]

the marketing area to be a pool plant if 35 percent of the milk for 
which the cooperative is the handler is received at pool distributing 
plants during the month or during the immediately preceding 12-month 
period. This provision is similar to one currently contained in the 
Great Basin order and in some of the other consolidated orders.
    Although the two current orders that have been consolidated do not 
contain such a provision, the Western order would provide that a single 
handler be allowed to form a unit of distributing plants and Class II 
manufacturing plants provided each plant is located within the 
marketing area, as suggested by the Identical Provisions committee. The 
unit in total would be required to meet the requirements for a pool 
distributing plant and at least one of the plants in the unit would be 
required to meet the pool distributing plant definition individually. 
This provision would provide uniformity with other federal orders and 
would not change the status of any plants currently pooled. Class II 
manufacturing plants are proposed to be included for unit pooling with 
distributing plants operated by the same handler because such plants 
produce products that are marketed in conjunction with fluid milk 
products.
Proprietary Bulk Tank Handler
    The consolidated Western order final decision retains the bulk tank 
handler provision that is currently in the Southwestern Idaho-Eastern 
Oregon order, permitting a handler other than a cooperative association 
to divert milk to nonpool plants for the handler's account based on 
shipments of milk to pool plants of other handlers.
Producer-Handler
    The producer-handler provisions that were proposed have been 
revised in this final decision to be very similar to the provisions in 
the current Great Basin and Southwestern Idaho-Eastern Oregon orders. 
The revisions should assure that the status of current producers-
handlers will be unchanged.
Producer
    The Western order contains a dairy farmer for other markets 
definition. A producer would not qualify for pooling under the Western 
order unless all of the milk from the same farm was pooled under this 
or some other federal order or unless such non-pooled milk went to a 
plant with only Class III or Class IV utilization. This differs 
slightly from the current definition in the Great Basin order. Such a 
provision is contained in the Western order to prevent dairy farmers 
whose milk is regularly used for fluid disposition in other markets 
from pooling the surplus portion of their production on the 
consolidated order. Security Milk Producers Association supports this 
provision and states that it is needed to prevent the pooling of 
surplus milk from farms whose milk is regularly associated with other 
markets.
Producer Milk
    The percentage of a handler's pooled milk for the Western order 
final decision that may be diverted to non-pool plants is 90 percent in 
any month. The proposed rule recommended a limit of 80 percent, which 
is identical to the percentage currently included in the Southwestern 
Idaho-Eastern Oregon order and is only slightly higher than that for 
the present Great Basin order (i.e., 75 percent for cooperatives and 70 
percent for proprietary handlers).
    Avonmore West Inc. (Avonmore), a handler in the Southwestern Idaho-
Eastern Oregon order in Twin Falls, Idaho, favors the more liberal 
qualification rules proposed for the Western Order whereby only one 
day's production of producer milk has to be received at a pool plant. 
However, the handler opposed the 80 percent standard of a handler's 
pooled milk that may be diverted to non-pool plants as recommended in 
the proposed rule. Avonmore indicated that the 80 percent diversion 
limitation is identical to the one currently in the Southwestern Idaho-
Eastern Oregon Federal order and stated that this standard was 
suspended indefinitely in December 1989. The handler contends that the 
argument that the 80 percent diversion limitation caused uneconomic 
movements of milk is still valid today.
    In 1997, Avonmore notes, an average of 217 million pounds of 
producer milk was diverted to nonpool plants each month. Accordingly, 
Avonmore argues that the reintroduction of the 80 percent diversion 
limitation would allow only 80 million pounds of producer milk to be 
diverted to nonpool plants. The handler contends this would preclude 
many dairy producers in Idaho from having their milk associated with 
the Western order, which could cause significant price disparities 
between producers and create disorderly marketing conditions that 
Federal orders are intended to prevent.
    Utah Farm Bureau Federation filed a comment regarding the 
consolidation of the Great Basin and Southwestern Idaho-Eastern Oregon 
orders into the Western order. In their comments the federation states 
that the pooling provisions of the current Great Basin order must be 
maintained to prohibit opportunistic entry of outside milk into the 
Utah Class I pool.
    As adopted in this final decision, the 90 percent diversion 
limitation is the same as that adopted in the consolidated Upper 
Midwest order. The 90 percent limitation on movements of pooled milk to 
nonpool plants should permit all milk associated with the market that 
is not needed at pool plants during the month to be pooled and priced 
under the order. The 90 percent standard provides handlers more 
flexibility to efficiently move milk. Although unlimited diversions are 
not incorporated in the consolidated order, the 90 percent standard 
should not preclude most producers associated with the current 
individual orders from having their milk pooled under the consolidated 
Western order. The 90 percent standard is an appropriate level for the 
consolidated order given the provisions contained in the current 
individual orders and should not create any disorderly marketing 
conditions. The recommended standard also should ensure that additional 
amounts of unneeded milk would not be pooled. In addition, as contained 
in other consolidated orders the market administrator will have the 
authority to adjust the diversion percentage.
    The order language allowing two or more cooperative associations to 
jointly met the diversion limits was inadvertently excluded from the 
proposed rule. Order language to allow this to occur has been included 
in this final decision.
    Darigold Farms opposes the touch-base requirement that was 
recommended in the proposed rule. The cooperative contends that the 
exclusion of this provision may present an opportunity to obtain 
unified support for a provision that would prevent or reduce 
opportunistic pooling.
    The current Southwestern Idaho-Eastern Oregon and Great Basin 
orders contain such a touch-base provision. The provision ensure that a 
producer whose milk is pooled on the order is indeed servicing the 
Class I needs of the market. Accordingly, the touch-base provision 
recommended in the proposed rule is adopted in this final decision. The 
provision provides that during the month at least one day's milk 
production of a dairy farmer new to the order must be physically 
received at a pool plant so that milk of such producer is eligible for 
diversion.
Reports of Receipts and Utilization and Payroll Reports
    The Western order requires pool handlers to file a ``report of 
receipts and utilization'' on or before the seventh day

[[Page 16165]]

after the end of the month. This is identical to the current reporting 
date in the Great Basin order but two days earlier than the same 
provision in the Southwestern Idaho-Eastern Oregon order. Almost all 
handlers currently file reports by FAX or some other form of electronic 
data transfer, which eliminates delays due to mail handling. A seven-
day reporting period should allow adequate time for handlers to prepare 
reports and will allow the computation and release of producer price 
information to occur on or before the 12th day after the end of the 
month.
    The date on which the report of payments to producers is due to the 
market administrator under the Western order is on or before the 21st 
day after the end of the month. This is the same date as that under the 
Great Basin order, but one day earlier than under the Southwestern 
Idaho-Eastern Oregon order. The earlier reporting date and announcement 
of producer prices should assure that an earlier payroll reporting date 
would not be burdensome.
Multiple Component Pricing
    Both the Great Basin order and the Southwestern Idaho-Eastern 
Oregon order currently have multiple component pricing based on protein 
without a somatic cell adjustment. The multiple component pricing 
provisions of the consolidated Western order should be the same as 
those for other proposed orders that provide for multiple component 
pricing based on protein but without a somatic cell adjustment. The 
Western order has a significant amount of milk used in manufactured 
products, especially cheese, and component pricing will enable 
producers to be paid according to the value of the components of their 
milk. However, the somatic cell adjustment included in some of the 
consolidated orders for which component pricing is proposed is not 
warranted by marketing conditions under the Western order, and such an 
adjustment is not included in the final decision.
    Avonmore expressed support for the use of multiple component 
pricing in the Western Order and strongly recommended the inclusion of 
a somatic cell count price adjuster. Avonmore states the SCC adjuster 
is necessary because the manufacture of cheese is the predominant use 
of milk in the Western Order. Avonmore notes that it has been 
documented that elevated levels of SCC impact cheese yield. In 
addition, the handler contends that dairy products (i.e., cheese, NFDM, 
butter, whey products) exported to the European Union must be made with 
milk containing less than 400,000 SCC.
    Darigold Farms, a cooperative that will have milk on the order has 
expressed the opinion that an adjustment for somatic cells is a quality 
issue that may be better dealt with between the buyer and seller. In 
addition, the nearby Pacific Northwest order will not have a somatic 
cell adjustment. The somatic cell count of milk produced in the western 
U.S. is at an average level of 250,000. This level is significantly 
lower than the 350,000 level, which provides no adjustment in the 
consolidated orders that adjust for somatic cell count. For the reasons 
stated above and due to the high quality of milk produced in the 
consolidated Western marketing area, a quality adjustment is 
unnecessary and need not be included in the order.
Payments To and From the Producer Settlement Fund
    Payments to the producer settlement fund under the consolidated 
order are due on or before the 14th day after the end of the month. 
This is two days after the announcement of uniform producer prices, 
which is an identical time period to that which exists in the two 
current orders that are being consolidated.
    Payments from the producer settlement fund under the consolidated 
order would be due on or before the 15th day after the end of the 
month. This is the same date as under the current Great Basin order and 
three days earlier than under the Southwestern Idaho-Eastern Oregon 
order. This payment date should be practicable, given the use of 
current banking and transmission techniques.
Payments to Producers and Cooperative Associations
    Under the Western order, partial payments would be due from 
handlers to producers who are not members of cooperative associations 
on or before the 25th day of the month in an amount not less than 1.2 
times the lowest class price for the preceding month multiplied by the 
hundredweight of milk received from such producers during the first 15 
days of the month. Final payments would be due on or before the 17th 
day after the end of the month.
    Partial payments to cooperative associations would be due on or 
before the 24th day of the month at the same rate as above, with final 
payments due on or before the 16th day after the end of the month. 
These final payment dates represent very little or no change from the 
orders' present payment dates. The partial payment dates are earlier 
than those required under the current orders, but are very close to 
those suggested by the Identical Provisions committee, and compliance 
should present no hardship to handlers who would already have had the 
use of the producers' milk for 9 to 23 days.

Pacific Northwest Order

    Many of the provisions of the Pacific Northwest order are explained 
in the ``Identical Provisions'' portion of this final decision, and 
need not be addressed here. The provisions that deviate somewhat from 
those incorporated in other order areas are the provisions dealing with 
standards for determining the pool status of producers and handlers, 
the definition of producer-handlers, the factors upon which payments to 
producers are calculated, and reporting and payment dates. Because this 
order is not proposed to be consolidated with any other orders, there 
is little reason for changing the substance of many of the provisions 
that are not included in the General Provisions.
Pool Distributing Plant
    The pool distributing plant provisions of the proposed Pacific 
Northwest Order are changed from the current definition to one that 
more closely resembles the definition suggested in the identical 
provisions report. Rather than basing the identification of a pool 
distributing plant on only 10 percent of the plant's receipts as in-
area route dispositions, the order should specify that such a plant 
have at least 25 percent of its physical receipts distributed as route 
disposition, and at least 25 percent of its route disposition 
distributed within the marketing area.
    It is expected that the modified pooling standard will not affect 
the pool status of any plant that currently does or does not meet the 
pooling standard of the Pacific Northwest order. In addition, it would 
remedy a provision that could result in fully regulating a plant that 
has minimal association with the marketing area.
    The pool plant provisions of the Pacific Northwest order have been 
revised in this final decision. One modification provides for the 
pooling of plants that specialize in ultra-pasteurized or aseptically-
processed fluid milk products. A detailed explanation of the changes is 
located at the end of the western regional discussion.
Pool Supply Plant
    For the most part, the current pool supply plant definition of the 
Pacific Northwest order and the performance standard of shipping 20 
percent of the

[[Page 16166]]

milk is appropriate to the marketing conditions in the area. However, 
the provision that currently requires a handler to include producer 
milk moved directly to pool distributing plants in the shipments on 
which pool plant performance is calculated is changed to allow the 
handler to include such movements if the handler wants to qualify its 
plant for pooling. A plant operator who receives milk at a plant only 
for manufacturing use also will be able to supply producer milk 
directly to distributing plants without a requirement that the 
manufacturing plant be a supply plant.
    In the Pacific Northwest order the current March through August 
period during which supply plants do not have to ship the minimum 
percentage to distributing plants if they have done so during the 
previous September through February period is included in the pool 
supply plant definition.
    As in the other consolidated orders, the market administrator will 
have the authority to increase or decrease the order's pooling 
provisions as marketing conditions change for the purpose of assuring 
that an adequate supply of milk will be available for fluid use, or to 
assure that the order does not require handlers to undertake uneconomic 
movements of milk to maintain: (1) The pool status of their plants, or 
(2) the pooling of producers who have historically been associated with 
the market and who help serve Class I needs.
Nonpool Plant
    The current definition and exemption for milk produced and 
processed by state institutions, as contained in the present order's 
producer-handler definition, is expanded and moved to be included in 
the ``Nonpool plant'' definition contained in the General Provisions. 
Such entities, along with colleges and universities and charitable 
organizations, will not be subject to the orders' pricing and pooling 
provisions as long as they have no sales in commercial channels.
    The present Pacific Northwest order provisions allow a state 
institution to avoid any regulation on the portion of its milk that is 
used only within the institution, and apply some pricing regulation to 
that portion that is distributed in commercial channels. In some 
respects, this arrangement is similar to the situation of partially 
regulated distributing plants. However, partially regulated 
distributing plant operators, to avoid obligations under Federal 
orders, must show that they pay the dairy farmers who ship milk to them 
at a rate at least commensurate with that paid to producers whose milk 
is pooled under the order. In any case, they must procure a milk supply 
in the competitive market. State institutions may have any number of 
cost advantages over regulated handlers in the production and 
processing of milk, such as not having to pay a minimum wage and not 
having to pay property taxes. It would be unjust to allow such 
institutions to compete with fully regulated handlers in regular 
commercial channels as if the playing field were level. Therefore, 
state and other institutions that compete with regulated handlers in 
regular commercial channels, such as bids for school milk programs, 
would be regulated on those sales.
Producer-Handler
    The current Pacific Northwest producer-handler provisions remain 
essentially untouched. Some of the ``Identical Provisions'' features of 
the producer-handler definition, such as the 150,000-pound thresholds 
for route dispositions, own farm production, and receipts from pool 
plants are adopted in this final decision. The rest of the current 
producer-handler provisions remain in effect for administrative 
purposes.
    Producer-handlers represent a much larger portion of the Class I 
dispositions in the Pacific Northwest marketing area than in most other 
Federal order areas. In many marketing areas, producer-handlers supply 
one percent or less of the Class I sales. In the Pacific Northwest 
area, however, they furnish almost 10 percent of the market's Class I 
dispositions. The larger average size of the dairy farms in the western 
United States makes more likely the existence of a producer-handler 
that is a significant factor in the market.
    The current order's producer-handler provisions are based on the 
history of producer-handler operations in the marketing area, 
reflecting difficulties encountered in order administration, attempts 
to circumvent order provisions, and court challenges.
    In addition to the current order provisions, the producer-handler 
definition contains language clarifying that milk received by the 
producer-handler at a location other than the producer-handler's 
processing plant for distribution on routes will be included as a 
receipt from another handler.
Reserve Supply Unit
    The Pacific Northwest order will continue to provide for a 
cooperative reserve supply unit. The existing provision has many 
similarities to a reserve supply plant, which is not provided in this 
order but which is included in several of the consolidated orders.
    Under the terms of the present provision, the cooperative members 
of the reserve supply unit must be located near a pool distributing 
plant, as a reserve supply plant must be located in the marketing area. 
Both the reserve supply unit and the reserve supply plant provisions 
require that the plant or unit operator request prior approval of the 
market administrator to initiate and cancel their status, both require 
long-term association with the market, and both provide substantial 
penalties for failing to meet all required conditions. Although the 
cooperative unit does not have monthly qualification requirements, it 
is subject to a call by the market administrator after the market 
administrator's investigation of the need for supplemental supplies of 
milk. Because of the current existence of this provision, based on the 
need shown at a public hearing, and its similarities to a pooling 
mechanism suggested for other orders, provision for the cooperative 
reserve supply unit will continue to be included in the Pacific 
Northwest order.
    The order language regarding the exemption from diversion limits 
for a cooperative reserve supply unit was inadvertently excluded from 
the proposed rule. The order language for this exemption has been 
included in this final decision.
    The order language allowing two or more cooperative associations to 
jointly met the diversion limits was also inadvertently excluded from 
the proposed rule. Order language to allow this to occur has been 
included in this final decision.
Producer and Producer Milk
    The consolidated Pacific Northwest order would contain a ``dairy 
farmer for other markets'' provision for each month of the year. The 
large volume of milk production in California and California's quota 
system give dairy farmers an incentive to pool production in a volume 
equal to their quota pounds on the California order, and then attempt 
to share in the Pacific Northwest Class I market with their over-quota 
production, for which returns under the California order are much less. 
At the same time, none of the California Class I returns would be 
shared with Pacific Northwest producers. Similarly, producers subject 
to other state programs should not be allowed to pool the reserve 
supplies from the State-regulated markets and share in returns from the 
Pacific

[[Page 16167]]

Northwest pool while enjoying the benefits of the State orders' Class I 
returns.
    The current provisions of the Pacific Northwest order do not 
require that a producer's milk be received at pool plants for the 
producer's first pooled delivery on the market or for any specified 
period. If a handler meets its overall performance requirements for 
supplying milk to the market, it should make no difference which 
individual producer's milk is actually delivered to pool plants as long 
as the milk of each producer participating in the pool is Grade A and 
available to the market if and when needed. It is expensive, 
inefficient, and unnecessary to move milk from areas close to nonpool 
manufacturing plants to bottling plants in the city markets when that 
milk is not needed for bottling. For the above reasons and furthermore 
because there are often great distances and mountainous terrain between 
plants and farms in the more sparsely populated West, no ``touch base'' 
requirements should be included. As stated previously, Darigold Farms 
supports the exclusion of ``touch base'' requirements. The cooperative 
states that the exclusion may present an opportunity to obtain unified 
support for a provision that would prevent or reduce opportunistic 
pooling.
    This order and other western orders have allowed producers to pool 
milk on more than one order during the same month. Because of the 
locations of a number of dairy farmers, their milk may be used by pool 
plants regulated under more than one order in a single month. These 
producers also represent a reserve supply for more than one market. 
Large, multi-market handlers should be given the flexibility to market 
and transport their milk to fulfill the needs of their customers in the 
most efficient way possible.
    The small changes in the final decision from the current pooling 
provisions of the Pacific Northwest order result in very little change 
in the order's diversion limits. The limit of 80 percent of the 
handler's supply of producer milk remains unchanged, with the months 
during which the percentage is effective changed from September through 
April to September through February. These months will correspond to 
the months during which supply plants must ship 20 percent of their 
receipts to pool distributing plants.
    In the current order there is no limit on diversions during May 
through August. In this final decision there will be a limit of 99 
percent on diversions of producer milk for the months of March through 
August. The current delivery standards have not been overly restrictive 
nor associated unneeded supplies with the market and should be allowed 
to continue basically unchanged. However, the change from without limit 
to a percentage amount will allow the market administrator, as provided 
for in other orders the authority to adjust the percentage of milk that 
may be diverted.
Payments to Producers and Cooperative Associations
    Although the current Pacific Northwest order contains a multiple 
component pricing plan very like that proposed to be standard for the 
consolidated orders, it does not now and would not under this reform 
process contain a somatic cell adjustment provision. The level of 
somatic cells in the western U.S. is generally lower than in the east, 
with an overall average of approximately 250,000 instead of 350,000. 
This lower somatic cell count would seem to reduce the need for such a 
provision. Historically, the principal argument for a somatic cell 
adjuster has been the negative effect of somatic cells on the cheese 
yields. Although cheese manufacturing in the Northwest is increasing, 
most cheese manufacturing is done by cooperative associations who have 
expressed the opinion that an adjustment for somatic cells is a quality 
issue best dealt with internally. The somatic cell adjustments in the 
consolidated orders of the final decision are not incorporated in the 
Pacific Northwest order.
Announcement of Producer Prices
    The dates on which handler reports, market administrator's 
announcement of producer prices, and payment to producers would remain 
unchanged from those of the current order.
General Comment Related to Orders
    Darigold Farms suggests that the new orders provide some 
performance requirements attached to each individual market, but 
recommends that a producer, once qualified, should be locked into the 
pool for a minimum of four months. This recommendation has not been 
incorporated in the final decision for any of the western orders. The 
provisions adopted in each order should ensure that the Class I needs 
of the markets are met.
Major Changes to Orders From the Proposed Rule
    The pool plant provisions of the orders in the western region have 
been revised. Paragraph (b) of section 7 will accommodate the pooling 
of plants that specialize in ultra-pasteurized or aseptically-processed 
fluid milk products (i.e., fluid milk products with a shelf life of at 
least 60-90 days without refrigeration.) At the present time, there are 
no plants processing this type of product in the Southwest, Arizona-Las 
Vegas, or Pacific Northwest marketing areas. However, there is one 
plant in the Western order market area.
    Unlike a typical distributing plant, a plant specializing in 
extended shelf-life products may have a more erratic processing 
schedule, reflecting the longer shelf life of the products packaged at 
the plant. Consequently, a plant's Class I utilization may vary 
considerably from month to month. In certain areas of the country, such 
variability has resulted in shifting pool status for this type of plant 
from one order to another. Such regulatory instability is not conducive 
to orderly marketing. To provide greater regulatory stability for these 
plants, they should be fully regulated pool plants if they are located 
in the marketing area and process at least 25 percent of their fluid 
milk product receipts during the month into ultra-pasteurized or 
aseptically-processed fluid milk products. This provision will not 
guarantee that a plant qualifies as a fully-regulated pool plant every 
month; some months a plant may fail to process 25 percent of its milk 
receipts into ultra-pasteurized or aseptically-processed fluid milk 
products. Nevertheless, the provision will guarantee that if a plant 
meets the 25 percent standard described above, it will be qualified 
under the same order all the time.

7. Miscellaneous and Administrative

    (a) Consolidation of the marketing service, administrative expense, 
and producer-settlement funds. To complete the consolidation of the 
present 31 Federal orders effectively and equitably, the reserve 
balances in the marketing service, administrative expense, and 
producer-settlement funds that have resulted under the individual 
orders would be combined.
    The balances in these three funds should be combined on the same 
basis that the marketing areas are consolidated into regional orders 
herein. For instance, the Texas and New Mexico-West Texas marketing 
areas are merged into a new regional Southwest order. Accordingly, the 
reserve balances in the marketing service, administrative expense and 
producer-settlement funds of the two individual orders likewise should 
be combined into three separate funds established under the 
consolidated Southwest order.

[[Page 16168]]

    The marketing areas of the 11 consolidated orders essentially 
represent the territory covered by the 31 individual orders plus the 
territory included in the former Tennessee Valley marketing area. 
Because of this, the handlers and producers servicing the milk needs of 
the individual markets will continue to furnish the milk needs of the 
applicable regional market for the most part.
    In that regard, the reserve balances in the funds that have 
resulted under the 31 individual orders should be combined on a 
marketing area basis into the appropriate separate fund established for 
each of the 11 regional orders. Any liabilities of such funds under the 
individual orders would be paid from the appropriate newly established 
fund of the applicable regional order. Similarly, obligations that are 
due the separate funds under the individual orders would be paid to the 
appropriate combined fund of the applicable consolidated order.
    In most cases, the entire marketing area of an order or orders is 
included in the consolidated marketing area of one of the 11 regional 
orders. Four present marketing areas would be split between two 
consolidated orders. One county of the present Louisville-Lexington-
Evansville (Order 46) marketing area would be included in the Southeast 
order, and the rest of the territory in the Order 46 marketing area 
would be included under the Appalachian order. Even though one Order 46 
county is included in the consolidated Southeast order, all of the 
present Order 46 producers and handlers are expected to be covered 
under the consolidated Appalachian order. Accordingly, the balances in 
the Order 46 marketing service, administrative expense, and producer 
settlement funds should be consolidated into the three separate funds 
established for the consolidated Appalachian market.
    Different regulatory situations, however, will occur in the other 
three instances where a current marketing area is divided between two 
consolidated orders. The southwest Missouri and northwest Arkansas 
portions of the current Southwest Plains order area are included in the 
consolidated Southeast marketing area, while the remainder of the 
Southwest Plains area is combined with the marketing areas of eight 
other orders in the consolidated Central marketing area. Similarly, one 
county of the current Great Basin (Order 139) marketing area is 
included in the consolidated Arizona-Las Vegas order and the rest of 
the Order 139 marketing area is included in the consolidated marketing 
area for the West. In the third instance, two zones of the Michigan 
Upper Peninsula (Order 44) marketing area are included in the 
consolidated Upper Midwest marketing area and the other zone of the 
Order 44 marketing area is included in the marketing area for the 
Mideast regional order.
    In each of these 3 cases, some of the producers and handlers of 
each of the current order areas that are being divided will become 
pooled under one consolidated order, while the other producers and 
handlers of each of these areas will become pooled under another 
regional order. Accordingly, any reserve balances in the marketing 
service, administrative expense and producer-settlement funds of these 
three individual orders should be divided equitably among the 
applicable consolidated orders.
    The money accumulated in the marketing service funds of the 
individual orders is that which has been paid by producers for whom the 
market administrators are performing such services. Since the marketing 
areas of the 11 regional orders encompass the territory covered by the 
individual orders, for the most part, the producers who have 
contributed to the marketing service funds of the individual orders are 
expected to continue supplying milk for the consolidated orders. Since 
marketing service programs will be continued for these producers under 
the regional orders, it would be appropriate to combine the reserve 
balances in the marketing service funds of the order or orders that are 
represented in the consolidation of each of the 11 regional orders.
    When the consolidated marketing area includes the marketing area of 
one or more individual orders, any remaining balance in the marketing 
service fund of the individual order or orders should be combined in 
the marketing service fund established for the applicable consolidated 
order. If a current marketing area is split between two consolidated 
markets and the regulatory status of producers and handlers is divided 
between the two regional orders, as is the case with the Michigan Upper 
Peninsula, Southwest Plains, and Great Basin orders, any balance in the 
marketing service fund of the individual order should be prorated 
between the two consolidated orders on the basis of the amount of milk 
subject to the marketing service deduction that will be covered by each 
respective regional order (using producer deliveries in the last month 
the individual orders are in effect but assuming that the marketing 
areas had been consolidated).
    The money paid to the administrative expense fund is each handler's 
proportionate share of the cost of administering the order. For the 
most part, handlers currently regulated under the individual orders 
will continue to be regulated under the consolidated orders. In view of 
this, it would be an unnecessary administrative and financial burden to 
allocate the reserve funds of the individual orders back to handlers 
and then accumulate an adequate reserve for each of the consolidated 
orders. It would be as equitable and more efficient to combine the 
remaining administrative monies accumulated under the individual orders 
in the same manner as the marketing areas are combined.
    For the orders where the consolidated marketing area includes the 
regulated territory of one or more of the individual orders, any 
remaining balance in the administrative expense fund of the individual 
order or orders would be combined into the administrative expense fund 
established for the applicable consolidated order. In the situations 
where the current individual marketing area is split and the regulatory 
status of producers and handlers is divided (as in the case of the 
Michigan Upper Peninsula, Southwest Plains, and Great Basin orders) 
between two consolidated marketing areas, the remaining balance in the 
administrative expense fund should be prorated between the two regional 
orders on the basis of the amount of milk that would be pooled and 
priced under each respective consolidated order (using producer milk 
deliveries during the last month the individual orders are in effect 
but assuming that the orders had been consolidated).
    Likewise, the producer-settlement fund balances of the individual 
orders should be combined. They should be combined on the same basis as 
the marketing areas are consolidated herein. This will enable the 
producer-settlement funds of the consolidated orders to continue 
without interruption.
    The producers currently supplying the individual markets are 
expected to supply milk for the consolidated markets. Thus, monetary 
balances in the producer-settlement funds of the individual orders now 
would be reflected in the pay prices of the producers who will benefit 
from the applicable consolidated orders. The combined fund for each 
consolidated order also would serve as a contingency fund from which 
money would be available to meet obligations (resulting from audit 
adjustments and otherwise) occurring under the individual orders.

[[Page 16169]]

    The same procedure used in combining the remaining balances in the 
marketing service and administrative expense funds of the individual 
orders should be followed in combining the producer-settlement fund 
balances when the individual orders are consolidated. For orders where 
the consolidated marketing area includes the marketing area of one or 
more orders, any remaining balance in the producer-settlement fund of 
the individual order or orders would be combined into the producer-
settlement fund established for the applicable consolidated order. In 
the three situations (Michigan Upper Peninsula, Southwest Plains, and 
Great Basin) where the marketing area of a current order is split 
between two consolidated orders and some of the individual market's 
producers and handlers would be regulated under one consolidated order 
and others would be regulated under another consolidated order, the 
balance in the producer-settlement fund should be divided equitably 
between the two consolidated orders. Since the Michigan Upper Peninsula 
order is an individual-handler pool market, no producer-settlement fund 
is provided. In the 2 remaining instances in which current marketing 
areas are divided between 2 consolidated orders, the remaining balance 
in the producer-settlement funds of the Southwest Plains and Great 
Basin orders should be prorated between the consolidated orders on the 
basis of the amount of milk that will be pooled and priced under each 
respective consolidated order (using producer milk deliveries during 
the last month the individual orders are in effect but assuming that 
the orders had been consolidated).
    (b) Consolidation of the transportation credit balancing funds. To 
complete the consolidation process, the reserve balances in the 
transportation credit balancing funds that are in effect now under 
three Southeast orders (Carolina, Order 5; Southeast, Order 7; and 
Louisville-Lexington-Evansville, Order 46) also should be consolidated. 
These funds should be combined on a marketing area basis. In that 
regard, the reserve balances in the transportation credit balancing 
funds of the Carolina and Louisville-Lexington-Evansville orders should 
be consolidated into a newly established transportation credit 
balancing fund for the consolidated Appalachian order, which also 
includes the current marketing areas of these two orders with the 
exception of one county. Similarly, the reserve balance in the 
transportation credit balancing fund of the present Southeast order 
should be transferred to the consolidated Southeast order, which 
includes all of the marketing area of the present Southeast order. 
These procedures will enable the transportation credits to continue 
without interruption under these two consolidated orders.
    (c) 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.
    (1) 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;
    (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 each of the aforesaid marketing areas, 
and the minimum prices specified in the tentative marketing agreements 
and the orders, as hereby proposed to be amended, are such prices as 
will reflect the aforesaid factors, insure a sufficient quantity of 
pure and wholesome milk, and be in the public interest;
    (3) 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 the 
marketing agreements;
    (4) 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; and
    (5) It is hereby found that the necessary expense of the market 
administrator for the maintenance and functioning of such agency will 
require the payment by each handler, as his pro rata share of such 
expense, 5 cents per hundredweight or such lesser amount as the 
Secretary may prescribe, with respect to milk specified in Sec. 1000.85 
of the General Provisions.

Comments

    In arriving at the findings and conclusions, and the regulatory 
provisions of this decision, each of the comments received was 
carefully and fully considered in conjunction with the rulemaking 
record.

Marketing Agreements and Order Amending the Orders

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

Referendum Order to Determine Producer Approval

    This decision does not provide for conducting referendums of 
producers to determine if they approve of the issuance of the 
consolidated orders. A notice to conduct a referendum on each of the 
consolidated orders will be issued at a future date.

List of Subjects in 7 CFR Parts 1000, 1001, 1002, 1004, 1005, 1006, 
1007, 1012, 1013, 1030, 1032, 1033, 1036, 1040, 1044, 1046, 1049, 
1050, 1064, 1065, 1068, 1076, 1079, 1106, 1124, 1126, 1131, 1134, 
1135, 1137, 1138 and 1139

    Milk marketing orders.

    Dated: March 12, 1999.
Michael V. Dunn,
Under Secretary, Marketing and Regulatory Programs.

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

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

Findings and Determinations

    The findings and determinations hereinafter set forth supplement 
those that were made when the orders were first issued and when they 
were amended. The previous findings and determinations are hereby 
ratified and confirmed, except where they may conflict with those set 
forth herein.
    (a) The said orders as hereby 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

[[Page 16170]]

price of feeds, available supplies of feeds, and other economic 
conditions which affect market supply and demand for milk in the 
aforesaid marketing areas. The minimum prices specified in the orders 
as hereby amended are such prices as will reflect the aforesaid 
factors, insure a sufficient quantity of pure and wholesome milk, and 
be in the public interest; and
    (c) The said orders as hereby amended regulate the handling of milk 
in the same manner as, and are applicable only to persons in the 
respective classes of industrial or commercial activity specified in, 
the marketing agreements;
    (d) All milk and milk products handled by handlers, as defined in 
the orders as hereby amended, are in the current of interstate commerce 
or directly burden, obstruct, or affect interstate commerce in milk or 
its products; and
    (e) It is hereby found that the necessary expense of the market 
administrators for the maintenance and functioning of such agency will 
require the payment by each handler, as his pro rata share of such 
expense, 5 cents per hundredweight or such lesser amount as the 
Secretary may prescribe, with respect to milk specified in Sec. 1000.85 
of the General Provisions.

Order Relative to Handling

    It is therefore ordered, that on and after the effective date 
hereof, the handling of milk in the Northeast and other marketing areas 
shall be in conformity to and in compliance with the terms and 
conditions of the orders, as amended, and as hereby amended, as 
follows:
    The provisions of the proposed marketing agreements and order 
amending the orders contained in the proposed rule issued by the 
Administrator, Agricultural Marketing Service, on January 21, 1998, and 
published in the Federal Register on January 31, 1998 (63 FR 4802), as 
modified herein, shall be and are the terms and provisions of this 
order, amending the orders, and are set forth in full herein.
    For the reasons set forth in the preamble and under the authority 
of Title 7, chapter X, parts 1000, 1001, 1005, 1006, 1007, 1030, 1032, 
1033, 1124, 1126, 1131, and 1135 are revised and parts 1002, 1004, 
1012, 1013, 1036, 1040, 1044, 1046, 1049, 1050, 1064, 1065, 1068, 1076, 
1079, 1106, 1134, 1137, 1138 and 1139 are removed and reserved as 
follows:

PART 1000--GENERAL PROVISIONS OF FEDERAL MILK MARKETING ORDERS

Subpart A--Scope and Purpose

Sec.
1000.1  Scope and purpose of this Part 1000.

Subpart B--Definitions

1000.2  General definitions.
1000.3  Route disposition.
1000.4  Plant.
1000.5  Distributing plant.
1000.6  Supply plant.
1000.8  Nonpool plant.
1000.9  Handler.
1000.14  Other source milk.
1000.15  Fluid milk product.
1000.16  Fluid cream product.
1000.17  [Reserved]
1000.18  Cooperative association.
1000.19  Commercial food processing establishment.

Subpart C--Rules of Practice and Procedure Governing Market 
Administrators

1000.25  Market administrator.

Subpart D--Rules Governing Order Provisions

1000.26 Continuity and separability of provisions.

Subpart E--Rules of Practice and Procedure Governing Handlers

1000.27  Handler responsibility for records and facilities.
1000.28  Termination of obligations.

Subpart F--Classification of Milk

1000.40  Classes of utilization.
1000.41  [Reserved]
1000.42  Classification of transfers and diversions.
1000.43  General classification rules.
1000.44  Classification of producer milk.
1000.45  Market administrator's reports and announcements concerning 
classification.

Subpart G--Class Prices

1000.50  Class prices, component prices, and advanced pricing 
factors.
1000.51  [Reserved]
1000.52  Adjusted Class I differentials.
1000.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1000.54  Equivalent price.

Subpart H--Payments for Milk

1000.70  Producer-settlement fund.
1000.76  Payments by a handler operating a partially regulated 
distributing plant.
1000.77  Adjustment of accounts.
1000.78  Charges on overdue accounts.

Subpart I--Administrative Assessment and Marketing Service Deduction

1000.85  Assessment for order administration.
1000.86  Deduction for marketing services.

Subpart J--Miscellaneous Provisions

1000.90  Dates.
1000.91  [Reserved]
1000.92  [Reserved]
1000.93  OMB control number assigned pursuant to the Paperwork 
Reduction Act.

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

Subpart A--Scope and Purpose


Sec. 1000.1  Scope and purpose of this Part 1000.

    This part sets forth certain terms, definitions, and provisions 
which shall be common to and part of each Federal milk marketing order 
in 7 CFR, chapter X, except as specifically defined otherwise, or 
modified, or otherwise provided, in an individual order in 7 CFR, 
chapter X.

Subpart B--Definitions


Sec. 1000.2  General definitions.

    (a) Act means Public Act No. 10, 73d Congress, as amended and as 
reenacted and amended by the Agricultural Marketing Agreement Act of 
1937, as amended (7 U.S.C. 601 et seq.).
    (b) Order or Federal milk order means the applicable part of 7 CFR, 
chapter X, issued pursuant to section 8c of the Act as a Federal milk 
marketing order (as amended).
    (c) Department means the U.S. Department of Agriculture.
    (d) Secretary means the Secretary of Agriculture of the United 
States or any officer or employee of the Department to whom authority 
has heretofore been delegated, or to whom authority may hereafter be 
delegated, to act in his stead.
    (e) Person means any individual, partnership, corporation, 
association, or other business unit.


Sec. 1000.3  Route disposition.

    Route disposition means a delivery to a retail or wholesale outlet 
(except a plant), either directly or through any distribution facility 
(including disposition from a plant store, vendor, or vending machine) 
of a fluid milk product in consumer-type packages or dispenser units 
classified as Class I milk.


Sec. 1000.4  Plant.

    (a) Except as provided in paragraph (b) of this section, plant 
means the land, buildings, facilities, and equipment constituting a 
single operating unit or establishment at which milk or milk products 
are received, processed, or packaged, including a facility described in 
paragraph (b)(2) of this section if the facility receives the milk of 
more than one dairy farmer.
    (b) Plant shall not include:
    (1) A separate building without stationary storage tanks that is 
used only as a reload point for transferring bulk

[[Page 16171]]

milk from one tank truck to another or a separate building used only as 
a distribution point for storing packaged fluid milk products in 
transit for route disposition; or
    (2) An on-farm facility operated as part of a single dairy farm 
entity for the separation of cream and skim or the removal of water 
from milk.


Sec. 1000.5  Distributing plant.

    Distributing plant means a plant that is approved by a duly 
constituted regulatory agency for the handling of Grade A milk at which 
fluid milk products are processed or packaged and from which there is 
route disposition or transfers of packaged fluid milk products to other 
plants.


Sec. 1000.6  Supply plant.

    Supply plant means a plant approved by a duly constituted 
regulatory agency for the handling of Grade A milk that receives milk 
directly from dairy farmers and transfers or diverts fluid milk 
products to other plants or manufactures dairy products on its 
premises.


Sec. 1000.8  Nonpool plant.

    Nonpool plant  means any milk receiving, manufacturing, or 
processing plant other than a pool plant. The following categories of 
nonpool plants are further defined as follows:
    (a) A plant fully regulated under another Federal order means a 
plant that is fully subject to the pricing and pooling provisions of 
another Federal order.
    (b) Producer-handler plant means a plant operated by a producer-
handler as defined under any Federal order.
    (c) Partially regulated distributing plant means a nonpool plant 
that is not a plant fully regulated under another Federal order, a 
producer-handler plant, or an exempt plant, from which there is route 
disposition in the marketing area during the month.
    (d) Unregulated supply plant means a supply plant that does not 
qualify as a pool supply plant and is not a plant fully regulated under 
another Federal order, a producer-handler plant, or an exempt plant.
    (e) An exempt plant means a plant described in this paragraph that 
is exempt from the pricing and pooling provisions of any order provided 
that the operator of the plant files reports as prescribed by the 
market administrator of any marketing area in which the plant 
distributes packaged fluid milk products to enable determination of the 
handler's exempt status:
    (1) A plant that is operated by a governmental agency that has no 
route disposition in commercial channels;
    (2) A plant that is operated by a duly accredited college or 
university disposing of fluid milk products only through the operation 
of its own facilities with no route disposition in commercial channels;
    (3) A plant from which the total route disposition is for 
individuals or institutions for charitable purposes without 
remuneration; or
    (4) A plant that has route disposition and packaged sales of fluid 
milk products to other plants of 150,000 pounds or less during the 
month.


Sec. 1000.9  Handler.

    Handler means:
    (a) Any person who operates a pool plant or a nonpool plant.
    (b) Any person who receives packaged fluid milk products from a 
plant for resale and distribution to retail or wholesale outlets, any 
person who as a broker negotiates a purchase or sale of fluid milk 
products or fluid cream products from or to any pool or nonpool plant, 
and any person who by purchase or direction causes milk of producers to 
be picked up at the farm and/or moved to a plant. Persons who qualify 
as handlers only under this paragraph under any Federal milk order are 
not subject to the payment provisions of Secs. ____.70, ____.71, 
____.72, ____ .73, ____.76, and ____.85 of that order.
    (c) Any cooperative association with respect to milk that it 
receives for its account from the farm of a producer and delivers to 
pool plants or diverts to nonpool plants pursuant to Sec. ____.13 of 
the order. The operator of a pool plant receiving milk from a 
cooperative association may be the handler for such milk if both 
parties notify the market administrator of this agreement prior to the 
time that the milk is delivered to the pool plant and the plant 
operator purchases the milk on the basis of farm bulk tank weights and 
samples.


Sec. 1000.14  Other source milk.

    Other source milk means all skim milk and butterfat contained in or 
represented by:
    (a) Receipts of fluid milk products and bulk fluid cream products 
from any source other than producers, handlers described in 
Sec. 1000.9(c) and Sec. 1135.11, or pool plants;
    (b) Products (other than fluid milk products, fluid cream products, 
and products produced at the plant during the same month) from any 
source which are reprocessed, converted into, or combined with another 
product in the plant during the month; and
    (c) Receipts of any milk product (other than a fluid milk product 
or a fluid cream product) for which the handler fails to establish a 
disposition.


Sec. 1000.15  Fluid milk product.

    (a) Except as provided in paragraph (b) of this section, fluid milk 
product means any milk products in fluid or frozen form containing less 
than 9 percent butterfat that are intended to be used as beverages. 
Such products include, but are not limited to: Milk, fat-free milk, 
lowfat milk, light milk, reduced fat milk, milk drinks, eggnog and 
cultured buttermilk, including any such beverage products that are 
flavored, cultured, modified with added nonfat milk solids, sterilized, 
concentrated, or reconstituted. As used in this part, the term 
concentrated milk means milk that contains not less than 25.5 percent, 
and not more than 50 percent, total milk solids.
    (b) The term fluid milk product shall not include:
    (1) Plain or sweetened evaporated milk/skim milk, sweetened 
condensed milk/skim milk, formulas especially prepared for infant 
feeding or dietary use (meal replacement) that are packaged in 
hermetically-sealed containers, any product that contains by weight 
less than 6.5 percent nonfat milk solids, and whey; and
    (2) The quantity of skim milk equivalent in any modified product 
specified in paragraph (a) of this section that is greater than an 
equal volume of an unmodified product of the same nature and butterfat 
content.


Sec. 1000.16  Fluid cream product.

    Fluid cream product means cream (other than plastic cream or frozen 
cream), including sterilized cream, or a mixture of cream and milk or 
skim milk containing 9 percent or more butterfat, with or without the 
addition of other ingredients.


Sec. 1000.17  [Reserved]


Sec. 1000.18  Cooperative association.

    Cooperative association means any cooperative marketing association 
of producers which the Secretary determines is qualified under the 
provisions of the Capper-Volstead Act, has full authority in the sale 
of milk of its members, and is engaged in marketing milk or milk 
products for its members. A federation of 2 or more cooperatives 
incorporated under the laws of any state will be considered a 
cooperative association under any Federal milk order if all member 
cooperatives meet the requirements of this section.

[[Page 16172]]

Sec. 1000.19  Commercial food processing establishment.

    Commercial food processing establishment means any facility, other 
than a milk plant, to which fluid milk products and fluid cream 
products are disposed of, or producer milk is diverted, that uses such 
receipts as ingredients in food products and has no other disposition 
of fluid milk products other than those received in consumer-type 
packages (1 gallon or less). Producer milk diverted to commercial food 
processing establishments shall be subject to the same provisions 
relating to diversions to plants, including, but not limited to, 
Secs. ____.13 and ____.52 of each Federal milk order.

Subpart C--Rules of Practice and Procedure Governing Market 
Administrators


Sec. 1000.25  Market administrator.

    (a) Designation. The agency for the administration of the order 
shall be a market administrator selected by the Secretary and subject 
to removal at the Secretary's discretion. The market administrator 
shall be entitled to compensation determined by the Secretary.
    (b) Powers. The market administrator shall have the following 
powers with respect to each order under his/her administration:
    (1) Administer the order in accordance with its terms and 
provisions;
    (2) Maintain and invest funds outside of the United States 
Department of the Treasury for the purpose of administering the order;
    (3) Make rules and regulations to effectuate the terms and 
provisions of the order;
    (4) Receive, investigate, and report complaints of violations to 
the Secretary; and
    (5) Recommend amendments to the Secretary.
    (c) Duties. The market administrator shall perform all the duties 
necessary to administer the terms and provisions of each order under 
his/her administration, including, but not limited to, the following:
    (1) Employ and fix the compensation of persons necessary to enable 
him/her to exercise the powers and perform the duties of the office;
    (2) Pay out of funds provided by the administrative assessment, 
except expenses associated with functions for which the order provides 
a separate charge, all expenses necessarily incurred in the maintenance 
and functioning of the office and in the performance of the duties of 
the office, including the market administrator's compensation;
    (3) Keep records which will clearly reflect the transactions 
provided for in the order and upon request by the Secretary, surrender 
the records to a successor or such other person as the Secretary may 
designate;
    (4) Furnish information and reports requested by the Secretary and 
submit office records for examination by the Secretary;
    (5) Announce publicly at his/her discretion, unless otherwise 
directed by the Secretary, by such means as he/she deems appropriate, 
the name of any handler who, after the date upon which the handler is 
required to perform such act, has not:
    (i) Made reports required by the order;
    (ii) Made payments required by the order; or
    (iii) Made available records and facilities as required pursuant to 
Sec. 1000.27;
    (6) Prescribe reports required of each handler under the order. 
Verify such reports and the payments required by the order by examining 
records (including such papers as copies of income tax reports, fiscal 
and product accounts, correspondence, contracts, documents or memoranda 
of the handler, and the records of any other persons that are relevant 
to the handler's obligation under the order), by examining such 
handler's milk handling facilities, and by such other investigation as 
the market administrator deems necessary for the purpose of 
ascertaining the correctness of any report or any obligation under the 
order. Reclassify skim milk and butterfat received by any handler if 
such examination and investigation discloses that the original 
classification was incorrect;
    (7) Furnish each regulated handler a written statement of such 
handler's accounts with the market administrator promptly each month. 
Furnish a corrected statement to such handler if verification discloses 
that the original statement was incorrect; and
    (8) Prepare and disseminate publicly for the benefit of producers, 
handlers, and consumers such statistics and other information 
concerning operation of the order and facts relevant to the provisions 
thereof (or proposed provisions) as do not reveal confidential 
information.

Subpart D--Rules Governing Order Provisions


Sec. 1000.26  Continuity and separability of provisions.

    (a) Effective time. The provisions of the order or any amendment to 
the order shall become effective at such time as the Secretary may 
declare and shall continue in force until suspended or terminated.
    (b) Suspension or termination. The Secretary shall suspend or 
terminate any or all of the provisions of the order whenever he/she 
finds that such provision(s) obstructs or does not tend to effectuate 
the declared policy of the Act. The order shall terminate whenever the 
provisions of the Act authorizing it cease to be in effect.
    (c) Continuing obligations. If upon the suspension or termination 
of any or all of the provisions of the order there are any obligations 
arising under the order, the final accrual or ascertainment of which 
requires acts by any handler, by the market administrator or by any 
other person, the power and duty to perform such further acts shall 
continue notwithstanding such suspension or termination.
    (d) Liquidation. (1) Upon the suspension or termination of any or 
all provisions of the order the market administrator, or such other 
liquidating agent designated by the Secretary, shall, if so directed by 
the Secretary, liquidate the business of the market administrator's 
office, dispose of all property in his/her possession or control, 
including accounts receivable, and execute and deliver all assignments 
or other instruments necessary or appropriate to effectuate any such 
disposition; and
    (2) If a liquidating agent is so designated, all assets and records 
of the market administrator shall be transferred promptly to such 
liquidating agent. If, upon such liquidation, the funds on hand exceed 
the amounts required to pay outstanding obligations of the office of 
the market administrator and to pay necessary expenses of liquidation 
and distribution, such excess shall be distributed to contributing 
handlers and producers in an equitable manner.
    (e) Separability of provisions. If any provision of the order or 
its application to any person or circumstances is held invalid, the 
application of such provision and of the remaining provisions of the 
order to other persons or circumstances shall not be affected thereby.

Subpart E--Rules of Practice and Procedure Governing Handlers


Sec. 1000.27  Handler responsibility for records and facilities.

    Each handler shall maintain and retain records of its operations 
and make such records and its facilities available to the market 
administrator. If

[[Page 16173]]

adequate records of a handler, or of any other persons, that are 
relevant to the obligation of such handler are not maintained and made 
available, any skim milk and butterfat required to be reported by such 
handler for which adequate records are not available shall be 
considered as used in the highest-priced class.
    (a) Records to be maintained. (1) Each handler shall maintain 
records of its operations (including, but not limited to, records of 
purchases, sales, processing, packaging, and disposition) as are 
necessary to verify whether such handler has any obligation under the 
order and if so, the amount of such obligation. Such records shall be 
such as to establish for each plant or other receiving point for each 
month:
    (i) The quantities of skim milk and butterfat contained in, or 
represented by, products received in any form, including inventories on 
hand at the beginning of the month, according to form, time, and source 
of each receipt;
    (ii) The utilization of all skim milk and butterfat showing the 
respective quantities of such skim milk and butterfat in each form 
disposed of or on hand at the end of the month; and
    (iii) Payments to producers, dairy farmers, and cooperative 
associations, including the amount and nature of any deductions and the 
disbursement of money so deducted.
    (2) Each handler shall keep such other specific records as the 
market administrator deems necessary to verify or establish such 
handler's obligation under the order.
    (b) Availability of records and facilities. Each handler shall make 
available all records pertaining to such handler's operations and all 
facilities the market administrator finds are necessary to verify the 
information required to be reported by the order and/or to ascertain 
such handler's reporting, monetary, or other obligation under the 
order. Each handler shall permit the market administrator to weigh, 
sample, and test milk and milk products and observe plant operations 
and equipment and make available to the market administrator such 
facilities as are necessary to carry out his/her duties.
    (c) Retention of records. All records required under the order to 
be made available to the market administrator shall be retained by the 
handler for a period of 3 years to begin at the end of the month to 
which such records pertain. If, within such 3-year period, the market 
administrator notifies the handler in writing that the retention of 
such records, or of specified records, is necessary in connection with 
a proceeding under section 8c(15)(A) of the Act or a court action 
specified in such notice, the handler shall retain such records, or 
specified records, until further written notification from the market 
administrator. The market administrator shall give further written 
notification to the handler promptly upon the termination of the 
litigation or when the records are no longer necessary in connection 
therewith.


Sec. 1000.28  Termination of obligations.

    (a) Except as provided in paragraphs (b) and (c) of this section, 
the obligation of any handler to pay money required to be paid under 
the terms of the order shall terminate 2 years after the last day of 
the month during which the market administrator receives the handler's 
report of receipts and utilization on which such obligation is based, 
unless within such 2-year period, the market administrator notifies the 
handler in writing that such money is due and payable. Service of such 
written notice shall be complete upon mailing to the handler's last 
known address and it shall contain, but need not be limited to, the 
following information:
    (1) The amount of the obligation;
    (2) The month(s) on which such obligation is based; and
    (3) If the obligation is payable to one or more producers or to a 
cooperative association, the name of such producer(s) or such 
cooperative association, or if the obligation is payable to the market 
administrator, the account for which it is to be paid.
    (b) If a handler fails or refuses, with respect to any obligation 
under the order, to make available to the market administrator all 
records required by the order to be made available, the market 
administrator may notify the handler in writing, within the 2-year 
period provided for in paragraph (a) of this section, of such failure 
or refusal. If the market administrator so notifies a handler, the said 
2-year period with respect to such obligation shall not begin to run 
until the first day of the month following the month during which all 
such records pertaining to such obligation are made available to the 
market administrator.
    (c) Notwithstanding the provisions of paragraphs (a) and (b) of 
this section, a handler's obligation under the order to pay money shall 
not be terminated with respect to any transaction involving fraud or 
willful concealment of a fact, material to the obligation, on the part 
of the handler against whom the obligation is sought to be imposed.
    (d) Unless the handler files a petition pursuant to section 
8c(15)(A) of the Act and the applicable rules and regulations (7 CFR 
900.50 et seq.) within the applicable 2-year period indicated below, 
the obligation of the market administrator:
    (1) To pay a handler any money which such handler claims is due 
under the terms of the order shall terminate 2 years after the end of 
the month during which the skim milk and butterfat involved in the 
claim were received; or
    (2) To refund any payment made by a handler (including a deduction 
or offset by the market administrator) shall terminate 2 years after 
the end of the month during which payment was made by the handler.

Subpart F--Classification of Milk


Sec. 1000.40  Classes of Utilization.

    Except as provided in Sec. 1000.42, all skim milk and butterfat 
required to be reported pursuant to Sec. ______.30 of each Federal milk 
order shall be classified as follows:
    (a) Class I milk shall be all skim milk and butterfat:
    (1) Disposed of in the form of fluid milk products, except as 
otherwise provided in this section;
    (2) In packaged fluid milk products in inventory at the end of the 
month; and
    (3) In shrinkage assigned pursuant to Sec. 1000.43(b).
    (b) Class II milk shall be all skim milk and butterfat:
    (1) In fluid milk products in containers larger than 1 gallon and 
fluid cream products disposed of or diverted to a commercial food 
processing establishment if the market administrator is permitted to 
audit the records of the commercial food processing establishment for 
the purpose of verification. Otherwise, such uses shall be Class I;
    (2) Used to produce:
    (i) Cottage cheese, lowfat cottage cheese, dry curd cottage cheese, 
ricotta cheese, pot cheese, Creole cheese, and any similar soft, high-
moisture cheese resembling cottage cheese in form or use;
    (ii) Milkshake and ice milk mixes (or bases), frozen desserts, and 
frozen dessert mixes distributed in half-gallon containers or larger 
and intended to be used in soft or semi-solid form;
    (iii) Aerated cream, frozen cream, sour cream, sour half-and-half, 
sour cream mixtures containing nonmilk items, yogurt, and any other 
semi-solid product resembling a Class II product;
    (iv) Custards, puddings, pancake mixes, coatings, batter, and 
similar products;
    (v) Buttermilk biscuit mixes and other buttermilk for baking that 
contain food starch in excess of 2% of the total

[[Page 16174]]

solids, provided that the product is labeled to indicate the food 
starch content;
    (vi) Formulas especially prepared for infant feeding or dietary use 
(meal replacement) that are packaged in hermetically-sealed containers;
    (vii) Candy, soup, bakery products and other prepared foods which 
are processed for general distribution to the public, and intermediate 
products, including sweetened condensed milk, to be used in processing 
such prepared food products;
    (viii) A fluid cream product or any product containing artificial 
fat or fat substitutes that resembles a fluid cream product, except as 
otherwise provided in paragraph (c) of this section; and
    (ix) Any product not otherwise specified in this section; and
    (3) In shrinkage assigned pursuant to Sec. 1000.43(b).
    (c) Class III milk shall be all skim milk and butterfat:
    (1) Used to produce:
    (i) Cream cheese and other spreadable cheeses, and hard cheese of 
types that may be shredded, grated, or crumbled;
    (ii) Plastic cream, anhydrous milkfat, and butteroil; and
    (iii) Evaporated or sweetened condensed milk in a consumer-type 
package; and
    (2) In shrinkage assigned pursuant to Sec. 1000.43(b).
    (d) Class IV milk shall be all skim milk and butterfat:
    (1) Used to produce:
    (i) Butter; and
    (ii) Any milk product in dried form;
    (2) In inventory at the end of the month of fluid milk products and 
fluid cream products in bulk form;
    (3) In the skim milk equivalent of nonfat milk solids used to 
modify a fluid milk product that has not been accounted for in Class I; 
and
    (4) In shrinkage assigned pursuant to Sec. 1000.43(b).
    (e) Other uses. Other uses include skim milk and butterfat used in 
any product described in this section that is dumped, used for animal 
feed, destroyed, or lost by a handler in a vehicular accident, flood, 
fire, or similar occurrence beyond the handler's control. Such uses of 
skim milk and butterfat shall be assigned to the lowest priced class 
for the month to the extent that the quantities destroyed or lost can 
be verified from records satisfactory to the market administrator.


Sec. 1000.41  [Reserved]


Sec. 1000.42  Classification of transfers and diversions.

    (a) Transfers and diversions to pool plants. Skim milk or butterfat 
transferred or diverted in the form of a fluid milk product or 
transferred in the form of a bulk fluid cream product from a pool plant 
or a handler described in Sec. 1135.11 to another pool plant shall be 
classified as Class I milk unless the handlers both request the same 
classification in another class. In either case, the classification 
shall be subject to the following conditions:
    (1) The skim milk and butterfat classified in each class shall be 
limited to the amount of skim milk and butterfat, respectively, 
remaining in such class at the receiving plant after the computations 
pursuant to Sec. 1000.44(a)(9) and the corresponding step of 
Sec. 1000.44(b);
    (2) If the transferring plant received during the month other 
source milk to be allocated pursuant to Sec. 1000.44(a)(3) or the 
corresponding step of Sec. 1000.44(b), the skim milk or butterfat so 
transferred shall be classified so as to allocate the least possible 
Class I utilization to such other source milk; and
    (3) If the transferring handler received during the month other 
source milk to be allocated pursuant to Sec. 1000.44(a)(8) or (9) or 
the corresponding steps of Sec. 1000.44(b), the skim milk or butterfat 
so transferred, up to the total of the skim milk and butterfat, 
respectively, in such receipts of other source milk, shall not be 
classified as Class I milk to a greater extent than would be the case 
if the other source milk had been received at the receiving plant.
    (b) Transfers and diversions to a plant regulated under another 
Federal order. Skim milk or butterfat transferred or diverted in the 
form of a fluid milk product or transferred in the form of a bulk fluid 
cream product from a pool plant to a plant regulated under another 
Federal order shall be classified in the following manner. Such 
classification shall apply only to the skim milk or butterfat that is 
in excess of any receipts at the pool plant from a plant regulated 
under another Federal order of skim milk and butterfat, respectively, 
in fluid milk products and bulk fluid cream products, respectively, 
that are in the same category as described in paragraph (b)(1) or (2) 
of this section:
    (1) As Class I milk, if transferred as packaged fluid milk 
products;
    (2) If transferred or diverted in bulk form, classification shall 
be in the classes to which allocated under the other order:
    (i) If the operators of both plants so request in their reports of 
receipts and utilization filed with their respective market 
administrators, transfers in bulk form shall be classified as other 
than Class I to the extent that such utilization is available for such 
classification pursuant to the allocation provisions of the other 
order;
    (ii) If diverted, the diverting handler must request a 
classification other than Class I. If the plant receiving the diverted 
milk does not have sufficient utilization available for the requested 
classification and some of the diverted milk is consequently assigned 
to Class I use, the diverting handler shall be given the option of 
designating the entire load of diverted milk as producer milk at the 
plant physically receiving the milk. Alternatively, if the diverting 
handler so chooses, it may designate which dairy farmers whose milk was 
diverted during the month will be designated as producers under the 
order physically receiving the milk. If the diverting handler declines 
to accept either of these options, the market administrator will 
prorate the portion of diverted milk in excess of Class II, III, and IV 
use among all the dairy farmers whose milk was received from the 
diverting handler on the last day of the month, then the second-to-last 
day, and continuing in that fashion until the excess diverted milk has 
been assigned as producer milk under the receiving order; and
    (iii) If information concerning the classes to which such transfers 
or diversions were allocated under the other order is not available to 
the market administrator for the purpose of establishing classification 
under this paragraph, classification shall be Class I, subject to 
adjustment when such information is available.
    (c) Transfers and diversions to producer-handlers and to exempt 
plants. Skim milk or butterfat that is transferred or diverted from a 
pool plant to a producer-handler under any Federal order or to an 
exempt plant shall be classified:
    (1) As Class I milk if transferred or diverted to a producer-
handler;
    (2) As Class I milk if transferred to an exempt plant in the form 
of a packaged fluid milk product; and
    (3) In accordance with the utilization assigned to it by the market 
administrator if transferred or diverted in the form of a bulk fluid 
milk product or transferred in the form of a bulk fluid cream product 
to an exempt plant. For this purpose, the receiving handler's 
utilization of skim milk and butterfat in each class, in series 
beginning with Class IV, shall be assigned to the extent possible to 
its receipts of skim milk and butterfat, in bulk fluid cream products, 
and bulk fluid milk products, respectively, pro rata to each source.
    (d) Transfers and diversions to other nonpool plants. Skim milk or 
butterfat

[[Page 16175]]

transferred or diverted in the following forms from a pool plant to a 
nonpool plant that is not a plant regulated under another order, an 
exempt plant, or a producer-handler plant shall be classified:
    (1) As Class I milk, if transferred in the form of a packaged fluid 
milk product; and
    (2) As Class I milk, if transferred or diverted in the form of a 
bulk fluid milk product or transferred in the form of a bulk fluid 
cream product, unless the following conditions apply:
    (i) If the conditions described in paragraphs (d)(2)(i)(A) and (B) 
of this section are met, transfers or diversions in bulk form shall be 
classified on the basis of the assignment of the nonpool plant's 
utilization, excluding the milk equivalent of both nonfat milk solids 
and concentrated milk used in the plant during the month, to its 
receipts as set forth in paragraphs (d)(2)(ii) through (viii) of this 
section:
    (A) The transferring handler or diverting handler claims such 
classification in such handler's report of receipts and utilization 
filed pursuant to Sec. ______.30 of each Federal milk order for the 
month within which such transaction occurred; and
    (B) The nonpool plant operator maintains books and records showing 
the utilization of all skim milk and butterfat received at such plant 
which are made available for verification purposes if requested by the 
market administrator;
    (ii) Route disposition in the marketing area of each Federal milk 
order from the nonpool plant and transfers of packaged fluid milk 
products from such nonpool plant to plants fully regulated thereunder 
shall be assigned to the extent possible in the following sequence:
    (A) Pro rata to receipts of packaged fluid milk products at such 
nonpool plant from pool plants;
    (B) Pro rata to any remaining unassigned receipts of packaged fluid 
milk products at such nonpool plant from plants regulated under other 
Federal orders;
    (C) Pro rata to receipts of bulk fluid milk products at such 
nonpool plant from pool plants; and
    (D) Pro rata to any remaining unassigned receipts of bulk fluid 
milk products at such nonpool plant from plants regulated under other 
Federal orders;
    (iii) Any remaining Class I disposition of packaged fluid milk 
products from the nonpool plant shall be assigned to the extent 
possible pro rata to any remaining unassigned receipts of packaged 
fluid milk products at such nonpool plant from pool plants and plants 
regulated under other Federal orders;
    (iv) Transfers of bulk fluid milk products from the nonpool plant 
to a plant regulated under any Federal order, to the extent that such 
transfers to the regulated plant exceed receipts of fluid milk products 
from such plant and are allocated to Class I at the receiving plant, 
shall be assigned to the extent possible in the following sequence:
    (A) Pro rata to receipts of fluid milk products at such nonpool 
plant from pool plants; and
    (B) Pro rata to any remaining unassigned receipts of fluid milk 
products at such nonpool plant from plants regulated under other 
Federal orders;
    (v) Any remaining unassigned Class I disposition from the nonpool 
plant shall be assigned to the extent possible in the following 
sequence:
    (A) To such nonpool plant's receipts from dairy farmers who the 
market administrator determines constitute regular sources of Grade A 
milk for such nonpool plant; and
    (B) To such nonpool plant's receipts of Grade A milk from plants 
not fully regulated under any Federal order which the market 
administrator determines constitute regular sources of Grade A milk for 
such nonpool plant;
    (vi) Any remaining unassigned receipts of bulk fluid milk products 
at the nonpool plant from pool plants and plants regulated under other 
Federal orders shall be assigned, pro rata among such plants, to the 
extent possible first to any remaining Class I utilization and then to 
all other utilization, in sequence beginning with Class IV at such 
nonpool plant;
    (vii) Receipts of bulk fluid cream products at the nonpool plant 
from pool plants and plants regulated under other Federal orders shall 
be assigned, pro rata among such plants, to the extent possible to any 
remaining utilization, in sequence beginning with Class IV at such 
nonpool plant; and
    (viii) In determining the nonpool plant's utilization for purposes 
of this paragraph, any fluid milk products and bulk fluid cream 
products transferred from such nonpool plant to a plant not fully 
regulated under any Federal order shall be classified on the basis of 
the second plant's utilization using the same assignment priorities at 
the second plant that are set forth in this paragraph.


Sec. 1000.43  General classification rules.

    In determining the classification of producer milk pursuant to 
Sec. 1000.44, the following rules shall apply:
    (a) Each month the market administrator shall correct for 
mathematical and other obvious errors all reports filed pursuant to 
Sec. ______.30 of each Federal milk order and shall compute separately 
for each pool plant, for each handler described in Sec. 1000.9(c) and 
Sec. 1135.11, the pounds of skim milk and butterfat, respectively, in 
each class in accordance with Secs. 1000.40 and 1000.42, and paragraph 
(b) of this section.
    (b) Shrinkage and overage. For purposes of classifying all milk 
reported by a handler pursuant to Sec. ______.30 of each Federal milk 
order the market administrator shall determine the shrinkage or overage 
of skim milk and butterfat for each pool plant and each handler 
described in Sec. 1000.9(c) and Sec. 1135.11 by subtracting total 
utilization from total receipts. Any positive difference shall be 
shrinkage, and any negative difference shall be overage.
    (1) Shrinkage incurred by pool plants qualified pursuant to Sec. --
--.7 of any Federal milk order shall be assigned to the lowest-priced 
class to the extent that such shrinkage does not exceed:
    (i) Two percent of the total quantity of milk physically received 
at the plant directly from producers' farms on the basis of farm 
weights and tests;
    (ii) Plus 1.5 percent of the quantity of bulk milk physically 
received on a basis other than farm weights and tests, excluding 
concentrated milk received by agreement for other than Class I use;
    (iii) Plus .5 percent of the quantity of milk diverted by the plant 
operator to another plant on a basis other than farm weights and tests; 
and
    (iv) Minus 1.5 percent of the quantity of bulk milk transferred to 
other plants, excluding concentrated milk transferred by agreement for 
other than Class I use.
    (2) A handler described in Sec. 1000.9(c) or Sec. 1135.11 that 
delivers milk to plants on a basis other than farm weights and tests 
shall receive a lowest-priced-class shrinkage allowance of .5 percent 
of the total quantity of such milk picked up at producers' farms.
    (3) Shrinkage in excess of the amounts provided in paragraphs 
(b)(1) and (2) of this section shall be assigned to existing 
utilization in series starting with Class I. The shrinkage assigned 
pursuant to this paragraph shall be added to the handler's reported 
utilization and the result shall be known as the gross utilization in 
each class.
    (c) If any of the water contained in the milk from which a product 
is made is removed before the product is utilized or disposed of by the 
handler, the pounds of skim milk in such product that are to be 
considered under this part as used or disposed of by the handler

[[Page 16176]]

shall be an amount equivalent to the nonfat milk solids contained in 
such product plus all of the water originally associated with such 
solids.
    (d) Skim milk and butterfat contained in receipts of bulk 
concentrated fluid milk and nonfluid milk products that are 
reconstituted for fluid use shall be assigned to Class I use, up to the 
reconstituted portion of labeled reconstituted fluid milk products, on 
a pro rata basis (except for any Class I use of specific concentrated 
receipts that is established by the handler) prior to any assignments 
under Sec. 1000.44. Any remaining skim milk and butterfat in 
concentrated receipts shall be assigned to uses under Sec. 1000.44 on a 
pro rata basis, unless a specific use of such receipts is established 
by the handler.


Sec. 1000.44  Classification of producer milk.

    For each month the market administrator shall determine for each 
handler described in Sec. 1000.9(a) for each pool plant of the handler 
separately and for each handler described in Sec. 1000.9(c) and 
Sec. 1135.11 the classification of producer milk by allocating the 
handler's receipts of skim milk and butterfat to the handler's gross 
utilization of such receipts pursuant to Sec. 1000.43(b)(3) as follows:
    (a) Skim milk shall be allocated in the following manner:
    (1) Subtract from the pounds of skim milk in Class I the pounds of 
skim milk in:
    (i) Receipts of packaged fluid milk products from an unregulated 
supply plant to the extent that an equivalent amount of skim milk 
disposed of to such plant by handlers fully regulated under any Federal 
order is classified and priced as Class I milk and is not used as an 
offset for any other payment obligation under any order;
    (ii) Packaged fluid milk products in inventory at the beginning of 
the month. This paragraph shall apply only if the pool plant was 
subject to the provisions of this paragraph or comparable provisions of 
another Federal order in the immediately preceding month;
    (iii) Fluid milk products received in packaged form from plants 
regulated under other Federal orders; and
    (iv) To the extent that the receipts described in paragraphs 
(a)(1)(i) through (iii) of this section exceed the gross Class I 
utilization of skim milk, the excess receipts shall be subtracted 
pursuant to paragraph (a)(3)(vi) of this section.
    (2) Subtract from the pounds of skim milk in Class II the pounds of 
skim milk in the receipts of skim milk in bulk concentrated fluid milk 
products and in other source milk (except other source milk received in 
the form of an unconcentrated fluid milk product or a fluid cream 
product) that is used to produce, or added to, any product in Class II 
(excluding the quantity of such skim milk that was classified as Class 
IV milk pursuant to Sec. 1000.40(d)(3)). To the extent that the 
receipts described in this paragraph exceed the gross Class II 
utilization of skim milk, the excess receipts shall be subtracted 
pursuant to paragraph (a)(3)(vi) of this section.
    (3) Subtract from the pounds of skim milk remaining in each class, 
in series beginning with Class IV, the pounds of skim milk in:
    (i) Receipts of bulk concentrated fluid milk products and other 
source milk (except other source milk received in the form of an 
unconcentrated fluid milk product);
    (ii) Receipts of fluid milk products and bulk fluid cream products 
for which appropriate health approval is not established and from 
unidentified sources;
    (iii) Receipts of fluid milk products and bulk fluid cream products 
from an exempt plant;
    (iv) Fluid milk products and bulk fluid cream products received 
from a producer-handler as defined under this order or any other 
Federal order;
    (v) Receipts of fluid milk products from dairy farmers for other 
markets; and
    (vi) The excess receipts specified in paragraphs (a)(1)(iv) and 
(a)(2) of this section.
    (4) Subtract from the pounds of skim milk remaining in all classes 
other than Class I, in sequence beginning with Class IV, the receipts 
of fluid milk products from an unregulated supply plant that were not 
previously subtracted in this section for which the handler requests 
classification other than Class I, but not in excess of the pounds of 
skim milk remaining in these other classes combined.
    (5) Subtract from the pounds of skim milk remaining in all classes 
other than Class I, in sequence beginning with Class IV, receipts of 
fluid milk products from an unregulated supply plant that were not 
subtracted in previous paragraphs, and which are in excess of the 
pounds of skim milk determined pursuant to paragraphs (a)(5)(i) and 
(ii) of this section;
    (i) Multiply by 1.25 the pounds of skim milk remaining in Class I 
at this allocation step; and
    (ii) Subtract from the above result the pounds of skim milk in 
receipts of producer milk and fluid milk products from other pool 
plants.
    (6) Subtract from the pounds of skim milk remaining in all classes 
other than Class I, in sequence beginning with Class IV, the pounds of 
skim milk in receipts of bulk fluid milk products from a handler 
regulated under another Federal order that are in excess of bulk fluid 
milk products transferred or diverted to such handler, if other than 
Class I classification is requested, but not in excess of the pounds of 
skim milk remaining in these classes combined.
    (7) Subtract from the pounds of skim milk remaining in each class, 
in series beginning with Class IV, the pounds of skim milk in fluid 
milk products and bulk fluid cream products in inventory at the 
beginning of the month that were not previously subtracted in this 
section.
    (8) Subtract from the pounds of skim milk remaining in each class 
at the plant receipts of skim milk in fluid milk products from an 
unregulated supply plant that were not previously subtracted in this 
section and that were not offset by transfers or diversions of fluid 
milk products to the unregulated supply plant from which fluid milk 
products to be allocated at this step were received. Such subtraction 
shall be pro rata to the pounds of skim milk in Class I and in Classes 
II, III, and IV combined, with the quantity prorated to Classes II, 
III, and IV combined being subtracted in sequence beginning with Class 
IV.
    (9) Subtract in the manner specified below from the pounds of skim 
milk remaining in each class the pounds of skim milk in receipts of 
bulk fluid milk products from a handler regulated under another Federal 
order that are in excess of bulk fluid milk products transferred or 
diverted to such handler that were not subtracted in paragraph (a)(6) 
of this section. Such subtraction shall be pro rata to the pounds of 
skim milk in Class I and in Classes II, III, and IV combined, with the 
quantity prorated to Classes II, III, and IV combined being subtracted 
in sequence beginning with Class IV, with respect to whichever of the 
following quantities represents the lower proportion of Class I milk:
    (i) The estimated utilization of skim milk of all handlers in each 
class as announced for the month pursuant to Sec. 1000.45(a); or
    (ii) The total pounds of skim milk remaining in each class at this 
allocation step.
    (10) Subtract from the pounds of skim milk remaining in each class 
the pounds of skim milk in receipts of fluid milk products and bulk 
fluid cream products from another pool plant and from a handler 
described in Sec. 1135.11 according to the classification of such 
products pursuant to Sec. 1000.42(a).

[[Page 16177]]

    (11) If the total pounds of skim milk remaining in all classes 
exceed the pounds of skim milk in producer milk, subtract such excess 
from the pounds of skim milk remaining in each class in series 
beginning with Class IV.
    (b) Butterfat shall be allocated in accordance with the procedure 
outlined for skim milk in paragraph (a) of this section.
    (c) The quantity of producer milk in each class shall be the 
combined pounds of skim milk and butterfat remaining in each class 
after the computations pursuant to paragraphs (a) and (b) of this 
section.


Sec. 1000.45  Market administrator's reports and announcements 
concerning classification.

    (a) Whenever required for the purpose of allocating receipts from 
plants regulated under other Federal orders pursuant to 
Sec. 1000.44(a)(9) and the corresponding step of Sec. 1000.44(b), the 
market administrator shall estimate and publicly announce the 
utilization (to the nearest whole percentage) in Class I during the 
month of skim milk and butterfat, respectively, in producer milk of all 
handlers. The estimate shall be based upon the most current available 
data and shall be final for such purpose.
    (b) The market administrator shall report to the market 
administrators of other Federal orders as soon as possible after the 
handlers' reports of receipts and utilization are received, the class 
to which receipts from plants regulated under other Federal orders are 
allocated pursuant to Secs. 1000.43(d) and 1000.44 (including any 
reclassification of inventories of bulk concentrated fluid milk 
products), and thereafter any change in allocation required to correct 
errors disclosed on the verification of such report.
    (c) The market administrator shall furnish each handler operating a 
pool plant and each handler described in Sec. 1135.11 who has shipped 
fluid milk products or bulk fluid cream products to a plant fully 
regulated under another Federal order the class to which the shipments 
were allocated by the market administrator of the other Federal order 
on the basis of the report by the receiving handler and, as necessary, 
any changes in the allocation arising from the verification of such 
report.
    (d) The market administrator shall report to each cooperative 
association which so requests, the percentage of producer milk 
delivered by members of the association that was used in each class by 
each handler receiving the milk. For the purpose of this report, the 
milk so received shall be prorated to each class in accordance with the 
total utilization of producer milk by the handler.

Subpart G--Class Prices


Sec. 1000.50  Class prices, component prices, and advanced pricing 
factors.

    Class prices per hundredweight of milk containing 3.5 percent 
butterfat, component prices, and advanced pricing factors shall be as 
follows. The prices and pricing factors described in paragraphs (a), 
(b), (c), (e), (f), and (q) of this section shall be based on a 
weighted average of the most recent 2 weekly prices announced by the 
National Agricultural Statistical Service (NASS) before the 24th day of 
the month. These prices shall be announced on or before the 23rd day of 
the month and shall apply to milk received during the following month. 
The prices described in paragraphs (g)-(p) of this section shall be 
based on a weighted average for the preceding month of weekly prices 
announced by NASS on or before the 5th day of the month and shall apply 
to milk received during the preceding month. The price described in 
paragraph (d) of this section shall be derived from the Class II skim 
milk price announced on or before the 23rd day of the month preceding 
the month to which it applies and the butterfat price announced on or 
before the 5th day of the month following the month to which it 
applies.
    (a) Class I price. The Class I price per hundredweight, rounded to 
the nearest cent, shall be .965 times the Class I skim milk price plus 
3.5 times the Class I butterfat price.
    (b) Class I skim milk price. The Class I skim milk price per 
hundredweight shall be the adjusted Class I differential specified in 
Sec. 1000.52 plus the higher of the advanced pricing factors computed 
in paragraph (q)(1) or (2) of this section.
    (c) Class I butterfat price. The Class I butterfat price per pound 
shall be the adjusted Class I differential specified in Sec. 1000.52 
divided by 100, plus the advanced butterfat price computed in paragraph 
(q)(3) of this section.
    (d) The Class II price per hundredweight, rounded to the nearest 
cent, shall be .965 times the Class II skim milk price plus 3.5 times 
the Class II butterfat price.
    (e) Class II skim milk price. The Class II skim milk price per 
hundredweight shall be the advanced Class IV skim milk price computed 
in paragraph (q)(2) of this section plus 70 cents.
    (f) Class II nonfat solids price. The Class II nonfat solids price 
per pound, rounded to the nearest one-hundredth cent, shall be the 
Class II skim milk price divided by 9.
    (g) Class II butterfat price. The Class II butterfat price per 
pound shall be the butterfat price plus $.007.
    (h) Class III price. The Class III price per hundredweight, rounded 
to the nearest cent, shall be .965 times the Class III skim milk price 
plus 3.5 times the butterfat price.
    (i) Class III skim milk price. The Class III skim milk price per 
hundredweight, rounded to the nearest cent, shall be the protein price 
per pound times 3.1 plus the other solids price per pound times 5.9.
    (j) Class IV price. The Class IV price per hundredweight, rounded 
to the nearest cent, shall be .965 times the Class IV skim milk price 
plus 3.5 times the butterfat price.
    (k) Class IV skim milk price. The Class IV skim milk price per 
hundredweight, rounded to the nearest cent, shall be the nonfat solids 
price per pound times 9.
    (l) Butterfat price. The butterfat price per pound, rounded to the 
nearest one-hundredth cent, shall be the U.S. average NASS AA Butter 
survey price reported by the Department for the month less 11.4 cents, 
with the result divided by 0.82.
    (m) Nonfat solids price. The nonfat solids price per pound, rounded 
to the nearest one-hundredth cent, shall be the U.S. average NASS 
nonfat dry milk survey price reported by the Department for the month 
less 13.7 cents, with the result divided by 1.02.
    (n) Protein price. The protein price per pound, rounded to the 
nearest one-hundredth cent, shall be computed as follows:
    (1) Compute a weighted average of the amounts described in 
paragraphs (n)(1)(i) and (ii) of this section:
    (i) The U.S. average NASS survey price for 40-lb. block cheese 
reported by the Department for the month; and
    (ii) The U.S. average NASS survey price for 500-pound barrel 
cheddar cheese (39 percent moisture) reported by the Department for the 
month plus 3 cents;
    (2) Subtract 17.02 cents from the price computed pursuant to 
paragraph (n)(1) of this section and multiply the result by 1.405;
    (3) Add to the amount computed pursuant to paragraph (n)(2) of this 
section an amount computed as follows:
    (i) Subtract 17.02 cents from the price computed pursuant to 
paragraph (n)(1) of this section and multiply the result by 1.582;
    (ii) Subtract the butterfat price computed pursuant to paragraph 
(l) of this section from the amount computed pursuant to paragraph 
(n)(3)(i) of this section; and

[[Page 16178]]

    (iii) Multiply the amount computed pursuant to paragraph (n)(3)(ii) 
of this section by 1.28.
    (o) Other solids price. The other solids price per pound, rounded 
to the nearest one-hundredth cent, shall be the U.S. average NASS dry 
whey survey price reported by the Department for the month minus 13.7 
cents, with the result divided by 0.968.
    (p) Somatic cell adjustment. The somatic cell adjustment per 
hundredweight of milk shall be determined as follows:
    (1) Multiply .0005 by the weighted average price computed pursuant 
to paragraph (n)(1) of this section and round to the 5th decimal place;
    (2) Subtract the somatic cell count of the milk (reported in 
thousands) from 350; and
    (3) Multiply the amount computed in paragraph (p)(1) of this 
section by the amount computed in paragraph (p)(2) of this section and 
round to the nearest full cent.
    (q) Advanced pricing factors. For the purpose of computing the 
Class I skim milk price, the Class II skim milk price, the Class II 
nonfat solids price, and the Class I butterfat price for the following 
month, the following pricing factors shall be computed using the 
weighted average of the 2 most recent NASS U.S. average weekly survey 
prices announced before the 24th day of the month:
    (1) An advanced Class III skim milk price per hundredweight, 
rounded to the nearest cent, shall be computed as follows:
    (i) Following the procedure set forth in paragraphs (n) and (o) of 
this section, but using the weighted average of the NASS U.S. average 
weekly survey prices announced before the 24th day of the month, 
compute a protein price and another solids price;
    (ii) Multiply the protein price computed in paragraph (q)(1)(i) of 
this section by 3.1;
    (iii) Multiply the other solids price per pound computed in 
paragraph (q)(1)(i) of this section by 5.9; and
    (iv) Add the amounts computed in paragraphs (q)(1)(ii) and (iii) of 
this section.
    (2) An advanced Class IV skim milk price per hundredweight, rounded 
to the nearest cent, shall be computed as follows:
    (i) Following the procedure set forth in paragraph (m) of this 
section, but using the weighted average of the 2 most recent NASS U.S. 
average weekly survey prices announced before the 24th day of the 
month, compute a nonfat solids price; and
    (ii) Multiply the nonfat solids price computed in paragraph 
(q)(2)(i) of this section by 9.
    (3) An advanced butterfat price per pound, rounded to the nearest 
one-hundredth cent, shall be calculated by computing a weighted average 
of the 2 most recent U.S. average NASS AA Butter survey prices 
announced before the 24th day of the month, subtracting 11.4 cents from 
this average, and dividing the result by 0.82.


Sec. 1000.51  [Reserved]


Sec. 1000.52  Adjusted Class I differentials.

    The Class I differential adjusted for location to be used in 
Sec. 1000.50(b) and (c) shall be as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                     Class I
                                                                                                  differential
             County/Parish/City                             State                 FIPS__Code      adjusted for
                                                                                                    location
----------------------------------------------------------------------------------------------------------------
AUTAUGA.....................................  AL                                         01001              2.90
BALDWIN.....................................  AL                                         01003              3.30
BARBOUR.....................................  AL                                         01005              3.20
BIBB........................................  AL                                         01007              2.70
BLOUNT......................................  AL                                         01009              2.55
BULLOCK.....................................  AL                                         01011              3.10
BUTLER......................................  AL                                         01013              3.20
CALHOUN.....................................  AL                                         01015              2.70
CHAMBERS....................................  AL                                         01017              2.90
CHEROKEE....................................  AL                                         01019              2.55
CHILTON.....................................  AL                                         01021              2.70
CHOCTAW.....................................  AL                                         01023              3.10
CLARKE......................................  AL                                         01025              3.10
CLAY........................................  AL                                         01027              2.80
CLEBURNE....................................  AL                                         01029              2.70
COFFEE......................................  AL                                         01031              3.20
COLBERT.....................................  AL                                         01033              2.25
CONECUH.....................................  AL                                         01035              3.20
COOSA.......................................  AL                                         01037              2.80
COVINGTON...................................  AL                                         01039              3.20
CRENSHAW....................................  AL                                         01041              3.20
CULLMAN.....................................  AL                                         01043              2.55
DALE........................................  AL                                         01045              3.20
DALLAS......................................  AL                                         01047              2.90
DE KALB.....................................  AL                                         01049              2.25
ELMORE......................................  AL                                         01051              2.90
ESCAMBIA....................................  AL                                         01053              3.30
ETOWAH......................................  AL                                         01055              2.55
FAYETTE.....................................  AL                                         01057              2.70
FRANKLIN....................................  AL                                         01059              2.25
GENEVA......................................  AL                                         01061              3.30
GREENE......................................  AL                                         01063              2.70
HALE........................................  AL                                         01065              2.70
HENRY.......................................  AL                                         01067              3.20
HOUSTON.....................................  AL                                         01069              3.30
JACKSON.....................................  AL                                         01071              2.25
JEFFERSON...................................  AL                                         01073              2.70
LAMAR.......................................  AL                                         01075              2.70
LAUDERDALE..................................  AL                                         01077              2.20

[[Page 16179]]

 
LAWRENCE....................................  AL                                         01079              2.25
LEE.........................................  AL                                         01081              2.90
LIMESTONE...................................  AL                                         01083              2.25
LOWNDES.....................................  AL                                         01085              3.10
MACON.......................................  AL                                         01087              3.10
MADISON.....................................  AL                                         01089              2.25
MARENGO.....................................  AL                                         01091              3.10
MARION......................................  AL                                         01093              2.55
MARSHALL....................................  AL                                         01095              2.25
MOBILE......................................  AL                                         01097              3.30
MONROE......................................  AL                                         01099              3.20
MONTGOMERY..................................  AL                                         01101              3.10
MORGAN......................................  AL                                         01103              2.25
PERRY.......................................  AL                                         01105              2.70
PICKENS.....................................  AL                                         01107              2.70
PIKE........................................  AL                                         01109              3.20
RANDOLPH....................................  AL                                         01111              2.80
RUSSELL.....................................  AL                                         01113              3.10
ST. CLAIR...................................  AL                                         01115              2.70
SHELBY......................................  AL                                         01117              2.70
SUMTER......................................  AL                                         01119              2.70
TALLADEGA...................................  AL                                         01121              2.70
TALLAPOOSA..................................  AL                                         01123              2.90
TUSCALOOSA..................................  AL                                         01125              2.70
WALKER......................................  AL                                         01127              2.70
WASHINGTON..................................  AL                                         01129              3.10
WILCOX......................................  AL                                         01131              3.10
WINSTON.....................................  AL                                         01133              2.55
APACHE......................................  AZ                                         04001              1.90
COCHISE.....................................  AZ                                         04003              1.60
COCONINO....................................  AZ                                         04005              1.90
GILA........................................  AZ                                         04007              1.60
GRAHAM......................................  AZ                                         04009              1.60
GREENLEE....................................  AZ                                         04011              1.60
LA PAZ......................................  AZ                                         04012              1.60
MARICOPA....................................  AZ                                         04013              1.55
MOHAVE......................................  AZ                                         04015              1.90
NAVAJO......................................  AZ                                         04017              1.90
PIMA........................................  AZ                                         04019              1.60
PINAL.......................................  AZ                                         04021              1.55
SANTA CRUZ..................................  AZ                                         04023              1.60
YAVAPAI.....................................  AZ                                         04025              1.60
YUMA........................................  AZ                                         04027              1.60
ARKANSAS....................................  AR                                         05001              2.65
ASHLEY......................................  AR                                         05003              2.75
BAXTER......................................  AR                                         05005              1.90
BENTON......................................  AR                                         05007              1.70
BOONE.......................................  AR                                         05009              1.70
BRADLEY.....................................  AR                                         05011              2.65
CALHOUN.....................................  AR                                         05013              2.65
CARROLL.....................................  AR                                         05015              1.70
CHICOT......................................  AR                                         05017              2.75
CLARK.......................................  AR                                         05019              2.35
CLAY........................................  AR                                         05021              2.35
CLEBURNE....................................  AR                                         05023              2.10
CLEVELAND...................................  AR                                         05025              2.65
COLUMBIA....................................  AR                                         05027              2.35
CONWAY......................................  AR                                         05029              2.10
CRAIGHEAD...................................  AR                                         05031              2.65
CRAWFORD....................................  AR                                         05033              1.90
CRITTENDEN..................................  AR                                         05035              2.65
CROSS.......................................  AR                                         05037              2.65
DALLAS......................................  AR                                         05039              2.35
DESHA.......................................  AR                                         05041              2.75
DREW........................................  AR                                         05043              2.75
FAULKNER....................................  AR                                         05045              2.35
FRANKLIN....................................  AR                                         05047              1.90
FULTON......................................  AR                                         05049              2.10
GARLAND.....................................  AR                                         05051              2.10
GRANT.......................................  AR                                         05053              2.35
GREENE......................................  AR                                         05055              2.35
HEMPSTEAD...................................  AR                                         05057              2.10

[[Page 16180]]

 
HOT SPRING..................................  AR                                         05059              2.35
HOWARD......................................  AR                                         05061              2.10
INDEPENDENCE................................  AR                                         05063              2.35
IZARD.......................................  AR                                         05065              2.10
JACKSON.....................................  AR                                         05067              2.35
JEFFERSON...................................  AR                                         05069              2.65
JOHNSON.....................................  AR                                         05071              1.90
LAFAYETTE...................................  AR                                         05073              2.35
LAWRENCE....................................  AR                                         05075              2.35
LEE.........................................  AR                                         05077              2.65
LINCOLN.....................................  AR                                         05079              2.65
LITTLE RIVER................................  AR                                         05081              2.10
LOGAN.......................................  AR                                         05083              1.90
LONOKE......................................  AR                                         05085              2.35
MADISON.....................................  AR                                         05087              1.70
MARION......................................  AR                                         05089              1.90
MILLER......................................  AR                                         05091              2.10
MISSISSIPPI.................................  AR                                         05093              2.65
MONROE......................................  AR                                         05095              2.65
MONTGOMERY..................................  AR                                         05097              2.10
NEVADA......................................  AR                                         05099              2.35
NEWTON......................................  AR                                         05101              1.90
OUACHITA....................................  AR                                         05103              2.35
PERRY.......................................  AR                                         05105              2.10
PHILLIPS....................................  AR                                         05107              2.65
PIKE........................................  AR                                         05109              2.10
POINSETT....................................  AR                                         05111              2.65
POLK........................................  AR                                         05113              2.10
POPE........................................  AR                                         05115              1.90
PRAIRIE.....................................  AR                                         05117              2.65
PULASKI.....................................  AR                                         05119              2.35
RANDOLPH....................................  AR                                         05121              2.10
ST. FRANCIS.................................  AR                                         05123              2.65
SALINE......................................  AR                                         05125              2.35
SCOTT.......................................  AR                                         05127              1.90
SEARCY......................................  AR                                         05129              1.90
SEBASTIAN...................................  AR                                         05131              1.90
SEVIER......................................  AR                                         05133              2.10
SHARP.......................................  AR                                         05135              2.10
STONE.......................................  AR                                         05137              2.10
UNION.......................................  AR                                         05139              2.65
VAN BUREN...................................  AR                                         05141              2.10
WASHINGTON..................................  AR                                         05143              1.70
WHITE.......................................  AR                                         05145              2.35
WOODRUFF....................................  AR                                         05147              2.65
YELL........................................  AR                                         05149              2.10
ALAMEDA.....................................  CA                                         06001              1.75
ALPINE......................................  CA                                         06003              1.20
AMADOR......................................  CA                                         06005              1.20
BUTTE.......................................  CA                                         06007              1.65
CALAVERAS...................................  CA                                         06009              1.20
COLUSA......................................  CA                                         06011              1.80
CONTRA COSTA................................  CA                                         06013              1.75
DEL NORTE...................................  CA                                         06015              1.80
EL DORADO...................................  CA                                         06017              1.20
FRESNO......................................  CA                                         06019              1.40
GLENN.......................................  CA                                         06021              1.80
HUMBOLDT....................................  CA                                         06023              1.80
IMPERIAL....................................  CA                                         06025              1.60
INYO........................................  CA                                         06027              1.50
KERN........................................  CA                                         06029              1.60
KINGS.......................................  CA                                         06031              1.40
LAKE........................................  CA                                         06033              1.80
LASSEN......................................  CA                                         06035              1.65
LOS ANGELES.................................  CA                                         06037              1.60
MADERA......................................  CA                                         06039              1.40
MARIN.......................................  CA                                         06041              1.80
MARIPOSA....................................  CA                                         06043              1.20
MENDOCINO...................................  CA                                         06045              1.80
MERCED......................................  CA                                         06047              1.40
MODOC.......................................  CA                                         06049              1.65
MONO........................................  CA                                         06051              1.20

[[Page 16181]]

 
MONTEREY....................................  CA                                         06053              2.20
NAPA........................................  CA                                         06055              1.80
NEVADA......................................  CA                                         06057              1.40
ORANGE......................................  CA                                         06059              1.60
PLACER......................................  CA                                         06061              1.40
PLUMAS......................................  CA                                         06063              1.65
RIVERSIDE...................................  CA                                         06065              1.60
SACRAMENTO..................................  CA                                         06067              1.40
SAN BENITO..................................  CA                                         06069              1.75
SAN BERNARDINO..............................  CA                                         06071              1.60
SAN DIEGO...................................  CA                                         06073              1.80
SAN FRANCISCO...............................  CA                                         06075              1.75
SAN JOAQUIN.................................  CA                                         06077              1.40
SAN LUIS OBISPO.............................  CA                                         06079              2.20
SAN MATEO...................................  CA                                         06081              1.75
SANTA BARBARA...............................  CA                                         06083              2.20
SANTA CLARA.................................  CA                                         06085              1.75
SANTA CRUZ..................................  CA                                         06087              1.75
SHASTA......................................  CA                                         06089              1.80
SIERRA......................................  CA                                         06091              1.40
SISKIYOU....................................  CA                                         06093              1.80
SOLANO......................................  CA                                         06095              1.65
SONOMA......................................  CA                                         06097              1.80
STANISLAUS..................................  CA                                         06099              1.40
SUTTER......................................  CA                                         06101              1.65
TEHAMA......................................  CA                                         06103              1.80
TRINITY.....................................  CA                                         06105              1.80
TULARE......................................  CA                                         06107              1.40
TUOLUMNE....................................  CA                                         06109              1.20
VENTURA.....................................  CA                                         06111              2.20
YOLO........................................  CA                                         06113              1.65
YUBA........................................  CA                                         06115              1.65
ADAMS.......................................  CO                                         08001              1.55
ALAMOSA.....................................  CO                                         08003              1.90
ARAPAHOE....................................  CO                                         08005              1.55
ARCHULETA...................................  CO                                         08007              2.20
BACA........................................  CO                                         08009              1.90
BENT........................................  CO                                         08011              1.80
BOULDER.....................................  CO                                         08013              1.55
CHAFFEE.....................................  CO                                         08015              1.90
CHEYENNE....................................  CO                                         08017              1.60
CLEAR CREEK.................................  CO                                         08019              1.55
CONEJOS.....................................  CO                                         08021              1.90
COSTILLA....................................  CO                                         08023              1.90
CROWLEY.....................................  CO                                         08025              1.80
CUSTER......................................  CO                                         08027              1.90
DELTA.......................................  CO                                         08029              2.20
DENVER......................................  CO                                         08031              1.55
DOLORES.....................................  CO                                         08033              2.20
DOUGLAS.....................................  CO                                         08035              1.55
EAGLE.......................................  CO                                         08037              1.80
ELBERT......................................  CO                                         08039              1.55
EL PASO.....................................  CO                                         08041              1.80
FREMONT.....................................  CO                                         08043              1.90
GARFIELD....................................  CO                                         08045              1.90
GILPIN......................................  CO                                         08047              1.55
GRAND.......................................  CO                                         08049              1.55
GUNNISON....................................  CO                                         08051              1.90
HINSDALE....................................  CO                                         08053              2.20
HUERFANO....................................  CO                                         08055              1.90
JACKSON.....................................  CO                                         08057              1.55
JEFFERSON...................................  CO                                         08059              1.55
KIOWA.......................................  CO                                         08061              1.80
KIT CARSON..................................  CO                                         08063              1.60
LAKE........................................  CO                                         08065              1.90
LA PLATA....................................  CO                                         08067              2.20
LARIMER.....................................  CO                                         08069              1.55
LAS ANIMAS..................................  CO                                         08071              1.90
LINCOLN.....................................  CO                                         08073              1.60
LOGAN.......................................  CO                                         08075              1.40
MESA........................................  CO                                         08077              2.20
MINERAL.....................................  CO                                         08079              2.20

[[Page 16182]]

 
MOFFAT......................................  CO                                         08081              1.80
MONTEZUMA...................................  CO                                         08083              2.20
MONTROSE....................................  CO                                         08085              2.20
MORGAN......................................  CO                                         08087              1.40
OTERO.......................................  CO                                         08089              1.80
OURAY.......................................  CO                                         08091              2.20
PARK........................................  CO                                         08093              1.80
PHILLIPS....................................  CO                                         08095              1.50
PITKIN......................................  CO                                         08097              1.90
PROWERS.....................................  CO                                         08099              1.80
PUEBLO......................................  CO                                         08101              1.80
RIO BLANCO..................................  CO                                         08103              1.90
RIO GRANDE..................................  CO                                         08105              1.90
ROUTT.......................................  CO                                         08107              1.80
SAGUACHE....................................  CO                                         08109              1.90
SAN JUAN....................................  CO                                         08111              2.20
SAN MIGUEL..................................  CO                                         08113              2.20
SEDGWICK....................................  CO                                         08115              1.40
SUMMIT......................................  CO                                         08117              1.80
TELLER......................................  CO                                         08119              1.80
WASHINGTON..................................  CO                                         08121              1.50
WELD........................................  CO                                         08123              1.40
YUMA........................................  CO                                         08125              1.50
FAIRFIELD...................................  CT                                         09001              2.50
HARTFORD....................................  CT                                         09003              2.50
LITCHFIELD..................................  CT                                         09005              2.30
MIDDLESEX...................................  CT                                         09007              2.50
NEW HAVEN...................................  CT                                         09009              2.30
NEW LONDON..................................  CT                                         09011              2.60
TOLLAND.....................................  CT                                         09013              2.50
WINDHAM.....................................  CT                                         09015              2.60
KENT........................................  DE                                         10001              2.20
NEW CASTLE..................................  DE                                         10003              2.20
SUSSEX......................................  DE                                         10005              2.20
DISTRICT OF COLUMBIA........................  DC                                         11001              2.05
ALACHUA.....................................  FL                                         12001              4.00
BAKER.......................................  FL                                         12003              3.80
BAY.........................................  FL                                         12005              3.40
BRADFORD....................................  FL                                         12007              3.80
BREVARD.....................................  FL                                         12009              4.20
BROWARD.....................................  FL                                         12011              4.75
CALHOUN.....................................  FL                                         12013              3.40
CHARLOTTE...................................  FL                                         12015              4.40
CITRUS......................................  FL                                         12017              4.00
CLAY........................................  FL                                         12019              3.80
COLLIER.....................................  FL                                         12021              4.75
COLUMBIA....................................  FL                                         12023              3.80
DADE........................................  FL                                         12025              4.75
DE SOTO.....................................  FL                                         12027              4.40
DIXIE.......................................  FL                                         12029              3.80
DUVAL.......................................  FL                                         12031              3.80
ESCAMBIA....................................  FL                                         12033              3.30
FLAGLER.....................................  FL                                         12035              4.00
FRANKLIN....................................  FL                                         12037              3.40
GADSDEN.....................................  FL                                         12039              3.40
GILCHRIST...................................  FL                                         12041              3.80
GLADES......................................  FL                                         12043              4.40
GULF........................................  FL                                         12045              3.40
HAMILTON....................................  FL                                         12047              3.60
HARDEE......................................  FL                                         12049              4.40
HENDRY......................................  FL                                         12051              4.75
HERNANDO....................................  FL                                         12053              4.20
HIGHLANDS...................................  FL                                         12055              4.40
HILLSBOROUGH................................  FL                                         12057              4.20
HOLMES......................................  FL                                         12059              3.30
INDIAN RIVER................................  FL                                         12061              4.40
JACKSON.....................................  FL                                         12063              3.30
JEFFERSON...................................  FL                                         12065              3.50
LAFAYETTE...................................  FL                                         12067              3.80
LAKE........................................  FL                                         12069              4.20
LEE.........................................  FL                                         12071              4.75
LEON........................................  FL                                         12073              3.50

[[Page 16183]]

 
LEVY........................................  FL                                         12075              4.00
LIBERTY.....................................  FL                                         12077              3.40
MADISON.....................................  FL                                         12079              3.60
MANATEE.....................................  FL                                         12081              4.40
MARION......................................  FL                                         12083              4.00
MARTIN......................................  FL                                         12085              4.40
MONROE......................................  FL                                         12087              4.75
NASSAU......................................  FL                                         12089              3.80
OKALOOSA....................................  FL                                         12091              3.30
OKEECHOBEE..................................  FL                                         12093              4.40
ORANGE......................................  FL                                         12095              4.20
OSCEOLA.....................................  FL                                         12097              4.20
PALM BEACH..................................  FL                                         12099              4.75
PASCO.......................................  FL                                         12101              4.20
PINELLAS....................................  FL                                         12103              4.20
POLK........................................  FL                                         12105              4.20
PUTNAM......................................  FL                                         12107              4.00
ST. JOHNS...................................  FL                                         12109              3.80
ST. LUCIE...................................  FL                                         12111              4.40
SANTA ROSA..................................  FL                                         12113              3.30
SARASOTA....................................  FL                                         12115              4.40
SEMINOLE....................................  FL                                         12117              4.20
SUMTER......................................  FL                                         12119              4.20
SUWANNEE....................................  FL                                         12121              3.80
TAYLOR......................................  FL                                         12123              3.60
UNION.......................................  FL                                         12125              3.80
VOLUSIA.....................................  FL                                         12127              4.20
WAKULLA.....................................  FL                                         12129              3.50
WALTON......................................  FL                                         12131              3.30
WASHINGTON..................................  FL                                         12133              3.40
APPLING.....................................  GA                                         13001              3.30
ATKINSON....................................  GA                                         13003              3.30
BACON.......................................  GA                                         13005              3.30
BAKER.......................................  GA                                         13007              3.30
BALDWIN.....................................  GA                                         13009              2.80
BANKS.......................................  GA                                         13011              2.70
BARROW......................................  GA                                         13013              2.90
BARTOW......................................  GA                                         13015              2.70
BEN HILL....................................  GA                                         13017              3.30
BERRIEN.....................................  GA                                         13019              3.30
BIBB........................................  GA                                         13021              2.80
BLECKLEY....................................  GA                                         13023              3.10
BRANTLEY....................................  GA                                         13025              3.60
BROOKS......................................  GA                                         13027              3.50
BRYAN.......................................  GA                                         13029              3.30
BULLOCH.....................................  GA                                         13031              3.20
BURKE.......................................  GA                                         13033              2.80
BUTTS.......................................  GA                                         13035              2.90
CALHOUN.....................................  GA                                         13037              3.20
CAMDEN......................................  GA                                         13039              3.60
CANDLER.....................................  GA                                         13043              3.20
CARROLL.....................................  GA                                         13045              2.90
CATOOSA.....................................  GA                                         13047              2.55
CHARLTON....................................  GA                                         13049              3.60
CHATHAM.....................................  GA                                         13051              3.30
CHATTAHOOCHEE...............................  GA                                         13053              3.10
CHATTOOGA...................................  GA                                         13055              2.55
CHEROKEE....................................  GA                                         13057              2.70
CLARKE......................................  GA                                         13059              2.80
CLAY........................................  GA                                         13061              3.20
CLAYTON.....................................  GA                                         13063              2.90
CLINCH......................................  GA                                         13065              3.60
COBB........................................  GA                                         13067              2.90
COFFEE......................................  GA                                         13069              3.30
COLQUITT....................................  GA                                         13071              3.30
COLUMBIA....................................  GA                                         13073              2.80
COOK........................................  GA                                         13075              3.30
COWETA......................................  GA                                         13077              2.90
CRAWFORD....................................  GA                                         13079              2.90
CRISP.......................................  GA                                         13081              3.20
DADE........................................  GA                                         13083              2.55
DAWSON......................................  GA                                         13085              2.70

[[Page 16184]]

 
DECATUR.....................................  GA                                         13087              3.30
DE KALB.....................................  GA                                         13089              2.90
DODGE.......................................  GA                                         13091              3.20
DOOLY.......................................  GA                                         13093              3.20
DOUGHERTY...................................  GA                                         13095              3.20
DOUGLAS.....................................  GA                                         13097              2.90
EARLY.......................................  GA                                         13099              3.30
ECHOLS......................................  GA                                         13101              3.60
EFFINGHAM...................................  GA                                         13103              3.20
ELBERT......................................  GA                                         13105              2.80
EMANUEL.....................................  GA                                         13107              3.10
EVANS.......................................  GA                                         13109              3.20
FANNIN......................................  GA                                         13111              2.55
FAYETTE.....................................  GA                                         13113              2.90
FLOYD.......................................  GA                                         13115              2.55
FORSYTH.....................................  GA                                         13117              2.90
FRANKLIN....................................  GA                                         13119              2.70
FULTON......................................  GA                                         13121              2.90
GILMER......................................  GA                                         13123              2.55
GLASCOCK....................................  GA                                         13125              2.80
GLYNN.......................................  GA                                         13127              3.60
GORDON......................................  GA                                         13129              2.55
GRADY.......................................  GA                                         13131              3.30
GREENE......................................  GA                                         13133              2.80
GWINNETT....................................  GA                                         13135              2.90
HABERSHAM...................................  GA                                         13137              2.70
HALL........................................  GA                                         13139              2.90
HANCOCK.....................................  GA                                         13141              2.80
HARALSON....................................  GA                                         13143              2.70
HARRIS......................................  GA                                         13145              2.90
HART........................................  GA                                         13147              2.70
HEARD.......................................  GA                                         13149              2.90
HENRY.......................................  GA                                         13151              2.90
HOUSTON.....................................  GA                                         13153              3.10
IRWIN.......................................  GA                                         13155              3.30
JACKSON.....................................  GA                                         13157              2.80
JASPER......................................  GA                                         13159              2.80
JEFF DAVIS..................................  GA                                         13161              3.30
JEFFERSON...................................  GA                                         13163              2.80
JENKINS.....................................  GA                                         13165              3.10
JOHNSON.....................................  GA                                         13167              3.10
JONES.......................................  GA                                         13169              2.80
LAMAR.......................................  GA                                         13171              2.90
LANIER......................................  GA                                         13173              3.60
LAURENS.....................................  GA                                         13175              3.10
LEE.........................................  GA                                         13177              3.20
LIBERTY.....................................  GA                                         13179              3.30
LINCOLN.....................................  GA                                         13181              2.80
LONG........................................  GA                                         13183              3.30
LOWNDES.....................................  GA                                         13185              3.60
LUMPKIN.....................................  GA                                         13187              2.70
MCDUFFIE....................................  GA                                         13189              2.80
MCINTOSH....................................  GA                                         13191              3.30
MACON.......................................  GA                                         13193              3.10
MADISON.....................................  GA                                         13195              2.80
MARION......................................  GA                                         13197              3.10
MERIWETHER..................................  GA                                         13199              2.90
MILLER......................................  GA                                         13201              3.30
MITCHELL....................................  GA                                         13205              3.30
MONROE......................................  GA                                         13207              2.90
MONTGOMERY..................................  GA                                         13209              3.20
MORGAN......................................  GA                                         13211              2.80
MURRAY......................................  GA                                         13213              2.55
MUSCOGEE....................................  GA                                         13215              3.10
NEWTON......................................  GA                                         13217              2.80
OCONEE......................................  GA                                         13219              2.80
OGLETHORPE..................................  GA                                         13221              2.80
PAULDING....................................  GA                                         13223              2.90
PEACH.......................................  GA                                         13225              2.90
PICKENS.....................................  GA                                         13227              2.70
PIERCE......................................  GA                                         13229              3.30
PIKE........................................  GA                                         13231              2.90

[[Page 16185]]

 
POLK........................................  GA                                         13233              2.70
PULASKI.....................................  GA                                         13235              3.20
PUTNAM......................................  GA                                         13237              2.80
QUITMAN.....................................  GA                                         13239              3.20
RABUN.......................................  GA                                         13241              2.55
RANDOLPH....................................  GA                                         13243              3.20
RICHMOND....................................  GA                                         13245              2.80
ROCKDALE....................................  GA                                         13247              2.90
SCHLEY......................................  GA                                         13249              3.10
SCREVEN.....................................  GA                                         13251              3.10
SEMINOLE....................................  GA                                         13253              3.30
SPALDING....................................  GA                                         13255              2.90
STEPHENS....................................  GA                                         13257              2.70
STEWART.....................................  GA                                         13259              3.10
SUMTER......................................  GA                                         13261              3.20
TALBOT......................................  GA                                         13263              2.90
TALIAFERRO..................................  GA                                         13265              2.80
TATTNALL....................................  GA                                         13267              3.20
TAYLOR......................................  GA                                         13269              2.90
TELFAIR.....................................  GA                                         13271              3.20
TERRELL.....................................  GA                                         13273              3.20
THOMAS......................................  GA                                         13275              3.50
TIFT........................................  GA                                         13277              3.30
TOOMBS......................................  GA                                         13279              3.20
TOWNS.......................................  GA                                         13281              2.55
TREUTLEN....................................  GA                                         13283              3.20
TROUP.......................................  GA                                         13285              2.90
TURNER......................................  GA                                         13287              3.30
TWIGGS......................................  GA                                         13289              2.80
UNION.......................................  GA                                         13291              2.55
UPSON.......................................  GA                                         13293              2.90
WALKER......................................  GA                                         13295              2.55
WALTON......................................  GA                                         13297              2.80
WARE........................................  GA                                         13299              3.60
WARREN......................................  GA                                         13301              2.80
WASHINGTON..................................  GA                                         13303              2.80
WAYNE.......................................  GA                                         13305              3.30
WEBSTER.....................................  GA                                         13307              3.20
WHEELER.....................................  GA                                         13309              3.20
WHITE.......................................  GA                                         13311              2.70
WHITFIELD...................................  GA                                         13313              2.55
WILCOX......................................  GA                                         13315              3.20
WILKES......................................  GA                                         13317              2.80
WILKINSON...................................  GA                                         13319              2.80
WORTH.......................................  GA                                         13321              3.30
ADA.........................................  ID                                         16001              1.35
ADAMS.......................................  ID                                         16003              1.35
BANNOCK.....................................  ID                                         16005              1.40
BEAR LAKE...................................  ID                                         16007              1.40
BENEWAH.....................................  ID                                         16009              1.35
BINGHAM.....................................  ID                                         16011              1.35
BLAINE......................................  ID                                         16013              1.35
BOISE.......................................  ID                                         16015              1.35
BONNER......................................  ID                                         16017              1.35
BONNEVILLE..................................  ID                                         16019              1.35
BOUNDARY....................................  ID                                         16021              1.35
BUTTE.......................................  ID                                         16023              1.35
CAMAS.......................................  ID                                         16025              1.35
CANYON......................................  ID                                         16027              1.35
CARIBOU.....................................  ID                                         16029              1.40
CASSIA......................................  ID                                         16031              1.40
CLARK.......................................  ID                                         16033              1.40
CLEARWATER..................................  ID                                         16035              1.40
CUSTER......................................  ID                                         16037              1.35
ELMORE......................................  ID                                         16039              1.35
FRANKLIN....................................  ID                                         16041              1.40
FREMONT.....................................  ID                                         16043              1.40
GEM.........................................  ID                                         16045              1.35
GOODING.....................................  ID                                         16047              1.35
IDAHO.......................................  ID                                         16049              1.40
JEFFERSON...................................  ID                                         16051              1.35
JEROME......................................  ID                                         16053              1.35

[[Page 16186]]

 
KOOTENAI....................................  ID                                         16055              1.35
LATAH.......................................  ID                                         16057              1.35
LEMHI.......................................  ID                                         16059              1.40
LEWIS.......................................  ID                                         16061              1.35
LINCOLN.....................................  ID                                         16063              1.35
MADISON.....................................  ID                                         16065              1.40
MINIDOKA....................................  ID                                         16067              1.35
NEZ PERCE...................................  ID                                         16069              1.35
ONEIDA......................................  ID                                         16071              1.40
OWYHEE......................................  ID                                         16073              1.35
PAYETTE.....................................  ID                                         16075              1.35
POWER.......................................  ID                                         16077              1.40
SHOSHONE....................................  ID                                         16079              1.40
TETON.......................................  ID                                         16081              1.40
TWIN FALLS..................................  ID                                         16083              1.35
VALLEY......................................  ID                                         16085              1.35
WASHINGTON..................................  ID                                         16087              1.35
ADAMS.......................................  IL                                         17001              2.00
ALEXANDER...................................  IL                                         17003              2.10
BOND........................................  IL                                         17005              2.00
BOONE.......................................  IL                                         17007              1.95
BROWN.......................................  IL                                         17009              2.00
BUREAU......................................  IL                                         17011              2.00
CALHOUN.....................................  IL                                         17013              2.00
CARROLL.....................................  IL                                         17015              1.95
CASS........................................  IL                                         17017              2.00
CHAMPAIGN...................................  IL                                         17019              2.00
CHRISTIAN...................................  IL                                         17021              2.00
CLARK.......................................  IL                                         17023              2.00
CLAY........................................  IL                                         17025              2.00
CLINTON.....................................  IL                                         17027              2.00
COLES.......................................  IL                                         17029              2.00
COOK........................................  IL                                         17031              1.95
CRAWFORD....................................  IL                                         17033              2.00
CUMBERLAND..................................  IL                                         17035              2.00
DE KALB.....................................  IL                                         17037              1.95
DE WITT.....................................  IL                                         17039              2.00
DOUGLAS.....................................  IL                                         17041              2.00
DU PAGE.....................................  IL                                         17043              1.95
EDGAR.......................................  IL                                         17045              2.00
EDWARDS.....................................  IL                                         17047              2.00
EFFINGHAM...................................  IL                                         17049              2.00
FAYETTE.....................................  IL                                         17051              2.00
FORD........................................  IL                                         17053              2.00
FRANKLIN....................................  IL                                         17055              2.10
FULTON......................................  IL                                         17057              2.00
GALLATIN....................................  IL                                         17059              2.10
GREENE......................................  IL                                         17061              2.00
GRUNDY......................................  IL                                         17063              2.00
HAMILTON....................................  IL                                         17065              2.10
HANCOCK.....................................  IL                                         17067              2.00
HARDIN......................................  IL                                         17069              2.10
HENDERSON...................................  IL                                         17071              2.00
HENRY.......................................  IL                                         17073              2.00
IROQUOIS....................................  IL                                         17075              2.00
JACKSON.....................................  IL                                         17077              2.10
JASPER......................................  IL                                         17079              2.00
JEFFERSON...................................  IL                                         17081              2.00
JERSEY......................................  IL                                         17083              2.00
JO DAVIESS..................................  IL                                         17085              1.95
JOHNSON.....................................  IL                                         17087              2.10
KANE........................................  IL                                         17089              1.95
KANKAKEE....................................  IL                                         17091              2.00
KENDALL.....................................  IL                                         17093              2.00
KNOX........................................  IL                                         17095              2.00
LAKE........................................  IL                                         17097              1.95
LA SALLE....................................  IL                                         17099              2.00
LAWRENCE....................................  IL                                         17101              2.00
LEE.........................................  IL                                         17103              1.95
LIVINGSTON..................................  IL                                         17105              2.00
LOGAN.......................................  IL                                         17107              2.00
MCDONOUGH...................................  IL                                         17109              2.00

[[Page 16187]]

 
MCHENRY.....................................  IL                                         17111              1.95
MCLEAN......................................  IL                                         17113              2.00
MACON.......................................  IL                                         17115              2.00
MACOUPIN....................................  IL                                         17117              2.00
MADISON.....................................  IL                                         17119              2.00
MARION......................................  IL                                         17121              2.00
MARSHALL....................................  IL                                         17123              2.00
MASON.......................................  IL                                         17125              2.00
MASSAC......................................  IL                                         17127              2.10
MENARD......................................  IL                                         17129              2.00
MERCER......................................  IL                                         17131              2.00
MONROE......................................  IL                                         17133              2.10
MONTGOMERY..................................  IL                                         17135              2.00
MORGAN......................................  IL                                         17137              2.00
MOULTRIE....................................  IL                                         17139              2.00
OGLE........................................  IL                                         17141              1.95
PEORIA......................................  IL                                         17143              2.00
PERRY.......................................  IL                                         17145              2.10
PIATT.......................................  IL                                         17147              2.00
PIKE........................................  IL                                         17149              2.00
POPE........................................  IL                                         17151              2.10
PULASKI.....................................  IL                                         17153              2.10
PUTNAM......................................  IL                                         17155              2.00
RANDOLPH....................................  IL                                         17157              2.10
RICHLAND....................................  IL                                         17159              2.00
ROCK ISLAND.................................  IL                                         17161              2.00
ST. CLAIR...................................  IL                                         17163              2.10
SALINE......................................  IL                                         17165              2.10
SANGAMON....................................  IL                                         17167              2.00
SCHUYLER....................................  IL                                         17169              2.00
SCOTT.......................................  IL                                         17171              2.00
SHELBY......................................  IL                                         17173              2.00
STARK.......................................  IL                                         17175              2.00
STEPHENSON..................................  IL                                         17177              1.95
TAZEWELL....................................  IL                                         17179              2.00
UNION.......................................  IL                                         17181              2.10
VERMILION...................................  IL                                         17183              2.00
WABASH......................................  IL                                         17185              2.00
WARREN......................................  IL                                         17187              2.00
WASHINGTON..................................  IL                                         17189              2.10
WAYNE.......................................  IL                                         17191              2.00
WHITE.......................................  IL                                         17193              2.00
WHITESIDE...................................  IL                                         17195              1.95
WILL........................................  IL                                         17197              2.00
WILLIAMSON..................................  IL                                         17199              2.10
WINNEBAGO...................................  IL                                         17201              1.95
WOODFORD....................................  IL                                         17203              2.00
ADAMS.......................................  IN                                         18001              2.00
ALLEN.......................................  IN                                         18003              1.80
BARTHOLOMEW.................................  IN                                         18005              2.05
BENTON......................................  IN                                         18007              2.00
BLACKFORD...................................  IN                                         18009              2.00
BOONE.......................................  IN                                         18011              2.00
BROWN.......................................  IN                                         18013              2.05
CARROLL.....................................  IN                                         18015              2.00
CASS........................................  IN                                         18017              2.00
CLARK.......................................  IN                                         18019              1.95
CLAY........................................  IN                                         18021              2.00
CLINTON.....................................  IN                                         18023              2.00
CRAWFORD....................................  IN                                         18025              2.10
DAVIESS.....................................  IN                                         18027              2.05
DEARBORN....................................  IN                                         18029              1.95
DECATUR.....................................  IN                                         18031              1.95
DE KALB.....................................  IN                                         18033              1.80
DELAWARE....................................  IN                                         18035              2.00
DUBOIS......................................  IN                                         18037              2.10
ELKHART.....................................  IN                                         18039              1.80
FAYETTE.....................................  IN                                         18041              2.00
FLOYD.......................................  IN                                         18043              1.95
FOUNTAIN....................................  IN                                         18045              2.00
FRANKLIN....................................  IN                                         18047              1.95
FULTON......................................  IN                                         18049              2.00

[[Page 16188]]

 
GIBSON......................................  IN                                         18051              2.10
GRANT.......................................  IN                                         18053              2.00
GREENE......................................  IN                                         18055              2.05
HAMILTON....................................  IN                                         18057              2.00
HANCOCK.....................................  IN                                         18059              2.00
HARRISON....................................  IN                                         18061              1.95
HENDRICKS...................................  IN                                         18063              2.00
HENRY.......................................  IN                                         18065              2.00
HOWARD......................................  IN                                         18067              2.00
HUNTINGTON..................................  IN                                         18069              2.00
JACKSON.....................................  IN                                         18071              2.05
JASPER......................................  IN                                         18073              2.00
JAY.........................................  IN                                         18075              2.00
JEFFERSON...................................  IN                                         18077              1.95
JENNINGS....................................  IN                                         18079              1.95
JOHNSON.....................................  IN                                         18081              2.00
KNOX........................................  IN                                         18083              2.05
KOSCIUSKO...................................  IN                                         18085              1.80
LAGRANGE....................................  IN                                         18087              1.80
LAKE........................................  IN                                         18089              1.95
LA PORTE....................................  IN                                         18091              1.80
LAWRENCE....................................  IN                                         18093              2.05
MADISON.....................................  IN                                         18095              2.00
MARION......................................  IN                                         18097              2.00
MARSHALL....................................  IN                                         18099              1.80
MARTIN......................................  IN                                         18101              2.05
MIAMI.......................................  IN                                         18103              2.00
MONROE......................................  IN                                         18105              2.05
MONTGOMERY..................................  IN                                         18107              2.00
MORGAN......................................  IN                                         18109              2.00
NEWTON......................................  IN                                         18111              2.00
NOBLE.......................................  IN                                         18113              1.80
OHIO........................................  IN                                         18115              1.95
ORANGE......................................  IN                                         18117              2.05
OWEN........................................  IN                                         18119              2.00
PARKE.......................................  IN                                         18121              2.00
PERRY.......................................  IN                                         18123              2.10
PIKE........................................  IN                                         18125              2.10
PORTER......................................  IN                                         18127              1.95
POSEY.......................................  IN                                         18129              2.10
PULASKI.....................................  IN                                         18131              2.00
PUTNAM......................................  IN                                         18133              2.00
RANDOLPH....................................  IN                                         18135              2.00
RIPLEY......................................  IN                                         18137              1.95
RUSH........................................  IN                                         18139              2.00
ST. JOSEPH..................................  IN                                         18141              1.80
SCOTT.......................................  IN                                         18143              1.95
SHELBY......................................  IN                                         18145              2.00
SPENCER.....................................  IN                                         18147              2.10
STARKE......................................  IN                                         18149              1.80
STEUBEN.....................................  IN                                         18151              1.80
SULLIVAN....................................  IN                                         18153              2.05
SWITZERLAND.................................  IN                                         18155              1.95
TIPPECANOE..................................  IN                                         18157              2.00
TIPTON......................................  IN                                         18159              2.00
UNION.......................................  IN                                         18161              2.00
VANDERBURGH.................................  IN                                         18163              2.10
VERMILLION..................................  IN                                         18165              2.00
VIGO........................................  IN                                         18167              2.00
WABASH......................................  IN                                         18169              2.00
WARREN......................................  IN                                         18171              2.00
WARRICK.....................................  IN                                         18173              2.10
WASHINGTON..................................  IN                                         18175              1.95
WAYNE.......................................  IN                                         18177              2.00
WELLS.......................................  IN                                         18179              2.00
WHITE.......................................  IN                                         18181              2.00
WHITLEY.....................................  IN                                         18183              1.80
ADAIR.......................................  IA                                         19001              1.90
ADAMS.......................................  IA1                                        19003              1.90
ALLAMAKEE...................................  IA                                         19005              1.70
APPANOOSE...................................  IA                                         19007              1.90
AUDUBON.....................................  IA                                         19009              1.90

[[Page 16189]]

 
BENTON......................................  IA                                         19011              1.95
BLACK HAWK..................................  IA                                         19013              1.80
BOONE.......................................  IA                                         19015              1.90
BREMER......................................  IA                                         19017              1.80
BUCHANAN....................................  IA                                         19019              1.80
BUENA VISTA.................................  IA                                         19021              1.80
BUTLER......................................  IA                                         19023              1.80
CALHOUN.....................................  IA                                         19025              1.80
CARROLL.....................................  IA                                         19027              1.90
CASS........................................  IA                                         19029              1.90
CEDAR.......................................  IA                                         19031              1.95
CERRO GORDO.................................  IA                                         19033              1.70
CHEROKEE....................................  IA                                         19035              1.80
CHICKASAW...................................  IA                                         19037              1.70
CLARKE......................................  IA                                         19039              1.90
CLAY........................................  IA                                         19041              1.70
CLAYTON.....................................  IA                                         19043              1.70
CLINTON.....................................  IA                                         19045              1.95
CRAWFORD....................................  IA                                         19047              1.90
DALLAS......................................  IA                                         19049              1.90
DAVIS.......................................  IA                                         19051              1.90
DECATUR.....................................  IA                                         19053              1.90
DELAWARE....................................  IA                                         19055              1.80
DES MOINES..................................  IA                                         19057              1.90
DICKINSON...................................  IA                                         19059              1.70
DUBUQUE.....................................  IA                                         19061              1.80
EMMET.......................................  IA                                         19063              1.70
FAYETTE.....................................  IA                                         19065              1.70
FLOYD.......................................  IA                                         19067              1.70
FRANKLIN....................................  IA                                         19069              1.80
FREMONT.....................................  IA                                         19071              1.90
GREENE......................................  IA                                         19073              1.90
GRUNDY......................................  IA1                                         9075              1.80
GUTHRIE.....................................  IA                                         19077              1.90
HAMILTON....................................  IA                                         19079              1.80
HANCOCK.....................................  IA                                         19081              1.70
HARDIN......................................  IA                                         19083              1.80
HARRISON....................................  IA                                         19085              1.90
HENRY.......................................  IA                                         19087              1.90
HOWARD......................................  IA                                         19089              1.70
HUMBOLDT....................................  IA                                         19091              1.80
IDA.........................................  IA                                         19093              1.80
IOWA........................................  IA                                         19095              1.95
JACKSON.....................................  IA                                         19097              1.95
JASPER......................................  IA                                         19099              1.95
JEFFERSON...................................  IA                                         19101              1.90
JOHNSON.....................................  IA                                         19103              1.95
JONES.......................................  IA                                         19105              1.95
KEOKUK......................................  IA                                         19107              1.90
KOSSUTH.....................................  IA                                         19109              1.70
LEE.........................................  IA                                         19111              1.90
LINN........................................  IA                                         19113              1.95
LOUISA......................................  IA                                         19115              1.90
LUCAS.......................................  IA                                         19117              1.90
LYON........................................  IA                                         19119              1.70
MADISON.....................................  IA                                         19121              1.90
MAHASKA.....................................  IA                                         19123              1.90
MARION......................................  IA                                         19125              1.90
MARSHALL....................................  IA                                         19127              1.95
MILLS.......................................  IA                                         19129              1.90
MITCHELL....................................  IA                                         19131              1.70
MONONA......................................  IA                                         19133              1.80
MONROE......................................  IA                                         19135              1.90
MONTGOMERY..................................  IA                                         19137              1.90
MUSCATINE...................................  IA                                         19139              1.90
O'BRIEN.....................................  IA                                         19141              1.70
OSCEOLA.....................................  IA                                         19143              1.70
PAGE........................................  IA                                         19145              1.90
PALO ALTO...................................  IA                                         19147              1.70
PLYMOUTH....................................  IA                                         19149              1.70
POCAHONTAS..................................  IA                                         19151              1.80
POLK........................................  IA                                         19153              1.90

[[Page 16190]]

 
POTTAWATTAMIE...............................  IA                                         19155              1.90
POWESHIEK...................................  IA                                         19157              1.95
RINGGOLD....................................  IA                                         19159              1.90
SAC.........................................  IA                                         19161              1.80
SCOTT.......................................  IA                                         19163              1.95
SHELBY......................................  IA                                         19165              1.90
SIOUX.......................................  IA                                         19167              1.70
STORY.......................................  IA                                         19169              1.95
TAMA........................................  IA                                         19171              1.95
TAYLOR......................................  IA                                         19173              1.90
UNION.......................................  IA                                         19175              1.90
VAN BUREN...................................  IA                                         19177              1.90
WAPELLO.....................................  IA                                         19179              1.90
WARREN......................................  IA                                         19181              1.90
WASHINGTON..................................  IA                                         19183              1.90
WAYNE.......................................  IA                                         19185              1.90
WEBSTER.....................................  IA                                         19187              1.80
WINNEBAGO...................................  IA                                         19189              1.70
WINNESHIEK..................................  IA                                         19191              1.70
WOODBURY....................................  IA                                         19193              1.80
WORTH.......................................  IA                                         19195              1.70
WRIGHT......................................  IA                                         19197              1.80
ALLEN.......................................  KS                                         20001              1.70
ANDERSON....................................  KS                                         20003              1.70
ATCHISON....................................  KS                                         20005              1.90
BARBER......................................  KS                                         20007              1.90
BARTON......................................  KS                                         20009              1.90
BOURBON.....................................  KS                                         20011              1.70
BROWN.......................................  KS                                         20013              1.90
BUTLER......................................  KS                                         20015              1.70
CHASE.......................................  KS                                         20017              1.70
CHAUTAUQUA..................................  KS                                         20019              1.70
CHEROKEE....................................  KS                                         20021              1.70
CHEYENNE....................................  KS                                         20023              1.60
CLARK.......................................  KS                                         20025              1.90
CLAY........................................  KS                                         20027              1.90
CLOUD.......................................  KS                                         20029              1.80
COFFEY......................................  KS                                         20031              1.70
COMANCHE....................................  KS                                         20033              1.90
COWLEY......................................  KS                                         20035              1.70
CRAWFORD....................................  KS                                         20037              1.70
DECATUR.....................................  KS                                         20039              1.60
DICKINSON...................................  KS                                         20041              1.90
DONIPHAN....................................  KS                                         20043              1.90
DOUGLAS.....................................  KS                                         20045              1.70
EDWARDS.....................................  KS                                         20047              1.90
ELK.........................................  KS                                         20049              1.70
ELLIS.......................................  KS                                         20051              1.80
ELLSWORTH...................................  KS                                         20053              1.90
FINNEY......................................  KS                                         20055              1.80
FORD........................................  KS                                         20057              1.90
FRANKLIN....................................  KS                                         20059              1.70
GEARY.......................................  KS                                         20061              1.90
GOVE........................................  KS                                         20063              1.60
GRAHAM......................................  KS                                         20065              1.60
GRANT.......................................  KS                                         20067              1.90
GRAY........................................  KS                                         20069              1.90
GREELEY.....................................  KS                                         20071              1.80
GREENWOOD...................................  KS                                         20073              1.70
HAMILTON....................................  KS                                         20075              1.80
HARPER......................................  KS                                         20077              1.70
HARVEY......................................  KS                                         20079              1.70
HASKELL.....................................  KS                                         20081              1.90
HODGEMAN....................................  KS                                         20083              1.80
JACKSON.....................................  KS                                         20085              1.90
JEFFERSON...................................  KS                                         20087              1.90
JEWELL......................................  KS                                         20089              1.80
JOHNSON.....................................  KS                                         20091              1.90
KEARNY......................................  KS                                         20093              1.80
KINGMAN.....................................  KS                                         20095              1.70
KIOWA.......................................  KS                                         20097              1.90
LABETTE.....................................  KS                                         20099              1.70

[[Page 16191]]

 
LANE........................................  KS                                         20101              1.80
LEAVENWORTH.................................  KS                                         20103              1.90
LINCOLN.....................................  KS                                         20105              1.80
LINN........................................  KS                                         20107              1.70
LOGAN.......................................  KS                                         20109              1.60
LYON........................................  KS                                         20111              1.70
MCPHERSON...................................  KS                                         20113              1.90
MARION......................................  KS                                         20115              1.70
MARSHALL....................................  KS                                         20117              1.90
MEADE.......................................  KS                                         20119              1.90
MIAMI.......................................  KS                                         20121              1.70
MITCHELL....................................  KS                                         20123              1.80
MONTGOMERY..................................  KS                                         20125              1.70
MORRIS......................................  KS                                         20127              1.90
MORTON......................................  KS                                         20129              1.90
NEMAHA......................................  KS                                         20131              1.90
NEOSHO......................................  KS                                         20133              1.70
NESS........................................  KS                                         20135              1.80
NORTON......................................  KS                                         20137              1.60
OSAGE.......................................  KS                                         20139              1.70
OSBORNE.....................................  KS                                         20141              1.80
OTTAWA......................................  KS                                         20143              1.90
PAWNEE......................................  KS                                         20145              1.90
PHILLIPS....................................  KS                                         20147              1.60
POTTAWATOMIE................................  KS                                         20149              1.90
PRATT.......................................  KS                                         20151              1.90
RAWLINS.....................................  KS                                         20153              1.60
RENO........................................  KS                                         20155              1.70
REPUBLIC....................................  KS                                         20157              1.80
RICE........................................  KS                                         20159              1.90
RILEY.......................................  KS                                         20161              1.90
ROOKS.......................................  KS                                         20163              1.60
RUSH........................................  KS                                         20165              1.80
RUSSELL.....................................  KS                                         20167              1.80
SALINE......................................  KS                                         20169              1.90
SCOTT.......................................  KS                                         20171              1.80
SEDGWICK....................................  KS                                         20173              1.70
SEWARD......................................  KS                                         20175              1.90
SHAWNEE.....................................  KS                                         20177              1.90
SHERIDAN....................................  KS                                         20179              1.60
SHERMAN.....................................  KS                                         20181              1.60
SMITH.......................................  KS                                         20183              1.60
STAFFORD....................................  KS                                         20185              1.90
STANTON.....................................  KS                                         20187              1.90
STEVENS.....................................  KS                                         20189              1.90
SUMNER......................................  KS                                         20191              1.70
THOMAS......................................  KS                                         20193              1.60
TREGO.......................................  KS                                         20195              1.80
WABAUNSEE...................................  KS                                         20197              1.90
WALLACE.....................................  KS                                         20199              1.60
WASHINGTON..................................  KS                                         20201              1.90
WICHITA.....................................  KS                                         20203              1.80
WILSON......................................  KS                                         20205              1.70
WOODSON.....................................  KS                                         20207              1.70
WYANDOTTE...................................  KS                                         20209              1.90
ADAIR.......................................  KY                                         21001              1.95
ALLEN.......................................  KY                                         21003              2.05
ANDERSON....................................  KY                                         21005              1.95
BALLARD.....................................  KY                                         21007              2.30
BARREN......................................  KY                                         21009              2.05
BATH........................................  KY                                         21011              2.05
BELL........................................  KY                                         21013              2.15
BOONE.......................................  KY                                         21015              1.95
BOURBON.....................................  KY                                         21017              2.05
BOYD........................................  KY                                         21019              2.20
BOYLE.......................................  KY                                         21021              1.95
BRACKEN.....................................  KY                                         21023              2.05
BREATHITT...................................  KY                                         21025              2.15
BRECKINRIDGE................................  KY                                         21027              2.10
BULLITT.....................................  KY                                         21029              1.95
BUTLER......................................  KY                                         21031              2.20
CALDWELL....................................  KY                                         21033              2.30

[[Page 16192]]

 
CALLOWAY....................................  KY                                         21035              2.30
CAMPBELL....................................  KY                                         21037              2.05
CARLISLE....................................  KY                                         21039              2.30
CARROLL.....................................  KY                                         21041              1.95
CARTER......................................  KY                                         21043              2.20
CASEY.......................................  KY                                         21045              1.95
CHRISTIAN...................................  KY                                         21047              2.20
CLARK.......................................  KY                                         21049              2.05
CLAY........................................  KY                                         21051              2.15
CLINTON.....................................  KY                                         21053              2.15
CRITTENDEN..................................  KY                                         21055              2.30
CUMBERLAND..................................  KY                                         21057              2.05
DAVIESS.....................................  KY                                         21059              2.10
EDMONSON....................................  KY                                         21061              2.05
ELLIOTT.....................................  KY                                         21063              2.05
ESTILL......................................  KY                                         21065              2.05
FAYETTE.....................................  KY                                         21067              2.05
FLEMING.....................................  KY                                         21069              2.05
FLOYD.......................................  KY                                         21071              2.15
FRANKLIN....................................  KY                                         21073              1.95
FULTON......................................  KY                                         21075              2.30
GALLATIN....................................  KY                                         21077              1.95
GARRARD.....................................  KY                                         21079              1.95
GRANT.......................................  KY                                         21081              1.95
GRAVES......................................  KY                                         21083              2.30
GRAYSON.....................................  KY                                         21085              2.10
GREEN.......................................  KY                                         21087              1.95
GREENUP.....................................  KY                                         21089              2.20
HANCOCK.....................................  KY                                         21091              2.10
HARDIN......................................  KY                                         21093              1.95
HARLAN......................................  KY                                         21095              2.15
HARRISON....................................  KY                                         21097              2.05
HART........................................  KY                                         21099              1.95
HENDERSON...................................  KY                                         21101              2.10
HENRY.......................................  KY                                         21103              1.95
HICKMAN.....................................  KY                                         21105              2.30
HOPKINS.....................................  KY                                         21107              2.20
JACKSON.....................................  KY                                         21109              1.95
JEFFERSON...................................  KY                                         21111              1.95
JESSAMINE...................................  KY                                         21113              1.95
JOHNSON.....................................  KY                                         21115              2.15
KENTON......................................  KY                                         21117              2.05
KNOTT.......................................  KY                                         21119              2.15
KNOX........................................  KY                                         21121              2.15
LARUE.......................................  KY                                         21123              1.95
LAUREL......................................  KY                                         21125              2.15
LAWRENCE....................................  KY                                         21127              2.15
LEE.........................................  KY                                         21129              2.05
LESLIE......................................  KY                                         21131              2.15
LETCHER.....................................  KY                                         21133              2.15
LEWIS.......................................  KY                                         21135              2.05
LINCOLN.....................................  KY                                         21137              1.95
LIVINGSTON..................................  KY                                         21139              2.30
LOGAN.......................................  KY                                         21141              2.20
LYON........................................  KY                                         21143              2.30
MCCRACKEN...................................  KY                                         21145              2.30
MCCREARY....................................  KY                                         21147              2.15
MCLEAN......................................  KY                                         21149              2.10
MADISON.....................................  KY                                         21151              2.05
MAGOFFIN....................................  KY                                         21153              2.15
MARION......................................  KY                                         21155              1.95
MARSHALL....................................  KY                                         21157              2.30
MARTIN......................................  KY                                         21159              2.15
MASON.......................................  KY                                         21161              2.05
MEADE.......................................  KY                                         21163              1.95
MENIFEE.....................................  KY                                         21165              2.05
MERCER......................................  KY                                         21167              1.95
METCALFE....................................  KY                                         21169              2.05
MONROE......................................  KY                                         21171              2.05
MONTGOMERY..................................  KY                                         21173              2.05
MORGAN......................................  KY                                         21175              2.05
MUHLENBERG..................................  KY                                         21177              2.20

[[Page 16193]]

 
NELSON......................................  KY                                         21179              1.95
NICHOLAS....................................  KY                                         21181              2.05
OHIO........................................  KY                                         21183              2.10
OLDHAM......................................  KY                                         21185              1.95
OWEN........................................  KY                                         21187              1.95
OWSLEY......................................  KY                                         21189              2.15
PENDLETON...................................  KY                                         21191              2.05
PERRY.......................................  KY                                         21193              2.15
PIKE........................................  KY                                         21195              2.15
POWELL......................................  KY                                         21197              2.05
PULASKI.....................................  KY                                         21199              2.15
ROBERTSON...................................  KY                                         21201              2.05
ROCKCASTLE..................................  KY                                         21203              1.95
ROWAN.......................................  KY                                         21205              2.05
RUSSELL.....................................  KY                                         21207              1.95
SCOTT.......................................  KY                                         21209              2.05
SHELBY......................................  KY                                         21211              1.95
SIMPSON.....................................  KY                                         21213              2.05
SPENCER.....................................  KY                                         21215              1.95
TAYLOR......................................  KY                                         21217              1.95
TODD........................................  KY                                         21219              2.20
TRIGG.......................................  KY                                         21221              2.30
TRIMBLE.....................................  KY                                         21223              1.95
UNION.......................................  KY                                         21225              2.10
WARREN......................................  KY                                         21227              2.05
WASHINGTON..................................  KY                                         21229              1.95
WAYNE.......................................  KY                                         21231              2.15
WEBSTER.....................................  KY                                         21233              2.10
WHITLEY.....................................  KY                                         21235              2.15
WOLFE.......................................  KY                                         21237              2.05
WOODFORD....................................  KY                                         21239              1.95
ACADIA......................................  LA                                         22001              3.05
ALLEN.......................................  LA                                         22003              2.85
ASCENSION...................................  LA                                         22005              2.85
ASSUMPTION..................................  LA                                         22007              3.05
AVOYELLES...................................  LA                                         22009              2.85
BEAUREGARD..................................  LA                                         22011              2.85
BIENVILLE...................................  LA                                         22013              2.65
BOSSIER.....................................  LA                                         22015              2.35
CADDO.......................................  LA                                         22017              2.35
CALCASIEU...................................  LA                                         22019              3.05
CALDWELL....................................  LA                                         22021              2.75
CAMERON.....................................  LA                                         22023              3.05
CATAHOULA...................................  LA                                         22025              2.85
CLAIBORNE...................................  LA                                         22027              2.65
CONCORDIA...................................  LA                                         22029              2.85
DE SOTO.....................................  LA                                         22031              2.65
EAST BATON ROUGE............................  LA                                         22033              2.85
EAST CARROLL................................  LA                                         22035              2.75
EAST FELICIANA..............................  LA                                         22037              2.85
EVANGELINE..................................  LA                                         22039              2.85
FRANKLIN....................................  LA                                         22041              2.75
GRANT.......................................  LA                                         22043              2.75
IBERIA......................................  LA                                         22045              3.05
IBERVILLE...................................  LA                                         22047              2.85
JACKSON.....................................  LA                                         22049              2.75
JEFFERSON...................................  LA                                         22051              3.05
JEFFERSON DAVIS.............................  LA                                         22053              3.05
LAFAYETTE...................................  LA                                         22055              3.05
LAFOURCHE...................................  LA                                         22057              3.05
LA SALLE....................................  LA                                         22059              2.75
LINCOLN.....................................  LA                                         22061              2.65
LIVINGSTON..................................  LA                                         22063              2.85
MADISON.....................................  LA                                         22065              2.75
MOREHOUSE...................................  LA                                         22067              2.75
NATCHITOCHES................................  LA                                         22069              2.75
ORLEANS.....................................  LA                                         22071              3.05
OUACHITA....................................  LA                                         22073              2.75
PLAQUEMINES.................................  LA                                         22075              3.05
POINTE COUPEE...............................  LA                                         22077              2.85
RAPIDES.....................................  LA                                         22079              2.85
RED RIVER...................................  LA                                         22081              2.65

[[Page 16194]]

 
RICHLAND....................................  LA                                         22083              2.75
SABINE......................................  LA                                         22085              2.75
ST. BERNARD.................................  LA                                         22087              3.05
ST. CHARLES.................................  LA                                         22089              3.05
ST. HELENA..................................  LA                                         22091              2.85
ST. JAMES...................................  LA                                         22093              2.85
ST. JOHN THE BAPTIST........................  LA                                         22095              2.85
ST. LANDRY..................................  LA                                         22097              3.05
ST. MARTIN..................................  LA                                         22099              3.05
ST. MARY....................................  LA                                         22101              3.05
ST. TAMMANY.................................  LA                                         22103              2.85
TANGIPAHOA..................................  LA                                         22105              2.85
TENSAS......................................  LA                                         22107              2.85
TERREBONNE..................................  LA                                         22109              3.05
UNION.......................................  LA                                         22111              2.65
VERMILION...................................  LA                                         22113              3.05
VERNON......................................  LA                                         22115              2.85
WASHINGTON..................................  LA                                         22117              2.85
WEBSTER.....................................  LA                                         22119              2.35
WEST BATON ROUGE............................  LA                                         22121              2.85
WEST CARROLL................................  LA                                         22123              2.75
WEST FELICIANA..............................  LA                                         22125              2.85
WINN........................................  LA                                         22127              2.75
ANDROSCOGGIN................................  ME                                         23001              2.20
AROOSTOOK...................................  ME                                         23003              2.15
CUMBERLAND..................................  ME                                         23005              2.30
FRANKLIN....................................  ME                                         23007              2.15
HANCOCK.....................................  ME                                         23009              2.15
KENNEBEC....................................  ME                                         23011              2.20
KNOX........................................  ME                                         23013              2.20
LINCOLN.....................................  ME                                         23015              2.20
OXFORD......................................  ME                                         23017              2.15
PENOBSCOT...................................  ME                                         23019              2.15
PISCATAQUIS.................................  ME                                         23021              2.15
SAGADAHOC...................................  ME                                         23023              2.30
SOMERSET....................................  ME                                         23025              2.15
WALDO.......................................  ME                                         23027              2.20
WASHINGTON..................................  ME                                         23029              2.15
YORK........................................  ME                                         23031              2.45
ALLEGANY....................................  MD                                         24001              2.05
ANNE ARUNDEL................................  MD                                         24003              2.05
BALTIMORE...................................  MD                                         24005              2.05
CALVERT.....................................  MD                                         24009              2.05
CAROLINE....................................  MD                                         24011              2.10
CARROLL.....................................  MD                                         24013              2.05
CECIL.......................................  MD                                         24015              2.10
CHARLES.....................................  MD                                         24017              2.05
DORCHESTER..................................  MD                                         24019              2.10
FREDERICK...................................  MD                                         24021              2.05
GARRETT.....................................  MD                                         24023              2.05
HARFORD.....................................  MD                                         24025              2.05
HOWARD......................................  MD                                         24027              2.05
KENT........................................  MD                                         24029              2.10
MONTGOMERY..................................  MD                                         24031              2.05
PRINCE GEORGE'S.............................  MD                                         24033              2.05
QUEEN ANNE'S................................  MD                                         24035              2.10
ST. MARY'S..................................  MD                                         24037              2.05
SOMERSET....................................  MD                                         24039              2.10
TALBOT......................................  MD                                         24041              2.10
WASHINGTON..................................  MD                                         24043              2.05
WICOMICO....................................  MD                                         24045              2.10
WORCESTER...................................  MD                                         24047              2.10
BALTIMORE CITY..............................  MD                                         24510              2.05
BARNSTABLE..................................  MA                                         25001              2.75
BERKSHIRE...................................  MA                                         25003              2.30
BRISTOL.....................................  MA                                         25005              2.75
DUKES.......................................  MA                                         25007              2.75
ESSEX.......................................  MA                                         25009              2.75
FRANKLIN....................................  MA                                         25011              2.40
HAMPDEN.....................................  MA                                         25013              2.40
HAMPSHIRE...................................  MA                                         25015              2.40
MIDDLESEX...................................  MA                                         25017              2.75

[[Page 16195]]

 
NANTUCKET...................................  MA                                         25019              2.75
NORFOLK.....................................  MA                                         25021              2.75
PLYMOUTH....................................  MA                                         25023              2.75
SUFFOLK.....................................  MA                                         25025              2.75
WORCESTER...................................  MA                                         25027              2.60
ALCONA......................................  MI                                         26001              1.50
ALGER.......................................  MI                                         26003              1.60
ALLEGAN.....................................  MI                                         26005              1.80
ALPENA......................................  MI                                         26007              1.35
ANTRIM......................................  MI                                         26009              1.35
ARENAC......................................  MI                                         26011              1.70
BARAGA......................................  MI                                         26013              1.50
BARRY.......................................  MI                                         26015              1.80
BAY.........................................  MI                                         26017              1.70
BENZIE......................................  MI                                         26019              1.50
BERRIEN.....................................  MI                                         26021              1.80
BRANCH......................................  MI                                         26023              1.80
CALHOUN.....................................  MI                                         26025              1.80
CASS........................................  MI                                         26027              1.80
CHARLEVOIX..................................  MI                                         26029              1.35
CHEBOYGAN...................................  MI                                         26031              1.35
CHIPPEWA....................................  MI                                         26033              1.70
CLARE.......................................  MI                                         26035              1.70
CLINTON.....................................  MI                                         26037              1.80
CRAWFORD....................................  MI                                         26039              1.50
DELTA.......................................  MI                                         26041              1.60
DICKINSON...................................  MI                                         26043              1.40
EATON.......................................  MI                                         26045              1.80
EMMET.......................................  MI                                         26047              1.35
GENESEE.....................................  MI                                         26049              1.85
GLADWIN.....................................  MI                                         26051              1.70
GOGEBIC.....................................  MI                                         26053              1.40
GRAND TRAVERSE..............................  MI                                         26055              1.50
GRATIOT.....................................  MI                                         26057              1.70
HILLSDALE...................................  MI                                         26059              1.80
HOUGHTON....................................  MI                                         26061              1.50
HURON.......................................  MI                                         26063              1.85
INGHAM......................................  MI                                         26065              1.80
IONIA.......................................  MI                                         26067              1.80
IOSCO.......................................  MI                                         26069              1.50
IRON........................................  MI                                         26071              1.40
ISABELLA....................................  MI                                         26073              1.70
JACKSON.....................................  MI                                         26075              1.80
KALAMAZOO...................................  MI                                         26077              1.80
KALKASKA....................................  MI                                         26079              1.50
KENT........................................  MI                                         26081              1.70
KEWEENAW....................................  MI                                         26083              1.50
LAKE........................................  MI                                         26085              1.70
LAPEER......................................  MI                                         26087              1.85
LEELANAU....................................  MI                                         26089              1.50
LENAWEE.....................................  MI                                         26091              1.80
LIVINGSTON..................................  MI                                         26093              1.85
LUCE........................................  MI                                         26095              1.70
MACKINAC....................................  MI                                         26097              1.70
MACOMB......................................  MI                                         26099              1.85
MANISTEE....................................  MI                                         26101              1.50
MARQUETTE...................................  MI                                         26103              1.50
MASON.......................................  MI                                         26105              1.70
MECOSTA.....................................  MI                                         26107              1.70
MENOMINEE...................................  MI                                         26109              1.50
MIDLAND.....................................  MI                                         26111              1.70
MISSAUKEE...................................  MI                                         26113              1.50
MONROE......................................  MI                                         26115              1.85
MONTCALM....................................  MI                                         26117              1.70
MONTMORENCY.................................  MI                                         26119              1.35
MUSKEGON....................................  MI                                         26121              1.70
NEWAYGO.....................................  MI                                         26123              1.70
OAKLAND.....................................  MI                                         26125              1.85
OCEANA......................................  MI                                         26127              1.70
OGEMAW......................................  MI                                         26129              1.50
ONTONAGON...................................  MI                                         26131              1.40
OSCEOLA.....................................  MI                                         26133              1.70

[[Page 16196]]

 
OSCODA......................................  MI                                         26135              1.50
OTSEGO......................................  MI                                         26137              1.35
OTTAWA......................................  MI                                         26139              1.70
PRESQUE ISLE................................  MI                                         26141              1.35
ROSCOMMON...................................  MI                                         26143              1.50
SAGINAW.....................................  MI                                         26145              1.85
ST. CLAIR...................................  MI                                         26147              1.85
ST. JOSEPH..................................  MI                                         26149              1.80
SANILAC.....................................  MI                                         26151              1.85
SCHOOLCRAFT.................................  MI                                         26153              1.60
SHIAWASSEE..................................  MI                                         26155              1.85
TUSCOLA.....................................  MI                                         26157              1.85
VAN BUREN...................................  MI                                         26159              1.80
WASHTENAW...................................  MI                                         26161              1.85
WAYNE.......................................  MI                                         26163              1.85
WEXFORD.....................................  MI                                         26165              1.50
AITKIN......................................  MN                                         27001              1.30
ANOKA.......................................  MN                                         27003              1.60
BECKER......................................  MN                                         27005              1.40
BELTRAMI....................................  MN                                         27007              1.10
BENTON......................................  MN                                         27009              1.50
BIG STONE...................................  MN                                         27011              1.50
BLUE EARTH..................................  MN                                         27013              1.60
BROWN.......................................  MN                                         27015              1.60
CARLTON.....................................  MN                                         27017              1.65
CARVER......................................  MN                                         27019              1.60
CASS........................................  MN                                         27021              1.30
CHIPPEWA....................................  MN                                         27023              1.50
CHISAGO.....................................  MN                                         27025              1.60
CLAY........................................  MN                                         27027              1.40
CLEARWATER..................................  MN                                         27029              1.10
COOK........................................  MN                                         27031              1.65
COTTONWOOD..................................  MN                                         27033              1.60
CROW WING...................................  MN                                         27035              1.30
DAKOTA......................................  MN                                         27037              1.60
DODGE.......................................  MN                                         27039              1.60
DOUGLAS.....................................  MN                                         27041              1.50
FARIBAULT...................................  MN                                         27043              1.60
FILLMORE....................................  MN                                         27045              1.60
FREEBORN....................................  MN                                         27047              1.60
GOODHUE.....................................  MN                                         27049              1.60
GRANT.......................................  MN                                         27051              1.50
HENNEPIN....................................  MN                                         27053              1.60
HOUSTON.....................................  MN                                         27055              1.60
HUBBARD.....................................  MN                                         27057              1.30
ISANTI......................................  MN                                         27059              1.60
ITASCA......................................  MN                                         27061              1.30
JACKSON.....................................  MN                                         27063              1.60
KANABEC.....................................  MN                                         27065              1.50
KANDIYOHI...................................  MN                                         27067              1.50
KITTSON.....................................  MN                                         27069              1.10
KOOCHICHING.................................  MN                                         27071              1.30
LAC QUI PARLE...............................  MN                                         27073              1.50
LAKE........................................  MN                                         27075              1.65
LAKE OF THE WOODS...........................  MN                                         27077              1.10
LE SUEUR....................................  MN                                         27079              1.60
LINCOLN.....................................  MN                                         27081              1.50
LYON........................................  MN                                         27083              1.50
MCLEOD......................................  MN                                         27085              1.60
MAHNOMEN....................................  MN                                         27087              1.40
MARSHALL....................................  MN                                         27089              1.10
MARTIN......................................  MN                                         27091              1.60
MEEKER......................................  MN                                         27093              1.60
MILLE LACS..................................  MN                                         27095              1.50
MORRISON....................................  MN                                         27097              1.50
MOWER.......................................  MN                                         27099              1.60
MURRAY......................................  MN                                         27101              1.60
NICOLLET....................................  MN                                         27103              1.60
NOBLES......................................  MN                                         27105              1.60
NORMAN......................................  MN                                         27107              1.40
OLMSTED.....................................  MN                                         27109              1.60
OTTER TAIL..................................  MN                                         27111              1.40

[[Page 16197]]

 
PENNINGTON..................................  MN                                         27113              1.10
PINE........................................  MN                                         27115              1.65
PIPESTONE...................................  MN                                         27117              1.60
POLK........................................  MN                                         27119              1.40
POPE........................................  MN                                         27121              1.50
RAMSEY......................................  MN                                         27123              1.60
RED LAKE....................................  MN                                         27125              1.10
REDWOOD.....................................  MN                                         27127              1.60
RENVILLE....................................  MN                                         27129              1.60
RICE........................................  MN                                         27131              1.60
ROCK........................................  MN                                         27133              1.60
ROSEAU......................................  MN                                         27135              1.10
ST. LOUIS...................................  MN                                         27137              1.65
SCOTT.......................................  MN                                         27139              1.60
SHERBURNE...................................  MN                                         27141              1.60
SIBLEY......................................  MN                                         27143              1.60
STEARNS.....................................  MN                                         27145              1.50
STEELE......................................  MN                                         27147              1.60
STEVENS.....................................  MN                                         27149              1.50
SWIFT.......................................  MN                                         27151              1.50
TODD........................................  MN                                         27153              1.50
TRAVERSE....................................  MN                                         27155              1.50
WABASHA.....................................  MN                                         27157              1.60
WADENA......................................  MN                                         27159              1.30
WASECA......................................  MN                                         27161              1.60
WASHINGTON..................................  MN                                         27163              1.60
WATONWAN....................................  MN                                         27165              1.60
WILKIN......................................  MN                                         27167              1.40
WINONA......................................  MN                                         27169              1.60
WRIGHT......................................  MN                                         27171              1.60
YELLOW MEDICINE.............................  MN                                         27173              1.50
ADAMS.......................................  MS                                         28001              2.85
ALCORN......................................  MS                                         28003              2.70
AMITE.......................................  MS                                         28005              2.85
ATTALA......................................  MS                                         28007              2.85
BENTON......................................  MS                                         28009              2.70
BOLIVAR.....................................  MS                                         28011              2.85
CALHOUN.....................................  MS                                         28013              2.85
CARROLL.....................................  MS                                         28015              2.85
CHICKASAW...................................  MS                                         28017              2.85
CHOCTAW.....................................  MS                                         28019              2.85
CLAIBORNE...................................  MS                                         28021              2.85
CLARKE......................................  MS                                         28023              3.10
CLAY........................................  MS                                         28025              2.85
COAHOMA.....................................  MS                                         28027              2.85
COPIAH......................................  MS                                         28029              2.85
COVINGTON...................................  MS                                         28031              3.00
DE SOTO.....................................  MS                                         28033              2.85
FORREST.....................................  MS                                         28035              3.10
FRANKLIN....................................  MS                                         28037              2.85
GEORGE......................................  MS                                         28039              3.00
GREENE......................................  MS                                         28041              3.10
GRENADA.....................................  MS                                         28043              2.85
HANCOCK.....................................  MS                                         28045              3.00
HARRISON....................................  MS                                         28047              3.00
HINDS.......................................  MS                                         28049              2.85
HOLMES......................................  MS                                         28051              2.85
HUMPHREYS...................................  MS                                         28053              2.85
ISSAQUENA...................................  MS                                         28055              2.85
ITAWAMBA....................................  MS                                         28057              2.55
JACKSON.....................................  MS                                         28059              3.00
JASPER......................................  MS                                         28061              3.10
JEFFERSON...................................  MS                                         28063              2.85
JEFFERSON DAVIS.............................  MS                                         28065              3.00
JONES.......................................  MS                                         28067              3.10
KEMPER......................................  MS                                         28069              2.70
LAFAYETTE...................................  MS                                         28071              2.85
LAMAR.......................................  MS                                         28073              3.00
LAUDERDALE..................................  MS                                         28075              2.70
LAWRENCE....................................  MS                                         28077              2.85
LEAKE.......................................  MS                                         28079              2.70
LEE.........................................  MS                                         28081              2.70

[[Page 16198]]

 
LEFLORE.....................................  MS                                         28083              2.85
LINCOLN.....................................  MS                                         28085              2.85
LOWNDES.....................................  MS                                         28087              2.70
MADISON.....................................  MS                                         28089              2.85
MARION......................................  MS                                         28091              3.00
MARSHALL....................................  MS                                         28093              2.85
MONROE......................................  MS                                         28095              2.70
MONTGOMERY..................................  MS                                         28097              2.85
NESHOBA.....................................  MS                                         28099              2.70
NEWTON......................................  MS                                         28101              2.70
NOXUBEE.....................................  MS                                         28103              2.70
OKTIBBEHA...................................  MS                                         28105              2.70
PANOLA......................................  MS                                         28107              2.85
PEARL RIVER.................................  MS                                         28109              3.00
PERRY.......................................  MS                                         28111              3.10
PIKE........................................  MS                                         28113              2.85
PONTOTOC....................................  MS                                         28115              2.85
PRENTISS....................................  MS                                         28117              2.70
QUITMAN.....................................  MS                                         28119              2.85
RANKIN......................................  MS                                         28121              2.85
SCOTT.......................................  MS                                         28123              2.70
SHARKEY.....................................  MS                                         28125              2.85
SIMPSON.....................................  MS                                         28127              2.85
SMITH.......................................  MS                                         28129              3.00
STONE.......................................  MS                                         28131              3.00
SUNFLOWER...................................  MS                                         28133              2.85
TALLAHATCHIE................................  MS                                         28135              2.85
TATE........................................  MS                                         28137              2.85
TIPPAH......................................  MS                                         28139              2.70
TISHOMINGO..................................  MS                                         28141              2.50
TUNICA......................................  MS                                         28143              2.85
UNION.......................................  MS                                         28145              2.70
WALTHALL....................................  MS                                         28147              2.85
WARREN......................................  MS                                         28149              2.85
WASHINGTON..................................  MS                                         28151              2.85
WAYNE.......................................  MS                                         28153              3.10
WEBSTER.....................................  MS                                         28155              2.85
WILKINSON...................................  MS                                         28157              2.85
WINSTON.....................................  MS                                         28159              2.70
YALOBUSHA...................................  MS                                         28161              2.85
YAZOO.......................................  MS                                         28163              2.85
ADAIR.......................................  MO                                         29001              1.90
ANDREW......................................  MO                                         29003              1.90
ATCHISON....................................  MO                                         29005              1.90
AUDRAIN.....................................  MO                                         29007              2.00
BARRY.......................................  MO                                         29009              1.70
BARTON......................................  MO                                         29011              1.70
BATES.......................................  MO                                         29013              1.70
BENTON......................................  MO                                         29015              1.90
BOLLINGER...................................  MO                                         29017              2.10
BOONE.......................................  MO                                         29019              2.00
BUCHANAN....................................  MO                                         29021              1.90
BUTLER......................................  MO                                         29023              2.10
CALDWELL....................................  MO                                         29025              1.90
CALLAWAY....................................  MO                                         29027              2.00
CAMDEN......................................  MO                                         29029              1.90
CAPE GIRARDEAU..............................  MO                                         29031              2.10
CARROLL.....................................  MO                                         29033              1.90
CARTER......................................  MO                                         29035              2.10
CASS........................................  MO                                         29037              1.90
CEDAR.......................................  MO                                         29039              1.70
CHARITON....................................  MO                                         29041              1.90
CHRISTIAN...................................  MO                                         29043              1.70
CLARK.......................................  MO                                         29045              1.90
CLAY........................................  MO                                         29047              1.90
CLINTON.....................................  MO                                         29049              1.90
COLE........................................  MO                                         29051              2.00
COOPER......................................  MO                                         29053              1.90
CRAWFORD....................................  MO                                         29055              1.90
DADE........................................  MO                                         29057              1.70
DALLAS......................................  MO                                         29059              1.70
DAVIESS.....................................  MO                                         29061              1.90

[[Page 16199]]

 
DE KALB.....................................  MO                                         29063              1.90
DENT........................................  MO                                         29065              1.90
DOUGLAS.....................................  MO                                         29067              1.70
DUNKLIN.....................................  MO                                         29069              2.35
FRANKLIN....................................  MO                                         29071              2.00
GASCONADE...................................  MO                                         29073              2.00
GENTRY......................................  MO                                         29075              1.90
GREENE......................................  MO                                         29077              1.70
GRUNDY......................................  MO                                         29079              1.90
HARRISON....................................  MO                                         29081              1.90
HENRY.......................................  MO                                         29083              1.70
HICKORY.....................................  MO                                         29085              1.70
HOLT........................................  MO                                         29087              1.90
HOWARD......................................  MO                                         29089              1.90
HOWELL......................................  MO                                         29091              1.90
IRON........................................  MO                                         29093              2.10
JACKSON.....................................  MO                                         29095              1.90
JASPER......................................  MO                                         29097              1.70
JEFFERSON...................................  MO                                         29099              2.10
JOHNSON.....................................  MO                                         29101              1.90
KNOX........................................  MO                                         29103              1.90
LACLEDE.....................................  MO                                         29105              1.70
LAFAYETTE...................................  MO                                         29107              1.90
LAWRENCE....................................  MO                                         29109              1.70
LEWIS.......................................  MO                                         29111              1.90
LINCOLN.....................................  MO                                         29113              2.00
LINN........................................  MO                                         29115              1.90
LIVINGSTON..................................  MO                                         29117              1.90
MCDONALD....................................  MO                                         29119              1.70
MACON.......................................  MO                                         29121              1.90
MADISON.....................................  MO                                         29123              2.10
MARIES......................................  MO                                         29125              1.90
MARION......................................  MO                                         29127              2.00
MERCER......................................  MO                                         29129              1.90
MILLER......................................  MO                                         29131              1.90
MISSISSIPPI.................................  MO                                         29133              2.10
MONITEAU....................................  MO                                         29135              2.00
MONROE......................................  MO                                         29137              2.00
MONTGOMERY..................................  MO                                         29139              2.00
MORGAN......................................  MO                                         29141              1.90
NEW MADRID..................................  MO                                         29143              2.35
NEWTON......................................  MO                                         29145              1.70
NODAWAY.....................................  MO                                         29147              1.90
OREGON......................................  MO                                         29149              2.10
OSAGE.......................................  MO                                         29151              2.00
OZARK.......................................  MO                                         29153              1.90
PEMISCOT....................................  MO                                         29155              2.35
PERRY.......................................  MO                                         29157              2.10
PETTIS......................................  MO                                         29159              1.90
PHELPS......................................  MO                                         29161              1.90
PIKE........................................  MO                                         29163              2.00
PLATTE......................................  MO                                         29165              1.90
POLK........................................  MO                                         29167              1.70
PULASKI.....................................  MO                                         29169              1.90
PUTNAM......................................  MO                                         29171              1.90
RALLS.......................................  MO                                         29173              2.00
RANDOLPH....................................  MO                                         29175              1.90
RAY.........................................  MO                                         29177              1.90
REYNOLDS....................................  MO                                         29179              2.10
RIPLEY......................................  MO                                         29181              2.10
ST. CHARLES.................................  MO                                         29183              2.00
ST. CLAIR...................................  MO                                         29185              1.70
STE. GENEVIEVE..............................  MO                                         29186              2.10
ST. FRANCOIS................................  MO                                         29187              2.10
ST. LOUIS...................................  MO                                         29189              2.10
SALINE......................................  MO                                         29195              1.90
SCHUYLER....................................  MO                                         29197              1.90
SCOTLAND....................................  MO                                         29199              1.90
SCOTT.......................................  MO                                         29201              2.10
SHANNON.....................................  MO                                         29203              1.90
SHELBY......................................  MO                                         29205              1.90
STODDARD....................................  MO                                         29207              2.10

[[Page 16200]]

 
STONE.......................................  MO                                         29209              1.70
SULLIVAN....................................  MO                                         29211              1.90
TANEY.......................................  MO                                         29213              1.70
TEXAS.......................................  MO                                         29215              1.90
VERNON......................................  MO                                         29217              1.70
WARREN......................................  MO                                         29219              2.00
WASHINGTON..................................  MO                                         29221              2.10
WAYNE.......................................  MO                                         29223              2.10
WEBSTER.....................................  MO                                         29225              1.70
WORTH.......................................  MO                                         29227              1.90
WRIGHT......................................  MO                                         29229              1.70
ST. LOUIS CITY..............................  MO                                         29510              2.10
BEAVERHEAD..................................  MT                                         30001              1.40
BIG HORN....................................  MT                                         30003              1.50
BLAINE......................................  MT                                         30005              1.65
BROADWATER..................................  MT                                         30007              1.40
CARBON......................................  MT                                         30009              1.40
CARTER......................................  MT                                         30011              1.40
CASCADE.....................................  MT                                         30013              1.75
CHOUTEAU....................................  MT                                         30015              1.75
CUSTER......................................  MT                                         30017              1.50
DANIELS.....................................  MT                                         30019              1.50
DAWSON......................................  MT                                         30021              1.50
DEER LODGE..................................  MT                                         30023              1.40
FALLON......................................  MT                                         30025              1.40
FERGUS......................................  MT                                         30027              1.65
FLATHEAD....................................  MT                                         30029              1.50
GALLATIN....................................  MT                                         30031              1.40
GARFIELD....................................  MT                                         30033              1.65
GLACIER.....................................  MT                                         30035              1.65
GOLDEN VALLEY...............................  MT                                         30037              1.65
GRANITE.....................................  MT                                         30039              1.65
HILL........................................  MT                                         30041              1.75
JEFFERSON...................................  MT                                         30043              1.40
JUDITH BASIN................................  MT                                         30045              1.65
LAKE........................................  MT                                         30047              1.50
LEWIS AND CLARK.............................  MT                                         30049              1.65
LIBERTY.....................................  MT                                         30051              1.75
LINCOLN.....................................  MT                                         30053              1.50
MCCONE......................................  MT                                         30055              1.50
MADISON.....................................  MT                                         30057              1.40
MEAGHER.....................................  MT                                         30059              1.40
MINERAL.....................................  MT                                         30061              1.50
MISSOULA....................................  MT                                         30063              1.50
MUSSELSHELL.................................  MT                                         30065              1.65
PARK........................................  MT                                         30067              1.40
PETROLEUM...................................  MT                                         30069              1.65
PHILLIPS....................................  MT                                         30071              1.65
PONDERA.....................................  MT                                         30073              1.65
POWDER RIVER................................  MT                                         30075              1.40
POWELL......................................  MT                                         30077              1.65
PRAIRIE.....................................  MT                                         30079              1.50
RAVALLI.....................................  MT                                         30081              1.65
RICHLAND....................................  MT                                         30083              1.50
ROOSEVELT...................................  MT                                         30085              1.50
ROSEBUD.....................................  MT                                         30087              1.50
SANDERS.....................................  MT                                         30089              1.50
SHERIDAN....................................  MT                                         30091              1.50
SILVER BOW..................................  MT                                         30093              1.40
STILLWATER..................................  MT                                         30095              1.40
SWEET GRASS.................................  MT                                         30097              1.40
TETON.......................................  MT                                         30099              1.65
TOOLE.......................................  MT                                         30101              1.65
TREASURE....................................  MT                                         30103              1.50
VALLEY......................................  MT                                         30105              1.65
WHEATLAND...................................  MT                                         30107              1.65
WIBAUX......................................  MT                                         30109              1.40
YELLOWSTONE.................................  MT                                         30111              1.65
YELLOWSTONE NATIONAL PARK...................  MT                                         30113              1.40
ADAMS.......................................  NE                                         31001              1.60
ANTELOPE....................................  NE                                         31003              1.60
ARTHUR......................................  NE                                         31005              1.40

[[Page 16201]]

 
BANNER......................................  NE                                         31007              1.40
BLAINE......................................  NE                                         31009              1.50
BOONE.......................................  NE                                         31011              1.60
BOX BUTTE...................................  NE                                         31013              1.40
BOYD........................................  NE                                         31015              1.50
BROWN.......................................  NE                                         31017              1.50
BUFFALO.....................................  NE                                         31019              1.60
BURT........................................  NE                                         31021              1.80
BUTLER......................................  NE                                         31023              1.80
CASS........................................  NE                                         31025              1.90
CEDAR.......................................  NE                                         31027              1.60
CHASE.......................................  NE                                         31029              1.50
CHERRY......................................  NE                                         31031              1.40
CHEYENNE....................................  NE                                         31033              1.40
CLAY........................................  NE                                         31035              1.80
COLFAX......................................  NE                                         31037              1.80
CUMING......................................  NE                                         31039              1.80
CUSTER......................................  NE                                         31041              1.50
DAKOTA......................................  NE                                         31043              1.80
DAWES.......................................  NE                                         31045              1.40
DAWSON......................................  NE                                         31047              1.60
DEUEL.......................................  NE                                         31049              1.40
DIXON.......................................  NE                                         31051              1.60
DODGE.......................................  NE                                         31053              1.80
DOUGLAS.....................................  NE                                         31055              1.90
DUNDY.......................................  NE                                         31057              1.60
FILLMORE....................................  NE                                         31059              1.80
FRANKLIN....................................  NE                                         31061              1.60
FRONTIER....................................  NE                                         31063              1.60
FURNAS......................................  NE                                         31065              1.60
GAGE........................................  NE                                         31067              1.90
GARDEN......................................  NE                                         31069              1.40
GARFIELD....................................  NE                                         31071              1.50
GOSPER......................................  NE                                         31073              1.60
GRANT.......................................  NE                                         31075              1.40
GREELEY.....................................  NE                                         31077              1.60
HALL........................................  NE                                         31079              1.60
HAMILTON....................................  NE                                         31081              1.80
HARLAN......................................  NE                                         31083              1.60
HAYES.......................................  NE                                         31085              1.60
HITCHCOCK...................................  NE                                         31087              1.60
HOLT........................................  NE                                         31089              1.50
HOOKER......................................  NE                                         31091              1.40
HOWARD......................................  NE                                         31093              1.60
JEFFERSON...................................  NE                                         31095              1.80
JOHNSON.....................................  NE                                         31097              1.90
KEARNEY.....................................  NE                                         31099              1.60
KEITH.......................................  NE                                         31101              1.40
KEYA PAHA...................................  NE                                         31103              1.50
KIMBALL.....................................  NE                                         31105              1.40
KNOX........................................  NE                                         31107              1.60
LANCASTER...................................  NE                                         31109              1.80
LINCOLN.....................................  NE                                         31111              1.50
LOGAN.......................................  NE                                         31113              1.50
LOUP........................................  NE                                         31115              1.50
MCPHERSON...................................  NE                                         31117              1.50
MADISON.....................................  NE                                         31119              1.60
MERRICK.....................................  NE                                         31121              1.60
MORRILL.....................................  NE                                         31123              1.40
NANCE.......................................  NE                                         31125              1.60
NEMAHA......................................  NE                                         31127              1.90
NUCKOLLS....................................  NE                                         31129              1.60
OTOE........................................  NE                                         31131              1.90
PAWNEE......................................  NE                                         31133              1.90
PERKINS.....................................  NE                                         31135              1.50
PHELPS......................................  NE                                         31137              1.60
PIERCE......................................  NE                                         31139              1.60
PLATTE......................................  NE                                         31141              1.80
POLK........................................  NE                                         31143              1.80
RED WILLOW..................................  NE                                         31145              1.60
RICHARDSON..................................  NE                                         31147              1.90
ROCK........................................  NE                                         31149              1.50

[[Page 16202]]

 
SALINE......................................  NE                                         31151              1.80
SARPY.......................................  NE                                         31153              1.90
SAUNDERS....................................  NE                                         31155              1.80
SCOTTS BLUFF................................  NE                                         31157              1.40
SEWARD......................................  NE                                         31159              1.80
SHERIDAN....................................  NE                                         31161              1.40
SHERMAN.....................................  NE                                         31163              1.60
SIOUX.......................................  NE                                         31165              1.40
STANTON.....................................  NE                                         31167              1.60
THAYER......................................  NE                                         31169              1.80
THOMAS......................................  NE                                         31171              1.40
THURSTON....................................  NE                                         31173              1.80
VALLEY......................................  NE                                         31175              1.60
WASHINGTON..................................  NE                                         31177              1.90
WAYNE.......................................  NE                                         31179              1.60
WEBSTER.....................................  NE                                         31181              1.60
WHEELER.....................................  NE                                         31183              1.60
YORK........................................  NE                                         31185              1.80
CHURCHILL...................................  NV                                         32001              1.40
CLARK.......................................  NV                                         32003              2.25
DOUGLAS.....................................  NV                                         32005              1.20
ELKO........................................  NV                                         32007              1.40
ESMERALDA...................................  NV                                         32009              1.50
EUREKA......................................  NV                                         32011              1.40
HUMBOLDT....................................  NV                                         32013              1.40
LANDER......................................  NV                                         32015              1.40
LINCOLN.....................................  NV                                         32017              1.80
LYON........................................  NV                                         32019              1.20
MINERAL.....................................  NV                                         32021              1.20
NYE.........................................  NV                                         32023              1.50
PERSHING....................................  NV                                         32027              1.40
STOREY......................................  NV                                         32029              1.20
WASHOE......................................  NV                                         32031              1.40
WHITE PINE..................................  NV                                         32033              1.50
CARSON CITY.................................  NV                                         32510              1.20
BELKNAP.....................................  NH                                         33001              2.30
CARROLL.....................................  NH                                         33003              2.15
CHESHIRE....................................  NH                                         33005              2.50
COOS........................................  NH                                         33007              1.95
GRAFTON.....................................  NH                                         33009              2.15
HILLSBOROUGH................................  NH                                         33011              2.60
MERRIMACK...................................  NH                                         33013              2.45
ROCKINGHAM..................................  NH                                         33015              2.60
STRAFFORD...................................  NH                                         33017              2.45
SULLIVAN....................................  NH                                         33019              2.30
ATLANTIC....................................  NJ                                         34001              2.20
BERGEN......................................  NJ                                         34003              2.50
BURLINGTON..................................  NJ                                         34005              2.20
CAMDEN......................................  NJ                                         34007              2.20
CAPE MAY....................................  NJ                                         34009              2.20
CUMBERLAND..................................  NJ                                         34011              2.20
ESSEX.......................................  NJ                                         34013              2.50
GLOUCESTER..................................  NJ                                         34015              2.20
HUDSON......................................  NJ                                         34017              2.50
HUNTERDON...................................  NJ                                         34019              2.30
MERCER......................................  NJ                                         34021              2.30
MIDDLESEX...................................  NJ                                         34023              2.30
MONMOUTH....................................  NJ                                         34025              2.30
MORRIS......................................  NJ                                         34027              2.30
OCEAN.......................................  NJ                                         34029              2.30
PASSAIC.....................................  NJ                                         34031              2.50
SALEM.......................................  NJ                                         34033              2.20
SOMERSET....................................  NJ                                         34035              2.30
SUSSEX......................................  NJ                                         34037              2.30
UNION.......................................  NJ                                         34039              2.50
WARREN......................................  NJ                                         34041              2.30
BERNALILLO..................................  NM                                         35001              2.30
CATRON......................................  NM                                         35003              1.90
CHAVES......................................  NM                                         35005              1.60
CIBOLA......................................  NM                                         35006              1.90
COLFAX......................................  NM                                         35007              1.90
CURRY.......................................  NM                                         35009              1.60

[[Page 16203]]

 
DE BACA.....................................  NM                                         35011              1.60
DONA ANA....................................  NM                                         35013              1.60
EDDY........................................  NM                                         35015              1.60
GRANT.......................................  NM                                         35017              1.60
GUADALUPE...................................  NM                                         35019              1.90
HARDING.....................................  NM                                         35021              1.90
HIDALGO.....................................  NM                                         35023              1.60
LEA.........................................  NM                                         35025              1.60
LINCOLN.....................................  NM                                         35027              1.90
LOS ALAMOS..................................  NM                                         35028              2.30
LUNA........................................  NM                                         35029              1.60
MCKINLEY....................................  NM                                         35031              1.90
MORA........................................  NM                                         35033              1.90
OTERO.......................................  NM                                         35035              1.60
QUAY........................................  NM                                         35037              1.60
RIO ARRIBA..................................  NM                                         35039              2.20
ROOSEVELT...................................  NM                                         35041              1.60
SANDOVAL....................................  NM                                         35043              2.30
SAN JUAN....................................  NM                                         35045              2.20
SAN MIGUEL..................................  NM                                         35047              1.90
SANTA FE....................................  NM                                         35049              2.30
SIERRA......................................  NM                                         35051              1.90
SOCORRO.....................................  NM                                         35053              1.90
TAOS........................................  NM                                         35055              1.90
TORRANCE....................................  NM                                         35057              1.90
UNION.......................................  NM                                         35059              1.90
VALENCIA....................................  NM                                         35061              1.90
ALBANY......................................  NY                                         36001              2.15
ALLEGANY....................................  NY                                         36003              1.85
BRONX.......................................  NY                                         36005              2.50
BROOME......................................  NY                                         36007              1.90
CATTARAUGUS.................................  NY                                         36009              1.60
CAYUGA......................................  NY                                         36011              1.85
CHAUTAUQUA..................................  NY                                         36013              1.60
CHEMUNG.....................................  NY                                         36015              1.85
CHENANGO....................................  NY                                         36017              1.85
CLINTON.....................................  NY                                         36019              1.95
COLUMBIA....................................  NY                                         36021              2.15
CORTLAND....................................  NY                                         36023              1.85
DELAWARE....................................  NY                                         36025              2.15
DUTCHESS....................................  NY                                         36027              2.30
ERIE........................................  NY                                         36029              1.85
ESSEX.......................................  NY                                         36031              2.05
FRANKLIN....................................  NY                                         36033              1.85
FULTON......................................  NY                                         36035              2.05
GENESEE.....................................  NY                                         36037              1.85
GREENE......................................  NY                                         36039              2.15
HAMILTON....................................  NY                                         36041              1.95
HERKIMER....................................  NY                                         36043              1.95
JEFFERSON...................................  NY                                         36045              1.85
KINGS.......................................  NY                                         36047              2.50
LEWIS.......................................  NY                                         36049              1.85
LIVINGSTON..................................  NY                                         36051              1.85
MADISON.....................................  NY                                         36053              1.85
MONROE......................................  NY                                         36055              1.85
MONTGOMERY..................................  NY                                         36057              2.05
NASSAU......................................  NY                                         36059              2.50
NEW YORK....................................  NY                                         36061              2.50
NIAGARA.....................................  NY                                         36063              1.85
ONEIDA......................................  NY                                         36065              1.85
ONONDAGA....................................  NY                                         36067              1.85
ONTARIO.....................................  NY                                         36069              1.85
ORANGE......................................  NY                                         36071              2.30
ORLEANS.....................................  NY                                         36073              1.85
OSWEGO......................................  NY                                         36075              1.85
OTSEGO......................................  NY                                         36077              1.95
PUTNAM......................................  NY                                         36079              2.30
QUEENS......................................  NY                                         36081              2.50
RENSSELAER..................................  NY                                         36083              2.15
RICHMOND....................................  NY                                         36085              2.50
ROCKLAND....................................  NY                                         36087              2.50
ST. LAWRENCE................................  NY                                         36089              1.85

[[Page 16204]]

 
SARATOGA....................................  NY                                         36091              2.05
SCHENECTADY.................................  NY                                         36093              2.15
SCHOHARIE...................................  NY                                         36095              2.05
SCHUYLER....................................  NY                                         36097              1.85
SENECA......................................  NY                                         36099              1.85
STEUBEN.....................................  NY                                         36101              1.85
SUFFOLK.....................................  NY                                         36103              2.50
SULLIVAN....................................  NY                                         36105              2.15
TIOGA.......................................  NY                                         36107              1.90
TOMPKINS....................................  NY                                         36109              1.85
ULSTER......................................  NY                                         36111              2.15
WARREN......................................  NY                                         36113              1.95
WASHINGTON..................................  NY                                         36115              2.05
WAYNE.......................................  NY                                         36117              1.85
WESTCHESTER.................................  NY                                         36119              2.50
WYOMING.....................................  NY                                         36121              1.85
YATES.......................................  NY                                         36123              1.85
ALAMANCE....................................  NC                                         37001              2.35
ALEXANDER...................................  NC                                         37003              2.35
ALLEGHANY...................................  NC                                         37005              2.35
ANSON.......................................  NC                                         37007              2.55
ASHE........................................  NC                                         37009              2.25
AVERY.......................................  NC                                         37011              2.25
BEAUFORT....................................  NC                                         37013              2.65
BERTIE......................................  NC                                         37015              2.65
BLADEN......................................  NC                                         37017              2.80
BRUNSWICK...................................  NC                                         37019              2.85
BUNCOMBE....................................  NC                                         37021              2.55
BURKE.......................................  NC                                         37023              2.35
CABARRUS....................................  NC                                         37025              2.55
CALDWELL....................................  NC                                         37027              2.35
CAMDEN......................................  NC                                         37029              2.55
CARTERET....................................  NC                                         37031              2.85
CASWELL.....................................  NC                                         37033              2.35
CATAWBA.....................................  NC                                         37035              2.35
CHATHAM.....................................  NC                                         37037              2.35
CHEROKEE....................................  NC                                         37039              2.55
CHOWAN......................................  NC                                         37041              2.55
CLAY........................................  NC                                         37043              2.55
CLEVELAND...................................  NC                                         37045              2.55
COLUMBUS....................................  NC                                         37047              3.00
CRAVEN......................................  NC                                         37049              2.85
CUMBERLAND..................................  NC                                         37051              2.80
CURRITUCK...................................  NC                                         37053              2.55
DARE........................................  NC                                         37055              2.65
DAVIDSON....................................  NC                                         37057              2.35
DAVIE.......................................  NC                                         37059              2.35
DUPLIN......................................  NC                                         37061              2.85
DURHAM......................................  NC                                         37063              2.35
EDGECOMBE...................................  NC                                         37065              2.65
FORSYTH.....................................  NC                                         37067              2.35
FRANKLIN....................................  NC                                         37069              2.55
GASTON......................................  NC                                         37071              2.55
GATES.......................................  NC                                         37073              2.55
GRAHAM......................................  NC                                         37075              2.55
GRANVILLE...................................  NC                                         37077              2.55
GREENE......................................  NC                                         37079              2.65
GUILFORD....................................  NC                                         37081              2.35
HALIFAX.....................................  NC                                         37083              2.55
HARNETT.....................................  NC                                         37085              2.55
HAYWOOD.....................................  NC                                         37087              2.55
HENDERSON...................................  NC                                         37089              2.55
HERTFORD....................................  NC                                         37091              2.55
HOKE........................................  NC                                         37093              2.80
HYDE........................................  NC                                         37095              2.65
IREDELL.....................................  NC                                         37097              2.35
JACKSON.....................................  NC                                         37099              2.55
JOHNSTON....................................  NC                                         37101              2.65
JONES.......................................  NC                                         37103              2.85
LEE.........................................  NC                                         37105              2.55
LENOIR......................................  NC                                         37107              2.85
LINCOLN.....................................  NC                                         37109              2.35

[[Page 16205]]

 
MCDOWELL....................................  NC                                         37111              2.35
MACON.......................................  NC                                         37113              2.55
MADISON.....................................  NC                                         37115              2.25
MARTIN......................................  NC                                         37117              2.65
MECKLENBURG.................................  NC                                         37119              2.55
MITCHELL....................................  NC                                         37121              2.25
MONTGOMERY..................................  NC                                         37123              2.55
MOORE.......................................  NC                                         37125              2.55
NASH........................................  NC                                         37127              2.65
NEW HANOVER.................................  NC                                         37129              2.85
NORTHAMPTON.................................  NC                                         37131              2.55
ONSLOW......................................  NC                                         37133              2.85
ORANGE......................................  NC                                         37135              2.35
PAMLICO.....................................  NC                                         37137              2.85
PASQUOTANK..................................  NC                                         37139              2.55
PENDER......................................  NC                                         37141              2.85
PERQUIMANS..................................  NC                                         37143              2.55
PERSON......................................  NC                                         37145              2.35
PITT........................................  NC                                         37147              2.65
POLK........................................  NC                                         37149              2.55
RANDOLPH....................................  NC                                         37151              2.35
RICHMOND....................................  NC                                         37153              2.55
ROBESON.....................................  NC                                         37155              3.00
ROCKINGHAM..................................  NC                                         37157              2.35
ROWAN.......................................  NC                                         37159              2.35
RUTHERFORD..................................  NC                                         37161              2.55
SAMPSON.....................................  NC                                         37163              2.80
SCOTLAND....................................  NC                                         37165              2.80
STANLY......................................  NC                                         37167              2.55
STOKES......................................  NC                                         37169              2.35
SURRY.......................................  NC                                         37171              2.35
SWAIN.......................................  NC                                         37173              2.25
TRANSYLVANIA................................  NC                                         37175              2.55
TYRRELL.....................................  NC                                         37177              2.65
UNION.......................................  NC                                         37179              2.55
VANCE.......................................  NC                                         37181              2.55
WAKE........................................  NC                                         37183              2.55
WARREN......................................  NC                                         37185              2.55
WASHINGTON..................................  NC                                         37187              2.65
WATAUGA.....................................  NC                                         37189              2.25
WAYNE.......................................  NC                                         37191              2.65
WILKES......................................  NC                                         37193              2.35
WILSON......................................  NC                                         37195              2.65
YADKIN......................................  NC                                         37197              2.35
YANCEY......................................  NC                                         37199              2.25
ADAMS.......................................  ND                                         38001              1.40
BARNES......................................  ND                                         38003              1.40
BENSON......................................  ND                                         38005              1.40
BILLINGS....................................  ND                                         38007              1.40
BOTTINEAU...................................  ND                                         38009              1.40
BOWMAN......................................  ND                                         38011              1.40
BURKE.......................................  ND                                         38013              1.40
BURLEIGH....................................  ND                                         38015              1.40
CASS........................................  ND                                         38017              1.40
CAVALIER....................................  ND                                         38019              1.40
DICKEY......................................  ND                                         38021              1.40
DIVIDE......................................  ND                                         38023              1.40
DUNN........................................  ND                                         38025              1.40
EDDY........................................  ND                                         38027              1.40
EMMONS......................................  ND                                         38029              1.40
FOSTER......................................  ND                                         38031              1.40
GOLDEN VALLEY...............................  ND                                         38033              1.40
GRAND FORKS.................................  ND                                         38035              1.40
GRANT.......................................  ND                                         38037              1.40
GRIGGS......................................  ND                                         38039              1.40
HETTINGER...................................  ND                                         38041              1.40
KIDDER......................................  ND                                         38043              1.40
LA MOURE....................................  ND                                         38045              1.40
LOGAN.......................................  ND                                         38047              1.40
MCHENRY.....................................  ND                                         38049              1.40
MCINTOSH....................................  ND                                         38051              1.40
MCKENZIE....................................  ND                                         38053              1.40

[[Page 16206]]

 
MCLEAN......................................  ND                                         38055              1.40
MERCER......................................  ND                                         38057              1.40
MORTON......................................  ND                                         38059              1.40
MOUNTRAIL...................................  ND                                         38061              1.40
NELSON......................................  ND                                         38063              1.40
OLIVER......................................  ND                                         38065              1.40
PEMBINA.....................................  ND                                         38067              1.40
PIERCE......................................  ND                                         38069              1.40
RAMSEY......................................  ND                                         38071              1.40
RANSOM......................................  ND                                         38073              1.40
RENVILLE....................................  ND                                         38075              1.40
RICHLAND....................................  ND                                         38077              1.40
ROLETTE.....................................  ND                                         38079              1.40
SARGENT.....................................  ND                                         38081              1.40
SHERIDAN....................................  ND                                         38083              1.40
SIOUX.......................................  ND                                         38085              1.40
SLOPE.......................................  ND                                         38087              1.40
STARK.......................................  ND                                         38089              1.40
STEELE......................................  ND                                         38091              1.40
STUTSMAN....................................  ND                                         38093              1.40
TOWNER......................................  ND                                         38095              1.40
TRAILL......................................  ND                                         38097              1.40
WALSH.......................................  ND                                         38099              1.40
WARD........................................  ND                                         38101              1.40
WELLS.......................................  ND                                         38103              1.40
WILLIAMS....................................  ND                                         38105              1.40
ADAMS.......................................  OH                                         39001              2.05
ALLEN.......................................  OH                                         39003              2.00
ASHLAND.....................................  OH                                         39005              2.00
ASHTABULA...................................  OH                                         39007              2.00
ATHENS......................................  OH                                         39009              2.00
AUGLAIZE....................................  OH                                         39011              2.00
BELMONT.....................................  OH                                         39013              2.00
BROWN.......................................  OH                                         39015              2.05
BUTLER......................................  OH                                         39017              2.05
CARROLL.....................................  OH                                         39019              1.95
CHAMPAIGN...................................  OH                                         39021              2.00
CLARK.......................................  OH                                         39023              2.00
CLERMONT....................................  OH                                         39025              2.05
CLINTON.....................................  OH                                         39027              2.05
COLUMBIANA..................................  OH                                         39029              1.95
COSHOCTON...................................  OH                                         39031              1.95
CRAWFORD....................................  OH                                         39033              2.00
CUYAHOGA....................................  OH                                         39035              2.00
DARKE.......................................  OH                                         39037              2.00
DEFIANCE....................................  OH                                         39039              1.80
DELAWARE....................................  OH                                         39041              2.00
ERIE........................................  OH                                         39043              2.00
FAIRFIELD...................................  OH                                         39045              2.00
FAYETTE.....................................  OH                                         39047              2.00
FRANKLIN....................................  OH                                         39049              2.00
FULTON......................................  OH                                         39051              1.85
GALLIA......................................  OH                                         39053              2.20
GEAUGA......................................  OH                                         39055              2.00
GREENE......................................  OH                                         39057              2.00
GUERNSEY....................................  OH                                         39059              2.00
HAMILTON....................................  OH                                         39061              2.05
HANCOCK.....................................  OH                                         39063              2.00
HARDIN......................................  OH                                         39065              2.00
HARRISON....................................  OH                                         39067              1.95
HENRY.......................................  OH                                         39069              1.85
HIGHLAND....................................  OH                                         39071              2.05
HOCKING.....................................  OH                                         39073              2.00
HOLMES......................................  OH                                         39075              1.95
HURON.......................................  OH                                         39077              2.00
JACKSON.....................................  OH                                         39079              2.05
JEFFERSON...................................  OH                                         39081              1.95
KNOX........................................  OH                                         39083              2.00
LAKE........................................  OH                                         39085              2.00
LAWRENCE....................................  OH                                         39087              2.20
LICKING.....................................  OH                                         39089              2.00
LOGAN.......................................  OH                                         39091              2.00

[[Page 16207]]

 
LORAIN......................................  OH                                         39093              2.00
LUCAS.......................................  OH                                         39095              1.85
MADISON.....................................  OH                                         39097              2.00
MAHONING....................................  OH                                         39099              1.95
MARION......................................  OH                                         39101              2.00
MEDINA......................................  OH                                         39103              2.00
MEIGS.......................................  OH                                         39105              2.05
MERCER......................................  OH                                         39107              2.00
MIAMI.......................................  OH                                         39109              2.00
MONROE......................................  OH                                         39111              2.00
MONTGOMERY..................................  OH                                         39113              2.00
MORGAN......................................  OH                                         39115              2.00
MORROW......................................  OH                                         39117              2.00
MUSKINGUM...................................  OH                                         39119              2.00
NOBLE.......................................  OH                                         39121              2.00
OTTAWA......................................  OH                                         39123              1.85
PAULDING....................................  OH                                         39125              1.80
PERRY.......................................  OH                                         39127              2.00
PICKAWAY....................................  OH                                         39129              2.00
PIKE........................................  OH                                         39131              2.05
PORTAGE.....................................  OH                                         39133              2.00
PREBLE......................................  OH                                         39135              2.00
PUTNAM......................................  OH                                         39137              2.00
RICHLAND....................................  OH                                         39139              2.00
ROSS........................................  OH                                         39141              2.05
SANDUSKY....................................  OH                                         39143              2.00
SCIOTO......................................  OH                                         39145              2.05
SENECA......................................  OH                                         39147              2.00
SHELBY......................................  OH                                         39149              2.00
STARK.......................................  OH                                         39151              1.95
SUMMIT......................................  OH                                         39153              2.00
TRUMBULL....................................  OH                                         39155              2.00
TUSCARAWAS..................................  OH                                         39157              1.95
UNION.......................................  OH                                         39159              2.00
VAN WERT....................................  OH                                         39161              2.00
VINTON......................................  OH                                         39163              2.05
WARREN......................................  OH                                         39165              2.05
WASHINGTON..................................  OH                                         39167              2.00
WAYNE.......................................  OH                                         39169              1.95
WILLIAMS....................................  OH                                         39171              1.80
WOOD........................................  OH                                         39173              1.85
WYANDOT.....................................  OH                                         39175              2.00
ADAIR.......................................  OK                                         40001              1.90
ALFALFA.....................................  OK                                         40003              1.90
ATOKA.......................................  OK                                         40005              1.95
BEAVER......................................  OK                                         40007              1.90
BECKHAM.....................................  OK                                         40009              1.90
BLAINE......................................  OK                                         40011              1.90
BRYAN.......................................  OK                                         40013              1.95
CADDO.......................................  OK                                         40015              1.90
CANADIAN....................................  OK                                         40017              1.90
CARTER......................................  OK                                         40019              1.95
CHEROKEE....................................  OK                                         40021              1.90
CHOCTAW.....................................  OK                                         40023              1.95
CIMARRON....................................  OK                                         40025              1.90
CLEVELAND...................................  OK                                         40027              1.90
COAL........................................  OK                                         40029              1.95
COMANCHE....................................  OK                                         40031              1.95
COTTON......................................  OK                                         40033              1.95
CRAIG.......................................  OK                                         40035              1.70
CREEK.......................................  OK                                         40037              1.90
CUSTER......................................  OK                                         40039              1.90
DELAWARE....................................  OK                                         40041              1.70
DEWEY.......................................  OK                                         40043              1.90
ELLIS.......................................  OK                                         40045              1.90
GARFIELD....................................  OK                                         40047              1.90
GARVIN......................................  OK                                         40049              1.95
GRADY.......................................  OK                                         40051              1.90
GRANT.......................................  OK                                         40053              1.90
GREER.......................................  OK                                         40055              1.95
HARMON......................................  OK                                         40057              1.95
HARPER......................................  OK                                         40059              1.90

[[Page 16208]]

 
HASKELL.....................................  OK                                         40061              1.90
HUGHES......................................  OK                                         40063              1.90
JACKSON.....................................  OK                                         40065              1.95
JEFFERSON...................................  OK                                         40067              1.95
JOHNSTON....................................  OK                                         40069              1.95
KAY.........................................  OK                                         40071              1.90
KINGFISHER..................................  OK                                         40073              1.90
KIOWA.......................................  OK                                         40075              1.95
LATIMER.....................................  OK                                         40077              1.90
LE FLORE....................................  OK                                         40079              1.90
LINCOLN.....................................  OK                                         40081              1.90
LOGAN.......................................  OK                                         40083              1.90
LOVE........................................  OK                                         40085              1.95
MCCLAIN.....................................  OK                                         40087              1.90
MCCURTAIN...................................  OK                                         40089              1.95
MCINTOSH....................................  OK                                         40091              1.90
MAJOR.......................................  OK                                         40093              1.90
MARSHALL....................................  OK                                         40095              1.95
MAYES.......................................  OK                                         40097              1.70
MURRAY......................................  OK                                         40099              1.95
MUSKOGEE....................................  OK                                         40101              1.90
NOBLE.......................................  OK                                         40103              1.90
NOWATA......................................  OK                                         40105              1.70
OKFUSKEE....................................  OK                                         40107              1.90
OKLAHOMA....................................  OK                                         40109              1.90
OKMULGEE....................................  OK                                         40111              1.90
OSAGE.......................................  OK                                         40113              1.90
OTTAWA......................................  OK                                         40115              1.70
PAWNEE......................................  OK                                         40117              1.90
PAYNE.......................................  OK                                         40119              1.90
PITTSBURG...................................  OK                                         40121              1.90
PONTOTOC....................................  OK                                         40123              1.95
POTTAWATOMIE................................  OK                                         40125              1.90
PUSHMATAHA..................................  OK                                         40127              1.95
ROGER MILLS.................................  OK                                         40129              1.90
ROGERS......................................  OK                                         40131              1.70
SEMINOLE....................................  OK                                         40133              1.90
SEQUOYAH....................................  OK                                         40135              1.90
STEPHENS....................................  OK                                         40137              1.95
TEXAS.......................................  OK                                         40139              1.90
TILLMAN.....................................  OK                                         40141              1.95
TULSA.......................................  OK                                         40143              1.90
WAGONER.....................................  OK                                         40145              1.90
WASHINGTON..................................  OK                                         40147              1.70
WASHITA.....................................  OK                                         40149              1.90
WOODS.......................................  OK                                         40151              1.90
WOODWARD....................................  OK                                         40153              1.90
BAKER.......................................  OR                                         41001              1.35
BENTON......................................  OR                                         41003              1.55
CLACKAMAS...................................  OR                                         41005              1.45
CLATSOP.....................................  OR                                         41007              1.45
COLUMBIA....................................  OR                                         41009              1.45
COOS........................................  OR                                         41011              1.70
CROOK.......................................  OR                                         41013              1.30
CURRY.......................................  OR                                         41015              1.85
DESCHUTES...................................  OR                                         41017              1.55
DOUGLAS.....................................  OR                                         41019              1.70
GILLIAM.....................................  OR                                         41021              1.30
GRANT.......................................  OR                                         41023              1.35
HARNEY......................................  OR                                         41025              1.35
HOOD RIVER..................................  OR                                         41027              1.45
JACKSON.....................................  OR                                         41029              1.85
JEFFERSON...................................  OR                                         41031              1.30
JOSEPHINE...................................  OR                                         41033              1.85
KLAMATH.....................................  OR                                         41035              1.70
LAKE........................................  OR                                         41037              1.55
LANE........................................  OR                                         41039              1.55
LINCOLN.....................................  OR                                         41041              1.55
LINN........................................  OR                                         41043              1.55
MALHEUR.....................................  OR                                         41045              1.35
MARION......................................  OR                                         41047              1.45
MORROW......................................  OR                                         41049              1.30

[[Page 16209]]

 
MULTNOMAH...................................  OR                                         41051              1.45
POLK........................................  OR                                         41053              1.45
SHERMAN.....................................  OR                                         41055              1.30
TILLAMOOK...................................  OR                                         41057              1.45
UMATILLA....................................  OR                                         41059              1.35
UNION.......................................  OR                                         41061              1.35
WALLOWA.....................................  OR                                         41063              1.35
WASCO.......................................  OR                                         41065              1.30
WASHINGTON..................................  OR                                         41067              1.45
WHEELER.....................................  OR                                         41069              1.30
YAMHILL.....................................  OR                                         41071              1.45
ADAMS.......................................  PA                                         42001              2.05
ALLEGHENY...................................  PA                                         42003              1.95
ARMSTRONG...................................  PA                                         42005              1.95
BEAVER......................................  PA                                         42007              1.95
BEDFORD.....................................  PA                                         42009              2.05
BERKS.......................................  PA                                         42011              2.05
BLAIR.......................................  PA                                         42013              2.05
BRADFORD....................................  PA                                         42015              1.90
BUCKS.......................................  PA                                         42017              2.10
BUTLER......................................  PA                                         42019              1.95
CAMBRIA.....................................  PA                                         42021              2.05
CAMERON.....................................  PA                                         42023              1.95
CARBON......................................  PA                                         42025              2.10
CENTRE......................................  PA                                         42027              2.00
CHESTER.....................................  PA                                         42029              2.10
CLARION.....................................  PA                                         42031              1.95
CLEARFIELD..................................  PA                                         42033              1.95
CLINTON.....................................  PA                                         42035              2.00
COLUMBIA....................................  PA                                         42037              2.00
CRAWFORD....................................  PA                                         42039              1.75
CUMBERLAND..................................  PA                                         42041              2.05
DAUPHIN.....................................  PA                                         42043              2.05
DELAWARE....................................  PA                                         42045              2.20
ELK.........................................  PA                                         42047              1.95
ERIE........................................  PA                                         42049              1.75
FAYETTE.....................................  PA                                         42051              1.95
FOREST......................................  PA                                         42053              1.75
FRANKLIN....................................  PA                                         42055              2.05
FULTON......................................  PA                                         42057              2.05
GREENE......................................  PA                                         42059              1.95
HUNTINGDON..................................  PA                                         42061              2.05
INDIANA.....................................  PA                                         42063              1.95
JEFFERSON...................................  PA                                         42065              1.95
JUNIATA.....................................  PA                                         42067              2.00
LACKAWANNA..................................  PA                                         42069              2.00
LANCASTER...................................  PA                                         42071              2.05
LAWRENCE....................................  PA                                         42073              1.95
LEBANON.....................................  PA                                         42075              2.05
LEHIGH......................................  PA                                         42077              2.10
LUZERNE.....................................  PA                                         42079              2.00
LYCOMING....................................  PA                                         42081              2.00
MCKEAN......................................  PA                                         42083              1.85
MERCER......................................  PA                                         42085              1.75
MIFFLIN.....................................  PA                                         42087              2.00
MONROE......................................  PA                                         42089              2.10
MONTGOMERY..................................  PA                                         42091              2.10
MONTOUR.....................................  PA                                         42093              2.00
NORTHAMPTON.................................  PA                                         42095              2.10
NORTHUMBERLAND..............................  PA                                         42097              2.00
PERRY.......................................  PA                                         42099              2.05
PHILADELPHIA................................  PA                                         42101              2.20
PIKE........................................  PA                                         42103              2.15
POTTER......................................  PA                                         42105              1.90
SCHUYLKILL..................................  PA                                         42107              2.05
SNYDER......................................  PA                                         42109              2.00
SOMERSET....................................  PA                                         42111              2.05
SULLIVAN....................................  PA                                         42113              2.00
SUSQUEHANNA.................................  PA                                         42115              1.90
TIOGA.......................................  PA                                         42117              1.90
UNION.......................................  PA                                         42119              2.00
VENANGO.....................................  PA                                         42121              1.75

[[Page 16210]]

 
WARREN......................................  PA                                         42123              1.60
WASHINGTON..................................  PA                                         42125              1.95
WAYNE.......................................  PA                                         42127              2.15
WESTMORELAND................................  PA                                         42129              1.95
WYOMING.....................................  PA                                         42131              2.00
YORK........................................  PA                                         42133              2.05
BRISTOL.....................................  RI                                         44001              2.75
KENT........................................  RI                                         44003              2.75
NEWPORT.....................................  RI                                         44005              2.75
PROVIDENCE..................................  RI                                         44007              2.75
WASHINGTON..................................  RI                                         44009              2.75
ABBEVILLE...................................  SC                                         45001              2.70
AIKEN.......................................  SC                                         45003              2.80
ALLENDALE...................................  SC                                         45005              3.10
ANDERSON....................................  SC                                         45007              2.55
BAMBERG.....................................  SC                                         45009              3.10
BARNWELL....................................  SC                                         45011              2.80
BEAUFORT....................................  SC                                         45013              3.10
BERKELEY....................................  SC                                         45015              3.00
CALHOUN.....................................  SC                                         45017              2.80
CHARLESTON..................................  SC                                         45019              3.10
CHEROKEE....................................  SC                                         45021              2.55
CHESTER.....................................  SC                                         45023              2.70
CHESTERFIELD................................  SC                                         45025              2.70
CLARENDON...................................  SC                                         45027              2.80
COLLETON....................................  SC                                         45029              3.10
DARLINGTON..................................  SC                                         45031              2.80
DILLON......................................  SC                                         45033              3.00
DORCHESTER..................................  SC                                         45035              3.10
EDGEFIELD...................................  SC                                         45037              2.80
FAIRFIELD...................................  SC                                         45039              2.70
FLORENCE....................................  SC                                         45041              3.00
GEORGETOWN..................................  SC                                         45043              3.00
GREENVILLE..................................  SC                                         45045              2.55
GREENWOOD...................................  SC                                         45047              2.70
HAMPTON.....................................  SC                                         45049              3.20
HORRY.......................................  SC                                         45051              3.00
JASPER......................................  SC                                         45053              3.20
KERSHAW.....................................  SC                                         45055              2.70
LANCASTER...................................  SC                                         45057              2.70
LAURENS.....................................  SC                                         45059              2.55
LEE.........................................  SC                                         45061              2.80
LEXINGTON...................................  SC                                         45063              2.80
MCCORMICK...................................  SC                                         45065              2.80
MARION......................................  SC                                         45067              3.00
MARLBORO....................................  SC                                         45069              2.80
NEWBERRY....................................  SC                                         45071              2.70
OCONEE......................................  SC                                         45073              2.55
ORANGEBURG..................................  SC                                         45075              2.80
PICKENS.....................................  SC                                         45077              2.55
RICHLAND....................................  SC                                         45079              2.80
SALUDA......................................  SC                                         45081              2.80
SPARTANBURG.................................  SC                                         45083              2.55
SUMTER......................................  SC                                         45085              2.80
UNION.......................................  SC                                         45087              2.55
WILLIAMSBURG................................  SC                                         45089              3.00
YORK........................................  SC                                         45091              2.55
AURORA......................................  SD                                         46003              1.50
BEADLE......................................  SD                                         46005              1.50
BENNETT.....................................  SD                                         46007              1.40
BON HOMME...................................  SD                                         46009              1.50
BROOKINGS...................................  SD                                         46011              1.50
BROWN.......................................  SD                                         46013              1.40
BRULE.......................................  SD                                         46015              1.50
BUFFALO.....................................  SD                                         46017              1.40
BUTTE.......................................  SD                                         46019              1.40
CAMPBELL....................................  SD                                         46021              1.40
CHARLES MIX.................................  SD                                         46023              1.50
CLARK.......................................  SD                                         46025              1.50
CLAY........................................  SD                                         46027              1.70
CODINGTON...................................  SD                                         46029              1.50
CORSON......................................  SD                                         46031              1.40

[[Page 16211]]

 
CUSTER......................................  SD                                         46033              1.40
DAVISON.....................................  SD                                         46035              1.50
DAY.........................................  SD                                         46037              1.40
DEUEL.......................................  SD                                         46039              1.50
DEWEY.......................................  SD                                         46041              1.40
DOUGLAS.....................................  SD                                         46043              1.50
EDMUNDS.....................................  SD                                         46045              1.40
FALL RIVER..................................  SD                                         46047              1.40
FAULK.......................................  SD                                         46049              1.40
GRANT.......................................  SD                                         46051              1.50
GREGORY.....................................  SD                                         46053              1.50
HAAKON......................................  SD                                         46055              1.40
HAMLIN......................................  SD                                         46057              1.50
HAND........................................  SD                                         46059              1.40
HANSON......................................  SD                                         46061              1.50
HARDING.....................................  SD                                         46063              1.40
HUGHES......................................  SD                                         46065              1.40
HUTCHINSON..................................  SD                                         46067              1.50
HYDE........................................  SD                                         46069              1.40
JACKSON.....................................  SD                                         46071              1.40
JERAULD.....................................  SD                                         46073              1.50
JONES.......................................  SD                                         46075              1.40
KINGSBURY...................................  SD                                         46077              1.50
LAKE........................................  SD                                         46079              1.50
LAWRENCE....................................  SD                                         46081              1.40
LINCOLN.....................................  SD                                         46083              1.60
LYMAN.......................................  SD                                         46085              1.40
MCCOOK......................................  SD                                         46087              1.50
MCPHERSON...................................  SD                                         46089              1.40
MARSHALL....................................  SD                                         46091              1.40
MEADE.......................................  SD                                         46093              1.40
MELLETTE....................................  SD                                         46095              1.40
MINER.......................................  SD                                         46097              1.50
MINNEHAHA...................................  SD                                         46099              1.60
MOODY.......................................  SD                                         46101              1.50
PENNINGTON..................................  SD                                         46103              1.40
PERKINS.....................................  SD                                         46105              1.40
POTTER......................................  SD                                         46107              1.40
ROBERTS.....................................  SD                                         46109              1.50
SANBORN.....................................  SD                                         46111              1.50
SHANNON.....................................  SD                                         46113              1.40
SPINK.......................................  SD                                         46115              1.40
STANLEY.....................................  SD                                         46117              1.40
SULLY.......................................  SD                                         46119              1.40
TODD........................................  SD                                         46121              1.40
TRIPP.......................................  SD                                         46123              1.40
TURNER......................................  SD                                         46125              1.60
UNION.......................................  SD                                         46127              1.70
WALWORTH....................................  SD                                         46129              1.40
YANKTON.....................................  SD                                         46135              1.60
ZIEBACH.....................................  SD                                         46137              1.40
ANDERSON....................................  TN                                         47001              2.15
BEDFORD.....................................  TN                                         47003              2.05
BENTON......................................  TN                                         47005              2.20
BLEDSOE.....................................  TN                                         47007              2.25
BLOUNT......................................  TN                                         47009              2.25
BRADLEY.....................................  TN                                         47011              2.55
CAMPBELL....................................  TN                                         47013              2.15
CANNON......................................  TN                                         47015              2.05
CARROLL.....................................  TN                                         47017              2.50
CARTER......................................  TN                                         47019              2.25
CHEATHAM....................................  TN                                         47021              2.05
CHESTER.....................................  TN                                         47023              2.70
CLAIBORNE...................................  TN                                         47025              2.15
CLAY........................................  TN                                         47027              2.05
COCKE.......................................  TN                                         47029              2.25
COFFEE......................................  TN                                         47031              2.05
CROCKETT....................................  TN                                         47033              2.70
CUMBERLAND..................................  TN                                         47035              2.15
DAVIDSON....................................  TN                                         47037              2.05
DECATUR.....................................  TN                                         47039              2.20
DE KALB.....................................  TN                                         47041              2.05

[[Page 16212]]

 
DICKSON.....................................  TN                                         47043              2.20
DYER........................................  TN                                         47045              2.50
FAYETTE.....................................  TN                                         47047              2.85
FENTRESS....................................  TN                                         47049              2.15
FRANKLIN....................................  TN                                         47051              2.25
GIBSON......................................  TN                                         47053              2.50
GILES.......................................  TN                                         47055              2.20
GRAINGER....................................  TN                                         47057              2.25
GREENE......................................  TN                                         47059              2.25
GRUNDY......................................  TN                                         47061              2.25
HAMBLEN.....................................  TN                                         47063              2.25
HAMILTON....................................  TN                                         47065              2.55
HANCOCK.....................................  TN                                         47067              2.25
HARDEMAN....................................  TN                                         47069              2.70
HARDIN......................................  TN                                         47071              2.50
HAWKINS.....................................  TN                                         47073              2.25
HAYWOOD.....................................  TN                                         47075              2.70
HENDERSON...................................  TN                                         47077              2.50
HENRY.......................................  TN                                         47079              2.30
HICKMAN.....................................  TN                                         47081              2.20
HOUSTON.....................................  TN                                         47083              2.20
HUMPHREYS...................................  TN                                         47085              2.20
JACKSON.....................................  TN                                         47087              2.05
JEFFERSON...................................  TN                                         47089              2.25
JOHNSON.....................................  TN                                         47091              2.25
KNOX........................................  TN                                         47093              2.25
LAKE........................................  TN                                         47095              2.30
LAUDERDALE..................................  TN                                         47097              2.70
LAWRENCE....................................  TN                                         47099              2.20
LEWIS.......................................  TN                                         47101              2.20
LINCOLN.....................................  TN                                         47103              2.25
LOUDON......................................  TN                                         47105              2.25
MCMINN......................................  TN                                         47107              2.55
MCNAIRY.....................................  TN                                         47109              2.70
MACON.......................................  TN                                         47111              2.05
MADISON.....................................  TN                                         47113              2.70
MARION......................................  TN                                         47115              2.25
MARSHALL....................................  TN                                         47117              2.05
MAURY.......................................  TN                                         47119              2.05
MEIGS.......................................  TN                                         47121              2.55
MONROE......................................  TN                                         47123              2.55
MONTGOMERY..................................  TN                                         47125              2.20
MOORE.......................................  TN                                         47127              2.25
MORGAN......................................  TN                                         47129              2.15
OBION.......................................  TN                                         47131              2.30
OVERTON.....................................  TN                                         47133              2.15
PERRY.......................................  TN                                         47135              2.20
PICKETT.....................................  TN                                         47137              2.15
POLK........................................  TN                                         47139              2.55
PUTNAM......................................  TN                                         47141              2.15
RHEA........................................  TN                                         47143              2.25
ROANE.......................................  TN                                         47145              2.25
ROBERTSON...................................  TN                                         47147              2.05
RUTHERFORD..................................  TN                                         47149              2.05
SCOTT.......................................  TN                                         47151              2.15
SEQUATCHIE..................................  TN                                         47153              2.25
SEVIER......................................  TN                                         47155              2.25
SHELBY......................................  TN                                         47157              2.85
SMITH.......................................  TN                                         47159              2.05
STEWART.....................................  TN                                         47161              2.20
SULLIVAN....................................  TN                                         47163              2.25
SUMNER......................................  TN                                         47165              2.05
TIPTON......................................  TN                                         47167              2.85
TROUSDALE...................................  TN                                         47169              2.05
UNICOI......................................  TN                                         47171              2.25
UNION.......................................  TN                                         47173              2.15
VAN BUREN...................................  TN                                         47175              2.15
WARREN......................................  TN                                         47177              2.05
WASHINGTON..................................  TN                                         47179              2.25
WAYNE.......................................  TN                                         47181              2.20
WEAKLEY.....................................  TN                                         47183              2.30
WHITE.......................................  TN                                         47185              2.15

[[Page 16213]]

 
WILLIAMSON..................................  TN                                         47187              2.05
WILSON......................................  TN                                         47189              2.05
ANDERSON....................................  TX                                         48001              2.35
ANDREWS.....................................  TX                                         48003              1.95
ANGELINA....................................  TX                                         48005              2.65
ARANSAS.....................................  TX                                         48007              2.95
ARCHER......................................  TX                                         48009              1.95
ARMSTRONG...................................  TX                                         48011              1.95
ATASCOSA....................................  TX                                         48013              2.75
AUSTIN......................................  TX                                         48015              2.75
BAILEY......................................  TX                                         48017              1.60
BANDERA.....................................  TX                                         48019              2.55
BASTROP.....................................  TX                                         48021              2.65
BAYLOR......................................  TX                                         48023              1.95
BEE.........................................  TX                                         48025              2.95
BELL........................................  TX                                         48027              2.35
BEXAR.......................................  TX                                         48029              2.65
BLANCO......................................  TX                                         48031              2.55
BORDEN......................................  TX                                         48033              2.10
BOSQUE......................................  TX                                         48035              2.35
BOWIE.......................................  TX                                         48037              2.10
BRAZORIA....................................  TX                                         48039              2.95
BRAZOS......................................  TX                                         48041              2.65
BREWSTER....................................  TX                                         48043              2.35
BRISCOE.....................................  TX                                         48045              1.95
BROOKS......................................  TX                                         48047              3.15
BROWN.......................................  TX                                         48049              2.10
BURLESON....................................  TX                                         48051              2.65
BURNET......................................  TX                                         48053              2.35
CALDWELL....................................  TX                                         48055              2.65
CALHOUN.....................................  TX                                         48057              2.95
CALLAHAN....................................  TX                                         48059              2.10
CAMERON.....................................  TX                                         48061              3.15
CAMP........................................  TX                                         48063              1.95
CARSON......................................  TX                                         48065              1.95
CASS........................................  TX                                         48067              2.10
CASTRO......................................  TX                                         48069              1.60
CHAMBERS....................................  TX                                         48071              2.95
CHEROKEE....................................  TX                                         48073              2.35
CHILDRESS...................................  TX                                         48075              1.95
CLAY........................................  TX                                         48077              1.95
COCHRAN.....................................  TX                                         48079              1.60
COKE........................................  TX                                         48081              2.10
COLEMAN.....................................  TX                                         48083              2.10
COLLIN......................................  TX                                         48085              1.95
COLLINGSWORTH...............................  TX                                         48087              1.95
COLORADO....................................  TX                                         48089              2.75
COMAL.......................................  TX                                         48091              2.55
COMANCHE....................................  TX                                         48093              2.10
CONCHO......................................  TX                                         48095              2.10
COOKE.......................................  TX                                         48097              1.95
CORYELL.....................................  TX                                         48099              2.35
COTTLE......................................  TX                                         48101              1.95
CRANE.......................................  TX                                         48103              2.10
CROCKETT....................................  TX                                         48105              2.35
CROSBY......................................  TX                                         48107              1.95
CULBERSON...................................  TX                                         48109              1.95
DALLAM......................................  TX                                         48111              1.90
DALLAS......................................  TX                                         48113              2.10
DAWSON......................................  TX                                         48115              1.95
DEAF SMITH..................................  TX                                         48117              1.60
DELTA.......................................  TX                                         48119              1.95
DENTON......................................  TX                                         48121              1.95
DE WITT.....................................  TX                                         48123              2.75
DICKENS.....................................  TX                                         48125              1.95
DIMMIT......................................  TX                                         48127              2.75
DONLEY......................................  TX                                         48129              1.95
DUVAL.......................................  TX                                         48131              2.95
EASTLAND....................................  TX                                         48133              2.10
ECTOR.......................................  TX                                         48135              2.10
EDWARDS.....................................  TX                                         48137              2.35
ELLIS.......................................  TX                                         48139              2.10

[[Page 16214]]

 
EL PASO.....................................  TX                                         48141              1.75
ERATH.......................................  TX                                         48143              2.10
FALLS.......................................  TX                                         48145              2.35
FANNIN......................................  TX                                         48147              1.95
FAYETTE.....................................  TX                                         48149              2.75
FISHER......................................  TX                                         48151              2.10
FLOYD.......................................  TX                                         48153              1.95
FOARD.......................................  TX                                         48155              1.95
FORT BEND...................................  TX                                         48157              2.95
FRANKLIN....................................  TX                                         48159              1.95
FREESTONE...................................  TX                                         48161              2.35
FRIO........................................  TX                                         48163              2.75
GAINES......................................  TX                                         48165              1.95
GALVESTON...................................  TX                                         48167              2.95
GARZA.......................................  TX                                         48169              1.95
GILLESPIE...................................  TX                                         48171              2.35
GLASSCOCK...................................  TX                                         48173              2.10
GOLIAD......................................  TX                                         48175              2.95
GONZALES....................................  TX                                         48177              2.75
GRAY........................................  TX                                         48179              1.95
GRAYSON.....................................  TX                                         48181              1.95
GREGG.......................................  TX                                         48183              2.10
GRIMES......................................  TX                                         48185              2.75
GUADALUPE...................................  TX                                         48187              2.65
HALE........................................  TX                                         48189              1.95
HALL........................................  TX                                         48191              1.95
HAMILTON....................................  TX                                         48193              2.10
HANSFORD....................................  TX                                         48195              1.90
HARDEMAN....................................  TX                                         48197              1.95
HARDIN......................................  TX                                         48199              2.95
HARRIS......................................  TX                                         48201              2.95
HARRISON....................................  TX                                         48203              2.10
HARTLEY.....................................  TX                                         48205              1.90
HASKELL.....................................  TX                                         48207              1.95
HAYS........................................  TX                                         48209              2.55
HEMPHILL....................................  TX                                         48211              1.90
HENDERSON...................................  TX                                         48213              2.35
HIDALGO.....................................  TX                                         48215              3.15
HILL........................................  TX                                         48217              2.35
HOCKLEY.....................................  TX                                         48219              1.95
HOOD........................................  TX                                         48221              2.10
HOPKINS.....................................  TX                                         48223              1.95
HOUSTON.....................................  TX                                         48225              2.55
HOWARD......................................  TX                                         48227              2.10
HUDSPETH....................................  TX                                         48229              1.75
HUNT........................................  TX                                         48231              1.95
HUTCHINSON..................................  TX                                         48233              1.90
IRION.......................................  TX                                         48235              2.35
JACK........................................  TX                                         48237              1.95
JACKSON.....................................  TX                                         48239              2.95
JASPER......................................  TX                                         48241              2.75
JEFF DAVIS..................................  TX                                         48243              2.10
JEFFERSON...................................  TX                                         48245              2.95
JIM HOGG....................................  TX                                         48247              2.95
JIM WELLS...................................  TX                                         48249              2.95
JOHNSON.....................................  TX                                         48251              2.10
JONES.......................................  TX                                         48253              2.10
KARNES......................................  TX                                         48255              2.75
KAUFMAN.....................................  TX                                         48257              2.10
KENDALL.....................................  TX                                         48259              2.55
KENEDY......................................  TX                                         48261              3.15
KENT........................................  TX                                         48263              2.10
KERR........................................  TX                                         48265              2.55
KIMBLE......................................  TX                                         48267              2.35
KING........................................  TX                                         48269              1.95
KINNEY......................................  TX                                         48271              2.65
KLEBERG.....................................  TX                                         48273              3.15
KNOX........................................  TX                                         48275              1.95
LAMAR.......................................  TX                                         48277              1.95
LAMB........................................  TX                                         48279              1.60
LAMPASAS....................................  TX                                         48281              2.35
LA SALLE....................................  TX                                         48283              2.75

[[Page 16215]]

 
LAVACA......................................  TX                                         48285              2.75
LEE.........................................  TX                                         48287              2.65
LEON........................................  TX                                         48289              2.55
LIBERTY.....................................  TX                                         48291              2.95
LIMESTONE...................................  TX                                         48293              2.35
LIPSCOMB....................................  TX                                         48295              1.90
LIVE OAK....................................  TX                                         48297              2.95
LLANO.......................................  TX                                         48299              2.35
LOVING......................................  TX                                         48301              1.95
LUBBOCK.....................................  TX                                         48303              1.95
LYNN........................................  TX                                         48305              1.95
MCCULLOCH...................................  TX                                         48307              2.10
MCLENNAN....................................  TX                                         48309              2.35
MCMULLEN....................................  TX                                         48311              2.75
MADISON.....................................  TX                                         48313              2.65
MARION......................................  TX                                         48315              2.10
MARTIN......................................  TX                                         48317              2.10
MASON.......................................  TX                                         48319              2.35
MATAGORDA...................................  TX                                         48321              2.95
MAVERICK....................................  TX                                         48323              2.65
MEDINA......................................  TX                                         48325              2.65
MENARD......................................  TX                                         48327              2.35
MIDLAND.....................................  TX                                         48329              2.10
MILAM.......................................  TX                                         48331              2.55
MILLS.......................................  TX                                         48333              2.10
MITCHELL....................................  TX                                         48335              2.10
MONTAGUE....................................  TX                                         48337              1.95
MONTGOMERY..................................  TX                                         48339              2.95
MOORE.......................................  TX                                         48341              1.90
MORRIS......................................  TX                                         48343              1.95
MOTLEY......................................  TX                                         48345              1.95
NACOGDOCHES.................................  TX                                         48347              2.55
NAVARRO.....................................  TX                                         48349              2.35
NEWTON......................................  TX                                         48351              2.75
NOLAN.......................................  TX                                         48353              2.10
NUECES......................................  TX                                         48355              3.15
OCHILTREE...................................  TX                                         48357              1.90
OLDHAM......................................  TX                                         48359              1.90
ORANGE......................................  TX                                         48361              2.95
PALO PINTO..................................  TX                                         48363              2.10
PANOLA......................................  TX                                         48365              2.35
PARKER......................................  TX                                         48367              2.10
PARMER......................................  TX                                         48369              1.60
PECOS.......................................  TX                                         48371              2.35
POLK........................................  TX                                         48373              2.75
POTTER......................................  TX                                         48375              1.95
PRESIDIO....................................  TX                                         48377              2.10
RAINS.......................................  TX                                         48379              1.95
RANDALL.....................................  TX                                         48381              1.95
REAGAN......................................  TX                                         48383              2.35
REAL........................................  TX                                         48385              2.55
RED RIVER...................................  TX                                         48387              1.95
REEVES......................................  TX                                         48389              2.10
REFUGIO.....................................  TX                                         48391              2.95
ROBERTS.....................................  TX                                         48393              1.90
ROBERTSON...................................  TX                                         48395              2.55
ROCKWALL....................................  TX                                         48397              1.95
RUNNELS.....................................  TX                                         48399              2.10
RUSK........................................  TX                                         48401              2.35
SABINE......................................  TX                                         48403              2.65
SAN AUGUSTINE...............................  TX                                         48405              2.65
SAN JACINTO.................................  TX                                         48407              2.75
SAN PATRICIO................................  TX                                         48409              2.95
SAN SABA....................................  TX                                         48411              2.10
SCHLEICHER..................................  TX                                         48413              2.35
SCURRY......................................  TX                                         48415              2.10
SHACKELFORD.................................  TX                                         48417              2.10
SHELBY......................................  TX                                         48419              2.55
SHERMAN.....................................  TX                                         48421              1.90
SMITH.......................................  TX                                         48423              2.35
SOMERVELL...................................  TX                                         48425              2.10
STARR.......................................  TX                                         48427              2.95

[[Page 16216]]

 
STEPHENS....................................  TX                                         48429              2.10
STERLING....................................  TX                                         48431              2.10
STONEWALL...................................  TX                                         48433              2.10
SUTTON......................................  TX                                         48435              2.35
SWISHER.....................................  TX                                         48437              1.95
TARRANT.....................................  TX                                         48439              2.10
TAYLOR......................................  TX                                         48441              2.10
TERRELL.....................................  TX                                         48443              2.35
TERRY.......................................  TX                                         48445              1.95
THROCKMORTON................................  TX                                         48447              1.95
TITUS.......................................  TX                                         48449              1.95
TOM GREEN...................................  TX                                         48451              2.10
TRAVIS......................................  TX                                         48453              2.55
TRINITY.....................................  TX                                         48455              2.65
TYLER.......................................  TX                                         48457              2.75
UPSHUR......................................  TX                                         48459              2.10
UPTON.......................................  TX                                         48461              2.35
UVALDE......................................  TX                                         48463              2.65
VAL VERDE...................................  TX                                         48465              2.35
VAN ZANDT...................................  TX                                         48467              2.10
VICTORIA....................................  TX                                         48469              2.95
WALKER......................................  TX                                         48471              2.75
WALLER......................................  TX                                         48473              2.75
WARD........................................  TX                                         48475              2.10
WASHINGTON..................................  TX                                         48477              2.75
WEBB........................................  TX                                         48479              2.75
WHARTON.....................................  TX                                         48481              2.95
WHEELER.....................................  TX                                         48483              1.90
WICHITA.....................................  TX                                         48485              1.95
WILBARGER...................................  TX                                         48487              1.95
WILLACY.....................................  TX                                         48489              3.15
WILLIAMSON..................................  TX                                         48491              2.55
WILSON......................................  TX                                         48493              2.75
WINKLER.....................................  TX                                         48495              1.95
WISE........................................  TX                                         48497              1.95
WOOD........................................  TX                                         48499              1.95
YOAKUM......................................  TX                                         48501              1.95
YOUNG.......................................  TX                                         48503              1.95
ZAPATA......................................  TX                                         48505              2.95
ZAVALA......................................  TX                                         48507              2.65
BEAVER......................................  UT                                         49001              1.50
BOX ELDER...................................  UT                                         49003              1.50
CACHE.......................................  UT                                         49005              1.50
CARBON......................................  UT                                         49007              1.80
DAGGETT.....................................  UT                                         49009              1.50
DAVIS.......................................  UT                                         49011              1.50
DUCHESNE....................................  UT                                         49013              1.50
EMERY.......................................  UT                                         49015              1.80
GARFIELD....................................  UT                                         49017              1.80
GRAND.......................................  UT                                         49019              1.90
IRON........................................  UT                                         49021              1.80
JUAB........................................  UT                                         49023              1.50
KANE........................................  UT                                         49025              1.90
MILLARD.....................................  UT                                         49027              1.50
MORGAN......................................  UT                                         49029              1.50
PIUTE.......................................  UT                                         49031              1.50
RICH........................................  UT                                         49033              1.50
SALT LAKE...................................  UT                                         49035              1.50
SAN JUAN....................................  UT                                         49037              1.90
SANPETE.....................................  UT                                         49039              1.50
SEVIER......................................  UT                                         49041              1.50
SUMMIT......................................  UT                                         49043              1.50
TOOELE......................................  UT                                         49045              1.50
UINTAH......................................  UT                                         49047              1.80
UTAH........................................  UT                                         49049              1.50
WASATCH.....................................  UT                                         49051              1.50
WASHINGTON..................................  UT                                         49053              1.90
WAYNE.......................................  UT                                         49055              1.80
WEBER.......................................  UT                                         49057              1.50
ADDISON.....................................  VT                                         50001              2.05
BENNINGTON..................................  VT                                         50003              2.15
CALEDONIA...................................  VT                                         50005              1.95

[[Page 16217]]

 
CHITTENDEN..................................  VT                                         50007              2.05
ESSEX.......................................  VT                                         50009              1.95
FRANKLIN....................................  VT                                         50011              1.95
GRAND ISLE..................................  VT                                         50013              1.95
LAMOILLE....................................  VT                                         50015              1.95
ORANGE......................................  VT                                         50017              2.05
ORLEANS.....................................  VT                                         50019              1.95
RUTLAND.....................................  VT                                         50021              2.05
WASHINGTON..................................  VT                                         50023              2.05
WINDHAM.....................................  VT                                         50025              2.30
WINDSOR.....................................  VT                                         50027              2.15
ACCOMACK....................................  VA                                         51001              2.10
ALBEMARLE...................................  VA                                         51003              2.15
ALLEGHANY...................................  VA                                         51005              2.15
AMELIA......................................  VA                                         51007              2.20
AMHERST.....................................  VA                                         51009              2.15
APPOMATTOX..................................  VA                                         51011              2.15
ARLINGTON...................................  VA                                         51013              2.05
AUGUSTA.....................................  VA                                         51015              2.15
BATH........................................  VA                                         51017              2.15
BEDFORD.....................................  VA                                         51019              2.15
BLAND.......................................  VA                                         51021              2.25
BOTETOURT...................................  VA                                         51023              2.15
BRUNSWICK...................................  VA                                         51025              2.35
BUCHANAN....................................  VA                                         51027              2.25
BUCKINGHAM..................................  VA                                         51029              2.15
CAMPBELL....................................  VA                                         51031              2.15
CAROLINE....................................  VA                                         51033              2.20
CARROLL.....................................  VA                                         51035              2.25
CHARLES CITY................................  VA                                         51036              2.20
CHARLOTTE...................................  VA                                         51037              2.15
CHESTERFIELD................................  VA                                         51041              2.20
CLARKE......................................  VA                                         51043              2.05
CRAIG.......................................  VA                                         51045              2.15
CULPEPER....................................  VA                                         51047              2.05
CUMBERLAND..................................  VA                                         51049              2.15
DICKENSON...................................  VA                                         51051              2.25
DINWIDDIE...................................  VA                                         51053              2.35
ESSEX.......................................  VA                                         51057              2.20
FAIRFAX.....................................  VA                                         51059              2.05
FAUQUIER....................................  VA                                         51061              2.05
FLOYD.......................................  VA                                         51063              2.15
FLUVANNA....................................  VA                                         51065              2.15
FRANKLIN....................................  VA                                         51067              2.15
FREDERICK...................................  VA                                         51069              2.05
GILES.......................................  VA                                         51071              2.15
GLOUCESTER..................................  VA                                         51073              2.20
GOOCHLAND...................................  VA                                         51075              2.20
GRAYSON.....................................  VA                                         51077              2.25
GREENE......................................  VA                                         51079              2.15
GREENSVILLE.................................  VA                                         51081              2.35
HALIFAX.....................................  VA                                         51083              2.35
HANOVER.....................................  VA                                         51085              2.20
HENRICO.....................................  VA                                         51087              2.20
HENRY.......................................  VA                                         51089              2.35
HIGHLAND....................................  VA                                         51091              2.15
ISLE OF WIGHT...............................  VA                                         51093              2.55
JAMES CITY..................................  VA                                         51095              2.55
KING AND QUEEN..............................  VA                                         51097              2.20
KING GEORGE.................................  VA                                         51099              2.05
KING WILLIAM................................  VA                                         51101              2.20
LANCASTER...................................  VA                                         51103              2.20
LEE.........................................  VA                                         51105              2.25
LOUDOUN.....................................  VA                                         51107              2.05
LOUISA......................................  VA                                         51109              2.15
LUNENBURG...................................  VA                                         51111              2.35
MADISON.....................................  VA                                         51113              2.15
MATHEWS.....................................  VA                                         51115              2.20
MECKLENBURG.................................  VA                                         51117              2.35
MIDDLESEX...................................  VA                                         51119              2.20
MONTGOMERY..................................  VA                                         51121              2.15
NELSON......................................  VA                                         51125              2.15

[[Page 16218]]

 
NEW KENT....................................  VA                                         51127              2.20
NORTHAMPTON.................................  VA                                         51131              2.10
NORTHUMBERLAND..............................  VA                                         51133              2.20
NOTTOWAY....................................  VA                                         51135              2.35
ORANGE......................................  VA                                         51137              2.15
PAGE........................................  VA                                         51139              2.05
PATRICK.....................................  VA                                         51141              2.35
PITTSYLVANIA................................  VA                                         51143              2.35
POWHATAN....................................  VA                                         51145              2.20
PRINCE EDWARD...............................  VA                                         51147              2.15
PRINCE GEORGE...............................  VA                                         51149              2.35
PRINCE WILLIAM..............................  VA                                         51153              2.05
PULASKI.....................................  VA                                         51155              2.15
RAPPAHANNOCK................................  VA                                         51157              2.05
RICHMOND....................................  VA                                         51159              2.20
ROANOKE.....................................  VA                                         51161              2.15
ROCKBRIDGE..................................  VA                                         51163              2.15
ROCKINGHAM..................................  VA                                         51165              2.15
RUSSELL.....................................  VA                                         51167              2.25
SCOTT.......................................  VA                                         51169              2.25
SHENANDOAH..................................  VA                                         51171              2.05
SMYTH.......................................  VA                                         51173              2.25
SOUTHAMPTON.................................  VA                                         51175              2.55
SPOTSYLVANIA................................  VA                                         51177              2.15
STAFFORD....................................  VA                                         51179              2.05
SURRY.......................................  VA                                         51181              2.55
SUSSEX......................................  VA                                         51183              2.35
TAZEWELL....................................  VA                                         51185              2.25
WARREN......................................  VA                                         51187              2.05
WASHINGTON..................................  VA                                         51191              2.25
WESTMORELAND................................  VA                                         51193              2.05
WISE........................................  VA                                         51195              2.25
WYTHE.......................................  VA                                         51197              2.25
YORK........................................  VA                                         51199              2.55
ALEXANDRIA CITY.............................  VA                                         51510              2.05
BEDFORD CITY................................  VA                                         51515              2.15
BRISTOL CITY................................  VA                                         51520              2.25
BUENA VISTA CITY............................  VA                                         51530              2.15
CHARLOTTESVILLE CITY........................  VA                                         51540              2.15
CHESAPEAKE CITY.............................  VA                                         51550              2.55
CLIFTON FORGE CITY..........................  VA                                         51560              2.15
COLONIAL HEIGHTS CITY.......................  VA                                         51570              2.30
COVINGTON CITY..............................  VA                                         51580              2.15
DANVILLE CITY...............................  VA                                         51590              2.35
EMPORIA CITY................................  VA                                         51595              2.35
FAIRFAX CITY................................  VA                                         51600              2.05
FALLS CHURCH CITY...........................  VA                                         51610              2.05
FRANKLIN CITY...............................  VA                                         51620              2.55
FREDERICKSBURG CITY.........................  VA                                         51630              2.15
GALAX CITY..................................  VA                                         51640              2.25
HAMPTON CITY................................  VA                                         51650              2.55
HARRISONBURG CITY...........................  VA                                         51660              2.15
HOPEWELL CITY...............................  VA                                         51670              2.35
LEXINGTON CITY..............................  VA                                         51678              2.15
LYNCHBURG CITY..............................  VA                                         51680              2.15
MANASSAS CITY...............................  VA                                         51683              2.05
MANASSAS PARK CITY..........................  VA                                         51685              2.05
MARTINSVILLE CITY...........................  VA                                         51690              2.35
NEWPORT NEWS CITY...........................  VA                                         51700              2.55
NORFOLK CITY................................  VA                                         51710              2.55
NORTON CITY.................................  VA                                         51720              2.25
PETERSBURG CITY.............................  VA                                         51730              2.35
POQUOSON CITY...............................  VA                                         51735              2.55
PORTSMOUTH CITY.............................  VA                                         51740              2.55
RADFORD CITY................................  VA                                         51750              2.15
RICHMOND CITY...............................  VA                                         51760              2.20
ROANOKE CITY................................  VA                                         51770              2.15
SALEM CITY..................................  VA                                         51775              2.15
STAUNTON CITY...............................  VA                                         51790              2.15
SUFFOLK CITY................................  VA                                         51800              2.55
VIRGINIA BEACH CITY.........................  VA                                         51810              2.55
WAYNESBORO CITY.............................  VA                                         51820              2.15

[[Page 16219]]

 
WILLIAMSBURG CITY...........................  VA                                         51830              2.55
WINCHESTER CITY.............................  VA                                         51840              2.05
ADAMS.......................................  WA                                         53001              1.35
ASOTIN......................................  WA                                         53003              1.35
BENTON......................................  WA                                         53005              1.30
CHELAN......................................  WA                                         53007              1.30
CLALLAM.....................................  WA                                         53009              1.45
CLARK.......................................  WA                                         53011              1.45
COLUMBIA....................................  WA                                         53013              1.35
COWLITZ.....................................  WA                                         53015              1.45
DOUGLAS.....................................  WA                                         53017              1.30
FERRY.......................................  WA                                         53019              1.35
FRANKLIN....................................  WA                                         53021              1.35
GARFIELD....................................  WA                                         53023              1.35
GRANT.......................................  WA                                         53025              1.30
GRAYS HARBOR................................  WA                                         53027              1.45
ISLAND......................................  WA                                         53029              1.45
JEFFERSON...................................  WA                                         53031              1.45
KING........................................  WA                                         53033              1.45
KITSAP......................................  WA                                         53035              1.45
KITTITAS....................................  WA                                         53037              1.30
KLICKITAT...................................  WA                                         53039              1.30
LEWIS.......................................  WA                                         53041              1.45
LINCOLN.....................................  WA                                         53043              1.35
MASON.......................................  WA                                         53045              1.45
OKANOGAN....................................  WA                                         53047              1.30
PACIFIC.....................................  WA                                         53049              1.45
PEND OREILLE................................  WA                                         53051              1.35
PIERCE......................................  WA                                         53053              1.45
SAN JUAN....................................  WA                                         53055              1.45
SKAGIT......................................  WA                                         53057              1.20
SKAMANIA....................................  WA                                         53059              1.45
SNOHOMISH...................................  WA                                         53061              1.45
SPOKANE.....................................  WA                                         53063              1.35
STEVENS.....................................  WA                                         53065              1.35
THURSTON....................................  WA                                         53067              1.45
WAHKIAKUM...................................  WA                                         53069              1.45
WALLA WALLA.................................  WA                                         53071              1.35
WHATCOM.....................................  WA                                         53073              1.20
WHITMAN.....................................  WA                                         53075              1.35
YAKIMA......................................  WA                                         53077              1.30
BARBOUR.....................................  WV                                         54001              2.05
BERKELEY....................................  WV                                         54003              2.05
BOONE.......................................  WV                                         54005              2.20
BRAXTON.....................................  WV                                         54007              2.20
BROOKE......................................  WV                                         54009              1.95
CABELL......................................  WV                                         54011              2.20
CALHOUN.....................................  WV                                         54013              2.05
CLAY........................................  WV                                         54015              2.20
DODDRIDGE...................................  WV                                         54017              2.05
FAYETTE.....................................  WV                                         54019              2.20
GILMER......................................  WV                                         54021              2.05
GRANT.......................................  WV                                         54023              2.05
GREENBRIER..................................  WV                                         54025              2.15
HAMPSHIRE...................................  WV                                         54027              2.05
HANCOCK.....................................  WV                                         54029              1.95
HARDY.......................................  WV                                         54031              2.05
HARRISON....................................  WV                                         54033              2.05
JACKSON.....................................  WV                                         54035              2.05
JEFFERSON...................................  WV                                         54037              2.05
KANAWHA.....................................  WV                                         54039              2.20
LEWIS.......................................  WV                                         54041              2.05
LINCOLN.....................................  WV                                         54043              2.20
LOGAN.......................................  WV                                         54045              2.20
MCDOWELL....................................  WV                                         54047              2.20
MARION......................................  WV                                         54049              1.95
MARSHALL....................................  WV                                         54051              1.95
MASON.......................................  WV                                         54053              2.05
MERCER......................................  WV                                         54055              2.15
MINERAL.....................................  WV                                         54057              2.05
MINGO.......................................  WV                                         54059              2.20
MONONGALIA..................................  WV                                         54061              1.95

[[Page 16220]]

 
MONROE......................................  WV                                         54063              2.15
MORGAN......................................  WV                                         54065              2.05
NICHOLAS....................................  WV                                         54067              2.20
OHIO........................................  WV                                         54069              1.95
PENDLETON...................................  WV                                         54071              2.15
PLEASANTS...................................  WV                                         54073              2.05
POCAHONTAS..................................  WV                                         54075              2.15
PRESTON.....................................  WV                                         54077              1.95
PUTNAM......................................  WV                                         54079              2.20
RALEIGH.....................................  WV                                         54081              2.20
RANDOLPH....................................  WV                                         54083              2.05
RITCHIE.....................................  WV                                         54085              2.05
ROANE.......................................  WV                                         54087              2.20
SUMMERS.....................................  WV                                         54089              2.15
TAYLOR......................................  WV                                         54091              1.95
TUCKER......................................  WV                                         54093              2.05
TYLER.......................................  WV                                         54095              2.05
UPSHUR......................................  WV                                         54097              2.05
WAYNE.......................................  WV                                         54099              2.20
WEBSTER.....................................  WV                                         54101              2.05
WETZEL......................................  WV                                         54103              1.95
WIRT........................................  WV                                         54105              2.05
WOOD........................................  WV                                         54107              2.05
WYOMING.....................................  WV                                         54109              2.20
ADAMS.......................................  WI                                         55001              1.70
ASHLAND.....................................  WI                                         55003              1.60
BARRON......................................  WI                                         55005              1.60
BAYFIELD....................................  WI                                         55007              1.65
BROWN.......................................  WI                                         55009              1.80
BUFFALO.....................................  WI                                         55011              1.60
BURNETT.....................................  WI                                         55013              1.60
CALUMET.....................................  WI                                         55015              1.80
CHIPPEWA....................................  WI                                         55017              1.60
CLARK.......................................  WI                                         55019              1.60
COLUMBIA....................................  WI                                         55021              1.70
CRAWFORD....................................  WI                                         55023              1.70
DANE........................................  WI                                         55025              1.80
DODGE.......................................  WI                                         55027              1.80
DOOR........................................  WI                                         55029              1.80
DOUGLAS.....................................  WI                                         55031              1.65
DUNN........................................  WI                                         55033              1.60
EAU CLAIRE..................................  WI                                         55035              1.60
FLORENCE....................................  WI                                         55037              1.60
FOND DU LAC.................................  WI                                         55039              1.80
FOREST......................................  WI                                         55041              1.60
GRANT.......................................  WI                                         55043              1.80
GREEN.......................................  WI                                         55045              1.80
GREEN LAKE..................................  WI                                         55047              1.70
IOWA........................................  WI                                         55049              1.80
IRON........................................  WI                                         55051              1.60
JACKSON.....................................  WI                                         55053              1.60
JEFFERSON...................................  WI                                         55055              1.80
JUNEAU......................................  WI                                         55057              1.70
KENOSHA.....................................  WI                                         55059              1.95
KEWAUNEE....................................  WI                                         55061              1.80
LA CROSSE...................................  WI                                         55063              1.60
LAFAYETTE...................................  WI                                         55065              1.80
LANGLADE....................................  WI                                         55067              1.60
LINCOLN.....................................  WI                                         55069              1.60
MANITOWOC...................................  WI                                         55071              1.80
MARATHON....................................  WI                                         55073              1.60
MARINETTE...................................  WI                                         55075              1.60
MARQUETTE...................................  WI                                         55077              1.70
MENOMINEE...................................  WI                                         55078              1.70
MILWAUKEE...................................  WI                                         55079              1.95
MONROE......................................  WI                                         55081              1.60
OCONTO......................................  WI                                         55083              1.70
ONEIDA......................................  WI                                         55085              1.60
OUTAGAMIE...................................  WI                                         55087              1.70
OZAUKEE.....................................  WI                                         55089              1.95
PEPIN.......................................  WI                                         55091              1.60
PIERCE......................................  WI                                         55093              1.60

[[Page 16221]]

 
POLK........................................  WI                                         55095              1.60
PORTAGE.....................................  WI                                         55097              1.60
PRICE.......................................  WI                                         55099              1.60
RACINE......................................  WI                                         55101              1.95
RICHLAND....................................  WI                                         55103              1.70
ROCK........................................  WI                                         55105              1.80
RUSK........................................  WI                                         55107              1.60
ST. CROIX...................................  WI                                         55109              1.60
SAUK........................................  WI                                         55111              1.70
SAWYER......................................  WI                                         55113              1.60
SHAWANO.....................................  WI                                         55115              1.70
SHEBOYGAN...................................  WI                                         55117              1.95
TAYLOR......................................  WI                                         55119              1.60
TREMPEALEAU.................................  WI                                         55121              1.60
VERNON......................................  WI                                         55123              1.70
VILAS.......................................  WI                                         55125              1.60
WALWORTH....................................  WI                                         55127              1.80
WASHBURN....................................  WI                                         55129              1.60
WASHINGTON..................................  WI                                         55131              1.80
WAUKESHA....................................  WI                                         55133              1.80
WAUPACA.....................................  WI                                         55135              1.70
WAUSHARA....................................  WI                                         55137              1.70
WINNEBAGO...................................  WI                                         55139              1.70
WOOD........................................  WI                                         55141              1.60
ALBANY......................................  WY                                         56001              1.55
BIG HORN....................................  WY                                         56003              1.40
CAMPBELL....................................  WY                                         56005              1.40
CARBON......................................  WY                                         56007              1.55
CONVERSE....................................  WY                                         56009              1.40
CROOK.......................................  WY                                         56011              1.40
FREMONT.....................................  WY                                         56013              1.40
GOSHEN......................................  WY                                         56015              1.40
HOT SPRINGS.................................  WY                                         56017              1.40
JOHNSON.....................................  WY                                         56019              1.40
LARAMIE.....................................  WY                                         56021              1.55
LINCOLN.....................................  WY                                         56023              1.40
NATRONA.....................................  WY                                         56025              1.40
NIOBRARA....................................  WY                                         56027              1.40
PARK........................................  WY                                         56029              1.40
PLATTE......................................  WY                                         56031              1.55
SHERIDAN....................................  WY                                         56033              1.50
SUBLETTE....................................  WY                                         56035              1.40
SWEETWATER..................................  WY                                         56037              1.50
TETON.......................................  WY                                         56039              1.40
UINTA.......................................  WY                                         56041              1.50
WASHAKIE....................................  WY                                         56043              1.40
WESTON......................................  WY                                         56045              1.40
----------------------------------------------------------------------------------------------------------------

Sec. 1000.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    (a) On or before the 5th day of the month, the market administrator 
for each Federal milk marketing order shall announce the following 
prices (as applicable to that order) for the preceding month:
    (1) The Class II price;
    (2) The Class II butterfat price;
    (3) The Class III price;
    (4) The Class III skim milk price;
    (5) The Class IV price;
    (6) The Class IV skim milk price;
    (7) The butterfat price;
    (8) The nonfat solids price;
    (9) The protein price;
    (10) The other solids price; and
    (11) The somatic cell adjustment rate.
    (b) On or before the 23rd day of the month, the market 
administrator for each Federal milk marketing order shall announce the 
following prices and pricing factors for the following month:
    (1) The Class I price;
    (2) The Class I skim milk price;
    (3) The Class I butterfat price;
    (4) The Class II skim milk price;
    (5) The Class II nonfat solids price; and
    (6) The advanced pricing factors described in Sec. 1000.50(q).


Sec. 1000.54  Equivalent price.

    If for any reason a price or pricing constituent required for 
computing the prices described in Sec. 1000.50 is not available, the 
market administrator shall use a price or pricing constituent 
determined by the Deputy Administrator, Dairy Programs, Agricultural 
Marketing Service, to be equivalent to the price or pricing constituent 
that is required.

Subpart H--Payments for Milk


Sec. 1000.70  Producer-settlement fund.

    The market administrator shall establish and maintain a separate 
fund known as the producer-settlement fund into which the market 
administrator shall deposit all payments made by handlers pursuant to 
Secs. ________.71, ________.76, and ________.77 of each Federal milk 
order and out of which the market administrator shall make all payments 
pursuant to Secs. ________.72 and ________.77 of each Federal milk 
order. Payments due any handler shall

[[Page 16222]]

be offset by any payments due from that handler.


Sec. 1000.76  Payments by a handler operating a partially regulated 
distributing plant.

    On or before the 25th day after the end of the month (except as 
provided in Sec. 1000.90), the operator of a partially regulated 
distributing plant, other than a plant that is subject to marketwide 
pooling of producer returns under a State government's milk 
classification and pricing program, shall pay to the market 
administrator for the producer-settlement fund the amount computed 
pursuant to paragraph (a) of this section or, if the handler submits 
the information specified in Secs. ________.30(b) and ________.31(b) of 
the order, the handler may elect to pay the amount computed pursuant to 
paragraph (b) of this section. A partially regulated distributing plant 
that is subject to marketwide pooling of producer returns under a State 
government's milk classification and pricing program shall pay the 
amount computed pursuant to paragraph (c) of this section.
    (a) The payment under this paragraph shall be an amount resulting 
from the following computations:
    (1) From the plant's route disposition in the marketing area:
    (i) Subtract receipts of fluid milk products classified as Class I 
milk from pool plants, plants fully regulated under other Federal 
orders, and handlers described in Sec. 1000.9(c) and Sec. 1135.11, 
except those receipts subtracted under a similar provision of another 
Federal milk order;
    (ii) Subtract receipts of fluid milk products from another nonpool 
plant that is not a plant fully regulated under another Federal order 
to the extent that an equivalent amount of fluid milk products disposed 
of to the nonpool plant by handlers fully regulated under any Federal 
order is classified and priced as Class I milk and is not used as an 
offset for any payment obligation under any order; and
    (iii) Subtract the pounds of reconstituted milk made from nonfluid 
milk products which are disposed of as route disposition in the 
marketing area;
    (2) For orders with multiple component pricing, compute a Class I 
differential price by subtracting Class III price from the current 
month's Class I price. Multiply the pounds remaining after the 
computation in paragraph (a)(1)(iii) of this section by the amount by 
which the Class I differential price exceeds the producer price 
differential, both prices to be applicable at the location of the 
partially regulated distributing plant except that neither the adjusted 
Class I differential price nor the adjusted producer price differential 
shall be less than zero;
    (3) For orders with skim milk and butterfat pricing, multiply the 
remaining pounds by the amount by which the Class I price exceeds the 
uniform price, both prices to be applicable at the location of the 
partially regulated distributing plant except that neither the adjusted 
Class I price nor the adjusted uniform price differential shall be less 
than the lowest announced class price; and
    (4) Unless the payment option described in paragraph (d) is 
selected, add the amount obtained from multiplying the pounds of 
labeled reconstituted milk included in paragraph (a)(1)(iii) of this 
section by any positive difference between the Class I price applicable 
at the location of the partially regulated distributing plant (less 
$1.00 if the reconstituted milk is labeled as such) and the Class IV 
price.
    (b) The payment under this paragraph shall be the amount resulting 
from the following computations:
    (1) Determine the value that would have been computed pursuant to 
Sec. ________.60 of the order for the partially regulated distributing 
plant if the plant had been a pool plant, subject to the following 
modifications:
    (i) Fluid milk products and bulk fluid cream products received at 
the plant from a pool plant, a plant fully regulated under another 
Federal order, and handlers described in Sec. 1000.9(c) and 
Sec. 1135.11 shall be allocated at the partially regulated distributing 
plant to the same class in which such products were classified at the 
fully regulated plant;
    (ii) Fluid milk products and bulk fluid cream products transferred 
from the partially regulated distributing plant to a pool plant or a 
plant fully regulated under another Federal order shall be classified 
at the partially regulated distributing plant in the class to which 
allocated at the fully regulated plant. Such transfers shall be 
allocated to the extent possible to those receipts at the partially 
regulated distributing plant from the pool plant and plants fully 
regulated under other Federal orders that are classified in the 
corresponding class pursuant to paragraph (b)(1)(i) of this section. 
Any such transfers remaining after the above allocation which are in 
Class I and for which a value is computed pursuant to Sec. ________.60 
of the order for the partially regulated distributing plant shall be 
priced at the statistical uniform price or uniform price, whichever is 
applicable, of the respective order regulating the handling of milk at 
the receiving plant, with such statistical uniform price or uniform 
price adjusted to the location of the nonpool plant (but not to be less 
than the lowest announced class price of the respective order); and
    (iii) If the operator of the partially regulated distributing plant 
so requests, the handler's value of milk determined pursuant to 
Sec. ________.60 of the order shall include a value of milk determined 
for each nonpool plant that is not a plant fully regulated under 
another Federal order which serves as a supply plant for the partially 
regulated distributing plant by making shipments to the partially 
regulated distributing plant during the month equivalent to the 
requirements of section 7(c) of the order subject to the following 
conditions:
    (A) The operator of the partially regulated distributing plant 
submits with its reports filed pursuant to Secs. ________.30(b) and 
________.31(b) of the order similar reports for each such nonpool 
supply plant;
    (B) The operator of the nonpool plant maintains books and records 
showing the utilization of all skim milk and butterfat received at the 
plant which are made available if requested by the market administrator 
for verification purposes; and
    (C) The value of milk determined pursuant to Sec. ________.60 for 
the unregulated supply plant shall be determined in the same manner 
prescribed for computing the obligation of the partially regulated 
distributing plant; and
    (2) From the partially regulated distributing plant's value of milk 
computed pursuant to paragraph (b)(1) of this section, subtract:
    (i) The gross payments that were made for milk that would have been 
producer milk had the plant been fully regulated;
    (ii) If paragraph (b)(1)(iii) of this section applies, the gross 
payments by the operator of the nonpool supply plant for milk received 
at the plant during the month that would have been producer milk if the 
plant had been fully regulated; and
    (iii) The payments by the operator of the partially regulated 
distributing plant to the producer-settlement fund of another Federal 
order under which the plant is also a partially regulated distributing 
plant and, if paragraph (b)(1)(iii) of this section applies, payments 
made by the operator of the nonpool supply plant to the producer-
settlement fund of any order.

[[Page 16223]]

    (c) The operator of a partially regulated distributing plant that 
is subject to marketwide pooling of returns under a milk classification 
and pricing program that is imposed under the authority of a State 
government shall pay on or before the 25th day after the end of the 
month (except as provided in Sec. 1000.90) to the market administrator 
for the producer-settlement fund an amount computed as follows:
    After completing the computations described in paragraphs (a)(1)(i) 
and (ii) of this section, determine the value of the remaining pounds 
of fluid milk products disposed of as route disposition in the 
marketing area by multiplying the hundredweight of such pounds by the 
amount, if greater than zero, that remains after subtracting the State 
program's class prices applicable to such products at the plant's 
location from the Federal order Class I price applicable at the 
location of the plant.
    (d) Any handler may elect partially regulated distributing plant 
status for any plant with respect to receipts of nonfluid milk 
ingredients that are reconstituted for fluid use. Payments may be made 
to the producer-settlement fund of the order regulating the producer 
milk used to produce the nonfluid milk ingredients at the positive 
difference between the Class I price applicable under the other order 
at the location of the plant where the nonfluid milk ingredients were 
processed and the Class IV price. This payment option shall apply only 
if a majority of the total milk received at the plant that processed 
the nonfluid milk ingredients is regulated under one or more Federal 
orders and payment may only be made to the producer-settlement fund of 
the order pricing a plurality of the milk used to produce the nonfluid 
milk ingredients. This payment option shall not apply if the source of 
the nonfluid ingredients used in reconstituted fluid milk products 
cannot be determined by the market administrator.


Sec. 1000.77  Adjustment of accounts.

    Whenever audit by the market administrator of any handler's 
reports, books, records, or accounts, or other verification discloses 
errors resulting in money due the market administrator from a handler, 
or due a handler from the market administrator, or due a producer or 
cooperative association from a handler, the market administrator shall 
promptly notify such handler of any amount so due and payment thereof 
shall be made on or before the next date for making payments as set 
forth in the provisions under which the error(s) occurred.


Sec. 1000.78  Charges on overdue accounts.

    Any unpaid obligation due the market administrator, producers, or 
cooperative associations from a handler pursuant to the provisions of 
the order shall be increased 1.0 percent each month beginning with the 
day following the date such obligation was due under the order. Any 
remaining amount due shall be increased at the same rate on the 
corresponding day of each succeeding month until paid. The amounts 
payable pursuant to this section shall be computed monthly on each 
unpaid obligation and shall include any unpaid charges previously 
computed pursuant to this section. The late charges shall accrue to the 
administrative assessment fund. For the purpose of this section, any 
obligation that was determined at a date later than prescribed by the 
order because of a handler's failure to submit a report to the market 
administrator when due shall be considered to have been payable by the 
date it would have been due if the report had been filed when due.

Subpart I--Administrative Assessment and Marketing Service 
Deduction


Sec. 1000.85  Assessment for order administration.

    On or before the payment receipt date specified under 
Sec. ________.71 of each Federal milk order each handler shall pay to 
the market administrator its pro rata share of the expense of 
administration of the order at a rate specified by the market 
administrator that is no more than 5 cents per hundredweight with 
respect to:
    (a) Receipts of producer milk (including the handler's own 
production) other than such receipts by a handler described in 
Sec. 1000.9(c) that were delivered to pool plants of other handlers;
    (b) Receipts from a handler described in Sec. 1000.9(c);
    (c) Receipts of concentrated fluid milk products from unregulated 
supply plants and receipts of nonfluid milk products assigned to Class 
I use pursuant to Sec. 1000.43(d) and other source milk allocated to 
Class I pursuant to Sec. 1000.44(a)(3) and (8) and the corresponding 
steps of Sec. 1000.44(b), except other source milk that is excluded 
from the computations pursuant to Sec. ________.60(d) and (e) of parts 
1005, 1006, and 1007 or Sec. ________.60(h) and (i) of parts 1001, 
1030, 1032, 1033, 1124, 1126, 1131, and 1135; and
    (d) Route disposition in the marketing area from a partially 
regulated distributing plant that exceeds the skim milk and butterfat 
subtracted pursuant to Sec. 1000.76(a)(1)(i)and (ii).


Sec. 1000.86  Deduction for marketing services.

    (a) Except as provided in paragraph (b) of this section, each 
handler in making payments to producers for milk (other than milk of 
such handler's own production) pursuant to Sec. ________.73 of each 
Federal milk order shall deduct an amount specified by the market 
administrator that is no more than 7 cents per hundredweight and shall 
pay the amount deducted to the market administrator not later than the 
payment receipt date specified under Sec. ________.71 of each Federal 
milk order. The money shall be used by the market administrator to 
verify or establish weights, samples and tests of producer milk and 
provide market information for producers who are not receiving such 
services from a cooperative association. The services shall be 
performed in whole or in part by the market administrator or an agent 
engaged by and responsible to the market administrator.
    (b) In the case of producers for whom the market administrator has 
determined that a cooperative association is actually performing the 
services set forth in paragraph (a) of this section, each handler shall 
make deductions from the payments to be made to producers as may be 
authorized by the membership agreement or marketing contract between 
the cooperative association and the producers. On or before the 15th 
day after the end of the month (except as provided in Sec. 1000.90), 
such deductions shall be paid to the cooperative association rendering 
the services accompanied by a statement showing the amount of any 
deductions and the amount of milk for which the deduction was computed 
for each producer. These deductions shall be made in lieu of the 
deduction specified in paragraph (a) of this section.

Subpart J--Miscellaneous Provisions


Sec. 1000.90  Dates.

    If a date required for a payment contained in a Federal milk order 
falls on a Saturday, Sunday, or national holiday, such payment or 
announcement will be due on the next day that the market 
administrator's office is open for public business.

[[Page 16224]]

Sec. 1000.91  [Reserved]


Sec. 1000.92  [Reserved]


Sec. 1000.93  OMB control number assigned pursuant to the Paperwork 
Reduction Act.

    The information collection requirements contained in this 
regulation have been approved by the Office of Management and Budget 
(OMB) under the provisions of Title 44 U.S.C. chapter 35 and have been 
assigned OMB control number 0581-0032.

PART 1001--MILK IN THE NORTHEAST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1001.1  General provisions.

Definitions

1001.2  Northeast marketing area.
1001.3  Route disposition.
1001.4  Plant.
1001.5  Distributing plant.
1001.6  Supply plant.
1001.7  Pool plant.
1001.8  Nonpool plant.
1001.9  Handler.
1001.10  Producer-handler.
1001.11  [Reserved]
1001.12  Producer.
1001.13  Producer milk.
1001.14  Other source milk.
1001.15  Fluid milk product.
1001.16  Fluid cream product.
1001.17  [Reserved]
1001.18  Cooperative association.
1001.19  Commercial food processing establishment.

Handler Reports

1001.30  Reports of receipts and utilization.
1001.31  Payroll reports.
1001.32  Other reports.

Classification of Milk

1001.40  Classes of utilization.
1001.41  [Reserved]
1001.42  Classification of transfers and diversions.
1001.43  General classification rules.
1001.44  Classification of producer milk.
1001.45  Market administrator's reports and announcements concerning 
classification.

Class Prices

1001.50  Class prices, component prices, and advanced pricing 
factors.
1001.51  Class I differential and price.
1001.52  Adjusted Class I differentials.
1001.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1001.54  Equivalent price.

Producer Price Differential

1001.60  Handler's value of milk.
1001.61  Computation of producer price differential.
1001.62  Announcement of producer prices.

Payments for Milk

1001.70  Producer-settlement fund.
1001.71  Payments to the producer-settlement fund.
1001.72  Payments from the producer-settlement fund.
1001.73  Payments to producers and to cooperative associations.
1001.74  [Reserved]
1001.75  Plant location adjustments for producer milk and nonpool 
milk.
1001.76  Payments by a handler operating a partially regulated 
distributing plant.
1001.77  Adjustment of accounts.
1001.78  Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1001.85  Assessment for order administration.
1001.86  Deduction for marketing services.

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

Subpart--Order Regulating Handling

General Provisions


Sec. 1001.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to and are hereby made a part of this order. In this part 1001, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

Definitions


Sec. 1001.2  Northeast marketing area.

    The marketing area means all the territory within the bounds of the 
following states and political subdivisions, including all piers, docks 
and wharves connected therewith and all craft moored thereat, and all 
territory occupied by government (municipal, State or Federal) 
reservations, installations, institutions, or other similar 
establishments if any part thereof is within any of the listed states 
or political subdivisions:

Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, Rhode 
Island, Vermont and District of Columbia

    All of the States of Connecticut, Delaware, Massachusetts, New 
Hampshire, New Jersey, Rhode Island, Vermont and the District of 
Columbia.

Maryland Counties

    All of the State of Maryland except the counties of Allegany and 
Garrett.

New York Counties, Cities, and Townships

    All counties within the State of New York except Allegany, 
Cattaraugus, Chatauqua, Erie, Genessee, Livingston, Monroe, Niagara, 
Ontario, Orleans, Seneca, Wayne, and Wyoming; the townships of 
Conquest, Montezuma, Sterling and Victory in Cayuga County; the city of 
Hornell, and the townships of Avoca, Bath, Bradford, Canisteo, 
Cohocton, Dansville, Fremont, Pulteney, Hartsville, Hornellsville, 
Howard, Prattsburg, Urbana, Wayland, Wayne and Wheeler in Steuben 
County; and the townships of Italy, Middlesex, and Potter in Yates 
County.

Pennsylvania Counties

    Adams, Bucks, Chester, Cumberland, Dauphin, Delaware, Franklin, 
Fulton, Juniata, Lancaster, Lebanon, Montgomery, Perry, Philadelphia, 
and York.

Virginia Counties and Cities

    Arlington, Fairfax, Loudoun, and Prince William, and the cities of 
Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park.


Sec. 1001.3  Route disposition.

    See Sec. 1000.3.


Sec. 1001.4  Plant.

    (a) Except as provided in paragraph (b) of this section, plant 
means the land, buildings, facilities, and equipment constituting a 
single operating unit or establishment at which milk or milk products 
are received, processed, or packaged, including a facility described in 
paragraph (b)(2) of this section if the facility receives the milk of 
more than one dairy farmer.
    (b) Plant shall not include:
    (1) A separate building without stationary storage tanks that is 
used only as a reload point for transferring bulk milk from one tank 
truck to another or a separate building used only as a distribution 
point for storing packaged fluid milk products in transit for route 
disposition;
    (2) An on-farm facility operated as part of a single dairy farm 
entity for the separation of cream and skim milk; or
    (3) Bulk reload points where milk is transferred from one tank 
truck to another while en route from dairy farmers' farms to a plant. 
If stationary storage tanks are used for transferring milk at the 
premises, the operator of the facility shall make an advance written 
request to the market administrator that the facility shall be treated 
as a reload point. The cooling of milk, collection of samples, and 
washing and sanitizing of tank trucks at the premises shall not 
disqualify it as a bulk reload point.


Sec. 1001.5  Distributing plant.

    See Sec. 1000.5.


Sec. 1001.6  Supply plant.

    See Sec. 1000.6.

[[Page 16225]]

Sec. 1001.7  Pool plant.

    Pool plant means a plant, unit of plants, or system of plants as 
specified in paragraphs (a) through (f) of this section, but excluding 
a plant described in paragraph (h) of this section. The pooling 
standards described in paragraphs (c) and (f) of this section are 
subject to modification pursuant to paragraph (g) of this section.
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or section 7(b) of any 
other Federal milk order, from which during the month 25 percent or 
more of the total quantity of fluid milk products physically received 
at the plant (excluding concentrated milk received from another plant 
by agreement for other than Class I use) are disposed of as route 
disposition or are transferred in the form of packaged fluid milk 
products to other distributing plants. At least 25 percent of such 
route disposition and transfers must be to outlets in the marketing 
area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 25 percent of the total quantity of 
fluid milk products physically received at the plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) into ultra-pasteurized or aseptically-processed fluid 
milk products.
    (c) A supply plant from which fluid milk products are transferred 
or diverted to plants described in paragraph (a) or (b) of this section 
subject to the additional conditions described in this paragraph. In 
the case of a supply plant operated by a cooperative association 
handler described in Sec. 1000.9(c), fluid milk products that the 
cooperative delivers to pool plants directly from producers' farms 
shall be treated as if transferred from the cooperative association's 
plant for the purpose of meeting the shipping requirements of this 
paragraph.
    (1) During the months of August and December, such shipments must 
equal not less than 10 percent of the total quantity of milk that is 
received at the plant or diverted from it pursuant to Sec. 1001.13 
during the month;
    (2) During the months of September through November, such shipments 
must equal not less than 20 percent of the total quantity of milk that 
is received at the plant or diverted from it pursuant to Sec. 1001.13 
during the month;
    (3) A plant which meets the shipping requirements of this paragraph 
during each of the months of August through December shall be a pool 
plant during the following months of January through July unless the 
milk received at the plant fails to meet the requirements of a duly 
constituted regulatory agency, the plant fails to meet a shipping 
requirement instituted pursuant to paragraph (f) of this section, or 
the plant operator requests nonpool status for the plant. The shipping 
requirement for any plant which has not met the requirements of 
paragraphs (c)(1) and (c)(2) of this section must equal not less than 
10 percent of the total quantity of milk that is received at the plant 
or diverted from it pursuant to Sec. 1001.13 during each of the months 
of January through July in order for the plant to be a pool plant in 
each of those months;
    (4) If milk is delivered directly from producers' farms that are 
located outside of the states included in the marketing area or outside 
Maine or West Virginia, such producers must be grouped by state into 
reporting units and each reporting unit must independently meet the 
shipping requirements of this paragraph; and
    (5) Concentrated milk transferred from the supply plant to a 
distributing plant for an agreed-upon use other than Class I shall be 
excluded from the supply plant's shipments in computing the percentages 
in paragraphs (c)(1) and (2) of this section.
    (d) [Reserved]
    (e) Two or more plants that are located in the marketing area and 
operated by the same handler may qualify as a unit by meeting the total 
and in-area route distribution requirements specified in paragraph (a) 
of this section subject to the following additional requirements:
    (1) At least one of the plants in the unit qualifies as a pool 
plant pursuant to paragraph (a) of this section;
    (2) Other plants in the unit must process only Class I or Class II 
products and must be located in a pricing zone providing the same or a 
lower Class I price than the price applicable at the distributing plant 
included in the unit; and
    (3) A written request to form a unit, or to add or remove plants 
from a unit, or to cancel a unit, must be filed with the market 
administrator prior to the first day of the month for which unit 
formation is to be effective.
    (f) Two or more supply plants operated by the same handler, or by 
one or more cooperative associations, may qualify for pooling as a 
system of plants by meeting the applicable percentage requirements of 
paragraph (c) of this section in the same manner as a single plant 
subject to the following additional requirements:
    (1) A supply plant system will be effective for the period of 
August 1 through July 31 of the following year. Written notification 
must be given to the market administrator listing the plants to be 
included in the system prior to the first day of July preceding the 
effective date of the system. The plants included in the system shall 
be listed in the sequence in which they shall qualify for pool plant 
status based on the minimum deliveries required. If the deliveries made 
are insufficient to qualify the entire system for pooling, the last 
listed plant shall be excluded from the system, followed by the plant 
next-to-last on the list, and continuing in this sequence until 
remaining listed plants have met the minimum shipping requirements; and
    (2) Each plant that qualifies as a pool plant within a system shall 
continue each month as a plant in the system through the following July 
unless the plant subsequently fails to qualify for pooling, the handler 
submits a written notification to the market administrator prior to the 
first day of the month that the plant be deleted from the system, or 
that the system be discontinued. Any plant that has been so deleted 
from the system, or that has failed to qualify as a pool plant in any 
month, will not be part of the system for the remaining months through 
July. For any system that qualifies in August, no plant may be added in 
any subsequent month through the following July unless the plant 
replaces another plant in the system that has ceased operations and the 
market administrator is notified of such replacement prior to the first 
day of the month for which it is to be effective.
    (g) The applicable shipping percentages of paragraphs (c) and (f) 
of this section may be increased or decreased by the market 
administrator if the market administrator finds that such adjustment is 
necessary to encourage needed shipments or to prevent uneconomic 
shipments. Before making such a finding, the market administrator shall 
investigate the need for adjustment either on the market 
administrator's own initiative or at the request of interested parties 
if the request is made in writing at least 15 days prior to the month 
for which the requested revision is desired effective. If the 
investigation shows that an adjustment of the shipping percentages 
might be appropriate, the market administrator shall issue a notice 
stating that an adjustment is being considered and invite data, views 
and arguments. Any decision to revise an applicable shipping percentage 
must be issued in writing at least one day before the effective date.
    (h) The term pool plant shall not apply to the following plants:

[[Page 16226]]

    (1) A producer-handler plant;
    (2) An exempt plant as defined in Sec. 1000.8(e);
    (3) A plant qualified pursuant to paragraph (a) of this section 
that is located within the marketing area if the plant also meets the 
pooling requirements of another Federal order and more than 50 percent 
of its route distribution has been in such other Federal order 
marketing area for 3 consecutive months;
    (4) A plant qualified pursuant to paragraph (a) of this section 
which is not located within any Federal order marketing area that meets 
the pooling requirements of another Federal order and has had greater 
route disposition in such other Federal order's marketing area for 3 
consecutive months;
    (5) A plant qualified pursuant to paragraph (a) of this section 
that is located in another Federal order marketing area if the plant 
meets the pooling requirements of such other Federal order and does not 
have a majority of its route distribution in this marketing area for 3 
consecutive months or if the plant is required to be regulated under 
such other Federal order without regard to its route disposition in any 
other Federal order marketing area;
    (6) A plant qualified pursuant to paragraph (c) of this section 
which also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under the other Federal order than are made to plants regulated under 
this order, or the plant has automatic pooling status under the other 
Federal order; and
    (7) That portion of a pool plant designated as a ``nonpool plant'' 
that is physically separate and operated separately from the pool 
portion of such plant. The designation of a portion of a regulated 
plant as a nonpool plant must be requested in writing by the handler 
and must be approved by the market administrator.


Sec. 1001.8  Nonpool plant.

    See Sec. 1000.8.


Sec. 1001.9  Handler.

    See Sec. 1000.9.


Sec. 1001.10  Producer-handler.

    Producer-handler means a person who:
    (a) Operates a dairy farm and a distributing plant from which there 
is monthly route disposition in the marketing area during the month;
    (b) Receives milk solely from own farm production or receives milk 
that is fully subject to the pricing and pooling provisions of this or 
any other Federal order;
    (c) Receives at its plant or acquires for route disposition no more 
than 150,000 pounds of fluid milk products from handlers fully 
regulated under any Federal order. This limitation shall not apply if 
the producer-handler's own farm production is less than 150,000 pounds 
during the month;
    (d) Disposes of no other source milk as Class I milk except by 
increasing the nonfat milk solids content of the fluid milk products; 
and
    (e) Provides proof satisfactory to the market administrator that 
the care and management of the dairy animals and other resources 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) and the processing 
and packaging operations are the producer-handler's own enterprise and 
at its own risk.


Sec. 1001.11  [Reserved]


Sec. 1001.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
(or components of milk) is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec. 1001.13; or
    (2) Received by a handler described in Sec. 1000.9(c).
    (b) Producer shall not include a dairy farmer described in 
paragraphs (b)(1) through (6) of this section. A dairy farmer described 
in paragraphs (b)(5) or (6) of this section shall be known as a dairy 
farmer for other markets.
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to 
Sec. 1001.13(d);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and that milk is allocated by request to a utilization other than 
Class I;
    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order;
    (5) For any month of December through June, any dairy farmer whose 
milk is received at a pool plant or by a cooperative association 
handler described in Sec. 1000.9(c) if the pool plant operator or the 
cooperative association caused milk from the same farm to be delivered 
to any plant as other than producer milk, as defined under this order 
or any other Federal milk order, during the same month, either of the 2 
preceding months, or during any of the preceding months of July through 
November; and
    (6) For any month of July through November, any dairy farmer whose 
milk is received at a pool plant or by a cooperative association 
handler described in Sec. 1000.9(c) if the pool plant operator or the 
cooperative association caused milk from the same farm to be delivered 
to any plant as other than producer milk, as defined under this order 
or any other Federal milk order, during the same month.


Sec. 1001.13  Producer milk.

    Producer milk means the skim milk (or the skim equivalent of 
components of skim milk) and butterfat contained in milk of a producer 
that is:
    (a) Received by the operator of a pool plant directly from a 
producer or from a handler described in Sec. 1000.9(c). Any milk which 
is picked up from the producer's farm in a tank truck under the control 
of the operator of a pool plant or a handler described in 
Sec. 1000.9(c) but which is not received at a plant until the following 
month shall be considered as having been received by the handler during 
the month in which it is picked up at the farm. All milk received 
pursuant to this paragraph shall be priced at the location of the plant 
where it is first physically received;
    (b) Received by the operator of a pool plant or a handler described 
in Sec. 1000.9(c) in excess of the quantity delivered to pool plants 
subject to the following conditions:
    (1) The producers whose farms are outside of the states included in 
the marketing area and outside the states of Maine or West Virginia 
shall be organized into state units and each such unit shall be 
reported separately; and
    (2) For pooling purposes, each reporting unit must satisfy the 
shipping standards specified for a supply plant pursuant to 
Sec. 1001.7(c);
    (c) Diverted by a proprietary pool plant operator to another pool 
plant. Milk so diverted shall be priced at the location of the plant to 
which diverted; or
    (d) Diverted by the operator of a pool plant or by a handler 
described in Sec. 1000.9(c) to a nonpool plant, subject to the 
following conditions:
    (1) Milk of a dairy farmer shall not be eligible for diversion 
unless milk of

[[Page 16227]]

such dairy farmer was physically received as producer milk at a pool 
plant and the dairy farmer has continuously retained producer status 
since that time. If a dairy farmer loses producer status under this 
order (except as a result of a temporary loss of Grade A approval), the 
dairy farmer's milk shall not be eligible for diversion until milk of 
the dairy farmer has been physically received as producer milk at a 
pool plant; and
    (2) Diverted milk shall be priced at the location of the plant to 
which diverted.


Sec. 1001.14  Other source milk.

    See Sec. 1000.14.


Sec. 1001.15  Fluid milk product.

    See Sec. 1000.15.


Sec. 1001.16  Fluid cream product.

    See Sec. 1000.16.


Sec. 1001.17  [Reserved]


Sec. 1001.18  Cooperative association.

    See Sec. 1000.18.


Sec. 1001.19  Commercial food processing establishment.

    See Sec. 1000.19.

Handler Reports


Sec. 1001.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 9th day 
after the end of the month, in the detail and on prescribed forms, as 
follows:
    (a) Each pool plant operator shall report for each of its 
operations the following information:
    (1) Product pounds, pounds of butterfat, pounds of protein, and 
pounds of nonfat solids other than protein (other solids) contained in 
or represented by:
    (i) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec. 1000.9(c); and
    (ii) Receipts of milk from handlers described in Sec. 1000.9(c);
    (2) Product pounds and pounds of butterfat contained in:
    (i) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (ii) Receipts of other source milk; and
    (iii) Inventories at the beginning and end of the month of fluid 
milk products and bulk fluid cream products;
    (3) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph; and
    (4) Such other information with respect to the receipts and 
utilization of skim milk, butterfat, milk protein, and other nonfat 
solids as the market administrator may prescribe.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. The 
report shall show also the quantity of any reconstituted skim milk in 
route disposition in the marketing area.
    (c) Each handler described in Sec. 1000.9(c) shall report:
    (1) The product pounds, pounds of butterfat, pounds of protein, and 
the pounds of solids-not-fat other than protein (other solids) 
contained in receipts of milk from producers; and
    (2) The utilization or disposition of such receipts.
    (d) Each handler not specified in paragraph (a) or (b) of this 
section shall report with respect to its receipts and utilization of 
milk and milk products in such manner as the market administrator may 
prescribe.


Sec. 1001.31  Payroll reports.

    (a) On or before the 22nd day after the end of each month, each 
handler that operates a pool plant pursuant to Sec. 1001.7 and each 
handler described in Sec. 1000.9(c) shall report to the market 
administrator its producer payroll for the month, in detail prescribed 
by the market administrator, showing for each producer the information 
specified in Sec. 1001.73(e).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 1000.76(b) shall report for 
each dairy farmer who would have been a producer if the plant had been 
fully regulated in the same manner as prescribed for reports required 
by paragraph (a) of this section.


Sec. 1001.32  Other reports.

    In addition to the reports required pursuant to Secs. 1001.30 and 
1001.31, each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Classification of Milk


Sec. 1001.40  Classes of utilization.

    See Sec. 1000.40.


Sec. 1001.41  [Reserved]


Sec. 1001.42  Classification of transfers and diversions.

    See Sec. 1000.42.


Sec. 1001.43  General classification rules.

    See Sec. 1000.43.


Sec. 1001.44  Classification of producer milk.

    See Sec. 1000.44.


Sec. 1001.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45.

Class Prices


Sec. 1001.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec. 1000.50.


Sec. 1001.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Suffolk County, Massachusetts, which is reported in Sec. 1000.52. The 
Class I price shall be the price computed pursuant to Sec. 1000.50(a) 
for Suffolk County, Massachusetts.


Sec. 1001.52  Adjusted Class I differentials.

    See Sec. 1000.52.


Sec. 1001.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec. 1000.53.


Sec. 1001.54  Equivalent price.

    See Sec. 1000.54.

Producer Price Differential


Sec. 1001.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec. 1000.9(c) with respect to 
milk that was not received at a pool plant by adding the amounts 
computed in paragraphs (a) through (h) of this section and subtracting 
from that total amount the value computed in paragraph (i) of this 
section. Unless otherwise specified, the skim milk, butterfat, and the 
combined pounds of skim milk and butterfat referred to in this section 
shall result from the steps set forth in Sec. 1000.44(a), (b), and (c), 
respectively, and the nonfat components of producer milk in each class 
shall be based upon the proportion of such components in producer skim 
milk. Receipts of nonfluid milk products that are distributed as 
labeled reconstituted milk for which payments are made to the producer-
settlement

[[Page 16228]]

fund of another Federal order under Sec. 1000.76(a)(4) or (d) shall be 
excluded from pricing under this section.
    (a) Class I value.
    (1) Multiply the pounds of skim milk in Class I by the Class I skim 
milk price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class I by the Class I butterfat price.
    (b) Class II value.
    (1) Multiply the pounds of nonfat solids in Class II skim milk by 
the Class II nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class II times the Class II butterfat price.
    (c) Class III value.
    (1) Multiply the pounds of protein in Class III skim milk by the 
protein price;
    (2) Add an amount obtained by multiplying the pounds of other 
solids in Class III skim milk by the other solids price; and
    (3) Add an amount obtained by multiplying the pounds of butterfat 
in Class III by the butterfat price.
    (d) Class IV value.
    (1) Multiply the pounds of nonfat solids in Class IV skim milk by 
the nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class IV by the butterfat price.
    (e) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec. 1000.44(a)(11) and the corresponding 
step of Sec. 1000.44(b) by the skim milk prices and butterfat prices 
applicable to each class.
    (f) Multiply the difference between the current month's Class I, 
II, or III price, as the case may be, and the Class IV price for the 
preceding month by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
    (g) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec. 1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(3)(i) through (vi) 
and the corresponding step of Sec. 1000.44(b), excluding receipts of 
bulk fluid cream products from a plant regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants.
    (h) Multiply the difference between the Class I price applicable at 
the location of the nearest unregulated supply plants from which an 
equivalent volume was received and the Class III price by the pounds of 
skim milk and butterfat in receipts of concentrated fluid milk products 
assigned to Class I pursuant to Sec. 1000.43(d) and 
Sec. 1000.44(a)(3)(i) and the corresponding step of Sec. 1000.44(b) and 
the pounds of skim milk and butterfat subtracted from Class I pursuant 
to Sec. 1000.44(a)(8) and the corresponding step of Sec. 1000.44(b), 
excluding such skim milk and butterfat in receipts of fluid milk 
products from an unregulated supply plant to the extent that an 
equivalent amount of skim milk or butterfat disposed of to such plant 
by handlers fully regulated under any Federal milk order is classified 
and priced as Class I milk and is not used as an offset for any other 
payment obligation under any order.
    (i) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of nonfluid milk products that are allocated to 
Class I use pursuant to Sec. 1000.43(d).


Sec. 1001.61  Computation of producer price differential.

    For each month, the market administrator shall compute a producer 
price differential per hundredweight. The report of any handler who has 
not made payments required pursuant to Sec. 1001.71 for the preceding 
month shall not be included in the computation of the producer price 
differential, and such handler's report shall not be included in the 
computation for succeeding months until the handler has made full 
payment of outstanding monthly obligations. Subject to the 
aforementioned conditions, the market administrator shall compute the 
producer price differential in the following manner:
    (a) Combine into one total the values computed pursuant to 
Sec. 1001.60 for all handlers required to file reports prescribed in 
Sec. 1001.30;
    (b) Subtract the total of the values obtained by multiplying each 
handler's total pounds of protein, other solids, and butterfat 
contained in the milk for which an obligation was computed pursuant to 
Sec. 1001.60 by the protein price, other solids price, and the 
butterfat price, respectively;
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 1001.75;
    (d) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (e) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (1) The total hundredweight of producer milk; and
    (2) The total hundredweight for which a value is computed pursuant 
to Sec. 1001.60(h); and
    (f) Subtract not less than 4 cents nor more than 5 cents from the 
price computed pursuant to paragraph (e) of this section. The result, 
rounded to the nearest cent, shall be known as the producer price 
differential for the month.


Sec. 1001.62  Announcement of producer prices.

    On or before the 13th day after the end of the month, the market 
administrator shall announce the following prices and information:
    (a) The producer price differential;
    (b) The protein price;
    (c) The nonfat solids price;
    (d) The other solids price;
    (e) The butterfat price;
    (f) The average butterfat, protein, nonfat solids, and other solids 
content of producer milk; and
    (g) The statistical uniform price for milk containing 3.5 percent 
butterfat computed by combining the Class III price and the producer 
price differential.

Payments for Milk


Sec. 1001.70  Producer-settlement fund.

    See Sec. 1000.70.


Sec. 1001.71  Payments to the producer-settlement fund.

    Each handler shall make payment to the producer-settlement fund in 
a manner that provides receipt of the funds by the market administrator 
no later than the 15th day after the end of the month (except as 
provided in Sec. 1000.90). Payment shall be the amount, if any, by 
which the amount specified in paragraph (a) of this section exceeds the 
amount specified in paragraph (b) of this section:
    (a) The total value of milk to the handler for the month as 
determined pursuant to Sec. 1001.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 1001.75;
    (2) An amount obtained by multiplying the total pounds of protein, 
other solids, and butterfat contained in producer milk by the protein, 
other solids, and butterfat prices respectively; and

[[Page 16229]]

    (3) An amount obtained by multiplying the pounds of skim milk and 
butterfat for which a value was computed pursuant to Sec. 1001.60(h) by 
the producer price differential as adjusted pursuant to Sec. 1001.75 
for the location of the plant from which received.


Sec. 1001.72  Payments from the producer-settlement fund.

    No later than the 16th day after the end of each month (except as 
provided in Sec. 1000.90), the market administrator shall pay to each 
handler the amount, if any, by which the amount computed pursuant to 
Sec. 1001.71(b) exceeds the amount computed pursuant to 
Sec. 1001.71(a). If, at such time, the balance in the producer-
settlement fund is insufficient to make all payments pursuant to this 
section, the market administrator shall reduce uniformly such payments 
and shall complete the payments as soon as the funds are available.


Sec. 1001.73  Payments to producers and to cooperative associations.

    (a) Each pool plant operator that is not paying a cooperative 
association for producer milk shall pay each producer as follows:
    (1) Partial payment. For each producer who has not discontinued 
shipments as of the 23rd day of the month, payment shall be made so 
that it is received by the producer on or before the 26th day of the 
month (except as provided in Sec. 1000.90) for milk received during the 
first 15 days of the month at not less than the lowest announced class 
price for the preceding month, less proper deductions authorized in 
writing by the producer.
    (2) Final payment. For milk received during the month, payment 
shall be made so that it is received by each producer no later than the 
day after the payment date required in Sec. 1001.72 in an amount 
computed as follows:
    (i) Multiply the hundredweight of producer milk received by the 
producer price differential for the month as adjusted pursuant to 
Sec. 1001.75;
    (ii) Multiply the pounds of butterfat received by the butterfat 
price for the month;
    (iii) Multiply the pounds of protein received by the protein price 
for the month;
    (iv) Multiply the pounds of other solids received by the other 
solids price for the month; and
    (v) Add the amounts computed in paragraphs (a)(2)(i) through (iv) 
of this section, and from that sum:
    (A) Subtract the partial payment made pursuant to paragraph (a)(1) 
of this section;
    (B) Subtract the deduction for marketing services pursuant to 
Sec. 1000.86;
    (C) Add or subtract for errors made in previous payments to the 
producer; and
    (D) Subtract proper deductions authorized in writing by the 
producer.
    (b) One day before partial and final payments are due pursuant to 
paragraph (a) of this section, each pool plant operator shall pay a 
cooperative association for milk received as follows:
    (1) Partial payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk (including the 
milk of producers who are not members of such association and who the 
market administrator determines have authorized the cooperative 
association to collect payment for their milk) received during the 
first 15 days of the month from a cooperative association in any 
capacity, except as the operator of a pool plant, the payment shall be 
equal to the hundredweight of milk received multiplied by the lowest 
announced class price for the preceding month.
    (2) Partial payment to a cooperative association for milk 
transferred from its pool plant. For bulk milk/skimmed milk products 
received during the first 15 days of the month from a cooperative 
association in its capacity as the operator of a pool plant, the 
partial payment shall be at the pool plant operator's estimated use 
value of the milk using the most recent class prices available at the 
receiving plant's location.
    (3) Final payment to a cooperative association for milk transferred 
from its pool plant. Following the classification of bulk fluid milk 
products and bulk fluid cream products received during the month from a 
cooperative association in its capacity as the operator of a pool 
plant, the final payment for such receipts shall be determined as 
follows:
    (i) Multiply the hundredweight of Class I skim milk by the Class I 
skim milk price for the month at the receiving plant;
    (ii) Multiply the pounds of Class I butterfat by the Class I 
butterfat price for the month at the receiving plant;
    (iii) Multiply the pounds of nonfat solids in Class II skim milk by 
the Class II nonfat solids price;
    (iv) Multiply the pounds of butterfat in Class II times the Class 
II butterfat price;
    (v) Multiply the pounds of nonfat solids in Class IV milk by the 
nonfat solids price for the month;
    (vi) Multiply the pounds of butterfat in Class III and IV milk by 
the butterfat price for the month;
    (vii) Multiply the pounds of protein in Class III milk by the 
protein price for the month;
    (viii) Multiply the pounds of other solids in Class III milk by the 
other solids price for the month; and
    (ix) Add together the amounts computed in paragraphs (b)(3)(i) 
through (viii) of this section and from that sum deduct any payment 
made pursuant to paragraph (b)(2) of this section.
    (4) Final payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk received from a 
cooperative association during the month, including the milk of 
producers who are not members of such association and who the market 
administrator determines have authorized the cooperative association to 
collect payment for their milk, the final payment for such milk shall 
be an amount equal to the sum of the individual payments otherwise 
payable for such milk pursuant to paragraph (a)(2) of this section.
    (c) If a handler has not received full payment from the market 
administrator pursuant to Sec. 1001.72 by the payment date specified in 
paragraph (a) or (b) of this section, the handler may reduce payments 
pursuant to paragraphs (a) and (b) of this section, but by not more 
than the amount of the underpayment. The payments shall be completed on 
the next scheduled payment date after receipt of the balance due from 
the market administrator.
    (d) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer-settlement fund, and in the event that the handler 
subsequently locates and pays the producer or a lawful claimant, or in 
the event that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer-settlement fund to the handler or to the lawful 
claimant as the case may be.
    (e) In making payments to producers pursuant to this section, each 
pool plant operator shall furnish each producer, except a producer 
whose milk was received from a cooperative association handler 
described in Sec. 1000.9(a) or (c), a supporting statement in such form 
that it may be retained by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and the payroll number of the producer;

[[Page 16230]]

    (2) The month and dates that milk was received from the producer, 
including the daily and total pounds of milk received;
    (3) The total pounds of butterfat, protein, and other solids 
contained in the producer's milk;
    (4) The minimum rate or rates at which payment to the producer is 
required pursuant to this order;
    (5) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (6) The amount, or rate per hundredweight, or rate per pound of 
component, and the nature of each deduction claimed by the handler; and
    (7) The net amount of payment to the producer or cooperative 
association.


Sec. 1001.74  [Reserved]


Sec. 1001.75  Plant location adjustments for producer milk and nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec. 1001.51 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Secs. 1001.73 
and 1000.76.


Sec. 1001.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76.


Sec. 1001.77  Adjustment of accounts.

    See Sec. 1000.77.


Sec. 1001.78  Charges on overdue accounts.

    See Sec. 1000.78.

Administrative Assessment and Marketing Service Deduction


Sec. 1001.85  Assessment for order administration.

    See Sec. 1000.85.


Sec. 1001.86  Deduction for marketing services.

    See Sec. 1000.86.

PART 1005--MILK IN THE APPALACHIAN MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1005.1  General provisions.

Definitions

1005.2  Appalachian marketing area.
1005.3  Route disposition.
1005.4  Plant.
1005.5  Distributing plant.
1005.6  Supply plant.
1005.7  Pool plant.
1005.8  Nonpool plant.
1005.9  Handler.
1005.10  Producer-handler.
1005.11  [Reserved]
1005.12  Producer.
1005.13  Producer milk.
1005.14  Other source milk.
1005.15  Fluid milk product.
1005.16  Fluid cream product.
1005.17  [Reserved]
1005.18  Cooperative association.
1005.19  Commercial food processing establishment.

Handler Reports

1005.30  Reports of receipts and utilization.
1005.31  Payroll reports.
1005.32  Other reports.

Classification of Milk

1005.40  Classes of utilization.
1005.41  [Reserved]
1005.42  Classification of transfers and diversions.
1005.43  General classification rules.
1005.44  Classification of producer milk.
1005.45  Market administrator's reports and announcements concerning 
classification.

Class Prices

1005.50  Class prices, component prices, and advanced pricing 
factors.
1005.51  Class I differential and price.
1005.52  Adjusted Class I differentials.
1005.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1005.54  Equivalent price.

Uniform Prices

1005.60  Handler's value of milk.
1005.61  Computation of uniform prices.
1005.62  Announcement of uniform prices.

Payments for Milk

1005.70  Producer-settlement fund.
1005.71  Payments to the producer-settlement fund.
1005.72  Payments from the producer-settlement fund.
1005.73  Payments to producers and to cooperative associations.
1005.74  [Reserved]
1005.75  Plant location adjustments for producer milk and nonpool 
milk.
1005.76  Payments by a handler operating a partially regulated 
distributing plant.
1005.77  Adjustment of accounts.
1005.78  Charges on overdue accounts.

Marketwide Service Payments

1005.80  Transportation credit balancing fund.
1005.81  Payments to the transportation credit balancing fund.
1005.82  Payments from the transportation credit balancing fund.

Administrative Assessment and Marketing Service Deduction

1005.85  Assessment for order administration.
1005.86  Deduction for marketing services.

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

Subpart--Order Regulating Handling

General Provisions


Sec. 1005.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to and are hereby made a part of this order. In this part 1005, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

Definitions


Sec. 1005.2  Appalachian marketing area.

    The marketing area means all the territory within the bounds of the 
following states and political subdivisions, including all piers, docks 
and wharves connected therewith and all craft moored thereat, and all 
territory occupied by government (municipal, State or Federal) 
reservations, installations, institutions, or other similar 
establishments if any part thereof is within any of the listed states 
or political subdivisions:

Georgia Counties

    Catoosa, Chattooga, Dade, Fannin, Murray, Walker, and Whitfield.

Indiana Counties

    Clark, Crawford, Daviess, Dubois, Floyd, Gibson, Greene, 
Harrison, Knox, Martin, Orange, Perry, Pike, Posey, Scott, Spencer, 
Sullivan, Vanderburgh, Warrick, and Washington.

Kentucky Counties

    Adair, Anderson, Bath, Bell, Bourbon, Boyle, Breathitt, 
Breckinridge, Bullitt, Butler, Carroll, Carter, Casey, Clark, Clay, 
Clinton, Cumberland, Daviess, Edmonson, Elliott, Estill, Fayette, 
Fleming, Franklin, Gallatin, Garrard, Grayson, Green, Hancock, 
Hardin, Harlan, Hart, Henderson, Henry, Hopkins, Jackson, Jefferson, 
Jessamine, Knott, Knox, Larue, Laurel, Lee, Leslie, Letcher, 
Lincoln, Madison, Marion, McCreary, McLean, Meade, Menifee, Mercer, 
Montgomery, Morgan, Muhlenberg, Nelson, Nicholas, Ohio, Oldham, 
Owen, Owsley, Perry, Powell, Pulaski, Rockcastle, Rowan, Russell, 
Scott, Shelby, Spencer, Taylor, Trimble, Union, Washington, Wayne, 
Webster, Whitley, Wolfe, and Woodford.

North Carolina and South Carolina

    All of the States of North Carolina and South Carolina.

Tennessee Counties

    Anderson, Blount, Bradley, Campbell, Carter, Claiborne, Cocke, 
Cumberland, Grainger, Greene, Hamblen, Hamilton, Hancock, Hawkins, 
Jefferson, Johnson, Knox, Loudon, Marion, McMinn, Meigs, Monroe, 
Morgan, Polk, Rhea, Roane, Scott, Sequatchie, Sevier, Sullivan, 
Unicoi, Union, and Washington.

Virginia Counties and Cities

    Buchanan, Dickenson, Lee, Russell, Scott, Tazewell, Washington, 
and Wise; and the cities of Bristol and Norton.

[[Page 16231]]

West Virginia Counties

    McDowell and Mercer.


Sec. 1005.3  Route disposition.

    See Sec. 1000.3.


Sec. 1005.4  Plant.

    See Sec. 1000.4.


Sec. 1005.5  Distributing plant.

    See Sec. 1000.5.


Sec. 1005.6  Supply plant.

    See Sec. 1000.6.


Sec. 1005.7  Pool plant.

    Pool plant means a plant specified in paragraphs (a) through (d) of 
this section, or a unit of plants as specified in paragraph (e) of this 
section, but excluding a plant specified in paragraph (g) of this 
section. The pooling standards described in paragraphs (c) and (d) of 
this section are subject to modification pursuant to paragraph (f) of 
this section:
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or section 7(b) of any 
other Federal milk order, from which during the month 50 percent or 
more of the fluid milk products received at such plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) are disposed of as route disposition or are 
transferred in the form of packaged fluid milk products to other 
distributing plants. At least 25 percent of such route disposition and 
transfers must be to outlets in the marketing area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 50 percent of the total quantity of 
fluid milk products received at the plant (excluding concentrated milk 
received from another plant by agreement for other than Class I use) 
into ultra-pasteurized or aseptically-processed fluid milk products.
    (c) A supply plant from which 50 percent or more of the total 
quantity of milk that is received during the month from dairy farmers 
and handlers described in Sec. 1000.9(c), including milk that is 
diverted from the plant, is transferred to pool distributing plants. 
Concentrated milk transferred from the supply plant to a distributing 
plant for an agreed-upon use other than Class I shall be excluded from 
the supply plant's shipments in computing the plant's shipping 
percentage.
    (d) A plant located within the marketing area or in the State of 
Virginia that is operated by a cooperative association if pool plant 
status under this paragraph is requested for such plant by the 
cooperative association and during the month at least 60 percent of the 
producer milk of members of such cooperative association is delivered 
directly from farms to pool distributing plants or is transferred to 
such plants as a fluid milk product (excluding concentrated milk 
transferred to a distributing plant for an agreed-upon use other than 
Class I) from the cooperative's plant.
    (e) Two or more plants operated by the same handler and that are 
located within the marketing area may qualify for pool status as a unit 
by meeting the total and in-area route disposition requirements 
specified in paragraph (a) of this section and the following additional 
requirements:
    (1) At least one of the plants in the unit must qualify as a pool 
plant pursuant to paragraph (a) of this section;
    (2) Other plants in the unit must process only Class I or Class II 
products and must be located in a pricing zone providing the same or a 
lower Class I price than the price applicable at the distributing plant 
included in the unit pursuant to paragraph (e)(1) of this section; and
    (3) A written request to form a unit, or to add or remove plants 
from a unit, must be filed with the market administrator prior to the 
first day of the month for which it is to be effective.
    (f) The applicable shipping percentages of paragraphs (c) and (d) 
of this section may be increased or decreased by the market 
administrator if the market administrator finds that such adjustment is 
necessary to encourage needed shipments or to prevent uneconomic 
shipments. Before making such a finding, the market administrator shall 
investigate the need for adjustment either on the market 
administrator's own initiative or at the request of interested parties 
if the request is made in writing at least 15 days prior to the date 
for which the requested revision is desired effective. If the 
investigation shows that an adjustment of the shipping percentages 
might be appropriate, the market administrator shall issue a notice 
stating that an adjustment is being considered and invite data, views 
and arguments. Any decision to revise an applicable shipping percentage 
must be issued in writing at least one day before the effective date.
    (g) The term pool plant shall not apply to the following plants:
    (1) A producer-handler plant;
    (2) An exempt plant as defined in Sec. 1000.8(e);
    (3) A plant qualified pursuant to paragraph (a) of this section 
which is not located within any Federal order marketing area, meets the 
pooling requirements of another Federal order, and has had greater 
route disposition in such other Federal order marketing area for 3 
consecutive months;
    (4) A plant qualified pursuant to paragraph (a) of this section 
which is located in another Federal order marketing area, meets the 
pooling standards of the other Federal order, and has not had a 
majority of its route disposition in this marketing area for 3 
consecutive months or is locked into pool status under such other 
Federal order without regard to its route disposition in any other 
Federal order marketing area;
    (5) A plant qualified pursuant to paragraph (c) of this section 
which also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under such other order than are made to plants regulated under this 
order, or such plant has automatic pooling status under such other 
order; and
    (6) That portion of a pool plant designated as a ``nonpool plant'' 
that is physically separate and operated separately from the pool 
portion of such plant. The designation of a portion of a regulated 
plant as a nonpool plant must be requested in writing by the handler 
and must be approved by the market administrator.


Sec. 1005.8  Nonpool plant.

    See Sec. 1000.8.


Sec. 1005.9  Handler.

    See Sec. 1000.9.


Sec. 1005.10  Producer-handler.

    Producer-handler means a person who:
    (a) Operates a dairy farm and a distributing plant from which there 
is monthly route disposition in the marketing area;
    (b) Receives no fluid milk products, and acquires no fluid milk 
products for route disposition, from sources other than own farm 
production;
    (c) Disposes of no other source milk as Class I milk except by 
increasing the nonfat milk solids content of the fluid milk products 
received from own farm production; and
    (d) Provides proof satisfactory to the market administrator that 
the care and management of the dairy animals and other resources 
necessary to produce all Class I milk handled, and the processing and 
packaging operations are the producer-handler's own enterprise and are 
operated at the producer-handler's own risk.

[[Page 16232]]

Sec. 1005.11  [Reserved]


Sec. 1005.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
(or components of milk) is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec. 1005.13; or
    (2) Received by a handler described in Sec. 1000.9(c).
    (b) Producer shall not include:
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to 
Sec. 1005.13(d);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and that milk is allocated by request to a utilization other than 
Class I; and
    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another order with respect to that portion of the 
milk so diverted that is assigned to Class I under the provisions of 
such other order.


Sec. 1005.13  Producer milk.

    Producer milk means the skim milk (or the skim equivalent of 
components of skim milk) and butterfat contained in milk of a producer 
that is:
    (a) Received by the operator of a pool plant directly from a 
producer or a handler described in Sec. 1000.9(c). All milk received 
pursuant to this paragraph shall be priced at the location of the plant 
where it is first physically received;
    (b) Received by a handler described in Sec. 1000.9(c) in excess of 
the quantity delivered to pool plants;
    (c) Diverted by a pool plant operator to another pool plant. Milk 
so diverted shall be priced at the location of the plant to which 
diverted; or
    (d) Diverted by the operator of a pool plant or a handler described 
in Sec. 1000.9(c) to a nonpool plant, subject to the following 
conditions:
    (1) In any month of July through December, not less than 6 days' 
production of the producer whose milk is diverted is physically 
received at a pool plant during the month;
    (2) In any month of January through June, not less than 2 days' 
production of the producer whose milk is diverted is physically 
received at a pool plant during the month;
    (3) The total quantity of milk so diverted during the month by a 
cooperative association shall not exceed 25 percent during the months 
of July through November, January, and February, and 40 percent during 
the months of December and March through June, of the producer milk 
that the cooperative association caused to be delivered to, and 
physically received at, pool plants during the month;
    (4) The operator of a pool plant that is not a cooperative 
association may divert any milk that is not under the control of a 
cooperative association that diverts milk during the month pursuant to 
paragraph (d) of this section. The total quantity of milk so diverted 
during the month shall not exceed 25 percent during the months of July 
through November, January, and February, and 40 percent during the 
months of December and March through June, of the producer milk 
physically received at such plant (or such unit of plants in the case 
of plants that pool as a unit pursuant to Sec. 1005.7(d)) during the 
month, excluding the quantity of producer milk received from a handler 
described in Sec. 1000.9(c);
    (5) Any milk diverted in excess of the limits prescribed in 
paragraphs (d)(3) and (4) of this section shall not be producer milk. 
If the diverting handler or cooperative association fails to designate 
the dairy farmers' deliveries that will not be producer milk, no milk 
diverted by the handler or cooperative association shall be producer 
milk;
    (6) Diverted milk shall be priced at the location of the plant to 
which diverted; and
    (7) The delivery day requirements and the diversion percentages in 
paragraphs (d)(1) through (4) of this section may be increased or 
decreased by the market administrator if the market administrator finds 
that such revision is necessary to assure orderly marketing and 
efficient handling of milk in the marketing area. Before making such a 
finding, the market administrator shall investigate the need for the 
revision either on the market administrator's own initiative or at the 
request of interested persons. If the investigation shows that a 
revision might be appropriate, the market administrator shall issue a 
notice stating that the revision is being considered and inviting 
written data, views, and arguments. Any decision to revise an 
applicable percentage must be issued in writing at least one day before 
the effective date.


Sec. 1005.14  Other source milk.

    See Sec. 1000.14.


Sec. 1005.15  Fluid milk product.

    See Sec. 1000.15.


Sec. 1005.16  Fluid cream product.

    See Sec. 1000.16.


Sec. 1005.17  [Reserved]


Sec. 1005.18  Cooperative association.

    See Sec. 1000.18.


Sec. 1005.19  Commercial food processing establishment.

    See Sec. 1000.19.

Handler Reports


Sec. 1005.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 7th day 
after the end of the month, in the detail and on prescribed forms, as 
follows:
    (a) With respect to each of its pool plants, the quantities of skim 
milk and butterfat contained in or represented by:
    (1) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec. 1000.9(c);
    (2) Receipts of milk from handlers described in Sec. 1000.9(c);
    (3) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (4) Receipts of other source milk;
    (5) Receipts of bulk milk from a plant regulated under another 
Federal order, except Federal Order 1007, for which a transportation 
credit is requested pursuant to Sec. 1005.82;
    (6) Receipts of producer milk described in Sec. 1005.82(c)(2), 
including the identity of the individual producers whose milk is 
eligible for the transportation credit pursuant to that paragraph and 
the date that such milk was received;
    (7) For handlers submitting transportation credit requests, 
transfers of bulk milk to nonpool plants, including the dates that such 
milk was transferred;
    (8) Inventories at the beginning and end of the month of fluid milk 
products and bulk fluid cream products; and
    (9) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. The 
report shall show

[[Page 16233]]

also the quantity of any reconstituted skim milk in route disposition 
in the marketing area.
    (c) Each handler described in Sec. 1000.9(c) shall report:
    (1) The quantities of all skim milk and butterfat contained in 
receipts of milk from producers;
    (2) The utilization or disposition of all such receipts; and
    (3) With respect to milk for which a cooperative association is 
requesting a transportation credit pursuant to Sec. 1005.82, all of the 
information required in paragraphs (a)(5), (a)(6), and (a)(7) of this 
section.
    (d) Each handler not specified in paragraphs (a) through (c) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.


Sec. 1005.31  Payroll reports.

    (a) On or before the 20th day after the end of each month, each 
handler that operates a pool plant pursuant to Sec. 1005.7 and each 
handler described in Sec. 1000.9 (c) shall report to the market 
administrator its producer payroll for the month, in detail prescribed 
by the market administrator, showing for each producer the information 
specified in Sec. 1005.73(e).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 1000.76(b) shall report for 
each dairy farmer who would have been a producer if the plant had been 
fully regulated in the same manner as prescribed for reports required 
by paragraph (a) of this section.


Sec. 1005.32  Other reports.

    (a) On or before the 20th day after the end of each month, each 
handler described in Sec. 1000.9(a) and (c) shall report to the market 
administrator any adjustments to transportation credit requests as 
reported pursuant to Sec. 1005.30(a)(5), (6), and (7).
    (b) In addition to the reports required pursuant to Secs. 1005.30, 
1005.31, and 1005.32(a), each handler shall report any information the 
market administrator deems necessary to verify or establish each 
handler's obligation under the order.

Classification of Milk


Sec. 1005.40  Classes of utilization.

    See Sec. 1000.40.


Sec. 1005.41  [Reserved]


Sec. 1005.42  Classification of transfers and diversions.

    See Sec. 1000.42.


Sec. 1005.43  General classification rules.

    See Sec. 1000.43.


Sec. 1005.44  Classification of producer milk.

    See Sec. 1000.44.


Sec. 1005.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45.

Class Prices


Sec. 1005.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec. 1000.50.


Sec. 1005.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Mecklenburg County, North Carolina, which is reported in Sec. 1000.52. 
The Class I price shall be the price computed pursuant to 
Sec. 1000.50(a) for Mecklenburg County, North Carolina.


Sec. 1005.52  Adjusted Class I differentials.

    See Sec. 1000.52.


Sec. 1005.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec. 1000.53.


Sec. 1005.54  Equivalent price.

    See Sec. 1000.54.

Uniform Prices


Sec. 1005.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec. 1000.9(c) with respect to 
milk that was not received at a pool plant by adding the amounts 
computed in paragraphs (a) through (e) of this section and subtracting 
from that total amount the value computed in paragraph (f) of this 
section. Receipts of nonfluid milk products that are distributed as 
labeled reconstituted milk for which payments are made to the producer-
settlement fund of another Federal order under Sec. 1000.76(a)(4) or 
(d) shall be excluded from pricing under this section.
    (a) Multiply the pounds of skim milk and butterfat in producer milk 
that were classified in each class pursuant to Sec. 1000.44(c) by the 
applicable skim milk and butterfat prices, and add the resulting 
amounts;
    (b) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec. 1000.44(a)(11) by the respective skim 
milk and butterfat prices applicable at the location of the pool plant;
    (c) Multiply the difference between the Class IV price for the 
preceding month and the current month's Class I, II, or III price, as 
the case may be, by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
    (d) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec. 1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(3)(i) through (vi) 
and the corresponding step of Sec. 1000.44(b), excluding receipts of 
bulk fluid cream products from a plant regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants;
    (e) Multiply the Class I price applicable at the location of the 
nearest unregulated supply plants from which an equivalent volume was 
received by the pounds of skim milk and butterfat in receipts of 
concentrated fluid milk products assigned to Class I pursuant to 
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk 
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8) 
and the corresponding step of Sec. 1000.44(b), excluding such skim milk 
and butterfat in receipts of fluid milk products from an unregulated 
supply plant to the extent that an equivalent amount of skim milk or 
butterfat disposed of to such plant by handlers fully regulated under 
any Federal milk order is classified and priced as Class I milk and is 
not used as an offset for any other payment obligation under any order; 
and
    (f) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of nonfluid milk products that are allocated to 
Class I use pursuant to Sec. 1000.43(d).


Sec. 1005.61  Computation of uniform prices.

    On or before the 11th day of each month, the market administrator 
shall compute a uniform butterfat price, a uniform skim milk price, and 
a uniform price for producer milk receipts reported for the prior 
month. The report of any handler who has not made payments required 
pursuant to

[[Page 16234]]

Sec. 1005.71 for the preceding month shall not be included in the 
computation of these prices, and such handler's report shall not be 
included in the computation for succeeding months until the handler has 
made full payment of outstanding monthly obligations.
    (a) Uniform butterfat price. The uniform butterfat price per pound, 
rounded to the nearest one-hundredth cent, shall be computed by 
multiplying the pounds of butterfat in producer milk allocated to each 
class pursuant to Sec. 1000.44(b) by the respective class butterfat 
prices and dividing the sum of such values by the total pounds of such 
butterfat.
    (b) Uniform skim milk price. The uniform skim milk price per 
hundredweight, rounded to the nearest cent, shall be computed as 
follows:
    (1) Combine into one total the values computed pursuant to 
Sec. 1005.60 for all handlers;
    (2) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 1005.75;
    (3) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (4) Subtract the value of the total pounds of butterfat for all 
handlers. The butterfat value shall be computed by multiplying the 
pounds of butterfat by the butterfat price computed in paragraph (a) of 
this section;
    (5) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (i) The total skim pounds of producer milk; and
    (ii) The total skim pounds for which a value is computed pursuant 
to Sec. 1005.60(e); and
    (6) Subtract not less than 4 cents and not more than 5 cents.
    (c) Uniform price. The uniform price per hundredweight, rounded to 
the nearest cent, shall be the sum of the following:
    (1) Multiply the uniform butterfat price for the month pursuant to 
paragraph (a) of this section times 3.5 pounds of butterfat; and
    (2) Multiply the uniform skim milk price for the month pursuant to 
paragraph (b) of this section times 96.5 pounds of skim milk.


Sec. 1005.62  Announcement of uniform prices.

    On or before the 11th day after the end of the month, the market 
administrator shall announce the uniform prices for the month computed 
pursuant to Sec. 1005.61.


Sec. 1005.62  Announcement of uniform price, uniform butterfat price 
and uniform skim milk price.

    On or before the 11th day after the end of the month, the market 
administrator shall announce the following prices and information:
    (a) The uniform price pursuant to Sec. 1005.61 for such month;
    (b) The uniform butterfat price pursuant to Sec. 1005.61(b) for 
such month; and
    (c) The uniform skim milk price pursuant to Sec. 1005.61(c) for 
such month.

Payments for Milk


Sec. 1005.70  Producer-settlement fund.

    See Sec. 1000.70.


Sec. 1005.71  Payments to the producer-settlement fund.

    Each handler shall make a payment to the producer-settlement fund 
in a manner that provides receipt of the funds by the market 
administrator no later than the 12th day after the end of the month 
(except as provided in Sec. 1000.90). Payment shall be the amount, if 
any, by which the amount specified in paragraph (a) of this section 
exceeds the amount specified in paragraph (b) of this section:
    (a) The total value of milk of the handler for the month as 
determined pursuant to Sec. 1005.60; and
    (b) The sum of the value at the uniform prices for skim milk and 
butterfat, adjusted for plant location, of the handler's receipts of 
producer milk; and the value at the uniform price, as adjusted pursuant 
to Sec. 1005.75, applicable at the location of the plant from which 
received of other source milk for which a value is computed pursuant to 
Sec. 1005.60(e).


Sec. 1005.72  Payments from the producer-settlement fund.

    No later than one day after the date of payment receipt required 
under Sec. 1005.71, the market administrator shall pay to each handler 
the amount, if any, by which the amount computed pursuant to 
Sec. 1005.71(b) exceeds the amount computed pursuant to 
Sec. 1005.71(a). If, at such time, the balance in the producer-
settlement fund is insufficient to make all payments pursuant to this 
section, the market administrator shall reduce uniformly such payments 
and shall complete the payments as soon as the funds are available.


Sec. 1005.73  Payments to producers and to cooperative associations.

    (a) Each pool plant operator that is not paying a cooperative 
association for producer milk shall pay each producer as follows:
    (1) Partial payment. For each producer who has not discontinued 
shipments as of the 23rd day of the month, payment shall be made so 
that it is received by the producer on or before the 26th day of the 
month (except as provided in Sec. 1000.90) for milk received during the 
first 15 days of the month at not less than 90 percent of the preceding 
month's uniform price, adjusted for plant location pursuant to 
Sec. 1005.75 and proper deductions authorized in writing by the 
producer.
    (2) Final payment. For milk received during the month, a payment 
computed as follows shall be made so that it is received by each 
producer one day after the payment date required in Sec. 1005.72:
    (i) Multiply the hundredweight of producer skim milk received times 
the uniform skim milk price for the month;
    (ii) Multiply the pounds of butterfat received times the uniform 
butterfat price for the month;
    (iii) Multiply the hundredweight of producer milk received times 
the plant location adjustment pursuant to Sec. 1005.75; and
    (iv) Add the amounts computed in paragraph (a)(2)(i), (ii), and 
(iii) of this section, and from that sum:
    (A) Subtract the partial payment made pursuant to paragraph (a)(1) 
of this section;
    (B) Subtract the deduction for marketing services pursuant to 
Sec. 1000.86;
    (C) Add or subtract for errors made in previous payments to the 
producer; and
    (D) Subtract proper deductions authorized in writing by the 
producer.
    (b) One day before partial and final payments are due pursuant to 
paragraph (a) of this section, each pool plant operator shall pay a 
cooperative association for milk received as follows:
    (1) Partial payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk (including the 
milk of producers who are not members of such association and who the 
market administrator determines have authorized the cooperative 
association to collect payment for their milk) received during the 
first 15 days of the month from a cooperative association in any 
capacity, except as the operator of a pool plant, the payment shall be 
equal to the hundredweight of milk received multiplied by 90 percent of 
the preceding month's uniform price, adjusted for plant location 
pursuant to Sec. 1005.75.
    (2) Partial payment to a cooperative association for milk 
transferred from its pool plant. For bulk fluid milk products and bulk 
fluid cream products received during the first 15 days of the month

[[Page 16235]]

from a cooperative association in its capacity as the operator of a 
pool plant, the partial payment shall be at the pool plant operator's 
estimated use value of the milk using the most recent class prices 
available for skim milk and butterfat at the receiving plant's 
location.
    (3) Final payment to a cooperative association for milk transferred 
from its pool plant. For bulk fluid milk products and bulk fluid cream 
products received during the month from a cooperative association in 
its capacity as the operator of a pool plant, the final payment shall 
be the classified value of such milk as determined by multiplying the 
pounds of skim milk and butterfat assigned to each class pursuant to 
Sec. 1000.44 by the class prices for the month at the receiving plant's 
location, and subtracting from this sum the partial payment made 
pursuant to paragraph (b)(2) of this section.
    (4) Final payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk received from a 
cooperative association during the month, including the milk of 
producers who are not members of such association and who the market 
administrator determines have authorized the cooperative association to 
collect payment for their milk, the final payment for such milk shall 
be an amount equal to the sum of the individual payments otherwise 
payable for such milk pursuant to paragraph (a)(2) of this section.
    (c) If a handler has not received full payment from the market 
administrator pursuant to Sec. 1005.72 by the payment date specified in 
paragraph (a) or (b) of this section, the handler may reduce payments 
pursuant to paragraphs (a) and (b) of this section, but by not more 
than the amount of the underpayment. The payments shall be completed on 
the next scheduled payment date after receipt of the balance due from 
the market administrator.
    (d) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer-settlement fund, and in the event that the handler 
subsequently locates and pays the producer or a lawful claimant, or in 
the event that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer-settlement fund to the handler or to the lawful 
claimant as the case may be.
    (e) In making payments to producers pursuant to this section, each 
pool plant operator shall furnish each producer, except a producer 
whose milk was received from a cooperative association described in 
Sec. 1000.9(a) or (c), a supporting statement in such form that it may 
be retained by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and the payroll number of the producer;
    (2) The month and dates that milk was received from the producer, 
including the daily and total pounds of milk received;
    (3) The total pounds of butterfat in the producer's milk;
    (4) The minimum rate or rates at which payment to the producer is 
required pursuant to this order;
    (5) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (6) The amount, or rate per hundredweight, and nature of each 
deduction claimed by the handler; and
    (7) The net amount of payment to the producer or cooperative 
association.


Sec. 1005.74  [Reserved]


Sec. 1005.75  Plant location adjustments for producer milk and nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec. 1005.50 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Secs. 1005.73 
and 1000.76.


Sec. 1005.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76.


Sec. 1005.77  Adjustment of accounts.

    See Sec. 1000.77.


Sec. 1005.78  Charges on overdue accounts.

    See Sec. 1000.78.

Marketwide Service Payments


Sec. 1005.80  Transportation credit balancing fund.

    The market administrator shall maintain a separate fund known as 
the Transportation Credit Balancing Fund into which shall be deposited 
the payments made by handlers pursuant to Sec. 1005.81 and out of which 
shall be made the payments due handlers pursuant to Sec. 1005.82. 
Payments due a handler shall be offset against payments due from the 
handler.


Sec. 1005.81  Payments to the transportation credit balancing fund.

    (a) On or before the 12th day after the end of the month (except as 
provided in Sec. 1000.90), each handler operating a pool plant and each 
handler specified in Sec. 1000.9(c) shall pay to the market 
administrator a transportation credit balancing fund assessment 
determined by multiplying the pounds of Class I producer milk assigned 
pursuant to Sec. 1005.44 by $0.065 per hundredweight or such lesser 
amount as the market administrator deems necessary to maintain a 
balance in the fund equal to the total transportation credits disbursed 
during the prior June-January period. In the event that during any 
month of the June-January period the fund balance is insufficient to 
cover the amount of credits that are due, the assessment should be 
based upon the amount of credits that would have been disbursed had the 
fund balance been sufficient.
    (b) The market administrator shall announce publicly on or before 
the 5th day of the month (except as provided in Sec. 1000.90) the 
assessment pursuant to paragraph (a) of this section for the following 
month.


Sec. 1005.82  Payments from the transportation credit balancing fund.

    (a) Payments from the transportation credit balancing fund to 
handlers and cooperative associations requesting transportation credits 
shall be made as follows:
    (1) On or before the 13th day (except as provided in Sec. 1000.90) 
after the end of each of the months of July through December and any 
other month in which transportation credits are in effect pursuant to 
paragraph (b) of this section, the market administrator shall pay to 
each handler that received, and reported pursuant to 
Sec. 1005.30(a)(5), bulk milk transferred from a plant fully regulated 
under another Federal order as described in paragraph (c)(1) of this 
section or that received, and reported pursuant to Sec. 1005.30(a)(6), 
milk directly from producers' farms as specified in paragraph (c)(2) of 
this section, a preliminary amount determined pursuant to paragraph (d) 
of this section to the extent that funds are available in the 
transportation credit balancing fund. If an insufficient balance exists 
to pay all of the credits computed pursuant to this section, the market 
administrator shall distribute the balance available in the 
transportation credit balancing fund by reducing payments pro rata 
using the percentage derived by dividing the balance in the fund by the 
total credits that are due for the month. The amount of credits

[[Page 16236]]

resulting from this initial proration shall be subject to audit 
adjustment pursuant to paragraph (a)(2) of this section.
    (2) The market administrator shall accept adjusted requests for 
transportation credits on or before the 20th day of the month following 
the month for which such credits were requested pursuant to 
Sec. 1005.32(a). After such date, a preliminary audit will be conducted 
by the market administrator, who will recalculate any necessary 
proration of transportation credit payments for the preceding month 
pursuant to paragraph (a) of this section. Handlers will be promptly 
notified of an overpayment of credits based upon this final computation 
and remedial payments to or from the transportation credit balancing 
fund will be made on or before the next payment date for the following 
month.
    (3) Transportation credits paid pursuant to paragraphs (a)(1) and 
(2) of this section shall be subject to final verification by the 
market administrator pursuant to Sec. 1000.77. Adjusted payments to or 
from the transportation credit balancing fund will remain subject to 
the final proration established pursuant to paragraph (a)(2) of this 
section.
    (4) In the event that a qualified cooperative association is the 
responsible party for whose account such milk is received and written 
documentation of this fact is provided to the market administrator 
pursuant to Sec. 1005.30(c)(3) prior to the date payment is due, the 
transportation credits for such milk computed pursuant to this section 
shall be made to such cooperative association rather than to the 
operator of the pool plant at which the milk was received.
    (b) The market administrator may extend the period during which 
transportation credits are in effect (i.e., the transportation credit 
period) to the months of January and June if a written request to do so 
is received 15 days prior to the beginning of the month for which the 
request is made and, after conducting an independent investigation, 
finds that such extension is necessary to assure the market of an 
adequate supply of milk for fluid use. Before making such a finding, 
the market administrator shall notify the Director of the Dairy 
Division and all handlers in the market that an extension is being 
considered and invite written data, views, and arguments. Any decision 
to extend the transportation credit period must be issued in writing 
prior to the first day of the month for which the extension is to be 
effective.
    (c) Transportation credits shall apply to the following milk:
    (1) Bulk milk received from a plant regulated under another Federal 
order, except Federal Order 1007, and allocated to Class I milk 
pursuant to Sec. 1000.44(a)(9); and
    (2) Bulk milk received directly from the farms of dairy farmers at 
pool distributing plants subject to the following conditions:
    (i) The quantity of such milk that shall be eligible for the 
transportation credit shall be determined by multiplying the total 
pounds of milk received from producers meeting the conditions of this 
paragraph by the lower of:
    (A) The marketwide estimated Class I utilization of all handlers 
for the month pursuant to Sec. 1000.45(a); or
    (B) The Class I utilization of all producer milk of the pool plant 
operator receiving the milk after the computations described in 
Sec. 1000.44;
    (ii) The dairy farmer was not a ``producer'' under this order 
during more than 2 of the immediately preceding months of February 
through May and not more than 50 percent of the production of the dairy 
farmer during those 2 months, in aggregate, was received as producer 
milk under this order during those 2 months; and
    (iii) The farm on which the milk was produced is not located within 
the specified marketing area of this order or the marketing area of 
Federal Order 1007.
    (d) Transportation credits shall be computed as follows:
    (1) The market administrator shall subtract from the pounds of milk 
described in paragraphs (c)(1) and (2) of this section the pounds of 
bulk milk transferred from the pool plant receiving the supplemental 
milk if milk was transferred to a nonpool plant on the same calendar 
day that the supplemental milk was received. For this purpose, the 
transferred milk shall be subtracted from the most distant load of 
supplemental milk received, and then in sequence with the next most 
distant load until all of the transfers have been offset.
    (2) With respect to the pounds of milk described in paragraph 
(c)(1) of this section that remain after the computations described in 
paragraph (d)(1) of this section, the market administrator shall:
    (i) Determine the shortest hard-surface highway distance between 
the shipping plant and the receiving plant;
    (ii) Multiply the number of miles so determined by 0.35 cent;
    (iii) Subtract the applicable Class I differential in Sec. 1000.52 
for the county in which the shipping plant is located from the Class I 
differential applicable for the county in which the receiving plant is 
located;
    (iv) Subtract any positive difference computed in paragraph 
(d)(2)(iii) of this section from the amount computed in paragraph 
(d)(2)(ii) of this section; and
    (v) Multiply the remainder computed in paragraph (d)(2)(iv) of this 
section by the hundredweight of milk described in paragraph (d)(2) of 
this section.
    (3) For the remaining milk described in paragraph (c)(2) of this 
section after computations described in paragraph (d)(1) of this 
section, the market administrator shall:
    (i) Determine an origination point for each load of milk by 
locating the nearest city to the last producer's farm from which milk 
was picked up for delivery to the receiving pool plant;
    (ii) Determine the shortest hard-surface highway distance between 
the receiving pool plant and the origination point;
    (iii) Subtract 85 miles from the mileage so determined;
    (iv) Multiply the remaining miles so computed by 0.35 cent;
    (v) Subtract the Class I differential specified in Sec. 1000.52 
applicable for the county in which the origination point is located 
from the Class I differential applicable at the receiving pool plant's 
location;
    (vi) Subtract any positive difference computed in paragraph 
(d)(3)(v) of this section from the amount computed in paragraph 
(d)(3)(iv) of this section; and
    (vii) Multiply the remainder computed in paragraph (d)(3)(vi) of 
this section by the hundredweight of milk described in paragraph (d)(3) 
of this section.

Administrative Assessment and Marketing Service Deduction


Sec. 1005.85  Assessment for order administration.

    See Sec. 1000.85.


Sec. 1005.86  Deduction for marketing services.

    See Sec. 1000.86.

PART 1006--MILK IN THE FLORIDA MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1006.1  General provisions.

Definitions

1006.2  Florida marketing area.
1006.3  Route disposition.
1006.4  Plant.
1006.5  Distributing plant.
1006.6  Supply plant.
1006.7  Pool plant.
1006.8  Nonpool plant.

[[Page 16237]]

1006.9  Handler.
1006.10  Producer-handler.
1006.11  [Reserved]
1006.12  Producer.
1006.13  Producer milk.
1006.14  Other source milk.
1006.15  Fluid milk product.
1006.16  Fluid cream product.
1006.17  [Reserved]
1006.18  Cooperative association.
1006.19  Commercial food processing establishment.

Handler Reports

1006.30  Reports of receipts and utilization.
1006.31  Payroll reports.
1006.32  Other reports.

Classification of Milk

1006.40  Classes of utilization.
1006.41  [Reserved]
1006.42  Classification of transfers and diversions.
1006.43  General classification rules.
1006.44  Classification of producer milk.
1006.45  Market administrator's reports and announcements concerning 
classification.

Class Prices

1006.50  Class prices, component prices, and advanced pricing 
factors.
1006.51  Class I differential and price.
1006.52  Adjusted Class I differentials.
1006.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1006.54  Equivalent price.

Uniform Prices

1006.60  Handler's value of milk.
1006.61  Computation of uniform prices.
1006.62  Announcement of uniform prices.

Payments for Milk

1006.70  Producer-settlement fund.
1006.71  Payments to the producer-settlement fund.
1006.72  Payments from the producer-settlement fund.
1006.73  Payments to producers and to cooperative associations.
1006.74  [Reserved]
1006.75  Plant location adjustments for producer milk and nonpool 
milk.
1006.76  Payments by a handler operating a partially regulated 
distributing plant.
1006.77  Adjustment of accounts.
1006.78  Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1006.85  Assessment for order administration.
1006.86  Deduction for marketing services.

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

Subpart--Order Regulating Handling

General Provisions


Sec. 1006.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to and are hereby made a part of this order. In this part 1006, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

Definitions


Sec. 1006.2  Florida marketing area.

    The marketing area means all the territory within the State of 
Florida, except the counties of Escambia, Okaloosa, Santa Rosa, and 
Walton, including all piers, docks and wharves connected therewith and 
all craft moored thereat, and all territory occupied by government 
(municipal, State or Federal) reservations, installations, 
institutions, or other similar establishments if any part thereof is 
within any of the listed states or political subdivisions.


Sec. 1006.3  Route disposition.

    See Sec. 1000.3.


Sec. 1006.4  Plant.

    See Sec. 1000.4.


Sec. 1006.5  Distributing plant.

    See Sec. 1000.5.


Sec. 1006.6  Supply plant.

    See Sec. 1000.6.


Sec. 1006.7  Pool plant.

    Pool plant means a plant specified in paragraphs (a) through (d) of 
this section, or a unit of plants as specified in paragraph (e) of this 
section, but excluding a plant specified in paragraph (g) of this 
section. The pooling standards described in paragraphs (c) and (d) of 
this section are subject to modification pursuant to paragraph (f) of 
this section:
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or section 7(b) of any 
other Federal milk order, from which during the month 50 percent or 
more of the fluid milk products received at such plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) are disposed of as route disposition or are 
transferred in the form of packaged fluid milk products to other 
distributing plants. At least 25 percent of such route disposition and 
transfers must be to outlets in the marketing area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 50 percent of the total quantity of 
fluid milk products received at the plant (excluding concentrated milk 
received from another plant by agreement for other than Class I use) 
into ultra-pasteurized or aseptically-processed fluid milk products.
    (c) A supply plant from which 60 percent or more of the total 
quantity of milk that is received during the month from dairy farmers 
and handlers described in Sec. 1000.9(c), including milk that is 
diverted from the plant, is transferred to pool distributing plants. 
Concentrated milk transferred from the supply plant to a distributing 
plant for an agreed-upon use other than Class I shall be excluded from 
the supply plant's shipments in computing the plant's shipping 
percentage.
    (d) A plant located within the marketing area that is operated by a 
cooperative association if pool plant status under this paragraph is 
requested for such plant by the cooperative association and during the 
month 60 percent of the producer milk of members of such cooperative 
association is delivered directly from farms to pool distributing 
plants or is transferred to such plants as a fluid milk product 
(excluding concentrated milk transferred to a distributing plant for an 
agreed-upon use other than Class I) from the cooperative's plant.
    (e) Two or more plants operated by the same handler and that are 
located within the marketing area may qualify for pool status as a unit 
by meeting the total and in-area route disposition requirements 
specified in paragraph (a) of this section and the following additional 
requirements:
    (1) At least one of the plants in the unit must qualify as a pool 
plant pursuant to paragraph (a) of this section;
    (2) Other plants in the unit must process only Class I or Class II 
products and must be located in a pricing zone providing the same or a 
lower Class I price than the price applicable at the distributing plant 
included in the unit pursuant to paragraph (e)(1) of this section; and
    (3) A written request to form a unit, or to add or remove plants 
from a unit, must be filed with the market administrator prior to the 
first day of the month for which it is to be effective.
    (f) The applicable shipping percentages of paragraphs (c) and (d) 
of this section may be increased or decreased by the market 
administrator if the market administrator finds that such adjustment is 
necessary to encourage needed shipments or to prevent uneconomic 
shipments. Before making such a finding, the market administrator shall 
investigate the need for adjustment either on the market 
administrator's own initiative or at the request of interested parties 
if the request is made in writing at least 15 days prior to the date 
for which the requested revision is desired effective. If the 
investigation shows that an adjustment of the shipping percentages 
might be appropriate, the market administrator

[[Page 16238]]

shall issue a notice stating that an adjustment is being considered and 
invite data, views and arguments. Any decision to revise an applicable 
shipping percentage must be issued in writing at least one day before 
the effective date.
    (g) The term pool plant shall not apply to the following plants:
    (1) A producer-handler plant;
    (2) An exempt plant as defined in Sec. 1000.8(e);
    (3) A plant qualified pursuant to paragraph (a) of this section 
which is not located within any Federal order marketing area, meets the 
pooling requirements of another Federal order, and has had greater 
route disposition in such other Federal order marketing area for 3 
consecutive months;
    (4) A plant qualified pursuant to paragraph (a) of this section 
which is located in another Federal order marketing area, meets the 
pooling standards of the other Federal order, and has not had a 
majority of its route disposition in this marketing area for 3 
consecutive months or is locked into pool status under such other 
Federal order without regard to its route disposition in any other 
Federal order marketing area; and
    (5) A plant qualified pursuant to paragraph (c) of this section 
which also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under such other order than are made to plants regulated under this 
order, or such plant has automatic pooling status under such other 
order.


Sec. 1006.8  Nonpool plant.

    See Sec. 1000.8.


Sec. 1006.9  Handler.

    See Sec. 1000.9.


Sec. 1006.10  Producer-handler.

    Producer-handler means a person who:
    (a) Operates a dairy farm and a distributing plant from which there 
is monthly route disposition in the marketing area;
    (b) Receives no fluid milk products, and acquires no fluid milk 
products for route disposition, from sources other than own farm 
production;
    (c) Disposes of no other source milk as Class I milk except by 
increasing the nonfat milk solids content of the fluid milk products 
received from own farm production; and
    (d) Provides proof satisfactory to the market administrator that 
the care and management of the dairy animals and other resources 
necessary to produce all Class I milk handled, and the processing and 
packaging operations, are the producer-handler's own enterprise and are 
operated at the producer-handler's own risk.


Sec. 1006.11  [Reserved]


Sec. 1006.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
(or components of milk) is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec. 1006.13; or
    (2) Received by a handler described in Sec. 1000.9(c).
    (b) Producer shall not include:
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to 
Sec. 1006.13(d);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and that milk is allocated by request to a utilization other than 
Class I; and
    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order.


Sec. 1006.13  Producer milk.

    Producer milk means the skim milk (or the skim equivalent of 
components of skim milk) and butterfat contained in milk of a producer 
that is:
    (a) Received by the operator of a pool plant directly from a 
producer or a handler described in Sec. 1000.9(c). All milk received 
pursuant to this paragraph shall be priced at the location of the plant 
where it is first physically received;
    (b) Received by a handler described in Sec. 1000.9(c) in excess of 
the quantity delivered to pool plants;
    (c) Diverted by a pool plant operator to another pool plant. Milk 
so diverted shall be priced at the location of the plant to which 
diverted; or
    (d) Diverted by the operator of a pool plant or a handler described 
in Sec. 1000.9(c) to a nonpool plant, subject to the following 
conditions:
    (1) In any month, not less than 10 days' production of the producer 
whose milk is diverted is physically received at a pool plant during 
the month;
    (2) The total quantity of milk so diverted during the month by a 
cooperative association shall not exceed 20 percent during the months 
of July through November, 25 percent during the months of December 
through February, and 40 percent during all other months, of the 
producer milk that the cooperative association caused to be delivered 
to, and physically received at, pool plants during the month;
    (3) The operator of a pool plant that is not a cooperative 
association may divert any milk that is not under the control of a 
cooperative association that diverts milk during the month pursuant to 
paragraph (d) of this section. The total quantity of milk so diverted 
during the month shall not exceed 20 percent during the months of July 
through November, 25 percent during the months of December through 
February, and 40 percent during all other months, of the producer milk 
physically received at such plant (or such unit of plants in the case 
of plants that pool as a unit pursuant to Sec. 1006.7(d)) during the 
month, excluding the quantity of producer milk received from a handler 
described in Sec. 1000.9(c);
    (4) Any milk diverted in excess of the limits prescribed in 
paragraphs (d)(3) and (4) of this section shall not be producer milk. 
If the diverting handler or cooperative association fails to designate 
the dairy farmers' deliveries that will not be producer milk, no milk 
diverted by the handler or cooperative association shall be producer 
milk;
    (5) Diverted milk shall be priced at the location of the plant to 
which diverted; and
    (6) The delivery day requirements and the diversion percentages in 
paragraphs (d)(1) through (3) of this section may be increased or 
decreased by the market administrator if the market administrator finds 
that such revision is necessary to assure orderly marketing and 
efficient handling of milk in the marketing area. Before making such a 
finding, the market administrator shall investigate the need for the 
revision either on the market administrator's own initiative or at the 
request of interested persons. If the investigation shows that a 
revision might be appropriate, the market administrator shall issue a 
notice stating that the revision is being considered and inviting 
written data, views, and arguments. Any decision to revise an 
applicable percentage must be issued in writing at least one day before 
the effective date.

[[Page 16239]]

Sec. 1006.14  Other source milk.

    See Sec. 1000.14.


Sec. 1006.15  Fluid milk product.

    See Sec. 1000.15.


Sec. 1006.16  Fluid cream product.

    See Sec. 1000.16.


Sec. 1006.17  [Reserved]


Sec. 1006.18  Cooperative association.

    See Sec. 1000.18.


Sec. 1006.19  Commercial food processing establishment.

    See Sec. 1000.19.

Handler Reports


Sec. 1006.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 7th day 
after the end of the month, in the detail and on prescribed forms, as 
follows:
    (a) With respect to each of its pool plants, the quantities of skim 
milk and butterfat contained in or represented by:
    (1) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec. 1000.9(c);
    (2) Receipts of milk from handlers described in Sec. 1000.9(c);
    (3) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (4) Receipts of other source milk;
    (5) Inventories at the beginning and end of the month of fluid milk 
products and bulk fluid cream products; and
    (6) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. The 
report shall show also the quantity of any reconstituted skim milk in 
route disposition in the marketing area.
    (c) Each handler described in Sec. 1000.9(c) shall report:
    (1) The quantities of all skim milk and butterfat contained in 
receipts of milk from producers; and
    (2) The utilization or disposition of all such receipts.
    (d) Each handler not specified in paragraphs (a) through (c) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.


Sec. 1006.31  Payroll reports.

    (a) On or before the 20th day after the end of each month, each 
handler that operates a pool plant pursuant to Sec. 1006.7 and each 
handler described in Sec. 1000.9(c) shall report to the market 
administrator its producer payroll for the month, in detail prescribed 
by the market administrator, showing for each producer the information 
specified in Sec. 1006.73(e).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 1000.76(b) shall report for 
each dairy farmer who would have been a producer if the plant had been 
fully regulated in the same manner as prescribed for reports required 
by paragraph (a) of this section.


Sec. 1006.32  Other reports.

    In addition to the reports required pursuant to Secs. 1006.30 and 
1006.31, each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Classification of Milk


Sec. 1006.40  Classes of utilization.

    See Sec. 1000.40.


Sec. 1006.41  [Reserved]


Sec. 1006.42  Classification of transfers and diversions.

    See Sec. 1000.42.


Sec. 1006.43  General classification rules.

    See Sec. 1000.43.


Sec. 1006.44  Classification of producer milk.

    See Sec. 1000.44.


Sec. 1006.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45.

Class Prices


Sec. 1006.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec. 1000.50.


Sec. 1006.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Hillsborough County, Florida, which is reported in Sec. 1000.52. The 
Class I price shall be the price computed pursuant to Sec. 1000.50(a) 
for Hillsborough County, Florida.


Sec. 1006.52  Adjusted Class I differentials.

    See Sec. 1000.52.


Sec. 1006.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec. 1000.53.


Sec. 1006.54  Equivalent price.

    See Sec. 1000.54.

Uniform Prices


Sec. 1006.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec. 1000.9(c) with respect to 
milk that was not received at a pool plant by adding the amounts 
computed in paragraphs (a) through (e) of this section and subtracting 
from that total amount the value computed in paragraph (f) of this 
section. Receipts of nonfluid milk products that are distributed as 
labeled reconstituted milk for which payments are made to the producer-
settlement fund of another Federal order under Sec. 1000.76(a)(4) or 
(d) shall be excluded from pricing under this section.
    (a) Multiply the pounds of skim milk and butterfat in producer milk 
that were classified in each class pursuant to Sec. 1000.44(c) by the 
applicable skim milk and butterfat prices, and add the resulting 
amounts;
    (b) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec. 1000.44(a)(11) by the respective skim 
milk and butterfat prices applicable at the location of the pool plant;
    (c) Multiply the difference between the Class IV price for the 
preceding month and the current month's Class I, II, or III price, as 
the case may be, by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
    (d) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec. 1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(3)(i) through (vi) 
and the corresponding step of Sec. 1000.44(b), excluding receipts of 
bulk fluid cream products from a plant regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants;
    (e) Multiply the Class I price applicable at the location of the 
nearest unregulated supply plants from which an equivalent volume was 
received by the pounds of skim milk and butterfat

[[Page 16240]]

in receipts of concentrated fluid milk products assigned to Class I 
pursuant to Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of 
skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(8) and the corresponding step of Sec. 1000.44(b), 
excluding such skim milk and butterfat in receipts of fluid milk 
products from an unregulated supply plant to the extent that an 
equivalent amount of skim milk or butterfat disposed of to such plant 
by handlers fully regulated under any Federal milk order is classified 
and priced as Class I milk and is not used as an offset for any other 
payment obligation under any order; and
    (f) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of nonfluid milk products that are allocated to 
Class I use pursuant to Sec. 1000.43(d).


Sec. 1006.61  Computation of uniform prices.

    On or before the 11th day of each month, the market administrator 
shall compute a uniform butterfat price, a uniform skim milk price, and 
a uniform price for producer milk receipts reported for the prior 
month. The report of any handler who has not made payments required 
pursuant to Sec. 1006.71 for the preceding month shall not be included 
in the computation of these prices, and such handler's report shall not 
be included in the computation for succeeding months until the handler 
has made full payment of outstanding monthly obligations.
    (a) Uniform butterfat price. The uniform butterfat price per pound, 
rounded to the nearest one-hundredth cent, shall be computed by 
multiplying the pounds of butterfat in producer milk allocated to each 
class pursuant to Sec. 1000.44(b) by the respective class butterfat 
prices and dividing the sum of such values by the total pounds of such 
butterfat.
    (b) Uniform skim milk price. The uniform skim milk price per 
hundredweight, rounded to the nearest cent, shall be computed as 
follows:
    (1) Combine into one total the values computed pursuant to 
Sec. 1005.60 for all handlers;
    (2) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 1006.75;
    (3) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (4) Subtract the value of the total pounds of butterfat for all 
handlers. The butterfat value shall be computed by multiplying the 
pounds of butterfat by the butterfat price computed in paragraph (a) of 
this section;
    (5) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (i) The total skim pounds of producer milk; and
    (ii) The total skim pounds for which a value is computed pursuant 
to Sec. 1006.60(e); and
    (6) Subtract not less than 4 cents and not more than 5 cents.
    (c) Uniform price. The uniform price per hundredweight, rounded to 
the nearest cent, shall be the sum of the following:
    (1) Multiply the uniform butterfat price for the month pursuant to 
paragraph (a) of this section times 3.5 pounds of butterfat; and
    (2) Multiply the uniform skim milk price for the month pursuant to 
paragraph (b) of this section times 96.5 pounds of skim milk.


Sec. 1006.62  Announcement of uniform prices.

    On or before the 11th day after the end of the month, the market 
administrator shall announce the uniform prices for the month computed 
pursuant to Sec. 1006.61.

Payments for Milk


Sec. 1006.70  Producer-settlement fund.

    See Sec. 1000.70.


Sec. 1006.71  Payments to the producer-settlement fund.

    Each handler shall make a payment to the producer-settlement fund 
in a manner that provides receipt of the funds by the market 
administrator no later than the 12th day after the end of the month 
(except as provided in Sec. 1000.90). Payment shall be the amount, if 
any, by which the amount specified in paragraph (a) of this section 
exceeds the amount specified in paragraph (b) of this section:
    (a) The total value of milk of the handler for the month as 
determined pursuant to Sec. 1006.60; and
    (b) The sum of the value at the uniform prices for skim milk and 
butterfat, adjusted for plant location, of the handler's receipts of 
producer milk; and the value at the uniform price, as adjusted pursuant 
to Sec. 1006.75, applicable at the location of the plant from which 
received of other source milk for which a value is computed pursuant to 
Sec. 1006.60(e).


Sec. 1006.72  Payments from the producer-settlement fund.

    No later than one day after the date of payment receipt required 
under Sec. 1006.71, the market administrator shall pay to each handler 
the amount, if any, by which the amount computed pursuant to 
Sec. 1006.71(b) exceeds the amount computed pursuant to 
Sec. 1006.71(a). If, at such time, the balance in the producer-
settlement fund is insufficient to make all payments pursuant to this 
section, the market administrator shall reduce uniformly such payments 
and shall complete the payments as soon as the funds are available.


Sec. 1006.73  Payments to producers and to cooperative associations.

    (a) Each pool plant operator that is not paying a cooperative 
association for producer milk shall pay each producer as follows:
    (1) Partial payments. (i) For each producer who has not 
discontinued shipments as of the 15th day of the month, payment shall 
be made so that it is received by the producer on or before the 20th 
day of the month (except as provided in Sec. 1000.90) for milk received 
during the first 15 days of the month at not less than 85 percent of 
the preceding month's uniform price, adjusted for plant location 
pursuant to Sec. 1006.75 and proper deductions authorized in writing by 
the producer; and
    (ii) For each producer who has not discontinued shipments as of the 
last day of the month, payment shall be made so that it is received by 
the producer on or before the 5th day of the following month (except as 
provided in Sec. 1000.90) for milk received from the 16th to the last 
day of the month at not less than 85 percent of the preceding month's 
uniform price, adjusted for plant location pursuant to Sec. 1006.75 and 
proper deductions authorized in writing by the producer.
    (2) Final payment. For milk received during the month, a payment 
computed as follows shall be made so that it is received by each 
producer one day after the payment date required in Sec. 1006.72:
    (i) Multiply the hundredweight of producer skim milk received times 
the uniform skim milk price for the month;
    (ii) Multiply the pounds of butterfat received times the uniform 
butterfat price for the month;
    (iii) Multiply the hundredweight of producer milk received times 
the plant location adjustment pursuant to Sec. 1006.75; and
    (iv) Add the amounts computed in paragraphs (a)(2)(i), (ii), and 
(iii) of this section, and from that sum:

[[Page 16241]]

    (A) Subtract the partial payments made pursuant to paragraph (a)(1) 
of this section;
    (B) Subtract the deduction for marketing services pursuant to 
Sec. 1000.86;
    (C) Add or subtract for errors made in previous payments to the 
producer; and
    (D) Subtract proper deductions authorized in writing by the 
producer.
    (b) One day before partial and final payments are due pursuant to 
paragraph (a) of this section, each pool plant operator shall pay a 
cooperative association for milk received as follows:
    (1) Partial payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk (including the 
milk of producers who are not members of such association and who the 
market administrator determines have authorized the cooperative 
association to collect payment for their milk) received from a 
cooperative association in any capacity, except as the operator of a 
pool plant, the payment shall be equal to the hundredweight of milk 
received multiplied by 90 percent of the preceding month's uniform 
price, adjusted for plant location pursuant to Sec. 1006.75.
    (2) Partial payment to a cooperative association for milk 
transferred from its pool plant. For bulk fluid milk products and bulk 
fluid cream products received during the first 15 days of the month 
from a cooperative association in its capacity as the operator of a 
pool plant, the partial payment shall be at the pool plant operator's 
estimated use value of the milk using the most recent class prices 
available for skim milk and butterfat at the receiving plant's 
location.
    (3) Final payment to a cooperative association for milk transferred 
from its pool plant. For bulk fluid milk products and bulk fluid cream 
products received during the month from a cooperative association in 
its capacity as the operator of a pool plant, the final payment shall 
be the classified value of such milk as determined by multiplying the 
pounds of skim milk and butterfat assigned to each class pursuant to 
Sec. 1000.44 by the class prices for the month at the receiving plant's 
location, and subtracting from this sum the partial payment made 
pursuant to paragraph (b)(2) of this section.
    (4) Final payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk received from a 
cooperative association during the month, including the milk of 
producers who are not members of such association and who the market 
administrator determines have authorized the cooperative association to 
collect payment for their milk, the final payment for such milk shall 
be an amount equal to the sum of the individual payments otherwise 
payable for such milk pursuant to paragraph (a)(2) of this section.
    (c) If a handler has not received full payment from the market 
administrator pursuant to Sec. 1006.72 by the payment date specified in 
paragraph (a) or (b) of this section, the handler may reduce payments 
pursuant to paragraphs (a) and (b) of this section, but by not more 
than the amount of the underpayment. The payments shall be completed on 
the next scheduled payment date after receipt of the balance due from 
the market administrator.
    (d) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer-settlement fund, and in the event that the handler 
subsequently locates and pays the producer or a lawful claimant, or in 
the event that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer-settlement fund to the handler or to the lawful 
claimant as the case may be.
    (e) In making payments to producers pursuant to this section, each 
pool plant operator shall furnish each producer, except a producer 
whose milk was received from a cooperative association described in 
Sec. 1000.9(a) or (c), a supporting statement in such form that it may 
be retained by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and the payroll number of the producer;
    (2) The month and dates that milk was received from the producer, 
including the daily and total pounds of milk received;
    (3) The total pounds of butterfat in the producer's milk;
    (4) The minimum rate or rates at which payment to the producer is 
required pursuant to this order;
    (5) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (6) The amount, or rate per hundredweight, and nature of each 
deduction claimed by the handler; and
    (7) The net amount of payment to the producer or cooperative 
association.


Sec. 1006.74  [Reserved]


Sec. 1006.75  Plant location adjustments for producer milk and nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec. 1006.50 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Secs. 1006.73 
and 1000.76.


Sec. 1006.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76.


Sec. 1006.77  Adjustment of accounts.

    See Sec. 1000.77.


Sec. 1006.78  Charges on overdue accounts.

    See Sec. 1000.78.

Administrative Assessment and Marketing Service Deduction


Sec. 1006.85  Assessment for order administration.

    See Sec. 1000.85.


Sec. 1006.86  Deduction for marketing services.

    See Sec. 1000.86.

PART 1007--MILK IN THE SOUTHEAST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1007.1  General provisions.

Definitions

1007.2  Southeast marketing area.
1007.3  Route disposition.
1007.4  Plant.
1007.5  Distributing plant.
1007.6  Supply plant.
1007.7  Pool plant.
1007.8  Nonpool plant.
1007.9  Handler.
1007.10  Producer-handler.
1007.11  [Reserved]
1007.12  Producer.
1007.13  Producer milk.
1007.14  Other source milk.
1007.15  Fluid milk product.
1007.16  Fluid cream product.
1007.17  [Reserved]
1007.18  Cooperative association.
1007.19  Commercial food processing establishment.

Handler Reports

1007.30  Reports of receipts and utilization.
1007.31  Payroll reports.
1007.32  Other reports.

Classification of Milk

1007.40  Classes of utilization.
1007.41  [Reserved]

[[Page 16242]]

1007.42  Classification of transfers and diversions.
1007.43  General classification rules.
1007.44  Classification of producer milk.
1007.45  Market administrator's reports and announcements concerning 
classification.

Class Prices

1007.50  Class prices, component prices, and advanced pricing 
factors.
1007.51  Class I differential and price.
1007.52  Adjusted Class I differentials.
1007.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1007.54  Equivalent price.

Uniform Prices

1007.60  Handler's value of milk.
1007.61  Computation of uniform prices.
1007.62  Announcement of uniform prices.

Payments for Milk

1007.70  Producer-settlement fund.
1007.71  Payments to the producer-settlement fund.
1007.72  Payments from the producer-settlement fund.
1007.73  Payments to producers and to cooperative associations.
1007.74  [Reserved]
1007.75  Plant location adjustments for producer milk and nonpool 
milk.
1007.76  Payments by a handler operating a partially regulated 
distributing plant.
1007.77  Adjustment of accounts.
1007.78  Charges on overdue accounts.

Marketwide Service Payments

1007.80  Transportation credit balancing fund.
1007.81  Payments to the transportation credit balancing fund.
1007.82  Payments from the transportation credit balancing fund.

Administrative Assessment and Marketing Service Deduction

1007.85  Assessment for order administration.
1007.86  Deduction for marketing services.

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

Subpart--Order Regulating Handling

General Provisions


Sec. 1007.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to and are hereby made a part of this order. In this part 1007, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

Definitions


Sec. 1007.2  Southeast marketing area.

    The marketing area means all territory within the bounds of the 
following states and political subdivisions, including all piers, docks 
and wharves connected therewith and all craft moored thereat, and all 
territory occupied by government (municipal, State or Federal) 
reservations, installations, institutions, or other similar 
establishments if any part thereof is within any of the listed states 
or political subdivisions:

Alabama, Arkansas, Louisiana, and Mississippi

    All of the States of Alabama, Arkansas, Louisiana, and 
Mississippi.

Florida Counties

    Escambia, Okaloosa, Santa Rosa, and Walton.

Georgia Counties

    All of the State of Georgia except for the counties of Catoosa, 
Chattooga, Dade, Fannin, Murray, Walker, and Whitfield.

Kentucky Counties

    Allen, Ballard, Barren, Caldwell, Calloway, Carlisle, Christian, 
Crittenden, Fulton, Graves, Hickman, Livingston, Logan, Lyon, 
Marshall, McCracken, Metcalfe, Monroe, Simpson, Todd, Trigg, and 
Warren.

Missouri Counties

    Barry, Barton, Bollinger, Butler, Cape Girardeau, Carter, Cedar, 
Christian, Crawford, Dade, Dallas, Dent, Douglas, Dunklin, Greene, 
Howell, Iron, Jasper, Laclede, Lawrence, Madison, McDonald, 
Mississippi, New Madrid, Newton, Oregon, Ozark, Pemiscot, Perry, 
Polk, Reynolds, Ripley, Scott, Shannon, St. Francois, Stoddard, 
Stone, Taney, Texas, Vernon, Washington, Wayne, Webster, and Wright.

Tennessee Counties

    All of the State of Tennessee except for the counties of 
Anderson, Blount, Bradley, Campbell, Carter, Claiborne, Cocke, 
Cumberland, Grainger, Greene, Hamblen, Hamilton, Hancock, Hawkins, 
Jefferson, Johnson, Knox, Loudon, Marion, McMinn, Meigs, Monroe, 
Morgan, Polk, Rhea, Roane, Scott, Sequatchie, Sevier, Sullivan, 
Unicoi, Union, and Washington.


Sec. 1007.3  Route disposition.

    See Sec. 1000.3.


Sec. 1007.4  Plant.

    See Sec. 1000.4.


Sec. 1007.5  Distributing plant.

    See Sec. 1000.5.


Sec. 1007.6  Supply plant.

    See Sec. 1000.6.


Sec. 1007.7  Pool plant.

    Pool plant means a plant specified in paragraphs (a) through (d) of 
this section, or a unit of plants as specified in paragraph (e) of this 
section, but excluding a plant specified in paragraph (g) of this 
section. The pooling standards described in paragraphs (c) and (d) of 
this section are subject to modification pursuant to paragraph (f) of 
this section:
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or section 7(b) of any 
other Federal milk order, from which during the month 50 percent or 
more of the fluid milk products received at such plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) are disposed of as route disposition or are 
transferred in the form of packaged fluid milk products to other 
distributing plants. At least 25 percent of such route disposition and 
transfers must be to outlets in the marketing area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 50 percent of the total quantity of 
fluid milk products received at the plant (excluding concentrated milk 
received from another plant by agreement for other than Class I use) 
into ultra-pasteurized or aseptically-processed fluid milk products.
    (c) A supply plant from which 50 percent or more of the total 
quantity of milk that is received during the month from dairy farmers 
and handlers described in Sec. 1000.9(c), including milk that is 
diverted from the plant, is transferred to pool distributing plants. 
Concentrated milk transferred from the supply plant to a distributing 
plant for an agreed-upon use other than Class I shall be excluded from 
the supply plant's shipments in computing the plant's shipping 
percentage.
    (d) A plant located within the marketing area that is operated by a 
cooperative association if pool plant status under this paragraph is 
requested for such plant by the cooperative association and during the 
month at least 60 percent of the producer milk of members of such 
cooperative association is delivered directly from farms to pool 
distributing plants or is transferred to such plants as a fluid milk 
product (excluding concentrated milk transferred to a distributing 
plant for an agreed-upon use other than Class I) from the cooperative's 
plant.
    (e) Two or more plants operated by the same handler and located 
within the marketing area may qualify for pool status as a unit by 
meeting the total and in-area route disposition requirements specified 
in paragraph (a) of this section and the following additional 
requirements:
    (1) At least one of the plants in the unit must qualify as a pool 
plant pursuant to paragraph (a) of this section;
    (2) Other plants in the unit must process only Class I or Class II 
products and must be located in a pricing zone providing the same or a 
lower Class I price than the price applicable at the distributing plant 
included in the unit

[[Page 16243]]

pursuant to paragraph (e)(1) of this section; and
    (3) A written request to form a unit, or to add or remove plants 
from a unit, must be filed with the market administrator prior to the 
first day of the month for which it is to be effective.
    (f) The applicable shipping percentages of paragraphs (c) and (d) 
of this section may be increased or decreased by the market 
administrator if the market administrator finds that such adjustment is 
necessary to encourage needed shipments or to prevent uneconomic 
shipments. Before making such a finding, the market administrator shall 
investigate the need for adjustment either on the market 
administrator's own initiative or at the request of interested parties 
if the request is made in writing at least 15 days prior to the date 
for which the requested revision is desired effective. If the 
investigation shows that an adjustment of the shipping percentages 
might be appropriate, the market administrator shall issue a notice 
stating that an adjustment is being considered and invite data, views 
and arguments. Any decision to revise an applicable shipping percentage 
must be issued in writing at least one day before the effective date.
    (g) The term pool plant shall not apply to the following plants:
    (1) A producer-handler plant;
    (2) An exempt plant as defined in Sec. 1000.8(e);
    (3) A plant qualified pursuant to paragraph (a) of this section 
which is not located within any Federal order marketing area, meets the 
pooling requirements of another Federal order, and has had greater 
route disposition in such other Federal order marketing area for 3 
consecutive months;
    (4) A plant qualified pursuant to paragraph (a) of this section 
which is located in another Federal order marketing area, meets the 
pooling standards of the other Federal order, and has not had a 
majority of its route disposition in this marketing area for 3 
consecutive months or is locked into pool status under such other 
Federal order without regard to its route disposition in any other 
Federal order marketing area; and
    (5) A plant qualified pursuant to paragraph (c) of this section 
which also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under such other order than are made to plants regulated under this 
order, or such plant has automatic pooling status under such other 
order.


Sec. 1007.8  Nonpool plant.

    See Sec. 1000.8.


Sec. 1007.9  Handler.

    See Sec. 1000.9.


Sec. 1007.10  Producer-handler.

    Producer-handler means a person who:
    (a) Operates a dairy farm and a distributing plant from which there 
is monthly route disposition in the marketing area;
    (b) Receives no fluid milk products, and acquires no fluid milk 
products for route disposition, from sources other than own farm 
production;
    (c) Disposes of no other source milk as Class I milk except by 
increasing the nonfat milk solids content of the fluid milk products 
received from own farm production; and
    (d) Provides proof satisfactory to the market administrator that 
the care and management of the dairy animals and other resources 
necessary to produce all Class I milk handled, and the processing and 
packaging operations, are the producer-handler's own enterprise and are 
operated at the producer-handler's own risk.


Sec. 1007.11  [Reserved]


Sec. 1007.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
(or components of milk) is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec. 1007.13; or
    (2) Received by a handler described in Sec. 1000.9(c).
    (b) Producer shall not include:
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to 
Sec. 1007.13(d);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and that milk is allocated by request to a utilization other than 
Class I; and
    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order.


Sec. 1007.13  Producer milk.

    Producer milk means the skim milk (or the skim equivalent of 
components of skim milk) and butterfat contained in milk of a producer 
that is:
    (a) Received by the operator of a pool plant directly from a 
producer or a handler described in Sec. 1000.9(c). All milk received 
pursuant to this paragraph shall be priced at the location of the plant 
where it is first physically received;
    (b) Received by a handler described in Sec. 1000.9(c) in excess of 
the quantity delivered to pool plants;
    (c) Diverted by a pool plant operator to another pool plant. Milk 
so diverted shall be priced at the location of the plant to which 
diverted; or
    (d) Diverted by the operator of a pool plant or a handler described 
in Sec. 1000.9(c) to a nonpool plant, subject to the following 
conditions:
    (1) In any month of January through June, not less than 4 days' 
production of the producer whose milk is diverted is physically 
received at a pool plant during the month;
    (2) In any month of July through December, not less than 10 days' 
production of the producer whose milk is diverted is physically 
received at a pool plant during the month;
    (3) The total quantity of milk so diverted during the month by a 
cooperative association shall not exceed 33 percent during the months 
of July through December, and 50 percent during the months of January 
through June, of the producer milk that the cooperative association 
caused to be delivered to, and physically received at, pool plants 
during the month;
    (4) The operator of a pool plant that is not a cooperative 
association may divert any milk that is not under the control of a 
cooperative association that diverts milk during the month pursuant to 
paragraph (d) of this section. The total quantity of milk so diverted 
during the month shall not exceed 33 percent during the months of July 
through December, or 50 percent during the months of January through 
June, of the producer milk physically received at such plant (or such 
unit of plants in the case of plants that pool as a unit pursuant to 
Sec. 1007.7(e)) during the month, excluding the quantity of producer 
milk received from a handler described in Sec. 1000.9(c);
    (5) Any milk diverted in excess of the limits prescribed in 
paragraphs (d)(3) and (4) of this section shall not be producer milk. 
If the diverting handler or cooperative association fails to designate 
the dairy farmers' deliveries that will not be producer milk, no milk

[[Page 16244]]

diverted by the handler or cooperative association shall be producer 
milk;
    (6) Diverted milk shall be priced at the location of the plant to 
which diverted; and
    (7) The delivery day requirements and the diversion percentages in 
paragraphs (d)(1) through (4) of this section may be increased or 
decreased by the market administrator if the market administrator finds 
that such revision is necessary to assure orderly marketing and 
efficient handling of milk in the marketing area. Before making such a 
finding, the market administrator shall investigate the need for the 
revision either on the market administrator's own initiative or at the 
request of interested persons. If the investigation shows that a 
revision might be appropriate, the market administrator shall issue a 
notice stating that the revision is being considered and inviting 
written data, views, and arguments. Any decision to revise an 
applicable percentage must be issued in writing at least one day before 
the effective date.


Sec. 1007.14  Other source milk.

    See Sec. 1000.14.


Sec. 1007.15  Fluid milk product.

    See Sec. 1000.15.


Sec. 1007.16  Fluid cream product.

    See Sec. 1000.16.


Sec. 1007.17  [Reserved]


Sec. 1007.18  Cooperative association.

    See Sec. 1000.18.


Sec. 1007.19  Commercial food processing establishment.

    See Sec. 1000.19.

Handler Reports


Sec. 1007.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 7th day 
after the end of the month, in the detail and on prescribed forms, as 
follows:
    (a) With respect to each of its pool plants, the quantities of skim 
milk and butterfat contained in or represented by:
    (1) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec. 1000.9(c);
    (2) Receipts of milk from handlers described in Sec. 1000.9(c);
    (3) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (4) Receipts of other source milk;
    (5) Receipts of bulk milk from a plant regulated under another 
Federal order, except Federal Order 1005, for which a transportation 
credit is requested pursuant to Sec. 1007.82;
    (6) Receipts of producer milk described in Sec. 1007.82(c)(2), 
including the identity of the individual producers whose milk is 
eligible for the transportation credit pursuant to that paragraph and 
the date that such milk was received;
    (7) For handlers submitting transportation credit requests, 
transfers of bulk milk to nonpool plants, including the dates that such 
milk was transferred;
    (8) Inventories at the beginning and end of the month of fluid milk 
products and bulk fluid cream products; and
    (9) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraphs (a)(1), (a)(2), (a)(3), 
(a)(4), and (a)(8) of this section. Receipts of milk that would have 
been producer milk if the plant had been fully regulated shall be 
reported in lieu of producer milk. The report shall show also the 
quantity of any reconstituted skim milk in route disposition in the 
marketing area.
    (c) Each handler described in Sec. 1000.9(c) shall report:
    (1) The quantities of all skim milk and butterfat contained in 
receipts of milk from producers;
    (2) The utilization or disposition of all such receipts; and
    (3) With respect to milk for which a cooperative association is 
requesting a transportation credit pursuant to Sec. 1007.82, all of the 
information required in paragraphs (a)(5), (a)(6), and (a)(7) of this 
section.
    (d) Each handler not specified in paragraphs (a) through (c) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.


Sec. 1007.31  Payroll reports.

    (a) On or before the 20th day after the end of each month, each 
handler that operates a pool plant pursuant to Sec. 1007.7 and each 
handler described in Sec. 1000.9(c) shall report to the market 
administrator its producer payroll for the month, in detail prescribed 
by the market administrator, showing for each producer the information 
specified in Sec. 1007.73(e).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 1000.76(b) shall report for 
each dairy farmer who would have been a producer if the plant had been 
fully regulated in the same manner as prescribed for reports required 
by paragraph (a) of this section.


Sec. 1007.32  Other reports.

    (a) On or before the 20th day after the end of each month, each 
handler described in Sec. 1000.9(a) and (c) shall report to the market 
administrator any adjustments to transportation credit requests as 
reported pursuant to Sec. 1007.30(a)(5), (6), and (7).
    (b) In addition to the reports required pursuant to Secs. 1007.30, 
31, and 32(a), each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Classification of Milk


Sec. 1007.40  Classes of utilization.

    See Sec. 1000.40.


Sec. 1007.41  [Reserved]


Sec. 1007.42  Classification of transfers and diversions.

    See Sec. 1000.42.


Sec. 1007.43  General classification rules.

    See Sec. 1000.43.


Sec. 1007.44  Classification of producer milk.

    See Sec. 1000.44.


Sec. 1007.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45.

Class Prices


Sec. 1007.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec. 1000.50.


Sec. 1007.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Fulton County, Georgia, which is reported in Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for 
Fulton County, Georgia.


Sec. 1007.52  Adjusted Class I differentials.

    See Sec. 1000.52.


Sec. 1007.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec. 1000.53.


Sec. 1007.54  Equivalent price.

    See Sec. 1000.54.

Uniform Prices


Sec. 1007.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk,

[[Page 16245]]

the market administrator shall determine for each month the value of 
milk of each handler with respect to each of the handler's pool plants 
and of each handler described in Sec. 1000.9(c) with respect to milk 
that was not received at a pool plant by adding the amounts computed in 
paragraphs (a) through (e) of this section and subtracting from that 
total amount the value computed in paragraph (f) of this section. 
Receipts of nonfluid milk products that are distributed as labeled 
reconstituted milk for which payments are made to the producer-
settlement fund of another Federal order under Sec. 1000.76(a)(4) or 
(d) shall be excluded from pricing under this section.
    (a) Multiply the pounds of skim milk and butterfat in producer milk 
that were classified in each class pursuant to Sec. 1000.44(c) by the 
applicable skim milk and butterfat prices, and add the resulting 
amounts;
    (b) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec. 1000.44(a)(11) by the respective skim 
milk and butterfat prices applicable at the location of the pool plant;
    (c) Multiply the difference between the Class IV price for the 
preceding month and the current month's Class I, II, or III price, as 
the case may be, by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
    (d) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec. 1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(3) (i) through (vi) 
and the corresponding step of Sec. 1000.44(b), excluding receipts of 
bulk fluid cream products from a plant regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants;
    (e) Multiply the Class I price applicable at the location of the 
nearest unregulated supply plants from which an equivalent volume was 
received by the pounds of skim milk and butterfat in receipts of 
concentrated fluid milk products assigned to Class I pursuant to 
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk 
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8) 
and the corresponding step of Sec. 1000.44(b), excluding such skim milk 
and butterfat in receipts of fluid milk products from an unregulated 
supply plant to the extent that an equivalent amount of skim milk or 
butterfat disposed of to such plant by handlers fully regulated under 
any Federal milk order is classified and priced as Class I milk and is 
not used as an offset for any other payment obligation under any order; 
and
    (f) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of nonfluid milk products that are allocated to 
Class I use pursuant to Sec. 1000.43(d).


Sec. 1007.61  Computation of uniform prices.

    On or before the 11th day of each month, the market administrator 
shall compute a uniform butterfat price, a uniform skim milk price, and 
a uniform price for producer milk receipts reported for the prior 
month. The report of any handler who has not made payments required 
pursuant to Sec. 1007.71 for the preceding month shall not be included 
in the computation of these prices, and such handler's report shall not 
be included in the computation for succeeding months until the handler 
has made full payment of outstanding monthly obligations.
    (a) Uniform butterfat price. The uniform butterfat price per pound, 
rounded to the nearest one-hundredth cent, shall be computed by 
multiplying the pounds of butterfat in producer milk allocated to each 
class pursuant to Sec. 1000.44(b) by the respective class butterfat 
prices and dividing the sum of such values by the total pounds of such 
butterfat.
    (b) Uniform skim milk price. The uniform skim milk price per 
hundredweight, rounded to the nearest cent, shall be computed as 
follows:
    (1) Combine into one total the values computed pursuant to 
Sec. 1005.60 for all handlers;
    (2) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 1007.75;
    (3) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (4) Subtract the value of the total pounds of butterfat for all 
handlers. The butterfat value shall be computed by multiplying the 
pounds of butterfat by the butterfat price computed in paragraph (a) of 
this section;
    (5) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (i) The total skim pounds of producer milk; and
    (ii) The total skim pounds for which a value is computed pursuant 
to Sec. 1007.60(e); and
    (6) Subtract not less than 4 cents and not more than 5 cents.
    (c) Uniform price. The uniform price per hundredweight, rounded to 
the nearest cent, shall be the sum of the following:
    (1) Multiply the uniform butterfat price for the month pursuant to 
paragraph (a) of this section times 3.5 pounds of butterfat; and
    (2) Multiply the uniform skim milk price for the month pursuant to 
paragraph (b) of this section times 96.5 pounds of skim milk.


Sec. 1007.62  Announcement of uniform prices.

    On or before the 11th day after the end of the month, the market 
administrator shall announce the uniform prices for the month computed 
pursuant to Sec. 1007.61.

Payments for Milk


Sec. 1007.70  Producer-settlement fund.

    See Sec. 1000.70.


Sec. 1007.71  Payments to the producer-settlement fund.

    Each handler shall make a payment to the producer-settlement fund 
in a manner that provides receipt of the funds by the market 
administrator no later than the 12th day after the end of the month 
(except as provided in Sec. 1000.90). Payment shall be the amount, if 
any, by which the amount specified in paragraph (a) of this section 
exceeds the amount specified in paragraph (b) of this section:
    (a) The total value of milk of the handler for the month as 
determined pursuant to Sec. 1007.60; and
    (b) The sum of the value at the uniform prices for skim milk and 
butterfat, adjusted for plant location, of the handler's receipts of 
producer milk; and the value at the uniform price, as adjusted pursuant 
to Sec. 1007.75, applicable at the location of the plant from which 
received of other source milk for which a value is computed pursuant to 
Sec. 1007.60(e).


Sec. 1007.72  Payments from the producer-settlement fund.

    No later than one day after the date of payment receipt required 
under Sec. 1007.71, the market administrator shall pay to each handler 
the amount, if any, by which the amount computed pursuant to 
Sec. 1007.71(b) exceeds the amount computed pursuant to 
Sec. 1007.71(a). If, at such time, the balance

[[Page 16246]]

in the producer-settlement fund is insufficient to make all payments 
pursuant to this section, the market administrator shall reduce 
uniformly such payments and shall complete the payments as soon as the 
funds are available.


Sec. 1007.73  Payments to producers and to cooperative associations.

    (a) Each pool plant operator that is not paying a cooperative 
association for producer milk shall pay each producer as follows:
    (1) Partial payment. For each producer who has not discontinued 
shipments as of the 23rd day of the month, payment shall be made so 
that it is received by the producer on or before the 26th day of the 
month (except as provided in Sec. 1000.90) for milk received during the 
first 15 days of the month at not less than 90 percent of the preceding 
month's uniform price, adjusted for plant location pursuant to 
Sec. 1007.75 and proper deductions authorized in writing by the 
producer.
    (2) Final payment. For milk received during the month, a payment 
computed as follows shall be made so that it is received by each 
producer one day after the payment date required in Sec. 1007.72:
    (i) Multiply the hundredweight of producer skim milk received times 
the uniform skim milk price for the month;
    (ii) Multiply the pounds of butterfat received times the uniform 
butterfat price for the month;
    (iii) Multiply the hundredweight of producer milk received times 
the plant location adjustment pursuant to Sec. 1007.75; and
    (iv) Add the amounts computed in paragraph (a)(2)(i), (ii), and 
(iii) of this section, and from that sum:
    (A) Subtract the partial payment made pursuant to paragraph (a)(1) 
of this section;
    (B) Subtract the deduction for marketing services pursuant to 
Sec. 1000.86;
    (C) Add or subtract for errors made in previous payments to the 
producer; and
    (D) Subtract proper deductions authorized in writing by the 
producer.
    (b) One day before partial and final payments are due pursuant to 
paragraph (a) of this section, each pool plant operator shall pay a 
cooperative association for milk received as follows:
    (1) Partial payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk (including the 
milk of producers who are not members of such association and who the 
market administrator determines have authorized the cooperative 
association to collect payment for their milk) received during the 
first 15 days of the month from a cooperative association in any 
capacity, except as the operator of a pool plant, the payment shall be 
equal to the hundredweight of milk received multiplied by 90 percent of 
the preceding month's uniform price, adjusted for plant location 
pursuant to Sec. 1007.75.
    (2) Partial payment to a cooperative association for milk 
transferred from its pool plant. For bulk fluid milk products and bulk 
fluid cream products received during the first 15 days of the month 
from a cooperative association in its capacity as the operator of a 
pool plant, the partial payment shall be at the pool plant operator's 
estimated use value of the milk using the most recent class prices 
available for skim milk and butterfat at the receiving plant's 
location.
    (3) Final payment to a cooperative association for milk transferred 
from its pool plant. For bulk fluid milk products and bulk fluid cream 
products received during the month from a cooperative association in 
its capacity as the operator of a pool plant, the final payment shall 
be the classified value of such milk as determined by multiplying the 
pounds of skim milk and butterfat assigned to each class pursuant to 
Sec. 1000.44 by the class prices for the month at the receiving plant's 
location, and subtracting from this sum the partial payment made 
pursuant to paragraph (b)(2) of this section.
    (4) Final payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk received from a 
cooperative association during the month, including the milk of 
producers who are not members of such association and who the market 
administrator determines have authorized the cooperative association to 
collect payment for their milk, the final payment for such milk shall 
be an amount equal to the sum of the individual payments otherwise 
payable for such milk pursuant to paragraph (a)(2) of this section.
    (c) If a handler has not received full payment from the market 
administrator pursuant to Sec. 1007.72 by the payment date specified in 
paragraph (a) or (b) of this section, the handler may reduce payments 
pursuant to paragraphs (a) and (b) of this section, but by not more 
than the amount of the underpayment. The payments shall be completed on 
the next scheduled payment date after receipt of the balance due from 
the market administrator.
    (d) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer-settlement fund, and in the event that the handler 
subsequently locates and pays the producer or a lawful claimant, or in 
the event that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer-settlement fund to the handler or to the lawful 
claimant as the case may be.
    (e) In making payments to producers pursuant to this section, each 
pool plant operator shall furnish each producer, except a producer 
whose milk was received from a cooperative association described in 
Sec. 1000.9(a) or (c), a supporting statement in such form that it may 
be retained by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and the payroll number of the producer;
    (2) The month and dates that milk was received from the producer, 
including the daily and total pounds of milk received;
    (3) The total pounds of butterfat in the producer's milk;
    (4) The minimum rate or rates at which payment to the producer is 
required pursuant to this order;
    (5) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (6) The amount, or rate per hundredweight, and nature of each 
deduction claimed by the handler; and
    (7) The net amount of payment to the producer or cooperative 
association.


Sec. 1007.74  [Reserved]


Sec. 1007.75  Plant location adjustments for producer milk and nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec. 1007.50 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Secs. 1007.73 
and 1000.76.


Sec. 1007.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76.


Sec. 1007.77  Adjustment of accounts.

    See Sec. 1000.77.


Sec. 1007.78  Charges on overdue accounts.

    See Sec. 1000.78.

[[Page 16247]]

Marketwide Service Payments


Sec. 1007.80  Transportation credit balancing fund.

    The market administrator shall maintain a separate fund known as 
the Transportation Credit Balancing Fund into which shall be deposited 
the payments made by handlers pursuant to Sec. 1007.81 and out of which 
shall be made the payments due handlers pursuant to Sec. 1007.82. 
Payments due a handler shall be offset against payments due from the 
handler.


Sec. 1007.81  Payments to the transportation credit balancing fund.

    (a) On or before the 12th day after the end of the month (except as 
provided in Sec. 1000.90), each handler operating a pool plant and each 
handler specified in Sec. 1000.9(c) shall pay to the market 
administrator a transportation credit balancing fund assessment 
determined by multiplying the pounds of Class I producer milk assigned 
pursuant to Sec. 1000.44 by $0.07 per hundredweight or such lesser 
amount as the market administrator deems necessary to maintain a 
balance in the fund equal to the total transportation credits disbursed 
during the prior June-January period. In the event that during any 
month of the June-January period the fund balance is insufficient to 
cover the amount of credits that are due, the assessment should be 
based upon the amount of credits that would have been disbursed had the 
fund balance been sufficient.
    (b) The market administrator shall announce publicly on or before 
the 5th day of the month (except as provided in Sec. 1000.90) the 
assessment pursuant to paragraph (a) of this section for the following 
month.


Sec. 1007.82  Payments from the transportation credit balancing fund.

    (a) Payments from the transportation credit balancing fund to 
handlers and cooperative associations requesting transportation credits 
shall be made as follows:
    (1) On or before the 13th day (except as provided in Sec. 1000.90) 
after the end of each of the months of July through December and any 
other month in which transportation credits are in effect pursuant to 
paragraph (b) of this section, the market administrator shall pay to 
each handler that received, and reported pursuant to 
Sec. 1007.30(a)(5), bulk milk transferred from a plant fully regulated 
under another Federal order as described in paragraph (c)(1) of this 
section or that received, and reported pursuant to Sec. 1007.30(a)(6), 
milk directly from producers' farms as specified in paragraph (c)(2) of 
this section, a preliminary amount determined pursuant to paragraph (d) 
of this section to the extent that funds are available in the 
transportation credit balancing fund. If an insufficient balance exists 
to pay all of the credits computed pursuant to this section, the market 
administrator shall distribute the balance available in the 
transportation credit balancing fund by reducing payments pro rata 
using the percentage derived by dividing the balance in the fund by the 
total credits that are due for the month. The amount of credits 
resulting from this initial proration shall be subject to audit 
adjustment pursuant to paragraph (a)(2) of this section;
    (2) The market administrator shall accept adjusted requests for 
transportation credits on or before the 20th day of the month following 
the month for which such credits were requested pursuant to 
Sec. 1007.32(a). After such date, a preliminary audit will be conducted 
by the market administrator, who will recalculate any necessary 
proration of transportation credit payments for the preceding month 
pursuant to paragraph (a) of this section. Handlers will be promptly 
notified of an overpayment of credits based upon this final computation 
and remedial payments to or from the transportation credit balancing 
fund will be made on or before the next payment date for the following 
month;
    (3) Transportation credits paid pursuant to paragraphs (a)(1) and 
(2) of this section shall be subject to final verification by the 
market administrator pursuant to Sec. 1000.77. Adjusted payments to or 
from the transportation credit balancing fund will remain subject to 
the final proration established pursuant to paragraph (a)(2) of this 
section; and
    (4) In the event that a qualified cooperative association is the 
responsible party for whose account such milk is received and written 
documentation of this fact is provided to the market administrator 
pursuant to Sec. 1007.30(c)(3) prior to the date payment is due, the 
transportation credits for such milk computed pursuant to this section 
shall be made to such cooperative association rather than to the 
operator of the pool plant at which the milk was received.
    (b) The market administrator may extend the period during which 
transportation credits are in effect (i.e., the transportation credit 
period) to the months of January and June if a written request to do so 
is received 15 days prior to the beginning of the month for which the 
request is made and, after conducting an independent investigation, 
finds that such extension is necessary to assure the market of an 
adequate supply of milk for fluid use. Before making such a finding, 
the market administrator shall notify the Director of the Dairy 
Division and all handlers in the market that an extension is being 
considered and invite written data, views, and arguments. Any decision 
to extend the transportation credit period must be issued in writing 
prior to the first day of the month for which the extension is to be 
effective.
    (c) Transportation credits shall apply to the following milk:
    (1) Bulk milk received from a plant regulated under another Federal 
order, except Federal Order 1005, and allocated to Class I milk 
pursuant to Sec. 1000.44(a)(9); and
    (2) Bulk milk received directly from the farms of dairy farmers at 
pool distributing plants subject to the following conditions:
    (i) The quantity of such milk that shall be eligible for the 
transportation credit shall be determined by multiplying the total 
pounds of milk received from producers meeting the conditions of this 
paragraph by the lower of:
    (A) The marketwide estimated Class I utilization of all handlers 
for the month pursuant to Sec. 1000.45(a); or
    (B) The Class I utilization of all producer milk of the pool plant 
operator receiving the milk after the computations described in 
Sec. 1000.44;
    (ii) The dairy farmer was not a ``producer'' under this order 
during more than 2 of the immediately preceding months of February 
through May and not more than 50 percent of the production of the dairy 
farmer during those 2 months, in aggregate, was received as producer 
milk under this order during those 2 months; and
    (iii) The farm on which the milk was produced is not located within 
the specified marketing area of this order or the marketing area of 
Federal Order 1005.
    (d) Transportation credits shall be computed as follows:
    (1) The market administrator shall subtract from the pounds of milk 
described in paragraphs (c)(1) and (2) of this section the pounds of 
bulk milk transferred from the pool plant receiving the supplemental 
milk if milk was transferred to a nonpool plant on the same calendar 
day that the supplemental milk was received. For this purpose, the 
transferred milk shall be subtracted from the most distant load of 
supplemental milk received, and then in sequence with the next most 
distant load until all of the transfers have been offset;

[[Page 16248]]

    (2) With respect to the pounds of milk described in paragraph 
(c)(1) of this section that remain after the computations described in 
paragraph (d)(1) of this section, the market administrator shall:
    (i) Determine the shortest hard-surface highway distance between 
the shipping plant and the receiving plant;
    (ii) Multiply the number of miles so determined by 0.35 cent;
    (iii) Subtract the applicable Class I differential in Sec. 1000.52 
for the county in which the shipping plant is located from the Class I 
differential applicable for the county in which the receiving plant is 
located;
    (iv) Subtract any positive difference computed in paragraph 
(d)(2)(iii) of this section from the amount computed in paragraph 
(d)(2)(ii) of this section; and
    (v) Multiply the remainder computed in paragraph (d)(2)(iv) of this 
section by the hundredweight of milk described in paragraph (d)(2) of 
this section.
    (3) For the remaining milk described in paragraph (c)(2) of this 
section after computations described in paragraph (d)(1) of this 
section, the market administrator shall:
    (i) Determine an origination point for each load of milk by 
locating the nearest city to the last producer's farm from which milk 
was picked up for delivery to the receiving pool plant;
    (ii) Determine the shortest hard-surface highway distance between 
the receiving pool plant and the origination point;
    (iii) Subtract 85 miles from the mileage so determined;
    (iv) Multiply the remaining miles so computed by 0.35 cent;
    (v) Subtract the Class I differential specified in Sec. 1000.52 
applicable for the county in which the origination point is located 
from the Class I differential applicable at the receiving pool plant's 
location;
    (vi) Subtract any positive difference computed in paragraph 
(d)(3)(v) of this section from the amount computed in paragraph 
(d)(3)(iv) of this section; and
    (vii) Multiply the remainder computed in paragraph (d)(3)(vi) of 
this section by the hundredweight of milk described in paragraph (d)(3) 
of this section.

Administrative Assessment and Marketing Service Deduction


Sec. 1007.85  Assessment for order administration.

    See Sec. 1000.85.


Sec. 1007.86  Deduction for marketing services.

    See Sec. 1000.86.

PART 1030--MILK IN THE UPPER MIDWEST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1030.1  General provisions.

Definitions

1030.2  Upper Midwest marketing area.
1030.3  Route disposition.
1030.4  Plant.
1030.5  Distributing plant.
1030.6  Supply plant.
1030.7  Pool plant.
1030.8  Nonpool plant.
1030.9  Handler.
1030.10  Producer-handler.
1030.11  [Reserved]
1030.12  Producer.
1030.13  Producer milk.
1030.14  Other source milk.
1030.15  Fluid milk product.
1030.16  Fluid cream product.
1030.17  [Reserved]
1030.18  Cooperative association.
1030.19  Commercial food processing establishment.

Handler Reports

1030.30  Reports of receipts and utilization.
1030.31  Payroll reports.
1030.32  Other reports.

Classification of Milk

1030.40  Classes of utilization.
1030.41  [Reserved]
1030.42  Classification of transfers and diversions.
1030.43  General classification rules.
1030.44  Classification of producer milk.
1030.45  Market administrator's reports and announcements concerning 
classification.

Class Prices

1030.50  Class prices, component prices, and advanced pricing 
factors.
1030.51  Class I differential and price.
1030.52  Adjusted Class I differentials.
1030.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1030.54  Equivalent price.
1030.55  Transportation credits and assembly credits.

Producer Price Differential

1030.60  Handler's value of milk.
1030.61  Computation of producer price differential.
1030.62  Announcement of producer prices.

Payments for Milk

1030.70  Producer-settlement fund.
1030.71  Payments to the producer-settlement fund.
1030.72  Payments from the producer-settlement fund.
1030.73  Payments to producers and to cooperative associations.
1030.74  [Reserved]
1030.75  Plant location adjustments for producer milk and nonpool 
milk.
1030.76  Payments by a handler operating a partially regulated 
distributing plant.
1030.77  Adjustment of accounts.
1030.78  Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1030.85  Assessment for order administration.
1030.86  Deduction for marketing services.

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

Subpart--Order Regulating Handling

General Provisions


Sec. 1030.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to and are hereby made a part of this order. In this part 1030, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

Definitions


Sec. 1030.2  Upper Midwest marketing area.

    The marketing area means all territory within the bounds of the 
following states and political subdivisions, including all piers, 
docks, and wharves connected therewith and all craft moored thereat, 
and all territory occupied by government (municipal, State, or Federal) 
reservations, installations, institutions, or other similar 
establishments if any part thereof is within any of the listed states 
or political subdivisions:

Illinois Counties

    Boone, Carroll, Cook, De Kalb, Du Page, Jo Daviess, Kane, 
Kendall, Lake, Lee, McHenry, Ogle, Stephenson, Will, and Winnebago.

Iowa Counties

    Howard, Kossuth, Mitchell, Winnebago, Winneshiek, and Worth.

Michigan Counties

    Delta, Dickinson, Gogebic, Iron, Menominee, and Ontonagon.

Minnesota

    All counties except Lincoln, Nobles, Pipestone, and Rock.

North Dakota Counties

    Barnes, Cass, Cavalier, Dickey, Grand Forks, Griggs, La Moure, 
Nelson, Pembina, Ramsey, Ransom, Richland, Sargent, Steele, Traill, 
and Walsh.

South Dakota Counties

    Brown, Day, Edmunds, Grant, Marshall, McPherson, Roberts, and 
Walworth.

Wisconsin Counties

    All counties except Crawford and Grant.


Sec. 1030.3  Route disposition.

    See Sec. 1000.3.


Sec. 1030.4  Plant.

    See Sec. 1000.4.


Sec. 1030.5  Distributing plant.

    See Sec. 1000.5.

[[Page 16249]]

Sec. 1030.6  Supply plant.

    See Sec. 1000.6.


Sec. 1030.7  Pool plant.

    Pool plant means a plant, unit of plants, or system of plants as 
specified in paragraphs (a) through (f) of this section, but excluding 
a plant specified in paragraph (h) of this section. The pooling 
standards described in paragraphs (c) and (f) of this section are 
subject to modification pursuant to paragraph (g) of this section:
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or section 7(b) of any 
other Federal milk order, from which during the month 15 percent or 
more of the total quantity of fluid milk products physically received 
at the plant (excluding concentrated milk received from another plant 
by agreement for other than Class I use) are disposed of as route 
disposition or are transferred in the form of packaged fluid milk 
products to other distributing plants. At least 25 percent of such 
route disposition and transfers must be to outlets in the marketing 
area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 15 percent of the total quantity of 
fluid milk products physically received at the plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) into ultra-pasteurized or aseptically-processed fluid 
milk products.
    (c) A supply plant from which the quantity of bulk fluid milk 
products shipped to (and physically unloaded into) plants described in 
paragraph (c)(1) of this section is not less than 10 percent of the 
Grade A milk received from dairy farmers (except dairy farmers 
described in Sec. 1030.12(b)) and handlers described in Sec. 1000.9(c), 
including milk diverted pursuant to Sec. 1030.13, subject to the 
following conditions:
    (1) Qualifying shipments may be made to plants described in 
paragraphs (c)(1)(i) through (iv) of this section, except that whenever 
shipping requirements are increased pursuant to paragraph (g) of this 
section, only shipments to pool plants described in paragraphs (a), 
(b), and (e) of this section shall count as qualifying shipments for 
the purpose of meeting the increased shipments:
    (i) Pool plants described in Sec. 1030.7(a), (b) and (e);
    (ii) Plants of producer-handlers;
    (iii) Partially regulated distributing plants, except that credit 
for such shipments shall be limited to the amount of such milk 
classified as Class I at the transferee plant; and
    (iv) Distributing plants fully regulated under other Federal 
orders, except that credit for shipments to such plants shall be 
limited to the quantity shipped to pool distributing plants during the 
month and credits for shipments to other order plants shall not include 
any such shipments made on the basis of agreed-upon Class II, Class 
III, or Class IV utilization.
    (2) The operator of a supply plant may include as qualifying 
shipments under this paragraph milk delivered directly from producers' 
farms pursuant to Secs. 1000.9(c) or 1030.13(c) to plants described in 
paragraphs (a), (b), and (e) of this section.
    (3) Concentrated milk transferred from the supply plant to a 
distributing plant for an agreed-upon use other than Class I shall be 
excluded from the supply plant's shipments in computing the supply 
plant's shipping percentage.
    (d) [Reserved]
    (e) Two or more plants operated by the same handler and located in 
the marketing area may qualify for pool status as a unit by meeting the 
total and in-area route disposition requirements of a pool distributing 
plant specified in paragraph (a) of this section and subject to the 
following additional requirements:
    (1) At least one of the plants in the unit must qualify as a pool 
plant pursuant to paragraph (a) of this section;
    (2) Other plants in the unit must process Class I or Class II 
products, using 50 percent or more of the total Grade A fluid milk 
products received in bulk form at such plant or diverted therefrom by 
the plant operator in Class I or Class II products; and
    (3) The operator of the unit has filed a written request with the 
market administrator prior to the first day of the month for which such 
status is desired to be effective. The unit shall continue from month-
to-month thereafter without further notification. The handler shall 
notify the market administrator in writing prior to the first day of 
any month for which termination or any change of the unit is desired.
    (f) A system of 2 or more supply plants operated by one or more 
handlers may qualify for pooling by meeting the shipping requirements 
of paragraph (c) of this section in the same manner as a single plant 
subject to the following additional requirements:
    (1) Each plant in the system is located within the marketing area 
or was a pool supply plant pursuant to Sec. 1030.7(c) for each of the 3 
months immediately preceding the effective date of this paragraph so 
long as it continues to maintain pool status. Cooperative associations 
may not use shipments pursuant to Sec. 1000.9(c) to qualify plants 
located outside the marketing area;
    (2) The handler(s) establishing the system submits a written 
request to the market administrator on or before July 15 requesting 
that such plants qualify as a system for the period of August through 
July of the following year. Such request will contain a list of the 
plants participating in the system in the order, beginning with the 
last plant, in which the plants will be dropped from the system if the 
system fails to qualify. Each plant that qualifies as a pool plant 
within a system shall continue each month as a plant in the system 
through the following July unless the handler(s) establishing the 
system submits a written request to the market administrator that the 
plant be deleted from the system or that the system be discontinued. 
Any plant that has been so deleted from a system, or that has failed to 
qualify in any month, will not be part of any system for the remaining 
months through July. The handler(s) that established a system may add a 
plant operated by such handler(s) to a system if such plant has been a 
pool plant each of the 6 prior months and would otherwise be eligible 
to be in a system, upon written request to the market administrator no 
later than the 15th day of the prior month. In the event of an 
ownership change or the business failure of a handler that is a 
participant in a system, the system may be reorganized to reflect such 
changes if a written request to file a new marketing agreement is 
submitted to the market administrator; and
    (3) If a system fails to qualify under the requirements of this 
paragraph, the handler responsible for qualifying the system shall 
notify the market administrator which plant or plants will be deleted 
from the system so that the remaining plants may be pooled as a system. 
If the handler fails to do so, the market administrator shall exclude 
one or more plants, beginning at the bottom of the list of plants in 
the system and continuing up the list as necessary until the deliveries 
are sufficient to qualify the remaining plants in the system.
    (g) The applicable shipping percentages of paragraphs (c) and (f) 
of this section and the diversion limits described in 
Sec. 1030.13(d)(2) may be increased or decreased, for all or part of 
the marketing area, by the market administrator if the market 
administrator finds that such adjustment is necessary to encourage 
needed shipments or to prevent uneconomic shipments. Before making such 
a finding, the market administrator shall investigate the need for 
adjustment either on the market administrator's

[[Page 16250]]

own initiative or at the request of interested parties if the request 
is made in writing at least 15 days prior to the month for which the 
requested revision is desired effective. If the investigation shows 
that an adjustment of the shipping percentages might be appropriate, 
the market administrator shall issue a notice stating that an 
adjustment is being considered and invite data, views and arguments. 
Any decision to revise an applicable shipping or diversion percentage 
must be issued in writing at least one day before the effective date.
    (h) The term pool plant shall not apply to the following plants:
    (1) A producer-handler as defined under any Federal order;
    (2) An exempt plant as defined in Sec. 1000.8(e);
    (3) A plant located within the marketing area and qualified 
pursuant to paragraph (a) of this section which meets the pooling 
requirements of another Federal order, and from which more than 50 
percent of its route disposition has been in the other Federal order 
marketing area for 3 consecutive months;
    (4) A plant located outside any Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of another Federal order and has had greater route 
disposition in such other Federal order's marketing area for 3 
consecutive months;
    (5) A plant located in another Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of such other Federal order and does not have a 
majority of its route distribution in this marketing area for 3 
consecutive months or if the plant is required to be regulated under 
such other Federal order without regard to its route disposition in any 
other Federal order marketing area;
    (6) A plant qualified pursuant to paragraph (c) of this section 
which also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under the other Federal order than are made to plants regulated under 
this order, or the plant has automatic pooling status under the other 
Federal order; and
    (7) That portion of a regulated plant designated as a nonpool plant 
that is physically separate and operated separately from the pool 
portion of such plant. The designation of a portion of a regulated 
plant as a nonpool plant must be requested in advance and in writing by 
the handler and must be approved by the market administrator.
    (i) Any plant that qualifies as a pool plant in each of the 
immediately preceding 3 months pursuant to paragraph (a) of this 
section or the shipping percentages in paragraph (c) of this section 
that is unable to meet such performance standards for the current month 
because of unavoidable circumstances determined by the market 
administrator to be beyond the control of the handler operating the 
plant, such as a natural disaster (ice storm, wind storm, flood), fire, 
breakdown of equipment, or work stoppage, shall be considered to have 
met the minimum performance standards during the period of such 
unavoidable circumstances, but such relief shall not be granted for 
more than 2 consecutive months.


Sec. 1030.8  Nonpool plant.

    See Sec. 1000.8.


Sec. 1030.9  Handler.

    See Sec. 1000.9.


Sec. 1030.10  Producer-handler.

    Producer-handler means a person who:
    (a) Operates a dairy farm and a distributing plant from which there 
is route disposition in the marketing during the month;
    (b) Receives fluid milk from own farm production or milk that is 
fully subject to the pricing and pooling provisions of this or any 
other Federal order;
    (c) Receives at its plant or acquires for route disposition no more 
than 150,000 pounds of fluid milk products from handlers fully 
regulated under any Federal order. This limitation shall not apply if 
the producer-handler's own farm production is less than 150,000 pounds 
during the month;
    (d) Disposes of no other source milk as Class I milk except by 
increasing the nonfat milk solids content of the fluid milk products; 
and
    (e) Provides proof satisfactory to the market administrator that 
the care and management of the dairy animals and other resources 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) and the processing 
and packaging operations are the producer-handler's own enterprise and 
at its own risk.


Sec. 1030.11  [Reserved]


Sec. 1030.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec. 1030.13; or
    (2) Received by a handler described in Sec. 1000.9(c).
    (b) Producer shall not include:
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to 
Sec. 1030.13(d);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and that milk is allocated by request to a utilization other than 
Class I; and
    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order.


Sec. 1030.13  Producer milk.

    Producer milk means the skim milk (or the skim equivalent of 
components of skim milk), including nonfat components, and butterfat in 
milk of a producer that is:
    (a) Received by the operator of a pool plant directly from a 
producer or a handler described in Sec. 1000.9(c). All milk received 
pursuant to this paragraph shall be priced at the location of the plant 
where it is first physically received;
    (b) Received by a handler described in Sec. 1000.9(c) in excess of 
the quantity delivered to pool plants;
    (c) Diverted by a pool plant operator to another pool plant. Milk 
so diverted shall be priced at the location of the plant to which 
diverted; or
    (d) Diverted by the operator of a pool plant or a cooperative 
association described in Sec. 1000.9(c) to a nonpool plant, subject to 
the following conditions:
    (1) Milk of a dairy farmer shall not be eligible for diversion 
unless at least one day's production of such dairy farmer is physically 
received as producer milk at a pool plant during the first month the 
dairy farmer is a producer. If a dairy farmer loses producer status 
under this order (except as a result of a temporary loss of Grade A 
approval or as a result of the handler of the dairy farmer's milk 
failing to pool the milk under any order), the dairy farmer's milk 
shall not be eligible for diversion unless at least one day's 
production of the dairy farmer has been physically received as

[[Page 16251]]

producer milk at a pool plant during the first month the dairy farmer 
is re-associated with the market;
    (2) The quantity of milk diverted by a handler described in 
Sec. 1000.9(c) may not exceed 90 percent of the producer milk receipts 
reported by the handler pursuant to Sec. 1030.30(c) provided that not 
less than 10 percent of such receipts are delivered to plants described 
in Sec. 1030.7(c)(1)(i) through (iii). These percentages are subject to 
any adjustments that may be made pursuant to Sec. 1030.7(g); and
    (3) Diverted milk shall be priced at the location of the plant to 
which diverted.


Sec. 1030.14  Other source milk.

    See Sec. 1000.14.


Sec. 1030.15  Fluid milk product.

    See Sec. 1000.15.


Sec. 1030.16  Fluid cream product.

    See Sec. 1000.16.


Sec. 1030.17  [Reserved]


Sec. 1030.18  Cooperative association.

    See Sec. 1000.18.


Sec. 1030.19  Commercial food processing establishment.

    See Sec. 1000.19.

Handler Reports


Sec. 1030.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 9th day 
after the end of the month, in the detail and on the prescribed forms, 
as follows:
    (a) Each handler that operates a pool plant shall report for each 
of its operations the following information:
    (1) Product pounds, pounds of butterfat, pounds of protein, pounds 
of solids-not-fat other than protein (other solids), and the value of 
the somatic cell adjustment pursuant to Sec. 1000.50(p), contained in 
or represented by:
    (i) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec. 1000.9(c); and
    (ii) Receipts of milk from handlers described in Sec. 1000.9(c);
    (2) Product pounds and pounds of butterfat contained in:
    (i) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (ii) Receipts of other source milk; and
    (iii) Inventories at the beginning and end of the month of fluid 
milk products and bulk fluid cream products;
    (3) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph; and
    (4) Such other information with respect to the receipts and 
utilization of skim milk, butterfat, milk protein, other nonfat solids, 
and somatic cell information, as the market administrator may 
prescribe.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. The 
report shall show also the quantity of any reconstituted skim milk in 
route disposition in the marketing area.
    (c) Each handler described in Sec. 1000.9(c) shall report:
    (1) The product pounds, pounds of butterfat, pounds of protein, 
pounds of solids-not-fat other than protein (other solids), and the 
value of the somatic cell adjustment pursuant to Sec. 1000.50(p), 
contained in receipts of milk from producers; and
    (2) The utilization or disposition of such receipts.
    (d) Each handler not specified in paragraphs (a) through (c) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.


Sec. 1030.31  Payroll reports.

    (a) On or before the 22nd day after the end of each month, each 
handler that operates a pool plant pursuant to Sec. 1030.7 and each 
handler described in Sec. 1000.9(c) shall report to the market 
administrator its producer payroll for the month, in the detail 
prescribed by the market administrator, showing for each producer the 
information described in Sec. 1030.73(f).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 1000.76(b) shall report for 
each dairy farmer who would have been a producer if the plant had been 
fully regulated in the same manner as prescribed for reports required 
by paragraph (a) of this section.


Sec. 1030.32  Other reports.

    In addition to the reports required pursuant to Secs. 1030.30 and 
1030.31, each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Classification of Milk


Sec. 1030.40  Classes of utilization.

    See Sec. 1000.40.


Sec. 1030.41  [Reserved]


Sec. 1030.42  Classification of transfers and diversions.

    See Sec. 1000.42.


Sec. 1030.43  General classification rules.

    See Sec. 1000.43.


Sec. 1030.44  Classification of producer milk.

    See Sec. 1000.44.


Sec. 1030.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45.

Class Prices


Sec. 1030.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec. 1000.50.


Sec. 1030.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Cook County, Illinois, which is reported in Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for Cook 
County, Illinois.


Sec. 1030.52  Adjusted Class I differentials.

    See Sec. 1000.52.


Sec. 1030.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec. 1000.53.


Sec. 1030.54  Equivalent price.

    See Sec. 1000.54.


Sec. 1030.55  Transportation credits and assembly credits.

    (a) Each handler operating a pool distributing plant described in 
Sec. 1030.7(a), (b), or (e) that receives bulk milk from another pool 
plant shall receive a transportation credit for such milk computed as 
follows:
    (1) Determine the hundredweight of milk eligible for the credit by 
completing the steps in paragraph (c) of this section;
    (2) Multiply the hundredweight of milk eligible for the credit by 
.28 cents times the number of miles between the transferor plant and 
the transferee plant;
    (3) Subtract the effective Class I price at the transferor plant 
from the effective Class I price at the transferee plant;
    (4) Multiply any positive amount resulting from the subtraction in 
paragraph (a)(3) of this section by the hundredweight of milk eligible 
for the credit; and
    (5) Subtract the amount computed in paragraph (a)(4) of this 
section from the

[[Page 16252]]

amount computed in paragraph (a)(2) of this section. If the amount 
computed in paragraph (a)(4) of this section exceeds the amount 
computed in paragraph (a)(2) of this section, the transportation credit 
shall be zero.
    (b) Each handler operating a pool distributing plant described in 
Sec. 1030.7(a), (b), or (e) that receives milk from dairy farmers, each 
handler that transfers or diverts bulk milk from a pool plant to a pool 
distributing plant, and each handler described in Sec. 1000.9(c) that 
delivers producer milk to a pool distributing plant shall receive an 
assembly credit on the portion of such milk eligible for the credit 
pursuant to paragraph (c) of this section. The credit shall be computed 
by multiplying the hundredweight of milk eligible for the credit by 8 
cents.
    (c) The following procedure shall be used to determine the amount 
of milk eligible for transportation and assembly credits pursuant to 
paragraphs (a) and (b) of this section:
    (1) At each pool distributing plant, determine the aggregate 
quantity of Class I milk, excluding beginning inventory of packaged 
fluid milk products;
    (2) Subtract the quantity of packaged fluid milk products received 
at the pool distributing plant from other pool plants and from nonpool 
plants if such receipts are assigned to Class I;
    (3) Subtract the quantity of bulk milk shipped from the pool 
distributing plant to other plants to the extent that such milk is 
classified as Class I milk;
    (4) Subtract the quantity of bulk milk received at the pool 
distributing plant from other order plants and unregulated supply 
plants that is assigned to Class I pursuant to Secs. 1000.43(d) and 
1000.44; and
    (5) Assign the remaining quantity pro rata to physical receipts 
during the month from:
    (i) Producers;
    (ii) Handlers described in Sec. 1000.9(c); and
    (iii) Other pool plants.
    (d) For purposes of this section, the distances to be computed 
shall be determined by the market administrator using the shortest 
available state and/or Federal highway mileage. Mileage determinations 
are subject to redetermination at all times. In the event a handler 
requests a redetermination of the mileage pertaining to any plant, the 
market administrator shall notify the handler of such redetermination 
within 30 days after the receipt of such request. Any financial 
obligations resulting from a change in mileage shall not be retroactive 
for any periods prior to the redetermination by the market 
administrator.

Producer Price Differential


Sec. 1030.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec. 1000.9(c) with respect to 
milk that was not received at a pool plant by adding the amounts 
computed in paragraphs (a) through (i) of this section and subtracting 
from that total amount the values computed in paragraphs (j) and (k) of 
this section. Unless otherwise specified, the skim milk, butterfat, and 
the combined pounds of skim milk and butterfat referred to in this 
section shall result from the steps set forth in Sec. 1000.44(a), (b), 
and (c), respectively, and the nonfat components of producer milk in 
each class shall be based upon the proportion of such components in 
producer skim milk. Receipts of nonfluid milk products that are 
distributed as labeled reconstituted milk for which payments are made 
to the producer-settlement fund of another Federal order under 
Sec. 1000.76(a)(4) or (d) shall be excluded from pricing under this 
section.
    (a) Class I value.
    (1) Multiply the pounds of skim milk in Class I by the Class I skim 
milk price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class I by the Class I butterfat price.
    (b) Class II value.
    (1) Multiply the pounds of nonfat solids in Class II skim milk by 
the Class II nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class II times the Class II butterfat price.
    (c) Class III value.
    (1) Multiply the pounds of protein in Class III skim milk by the 
protein price;
    (2) Add an amount obtained by multiplying the pounds of other 
solids in Class III skim milk by the other solids price; and
    (3) Add an amount obtained by multiplying the pounds of butterfat 
in Class III by the butterfat price.
    (d) Class IV value.
    (1) Multiply the pounds of nonfat solids in Class IV skim milk by 
the nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class IV by the butterfat price.
    (e) Compute an adjustment for the somatic cell content of producer 
milk by multiplying the values reported pursuant to Sec. 1030.30(a)(1) 
and (c)(1) by the percentage of total producer milk allocated to Class 
II, Class III, and Class IV pursuant to Sec. 1000.44(c);
    (f) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec. 1000.44(a)(11) and the corresponding 
step of Sec. 1000.44(b) by the skim milk prices and butterfat prices 
applicable to each class.
    (g) Multiply the difference between the current month's Class I, 
II, or III price, as the case may be, and the Class IV price for the 
preceding month and by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
    (h) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec. 1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(3)(i) through (vi) 
and the corresponding step of Sec. 1000.44(b), excluding receipts of 
bulk fluid cream products from plants regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants.
    (i) Multiply the difference between the Class I price applicable at 
the location of the nearest unregulated supply plants from which an 
equivalent volume was received and the Class III price by the pounds of 
skim milk and butterfat in receipts of concentrated fluid milk products 
assigned to Class I pursuant to Sec. 1000.43(d) and 
Sec. 1000.44(a)(3)(i) and the corresponding step of Sec. 1000.44(b) and 
the pounds of skim milk and butterfat subtracted from Class I pursuant 
to Sec. 1000.44(a)(8) and the corresponding step of Sec. 1000.44(b), 
excluding such skim milk and butterfat in receipts of fluid milk 
products from an unregulated supply plant to the extent that an 
equivalent amount of skim milk or butterfat disposed of to such plant 
by handlers fully regulated under any Federal milk order is classified 
and priced as Class I milk and is not used as an offset for any other 
payment obligation under any order.
    (j) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of

[[Page 16253]]

nonfluid milk products that are allocated to Class I use pursuant to 
Sec. 1000.43(d).
    (k) Compute the amount of credits applicable pursuant to 
Sec. 1030.55.


Sec. 1030.61  Computation of producer price differential.

    For each month the market administrator shall compute a producer 
price differential per hundredweight. The report of any handler who has 
not made payments required pursuant to Sec. 1030.71 for the preceding 
month shall not be included in the computation of the producer price 
differential, and such handler's report shall not be included in the 
computation for succeeding months until the handler has made full 
payment of outstanding monthly obligations. Subject to the 
aforementioned conditions, the market administrator shall compute the 
producer price differential in the following manner:
    (a) Combine into one total the values computed pursuant to 
Sec. 1030.60 for all handlers required to file reports prescribed in 
Sec. 1030.30;
    (b) Subtract the total values obtained by multiplying each 
handler's total pounds of protein, other solids, and butterfat 
contained in the milk for which an obligation was computed pursuant to 
Sec. 1030.60 by the protein price, the other solids price, and the 
butterfat price, respectively, and the total value of the somatic cell 
adjustment pursuant to Sec. 1030.30(a)(1) and (c)(1);
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 1030.75;
    (d) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (e) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (1) The total hundredweight of producer milk; and
    (2) The total hundredweight for which a value is computed pursuant 
to Sec. 1030.60(i); and
    (f) Subtract not less than 4 cents nor more than 5 cents from the 
price computed pursuant to paragraph (e) of this section. The result 
shall be known as the producer price differential for the month.


Sec. 1030.62  Announcement of producer prices.

    On or before the 13th day after the end of each month, the market 
administrator shall announce publicly the following prices and 
information:
    (a) The producer price differential;
    (b) The protein price;
    (c) The nonfat solids price;
    (d) The other solids price;
    (e) The butterfat price;
    (f) The somatic cell adjustment rate;
    (g) The average butterfat, nonfat solids, protein and other solids 
content of producer milk; and
    (h) The statistical uniform price for milk containing 3.5 percent 
butterfat, computed by combining the Class III price and the producer 
price differential.

Payments for Milk


Sec. 1030.70  Producer-settlement fund.

    See Sec. 1000.70.


Sec. 1030.71  Payments to the producer-settlement fund.

    Each handler shall make payment to the producer-settlement fund in 
a manner that provides receipt of the funds by the market administrator 
no later than the 15th day after the end of the month (except as 
provided in Sec. 1000.90). Payment shall be the amount, if any, by 
which the amount specified in paragraph (a) of this section exceeds the 
amount specified in paragraph (b) of this section:
    (a) The total value of milk to the handler for the month as 
determined pursuant to Sec. 1030.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 1030.75;
    (2) An amount obtained by multiplying the total pounds of protein, 
other solids, and butterfat contained in producer milk by the protein, 
other solids, and butterfat prices respectively;
    (3) The total value of the somatic cell adjustment to producer 
milk; and
    (4) An amount obtained by multiplying the pounds of skim milk and 
butterfat for which a value was computed pursuant to Sec. 1030.60(i) by 
the producer price differential as adjusted pursuant to Sec. 1030.75 
for the location of the plant from which received.


Sec. 1030.72  Payments from the producer-settlement fund.

    No later than the 16th day after the end of each month (except as 
provided in Sec. 1000.90), the market administrator shall pay to each 
handler the amount, if any, by which the amount computed pursuant to 
Sec. 1030.71(b) exceeds the amount computed pursuant to 
Sec. 1030.71(a). If, at such time, the balance in the producer-
settlement fund is insufficient to make all payments pursuant to this 
section, the market administrator shall reduce uniformly such payments 
and shall complete the payments as soon as the funds are available.


Sec. 1030.73  Payments to producers and to cooperative associations.

    (a) Each handler shall pay each producer for producer milk for 
which payment is not made to a cooperative association pursuant to 
paragraph (b) of this section, as follows:
    (1) Partial payment. For each producer who has not discontinued 
shipments as of the date of this partial payment, payment shall be made 
so that it is received by each producer on or before the 26th day of 
the month (except as provided in Sec. 1000.90) for milk received during 
the first 15 days of the month from the producer at not less than the 
lowest announced class price for the preceding month, less proper 
deductions authorized in writing by the producer.
    (2) Final payment. For milk received during the month, payment 
shall be made so that it is received by each producer no later than the 
17th day after the end of the month (except as provided in 
Sec. 1000.90) in an amount equal to not less than the sum of:
    (i) The hundredweight of producer milk received times the producer 
price differential for the month as adjusted pursuant to Sec. 1030.75;
    (ii) The pounds of butterfat received times the butterfat price for 
the month;
    (iii) The pounds of protein received times the protein price for 
the month;
    (iv) The pounds of other solids received times the other solids 
price for the month;
    (v) The hundredweight of milk received times the somatic cell 
adjustment for the month;
    (vi) Less any payment made pursuant to paragraph (a)(1) of this 
section;
    (vii) Less proper deductions authorized in writing by such 
producer, and plus or minus adjustments for errors in previous payments 
to such producer subject to approval by the market administrator; and
    (viii) Less deductions for marketing services pursuant to 
Sec. 1000.86.
    (b) Payments for milk received from cooperative association 
members. On or before the day prior to the dates specified in 
paragraphs (a)(1) and (a)(2) of this section (except as provided in 
Sec. 1000.90), each handler shall pay to a cooperative association for 
milk from producers who market their milk through the cooperative 
association and who have authorized the cooperative to collect such 
payments on their behalf an amount equal to the sum of the individual 
payments otherwise payable for such producer milk pursuant to

[[Page 16254]]

paragraphs (a)(1) and (a)(2) of this section.
    (c) Payment for milk received from cooperative association pool 
plants or from cooperatives as handlers pursuant to Sec. 1000.9(c). On 
or before the day prior to the dates specified in paragraphs (a)(1) and 
(a)(2) of this section (except as provided in Sec. 1000.90), each 
handler who receives fluid milk products at its plant from a 
cooperative association in its capacity as the operator of a pool plant 
or who receives milk from a cooperative association in its capacity as 
a handler pursuant to Sec. 1000.9(c), including the milk of producers 
who are not members of such association and who the market 
administrator determines have authorized the cooperative association to 
collect payment for their milk, shall pay the cooperative for such milk 
as follows:
    (1) For bulk fluid milk products and bulk fluid cream products 
received from a cooperative association in its capacity as the operator 
of a pool plant and for milk received from a cooperative association in 
its capacity as a handler pursuant to Sec. 1000.9(c) during the first 
15 days of the month, at not less than the lowest announced class 
prices per hundredweight for the preceding month;
    (2) For the total quantity of bulk fluid milk products and bulk 
fluid cream products received from a cooperative association in its 
capacity as the operator of a pool plant, at not less than the total 
value of such products received from the association's pool plants, as 
determined by multiplying the respective quantities assigned to each 
class under Sec. 1000.44, as follows:
    (i) The hundredweight of Class I skim milk times the Class I skim 
milk price for the month plus the pounds of Class I butterfat times the 
Class I butterfat price for the month. The Class I price to be used 
shall be that price effective at the location of the receiving plant;
    (ii) The pounds of nonfat solids in Class II skim milk by the Class 
II nonfat solids price;
    (iii) The pounds of butterfat in Class II times the Class II 
butterfat price;
    (iv) The pounds of nonfat solids in Class IV times the nonfat 
solids price;
    (v) The pounds of butterfat in Class III and Class IV milk times 
the butterfat price;
    (vi) The pounds of protein in Class III milk times the protein 
price;
    (vii) The pounds of other solids in Class III milk times the other 
solids price;
    (viii) The hundredweight of Class II, Class III, and Class IV milk 
times the somatic cell adjustment; and
    (ix) Add together the amounts computed in paragraphs (c)(2)(i) 
through (viii) of this section and from that sum deduct any payment 
made pursuant to paragraph (c)(1) of this section; and
    (3) For the total quantity of milk received during the month from a 
cooperative association in its capacity as a handler under 
Sec. 1000.9(c) as follows:
    (i) The hundredweight of producer milk received times the producer 
price differential as adjusted pursuant to Sec. 1030.75;
    (ii) The pounds of butterfat received times the butterfat price for 
the month;
    (iii) The pounds of protein received times the protein price for 
the month;
    (iv) The pounds of other solids received times the other solids 
price for the month;
    (v) The hundredweight of milk received times the somatic cell 
adjustment for the month; and
    (vi) Add together the amounts computed in paragraphs (c)(3)(i) 
through (v) of this section and from that sum deduct any payment made 
pursuant to paragraph (c)(1) of this section.
    (d) If a handler has not received full payment from the market 
administrator pursuant to Sec. 1030.72 by the payment date specified in 
paragraph (a), (b) or (c) of this section, the handler may reduce pro 
rata its payments to producers or to the cooperative association (with 
respect to receipts described in paragraph (b) of this section, 
prorating the underpayment to the volume of milk received from the 
cooperative association in proportion to the total milk received from 
producers by the handler), but not by more than the amount of the 
underpayment. The payments shall be completed on the next scheduled 
payment date after receipt of the balance due from the market 
administrator.
    (e) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer-settlement fund, and in the event that the handler 
subsequently locates and pays the producer or a lawful claimant, or in 
the event that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer-settlement fund to the handler or to the lawful 
claimant, as the case may be.
    (f) In making payments to producers pursuant to this section, each 
handler shall furnish each producer, except a producer whose milk was 
received from a cooperative association handler described in 
Sec. 1000.9(a) or (c), a supporting statement in a form that may be 
retained by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and payroll number of the producer;
    (2) The daily and total pounds, and the month and dates such milk 
was received from that producer;
    (3) The total pounds of butterfat, protein, and other solids 
contained in the producer's milk;
    (4) The somatic cell count of the producer's milk;
    (5) The minimum rate or rates at which payment to the producer is 
required pursuant to this order;
    (6) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (7) The amount, or rate per hundredweight, or rate per pound of 
component, and the nature of each deduction claimed by the handler; and
    (8) The net amount of payment to the producer or cooperative 
association.


Sec. 1030.74  [Reserved]


Sec. 1030.75  Plant location adjustments for producer milk and nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec. 1030.51 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Secs. 1030.73 
and 1000.76.


Sec. 1030.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76.


Sec. 1030.77  Adjustment of accounts.

    See Sec. 1000.77.


Sec. 1030.78  Charges on overdue accounts.

    See Sec. 1000.78.

Administrative Assessment and Marketing Service Deduction


Sec. 1030.85  Assessment for order administration.

    See Sec. 1000.85.


Sec. 1030.86  Deduction for marketing services.

    See Sec. 1000.86.

[[Page 16255]]

PART 1032--MILK IN THE CENTRAL MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1032.1  General provisions.

Definitions

1032.2  Central marketing area.
1032.3  Route disposition.
1032.4  Plant.
1032.5  Distributing plant.
1032.6  Supply plant.
1032.7  Pool plant.
1032.8  Nonpool plant.
1032.9  Handler.
1032.10  Producer-handler.
1032.11  [Reserved]
1032.12  Producer.
1032.13  Producer milk.
1032.14  Other source milk.
1032.15  Fluid milk product.
1032.16  Fluid cream product.
1032.17  [Reserved]
1032.18  Cooperative association.
1032.19  Commercial food processing establishment.

Handler Reports

1032.30  Reports of receipts and utilization.
1032.31  Payroll reports.
1032.32  Other reports.

Classification of Milk

1032.40  Classes of utilization.
1032.41   [Reserved]
1032.42  Classification of transfers and diversions.
1032.43  General classification rules.
1032.44  Classification of producer milk.
1032.45  Market administrator's reports and announcements concerning 
classification.

Class Prices

1032.50  Class prices, component prices, and advanced pricing 
factors.
1032.51  Class I differential and price.
1032.52  Adjusted Class I differentials.
1032.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1032.54  Equivalent price.

Producer Price Differential

1032.60  Handler's value of milk.
1032.61  Computation of producer price differential.
1032.62  Announcement of producer prices.

Payments for Milk

1032.70  Producer-settlement fund.
1032.71  Payments to the producer-settlement fund.
1032.72  Payments from the producer-settlement fund.
1032.73  Payments to producers and to cooperative associations.
1032.74  [Reserved]
1032.75  Plant location adjustments for producer milk and nonpool 
milk.
1032.76  Payments by a handler operating a partially regulated 
distributing plant.
1032.77  Adjustment of accounts.
1032.78  Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1032.85  Assessment for order administration.
1032.86  Deduction for marketing services.

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

Subpart--Order Regulating Handling

General Provisions


Sec. 1032.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to and are hereby made a part of this order. In this part 1032, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

Definitions


Sec. 1032.2  Central marketing area.

    The marketing area means all territory within the bounds of the 
following states and political subdivisions, including all piers, 
docks, and wharves connected therewith and all craft moored thereat, 
and all territory occupied by government (municipal, State, or Federal) 
reservations, installations, institutions, or other similar 
establishments if any part thereof is within any of the listed states 
or political subdivisions:

Colorado Counties

    Adams, Arapahoe, Baca, Bent, Boulder, Chaffee, Clear Creek, 
Cheyenne, Crowley, Custer, Delta, Denver, Douglas, Eagle, El Paso, 
Elbert, Freemont, Garfield, Gilpin, Gunnison, Huerfano, Jefferson, 
Kiowa, Kit Carson, Lake, Larimer, Las Animas, Lincoln, Logan, Mesa, 
Montrose, Morgan, Otero, Park, Phillips, Pitkin, Prowers, Pueblo, 
Sedgwick, Summit, Teller, Washington, Weld, and Yuma.

Illinois Counties

    Adams, Alexander, Bond, Brown, Bureau, Calhoun, Cass, Champaign, 
Christian, Clark, Clay, Clinton, Coles, Crawford, Cumberland, De 
Witt, Douglas, Edgar, Edwards, Effingham, Fayette, Ford, Franklin, 
Fulton, Gallatin, Greene, Grundy, Hamilton, Hancock, Hardin, 
Henderson, Henry, Iroquois, Jackson, Jasper, Jefferson, Jersey, 
Johnson, Kankakee, Knox, La Salle, Lawrence, Livingston, Logan, 
McDonough, McLean, Macon, Macoupin, Madison, Marion, Marshall, 
Mason, Massac, Menard, Mercer, Monroe, Montgomery, Morgan, Moultrie, 
Peoria, Perry, Piatt, Pike, Pope, Pulaski, Putnam, Randolph, 
Richland, Rock Island, Saline, Sangamon, Schuyler, Scott, Shelby, 
St. Clair, Stark, Tazewell, Union, Vermilion, Wabash, Warren, 
Washington, Wayne, White, Whiteside, Williamson, and Woodford.

Iowa Counties

    All Iowa counties except Howard, Kossuth, Mitchell, Winnebago, 
Winneshiek, and Worth.

Kansas

    All of the State of Kansas.

Minnesota Counties

    Lincoln, Nobles, Pipestone, and Rock.

Missouri Counties and Cities

    The counties of Andrew, Atchison, Bates, Buchanan, Caldwell, 
Carroll, Cass, Clay, Clinton, Daviess, De Kalb, Franklin, Gentry, 
Grundy, Harrison, Henry, Hickory, Holt, Jackson, Jefferson, Johnson, 
Lafayette, Lincoln, Livingston, Mercer, Nodaway, Pettis, Platte, 
Putnam, Ray, Saline, Schuyler, St. Charles, St. Clair, Ste. 
Genevieve, St. Louis, Sullivan, Warren, and Worth; and the city of 
St. Louis.

Nebraska Counties

    Adams, Antelope, Boone, Buffalo, Burt, Butler, Cass, Cedar, 
Chase, Clay, Colfax, Cuming, Custer, Dakota, Dawson, Dixon, Dodge, 
Douglas, Dundy, Fillmore, Franklin, Frontier, Furnas, Gage, Gosper, 
Greeley, Hall, Hamilton, Harlan, Hayes, Hitchcock, Howard, 
Jefferson, Johnson, Kearney, Keith, Knox, Lancaster, Lincoln, 
Madison, Merrick, Nance, Nemaha, Nuckolls, Otoe, Pawnee, Perkins, 
Phelps, Pierce, Platte, Polk, Red Willow, Richardson, Saline, Sarpy, 
Saunders, Seward, Sherman, Stanton, Thayer, Thurston, Valley, 
Washington, Wayne, Webster, and York.

Oklahoma

    All of the State of Oklahoma.

South Dakota Counties

    Aurora, Beadle, Bon Homme, Brookings, Clark, Clay, Codington, 
Davison, Deuel, Douglas, Hamlin, Hanson, Hutchinson, Jerauld, 
Kingsbury, Lake, Lincoln, McCook, Miner, Minnehaha, Moody, Sanborn, 
Spink, Turner, Union, and Yankton.

Wisconsin Counties

    Crawford and Grant.


Sec. 1032.3  Route disposition.

    See Sec. 1000.3.


Sec. 1032.4  Plant.

    See Sec. 1000.4.


Sec. 1032.5  Distributing plant.

    See Sec. 1000.5.


Sec. 1032.6  Supply plant.

    See Sec. 1000.6.


Sec. 1032.7  Pool plant.

    Pool plant means a plant, unit of plants, or system of plants as 
specified in paragraphs (a) through (f) of this section, but excluding 
a plant specified in paragraph (h) of this section. The pooling 
standards described in paragraphs (c), (d), and (f) of this section are 
subject to modification pursuant to paragraph (g) of this section:
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or section 7(b) of any 
other Federal milk order, from which during the month 25 percent or 
more of the total quantity of fluid milk products physically received

[[Page 16256]]

at the plant (excluding concentrated milk received from another plant 
by agreement for other than Class I use) are disposed of as route 
disposition or are transferred in the form of packaged fluid milk 
products to other distributing plants. At least 25 percent of such 
route disposition and transfers must be to outlets in the marketing 
area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 25 percent of the total quantity of 
fluid milk products physically received at the plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) into ultra-pasteurized or aseptically-processed fluid 
milk products.
    (c) A supply plant from which the quantity of bulk fluid milk 
products transferred or diverted to plants described in paragraph (a) 
or (b) of this section during each of the months of September through 
November and January is 35 percent or more of the total Grade A milk 
received at the plant from dairy farmers (except dairy farmers 
described in Sec. 1032.12(b)) and handlers described in Sec. 1000.9(c), 
including milk diverted by the plant operator, and 25 percent for all 
other months, subject to the following conditions:
    (1) A supply plant that has qualified as a pool plant during each 
of the immediately preceding months of August through April shall 
continue to so qualify in each of the following months of May through 
July, unless the plant operator files a written request with the market 
administrator that such plant not be a pool plant, such nonpool status 
to be effective the first month following such request and thereafter 
until the plant qualifies as a pool plant on the basis of milk 
shipments;
    (2) A pool plant operator may include as qualifying shipments milk 
diverted to pool distributing plants pursuant to Sec. 1032.13(c);
    (3) Concentrated milk transferred from the supply plant to a 
distributing plant for an agreed-upon use other than Class I shall be 
excluded from the supply plant's shipments in computing the supply 
plant's shipping percentage;
    (4) The operator of a supply plant may include as qualifying 
shipments transfers of fluid milk products to distributing plants 
regulated under any other Federal order, except that credit for such 
transfers shall be limited to the amount of milk, including milk 
shipped directly from producers' farms, delivered to distributing 
plants qualified as pool plants pursuant to paragraphs (a) or (b) of 
this section; and
    (5) No plant may qualify as a pool plant due to a reduction in the 
shipping percentage pursuant to paragraph (g) of this section unless it 
has been a pool supply plant during each of the immediately preceding 3 
months.
    (d) A plant located in the marketing area and operated by a 
cooperative association if, during the month or the immediately 
preceding 12-month period, 35 percent or more of the producer milk of 
members of the association (and any producer milk of nonmembers and 
members of another cooperative association which may be marketed by the 
cooperative association) is physically received in the form of bulk 
fluid milk products (excluding concentrated milk transferred to a 
distributing plant for an agreed-upon use other than Class I) at plants 
specified in paragraph (a) or (b) of this section either directly from 
farms or by transfer from supply plants operated by the cooperative 
association and from plants of the cooperative association for which 
pool plant status has been requested under this paragraph subject to 
the following conditions:
    (1) The plant does not qualify as a pool plant under paragraph (a), 
(b) or (c) of this section or under comparable provisions of another 
Federal order; and
    (2) The plant is approved by a duly constituted regulatory agency 
for the handling of milk approved for fluid consumption in the 
marketing area.
    (e) Two or more plants operated by the same handler and located in 
the marketing area may qualify for pool status as a unit by meeting the 
total and in-area route disposition requirements of a pool distributing 
plant specified in paragraph (a) of this section subject to the 
following additional requirements:
    (1) At least one of the plants in the unit must qualify as a pool 
plant pursuant to paragraph (a) of this section;
    (2) Other plants in the unit must process Class I or Class II 
products, using 50 percent or more of the total Grade A fluid milk 
products received in bulk form at such plant or diverted therefrom by 
the plant operator in Class I or Class II products, and must be located 
in a pricing zone providing the same or a lower Class I price than the 
price applicable at the distributing plant included in the unit 
pursuant to paragraph (e)(1) of this section; and
    (3) The operator of the unit has filed a written request with the 
market administrator prior to the first day of the month for which such 
status is desired to be effective. The unit shall continue from month 
to month thereafter without further notification. The handler shall 
notify the market administrator in writing prior to the first day of 
any month for which termination or any change of the unit is desired.
    (f) A system of supply plants may qualify for pooling if 2 or more 
plants operated by one or more handlers meet the applicable percentage 
requirements of paragraph (c) of this section in the same manner as a 
single plant, subject to the following additional requirements:
    (1) Each plant in the system is located within the marketing area;
    (2) The handler(s) establishing the system submits a written 
request to the market administrator on or before September 1 requesting 
that such plants qualify as a system for the period of September 
through August of the following year. Such request will contain a list 
of the plants participating in the system;
    (3) Each plant included within a pool supply plant system shall 
continue each month as a plant in the system through the following 
August unless the handler(s) establishing the system submits a written 
request to the market administrator that the plant be deleted from the 
system or that the system be discontinued. Any plant that has been so 
deleted from a system, or that has failed to qualify in any month, will 
not be part of any system for the remaining months through August. No 
plant may be added in any subsequent month through the following August 
to a system that qualifies in September; and
    (4) If a system fails to qualify under the requirements of this 
paragraph, the handler responsible for qualifying the system shall 
notify the market administrator which plant or plants will be deleted 
from the system so that the remaining plants may be pooled as a system. 
If the handler fails to do so, the market administrator shall exclude 
one or more plants, beginning at the bottom of the list of plants in 
the system and continuing up the list as necessary until the deliveries 
are sufficient to qualify the remaining plants in the system.
    (g) The applicable shipping percentages of paragraphs (c), (d), and 
(f) of this section may be increased or decreased, for all or part of 
the marketing area, by the market administrator if the market 
administrator finds that such adjustment is necessary to encourage 
needed shipments or to prevent uneconomic shipments. Before making such 
a finding, the market administrator shall investigate the need for 
adjustment either on the market administrator's own initiative or at 
the request of interested parties if the request is made in writing at 
least 15 days prior to the month for which the requested revision is 
desired effective. If the investigation shows that an adjustment of the 
shipping percentages might be

[[Page 16257]]

appropriate, the market administrator shall issue a notice stating that 
an adjustment is being considered and invite data, views and arguments. 
Any decision to revise an applicable shipping percentage must be issued 
in writing at least one day before the effective date.
    (h) The term pool plant shall not apply to the following plants:
    (1) A producer-handler as defined under any Federal order;
    (2) An exempt plant as defined in Sec. 1000.8(e);
    (3) A plant located within the marketing area and qualified 
pursuant to paragraph (a) of this section which meets the pooling 
requirements of another Federal order, and from which more than 50 
percent of its route disposition has been in the other Federal order 
marketing area for 3 consecutive months. On the basis of a written 
application made by the plant operator at least 15 days prior to the 
date for which a determination of the market administrator is to be 
effective, the market administrator may determine that the route 
disposition in the respective marketing areas to be used for purposes 
of this paragraph shall exclude (for a specified period of time) route 
disposition made under limited term contracts to governmental bases and 
institutions;
    (4) A plant located outside any Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of another Federal order and has had greater route 
disposition in such other Federal order's marketing area for 3 
consecutive months;
    (5) A plant located in another Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of such other Federal order and does not have a 
majority of its route distribution in this marketing area for 3 
consecutive months or if the plant is required to be regulated under 
such other Federal order without regard to its route disposition in any 
other Federal order marketing area;
    (6) A plant qualified pursuant to paragraph (c) of this section 
which also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under the other Federal order than are made to plants regulated under 
this order, or the plant has automatic pooling status under the other 
Federal order; and
    (7) That portion of a regulated plant designated as a nonpool plant 
that is physically separate and operated separately from the pool 
portion of such plant. The designation of a portion of a regulated 
plant as a nonpool plant must be requested in advance and in writing by 
the handler and must be approved by the market administrator.


Sec. 1032.8  Nonpool plant.

    See Sec. 1000.8.


Sec. 1032.9  Handler.

    See Sec. 1000.9.


Sec. 1032.10  Producer-handler.

    Producer-handler means a person who:
    (a) Operates a dairy farm and a distributing plant from which there 
is route disposition in the marketing area during the month;
    (b) Receives fluid milk from own farm production or milk that is 
fully subject to the pricing and pooling provisions of this or any 
other Federal order;
    (c) Receives at its plant or acquires for route disposition no more 
than 150,000 pounds of fluid milk products from handlers fully 
regulated under any Federal order. This limitation shall not apply if 
the producer-handler's own farm production is less than 150,000 pounds 
during the month;
    (d) Disposes of no other source milk as Class I milk except by 
increasing the nonfat milk solids content of the fluid milk products; 
and
    (e) Provides proof satisfactory to the market administrator that 
the care and management of the dairy animals and other resources 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) and the processing 
and packaging operations are the producer-handler's own enterprise and 
at its own risk.


Sec. 1032.11  [Reserved]


Sec. 1032.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
(or components of milk) is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec. 1032.13; or
    (2) Received by a handler described in Sec. 1000.9(c).
    (b) Producer shall not include:
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to 
Sec. 1032.13(d);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and that milk is allocated by request to a utilization other than 
Class I; and
    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order.


Sec. 1032.13  Producer milk.

    Producer milk means the skim milk (or the skim equivalent of 
components of skim milk), including nonfat components, and butterfat in 
milk of a producer that is:
    (a) Received by the operator of a pool plant directly from a 
producer or a handler described in Sec. 1000.9(c). All milk received 
pursuant to this paragraph shall be priced at the location of the plant 
where it is first physically received;
    (b) Received by a handler described in Sec. 1000.9(c) in excess of 
the quantity delivered to pool plants;
    (c) Diverted by a pool plant operator to another pool plant. Milk 
so diverted shall be priced at the location of the plant to which 
diverted; or
    (d) Diverted by the operator of a pool plant or a cooperative 
association described in Sec. 1000.9(c) to a nonpool plant, subject to 
the following conditions:
    (1) Milk of a dairy farmer shall not be eligible for diversion 
until at least one day's production of such dairy farmer has been 
physically received as producer milk at a pool plant and the dairy 
farmer has continuously retained producer status since that time. If a 
dairy farmer loses producer status under this order (except as a result 
of a temporary loss of Grade A approval), the dairy farmer's milk shall 
not be eligible for diversion until milk of the dairy farmer has been 
physically received as producer milk at a pool plant;
    (2) Of the quantity of producer milk received during the month 
(including diversions, but excluding the quantity of producer milk 
received from a handler described in Sec. 1000.9(c)) the handler 
diverts to nonpool plants not more than 65 percent during the months of 
September through November and January, and not more than 75 percent 
during the months of February through April and December;
    (3) Diverted milk shall be priced at the location of the plant to 
which diverted;
    (4) Any milk diverted in excess of the limits prescribed in 
paragraph (d)(2) of

[[Page 16258]]

this section shall not be producer milk. If the diverting handler or 
cooperative association fails to designate the dairy farmers' 
deliveries that are not to be producer milk, no milk diverted by the 
handler or cooperative association during the month to a nonpool plant 
shall be producer milk; and
    (5) The applicable diversion limits in paragraph (d)(2) of this 
section may be increased or decreased by the market administrator if 
the market administrator finds that such revision is necessary to 
assure orderly marketing and efficient handling of milk in the 
marketing area. Before making such a finding, the market administrator 
shall investigate the need for the revision either on the market 
administrator's own initiative or at the request of interested persons 
if the request is made in writing at least 15 days prior to the month 
for which the requested revision is desired effective. If the 
investigation shows that a revision might be appropriate, the market 
administrator shall issue a notice stating that the revision is being 
considered and inviting written data, views, and arguments. Any 
decision to revise an applicable percentage must be issued in writing 
at least one day before the effective date.


Sec. 1032.14  Other source milk.

    See Sec. 1000.14.


Sec. 1032.15  Fluid milk product.

    See Sec. 1000.15.


Sec. 1032.16  Fluid cream product.

    See Sec. 1000.16.


Sec. 1032.17  [Reserved]


Sec. 1032.18  Cooperative association.

    See Sec. 1000.18.


Sec. 1032.19  Commercial food processing establishment.

    See Sec. 1000.19.

Handler Reports


Sec. 1032.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 7th day 
after the end of the month, in the detail and on the prescribed forms, 
as follows:
    (a) Each handler that operates a pool plant pursuant to Sec. 1032.7 
shall report for each of its operations the following information:
    (1) Product pounds, pounds of butterfat, pounds of protein, pounds 
of solids-not-fat other than protein (other solids), and the value of 
the somatic cell adjustment pursuant to Sec. 1000.50(p), contained in 
or represented by:
    (i) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec. 1000.9(c); and
    (ii) Receipts of milk from handlers described in Sec. 1000.9(c);
    (2) Product pounds and pounds of butterfat contained in:
    (i) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (ii) Receipts of other source milk; and (iii) Inventories at the 
beginning and end of the month of fluid milk products and bulk fluid 
cream products;
    (3) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph; and
    (4) Such other information with respect to the receipts and 
utilization of skim milk, butterfat, milk protein, other nonfat solids, 
and somatic cell information, as the market administrator may 
prescribe.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. The 
report shall show also the quantity of any reconstituted skim milk in 
route disposition in the marketing area.
    (c) Each handler described in Sec. 1000.9(c) shall report:
    (1) The product pounds, pounds of butterfat, pounds of protein, 
pounds of solids-not-fat other than protein (other solids), and the 
value of the somatic cell adjustment pursuant to Sec. 1000.50(p), 
contained in receipts of milk from producers; and
    (2) The utilization or disposition of such receipts.
    (d) Each handler not specified in paragraphs (a) through (c) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.


Sec. 1032.31  Payroll reports.

    (a) On or before the 20th day after the end of each month, each 
handler that operates a pool plant pursuant to Sec. 1032.7 and each 
handler described in Sec. 1000.9(c) shall report to the market 
administrator its producer payroll for the month, in the detail 
prescribed by the market administrator, showing for each producer the 
information described in Sec. 1032.73(f).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 1000.76(b) shall report for 
each dairy farmer who would have been a producer if the plant had been 
fully regulated in the same manner as prescribed for reports required 
by paragraph (a) of this section.


Sec. 1032.32  Other reports.

    In addition to the reports required pursuant to Secs. 1032.30 and 
1032.31, each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Classification of Milk


Sec. 1032.40  Classes of utilization.

    See Sec. 1000.40.


Sec. 1032.41  [Reserved]


Sec. 1032.42  Classification of transfers and diversions.

    See Sec. 1000.42.


Sec. 1032.43  General classification rules.

    See Sec. 1000.43.


Sec. 1032.44  Classification of producer milk.

    See Sec. 1000.44.


Sec. 1032.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45.

Class Prices


Sec. 1032.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec. 1000.50.


Sec. 1032.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Jackson County, Missouri, which is reported in Sec. 1000.52. The Class 
I price shall be the price computed pursuant to Sec. 1000.50(a) for 
Jackson County, Missouri.


Sec. 1032.52  Adjusted Class I differentials.

    See Sec. 1000.52.


Sec. 1032.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec. 1000.53.


Sec. 1032.54  Equivalent price.

    See Sec. 1000.54.

Producer Price Differential


Sec. 1032.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec. 1000.9(c)

[[Page 16259]]

with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (i) of this section and 
subtracting from that total amount the value computed in paragraph (j) 
of this section. Unless otherwise specified, the skim milk, butterfat, 
and the combined pounds of skim milk and butterfat referred to in this 
section shall result from the steps set forth in Sec. 1000.44(a), (b), 
and (c), respectively, and the nonfat components of producer milk in 
each class shall be based upon the proportion of such components in 
producer skim milk. Receipts of nonfluid milk products that are 
distributed as labeled reconstituted milk for which payments are made 
to the producer-settlement fund of another Federal order under 
Sec. 1000.76(a)(4) or (d) shall be excluded from pricing under this 
section.
    (a) Class I value.
    (1) Multiply the pounds of skim milk in Class I by the Class I skim 
milk price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class I by the Class I butterfat price.
    (b) Class II value.
    (1) Multiply the pounds of nonfat solids in Class II skim milk by 
the Class II nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class II times the Class II butterfat price.
    (c) Class III value.
    (1) Multiply the pounds of protein in Class III skim milk by the 
protein price;
    (2) Add an amount obtained by multiplying the pounds of other 
solids in Class III skim milk by the other solids price; and
    (3) Add an amount obtained by multiplying the pounds of butterfat 
in Class III by the butterfat price.
    (d) Class IV value.
    (1) Multiply the pounds of nonfat solids in Class IV skim milk by 
the nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class IV by the butterfat price.
    (e) Compute an adjustment for the somatic cell content of producer 
milk by multiplying the values reported pursuant to Sec. 1032.30(a)(1) 
and (c)(1) by the percentage of total producer milk allocated to Class 
II, Class III, and Class IV pursuant to Sec. 1000.44(c);
    (f) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec. 1000.44(a)(11) and the corresponding 
step of Sec. 1000.44(b) by the skim milk prices and butterfat prices 
applicable to each class.
    (g) Multiply the difference between the current month's Class I, 
II, or III price, as the case may be, and the Class IV price for the 
preceding month by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
    (h) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec. 1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(3)(i) through (vi) 
and the corresponding step of Sec. 1000.44(b), excluding receipts of 
bulk fluid cream products from a plant regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants.
    (i) Multiply the difference between the Class I price applicable at 
the location of the nearest unregulated supply plants from which an 
equivalent volume was received and the Class III price by the pounds of 
skim milk and butterfat in receipts of concentrated fluid milk products 
assigned to Class I pursuant to Sec. 1000.43(d) and 
Sec. 1000.44(a)(3)(i) and the corresponding step of Sec. 1000.44(b) and 
the pounds of skim milk and butterfat subtracted from Class I pursuant 
to Sec. 1000.44(a)(8) and the corresponding step of Sec. 1000.44(b), 
excluding such skim milk and butterfat in receipts of fluid milk 
products from an unregulated supply plant to the extent that an 
equivalent amount of skim milk or butterfat disposed of to such plant 
by handlers fully regulated under any Federal milk order is classified 
and priced as Class I milk and is not used as an offset for any other 
payment obligation under any order.
    (j) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of nonfluid milk products that are allocated to 
Class I use pursuant to Sec. 1000.43(d).


Sec. 1032.61  Computation of producer price differential.

    For each month the market administrator shall compute a producer 
price differential per hundredweight. The report of any handler who has 
not made payments required pursuant to Sec. 1032.71 for the preceding 
month shall not be included in the computation of the producer price 
differential, and such handler's report shall not be included in the 
computation for succeeding months until the handler has made full 
payment of outstanding monthly obligations. Subject to the 
aforementioned conditions, the market administrator shall compute the 
producer price differential in the following manner:
    (a) Combine into one total the values computed pursuant to 
Sec. 1032.60 for all handlers required to file reports prescribed in 
Sec. 1032.30;
    (b) Subtract the total values obtained by multiplying each 
handler's total pounds of protein, other solids, and butterfat 
contained in the milk for which an obligation was computed pursuant to 
Sec. 1032.60 by the protein price, the other solids price, and the 
butterfat price, respectively, and the total value of the somatic cell 
adjustment pursuant to Sec. 1032.30(a)(1) and (c)(1);
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 1032.75;
    (d) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (e) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (1) The total hundredweight of producer milk; and
    (2) The total hundredweight for which a value is computed pursuant 
to Sec. 1032.60(i); and
    (f) Subtract not less than 4 cents nor more than 5 cents from the 
price computed pursuant to paragraph (e) of this section. The result 
shall be known as the producer price differential for the month.


Sec. 1032.62  Announcement of producer prices.

    On or before the 11th day after the end of each month, the market 
administrator shall announce publicly the following prices and 
information:
    (a) The producer price differential;
    (b) The protein price;
    (c) The nonfat solids price;
    (d) The other solids price;
    (e) The butterfat price;
    (f) The somatic cell adjustment rate;
    (g) The average butterfat, protein, nonfat solids, and other solids 
content of producer milk; and
    (h) The statistical uniform price for milk containing 3.5 percent 
butterfat, computed by combining the Class III price and the producer 
price differential.

Payments for Milk


Sec. 1032.70  Producer-settlement fund.

    See Sec. 1000.70.

[[Page 16260]]

Sec. 1032.71  Payments to the producer-settlement fund.

    Each handler shall make payment to the producer-settlement fund in 
a manner that provides receipt of the funds by the market administrator 
no later than the 14th day after the end of the month (except as 
provided in Sec. 1000.90). Payment shall be the amount, if any, by 
which the amount specified in paragraph (a) of this section exceeds the 
amount specified in paragraph (b) of this section:
    (a) The total value of milk to the handler for the month as 
determined pursuant to Sec. 1032.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 1032.75;
    (2) An amount obtained by multiplying the total pounds of protein, 
other solids, and butterfat contained in producer milk by the protein, 
other solids, and butterfat prices respectively;
    (3) The total value of the somatic cell adjustment to producer 
milk; and
    (4) An amount obtained by multiplying the pounds of skim milk and 
butterfat for which a value was computed pursuant to Sec. 1032.60(i) by 
the producer price differential as adjusted pursuant to Sec. 1032.75 
for the location of the plant from which received.


Sec. 1032.72  Payments from the producer-settlement fund.

    No later than the 15th day after the end of each month (except as 
provided in Sec. 1000.90), the market administrator shall pay to each 
handler the amount, if any, by which the amount computed pursuant to 
Sec. 1032.71(b) exceeds the amount computed pursuant to 
Sec. 1032.71(a). If, at such time, the balance in the producer-
settlement fund is insufficient to make all payments pursuant to this 
section, the market administrator shall reduce uniformly such payments 
and shall complete the payments as soon as the funds are available.


Sec. 1032.73  Payments to producers and to cooperative associations.

    (a) Each handler shall pay each producer for producer milk for 
which payment is not made to a cooperative association pursuant to 
paragraph (b) of this section, as follows:
    (1) Partial payment. For each producer who has not discontinued 
shipments as of the date of this partial payment, payment shall be made 
so that it is received by each producer on or before the 26th day of 
the month (except as provided in Sec. 1000.90) for milk received during 
the first 15 days of the month from the producer at not less than the 
lowest announced class price for the preceding month, less proper 
deductions authorized in writing by the producer.
    (2) Final payment. For milk received during the month, payment 
shall be made so that it is received by each producer no later than the 
17th day after the end of the month (except as provided in 
Sec. 1000.90) in an amount equal to not less than the sum of:
    (i) The hundredweight of producer milk received times the producer 
price differential for the month as adjusted pursuant to Sec. 1032.75;
    (ii) The pounds of butterfat received times the butterfat price for 
the month;
    (iii) The pounds of protein received times the protein price for 
the month;
    (iv) The pounds of other solids received times the other solids 
price for the month;
    (v) The hundredweight of milk received times the somatic cell 
adjustment for the month;
    (vi) Less any payment made pursuant to paragraph (a)(1) of this 
section;
    (vii) Less proper deductions authorized in writing by such producer 
and plus or minus adjustments for errors in previous payments to such 
producer; and
    (viii) Less deductions for marketing services pursuant to 
Sec. 1000.86.
    (b) Payments for milk received from cooperative association 
members. On or before the day prior to the dates specified in 
paragraphs (a)(1) and (a)(2) of this section (except as provided in 
Sec. 1000.90), each handler shall pay to a cooperative association for 
milk from producers who market their milk through the cooperative 
association and who have authorized the cooperative to collect such 
payments on their behalf an amount equal to the sum of the individual 
payments otherwise payable for such producer milk pursuant to 
paragraphs (a)(1) and (a)(2) of this section.
    (c) Payment for milk received from cooperative association pool 
plants or from cooperatives as handlers pursuant to Sec. 1000.9(c). On 
or before the day prior to the dates specified in paragraphs (a)(1) and 
(a)(2) of this section (except as provided in Sec. 1000.90), each 
handler who receives fluid milk products at its plant from a 
cooperative association in its capacity as the operator of a pool plant 
or who receives milk from a cooperative association in its capacity as 
a handler pursuant to Sec. 1000.9(c), including the milk of producers 
who are not members of such association and who the market 
administrator determines have authorized the cooperative association to 
collect payment for their milk, shall pay the cooperative for such milk 
as follows:
    (1) For bulk fluid milk products and bulk fluid cream products 
received from a cooperative association in its capacity as the operator 
of a pool plant and for milk received from a cooperative association in 
its capacity as a handler pursuant to Sec. 1000.9(c) during the first 
15 days of the month, at not less than the lowest announced class 
prices per hundredweight for the preceding month;
    (2) For the total quantity of bulk fluid milk products and bulk 
fluid cream products received from a cooperative association in its 
capacity as the operator of a pool plant, at not less than the total 
value of such products received from the association's pool plants, as 
determined by multiplying the respective quantities assigned to each 
class under Sec. 1000.44 as follows:
    (i) The hundredweight of Class I skim milk times the Class I skim 
milk price for the month plus the pounds of Class I butterfat times the 
Class I butterfat price for the month. The Class I prices to be used 
shall be the prices effective at the location of the receiving plant;
    (ii) The pounds of nonfat solids in Class II skim milk by the Class 
II nonfat solids price;
    (iii) The pounds of butterfat in Class II times the Class II 
butterfat price;
    (iv) The pounds of nonfat solids in Class IV times the nonfat 
solids price;
    (v) The pounds of butterfat in Class III and Class IV milk times 
the butterfat price;
    (vi) The pounds of protein in Class III milk times the protein 
price;
    (vii) The pounds of other solids in Class III milk times the other 
solids price;
    (viii) The hundredweight of Class II, Class III, and Class IV milk 
times the somatic cell adjustment; and
    (ix) Add together the amounts computed in paragraphs (c)(2)(i) 
through (viii) of this section and from that sum deduct any payment 
made pursuant to paragraph (c)(1) of this section; and
    (3) For the total quantity of milk received during the month from a 
cooperative association in its capacity as a handler under 
Sec. 1000.9(c) as follows:
    (i) The hundredweight of producer milk received times the producer 
price differential as adjusted pursuant to Sec. 1032.75;
    (ii) The pounds of butterfat received times the butterfat price for 
the month;
    (iii) The pounds of protein received times the protein price for 
the month;

[[Page 16261]]

    (iv) The pounds of other solids received times the other solids 
price for the month;
    (v) The hundredweight of milk received times the somatic cell 
adjustment for the month; and
    (vi) Add together the amounts computed in paragraphs (c)(3)(i) 
through (v) of this section and from that sum deduct any payment made 
pursuant to paragraph (c)(1) of this section.
    (d) If a handler has not received full payment from the market 
administrator pursuant to Sec. 1032.72 by the payment date specified in 
paragraph (a), (b) or (c) of this section, the handler may reduce pro 
rata its payments to producers or to the cooperative association (with 
respect to receipts described in paragraph (b) of this section, 
prorating the underpayment to the volume of milk received from the 
cooperative association in proportion to the total milk received from 
producers by the handler), but not by more than the amount of the 
underpayment. The payments shall be completed on the next scheduled 
payment date after receipt of the balance due from the market 
administrator.
    (e) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer-settlement fund, and in the event that the handler 
subsequently locates and pays the producer or a lawful claimant, or in 
the event that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer-settlement fund to the handler or to the lawful 
claimant, as the case may be.
    (f) In making payments to producers pursuant to this section, each 
handler shall furnish each producer, except a producer whose milk was 
received from a cooperative association handler described in 
Sec. 1000.9(a) or (c), a supporting statement in a form that may be 
retained by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and payroll number of the producer;
    (2) The daily and total pounds, and the month and dates such milk 
was received from that producer;
    (3) The total pounds of butterfat, protein, and other solids 
contained in the producer's milk;
    (4) The somatic cell count of the producer's milk;
    (5) The minimum rate or rates at which payment to the producer is 
required pursuant to this order;
    (6) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (7) The amount, or rate per hundredweight, or rate per pound of 
component, and the nature of each deduction claimed by the handler; and 
(8) The net amount of payment to the producer or cooperative 
association.


Sec. 1032.74  [Reserved]


Sec. 1032.75  Plant location adjustments for producer milk and nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec. 1032.51 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Secs. 1032.73 
and 1000.76.


Sec. 1032.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76.


Sec. 1032.77  Adjustment of accounts.

    See Sec. 1000.77.


Sec. 1032.78  Charges on overdue accounts.

    See Sec. 1000.78.

Administrative Assessment and Marketing Service Deduction


Sec. 1032.85  Assessment for order administration.

    See Sec. 1000.85.


Sec. 1032.86  Deduction for marketing services.

    See Sec. 1000.86.

PART 1033--MILK IN THE MIDEAST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1033.1  General provisions.

Definitions

1033.2  Mideast marketing area.
1033.3  Route disposition.
1033.4  Plant.
1033.5  Distributing plant.
1033.6  Supply plant.
1033.7  Pool plant.
1033.8  Nonpool plant.
1033.9  Handler.
1033.10  Producer-handler.
1033.11  [Reserved]
1033.12  Producer.
1033.13  Producer milk.
1033.14  Other source milk.
1033.15  Fluid milk product.
1033.16  Fluid cream product.
1033.17  [Reserved]
1033.18  Cooperative association.
1033.19  Commercial food processing establishment.

Handler Reports

1033.30  Reports of receipts and utilization.
1033.31  Payroll reports.
1033.32  Other reports.

Classification of Milk

1033.40  Classes of utilization.
1033.41  [Reserved]
1033.42  Classification of transfers and diversions.
1033.43  General classification rules.
1033.44  Classification of producer milk.
1033.45  Market administrator's reports and announcements concerning 
classification.

Class Prices

1033.50  Class prices, component prices, and advanced pricing 
factors.
1033.51  Class I differential and price.
1033.52  Adjusted Class I differentials.
1033.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1033.54  Equivalent price.

Producer Price Differential

1033.60  Handler's value of milk.
1033.61  Computation of producer price differential.
1033.62  Announcement of producer prices.

Payments for Milk

1033.70  Producer-settlement fund.
1033.71  Payments to the producer-settlement fund.
1033.72  Payments from the producer-settlement fund.
1033.73  Payments to producers and to cooperative associations.
1033.74  [Reserved]
1033.75  Plant location adjustments for producer milk and nonpool 
milk.
1033.76  Payments by a handler operating a partially regulated 
distributing plant.
1033.77  Adjustment of accounts.
1033.78  Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1033.85  Assessment for order administration.
1033.86  Deduction for marketing services.

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

Subpart--Order Regulating Handling

General Provisions


Sec. 1033.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to and are hereby made a part of this order. In this part 1033, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

[[Page 16262]]

Definitions


Sec. 1033.2  Mideast marketing area.

    The marketing area means all territory within the bounds of the 
following states and political subdivisions, including all piers, 
docks, and wharves connected therewith and all craft moored thereat, 
and all territory occupied by government (municipal, State, or Federal) 
reservations, installations, institutions, or other similar 
establishments if any part thereof is within any of the listed states 
or political subdivisions:

Ohio

    The townships of Woodville and Madison in Sandusky County and 
all other counties in Ohio except Erie, Huron, and Ottawa.

Indiana Counties

    Adams, Allen, Bartholomew, Benton, Blackford, Boone, Brown, 
Carroll, Cass, Clay, Clinton, Dearborn, Decatur, De Kalb, Delaware, 
Elkhart, Fayette, Fountain, Franklin, Fulton, Grant, Hamilton, 
Hancock, Hendricks, Henry, Howard, Huntington, Jackson, Jasper, Jay, 
Jefferson, Jennings, Johnson, Kosciusko, Lagrange, Lake, La Porte, 
Lawrence, Madison, Marion, Marshall, Miami, Monroe, Montgomery, 
Morgan, Newton, Noble, Ohio, Owen, Parke, Porter, Pulaski, Putnam, 
Randolph, Ripley, Rush, Shelby, St. Joseph, Starke, Steuben, 
Switzerland, Tippecanoe, Tipton, Union, Vermillion, Vigo, Wabash, 
Warren, Wayne, Wells, White, and Whitley.

Kentucky Counties

    Boone, Boyd, Bracken, Campbell, Floyd, Grant, Greenup, Harrison, 
Johnson, Kenton, Lawrence, Lewis, Magoffin, Martin, Mason, 
Pendleton, Pike, and Robertson.

Michigan Counties

    All counties except Delta, Dickinson, Gogebic, Iron, Menominee, 
and Ontonagon.

Pennsylvania Counties

    Allegheny, Armstrong, Beaver, Butler, Crawford, Erie, Fayette, 
Greene, Lawrence, Mercer, Venango, and Washington.
    In Clarion County only the townships of Ashland, Beaver, 
Licking, Madison, Perry, Piney, Richland, Salem, and Toby.
    All of Westmoreland County except the townships of Cook, 
Donegal, Fairfield, Ligonier, and St. Clair, and the boroughs of 
Bolivar, Donegal, Ligonier, New Florence, and Seward.

West Virginia Counties

    Barbour, Boone, Brooke, Cabell, Calhoun, Doddridge, Fayette, 
Gilmer, Hancock, Harrison, Jackson, Kanawha, Lewis, Lincoln, Logan, 
Marion, Marshall, Mason, Mingo, Monongalia, Ohio, Pleasants, 
Preston, Putnam, Raleigh, Randolph, Ritchie, Roane, Taylor, Tucker, 
Tyler, Upshur, Wayne, Wetzel, Wirt, Wood, and Wyoming.


Sec. 1033.3  Route disposition.

    See Sec. 1000.3.


Sec. 1033.4  Plant.

    See Sec. 1000.4.


Sec. 1033.5  Distributing plant.

    See Sec. 1000.5.


Sec. 1033.6  Supply plant.

    See Sec. 1000.6.


Sec. 1033.7  Pool plant.

    Pool plant means a plant, unit of plants, or a system of plants as 
specified in paragraphs (a) through (f) of this section, but excluding 
a plant specified in paragraph (h) of this section. The pooling 
standards described in paragraphs (c) through (f) of this section are 
subject to modification pursuant to paragraph (g) of this section:
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or section 7(b) of any 
other Federal milk order, from which during the month 30 percent or 
more of the total quantity of fluid milk products physically received 
at the plant (excluding concentrated milk received from another plant 
by agreement for other than Class I use) are disposed of as route 
disposition or are transferred in the form of packaged fluid milk 
products to other distributing plants. At least 25 percent of such 
route disposition and transfers must be to outlets in the marketing 
area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 30 percent of the total quantity of 
fluid milk products physically received at the plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) into ultra-pasteurized or aseptically-processed fluid 
milk products.
    (c) A supply plant from which the quantity of bulk fluid milk 
products shipped to, received at, and physically unloaded into plants 
described in paragraph (a) or (b) of this section as a percent of the 
Grade A milk received at the plant from dairy farmers (except dairy 
farmers described in Sec. 1033.12(b)) and handlers described in 
Sec. 1033.9(c), as reported in Sec. 1033.30(a), is not less than 30 
percent of the milk received from dairy farmers, including milk 
diverted pursuant to Sec. 1033.13, subject to the following conditions:
    (1) Qualifying shipments pursuant to this paragraph may be made to 
the following plants, except whenever the authority provided in 
paragraph (g) of this section is applied to increase the shipping 
requirements specified in this section, only shipments to pool plants 
described in Sec. 1033.7(a) and (b), shall count as qualifying 
shipments for the purpose of meeting the increased shipments:
    (i) Pool plants described in Sec. 1033.7(a) and (b);
    (ii) Plants of producer-handlers;
    (iii) Partially regulated distributing plants, except that credit 
for such shipments shall be limited to the amount of such milk 
classified as Class I at the transferee plant; and
    (iv) Distributing plants fully regulated under other Federal 
orders, except that credit for transfers to such plants shall be 
limited to the quantity shipped to pool distributing plants during the 
month. Qualifying transfers to other order plants shall not include 
transfers made on the basis of agreed-upon Class II, Class III, or 
Class IV utilization.
    (2) The operator of a supply plant may include deliveries to pool 
distributing plants directly from farms of producers pursuant to 
Sec. 1033.13(c) as up to 90 percent of the supply plant's qualifying 
shipments.
    (3) Concentrated milk transferred from the supply plant to a 
distributing plant for an agreed-upon use other than Class I shall be 
excluded from the supply plant's shipments in computing the supply 
plant's shipping percentage.
    (4) A supply plant that meets the shipping requirements of this 
paragraph during each of the immediately preceding months of September 
through February shall be a pool plant during the following months of 
March through August unless the milk received at the plant fails to 
meet the requirements of a duly constituted regulatory agency, the 
plant fails to meet a shipping requirement instituted pursuant to 
paragraph (g) of this section, or the plant operator requests nonpool 
status for the plant. Such nonpool status shall be effective on the 
first day of the month following the receipt of such request and 
thereafter until the plant again qualifies as a pool plant on the basis 
of its deliveries to a pool distributing plant(s). The automatic pool 
qualification of a plant can be waived if the handler or cooperative 
requests in writing to the market administrator the nonpool status of 
such plant. The request must be made prior to the beginning of any 
month during the March through August period. The plant shall be a 
nonpool plant for such month and thereafter until it requalifies under 
paragraph (c) of this section on the basis of actual shipments 
therefrom. To requalify as a pool plant under paragraph (d), (e) or (f) 
of this section, such plant must first have met the percentage shipping 
requirements of paragraph (c) of this section for 6 consecutive months.

[[Page 16263]]

    (5) A supply plant that does not meet the minimum delivery 
requirements specified in this paragraph to qualify for pool status in 
the current month because a distributing plant to which the supply 
plant delivered its fluid milk products during such month failed to 
qualify as a pool plant pursuant to paragraph (a) or (b) of this 
section shall continue to be a pool plant for the current month if such 
supply plant qualified as a pool plant in the 3 immediately preceding 
months.
    (d) A plant operated by a cooperative association if, during the 
month, 30 percent or more of the producer milk of members of the 
association is delivered to a distributing pool plant(s) or to a 
nonpool plant(s), and classification other than Class I is not 
requested. Deliveries for qualification purposes may be made directly 
from the farm or by transfer from such association's plant, subject to 
the following conditions:
    (1) The cooperative requests pool status for such plant;
    (2) The 30-percent delivery requirement may be met for the current 
month or it may be met on the basis of deliveries during the preceding 
12-month period ending with the current month;
    (3) The plant is approved by a duly constituted regulatory 
authority to handle milk for fluid consumption; and
    (4) The plant does not qualify as a pool plant under paragraph (a), 
(b), or (c) of this section or under the similar provisions of another 
Federal order applicable to a distributing plant or supply plant.
    (e) A plant located inside the marketing area which has been a pool 
plant under this order or its predecessor orders for twelve consecutive 
months, but is not otherwise qualified under this paragraph, if it has 
a marketing agreement with a cooperative association and it fulfills 
the following conditions:
    (1) The aggregate monthly quantity supplied by all parties to such 
an agreement as a percentage of the producer milk receipts included in 
the unit during the month is not less than 35 percent; and
    (2) Shipments for qualification purposes shall include both 
transfers from supply plants to plants described in paragraph (c)(1) of 
this section, and deliveries made direct from the farm to plants 
qualified under paragraph (a) of this section.
    (f) A system of supply plants may qualify for pooling if 2 or more 
plants operated by one or more handlers meet the applicable percentage 
requirements of paragraph (c) of this section in the same manner as a 
single plant subject to the following additional requirements:
    (1) Each plant in the system is located within the marketing area, 
or was a pool supply plant for each of the 3 months immediately 
preceding the effective date of this paragraph so long as it continues 
to maintain pool status. Cooperative associations may not use shipments 
pursuant to Sec. 1033.9(c) to qualify plants located outside the 
marketing area;
    (2) A written notification to the market administrator listing the 
plants to be included in the system and the handler that is responsible 
for meeting the performance requirements of this paragraph under a 
marketing agreement certified to the market administrator by the 
designated handler and any others included in the system, and the 
period during which such consideration shall apply. Such notice, and 
notice of any change in designation, shall be furnished on or before 
the 5th working day following the month to which the notice applies. 
The listed plants included in the system shall also be in the sequence 
in which they shall qualify for pool plant status based on the minimum 
deliveries required. If the deliveries made are insufficient to qualify 
the entire system for pooling, the last listed plant shall be excluded 
from the system, followed by the plant next-to-last on the list, and 
continuing in this sequence until remaining listed plants have met the 
minimum shipping requirements; and
    (3) Each plant that qualifies as a pool plant within a system shall 
continue each month as a plant in the system unless the plant 
subsequently fails to qualify for pooling, or the responsible handler 
submits a written notification to the market administrator prior to the 
first day of the month that the plant is to be deleted from the system, 
or that the system is to be discontinued. In any month of March through 
August, a system shall not contain any plant which was not qualified 
under this paragraph, either individually or as a member of a system, 
during the previous September through February.
    (g) The applicable shipping percentages of paragraphs (c) through 
(f) of this section may be increased or decreased by the market 
administrator if the market administrator finds that such adjustment is 
necessary to encourage needed shipments or to prevent uneconomic 
shipments. Before making such a finding, the market administrator shall 
investigate the need for adjustment either on the market 
administrator's own initiative or at the request of interested parties 
if the request is made in writing at least 15 days prior to the month 
for which the requested revision is desired effective. If the 
investigation shows that an adjustment of the shipping percentages 
might be appropriate, the market administrator shall issue a notice 
stating that an adjustment is being considered and invite data, views 
and arguments. Any decision to revise an applicable shipping percentage 
must be issued in writing at least one day before the effective date.
    (h) The term pool plant shall not apply to the following plants:
    (1) A producer-handler as defined under any Federal order;
    (2) An exempt plant as defined in Sec. 1000.8(e);
    (3) A plant located within the marketing area and qualified 
pursuant to paragraph (a) of this section that meets the pooling 
requirements of another Federal order, and from which more than 50 
percent of its route disposition has been in the other Federal order 
marketing area for 3 consecutive months;
    (4) A plant located outside any Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of another Federal order and has had greater route 
disposition in such other Federal order's marketing area for 3 
consecutive months;
    (5) A plant located in another Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of such other Federal order and does not have a 
majority of its route distribution in this marketing area for 3 
consecutive months or if the plant is required to be regulated under 
such other Federal order without regard to its route disposition in any 
other Federal order marketing area;
    (6) A plant qualified pursuant to paragraph (c) of this section 
that also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under the other Federal order than are made to plants regulated under 
this order, or the plant has automatic pooling status under the other 
Federal order; and
    (7) That portion of a regulated plant designated as a nonpool plant 
that is physically separate and operated separately from the pool 
portion of such plant. The designation of a portion of a regulated 
plant as a nonpool plant must be requested in advance and in writing by 
the handler and must be approved by the market administrator.
    (i) Any plant that qualifies as a pool plant in each of the 
immediately preceding 3 months pursuant to

[[Page 16264]]

paragraph (a) of this section or the shipping percentages in paragraph 
(c) of this section that is unable to meet such performance standards 
for the current month because of unavoidable circumstances determined 
by the market administrator to be beyond the control of the handler 
operating the plant, such as a natural disaster (ice storm, wind storm, 
flood), fire, breakdown of equipment, or work stoppage, shall be 
considered to have met the minimum performance standards during the 
period of such unavoidable circumstances, but such relief shall not be 
granted for more than 2 consecutive months.


Sec. 1033.8  Nonpool plant.

    See Sec. 1000.8.


Sec. 1033.9  Handler.

    See Sec. 1000.9.


Sec. 1033.10  Producer-handler.

    Producer-handler means a person who:
    (a) Operates a dairy farm and a distributing plant from which there 
is route disposition in the marketing area during the month;
    (b) Receives fluid milk from own farm production or that is fully 
subject to the pricing and pooling provisions of this or any other 
Federal order;
    (c) Receives at its plant or acquires for route disposition no more 
than 150,000 pounds of fluid milk products from handlers fully 
regulated under any Federal order. This limitation shall not apply if 
the producer-handler's own farm production is less than 150,000 pounds 
during the month;
    (d) Disposes of no other source milk as Class I milk except by 
increasing the nonfat milk solids content of the fluid milk products; 
and
    (e) Provides proof satisfactory to the market administrator that 
the care and management of the dairy animals and other resources 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) and the processing 
and packaging operations are the producer-handler's own enterprise and 
at its own risk.


Sec. 1033.11  [Reserved]


Sec. 1033.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec. 1033.13; or
    (2) Received by a handler described in Sec. 1033.9(c).
    (b) Producer shall not include:
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to 
Sec. 1033.13(d);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and that milk is allocated by request to a utilization other than 
Class I; and
    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order.


Sec. 1033.13  Producer milk.

    Producer milk means the skim milk (or the skim equivalent of 
components of skim milk), including nonfat components, and butterfat in 
milk of a producer that is:
    (a) Received by the operator of a pool plant directly from a 
producer or a handler described in Sec. 1000.9(c). All milk received 
pursuant to this paragraph shall be priced at the location of the plant 
where it is first physically received;
    (b) Received by a handler described in Sec. 1000.9(c) in excess of 
the quantity delivered to pool plants;
    (c) Diverted by a pool plant operator to another pool plant. Milk 
so diverted shall be priced at the location of the plant to which 
diverted; or
    (d) Diverted by the operator of a pool plant or by a cooperative 
association described in Sec. 1033.9(c) to a nonpool plant, subject to 
the following conditions:
    (1) Milk of a dairy farmer shall not be eligible for diversion 
until milk of such dairy farmer has been physically received as 
producer milk at a pool plant and the dairy farmer has continuously 
retained producer status since that time. If a dairy farmer loses 
producer status under this order (except as a result of a temporary 
loss of Grade A approval), the dairy farmer's milk shall not be 
eligible for diversion until milk of the dairy farmer has been 
physically received as producer milk at a pool plant;
    (2) The equivalent of at least one day's production is caused by 
the handler to be physically received at a pool plant in each of the 
months of September through November;
    (3) Of the total quantity of producer milk received during the 
month (including diversions but excluding the quantity of producer milk 
received from a handler described in Sec. 1000.9(c)), the handler 
diverted to nonpool plants not more than 60 percent during the months 
of September through February;
    (4) Diverted milk shall be priced at the location of the plant to 
which diverted;
    (5) Any milk diverted in excess of the limits set forth in 
paragraph (d)(3) of this section shall not be producer milk. The 
diverting handler shall designate the dairy farmer deliveries that 
shall not be producer milk. If the handler fails to designate the dairy 
farmer deliveries which are ineligible, producer milk status shall be 
forfeited with respect to all milk diverted to nonpool plants by such 
handler; and
    (6) The delivery day requirements and the diversion percentages in 
paragraphs (d)(2) and (d)(3) of this section may be increased or 
decreased by the market administrator if the market administrator finds 
that such revision is necessary to assure orderly marketing and 
efficient handling of milk in the marketing area. Before making such a 
finding, the market administrator shall investigate the need for the 
revision either on the market administrator's own initiative or at the 
request of interested persons if the request is made in writing at 
least 15 days prior to the month for which the requested revision is 
desired effective. If the investigation shows that a revision might be 
appropriate, the market administrator shall issue a notice stating that 
the revision is being considered and inviting written data, views, and 
arguments. Any decision to revise an applicable percentage must be 
issued in writing at least one day before the effective date.


Sec. 1033.14  Other source milk.

    See Sec. 1000.14.


Sec. 1033.15  Fluid milk products.

    See Sec. 1000.15.


Sec. 1033.16  Fluid cream product.

    See Sec. 1000.16.


Sec. 1033.17  [Reserved]


Sec. 1033.18  Cooperative association.

    See Sec. 1000.18.


Sec. 1033.19  Commercial food processing establishment.

    See Sec. 1000.19.

[[Page 16265]]

Handler Reports


Sec. 1033.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 7th day 
after the end of the month, in the detail and on the prescribed forms, 
as follows:
    (a) Each handler that operates a pool plant pursuant to Sec. 1033.7 
shall report for each of its operations the following information:
    (1) Product pounds, pounds of butterfat, pounds of protein, pounds 
of solids-not-fat other than protein (other solids), and the value of 
the somatic cell adjustment pursuant to Sec. 1000.50(p), contained in 
or represented by:
    (i) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec. 1000.9(c); and
    (ii) Receipts of milk from handlers described in Sec. 1000.9(c);
    (2) Product pounds and pounds of butterfat contained in:
    (i) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (ii) Receipts of other source milk; and
    (iii) Inventories at the beginning and end of the month of fluid 
milk products and bulk fluid cream products;
    (3) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph; and
    (4) Such other information with respect to the receipts and 
utilization of skim milk, butterfat, milk protein, other nonfat solids, 
and somatic cell information as the market administrator may prescribe.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. The 
report shall show also the quantity of any reconstituted skim milk in 
route disposition in the marketing area.
    (c) Each handler described in Sec. 1000.9(c) shall report:
    (1) The product pounds, pounds of butterfat, pounds of protein, 
pounds of solids-not-fat other than protein (other solids), and the 
value of the somatic cell adjustment pursuant to Sec. 1000.50(p), 
contained in receipts of milk from producers; and
    (2) The utilization or disposition of such receipts.
    (d) Each handler not specified in paragraphs (a) through (c) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.


Sec. 1033.31  Payroll reports.

    (a) On or before the 22nd day after the end of each month, each 
handler that operates a pool plant pursuant to Sec. 1033.7 and each 
handler described in Sec. 1000.9(c) shall report to the market 
administrator its producer payroll for the month, in the detail 
prescribed by the market administrator, showing for each producer the 
information described in Sec. 1033.73(e).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 1000.76(b) shall report for 
each dairy farmer who would have been a producer if the plant had been 
fully regulated in the same manner as prescribed for reports required 
by paragraph (a) of this section.


Sec. 1033.32  Other reports.

    In addition to the reports required pursuant to Secs. 1033.30 and 
1033.31, each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Classification of Milk


Sec. 1033.40  Classes of utilization.

    See Sec. 1000.40.


Sec. 1033.41  [Reserved]


Sec. 1033.42  Classification of transfers and diversions.

    See Sec. 1000.42.


Sec. 1033.43  General classification rules.

    See Sec. 1000.43.


Sec. 1033.44  Classification of producer milk.

    See Sec. 1000.44.


Sec. 1033.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45.

Class Prices


Sec. 1033.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec. 1000.50.


Sec. 1033.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Cuyahoga County, Ohio which is reported in Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for 
Cuyahoga County, Ohio.


Sec. 1033.52  Adjusted Class I differentials.

    See Sec. 1000.52.


Sec. 1033.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec. 1000.53.


Sec. 1033.54  Equivalent price.

    See Sec. 1000.54.

Producer Price Differential


Sec. 1033.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec. 1000.9(c) with respect to 
milk that was not received at a pool plant by adding the amounts 
computed in paragraphs (a) through (i) of this section and subtracting 
from that total amount the value computed in paragraph (j) of this 
section. Unless otherwise specified, the skim milk, butterfat, and the 
combined pounds of skim milk and butterfat referred to in this section 
shall result from the steps set forth in Sec. 1000.44(a), (b), and (c), 
respectively, and the nonfat components of producer milk in each class 
shall be based upon the proportion of such components in producer skim 
milk. Receipts of nonfluid milk products that are distributed as 
labeled reconstituted milk for which payments are made to the producer-
settlement fund of another Federal order under Sec. 1000.76(a)(4) or 
(d) shall be excluded from pricing under this section.
    (a) Class I value.
    (1) Multiply the pounds of skim milk in Class I by the Class I skim 
milk price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class I by the Class I butterfat price.
    (b) Class II value.
    (1) Multiply the pounds of nonfat solids in Class II skim milk by 
the Class II nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class II times the Class II butterfat price.
    (c) Class III value.
    (1) Multiply the pounds of protein in Class III skim milk by the 
protein price;
    (2) Add an amount obtained by multiplying the pounds of other 
solids in Class III skim milk by the other solids price; and
    (3) Add an amount obtained by multiplying the pounds of butterfat 
in Class III by the butterfat price.
    (d) Class IV value.
    (1) Multiply the pounds of nonfat solids in Class IV skim milk by 
the nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class IV by the butterfat price.

[[Page 16266]]

    (e) Compute an adjustment for the somatic cell content of producer 
milk by multiplying the values reported pursuant to Sec. 1033.30(a)(1) 
and (c)(1) by the percentage of total producer milk allocated to Class 
II, Class III, and Class IV pursuant to Sec. 1000.44(c);
    (f) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec. 1000.44(a)(11) and the corresponding 
step of Sec. 1000.44(b) by the skim milk prices and butterfat prices 
applicable to each class.
    (g) Multiply the difference between the current month's Class I, 
II, or III price, as the case may be, and the Class IV price for the 
preceding month by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
    (h) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec. 1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(3)(i) through (vi) 
and the corresponding step of Sec. 1000.44(b), excluding receipts of 
bulk fluid cream products from a plant regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants.
    (i) Multiply the difference between the Class I price applicable at 
the location of the nearest unregulated supply plants from which an 
equivalent volume was received and the Class III price by the pounds of 
skim milk and butterfat in receipts of concentrated fluid milk products 
assigned to Class I pursuant to Sec. 1000.43(d) and 
Sec. 1000.44(a)(3)(i) and the corresponding step of Sec. 1000.44(b) and 
the pounds of skim milk and butterfat subtracted from Class I pursuant 
to Sec. 1000.44(a)(8) and the corresponding step of Sec. 1000.44(b), 
excluding such skim milk and butterfat in receipts of fluid milk 
products from an unregulated supply plant to the extent that an 
equivalent amount of skim milk or butterfat disposed of to such plant 
by handlers fully regulated under any Federal milk order is classified 
and priced as Class I milk and is not used as an offset for any other 
payment obligation under any order.
    (j) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of nonfluid milk products that are allocated to 
Class I use pursuant to Sec. 1000.43(d).


Sec. 1033.61  Computation of producer price differential.

    For each month the market administrator shall compute a producer 
price differential per hundredweight. The report of any handler who has 
not made payments required pursuant to Sec. 1033.71 for the preceding 
month shall not be included in the computation of the producer price 
differential, and such handler's report shall not be included in the 
computation for succeeding months until the handler has made full 
payment of outstanding monthly obligations. Subject to the 
aforementioned conditions, the market administrator shall compute the 
producer price differential in the following manner:
    (a) Combine into one total the values computed pursuant to 
Sec. 1033.60 for all handlers required to file reports prescribed in 
Sec. 1033.30;
    (b) Subtract the total values obtained by multiplying each 
handler's total pounds of protein, other solids, and butterfat 
contained in the milk for which an obligation was computed pursuant to 
Sec. 1033.60 by the protein price, the other solids price, and the 
butterfat price, respectively, and the total value of the somatic cell 
adjustment pursuant to Sec. 1033.30(a)(1) and (c)(1);
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 1033.75;
    (d) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (e) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (1) The total hundredweight of producer milk; and
    (2) The total hundredweight for which a value is computed pursuant 
to Sec. 1033.60(i); and
    (f) Subtract not less than 4 cents nor more than 5 cents from the 
price computed pursuant to paragraph (e) of this section. The result 
shall be known as the producer price differential for the month.


Sec. 1033.62  Announcement of producer prices.

    On or before the 13th day after the end of each month, the market 
administrator shall announce publicly the following prices and 
information:
    (a) The producer price differential;
    (b) The protein price;
    (c) The nonfat solids price;
    (d) The other solids price;
    (e) The butterfat price;
    (f) The somatic cell adjustment rate;
    (g) The average butterfat, protein, nonfat solids, and other solids 
content of producer milk; and
    (h) The statistical uniform price for milk containing 3.5 percent 
butterfat, computed by combining the Class III price and the producer 
price differential.

Payments for Milk


Sec. 1033.70  Producer-settlement fund.

    See Sec. 1000.70.


Sec. 1033.71  Payments to the producer-settlement fund.

    Each handler shall make payment to the producer-settlement fund in 
a manner that provides receipt of the funds by the market administrator 
no later than the 15th day after the end of the month (except as 
provided in Sec. 1000.90). Payment shall be the amount, if any, by 
which the amount specified in paragraph (a) of this section exceeds the 
amount specified in paragraph (b) of this section:
    (a) The total value of milk to the handler for the month as 
determined pursuant to Sec. 1033.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 1033.75;
    (2) An amount obtained by multiplying the total pounds of protein, 
other solids, and butterfat contained in producer milk by the protein, 
other solids, and butterfat prices, respectively;
    (3) The total value of the somatic cell adjustment to producer 
milk; and
    (4) An amount obtained by multiplying the pounds of skim milk and 
butterfat for which a value was computed pursuant to Sec. 1033.60(i) by 
the producer price differential as adjusted pursuant to Sec. 1033.75 
for the location of the plant from which received.


Sec. 1033.72  Payments from the producer-settlement fund.

    No later than the 16th day after the end of each month (except as 
provided in Sec. 1000.90), the market administrator shall pay to each 
handler the amount, if any, by which the amount computed pursuant to 
Sec. 1033.71(b) exceeds the amount computed pursuant to 
Sec. 1033.71(a). If, at such time, the balance in the producer-
settlement fund is insufficient to make all payments pursuant to this 
section, the market administrator shall reduce uniformly

[[Page 16267]]

such payments and shall complete the payments as soon as the funds are 
available.


Sec. 1033.73  Payments to producers and to cooperative associations.

    (a) Each handler shall pay each producer for producer milk for 
which payment is not made to a cooperative association pursuant to 
paragraph (b) of this section, as follows:
    (1) Partial payment. For each producer who has not discontinued 
shipments as of the date of this partial payment, payment shall be made 
so that it is received by each producer on or before the 26th day of 
the month (except as provided in Sec. 1000.90) for milk received during 
the first 15 days of the month from the producer at not less than the 
lowest announced class price for the preceding month, less proper 
deductions authorized in writing by the producer.
    (2) Final payment. For milk received during the month, payment 
shall be made so that it is received by each producer no later than the 
17th day after the end of the month (except as provided in 
Sec. 1000.90) in an amount equal to not less than the sum of:
    (i) The hundredweight of producer milk received times the producer 
price differential for the month as adjusted pursuant to Sec. 1033.75;
    (ii) The pounds of butterfat received times the butterfat price for 
the month;
    (iii) The pounds of protein received times the protein price for 
the month;
    (iv) The pounds of other solids received times the other solids 
price for the month;
    (v) The hundredweight of milk received times the somatic cell 
adjustment for the month;
    (vi) Less any payment made pursuant to paragraph (a)(1) of this 
section;
    (vii) Less proper deductions authorized in writing by such producer 
and plus or minus adjustments for errors in previous payments to such 
producer; and
    (viii) Less deductions for marketing services pursuant to 
Sec. 1000.86.
    (b) Payments for milk received from cooperative associations. On or 
before the day prior to the dates specified in paragraphs (a)(1) and 
(a)(2) of this section (except as provided in Sec. 1000.90), each 
handler shall pay to a cooperative association for milk received as 
follows:
    (1) Partial payment to a cooperative association. For bulk fluid 
milk/skimmed milk received during the first 15 days of the month from a 
cooperative association in any capacity, except as the operator of a 
pool plant, the partial payment shall be equal to the hundredweight of 
milk received multiplied by the lowest announced class price for the 
preceding month.
    (2) Partial payment to a cooperative association for milk 
transferred from its pool plant. For bulk fluid milk/skimmed milk 
products received during the first 15 days of the month from a 
cooperative association in its capacity as the operator of a pool 
plant, the partial payment shall be at the pool plant operator's 
estimated use value of the milk using the most recent class prices 
available at the receiving plant's location.
    (3) Final payment to a cooperative association for milk transferred 
from its pool plant. Following the classification of bulk fluid milk 
products and bulk fluid cream products received during the month from a 
cooperative association in its capacity as the operator of a pool 
plant, the final payment for such receipts shall be determined as 
follows:
    (i) The hundredweight of Class I skim milk times the Class I skim 
milk price for the month plus the pounds of Class I butterfat times the 
Class I butterfat price for the month. The Class I prices to be used 
shall be the prices effective at the location of the receiving plant;
    (ii) The pounds of nonfat solids in Class II skim milk by the Class 
II nonfat solids price;
    (iii) The pounds of butterfat in Class II times the Class II 
butterfat price;
    (iv) The pounds of nonfat solids in Class IV times the nonfat 
solids price;
    (v) The pounds of butterfat in Class III and Class IV milk times 
the butterfat price;
    (vi) The pounds of protein in Class III milk times the protein 
price;
    (vii) The pounds of other solids in Class III milk times the other 
solids price;
    (viii) The hundredweight of Class II, Class III, and Class IV milk 
times the somatic cell adjustment; and
    (ix) Add together the amounts computed in paragraphs (b)(3)(i) 
through (viii) of this section and from that sum deduct any payment 
made pursuant to paragraph (b)(2) of this section; and
    (4) Final payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk received from a 
cooperative association during the month, including the milk of 
producers who are not members of such association and who the market 
administrator determines have authorized the cooperative association to 
collect payment for their milk, the final payment for such milk shall 
be an amount equal to the sum of the individual payments otherwise 
payable for such milk pursuant to paragraph (a)(2) of this section.
    (c) If a handler has not received full payment from the market 
administrator pursuant to Sec. 1033.72 by the payment date specified in 
paragraph (a) or (b) of this section, the handler may reduce payments 
pursuant to paragraphs (a) and (b) of this section, but not by more 
than the amount of the underpayment. The payments shall be completed on 
the next scheduled payment date after receipt of the balance due from 
the market administrator.
    (d) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer-settlement fund, and in the event that the handler 
subsequently locates and pays the producer or a lawful claimant, or in 
the event that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer-settlement fund to the handler or to the lawful 
claimant, as the case may be.
    (e) In making payments to producers pursuant to this section, each 
handler shall furnish each producer, except a producer whose milk was 
received from a cooperative association handler described in 
Sec. 1000.9(a) or (c), a supporting statement in a form that may be 
retained by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and payroll number of the producer;
    (2) The daily and total pounds, and the month and dates such milk 
was received from that producer;
    (3) The total pounds of butterfat, protein, and other solids 
contained in the producer's milk;
    (4) The somatic cell count of the producer's milk;
    (5) The minimum rate or rates at which payment to the producer is 
required pursuant to this order;
    (6) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (7) The amount, or rate per hundredweight, or rate per pound of 
component, and the nature of each deduction claimed by the handler; and
    (8) The net amount of payment to the producer or cooperative 
association.

[[Page 16268]]

Sec. 1033.74  [Reserved]


Sec. 1033.75  Plant location adjustments for producer milk and nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec. 1033.51 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Secs. 1033.73 
and 1000.76.


Sec. 1033.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76.


Sec. 1033.77  Adjustment of accounts.

    See Sec. 1000.77.


Sec. 1033.78  Charges on overdue accounts.

    See Sec. 1000.78.

Administrative Assessment and Marketing Service Deduction


Sec. 1033.85  Assessment for order administration.

    See Sec. 1000.85.


Sec. 1033.86  Deduction for marketing services.

    See Sec. 1000.86.

PART 1124--MILK IN THE PACIFIC NORTHWEST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1124.1  General provisions.

Definitions

1124.2  Pacific Northwest marketing area.
1124.3  Route disposition.
1124.4  Plant.
1124.5  Distributing plant.
1124.6  Supply plant.
1124.7  Pool plant.
1124.8  Nonpool plant.
1124.9  Handler.
1124.10  Producer-handler.
1124.11  Cooperative reserve supply unit.
1124.12  Producer.
1124.13  Producer milk.
1124.14  Other source milk.
1124.15  Fluid milk product.
1124.16  Fluid cream product.
1124.17  [Reserved]
1124.18  Cooperative association.
1124.19  Commercial food processing establishment.

Handler Reports

1124.30  Reports of receipts and utilization.
1124.31  Payroll reports.
1124.32  Other reports.

Classification of Milk

1124.40  Classes of utilization.
1124.41  [Reserved]
1124.42  Classification of transfers and diversions.
1124.43  General classification rules.
1124.44  Classification of producer milk.
1124.45  Market administrator's reports and announcements concerning 
classification.

Class Prices

1124.50  Class prices, component prices, and advanced pricing 
factors.
1124.51  Class I differential and price.
1124.52  Adjusted Class I differentials.
1124.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1124.54  Equivalent price.

Producer Price Differential

1124.60  Handler's value of milk.
1124.61  Computation of producer price differential.
1124.62  Announcement of producer prices.

Payments for Milk

1124.70  Producer-settlement fund.
1124.71  Payments to the producer-settlement fund.
1124.72  Payments from the producer-settlement fund.
1124.73  Payments to producers and to cooperative associations.
1124.74  [Reserved]
1124.75  Plant location adjustments for producer milk and nonpool 
milk.
1124.76  Payments by a handler operating a partially regulated 
distributing plant.
1124.77  Adjustment of accounts.
1124.78  Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1124.85  Assessment for order administration.
1124.86  Deduction for marketing services.

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

Subpart--Order Regulating Handling

General Provisions


Sec. 1124.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to and are hereby made a part of this order. In this part 1124, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

Definitions


Sec. 1124.2  Pacific Northwest marketing area.

    The marketing area means all territory within the bounds of the 
following states and political subdivisions, including all piers, 
docks, and wharves connected therewith and all craft moored thereat, 
and all territory occupied by government (municipal, State, or Federal) 
reservations, installations, institutions, or other similar 
establishments if any part thereof is within any of the listed states 
or political subdivisions:

Washington

    All of the State of Washington.

Idaho Counties

    Benewah, Bonner, Boundary, Kootenai, Latah, and Shoshone.

Oregon Counties

    Benton, Clackamas, Clatsop, Columbia, Coos, Crook, Curry, 
Deschutes, Douglas, Gilliam, Hood River, Jackson, Jefferson, 
Josephine, Klamath, Lake, Lane, Lincoln, Linn, Marion, Morrow, 
Multnomah, Polk, Sherman, Tillamook, Umatilla, Wasco, Washington, 
Wheeler, and Yamhill.


Sec. 1124.3  Route disposition.

    See Sec. 1000.3.


Sec. 1124.4  Plant.

    See Sec. 1000.4.


Sec. 1124.5  Distributing plant.

    See Sec. 1000.5.


Sec. 1124.6  Supply plant.

    See Sec. 1000.6.


Sec. 1124.7  Pool plant.

    Pool plant means a plant, unit of plants, or a system of plants as 
specified in paragraphs (a) through (f) of this section, but excluding 
a plant specified in paragraph (h) of this section. The pooling 
standards described in paragraph (c) of this section are subject to 
modification pursuant to paragraph (g) of this section:
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or section 7(b) of any 
other Federal milk order, from which during the month 25 percent or 
more of the total quantity of fluid milk products physically received 
at the plant (excluding concentrated milk received from another plant 
by agreement for other than Class I use) are disposed of as route 
disposition or are transferred in the form of packaged fluid milk 
products to other distributing plants. At least 25 percent of such 
route disposition and transfers must be to outlets in the marketing 
area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 25 percent of the total quantity of 
fluid milk products physically received at the plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) into ultra-pasteurized or aseptically-processed fluid 
milk products.
    (c) A supply plant from which during any month not less than 20 
percent of the total quantity of milk that is physically received at 
such plant from dairy farmers eligible to be producers pursuant to 
Sec. 1124.12 (excluding milk received at such plant as diverted milk

[[Page 16269]]

from another plant, which milk is classified other than Class I under 
this order and is subject to the pricing and pooling provisions of this 
or another order issued pursuant to the Act) or diverted as producer 
milk to another plant pursuant to Sec. 1124.13, is shipped in the form 
of a fluid milk product (excluding concentrated milk transferred by 
agreement for other than Class I use) to a pool distributing plant or 
is a route disposition in the marketing area of fluid milk products 
processed and packaged at such plant;
    (1) A supply plant that has qualified as a pool plant during each 
of the immediately preceding months of September through February shall 
continue to so qualify in each of the following months of March through 
August, unless the plant operator files a written request with the 
market administrator that such plant not be a pool plant, such nonpool 
status to be effective the first month following such request and 
thereafter until the plant qualifies as a pool plant on the basis of 
milk shipments;
    (2) A cooperative association that operates a supply plant may 
include as qualifying shipments its deliveries to pool distributing 
plants directly from farms of producers pursuant to Sec. 1000.9(c);
    (3) A pool plant operator may include as qualifying shipments milk 
diverted to pool distributing plants pursuant to Sec. 1124.13(d);
    (4) No plant may qualify as a pool plant due to a reduction in the 
shipping percentage pursuant to paragraph (g) of this section unless it 
has been a pool supply plant during each of the immediately preceding 3 
months.
    (d)--(f) [Reserved]
    (g) The applicable shipping percentage of paragraph (c) of this 
section may be increased or decreased by the market administrator if 
the market administrator finds that such adjustment is necessary to 
encourage needed shipments or to prevent uneconomic shipments. Before 
making such a finding, the market administrator shall investigate the 
need for adjustment either on the market administrator's own initiative 
or at the request of interested parties if the request is made in 
writing at least 15 days prior to the month for which the requested 
revision is desired effective. If the investigation shows that an 
adjustment of the shipping percentages might be appropriate, the market 
administrator shall issue a notice stating that an adjustment is being 
considered and invite data, views and arguments. Any decision to revise 
an applicable shipping percentage must be issued in writing at least 
one day before the effective date.
    (h) The term pool plant shall not apply to the following plants:
    (1) A producer-handler as defined under any Federal order;
    (2) An exempt plant as defined in Sec. 1000.8(e);
    (3) A plant located within the marketing area and qualified 
pursuant to paragraph (a) of this section which meets the pooling 
requirements of another Federal order, and from which more than 50 
percent of its route disposition has been in the other Federal order 
marketing area for 3 consecutive months;
    (4) A plant located outside any Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of another Federal order and has had greater route 
disposition in such other Federal order's marketing area for 3 
consecutive months;
    (5) A plant located in another Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of such other Federal order and does not have a 
majority of its route distribution in this marketing area for 3 
consecutive months or if the plant is required to be regulated under 
such other Federal order without regard to its route disposition in any 
other Federal order marketing area; and
    (6) A plant qualified pursuant to paragraph (c) of this section 
which also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under the other Federal order than are made to plants regulated under 
this order, or the plant has automatic pooling status under the other 
Federal order.


Sec. 1124.8  Nonpool plant.

    See Sec. 1000.8.


Sec. 1124.9  Handler.

    See Sec. 1000.9.


Sec. 1124.10  Producer-handler.

    Producer-handler means a person who operates a dairy farm and a 
distributing plant from which there is route disposition within the 
marketing area during the month and who the market administrator has 
designated a producer-handler after determining that all of the 
requirements of this section have been met.
    (a) Requirements for designation. Designation of any person as a 
producer-handler by the market administrator shall be contingent upon 
meeting the conditions set forth in paragraphs (a)(1) through (4) of 
this section. Following the cancellation of a previous producer-handler 
designation, a person seeking to have his/her producer-handler 
designation reinstated must demonstrate that these conditions have been 
met for the preceding month.
    (1) The care and management of the dairy animals and other 
resources and facilities designated in paragraph (b)(1) of this section 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) are under the 
complete and exclusive control and management of the producer-handler 
and are operated as the producer-handler's own enterprise and at its 
own risk.
    (2) The plant operation designated in paragraph (b)(2) of this 
section at which the producer-handler processes and packages, and from 
which it distributes, its own milk production is under the complete and 
exclusive control and management of the producer-handler and is 
operated as the producer-handler's own enterprise and at its sole risk.
    (3) The producer-handler neither receives at its designated milk 
production resources and facilities nor receives, handles, processes, 
or distributes at or through any of its designated milk handling, 
processing, or distributing resources and facilities other source milk 
products for reconstitution into fluid milk products or fluid milk 
products derived from any source other than:
    (i) Its designated milk production resources and facilities (own 
farm production);
    (ii) Pool handlers and plants regulated under any Federal order 
within the limitation specified in paragraph (c)(2) of this section; or
    (iii) Nonfat milk solids which are used to fortify fluid milk 
products.
    (4) The producer-handler is neither directly nor indirectly 
associated with the business control or management of, nor has a 
financial interest in, another handler's operation; nor is any other 
handler so associated with the producer-handler's operation.
    (b) Designation of resources and facilities. Designation of a 
person as a producer-handler shall include the determination of what 
shall constitute the person's milk production, handling, processing, 
and distribution resources and facilities, all of which shall be 
considered an integrated operation.
    (1) Milk production resources and facilities shall include all 
resources and facilities (milking herd(s), buildings housing such 
herd(s), and the land on which such buildings are located) used for the 
production of milk which are

[[Page 16270]]

directly or indirectly, solely or partially, owned, operated, or 
controlled by the producer-handler, in which the producer-handler in 
any way has an interest, including any contractual arrangement, or 
which are directly, indirectly, or partially owned, operated, or 
controlled by any partner or stockholder of the producer-handler. 
However, for purposes of this paragraph, any such milk production 
resources and facilities which do not constitute an actual or potential 
source of milk supply for the producer-handler's operation shall not be 
considered a part of the producer-handler's milk production resources 
and facilities.
    (2) Milk handling, processing, and distribution resources and 
facilities shall include all resources and facilities (including store 
outlets) used for handling, processing, and distributing fluid milk 
products which are solely or partially owned by, and directly or 
indirectly operated or controlled by, the producer-handler or in which 
the producer-handler in any way has an interest, including any 
contractual arrangement, or over which the producer-handler directly or 
indirectly exercises any degree of management or control.
    (3) All designations shall remain in effect until canceled pursuant 
to paragraph (c) of this section.
    (c) Cancellation. The designation as a producer-handler shall be 
canceled upon determination by the market administrator that any of the 
requirements of paragraphs (a)(1) through (4) of this section are not 
continuing to be met, or under any of the conditions described in 
paragraphs (c)(1) and (2) of this section. Cancellation of a producer-
handler's status pursuant to this paragraph shall be effective on the 
first day of the month following the month in which the requirements 
were not met or the conditions for cancellation occurred.
    (1) Milk from the milk production resources and facilities of the 
producer-handler, designated in paragraph (b)(1) of this section, is 
delivered in the name of another person as producer milk to another 
handler.
    (2) The producer-handler handles fluid milk products derived from 
sources other than the milk production facilities and resources 
designated in paragraph (b)(1) of this section, except that it may 
receive at its plant, or acquire for route disposition, fluid milk 
products from fully regulated plants and handlers under any Federal 
order if such receipts do not exceed 150,000 pounds monthly. This 
limitation shall not apply if the producer-handler's own farm 
production is less than 150,000 pounds during the month.
    (d) Public announcement. The market administrator shall publicly 
announce:
    (1) The name, plant location(s), and farm location(s) of persons 
designated as producer-handlers;
    (2) The names of those persons whose designations have been 
canceled; and
    (3) The effective dates of producer-handler status or loss of 
producer-handler status for each. Such announcements shall be 
controlling with respect to the accounting at plants of other handlers 
for fluid milk products received from any producer-handler.
    (e) Burden of establishing and maintaining producer-handler status. 
The burden rests upon the handler who is designated as a producer-
handler to establish through records required pursuant to Sec. 1000.27 
that the requirements set forth in paragraph (a) of this section have 
been and are continuing to be met, and that the conditions set forth in 
paragraph (c) of this section for cancellation of designation do not 
exist.


Sec. 1124.11  Cooperative reserve supply unit.

    Cooperative reserve supply unit means any cooperative association 
or its agent that is a handler pursuant to Sec. 1000.9(c) that does not 
own or operate a plant, if such cooperative has been qualified to 
receive payments pursuant to Sec. 1124.73 and has been a handler of 
producer milk under this or its predecessor order during each of the 12 
previous months, and if a majority of the cooperative's member 
producers are located within 125 miles of a plant described in 
Sec. 1124.7(a). A cooperative reserve supply unit shall be subject to 
the following conditions:
    (a) The cooperative shall file a request with the market 
administrator for cooperative reserve supply unit status at least 15 
days prior to the first day of the month in which such status is 
desired to be effective. Once qualified as a cooperative reserve supply 
unit pursuant to this paragraph, such status shall continue to be 
effective unless the cooperative requests termination prior to the 
first day of the month that change of status is requested, or the 
cooperative fails to meet all of the conditions of this section.
    (b) The cooperative reserve supply unit supplies fluid milk 
products to pool distributing plants located within 125 miles of a 
majority of the cooperative's member producers in compliance with any 
announcement by the market administrator requesting a minimum level of 
shipments as further provided below:
    (1) The market administrator may require such supplies of bulk 
fluid milk from cooperative reserve supply units whenever the market 
administrator finds that milk supplies for Class I use are needed for 
plants defined in Sec. 1124.7(a) or (b). Before making such a finding, 
the market administrator shall investigate the need for such shipments 
either on the market administrator's own initiative or at the request 
of interested persons if the request is made in writing at least 15 
days prior to the month for which the requested revision is desired 
effective. If the market administrator's investigation shows that such 
shipments might be appropriate, the market administrator shall issue a 
notice stating that a shipping announcement is being considered and 
inviting data, views and arguments with respect to the proposed 
shipping announcement. Any decision on the required shipment of bulk 
fluid milk from cooperative reserve supply units must be made in 
writing at least one day before the effective date.
    (2) Failure of a cooperative reserve supply unit to comply with any 
announced shipping requirements, including making any significant 
change in the unit's marketing operation that the market administrator 
determines has the impact of evading or forcing such an announcement, 
shall result in immediate loss of cooperative reserve supply unit 
status until such time as the unit has been a handler pursuant to 
Sec. 1000.9(c) for at least 12 consecutive months.


Sec. 1124.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
(or components of milk) is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec. 1124.13; or
    (2) Received by a handler described in Sec. 1000.9(c).
    (b) Producer shall not include:
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to 
Sec. 1124.13(e);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and that milk is allocated by request to a utilization other than 
Class I;

[[Page 16271]]

    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order; and
    (5) A dairy farmer whose milk was received at a nonpool plant 
during the month from the same farm as other than producer milk under 
this or any other Federal order. Such a dairy farmer shall be known as 
a dairy farmer for other markets.


Sec. 1124.13  Producer milk.

    Producer milk means the skim milk (or the skim equivalent of 
components of skim milk), including nonfat components, and butterfat in 
milk of a producer that is:
    (a) Received by the operator of a pool plant directly from a 
producer or a handler described in Sec. 1000.9(c). All milk received 
pursuant to this paragraph shall be priced at the location of the plant 
where it is first physically received;
    (b) Received by a cooperative reserve supply unit described in 
Sec. 1124.11. All milk received pursuant to this paragraph shall be 
priced at the location of the plant where it is first physically 
received and shall not be subject to the conditions specified in 
paragraph (e) of this section;
    (c) Received by a handler described in Sec. 1000.9(c) in excess of 
the quantity delivered to pool plants;
    (d) Diverted by a pool plant operator to another pool plant. Milk 
so diverted shall be priced at the location of the plant to which 
diverted; or
    (e) Diverted by the operator of a pool plant or a cooperative 
association described in Sec. 1000.9(c), excluding a cooperative 
reserve supply unit described in Sec. 1124.11, to a nonpool plant, 
subject to the following conditions:
    (1) Of the quantity of producer milk received during the month 
(including diversions, but excluding the quantity of producer milk 
received from a handler described in Sec. 1000.9(c)) the handler 
diverts to nonpool plants not more than 80 percent during the months of 
September through February, and not more than 99 percent during the 
months of March through August;
    (2) Two or more handlers described in Sec. 1000.9(c) may have their 
allowable diversions computed on the basis of their combined deliveries 
of producer milk which they caused to be delivered to pool plants or 
diverted during the month if each has filed a request in writing with 
the market administrator before the first day of the month the 
agreement is to be effective. The request shall specify the basis for 
assigning overdiverted milk to the producer deliveries of each 
according to a method approved by the market administrator.
    (3) Diverted milk shall be priced at the location of the plant to 
which diverted;
    (4) Any milk diverted in excess of the limits prescribed in 
paragraph (e)(1) of this section shall not be producer milk. If the 
diverting handler or cooperative association fails to designate the 
dairy farmers' deliveries that are not to be producer milk, no milk 
diverted by the handler or cooperative association during the month to 
a nonpool plant shall be producer milk. In the event some of the milk 
of any producer is determined not to be producer milk pursuant to this 
paragraph, other milk delivered by such producer as producer milk 
during the month will not be subject to Sec. 1124.12(b)(5); and
    (5) The applicable diversion limits in paragraph (e)(1) of this 
section may be increased or decreased by the market administrator if 
the market administrator finds that such revision is necessary to 
assure orderly marketing and efficient handling of milk in the 
marketing area. Before making such a finding, the market administrator 
shall investigate the need for the revision either on the market 
administrator's own initiative or at the request of interested persons 
if the request is made at least 15 days prior to the month for which 
the requested revision is desired effective. If the investigation shows 
that a revision might be appropriate, the market administrator shall 
issue a notice stating that the revision is being considered and 
inviting written data, views, and arguments. Any decision to revise an 
applicable percentage must be issued in writing at least one day before 
the effective date.


Sec. 1124.14  Other source milk.

    See Sec. 1000.14.


Sec. 1124.15  Fluid milk product.

    See Sec. 1000.15.


Sec. 1124.16  Fluid cream product.

    See Sec. 1000.16.


Sec. 1124.17  [Reserved]


Sec. 1124.18  Cooperative association.

    See Sec. 1000.18.


Sec. 1124.19  Commercial food processing establishment.

    See Sec. 1000.19.

Handler Reports


Sec. 1124.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 9th day 
after the end of the month, in the detail and on the prescribed forms, 
as follows:
    (a) Each handler that operates a pool plant pursuant to Sec. 1124.7 
shall report for each of its operations the following information:
    (1) Product pounds, pounds of butterfat, pounds of protein, and 
pounds of solids-not-fat other than protein (other solids) contained in 
or represented by:
    (i) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec. 1000.9(c); and
    (ii) Receipts of milk from handlers described in Sec. 1000.9(c);
    (2) Product pounds and pounds of butterfat contained in:
    (i) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (ii) Receipts of other source milk; and
    (iii) Inventories at the beginning and end of the month of fluid 
milk products and bulk fluid cream products;
    (3) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph; and
    (4) Such other information with respect to the receipts and 
utilization of skim milk, butterfat, milk protein, and other nonfat 
solids, as the market administrator may prescribe.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. The 
report shall show also the quantity of any reconstituted skim milk in 
route disposition in the marketing area.
    (c) Each handler described in Sec. 1000.9(c) shall report:
    (1) The product pounds, pounds of butterfat, pounds of protein, and 
the pounds of solids-not-fat other than protein (other solids) 
contained in receipts of milk from producers; and
    (2) The utilization or disposition of such receipts.
    (d) Each handler not specified in paragraphs (a) through (c) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.

[[Page 16272]]

Sec. 1124.31  Payroll reports.

    (a) On or before the 20th day after the end of each month, each 
handler that operates a pool plant pursuant to Sec. 1124.7 and each 
handler described in Sec. 1000.9(c) shall report to the market 
administrator its producer payroll for the month, in the detail 
prescribed by the market administrator, showing for each producer the 
information described in Sec. 1124.73(f).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 1000.76(b) shall report for 
each dairy farmer who would have been a producer if the plant had been 
fully regulated in the same manner as prescribed for reports required 
by paragraph (a) of this section.


Sec. 1124.32  Other reports.

    In addition to the reports required pursuant to Secs. 1124.30 and 
1124.31, each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Classification of Milk


Sec. 1124.40  Classes of utilization.

    See Sec. 1000.40.


Sec. 1124.41  [Reserved]


Sec. 1124.42  Classification of transfers and diversions.

    See Sec. 1000.42.


Sec. 1124.43  General classification rules.

    See Sec. 1000.43.


Sec. 1124.44  Classification of producer milk.

    In addition to the provisions provided in Sec. 1000.44, the words 
``, or acquired for distribution,'' are inserted following the word 
``received'' in Sec. 1000.44(a)(3)(iv).


Sec. 1124.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45.

Class Prices


Sec. 1124.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec. 1000.50.


Sec. 1124.51  Class I differential and price.

    The Class I differential shall be the differential established for 
King County, Washington, which is reported in Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for King 
County, Washington.


Sec. 1124.52  Adjusted Class I differentials.

    See Sec. 1000.52.


Sec. 1124.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec. 1000.53.


Sec. 1124.54  Equivalent price.

    See Sec. 1000.54.

Producer Price Differential


Sec. 1124.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec. 1000.9(c) with respect to 
milk that was not received at a pool plant by adding the amounts 
computed in paragraphs (a) through (h) of this section and subtracting 
from that total amount the value computed in paragraph (i) of this 
section. Unless otherwise specified, the skim milk, butterfat, and the 
combined pounds of skim milk and butterfat referred to in this section 
shall result from the steps set forth in Sec. 1000.44(a), (b), and (c), 
respectively, and the nonfat components of producer milk in each class 
shall be based upon the proportion of such components in producer skim 
milk. Receipts of nonfluid milk products that are distributed as 
labeled reconstituted milk for which payments are made to the producer-
settlement fund of another Federal order under Sec. 1000.76(a)(4) or 
(d) shall be excluded from pricing under this section.
    (a) Class I value.
    (1) Multiply the hundredweight of skim milk in Class I by the Class 
I skim milk price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class I by the Class I butterfat price.
    (b) Class II value.
    (1) Multiply the pounds of nonfat solids in Class II skim milk by 
the Class II nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class II times the Class II butterfat price.
    (c) Class III value.
    (1) Multiply the pounds of protein in Class III skim milk by the 
protein price;
    (2) Add an amount obtained by multiplying the pounds of other 
solids in Class III skim milk by the other solids price; and
    (3) Add an amount obtained by multiplying the pounds of butterfat 
in Class III by the butterfat price.
    (d) Class IV value.
    (1) Multiply the pounds of nonfat solids in Class IV skim milk by 
the nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class IV by the butterfat price.
    (e) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec. 1000.44(a)(11) and the corresponding 
steps of Sec. 1000.44(b) by the skim milk prices and butterfat prices 
applicable to each class.
    (f) Multiply the difference between the current month's Class I, 
II, or III price, as the case may be, and the Class IV price for the 
preceding month by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
    (g) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec. 1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(3)(i) through (vi) 
and the corresponding step of Sec. 1000.44(b), excluding receipts of 
bulk fluid cream products from plants regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants.
    (h) Multiply the difference between the Class I price applicable at 
the location of the nearest unregulated supply plants from which an 
equivalent volume was received and the Class III price by the pounds of 
skim milk and butterfat in receipts of concentrated fluid milk products 
assigned to Class I pursuant to Sec. 1000.43(d) and 
Sec. 1000.44(a)(3)(i) and the corresponding step of Sec. 1000.44(b) and 
the pounds of skim milk and butterfat subtracted from Class I pursuant 
to Sec. 1000.44(a)(8) and the corresponding step of Sec. 1000.44(b), 
excluding such skim milk and butterfat in receipts of fluid milk 
products from an unregulated supply plant to the extent that an 
equivalent amount of skim milk or butterfat disposed of to such plant 
by handlers fully regulated under any Federal milk order is classified 
and priced as Class I milk and is not used as an offset for any other 
payment obligation under any order.
    (i) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of nonfluid milk products that are allocated to 
Class I use pursuant to Sec. 1000.43(d).

[[Page 16273]]

Sec. 1124.61  Computation of producer price differential.

    For each month the market administrator shall compute a producer 
price differential per hundredweight. The report of any handler who has 
not made payments required pursuant to Sec. 1124.71 for the preceding 
month shall not be included in the computation of the producer price 
differential, and such handler's report shall not be included in the 
computation for succeeding months until the handler has made full 
payment of outstanding monthly obligations. Subject to the 
aforementioned conditions, the market administrator shall compute the 
producer price differential in the following manner:
    (a) Combine into one total the values computed pursuant to 
Sec. 1124.60 for all handlers required to file reports prescribed in 
Sec. 1124.30;
    (b) Subtract the total values obtained by multiplying each 
handler's total pounds of protein, other solids, and butterfat 
contained in the milk for which an obligation was computed pursuant to 
Sec. 1124.60 by the protein price, the other solids price, and the 
butterfat price, respectively;
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 1124.75;
    (d) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (e) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (1) The total hundredweight of producer milk; and
    (2) The total hundredweight for which a value is computed pursuant 
to Sec. 1124.60(h); and
    (f) Subtract not less than 4 cents nor more than 5 cents from the 
price computed pursuant to paragraph (e) of this section. The result 
shall be known as the producer price differential for the month.


Sec. 1124.62  Announcement of producer prices.

    On or before the 14th day after the end of each month, the market 
administrator shall announce publicly the following prices and 
information:
    (a) The producer price differential;
    (b) The protein price;
    (c) The nonfat solids price;
    (d) The other solids price;
    (e) The butterfat price;
    (f) The average butterfat, protein, nonfat solids, and other solids 
content of producer milk; and
    (g) The statistical uniform price for milk containing 3.5 percent 
butterfat, computed by combining the Class III price and the producer 
price differential.

Payments for Milk


Sec. 1124.70  Producer-settlement fund.

    See Sec. 1000.70.


Sec. 1124.71  Payments to the producer-settlement fund.

    Each handler shall make payment to the producer-settlement fund in 
a manner that provides receipt of the funds by the market administrator 
no later than the 16th day after the end of the month (except as 
provided in Sec. 1000.90). Payment shall be the amount, if any, by 
which the amount specified in paragraph (a) of this section exceeds the 
amount specified in paragraph (b) of this section:
    (a) The total value of milk to the handler for the month as 
determined pursuant to Sec. 1124.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 1124.75;
    (2) An amount obtained by multiplying the total pounds of protein, 
other solids, and butterfat contained in producer milk by the protein, 
other solids, and butterfat prices, respectively; and
    (3) An amount obtained by multiplying the pounds of skim milk and 
butterfat for which a value was computed pursuant to Sec. 1124.60(h) by 
the producer price differential as adjusted pursuant to Sec. 1124.75 
for the location of the plant from which received.


Sec. 1124.72  Payments from the producer-settlement fund.

    No later than the 18th day after the end of each month (except as 
provided in Sec. 1000.90), the market administrator shall pay to each 
handler the amount, if any, by which the amount computed pursuant to 
Sec. 1124.71(b) exceeds the amount computed pursuant to 
Sec. 1124.71(a). If, at such time, the balance in the producer-
settlement fund is insufficient to make all payments pursuant to this 
section, the market administrator shall reduce uniformly such payments 
and shall complete the payments as soon as the funds are available.


Sec. 1124.73  Payments to producers and to cooperative associations.

    (a) Each handler shall pay each producer for producer milk for 
which payment is not made to a cooperative association pursuant to 
paragraph (b) of this section, as follows:
    (1) Partial payment. For each producer who has not discontinued 
shipments as of the 18th day of the month, partial payment shall be 
made so that it is received by each producer on or before the last day 
of the month (except as provided in Sec. 1000.90) for milk received 
during the first 15 days of the month from the producer at not less 
than the lowest announced class price for the preceding month, less 
proper deductions authorized in writing by the producer.
    (2) Final payment. For milk received during the month, payment 
shall be made so that it is received by each producer no later than the 
19th day after the end of the month (except as provided in 
Sec. 1000.90) in an amount equal to not less than the sum of:
    (i) The hundredweight of producer milk received times the producer 
price differential for the month as adjusted pursuant to Sec. 1124.75;
    (ii) The pounds of butterfat received times the butterfat price for 
the month;
    (iii) The pounds of protein received times the protein price for 
the month;
    (iv) The pounds of other solids received times the other solids 
price for the month;
    (v) Less any payment made pursuant to paragraph (a)(1) of this 
section;
    (vi) Less proper deductions authorized in writing by such producer 
and plus or minus adjustments for errors in previous payments to such 
producer subject to approval by the market administrator; and
    (vii) Less deductions for marketing services pursuant to 
Sec. 1000.86.
    (b) Payments for milk received from cooperative association 
members. On or before the 2nd day prior to the dates specified in 
paragraphs (a)(1) and (a)(2) of this section (except as provided in 
Sec. 1000.90), each handler shall pay to a cooperative association for 
milk from producers who market their milk through the cooperative 
association and who have authorized the cooperative to collect such 
payments on their behalf an amount equal to the sum of the individual 
payments otherwise payable for such producer milk pursuant to 
paragraphs (a)(1) and (a)(2) of this section.
    (c) Payment for milk received from cooperative association pool 
plants or from cooperatives as handlers pursuant to Sec. 1000.9(c). On 
or before the 2nd day prior to the dates specified in paragraphs (a)(1) 
and (a)(2) of this section (except as provided in Sec. 1000.90), each 
handler who receives fluid milk products at its plant from a 
cooperative association in its capacity as the operator of a pool plant 
or who receives milk from a cooperative association in its capacity as 
a handler pursuant to Sec. 1000.9(c), including the

[[Page 16274]]

milk of producers who are not members of such association and who the 
market administrator determines have authorized the cooperative 
association to collect payment for their milk, shall pay the 
cooperative for such milk as follows:
    (1) For bulk fluid milk products and bulk fluid cream products 
received from a cooperative association in its capacity as the operator 
of a pool plant and for milk received from a cooperative association in 
its capacity as a handler pursuant to Sec. 1000.9(c) during the first 
15 days of the month, at not less than the lowest announced class price 
per hundredweight for the preceding month.
    (2) For the total quantity of bulk fluid milk products and bulk 
fluid cream products received from a cooperative association in its 
capacity as the operator of a pool plant, at not less than the total 
value of such products received from the association's pool plants, as 
determined by multiplying the respective quantities assigned to each 
class under Sec. 1000.44, as follows:
    (i) The hundredweight of Class I skim milk times the Class I skim 
milk price for the month plus the pounds of Class I butterfat times the 
Class I butterfat price for the month. The Class I prices to be used 
shall be the prices effective at the location of the receiving plant;
    (ii) The pounds of nonfat solids in Class II skim milk by the Class 
II nonfat solids price;
    (iii) The pounds of butterfat in Class II times the Class II 
butterfat price;
    (iv) The pounds of nonfat solids in Class IV times the nonfat 
solids price;
    (v) The pounds of butterfat in Class III and Class IV milk times 
the butterfat price;
    (vi) The pounds of protein in Class III milk times the protein 
price;
    (vii) The pounds of other solids in Class III milk times the other 
solids price; and
    (viii) Add together the amounts computed in paragraphs (c)(2)(i) 
through (vii) of this section and from that sum deduct any payment made 
pursuant to paragraph (c)(1) of this section; and
    (3) For the total quantity of milk received during the month from a 
cooperative association in its capacity as a handler under 
Sec. 1000.9(c) as follows:
    (i) The hundredweight of producer milk received times the producer 
price differential as adjusted pursuant to Sec. 1124.75;
    (ii) The pounds of butterfat received times the butterfat price for 
the month;
    (iii) The pounds of protein received times the protein price for 
the month;
    (iv) The pounds of other solids received times the other solids 
price for the month; and
    (v) Add together the amounts computed in paragraphs (c)(3)(i) 
through (iv) of this section and from that sum deduct any payment made 
pursuant to paragraph (c)(1) of this section.
    (d) If a handler has not received full payment from the market 
administrator pursuant to Sec. 1124.72 by the payment date specified in 
paragraph (a), (b) or (c) of this section, the handler may reduce pro 
rata its payments to producers or to the cooperative association (with 
respect to receipts described in paragraph (b) of this section, 
prorating the underpayment to the volume of milk received from the 
cooperative association in proportion to the total milk received from 
producers by the handler), but not by more than the amount of the 
underpayment. The payments shall be completed on the next scheduled 
payment date after receipt of the balance due from the market 
administrator.
    (e) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer-settlement fund, and in the event that the handler 
subsequently locates and pays the producer or a lawful claimant, or in 
the event that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer-settlement fund to the handler or to the lawful 
claimant, as the case may be.
    (f) In making payments to producers pursuant to this section, each 
handler shall furnish each producer, except a producer whose milk was 
received from a cooperative association handler described in 
Sec. 1000.9(a) or (c), a supporting statement in a form that may be 
retained by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and payroll number of the producer;
    (2) The daily and total pounds, and the month and dates such milk 
was received from that producer;
    (3) The total pounds of butterfat, protein, and other solids 
contained in the producer's milk;
    (4) The minimum rate or rates at which payment to the producer is 
required pursuant to this order;
    (5) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (6) The amount, or rate per hundredweight, or rate per pound of 
component, and the nature of each deduction claimed by the handler; and
    (7) The net amount of payment to the producer or cooperative 
association.


Sec. 1124.74  [Reserved]


Sec. 1124.75  Plant location adjustments for producer milk and nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec. 1124.51 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Secs. 1124.73 
and 1000.76.


Sec. 1124.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76.


Sec. 1124.77  Adjustment of accounts.

    See Sec. 1000.77.


Sec. 1124.78  Charges on overdue accounts.

    See Sec. 1000.78.

Administrative Assessment and Marketing Service Deduction


Sec. 1124.85  Assessment for order administration.

    See Sec. 1000.85.


Sec. 1124.86  Deduction for marketing services.

    See Sec. 1000.86.

PART 1126--MILK IN THE SOUTHWEST MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1126.1  General provisions.

DEFINITIONS

1126.2  Southwest marketing area.
1126.3  Route disposition.
1126.4  Plant.
1126.5  Distributing plant.
1126.6  Supply plant.
1126.7  Pool plant.
1126.8  Nonpool plant.
1126.9  Handler.
1126.10  Producer-handler.
1126.11  [Reserved]
1126.12  Producer.
1126.13  Producer milk.
1126.14  Other source milk.
1126.15  Fluid milk product.
1126.16  Fluid cream product.
1126.17  [Reserved]
1126.18  Cooperative association.
1126.19  Commercial food processing establishment.

[[Page 16275]]

Handler Reports

1126.30  Reports of receipts and utilization.
1126.31  Payroll reports.
1126.32  Other reports.

Classification of Milk

1126.40  Classes of utilization.
1126.41  [Reserved]
1126.42  Classification of transfers and diversions.
1126.43  General classification rules.
1126.44  Classification of producer milk.
1126.45  Market administrator's reports and announcements concerning 
classification.

Class Prices

1126.50  Class prices, component prices, and advanced pricing 
factors.
1126.51  Class I differential and price.
1126.52  Adjusted Class I differentials.
1126.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1126.54  Equivalent price.

Producer Price Differential

1126.60  Handler's value of milk.
1126.61  Computation of producer price differential.
1126.62  Announcement of producer prices.

Payments for Milk

1126.70  Producer-settlement fund.
1126.71  Payments to the producer-settlement fund.
1126.72  Payments from the producer-settlement fund.
1126.73  Payments to producers and to cooperative associations.
1126.74  [Reserved]
1126.75  Plant location adjustments for producer milk and nonpool 
milk.
1126.76  Payments by a handler operating a partially regulated 
distributing plant.
1126.77  Adjustment of accounts.
1126.78  Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1126.85  Assessment for order administration.
1126.86  Deduction for marketing services.

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

Subpart--Order Regulating Handling

General Provisions


Sec. 1126.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to and are hereby made a part of this order. In this part, 1126, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

Definitions


Sec. 1126.2  Southwest marketing area.

    The marketing area means all territory within the bounds of the 
following states and political subdivisions, including all piers, docks 
and wharves connected therewith and all craft moored thereat, and all 
territory occupied by government (municipal, State or Federal) 
reservations, installations, institutions, or other similar 
establishments if any part thereof is within any of the listed states 
or political subdivisions:

New Mexico and Texas

    All of the States of New Mexico and Texas.

Colorado Counties

    Archuleta, LaPlata, and Montezuma.


Sec. 1126.3  Route disposition.

    See Sec. 1000.3.


Sec. 1126.4  Plant.

    See Sec. 1000.4.


Sec. 1126.5  Distributing plant.

    See Sec. 1000.5.


Sec. 1126.6  Supply plant.

    See Sec. 1000.6.


Sec. 1126.7  Pool plant.

    Pool plant means a plant specified in paragraphs (a) through (d) of 
this section, or a unit of plants as specified in paragraph (e) of this 
section, but excluding a plant specified in paragraph (g) of this 
section. The pooling standards described in paragraphs (c) and (d) of 
this section are subject to modification pursuant to paragraph (f) of 
this section:
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or section 7(b) of any 
other Federal milk order, from which during the month 25 percent or 
more of the total quantity of fluid milk products physically received 
at the plant (excluding concentrated milk received from another plant 
by agreement for other than Class I use) are disposed of as route 
disposition or are transferred in the form of packaged fluid milk 
products to other distributing plants. At least 25 percent of such 
route disposition and transfers must be to outlets in the marketing 
area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 25 percent of the total quantity of 
fluid milk products physically received at the plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) into ultra-pasteurized or aseptically-processed fluid 
milk products.
    (c) A supply plant from which 50 percent or more of the total 
quantity of milk that is physically received during the month from 
dairy farmers and handlers described in Sec. 1000.9(c), including milk 
that is diverted as producer milk to other plants, is transferred to 
pool distributing plants. Concentrated milk transferred from the supply 
plant to a distributing plant for an agreed-upon use other than Class I 
shall be excluded from the supply plant's shipments in computing the 
plant's shipping percentage.
    (d) A plant located within the marketing area that is operated by a 
cooperative association if pool plant status under this paragraph is 
requested for such plant by the cooperative association and during the 
month at least 30 percent of the producer milk of members of such 
cooperative association is delivered directly from farms to pool 
distributing plants or is transferred to such plants as a fluid milk 
product (excluding concentrated milk transferred to a distributing 
plant for an agreed-upon use other than Class I) from the cooperative's 
plant.
    (e) Two or more plants operated by the same handler and located 
within the marketing area may qualify for pool status as a unit by 
meeting the total and in-area route disposition requirements specified 
in paragraph (a) of this section and the following additional 
requirements:
    (1) At least one of the plants in the unit must qualify as a pool 
plant pursuant to paragraph (a) of this section;
    (2) Other plants in the unit must process only Class I or Class II 
products and must be located in a pricing zone providing the same or a 
lower Class I price than the price applicable at the distributing plant 
included in the unit pursuant to paragraph (e)(1) of this section; and
    (3) A written request to form a unit, or to add or remove plants 
from a unit, must be filed with the market administrator prior to the 
first day of the month for which it is to be effective.
    (f) The applicable shipping percentages of paragraphs (c) and (d) 
of this section may be increased or decreased by the market 
administrator if the market administrator finds that such adjustment is 
necessary to encourage needed shipments or to prevent uneconomic 
shipments. Before making such a finding, the market administrator shall 
investigate the need for adjustment either on the market 
administrator's own initiative or at the request of interested parties 
if the request is made in writing at least 15 days prior to the month 
for which the requested revision is desired effective. If the 
investigation shows that an adjustment of the shipping percentages 
might be appropriate, the market administrator shall issue a notice 
stating that an adjustment is being considered and invite data, views 
and arguments. Any decision to revise an applicable shipping percentage 
must be issued in

[[Page 16276]]

writing at least one day before the effective date.
    (g) The term pool plant shall not apply to the following plants:
    (1) A producer-handler plant;
    (2) An exempt plant as defined in Sec. 1000.8(e);
    (3) A plant qualified pursuant to paragraph (a) of this section 
that is located within the marketing area if the plant also meets the 
pooling requirements of another Federal order, and more than 50 percent 
of its route distribution has been in such other Federal order 
marketing area for 3 consecutive months;
    (4) A plant qualified pursuant to paragraph (a) of this section 
which is not located within any Federal order marketing area that meets 
the pooling requirements of another Federal order and has had greater 
route disposition in such other Federal order's marketing area for 3 
consecutive months;
    (5) A plant qualified pursuant to paragraph (a) of this section 
that is located in another Federal order marketing area if the plant 
meets the pooling requirements of such other Federal order and does not 
have a majority of its route distribution in this marketing area for 3 
consecutive months or if the plant is required to be regulated under 
such other Federal order without regard to its route disposition in any 
other Federal order marketing area;
    (6) A plant qualified pursuant to paragraph (c) or (d) of this 
section which also meets the pooling requirements of another Federal 
order and from which greater qualifying shipments are made to plants 
regulated under the other Federal order than are made to plants 
regulated under this order, or the plant has automatic pooling status 
under the other Federal order; and
    (7) That portion of a pool plant designated as a nonpool plant that 
is physically separate and operated separately from the pool portion of 
such plant. The designation of a portion of a regulated plant as a 
nonpool plant must be requested in writing by the handler and must be 
approved by the market administrator.


Sec. 1126.8  Nonpool plant.

    See Sec. 1000.8.


Sec. 1126.9  Handler.

    See Sec. 1000.9.


Sec. 1126.10  Producer-handler.

    Producer-handler means a person who:
    (a) Operates a dairy farm and a distributing plant from which there 
is route disposition in the marketing area during the month;
    (b) Receives fluid milk products from own farm production or milk 
that is fully subject to the pricing and pooling provisions of this or 
another Federal order;
    (c) Receives no more than 150,000 pounds of fluid milk products 
from handlers fully regulated under any Federal order, including such 
products received at a location other than the producer-handler's 
processing plant for distribution on routes. This limitation shall not 
apply if the producer-handler's own farm production is less than 
150,000 pounds during the month;
    (d) Disposes of no other source milk as Class I milk except by 
increasing the nonfat milk solids content of the fluid milk products; 
and
    (e) Provides proof satisfactory to the market administrator that 
the care and management of the dairy animals and other resources 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) and the processing 
and packaging operations are the producer-handler's own enterprise and 
at its own risk.


Sec. 1126.11  [Reserved]


Sec. 1126.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
(or components of milk) is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec. 1126.13; or
    (2) Received by a handler described in Sec. 1000.9(c).
    (b) Producer shall not include:
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to 
Sec. 1126.13(d);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and the milk is allocated by request to a utilization other than 
Class I; and
    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order.


Sec. 1126.13  Producer milk.

    Producer milk means the skim milk (or the skim equivalent of 
components of skim milk), including nonfat components, and butterfat 
contained in milk of a producer that is:
    (a) Received by the operator of a pool plant directly from a 
producer or a handler described in Sec. 1000.9(c). All milk received 
pursuant to this paragraph shall be priced at the location of the plant 
where it is first physically received;
    (b) Received by a handler described in Sec. 1000.9(c) in excess of 
the quantity delivered to pool plants;
    (c) Diverted by a pool plant operator for the account of the 
handler operating such plant to another pool plant. Milk so diverted 
shall be priced at the location of the plant to which diverted; or
    (d) Diverted by the operator of a pool plant or a handler described 
in Sec. 1000.9(c) to a nonpool plant, subject to the following 
conditions:
    (1) Milk of a dairy farmer shall not be eligible for diversion 
unless a delivery of at least 40,000 pounds or one day's milk 
production, whichever is less, of such dairy farmer has been physically 
received as producer milk at a pool plant and the dairy farmer has 
continuously retained producer status since that time;
    (2) The total quantity of milk diverted during the month by a 
cooperative association shall not exceed 50 percent of the total 
quantity of producer milk that the cooperative association caused to be 
received at pool plants and diverted;
    (3) The operator of a pool plant that is not a cooperative 
association may divert any milk that is not under the control of a 
cooperative association that diverts milk during the month pursuant to 
this paragraph. The total quantity of milk so diverted during the month 
shall not exceed 50 percent of the total quantity of the producer milk 
physically received at such plant (or such unit of plants in the case 
of plants that pool as a unit pursuant to Sec. 1126.7(e)) and diverted;
    (4) Any milk diverted in excess of the limits prescribed in 
paragraphs (d)(2) and (3) of this section shall not be producer milk. 
If the diverting handler or cooperative association fails to designate 
the dairy farmers' deliveries that will not be producer milk, no milk 
diverted by the handler or cooperative association shall be producer 
milk;
    (5) Diverted milk shall be priced at the location of the plant to 
which diverted; and
    (6) The delivery requirement in paragraph (d)(1) and the diversion

[[Page 16277]]

percentages in paragraphs (d)(2) and (3) of this section may be 
increased or decreased by the market administrator if there is a 
finding that such revision is necessary to assure orderly marketing and 
efficient handling of milk in the marketing area. Before making such a 
finding, the market administrator shall investigate the need for the 
revision either on the market administrator's own initiative or at the 
request of interested persons if the request is made in writing at 
least 15 days prior to the month for which the requested revision is 
desired effective. If the investigation shows that a revision might be 
appropriate, the market administrator shall issue a notice stating that 
the revision is being considered and inviting written data, views, and 
arguments. Any decision to revise the delivery day requirement or any 
diversion percentage must be issued in writing at least one day before 
the effective date.


Sec. 1126.14  Other source milk.

    See Sec. 1000.14.


Sec. 1126.15  Fluid milk product.

    See Sec. 1000.15.


Sec. 1126.16  Fluid cream product.

    See Sec. 1000.16.


Sec. 1126.17  [Reserved]


Sec. 1126.18  Cooperative association.

    See Sec. 1000.18.


Sec. 1126.19  Commercial food processing establishment.

    See Sec. 1000.19.

Handler Reports


Sec. 1126.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 8th day 
after the end of the month, in the detail and on prescribed forms, as 
follows:
    (a) Each pool plant operator shall report for each of its 
operations the following information:
    (1) Product pounds, pounds of butterfat, pounds of protein, pounds 
of nonfat solids other than protein (other solids), and the value of 
the somatic cell adjustment pursuant to Sec. 1000.50(p) contained in or 
represented by:
    (i) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec. 1000.9(c); and
    (ii) Receipts of milk from handlers described in Sec. 1000.9(c);
    (2) Product pounds and pounds of butterfat contained in:
    (i) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (ii) Receipts of other source milk; and
    (iii) Inventories at the beginning and end of the month of fluid 
milk products and bulk fluid cream products;
    (3) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph; and
    (4) Such other information with respect to the receipts and 
utilization of skim milk, butterfat, milk protein, other nonfat solids, 
and somatic cell information, as the market administrator may 
prescribe.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. The 
report shall show also the quantity of any reconstituted skim milk in 
route disposition in the marketing area.
    (c) Each handler described in Sec. 1000.9(c) shall report:
    (1) The product pounds, pounds of butterfat, pounds of protein, 
pounds of solids-not-fat other than protein (other solids), and the 
value of the somatic cell adjustment pursuant to Sec. 1000.50(p), 
contained in receipts of milk from producers; and
    (2) The utilization or disposition of such receipts.
    (d) Each handler not specified in paragraphs (a) through (c) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.


Sec. 1126.31  Payroll reports.

    (a) On or before the 20th day after the end of each month, each 
handler that operates a pool plant pursuant to Sec. 1126.7 and each 
handler described in Sec. 1000.9(c) shall report to the market 
administrator its producer payroll for the month, in the detail 
prescribed by the market administrator, showing for each producer the 
information specified in Sec. 1126.73(e).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 1000.76(b) shall report for 
each dairy farmer who would have been a producer if the plant had been 
fully regulated in the same manner as prescribed for reports required 
by paragraph (a) of this section.


Sec. 1126.32  Other reports.

    In addition to the reports required pursuant to Secs. 1126.30 and 
1126.31, each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Classification of Milk


Sec. 1126.40  Classes of utilization.

    See Sec. 1000.40.


Sec. 1126.41  [Reserved]


Sec. 1126.42  Classification of transfers and diversions.

    See Sec. 1000.42.


Sec. 1126.43  General classification rules.

    See Sec. 1000.43.


Sec. 1126.44  Classification of producer milk.

    See Sec. 1000.44.


Sec. 1126.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45.

Class Prices


Sec. 1126.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec. 1000.50.


Sec. 1126.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Dallas County, Texas, which is reported in Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for 
Dallas County, Texas.


Sec. 1126.52  Adjusted Class I differentials.

    See Sec. 1000.52.


Sec. 1126.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec. 1000.53.


Sec. 1126.54  Equivalent price.

    See Sec. 1000.54.

Producer Price Differential


Sec. 1126.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec. 1000.9(c) with respect to 
milk that was not received at a pool plant by adding the amounts 
computed in paragraphs (a) through (i) of this section and subtracting 
from that total amount the value computed in paragraph (j) of this 
section. Unless otherwise specified, the

[[Page 16278]]

skim milk, butterfat, and the combined pounds of skim milk and 
butterfat referred to in this section shall result from the steps set 
forth in Sec. 1000.44(a), (b), and (c), respectively, and the nonfat 
components of producer milk in each class shall be based upon the 
proportion of such components in producer skim milk. Receipts of 
nonfluid milk products that are distributed as labeled reconstituted 
milk for which payments are made to the producer-settlement fund of 
another Federal order under Sec. 1000.76(a)(4) or (d) shall be excluded 
from pricing under this section.
    (a) Class I value.
    (1) Multiply the pounds of skim milk in Class I by the Class I skim 
milk price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class I by the Class I butterfat price.
    (b) Class II value.
    (1) Multiply the pounds of nonfat solids in Class II skim milk by 
the Class II nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class II times the Class II butterfat price.
    (c) Class III value.
    (1) Multiply the pounds of protein in Class III skim milk by the 
protein price;
    (2) Add an amount obtained by multiplying the pounds of other 
solids in Class III skim milk by the other solids price; and
    (3) Add an amount obtained by multiplying the pounds of butterfat 
in Class III by the butterfat price.
    (d) Class IV value.
    (1) Multiply the pounds of nonfat solids in Class IV skim milk by 
the nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class IV by the butterfat price.
    (e) Compute an adjustment for the somatic cell content of producer 
milk by multiplying the values reported pursuant to Sec. 1126.30(a)(1) 
and (c)(1) by the percentage of total producer milk allocated to Class 
II, Class III, and Class IV pursuant to Sec. 1000.44(c);
    (f) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec. 1000.44(a)(11) and the corresponding 
step of Sec. 1000.44(b) by the skim milk prices and butterfat prices 
applicable to each class.
    (g) Multiply the difference between the current month's Class I, 
II, or III price, as the case may be, and the Class IV price for the 
preceding month by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
    (h) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec. 1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(3)(i) through (vi) 
and the corresponding step of Sec. 1000.44(b), excluding receipts of 
bulk fluid cream products from plants regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants.
    (i) Multiply the difference between the Class I price applicable at 
the location of the nearest unregulated supply plants from which an 
equivalent volume was received and the Class III price by the pounds of 
skim milk and butterfat in receipts of concentrated fluid milk products 
assigned to Class I pursuant to Sec. 1000.43(d) and 
Sec. 1000.44(a)(3)(i) and the corresponding step of Sec. 1000.44(b) and 
the pounds of skim milk and butterfat subtracted from Class I pursuant 
to Sec. 1000.44(a)(8) and the corresponding step of Sec. 1000.44(b), 
excluding such skim milk and butterfat in receipts of fluid milk 
products from an unregulated supply plant to the extent that an 
equivalent amount of skim milk or butterfat disposed of to such plant 
by handlers fully regulated under any Federal milk order is classified 
and priced as Class I milk and is not used as an offset for any other 
payment obligation under any order.
    (j) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of nonfluid milk products that are allocated to 
Class I use pursuant to Sec. 1000.43(d).


Sec. 1126.61  Computation of producer price differential.

    For each month the market administrator shall compute a producer 
price differential per hundredweight. The report of any handler who has 
not made payments required pursuant to Sec. 1126.71 for the preceding 
month shall not be included in the computation of the producer price 
differential, and such handler's report shall not be included in the 
computation for succeeding months until the handler has made full 
payment of outstanding monthly obligations. Subject to the 
aforementioned conditions, the market administrator shall compute the 
producer price differential in the following manner:
    (a) Combine into one total the values computed pursuant to 
Sec. 1126.60 for all handlers required to file reports prescribed in 
Sec. 1126.30;
    (b) Subtract the total of the values obtained by multiplying each 
handler's total pounds of protein, other solids, and butterfat 
contained in the milk for which an obligation was computed pursuant to 
Sec. 1126.60 by the protein price, other solids price, and the 
butterfat price, respectively, and the total value of the somatic cell 
adjustment pursuant to Sec. 1126.30(a)(1) and (c)(1);
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 1126.75;
    (d) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (e) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (1) The total hundredweight of producer milk; and
    (2) The total hundredweight for which a value is computed pursuant 
to Sec. 1126.60(i); and
    (f) Subtract not less than 4 cents nor more than 5 cents from the 
price computed pursuant to paragraph (e) of this section. The result 
shall be known as the producer price differential for the month.


Sec. 1126.62  Announcement of producer prices.

    On or before the 13th 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 nonfat solids price;
    (d) The other solids price;
    (e) The butterfat price;
    (f) The somatic cell adjustment rate;
    (g) The average butterfat, protein, nonfat solids, and other solids 
content of producer milk; and
    (h) The statistical uniform price for milk containing 3.5 percent 
butterfat, computed by combining the Class III price and the producer 
price differential.

Payments for Milk


Sec. 1126.70  Producer-settlement fund.

    See Sec. 1000.70.


Sec. 1126.71  Payments to the producer-settlement fund.

    Each handler shall make payment to the producer-settlement fund in 
a manner that provides receipt of the funds by the market administrator 
no later than the 16th day after the end of the month (except as 
provided in

[[Page 16279]]

Sec. 1000.90). Payment shall be the amount, if any, by which the amount 
specified in paragraph (a) of this section exceeds the amount specified 
in paragraph (b) of this section:
    (a) The total value of milk to the handler for the month as 
determined pursuant to Sec. 1126.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 1126.75;
    (2) An amount obtained by multiplying the total pounds of protein, 
other solids, and butterfat contained in producer milk by the protein, 
other solids, and butterfat prices respectively;
    (3) The total value of the somatic cell adjustment to producer 
milk; and
    (4) An amount obtained by multiplying the pounds of skim milk and 
butterfat for which a value was computed pursuant to Sec. 1126.60(i) by 
the producer price differential as adjusted pursuant to Sec. 1126.75 
for the location of the plant from which received.


Sec. 1126.72  Payments from the producer-settlement fund.

    No later than the 17th day after the end of each month (except as 
provided in Sec. 1000.90), the market administrator shall pay to each 
handler the amount, if any, by which the amount computed pursuant to 
Sec. 1126.71(b) exceeds the amount computed pursuant to 
Sec. 1126.71(a). If, at such time, the balance in the producer-
settlement fund is insufficient to make all payments pursuant to this 
section, the market administrator shall reduce uniformly such payments 
and shall complete the payments as soon as the funds are available.


Sec. 1126.73  Payments to producers and to cooperative associations.

    (a) Each handler shall pay each producer for producer milk for 
which payment is not made to a cooperative association pursuant to 
paragraph (b) of this section, as follows:
    (1) Partial payment. For each producer who has not discontinued 
shipments as of the 23rd day of the month, payment shall be made so 
that it is received by the producer on or before the 26th day of the 
month (except as provided in Sec. 1000.90) for milk received during the 
first 15 days of the month at not less than the lowest announced class 
price for the preceding month, less proper deductions authorized in 
writing by the producer.
    (2) Final payment. For milk received during the month, payment 
shall be made so that it is received by each producer no later than the 
18th day after the end of the month (except as provided in 
Sec. 1000.90) in an amount computed as follows:
    (i) Multiply the hundredweight of producer milk received times the 
producer price differential for the month as adjusted pursuant to 
Sec. 1126.75;
    (ii) Multiply the pounds of butterfat received times the butterfat 
price for the month;
    (iii) Multiply the pounds of protein received times the protein 
price for the month;
    (iv) Multiply the pounds of other solids received times the other 
solids price for the month;
    (v) Multiply the hundredweight of milk received times the somatic 
cell adjustment for the month;
    (vi) Add the amounts computed in paragraphs (a)(2)(i) through (v) 
of this section, and from that sum:
    (A) Subtract the partial payment made pursuant to paragraph (a)(1) 
of this section;
    (B) Subtract the deduction for marketing services pursuant to 
Sec. 1000.86;
    (C) Add or subtract for errors made in previous payments to the 
producer subject to approval by the market administrator; and
    (D) Subtract proper deductions authorized in writing by the 
producer.
    (b) On or before the day prior to the dates specified for partial 
and final payments pursuant to paragraph (a) of this section (except as 
provided in Sec. 1000.90), each pool plant operator shall pay a 
cooperative association for milk received as follows:
    (1) Partial payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk (including the 
milk of producers who are not members of such association and who the 
market administrator determines have authorized the cooperative 
association to collect payment for their milk) received during the 
first 15 days of the month from a cooperative association in any 
capacity, except as the operator of a pool plant, the payment shall be 
equal to the hundredweight of milk received multiplied by the lowest 
announced class price for the preceding month.
    (2) Partial payment to a cooperative association for milk 
transferred from its pool plant. For bulk milk/skimmed milk products 
received during the first 15 days of the month from a cooperative 
association in its capacity as the operator of a pool plant, the 
partial payment shall be at the pool plant operator's estimated use 
value of the milk using the most recent class prices available at the 
receiving plant's location.
    (3) Final payment to a cooperative association for milk transferred 
from its pool plant. Following the classification of bulk fluid milk 
products and bulk fluid cream products received during the month from a 
cooperative association in its capacity as the operator of a pool 
plant, the final payment for such receipts shall be determined as 
follows:
    (i) The hundredweight of Class I skim milk times the Class I skim 
milk price for the month plus the pounds of Class I butterfat times the 
Class I butterfat price for the month. The Class I prices to be used 
shall be the prices effective at the location of the receiving plant;
    (ii) The pounds of nonfat solids in Class II skim milk by the Class 
II nonfat solids price;
    (iii) The pounds of butterfat in Class II times the Class II 
butterfat price;
    (iv) The pounds of nonfat solids in Class IV times the nonfat 
solids price;
    (v) The pounds of butterfat in Class III and Class IV milk times 
the butterfat price;
    (vi) The pounds of protein in Class III milk times the protein 
price;
    (vii) The pounds of other solids in Class III milk times the other 
solids price;
    (viii) The hundredweight of Class II, Class III, and Class IV milk 
times the somatic cell adjustment; and
    (ix) Add together the amounts computed in paragraphs (b)(3)(i) 
through (viii) of this section and from that sum deduct any payments 
made pursuant to paragraph (b)(2) of this section.
    (4) Final payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk received from a 
cooperative association during the month, including the milk of 
producers who are not members of such association and who the market 
administrator determines have authorized the cooperative association to 
collect payment for their milk, the final payment for such milk shall 
be an amount equal to the sum of the individual payments otherwise 
payable for such milk pursuant to paragraph (a)(2) of this section.
    (c) If a handler has not received full payment from the market 
administrator pursuant to Sec. 1126.72 by the payment date specified in 
paragraph (a) or (b) of this section, the handler may reduce pro rata 
its payments to producers or to cooperative associations pursuant to 
paragraphs (a) and (b) of this section, but by not more than the amount 
of the underpayment. The payments shall be

[[Page 16280]]

completed on the next scheduled payment date after receipt of the 
balance due from the market administrator.
    (d) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer-settlement fund, and in the event that the handler 
subsequently locates and pays the producer or a lawful claimant, or in 
the event that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer-settlement fund to the handler or to the lawful 
claimant as the case may be.
    (e) In making payments to producers pursuant to this section, each 
pool plant operator shall furnish each producer, except a producer 
whose milk was received from a cooperative association handler 
described in Sec. 1000.9(a) or (c), a supporting statement in a form 
that may be retained by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and the payroll number of the producer;
    (2) The month and dates that milk was received from the producer, 
including the daily and total pounds of milk received;
    (3) The total pounds of butterfat, protein, and other solids 
contained in the producer's milk;
    (4) The somatic cell count of the producer's milk;
    (5) The minimum rate or rates at which payment to the producer is 
required pursuant to this order;
    (6) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (7) The amount, or rate per hundredweight, or rate per pound of 
component, and the nature of each deduction claimed by the handler; and
    (8) The net amount of payment to the producer or cooperative 
association.


Sec. 1126.74  [Reserved]


Sec. 1126.75  Plant location adjustments for producer milk and nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec. 1126.51 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Secs. 1126.73 
and 1000.76.


Sec. 1126.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76.


Sec. 1126.77  Adjustment of accounts.

    See Sec. 1000.77.


Sec. 1126.78  Charges on overdue accounts.

    See Sec. 1000.78.

Administrative Assessment and Marketing Service Deduction


Sec. 1126.85  Assessment for order administration.

    See Sec. 1000.85.


Sec. 1126.86  Deduction for marketing services.

    See Sec. 1000.86.

PART 1131--MILK IN ARIZONA-LAS VEGAS MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1131.1  General provisions.

Definitions

1131.2  Arizona-Las Vegas marketing area.
1131.3  Route disposition.
1131.4  Plant.
1131.5  Distributing plant.
1131.6  Supply plant.
1131.7  Pool plant.
1131.8  Nonpool plant.
1131.9  Handler.
1131.10  Producer-handler.
1131.11  [Reserved]
1131.12  Producer.
1131.13  Producer milk.
1131.14  Other source milk.
1131.15  Fluid milk product.
1131.16  Fluid cream product.
1131.17  [Reserved]
1131.18  Cooperative association.
1131.19  Commercial food processing establishment.

Handler Reports

1131.30  Reports of receipts and utilization.
1131.31  Payroll reports.
1131.32  Other reports.

Classification of Milk

1131.40  Classes of utilization.
1131.41  [Reserved]
1131.42  Classification of transfers and diversions.
1131.43  General classification rules.
1131.44  Classification of producer milk.
1131.45  Market administrator's reports and announcements concerning 
classification.

Class Prices

1131.50  Class prices, component prices, and advanced pricing 
factors.
1131.51  Class I differential and price.
1131.52  Adjusted Class I differentials.
1131.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1131.54  Equivalent price.

Uniform Prices

1131.60  Handler's value of milk.
1131.61  Computation of uniform prices.
1131.62  Announcement of uniform prices.

Payments for Milk

1131.70  Producer-settlement fund.
1131.71  Payments to the producer-settlement fund.
1131.72  Payments from the producer-settlement fund.
1131.73  Payments to producers and to cooperative associations.
1131.74  [Reserved]
1131.75  Plant location adjustments for producers and nonpool milk.
1131.76  Payments by a handler operating a partially regulated 
distributing plant.
1131.77  Adjustment of accounts.
1131.78  Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1131.85  Assessment for order administration.
1131.86  Deduction for marketing services.

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

Subpart--Order Regulating Handling

General Provisions


Sec. 1131.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to and are hereby made a part of this order. In this part, 1131, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

Definitions


Sec. 1131.2  Arizona-Las Vegas marketing area.

    The marketing area means all territory within the bounds of the 
following states and political subdivisions, including all piers, docks 
and wharves connected therewith and all craft moored thereat, and all 
territory occupied by government (municipal, State or Federal) 
reservations, installations, institutions, or other similar 
establishments if any part thereof is within any of the listed states 
or political subdivisions:

Arizona

    All of the State of Arizona.

Nevada Counties

    Clark.


Sec. 1131.3  Route disposition.

    See Sec. 1000.3.


Sec. 1131.4  Plant.

    See Sec. 1000.4.


Sec. 1131.5  Distributing plant.

    See Sec. 1000.5.

[[Page 16281]]

Sec. 1131.6  Supply plant.

    See Sec. 1000.6.


Sec. 1131.7  Pool plant.

    Pool Plant means a plant or unit of plants specified in paragraphs 
(a) through (e) of this section, but excluding a plant specified in 
paragraph (g) of this section. The pooling standards described in 
paragraphs (c) and (d) of this section are subject to modification 
pursuant to paragraph (f) of this section.
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or section 7(b) of any 
other Federal milk order, from which during the month 25 percent or 
more of the total quantity of fluid milk products physically received 
at the plant (excluding concentrated milk received from another plant 
by agreement for other than Class I use) are disposed of as route 
disposition or are transferred in the form of packaged fluid milk 
products to other distributing plants. At least 25 percent of such 
route disposition and transfers must be to outlets in the marketing 
area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 25 percent of the total quantity of 
fluid milk products physically received at the plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) into ultra-pasteurized or aseptically-processed fluid 
milk products.
    (c) A supply plant from which 50 percent or more of the total 
quantity of milk that is physically received at such plant from dairy 
farmers and handlers described in Sec. 1000.9(c), including milk that 
is diverted as producer milk to other plants, is transferred to pool 
distributing plants. Concentrated milk transferred from the supply 
plant to a distributing plant for an agreed-upon use other than Class I 
shall be excluded from the supply plant's shipments in computing the 
plant's shipping percentage.
    (d) A plant located within the marketing area and operated by a 
cooperative association if, during the month, or the immediately 
preceding 12-month period ending with the current month, 35 percent or 
more of the producer milk of members of the association (and any 
producer milk of nonmembers and members of another cooperative 
association which may be marketed by the cooperative association) is 
physically received in the form of bulk fluid milk products (excluding 
concentrated milk transferred to a distributing plant for an agreed-
upon use other than Class I) at plants specified in paragraph (a) or 
(b) of this section either directly from farms or by transfer from 
supply plants operated by the cooperative association and from plants 
of the cooperative association for which pool plant status has been 
requested under this paragraph subject to the following conditions:
    (1) The plant does not qualify as a pool plant under paragraph (a), 
(b) or (c) of this section or under comparable provisions of another 
Federal order; and
    (2) The plant is approved by a duly constituted regulatory agency 
for the handling of milk approved for fluid consumption in the 
marketing area.
    (e) Two or more plants operated by the same handler and located in 
the marketing area may qualify for pool plant status as a unit by 
together meeting the requirements specified in paragraph (a) of this 
section and subject to all of the following additional requirements:
    (1) At least one of the plants in the unit must qualify as a pool 
plant pursuant to paragraph (a) of this section;
    (2) Other plants in the unit must process Class I or Class II 
products, using 50 percent or more of the total Grade A fluid milk 
products received in bulk form at such plant or diverted therefrom by 
the plant operator in Class I or Class II products, and must be located 
in a pricing zone providing the same or lower Class I price than the 
price applicable at the distributing plant included in the unit 
pursuant to paragraph (e)(1) of this section; and
    (3) A written request to form a unit must be filed by the handler 
with the market administrator prior to the first day of the month for 
which such status is desired to be effective. The unit shall continue 
from month to month thereafter without further notification. The 
handler shall notify the market administrator in writing prior to the 
first day of any month for which termination or any change of the unit 
is desired.
    (f) The applicable shipping percentages of paragraphs (c) and (d) 
of this section may be increased or decreased by the market 
administrator if the market administrator finds that such adjustment is 
necessary to encourage needed shipments or to prevent uneconomic 
shipments. Before making such a finding, the market administrator shall 
investigate the need for adjustment either on the market 
administrator's own initiative or at the request of interested parties 
if the request is made in writing at least 15 days prior to the month 
for which the requested revision is desired effective. If the 
investigation shows that an adjustment of the shipping percentages 
might be appropriate, the market administrator shall issue a notice 
stating that an adjustment is being considered and invite data, views 
and arguments. Any decision to revise an applicable shipping percentage 
must be issued in writing at least one day before the effective date.
    (g) The term pool plant shall not apply to the following plants:
    (1) A producer-handler as defined under any Federal order;
    (2) An exempt plant as defined in Sec. 1000.8(e);
    (3) A plant located within the marketing area and qualified 
pursuant to paragraph (a) of this section which meets the pooling 
requirements of another Federal order, and from which more than 50 
percent of its route disposition has been in the other Federal order 
marketing area for 3 consecutive months;
    (4) A plant located outside any Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of another Federal order and has had greater route 
disposition in such other Federal order's marketing area for 3 
consecutive months;
    (5) A plant located in another Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of such other Federal order and does not have a 
majority of its route distribution in this marketing area for 3 
consecutive months or if the plant is required to be regulated under 
such other Federal order without regard to its route disposition in any 
other Federal order marketing area;
    (6) A plant qualified pursuant to paragraph (c) of this section 
which also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under the other Federal order than are made to plants regulated under 
this order, or the plant has automatic pooling status under the other 
Federal order; and
    (7) That portion of a regulated plant designated as a nonpool plant 
that is physically separate and operated separately from the pool 
portion of such plant. The designation of a portion of a regulated 
plant as a nonpool plant must be requested in advance and in writing by 
the handler and must be approved by the market administrator.


Sec. 1131.8  Nonpool plant.

    See Sec. 1000.8.


Sec. 1131.9  Handler.

    See Sec. 1000.9.


Sec. 1131.10  Producer-handler.

    Producer-handler means a person who:

[[Page 16282]]

    (a) Operates a dairy farm and a distributing plant from which there 
is route disposition in the marketing area during the month;
    (b) Receives fluid milk products from own farm production or milk 
that is fully subject to the pricing and pooling provisions of this or 
another Federal order;
    (c) Receives at its plant or acquires for route disposition no more 
than 150,000 pounds of fluid milk products from handlers fully 
regulated under any Federal order. This limitation shall not apply if 
the producer-handler's own farm production is less than 150,000 pounds 
during the month;
    (d) Disposes of no other source milk as Class I milk except by 
increasing the nonfat milk solids content of the fluid milk products;
    (e) Does not distribute fluid milk products to a wholesale customer 
who also is serviced by a plant described in Sec. 1131.7(a), (b), or 
(e), or a handler described in Sec. 1000.8(c) that supplied the same 
product in the same-sized package with a similar label to the wholesale 
customer during the month; and
    (f) Provides proof satisfactory to the market administrator that 
the care and management of the dairy animals and other resources 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) and the operation of 
the distributing plant are the personal enterprise of, and at the 
personal risk of, such person in his/her capacity as a producer-
handler.


Sec. 1131.11  [Reserved]


Sec. 1131.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
(or components of milk) is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec. 1131.13; or
    (2) Received by a handler described in Sec. 1000.9(c).
    (b) Producer shall not include:
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to 
Sec. 1131.13(d);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and that milk is allocated by request to a utilization other than 
Class I;
    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order; and
    (5) A dairy farmer whose milk is received at a pool plant if during 
the month milk from the same farm is received at a nonpool plant 
(except a nonpool plant that has no utilization of milk products in any 
class other than Class III or Class IV) other than as producer milk 
under this or some other Federal order. Such a dairy farmer shall be 
known as a dairy farmer for other markets.


Sec. 1131.13  Producer milk.

    Producer milk means the skim milk (or the skim equivalent of 
components of skim milk) and butterfat in milk of a producer that is:
    (a) Received by the operator of a pool plant directly from a 
producer or a handler described in Sec. 1000.9(c). All milk received 
pursuant to this paragraph shall be priced at the location of the plant 
where it is first physically received;
    (b) Received by a handler described in Sec. 1000.9(c) in excess of 
the quantity delivered to pool plants;
    (c) Diverted by a pool plant operator to another pool plant. Milk 
so diverted shall be priced at the location of the plant to which 
diverted; or
    (d) Diverted by the operator of a pool plant or a cooperative 
association described in Sec. 1000.9(c) to a nonpool plant, subject to 
the following conditions:
    (1) Milk of a dairy farmer shall not be eligible for diversion 
unless at least one day's production of such dairy farmer is physically 
received at a pool plant during the month;
    (2) The total quantity of milk diverted by a handler in any month 
shall not exceed 50 percent of the total producer milk caused by the 
handler to be received at pool plants and diverted;
    (3) Diverted milk shall be priced at the location of the plant to 
which diverted;
    (4) Any milk diverted in excess of the limits prescribed in 
paragraph (d)(2) of this section shall not be producer milk. If the 
diverting handler or cooperative association fails to designate the 
dairy farmers' deliveries that are not to be producer milk, no milk 
diverted by the handler or cooperative association during the month to 
a nonpool plant shall be producer milk. In the event some of the milk 
of any producer is determined not to be producer milk pursuant to this 
paragraph, other milk delivered by such producer as producer milk 
during the month will not be subject to Sec. 1131.12(b)(5); and
    (5) The delivery day requirement in paragraph (d)(1) of this 
section and diversion percentage in paragraph (d)(2) of this section 
may be increased or decreased by the market administrator if the market 
administrator finds that such revision is necessary to assure orderly 
marketing and efficient handling of milk in the marketing area. Before 
making such a finding, the market administrator shall investigate the 
need for the revision either on the market administrator's own 
initiative or at the request of interested persons if the request is 
made in writing at least 15 days prior to the month for which the 
requested revision is desired effective. If the investigation shows 
that a revision might be appropriate, the market administrator shall 
issue a notice stating that the revision is being considered and 
inviting written data, views, and arguments. Any decision to revise the 
delivery day requirement or the diversion percentage must be issued in 
writing at least one day before the effective date.


Sec. 1131.14  Other source milk.

    See Sec. 1000.14.


Sec. 1131.15  Fluid milk product.

    See Sec. 1000.15.


Sec. 1131.16  Fluid cream product.

    See Sec. 1000.16.


Sec. 1131.17  [Reserved]


Sec. 1131.18  Cooperative association.

    See Sec. 1000.18.


Sec. 1131.19  Commercial food processing establishment.

    See Sec. 1000.19.

Handler Reports


Sec. 1131.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 7th day 
after the end of the month, in the detail and on the forms prescribed 
by the market administrator, as follows:
    (a) With respect to each of its pool plants, the quantities of skim 
milk and butterfat contained in or represented by:
    (1) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec. 1000.9(c);
    (2) Receipts of milk from handlers described in Sec. 1000.9(c);

[[Page 16283]]

    (3) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (4) Receipts of other source milk;
    (5) Inventories at the beginning and end of the month of fluid milk 
products and bulk fluid cream products; and (6) The utilization or 
disposition of all milk and milk products required to be reported 
pursuant to this paragraph.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. Such 
report shall show also the quantity of any reconstituted skim milk in 
route disposition in the marketing area.
    (c) Each handler described in Sec. 1000.9(c) shall report:
    (1) The quantities of all skim milk and butterfat contained in 
receipts of milk from producers; and
    (2) The utilization or disposition of all such receipts.
    (d) Each handler described in Sec. 1131.10 shall report:
    (1) The pounds of milk received from each of the handler's own-farm 
production units, showing separately the production of each farm unit 
and the number of dairy cows in production at each farm unit;
    (2) Fluid milk products and bulk fluid cream products received at 
its plant or acquired for route disposition from pool plants, other 
order plants, and handlers described in Sec. 1000.9(c);
    (3) Receipts of other source milk not reported pursuant to 
paragraph (d)(2) of this section;
    (4) Inventories at the beginning and end of the month of fluid milk 
products and fluid cream products; and (5) The utilization or 
disposition of all milk and milk products required to be reported 
pursuant to this paragraph.
    (e) Each handler not specified in paragraphs (a) through (d) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.


Sec. 1131.31  Payroll reports.

    (a) On or before the 20th day after the end of each month, each 
handler that operates a pool plant pursuant to Sec. 1131.7 and each 
handler described in Sec. 1000.9(c) shall report to the market 
administrator its producer payroll for such month, in the detail 
prescribed by the market administrator, showing for each producer:
    (1) The month;
    (2) The producer's name and address;
    (3) The daily and total pounds of milk received from the producer;
    (4) The total butterfat content of such milk; and
    (5) The price per hundredweight, the gross amount due, the amount 
and nature of any deductions, and the net amount paid.
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 1000.76(b) shall report for 
each dairy farmer who would have been a producer if the plant had been 
fully regulated in the same manner as prescribed for reports required 
by paragraph (a) of this section.


Sec. 1131.32  Other reports.

    In addition to the reports required pursuant to Sec. 1131.30 and 
Sec. 1131.31, each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Classification of Milk


Sec. 1131.40  Classes of utilization.

    See Sec. 1000.40.


Sec. 1131.41  [Reserved]


Sec. 1131.42  Classification of transfers and diversions.

    See Sec. 1000.42.


Sec. 1131.43  General classification rules.

    See Sec. 1000.43.


Sec. 1131.44  Classification of producer milk.

    See Sec. 1000.44.


Sec. 1131.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45.

Class Prices


Sec. 1131.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec. 1000.50.


Sec. 1131.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Maricopa County, Arizona, which is reported in Sec. 1000.52. The Class 
I price shall be the price computed pursuant to Sec. 1000.50(a) for 
Maricopa County, Arizona.


Sec. 1131.52  Adjusted Class I differentials.

    See Sec. 1000.52.


Sec. 1131.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec. 1000.53.


Sec. 1131.54  Equivalent price.

    See Sec. 1000.54.

Uniform Prices


Sec. 1131.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec. 1000.9(c) with respect to 
milk that was not received at a pool plant by adding the amounts 
computed in paragraphs (a) through (e) of this section and subtracting 
from that total amount the value computed in paragraph (f) of this 
section. Receipts of nonfluid milk products that are distributed as 
labeled reconstituted milk for which payments are made to the producer-
settlement fund of another Federal order under Sec. 1000.76(a)(4) or 
(d) shall be excluded from pricing under this section.
    (a) Multiply the pounds of skim milk and butterfat in producer milk 
that were classified in each class pursuant to Sec. 1000.44(c) by the 
applicable skim milk and butterfat prices, and add the resulting 
amounts;
    (b) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec. 1000.44(a)(11) and the corresponding 
steps of Sec. 1000.44(b) by the respective skim milk and butterfat 
prices applicable at the location of the pool plant;
    (c) Multiply the difference between the current month's Class I, 
II, or III price, as the case may be, and the Class IV price for the 
preceding month by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
    (d) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec. 1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(3)(i) through (vi) 
and the corresponding step of Sec. 1000.44(b), excluding receipts of 
bulk fluid cream products from plants regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants;
    (e) Multiply the Class I price applicable at the location of the 
nearest unregulated supply plants from which an equivalent volume was 
received by the pounds of skim milk and butterfat in receipts of 
concentrated fluid milk products assigned to Class I pursuant to

[[Page 16284]]

Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the corresponding steps 
of Sec. 1000.44(b) and the pounds of skim milk and butterfat subtracted 
from Class I pursuant to Sec. 1000.44(a)(8) and the corresponding step 
of Sec. 1000.44(b), excluding such skim milk and butterfat in receipts 
of fluid milk products from an unregulated supply plant to the extent 
that an equivalent amount of skim milk or butterfat disposed of to such 
plant by handlers fully regulated under any Federal milk order is 
classified and priced as Class I milk and is not used as an offset for 
any other payment obligation under any order; and
    (f) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of nonfluid milk products that are allocated to 
Class I use pursuant to Sec. 1000.43(d).


Sec. 1131.61  Computation of uniform prices.

    On or before the 11th day of each month, the market administrator 
shall compute a uniform butterfat price, a uniform skim milk price, and 
a uniform price for producer milk receipts reported for the prior 
month. The report of any handler who has not made payments required 
pursuant to Sec. 1131.71 for the preceding month shall not be included 
in the computation of these prices, and such handler's report shall not 
be included in the computation for succeeding months until the handler 
has made full payment of outstanding monthly obligations.
    (a) Uniform butterfat price. The uniform butterfat price per pound, 
rounded to the nearest one-hundredth cent, shall be computed by 
multiplying the pounds of butterfat in producer milk allocated to each 
class pursuant to Sec. 1000.44(b) by the respective class butterfat 
prices and dividing the sum of such values by the total pounds of such 
butterfat.
    (b) Uniform skim milk price. The uniform skim milk price per 
hundredweight, rounded to the nearest cent, shall be computed as 
follows:
    (1) Combine into one total the values computed pursuant to 
Sec. 1131.60 for all handlers;
    (2) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 1131.75;
    (3) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (4) Subtract the value of the total pounds of butterfat for all 
handlers. The butterfat value shall be computed by multiplying the 
pounds of butterfat by the butterfat price computed in paragraph (a) of 
this section;
    (5) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (i) The total skim pounds of producer milk; and
    (ii) The total skim pounds for which a value is computed pursuant 
to Sec. 1131.60(e); and
    (6) Subtract not less than 4 cents and not more than 5 cents.
    (c) Uniform price. The uniform price per hundredweight, rounded to 
the nearest cent, shall be the sum of the following:
    (1) Multiply the uniform butterfat price for the month pursuant to 
paragraph (a) of this section times 3.5 pounds of butterfat; and
    (2) Multiply the uniform skim milk price for the month pursuant to 
paragraph (b) of this section times .965.


Sec. 1131.62  Announcement of uniform prices.

    On or before the 11th day after the end of the month, the market 
administrator shall announce the uniform prices for the month computed 
pursuant to Sec. 1131.61.

Payments for Milk


Sec. 1131.70  Producer-settlement fund.

    See Sec. 1000.70.


Sec. 1131.71  Payments to the producer-settlement fund.

    Each handler shall make payment to the producer-settlement fund in 
a manner that provides receipt of the funds by the market administrator 
no later than the 13th day after the end of the month (except as 
provided in Sec. 1000.90). Payments due the market administrator shall 
be deemed not to have been made until the money owed has been received 
at the market administrator's office, or deposited into the market 
administrator's bank account. Payment shall be the amount, if any, by 
which the amount specified in paragraph (a) of this section exceeds the 
amount specified in paragraph (b) of this section:
    (a) The total value of milk to the handler for the month as 
determined pursuant to Sec. 1131.60.
    (b) The sum of:
    (1) The value at the uniform prices for skim milk and butterfat, 
adjusted for plant location, of the handler's receipts of producer 
milk; and
    (2) The value at the uniform price as adjusted pursuant to 
Sec. 1131.75 applicable at the location of the plant from which 
received of other source milk for which a value is computed pursuant to 
Sec. 1131.60(e).


Sec. 1131.72  Payments from the producer-settlement fund.

    No later than the 14th day after the end of each month (except as 
provided in Sec. 1000.90), the market administrator shall pay to each 
handler the amount, if any, by which the amount computed pursuant to 
Sec. 1131.71(b) exceeds the amount computed pursuant to 
Sec. 1131.71(a). If, at such time, the balance in the producer-
settlement fund is insufficient to make all payments pursuant to this 
section, the market administrator shall reduce uniformly such payments 
and shall complete the payments as soon as the funds are available.


Sec. 1131.73  Payments to producers and to cooperative associations.

    (a) Except as provided in paragraphs (b) and (c) of this section, 
each handler shall make payment to each producer from whom milk is 
received during the month as follows:
    (1) Partial payment. For each producer who has not discontinued 
shipments as of the 25th day of the month, payment shall be made so 
that it is received by the producer on or before the 27th day of each 
month (except as provided in Sec. 1000.90) for milk received from such 
producer during the first 15 days of the month at not less than 1.3 
times the lowest class price for the preceding month less proper 
deductions authorized in writing by the producer.
    (2) Final payment. For milk received during the month, a payment 
computed as follows shall be made so that it is received by each 
producer one day after the payment date required in Sec. 1131.72:
    (i) Multiply the hundredweight of producer skim milk received times 
the uniform skim milk price for the month;
    (ii) Multiply the pounds of producer butterfat received times the 
uniform butterfat price for the month;
    (iii) Multiply the hundredweight of producer milk received times 
the plant location adjustment pursuant to Sec. 1131.75; and
    (iv) Add the amounts computed in paragraph (a)(2)(i), (ii), and 
(iii) of this section, and from that sum:
    (A) Subtract the partial payment made pursuant to paragraph (a)(1) 
of this section;
    (B) Subtract the deduction for marketing services pursuant to 
Sec. 1000.86;
    (C) Add or subtract for errors made in previous payments to the 
producer,

[[Page 16285]]

subject to approval by the market administrator; and
    (D) Subtract proper deductions authorized in writing by the 
producer.
    (b) Two days prior to the dates on which partial and final payments 
are due pursuant to paragraph (a) of this section, each pool plant 
operator shall pay a cooperative association for milk received as 
follows:
    (1) Partial payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk (including the 
milk of producers who are not members of such association and who the 
market administrator determines have authorized the cooperative 
association to collect payment for their milk) received during the 
first 15 days of the month from a cooperative association in any 
capacity except as the operator of a pool plant, the payment shall be 
an amount not less than 1.3 times the lowest class price for the 
preceding month multiplied by the hundredweight of milk.
    (2) Partial payment to a cooperative association for milk 
transferred from its pool plant. For bulk fluid milk products and bulk 
fluid cream products received during the first 15 days of the month 
from a cooperative association in its capacity as the operator of a 
pool plant, the partial payment shall be at the pool plant operator's 
estimated use value of the milk using the most recent class prices 
available for skim milk and butterfat at the receiving plant's 
location.
    (3) Final payment to a cooperative association for milk transferred 
from its pool plant. For bulk fluid milk products and bulk fluid cream 
products received during the month from a cooperative association in 
its capacity as the operator of a pool plant, the final payment shall 
be the classified value of such milk as determined by multiplying the 
pounds of skim milk and butterfat assigned to each class pursuant to 
Sec. 1000.44 by the class prices for the month at the receiving plant's 
location, and subtracting from this sum the partial payment made 
pursuant to paragraph (b)(2) of this section.
    (4) Final payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk received from a 
cooperative association during the month, including the milk of 
producers who are not members of such association and who the market 
administrator determines have authorized the cooperative association to 
collect payment for their milk, the final payment for such milk shall 
be an amount equal to the sum of the individual payments otherwise 
payable for such milk pursuant to paragraph (a)(2) of this section.
    (c) If a handler has not received full payment from the market 
administrator pursuant to Sec. 1131.72 by the payment date specified in 
paragraph (a) or (b) of this section, the handler may reduce pro rata 
his payments pursuant to such paragraphs, but by not more than the 
amount of such underpayment. Payments to producers shall be completed 
on the next scheduled payment date after receipt of the balance due 
from the market administrator.
    (d) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer-settlement fund. In the event the handler subsequently locates 
and pays the producer or a lawful claimant, or in the event that the 
handler no longer exists and a lawful claim is later established, the 
market administrator shall make the required payment from the producer-
settlement fund to the handler or the lawful claimant, as the case may 
be.
    (e) In making payments to producers pursuant to this section, each 
pool plant operator shall furnish each producer, except a producer 
whose milk was received from a cooperative association described in 
Sec. 1000.9(a) or (c), a supporting statement in such form that it may 
be retained by the recipient which shall show:
    (1) The month, and identity of the producer;
    (2) The daily and total pounds and the total pounds of butterfat 
content of producer milk;
    (3) The minimum rate at which payment to the producer is required 
pursuant to this order;
    (4) The rate used in making payments if the rate is other than the 
applicable minimum rate;
    (5) The amount, rate per hundredweight, and nature of each 
deduction claimed by the handler; and
    (6) The net amount of payment to the producer or cooperative 
association.


Sec. 1131.74  [Reserved]


Sec. 1131.75  Plant location adjustments for producers and on nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec. 1131.51 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Secs. 1131.73 
and 1000.76.


Sec. 1131.76  Payments by handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76.


Sec. 1131.77  Adjustment of accounts.

    See Sec. 1000.77.


Sec. 1131.78  Charges on overdue accounts.

    See Sec. 1000.78.

Administrative Assessment and Marketing Service Deduction


Sec. 1131.85  Assessment for order administration.

    See Sec. 1000.85.


Sec. 1131.86  Deduction for marketing services.

    See Sec. 1000.86.

PART 1135--MILK IN THE WESTERN MARKETING AREA

Subpart--Order Regulating Handling

General Provisions

Sec.
1135.1 General provisions.

Definitions

1135.2  Western marketing area.
1135.3  Route disposition.
1135.4  Plant.
1135.5  Distributing plant.
1135.6  Supply plant.
1135.7  Pool plant.
1135.8  Nonpool plant.
1135.9  Handler.
1135.10  Producer-handler.
1135.11  Proprietary bulk tank handler.
1135.12  Producer.
1135.13  Producer milk.
1135.14  Other source milk.
1135.15  Fluid milk product.
1135.16  Fluid cream product.
1135.17  [Reserved]
1135.18  Cooperative association.
1135.19  Commercial food processing establishment.

Handler Reports

1135.30  Reports of receipts and utilization.
1135.31  Payroll reports.
1135.32  Other reports.

Classification of Milk

1135.40  Classes of utilization.
1135.41  [Reserved]
1135.42  Classification of transfers and diversions.
1135.43  General classification rules.
1135.44  Classification of producer milk.
1135.45  Market administrator's reports and announcements concerning 
classification.

Class Prices

1135.50  Class prices, component prices, and advanced pricing 
factors.
1135.51  Class I differential and price.
1135.52  Adjusted Class I differentials.

[[Page 16286]]

1135.53  Announcement of class prices, component prices, and 
advanced pricing factors.
1135.54  Equivalent price.

Producer Price Differential

1135.60  Handler's value of milk.
1135.61  Computation of producer price differential.
1135.62  Announcement of producer prices.

Payments for Milk

1135.70  Producer-settlement fund.
1135.71  Payments to the producer-settlement fund.
1135.72  Payments from the producer-settlement fund.
1135.73  Payments to producers and to cooperative associations.
1135.74  [Reserved]
1135.75  Plant location adjustments for producer milk and nonpool 
milk.
1135.76  Payments by a handler operating a partially regulated 
distributing plant.
1135.77  Adjustment of accounts.
1135.78  Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1135.85  Assessment for order administration.
1135.86  Deduction for marketing services.

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

Subpart--Order Regulating Handling

General Provisions


Sec. 1135.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to and are hereby made a part of this order. In this part 1135, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

Definitions


Sec. 1135.2  Western marketing area.

    The marketing area means all territory within the bounds of the 
following states and political subdivisions, including all piers, docks 
and wharves connected therewith and all craft moored thereat, and all 
territory occupied by government (municipal, State or Federal) 
reservations, installations, institutions, or other similar 
establishments if any part thereof is within any of the listed states 
or political subdivisions:

Utah

    All of the State of Utah.

Idaho Counties

    Ada, Adams, Bannock, Bear Lake, Bingham, Blaine, Boise, 
Bonneville, Camas, Canyon, Caribou, Cassia, Elmore, Franklin, Gem, 
Gooding, Jefferson, Jerome, Lincoln, Madison, Minidoka, Oneida, 
Owyhee, Payette, Power, Twin Falls, Valley, and Washington.

Nevada Counties

    Elko, Lincoln, and White Pine.

Oregon Counties

    Baker, Grant, Harney, Malheur, and Union.

Wyoming Counties

    Lincoln and Uinta.


Sec. 1135.3  Route disposition.

    See Sec. 1000.3.


Sec. 1135.4  Plant.

    See Sec. 1000.4.


Sec. 1135.5  Distributing plant.

    See Sec. 1000.5.


Sec. 1135.6  Supply plant.

    See Sec. 1000.6.


Sec. 1135.7  Pool plant.

    Pool Plant means a plant or unit of plants specified in paragraphs 
(a) through (e) of this section, but excluding a plant specified in 
paragraph (g) of this section. The pooling standards described in 
paragraphs (c) and (d) of this section are subject to modification 
pursuant to paragraph (f) of this section.
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or section 7(b) of any 
other Federal milk order, from which during the month 25 percent or 
more of the total quantity of fluid milk products physically received 
at the plant (excluding concentrated milk received from another plant 
by agreement for other than Class I use) are disposed of as route 
disposition or are transferred in the form of packaged fluid milk 
products to other distributing plants. At least 25 percent of such 
route disposition and transfers must be to outlets in the marketing 
area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 25 percent of the total quantity of 
fluid milk products physically received at the plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) into ultra-pasteurized or aseptically-processed fluid 
milk products.
    (c) A supply plant from which during the month the quantity of bulk 
fluid milk products transferred or diverted to plants described in 
paragraph (a) or (b) of this section is 35 percent or more of the total 
Grade A milk received at the plant from dairy farmers (except dairy 
farmers described in Sec. 1135.12(b)) and handlers described in 
Sec. 1000.9(c) and Sec. 1135.11, including milk diverted by the plant 
operator, subject to the following conditions:
    (1) A supply plant that has qualified as a pool plant during each 
of the immediately preceding months of September through February shall 
continue to so qualify in each of the following months of March through 
August unless the plant operator files a written request with the 
market administrator that such plant not be a pool plant, such nonpool 
status to be effective the first month following such request. A plant 
withdrawn from pool supply plant status may not be reinstated for any 
subsequent month of the March through July period unless it qualifies 
as a pool plant on the basis of milk shipments;
    (2) A pool plant operator may include as qualifying shipments milk 
diverted to pool distributing plants pursuant to Sec. 1135.13(c);
    (3) Concentrated milk transferred from the supply plant to a 
distributing plant for an agreed-upon use other than Class I shall be 
excluded from the supply plant's shipments in computing the plant's 
shipping percentage; and
    (4) No plant may qualify as a pool plant due to a reduction in the 
shipping percentage pursuant to paragraph (f) of this section unless it 
has been a pool supply plant during each of the immediately preceding 3 
months.
    (d) A milk manufacturing plant located within the marketing area 
that is operated by a cooperative association if, during the month or 
the immediately preceding 12-month period ending with the current 
month, 35% or more of such cooperative's member producer milk (and any 
producer milk of nonmembers and members of another cooperative 
association which may be marketed by the cooperative association) is 
physically received in the form of bulk fluid milk products (excluding 
concentrated milk transferred to a distributing plant for an agreed-
upon use other than Class I) at plants specified in paragraph (a) or 
(b) of this section either directly from farms or by transfer from 
supply plants operated by the cooperative association and from plants 
of the cooperative association for which pool plant status has been 
requested under this paragraph subject to the following conditions:
    (1) The plant does not qualify as a pool plant under paragraph (a), 
(b) or (c) of this section or under comparable provisions of another 
Federal order; and
    (2) The plant is approved by a duly constituted regulatory agency 
for the handling of milk approved for fluid consumption in the 
marketing area.
    (e) Two or more plants located in the marketing area and operated 
by the same handler may qualify for pool plant status as a unit by 
together meeting the requirements specified in paragraph (a)

[[Page 16287]]

of this section and subject to the following additional requirements:
    (1) At least one of the plants in the unit must individually 
qualify as a pool plant pursuant to paragraph (a) of this section;
    (2) Other plants in the unit must process Class I or Class II 
products, using 50 percent or more of the total Grade A fluid milk 
products received in bulk form at such plant or diverted therefrom by 
the plant operator in Class I or Class II products, and must be located 
in a pricing zone providing the same or a lower Class I price than the 
price applicable at the distributing plant included in the unit 
pursuant to paragraph (e)(1) of this section; and
    (3) A written request to form a unit must be filed by the handler 
with the market administrator prior to the first day of the month for 
which such status is to be effective. The unit shall continue from 
month to month thereafter without further notification. The handler 
shall notify the market administrator in writing prior to the first day 
of any month for which termination or any change of the unit is 
desired.
    (f) The applicable shipping percentages of paragraphs (c) and (d) 
of this section may be increased or decreased by the market 
administrator if the market administrator finds that such adjustment is 
necessary to encourage needed shipments or to prevent uneconomic 
shipments. Before making such a finding, the market administrator shall 
investigate the need for adjustment either on the market 
administrator's own initiative or at the request of interested parties 
if the request is made in writing at least 15 days prior to the month 
for which the requested revision is desired effective. If the 
investigation shows that an adjustment of the shipping percentages 
might be appropriate, the market administrator shall issue a notice 
stating that an adjustment is being considered and invite data, views 
and arguments. Any decision to revise an applicable shipping percentage 
must be issued in writing at least one day before the effective date.
    (g) The term pool plant shall not apply to the following plants:
    (1) A producer-handler as defined under any Federal order;
    (2) An exempt plant as defined in 1000.8(e);
    (3) A plant located within the marketing area and qualified 
pursuant to paragraph (a) of this section which meets the pooling 
requirements of another Federal order, and from which more than 50 
percent of its route disposition has been in the other Federal order 
marketing area for 3 consecutive months;
    (4) A plant located outside any Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of another Federal order and has had greater route 
disposition in such other Federal order's marketing area for 3 
consecutive months;
    (5) A plant located in another Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of such other Federal order and does not have a 
majority of its route distribution in this marketing area for 3 
consecutive months or if the plant is required to be regulated under 
such other Federal order without regard to its route disposition in any 
other Federal order marketing area;
    (6) A plant qualified pursuant to paragraph (c) of this section 
which also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under the other Federal order than are made to plants regulated under 
this order, or the plant has automatic pooling status under the other 
Federal order; and
    (7) That portion of a regulated plant designated as a nonpool plant 
that is physically separate and operated separately from the pool 
portion of such plant. The designation of a portion of a regulated 
plant as a nonpool plant must be requested in advance and in writing by 
the handler and must be approved by the market administrator.


Sec. 1135.8  Nonpool plant.

    See Sec. 1000.8.


Sec. 1135.9  Handler.

    In addition to the handlers defined in Sec. 1000.9, handler shall 
include a person meeting the standards set forth in Sec. 1135.11.


Sec. 1135.10  Producer-handler.

    Producer-handler means a person who:
    (a) Operates a dairy farm and a distributing plant from which there 
is route disposition in the marketing area during the month;
    (b) Receives fluid milk products from own farm production or milk 
that is fully subject to the pricing and pooling provisions of this or 
another Federal order;
    (c) Receives at its plant or acquires for route disposition no more 
than 150,000 pounds of fluid milk products from handlers fully 
regulated under any Federal order. This limitation shall not apply if 
the producer-handler's own farm production is less than 150,000 pounds 
during the month;
    (d) Disposes of no other source milk as Class I milk except by 
increasing the nonfat milk solids content of the fluid milk products; 
and
    (e) Provides proof satisfactory to the market administrator that 
the care and management of the dairy animals and other resources 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) and the processing 
and packaging operations are the producer-handler's own enterprise and 
are operated at its own risk.


Sec. 1135.11  Proprietary bulk tank handler.

    Any person, except a cooperative association, with respect to milk 
that it receives for its account from the farm of a producer in a tank 
truck owned and operated by, or under the control of, such person and 
which is delivered during the month for the account of such person to 
the pool plant of another handler or diverted pursuant to Sec. 1135.13, 
subject to the following conditions:
    (a) Such person must operate a plant located in the marketing area 
at which milk is processed only into Class II, Class III, or Class IV 
products; and
    (b) Prior to operating as a handler pursuant to this paragraph, 
such person must submit to the marker administrator a statement signed 
by the applicant and the operator of the pool plant to which the milk 
will be delivered specifying that the applicant will be the responsible 
handler for the milk.


Sec. 1135.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
(or components of milk) is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec. 1135.13; or
    (2) Received by a handler described in Sec. 1000.9(c) or 
Sec. 1135.11.
    (b) Producer shall not include:
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is delivered to an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to 
Sec. 1135.13(d);
    (3) A dairy farmer whose milk is diverted to a pool plant by a 
handler regulated under another Federal order if the other Federal 
order designates the dairy farmer as a producer under that order and 
that milk is allocated by request to a utilization other than Class I;

[[Page 16288]]

    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order; and
    (5) A dairy farmer whose milk was received at a nonpool plant 
during the month from the same farm (except a nonpool plant that has no 
utilization of milk products in any Class other than Class III or Class 
IV) as other than producer milk under this or any other Federal order. 
Such a dairy farmer shall be known as a dairy farmer for other markets.


Sec. 1135.13  Producer milk.

    Producer milk means the skim milk (or the skim equivalent of 
components of skim milk), including nonfat components, and butterfat in 
milk of a producer that is:
    (a) Received by the operator of a pool plant directly from a 
producer, a handler described in Sec. 1000.9(c), or a handler described 
in Sec. 1135.11. All milk received pursuant to this paragraph shall be 
priced at the location of the plant where it is first physically 
received;
    (b) Received by a handler described in Sec. 1000.9(c) or in 
Sec. 1135.11 in excess of the quantity delivered to pool plants;
    (c) Diverted by a pool plant operator to another pool plant. Milk 
so diverted shall be priced at the location of the plant to which 
diverted; or
    (d) Diverted by the operator of a pool plant, a cooperative 
association described in Sec. 1000.9(c), or a proprietary bulk tank 
handler described in Sec. 1135.11, to a nonpool plant, subject to the 
following conditions:
    (1) Milk of a dairy farmer shall not be eligible for diversion 
unless at least one day's milk production of such dairy farmer has been 
physically received as producer milk at a pool plant and the dairy 
farmer has continuously retained producer status since that time. If a 
dairy farmer loses producer status under this order (except as a result 
of a temporary loss of Grade A approval), the dairy farmer's milk shall 
not be eligible for diversion until one day's milk production has been 
physically received as producer milk at a pool plant;
    (2) Of the quantity of producer milk received during the month 
(including diversions) the handler diverts to nonpool plants not more 
than 90 percent;
    (3) Two or more handlers described in Sec. 1000.9(c) may have their 
allowable diversions computed on the basis of their combined deliveries 
of producer milk which they caused to be delivered to pool plants or 
diverted during the month if each has filed a request in writing with 
the market administrator before the first day of the month the 
agreement is to be effective. The request shall specify the basis for 
assigning overdiverted milk to the producer deliveries of each 
according to a method approved by the market administrator.
    (4) Diverted milk shall be priced at the location of the plant to 
which diverted;
    (5) Any milk diverted in excess of the limits prescribed in 
paragraph (d)(2) of this section shall not be producer milk. If the 
diverting handler, cooperative association, or proprietary bulk tank 
handler fails to designate the dairy farmers' deliveries that are not 
to be producer milk, no milk diverted by the handler, cooperative 
association, or proprietary bulk tank handler during the month to a 
nonpool plant shall be producer milk. In the event some of the milk of 
any producer is determined not to be producer milk pursuant to this 
paragraph, other milk delivered by such producer as producer milk 
during the month will not be subject to Sec. 1135.12(b)(5); and
    (6) The delivery day requirement in paragraph (d)(1) of this 
section and the diversion percentage in paragraph (d)(2) of this 
section may be increased or decreased by the market administrator if 
the market administrator finds that such revision is necessary to 
assure orderly marketing and efficient handling of milk in the 
marketing area. Before making such a finding, the market administrator 
shall investigate the need for the revision either on the market 
administrator's own initiative or at the request of interested persons 
if the request is made in writing at least 15 days prior to the month 
for which the requested revision is desired effective. If the 
investigation shows that a revision might be appropriate, the market 
administrator shall issue a notice stating that the revision is being 
considered and inviting written data, views, and arguments. Any 
decision to revise the delivery day requirement or the diversion 
percentage must be issued in writing at least one day before the 
effective date.


Sec. 1135.14  Other source milk.

    See Sec. 1000.14.


Sec. 1135.15  Fluid milk product.

    See Sec. 1000.15.


Sec. 1135.16  Fluid cream product.

    See Sec. 1000.16.


Sec. 1135.17  [Reserved]


Sec. 1135.18  Cooperative association.

    See Sec. 1000.18.


Sec. 1135.19  Commercial food processing establishment.

    See Sec. 1000.19

Handler Reports


Sec. 1135.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market administrator 
receives the report on or before the 7th day after the end of each 
month, in the detail and on the forms prescribed by the market 
administrator, as follows:
    (a) Each handler that operates a pool plant pursuant to Sec. 1135.7 
shall report for each of its operations the following information:
    (1) Product pounds, pounds of butterfat, pounds of protein, and 
pounds of solids-not-fat other than protein (other solids), contained 
in or represented by:
    (i) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec. 1000.9(c) and Sec. 1135.11; and
    (ii) Receipts of milk from handlers described in Sec. 1000.9(c) and 
Sec. 1135.11;
    (2) Product pounds and pounds of butterfat contained in:
    (i) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (ii) Receipts of other source milk; and
    (iii) Inventories at the beginning and end of the month of fluid 
milk products and bulk fluid cream products;
    (3) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph; and
    (4) Such other information with respect to the receipts and 
utilization of skim milk, butterfat, milk protein, and other nonfat 
solids, as the market administrator may prescribe.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. The 
report shall show also the quantity of any reconstituted skim milk in 
route disposition in the marketing area.
    (c) Each handler described in Secs. 1000.9(c) or 1135.11 shall 
report:
    (1) The product pounds, pounds of butterfat, pounds of protein, and 
the pounds of solids-not-fat other than protein (other solids) 
contained in receipts of milk from producers; and

[[Page 16289]]

    (2) The utilization or disposition of such receipts.
    (d) Each handler not specified in paragraphs (a) through (c) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.


Sec. 1135.31  Payroll reports.

    (a) On or before the 21st day after the end of each month, each 
handler that operates a pool plant pursuant to Sec. 1135.7 and each 
handler described in Sec. 1000.9(c) and in Sec. 1135.11 shall report to 
the market administrator its producer payroll for the month, in the 
detail prescribed by the market administrator, showing for each 
producer the information described in Sec. 1135.73(e).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 1000.76(b) shall report for 
each dairy farmer who would have been a producer if the plant had been 
fully regulated in the same manner as prescribed for reports required 
by paragraph (a) of this section.


Sec. 1135.32  Other reports.

    In addition to the reports required pursuant to Secs. 1135.30 and 
1135.31, each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Classification of Milk


Sec. 1135.40  Classes of utilization.

    See Sec. 1000.40.


Sec. 1135.41  [Reserved]


Sec. 1135.42  Classification of transfers and diversions.

    See Sec. 1000.42.


Sec. 1135.43  General classification rules.

    See Sec. 1000.43.


Sec. 1135.44  Classification of producer milk.

    See Sec. 1000.44.


Sec. 1135.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45.

Class Prices


Sec. 1135.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec. 1000.50.


Sec. 1135.51  Class I differential and price.

    The Class I differential shall be the differential established at 
Salt Lake County, Utah, which is reported in Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for Salt 
Lake County, Utah.


Sec. 1135.52  Adjusted Class I differentials.

    See Sec. 1000.52.


Sec. 1135.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec. 1000.53.


Sec. 1135.54  Equivalent price.

    See Sec. 1000.54.

Producer Price Differential


Sec. 1135.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants, and of each handler described in Sec. 1000.9(c) and each 
handler described in Sec. 1135.11, with respect to milk that was not 
received at a pool plant, by adding the amounts computed in paragraphs 
(a) through (h) of this section and subtracting from that total amount 
the value computed in paragraph (i) of this section. Unless otherwise 
specified, the skim milk, butterfat, and the combined pounds of skim 
milk and butterfat referred to in this section shall result from the 
steps set forth in Sec. 1000.44(a), (b), and (c), respectively, and the 
nonfat components of producer milk in each class shall be based upon 
the proportion of such nonfat components in producer skim milk. 
Receipts of nonfluid milk products that are distributed as labeled 
reconstituted milk for which payments are made to the producer-
settlement fund of another Federal order under Sec. 1000.76(a)(4) or 
(d) shall be excluded from pricing under this section.
    (a) Class I value.
    (1) Multiply the hundredweight of skim milk in Class I by the Class 
I skim milk price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class I by the Class I butterfat price.
    (b) Class II value.
    (1) Multiply the pounds of nonfat solids in Class II skim milk by 
the Class II nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class II times the Class II butterfat price.
    (c) Class III value.
    (1) Multiply the pounds of protein in Class III skim milk by the 
protein price;
    (2) Add an amount obtained by multiplying the pounds of other 
solids in Class III skim milk by the other solids price; and
    (3) Add an amount obtained by multiplying the pounds of butterfat 
in Class III by the butterfat price.
    (d) Class IV value.
    (1) Multiply the pounds of nonfat solids in Class IV skim milk by 
the nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class IV by the butterfat price.
    (e) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec. 1000.44(a)(11) and the corresponding 
step of Sec. 1000.44(b) by the skim milk prices and butterfat prices 
applicable to each class.
    (f) Multiply the difference between the current month's Class I, 
II, or III price, as the case may be, and the Class IV price for the 
preceding month by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);
    (g) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec. 1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(3)(i) through (vi) 
and the corresponding step of Sec. 1000.44(b), excluding receipts of 
bulk fluid cream products from plants regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants.
    (h) Multiply the difference between the Class I price applicable at 
the location of the nearest unregulated supply plants from which an 
equivalent volume was received and the Class III price by the pounds of 
skim milk and butterfat in receipts of concentrated fluid milk products 
assigned to Class I pursuant to Sec. 1000.43(d) and 
Sec. 1000.44(a)(3)(i) and the pounds of skim milk and butterfat 
subtracted from Class I pursuant to Sec. 1000.44(a)(8) and the 
corresponding step of Sec. 1000.44(b), excluding such skim milk and 
butterfat in receipts of fluid milk products from an unregulated supply 
plant to the extent that an equivalent amount of skim milk or butterfat 
disposed of to such plant by handlers fully regulated under any Federal 
milk order is classified and priced as Class I milk and is not used as 
an offset for any other payment obligation under any order.
    (i) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and

[[Page 16290]]

butterfat contained in receipts of nonfluid milk products that are 
allocated to Class I use pursuant to Sec. 1000.43(d).


Sec. 1135.61  Computation of producer price differential.

    For each month the market administrator shall compute a producer 
price differential per hundredweight. The report of any handler who has 
not made payments required pursuant to Sec. 1135.71 for the preceding 
month shall not be included in the computation of the producer price 
differential, and such handler's report shall not be included in the 
computation for succeeding months until the handler has made full 
payment of outstanding monthly obligations. Subject to the 
aforementioned conditions, the market administrator shall compute the 
producer price differential in the following manner:
    (a) Combine into one total the values computed pursuant to 
Sec. 1135.60 for all handlers required to file reports prescribed in 
Sec. 1135.30;
    (b) Subtract the total values obtained by multiplying each 
handler's total pounds of protein, other solids, and butterfat 
contained in the milk for which an obligation was computed pursuant to 
Sec. 1135.60 by the protein price, the other solids price, and the 
butterfat price, respectively;
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 1135.75;
    (d) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (e) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (1) The total hundredweight of producer milk; and
    (2) The total hundredweight for which a value is computed pursuant 
to Sec. 1135.60(h); and
    (f) Subtract not less than 4 cents nor more than 5 cents from the 
price computed pursuant to paragraph (e) of this section. The result 
shall be known as the producer price differential for the month.


Sec. 1135.62  Announcement of producer prices.

    On or before the 12th day after the end of each month, the market 
administrator shall announce publicly the following prices and 
information:
    (a) The producer price differential;
    (b) The protein price;
    (c) The nonfat solids price;
    (d) The other solids price;
    (e) The butterfat price;
    (f) [Reserved]
    (g) The average butterfat, protein, nonfat solids, and other solids 
content of producer milk; and
    (h) The statistical uniform price for milk containing 3.5 percent 
butterfat, computed by combining the Class III price and the producer 
price differential.

Payments for Milk


Sec. 1135.70  Producer-settlement fund.

    See Sec. 1000.70.


Sec. 1135.71  Payments to the producer-settlement fund.

    Each handler shall make payment to the producer-settlement fund in 
a manner that provides receipt of the funds by the market administrator 
no later than the 14th day after the end of the month (except as 
provided in Sec. 1000.90). Payment shall be the amount, if any, by 
which the amount specified in paragraph (a) of this section exceeds the 
amount specified in paragraph (b) of this section:
    (a) The total value of milk to the handler for the month as 
determined pursuant to Sec. 1135.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 1135.75;
    (2) An amount obtained by multiplying the total pounds of protein, 
other solids, and butterfat contained in producer milk by the protein, 
other solids, and butterfat prices respectively;
    (3) [Reserved]
    (4) An amount obtained by multiplying the pounds of skim milk and 
butterfat for which a value was computed pursuant to Sec. 1135.60(h) by 
the producer price differential as adjusted pursuant to Sec. 1135.75 
for the location of the plant from which received.


Sec. 1135.72  Payments from the producer-settlement fund.

    No later than the 15th day after the end of each month (except as 
provided in Sec. 1000.90), the market administrator shall pay to each 
handler the amount, if any, by which the amount computed pursuant to 
Sec. 1135.71(b) exceeds the amount computed pursuant to 
Sec. 1135.71(a). If, at such time, the balance in the producer-
settlement fund is insufficient to make all payments pursuant to this 
section, the market administrator shall reduce uniformly such payments 
and shall complete the payments as soon as the funds are available.


Sec. 1135.73  Payments to producers and to cooperative associations.

    (a) Except as provided in paragraph (b) of this section, each 
handler shall make payment to each producer from whom milk is received 
during the month as follows:
    (1) Partial Payment. On or before the 25th day of each month 
(except as provided in Sec. 1000.90) to each producer an amount not 
less than 1.2 times the lowest class price for the preceding month 
multiplied by the hundredweight of milk received from such producer 
during the first 15 days of the month, less proper deductions 
authorized in writing by such producer to be made from payments due 
pursuant to this paragraph.
    (2) Final Payment. On or before the 17th day of the following month 
(except as provided in Sec. 1000.90), not less than an amount computed 
by the sum of the following:
    (i) The hundredweight of producer milk received times the producer 
price differential for the month as adjusted pursuant to Sec. 1135.75;
    (ii) The pounds of butterfat in producer milk received times the 
butterfat price for the month;
    (iii) The pounds of protein in producer milk received times the 
protein price for the month;
    (iv) The pounds of other solids in producer milk received times the 
other solids price for the month;
    (v) [Reserved]
    (vi) Less any payments made pursuant to paragraph (a)(1) of this 
section;
    (vii) Less proper deductions authorized in writing by such producer 
and plus or minus adjustments for errors in previous payments to such 
producer subject to approval by the market administrator; and
    (viii) Less deductions made for marketing service pursuant to 
Sec. 1000.86.
    (b) One day prior to the dates on which partial and final payments 
are due pursuant to paragraph (a) of this section, each pool plant 
operator shall pay a cooperative association for milk received as 
follows:
    (1) Partial payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk (including the 
milk of producers who are not members of such association and who the 
market administrator determines have authorized the cooperative 
association to collect payment for their milk) received during the 
first 15 days of the month from a cooperative association in any 
capacity, except as the operator of a pool plant, the payment shall be 
an amount not less than 1.2 times the lowest class price for the 
preceding

[[Page 16291]]

month multiplied by the hundredweight of milk.
    (2) Partial payment to a cooperative association for milk 
transferred from its pool plant. For bulk fluid milk products and bulk 
fluid cream products received during the first 15 days of the month 
from a cooperative association in its capacity as the operator of a 
pool plant, the partial payment shall be at the pool plant operator's 
estimated use value of the milk using the most recent class prices 
available at the receiving plant's location.
    (3) Final payment to a cooperative association for milk transferred 
from its pool plant. For the total quantity of bulk fluid milk products 
and bulk fluid cream products received from a cooperative association 
in its capacity as the operator of a pool plant, the final payment 
shall be at not less than the total value of such products received 
from the association's pool plants, as determined by multiplying the 
respective quantities assigned to each class under Sec. 1000.44, as 
follows:
    (i) The hundredweight of Class I skim milk times the Class I skim 
milk price for the month plus the pounds of Class I butterfat times the 
Class I butterfat price for the month. The Class I prices to be used 
shall be the prices effective at the location of the receiving plant;
    (ii) The pounds of nonfat solids in Class II skim milk by the Class 
II nonfat solids price;
    (iii) The pounds of butterfat in Class II times the Class II 
butterfat price;
    (iv) The pounds of nonfat solids in Class IV times the nonfat 
solids price;
    (v) The pounds of butterfat in Class III and Class IV milk times 
the butterfat price;
    (vi) The pounds of protein in Class III milk times the protein 
price;
    (vii) The pounds of other solids in Class III milk times the other 
solids price; and (viii) Add together the amounts computed in 
paragraphs (b)(3) (i) through (vii) of this section and from that sum 
deduct any payment made pursuant to paragraph (b)(1) of this section.
    (4) Final payment to a cooperative association for bulk milk 
received directly from producers' farms. For bulk milk received from a 
cooperative association during the month, including the milk of 
producers who are not members of such association and who the market 
administrator determines have authorized the cooperative association to 
collect payment for their milk, the final payment for such milk shall 
be an amount equal to the sum of the individual payments otherwise 
payable for such milk pursuant to paragraph (a)(2) of this section.
    (c) If a handler has not received full payment from the market 
administrator pursuant to Sec. 1135.72 by the payment date specified in 
paragraph (a) or (b) of this section, the handler may reduce pro rata 
its payments to producers or to the cooperative association by not more 
than the amount of such underpayment. The payments shall be completed 
on the next scheduled payment date after receipt of the balance due 
from the market administrator.
    (d) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer settlement fund, and in the event the handler subsequently 
locates and pays the producer or a lawful claimant, or in the event 
that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer-settlement fund to the handler or to the lawful 
claimant, as the case may be.
    (e) In making payments to producers pursuant to this section, each 
handler shall furnish each producer, except a producer whose milk was 
received from a cooperative association handler described in 
Sec. 1000.9 (a) or (c), a supporting statement in a form that may be 
retained by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and payroll number of the producer;
    (2) The daily and total pounds, and the month and dates such milk 
was received from that producer;
    (3) The total pounds of butterfat, protein, and other solids 
contained in the producer's milk;
    (4) [Reserved]
    (5) The minimum rate or rates at which payment to the producer is 
required pursuant to this order;
    (6) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (7) The amount, or rate per hundredweight, or rate per pounds of 
component, and the nature of each deduction claimed by the handler; and
    (8) The net amount of payment to the producer or cooperative 
association.


Sec. 1135.74  [Reserved]


Sec. 1135.75  Plant location adjustments for producer milk and nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec. 1135.51 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Secs. 1135.73 
and 1000.76.


Sec. 1135.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76.


Sec. 1135.77  Adjustment of accounts.

    See Sec. 1000.77.


Sec. 1135.78  Charges on overdue accounts.

    See Sec. 1000.78.

Administrative Assessment and Marketing Service Deduction


Sec. 1135.85  Assessment for order administration.

    See Sec. 1000.85.


Sec. 1135.86  Deduction for marketing services.

    See Sec. 1000.86.

    Note: Appendices A through F are to the Preamble and will not be 
condified in Title 7 of the Code of Federal Regulations.

Appendix A: Summary of Preliminary Suggested Order Consolidation Report

    Ten marketing areas are suggested in the preliminary 
consolidation report. As a means of determining where 
interrelationships among the current marketing areas are strongest, 
data relating to the receipts and distribution of fluid milk 
products by distributing plants were gathered for all known 
distributing plants located in the 47 contiguous States, not 
including the State of California, for the month of October 1995. At 
this time, California is not included as a suggested order area. The 
1996 Farm Bill allows for the inclusion of a California Federal milk 
order if California producers petition for and approve an order. If 
a California order were included in the suggested Federal order 
structure at a later time, it would encompass the entire State and 
would include no area outside the State of California. Although 
interest in a Federal order has been expressed by some California 
producer groups, no definite action has been taken.
    An analysis of the distribution and procurement patterns of the 
fluid processing plants, along with other factors, was used to 
determine which order areas were most closely related. Proposals 
submitted by the public were also taken into account. The primary 
criteria used in determining which markets exhibit a sufficient 
degree of association in terms of sales, procurement, and structural 
relationships to warrant consolidation were:
    1. Overlapping route disposition.
    2. Overlapping areas of milk supply.
    3. Number of handlers within a market.
    4. Natural boundaries.
    5. Cooperative association service areas.

[[Page 16292]]

    6. Features common to existing orders, such as similar multiple 
component pricing payment plans.
    7. Milk utilization in common dairy products.
    The requirement to consolidate existing marketing areas does not 
specify expansion of regulation to previously nonfederally regulated 
areas where such expansion would have the effect of regulating 
handlers not currently regulated. However, a number of the current 
marketing areas enclose unregulated areas. These ``pockets'' are 
included in the suggested merged marketing areas only if their 
inclusion does not change the current regulatory status of a plant. 
In the process of consolidating marketing areas, some handlers who 
currently are partially regulated may become fully regulated because 
their sales in a combined marketing area will likely meet the 
pooling standards of a suggested consolidated order. Further 
expansion of the marketing areas, which would result in regulating 
additional handlers, is an issue that should be addressed by the 
industry. Proposals to take such action should be accompanied by 
supporting data, views, and arguments concerning the need and basis 
for any such expansion.
    The 10 suggested consolidated marketing areas and the major 
reasons for consolidation are:
    1. NORTHEAST--current marketing areas of the New England, New 
York-New Jersey, and Middle Atlantic Federal milk orders. Reasons 
for consolidation include the existence of overlapping sales and 
procurement areas between New England and New York-New Jersey and 
between New York-New Jersey and Middle Atlantic. The orders are also 
surrounded by nonfederally regulated territory. A further measure of 
association is evident by industry efforts to study and pursue 
consolidation of the three Federal orders, as well as some of the 
nonfederally regulated territory, prior to the 1996 Farm Bill.
    2. APPALACHIAN--current marketing areas of the Carolina and 
Tennessee Valley Federal milk orders, and a portion of the 
Louisville-Lexington-Evansville Federal milk order. Overlapping 
sales and procurement areas between these marketing areas are major 
factors for supporting such a consolidation.
    3. FLORIDA--current marketing areas of the Upper Florida, Tampa 
Bay, and Southeastern Florida Federal milk orders. Natural boundary 
limitations and overlapping sales and procurement areas among the 
three orders are major reasons for consolidation, as well as a 
measure of association evidenced by cooperative association 
proposals to consolidate these three marketing areas. Further, the 
cooperative associations in this area have worked together for a 
number of years to accommodate needed movements of milk between the 
three Florida Federal orders.
    4. SOUTHEAST--current marketing area of the Southeast Federal 
milk order, plus 1 county from the Louisville-Lexington-Evansville 
Federal milk order marketing area, 15 currently unregulated Kentucky 
counties, and 2 currently unregulated northeast Texas counties. 
Major reasons for this consolidation include sales and procurement 
area overlaps between the Southeast order and the Kentucky and Texas 
counties suggested for inclusion. There is minimal sales area 
overlap with handlers regulated under other Federal orders.
    5. MIDEAST--current marketing areas of the Ohio Valley, Eastern 
Ohio-Western Pennsylvania, Southern Michigan, and Indiana Federal 
milk orders, plus most of the current marketing area of the 
Louisville-Lexington-Evansville Federal milk order, Zone 2 of the 
Michigan Upper Peninsula Federal milk order, and 12 counties of the 
Southern Illinois-Eastern Missouri Federal milk order. Major 
criteria suggesting this consolidation include the overlap of fluid 
sales in the Ohio Valley marketing area by handlers from the other 
areas suggested to be consolidated. With the consolidation, most 
route disposition by handlers located within the suggested Mideast 
order would be within the marketing area. Also, nearly all milk 
produced within the area would be pooled under the consolidated 
order. The portion of the Michigan Upper Peninsula marketing area 
suggested to be included in the Mideast consolidated area has sales 
and milk procurement areas in common with the Southern Michigan area 
and has minimal association with the western end of the current 
Michigan Upper Peninsula marketing area.
    6. UPPER MIDWEST--current marketing areas of the Chicago 
Regional and Upper Midwest Federal milk orders, plus Zones I and 
I(a) of the Michigan Upper Peninsula Federal milk order and seven 
unregulated or partly unregulated Wisconsin counties. Major 
consolidation criteria include an overlapping procurement area 
between the Chicago Regional and Upper Midwest orders, overlapping 
procurement and route disposition area between the western end of 
the Michigan Upper Peninsula order and the Chicago Regional order, 
natural boundary limitations, and the prevalence of cheese as a 
major manufactured product for the substantial reserve milk supplies 
that exceed fluid milk needs.
    7. CENTRAL--current marketing areas of the Southern Illinois-
Eastern Missouri (less 12 counties included in the suggested Mideast 
marketing area), Central Illinois, Greater Kansas City, Nebraska-
Western Iowa (less 11 currently-regulated counties suggested to be 
unregulated), Eastern South Dakota, Iowa, Southwest Plains, and 
Eastern Colorado Federal milk orders, plus 63 currently-unregulated 
counties in seven of the states. Major criteria suggesting this 
consolidation include the overlapping procurement and route 
disposition between the current orders. The suggested consolidation 
would result in a concentration of both the sales and supplies of 
milk within the consolidated marketing area. The suggested 
consolidation would combine several relatively small orders and 
provide for the release of market data without revealing proprietary 
information. In addition, most of the producers in these areas share 
membership in several common cooperatives.
    8. SOUTHWEST--current marketing areas of the Texas, New Mexico-
West Texas, and Central Arizona Federal milk orders. Major criteria 
suggesting consolidation include sales and procurement area overlaps 
and common cooperative association membership between the Texas and 
New Mexico-West Texas marketing areas, and similar marketing 
concerns with respect to trade with Mexico for all three orders. In 
addition, there is some route disposition by Central Arizona 
handlers into the New Mexico-West Texas marketing area, and the 
Central Arizona market contains a small number of handlers.
    9. WESTERN--current marketing areas of the Western Colorado, 
Southwestern Idaho-Eastern Oregon, and Great Basin Federal milk 
orders. Major criteria suggesting consolidation include overlapping 
sales between Southwestern Idaho-Eastern Oregon and Great Basin, as 
well as a significant overlap in procurement for the two orders in 
five Idaho counties. The two orders also share a similar multiple 
component pricing plan. The Western Colorado order is included 
because it is a small market where data cannot be released without 
revealing confidential information unless combined with the adjacent 
Great Basin order.
    10. PACIFIC NORTHWEST--current marketing area of the Pacific 
Northwest Federal milk order plus 1 currently-unregulated county in 
Oregon. The degree of association with other marketing areas is 
insufficient to warrant consolidation.
    Following is a table summarizing relevant data for the 
consolidated markets:

                                           Consolidated Market Summary
                                          [Based on October 1995 data]
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of
                                                                  Total producer       fully      Combined class
                       Consolidated order                          milk  (1,000      regulated     I utilization
                                                                       lbs.)       distributing      (percent)
                                                                                      plants
----------------------------------------------------------------------------------------------------------------
Northeast.......................................................       1,934,833              85            46.7
Appalachian.....................................................         320,198              25            82.5
Florida.........................................................         200,397              18            88.3
Southeast.......................................................         443,921              38            84.3

[[Page 16293]]

 
Mideast.........................................................      11,140,952              68            57.8
Upper Midwest...................................................     2 1,046,539              27          4 34.2
Central.........................................................         932,929              42            50.6
Southwest.......................................................         861,307              31            48.3
Western.........................................................         304,793              14          5 31.7
Pacific Northwest...............................................         501,257              23            36.3
    Total.......................................................       7,687,126             371             n/a
                                                                 -----------------------------------------------
----------------------------------------------------------------------------------------------------------------
\1\ Producer milk for F.O. 44 is included. Producer milk for a F.O. 32 handler who would be pooled under the
  suggested Mideast market is included in the Central consolidated market.
\2\ Producer milk for F.O. 30 and F.O. 68 only.
\3\ Producer milk for a F.O. 32 handler that would be in the Mideast consolidated market is included.
\4\ A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would
  result in a 15.3% combined Class I utilization.
\5\ A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would
  result in a 21.8% combined Class I utilization.

Appendix B: Summary of Pricing Options

    Several options for modifying Class I pricing under the Federal 
milk market order program, representing a spectrum of views, are 
discussed in this summary report. The accompanying technical report 
summarizes all of the comments and proposals received by the 
Department related to Class I pricing under Federal orders.
    Most Class I pricing concepts that were suggested would continue 
to employ a market-driven basic formula price (BFP) with an added 
differential. Differentials are a composite of one or more of the 
following elements: (1) A fixed component, (2) a location 
adjustment, (3) an adjustor relating to utilization, or (4) the cost 
of balancing the market. Based on the pricing concepts received, the 
following options were developed:
    Option 1A: Location-Specific Differential--$1.60 per 
hundredweight fixed differential for three surplus regions (Upper 
Midwest, West, and Southwest) within a nine-zone national price 
surface, plus for the other six zones an added component that 
reflects regional differences in the value of fluid and 
manufacturing milk.
    Option 1B: Modified Location-Specific Differential Option--$1.00 
per hundredweight fixed differential plus an added component that 
reflects the cost of moving bulk milk to deficit markets.
    Option 2: Relative Use Differential--$1.60 per hundredweight 
fixed differential plus a formula-based differential driven by the 
ratio of Class I milk to all other uses of milk.
    Option 3A: Flat Differential Option--$1.60 per hundredweight 
flat differential, uniformly applied across all orders to generate 
an identical minimum Class I price.
    Option 3B: Flat Differential Modified by Class I Use--$2.00 per 
hundredweight differential in markets where Class I utilization is 
less than 70 percent on an annual basis and a differential equal to 
$2.00 + $0.075(Class I use %--70%) in markets where the Class I 
utilization is equal to or exceeds 70 percent.
    Option 4: Demand-Based Differential--$1.00 per hundredweight 
fixed differential plus a transportation credit based on location of 
reserve milk supplies.
    Estimated Class I differentials are presented for each option to 
provide a preliminary basis for determining impacts that may occur. 
The report provides estimated differentials for the suggested 10 
consolidated orders and for the current 32 Federal milk marketing 
orders.
    The report concludes by soliciting comments on the options 
presented and poses a series of questions for the public to address 
when submitting comments back to the Department on the issue of 
Class I pricing.

Appendix C: Summary of Classification Report

    The Agricultural Marketing Agreement Act of 1937 provides that 
all milk should be classified ``in accordance with the form in which 
or the purpose for which it is used.'' This has resulted in a system 
of uniform classification provisions that places milk used for fluid 
purposes in the highest use class, Class I, and other manufactured 
products in lower classes, Classes II, III, and III-A.
    Currently products packaged for fluid consumption such as whole 
milk, skim milk, buttermilk, and flavored milk drinks are classified 
as Class I products. Class II products include ice cream, yogurt, 
cottage cheese, and cream. Class III and Class III-A products 
include cheese, butter, and nonfat dry milk.
    Among the changes in classification recommended in the technical 
report are the following:
     Eggnog would be reclassified from Class II to Class I.
     Any fluid beverage having less than 6.5 percent nonfat 
milk solids would be reclassified from Class II to Class I.
     Cream cheese would be reclassified from Class III to 
Class II.
    The technical report recommends changing the classification of 
milk used in nonfat dry milk from Class III-A to Class III. The 
report recommends that if Class III-A pricing is not eliminated, the 
following four alternatives be considered:
     Place a floor beneath the Class III-A price;
     Restrict III-A pricing to certain months or to certain 
markets;
     Provide an up-charge for nonfat dry milk used in 
higher-valued products; or
     Provide for a combination of these options.
    Maintaining the classification of milk used to make nonfat dry 
milk in Class III-A is also an option, although not discussed in the 
technical report.
    The technical report addresses Class III-A pricing because of 
industry concerns about the substitution of nonfat dry milk for 
fluid milk in Class II and III uses when the Class III-A price is 
substantially below the Class III price.

Appendix D: Summary of Identical Provisions Report

    Federal milk marketing orders contain numerous provisions that 
establish the regulations for the operation of the orders. Over the 
years, the orders have been individualized to account for specific 
situations associated with a given marketing area. However, there 
are several provisions within the orders that are similar or that 
could be similar and still provide for efficient and orderly 
marketing of milk.
    The technical report does the following:

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     Suggests a model for establishing the consolidated 
orders and provides suggestions on the order language that can be 
adopted uniformly throughout all orders.
     Reviewed, simplified, modified, and eliminated 
differences in order provisions that:
     Define various terms used in the orders.
     Establish regulatory standards for plants and handlers.
     Provide for uniform reporting dates of milk receipts 
and utilization.
     Provide for uniform dates for payment of milk.
     Provide for computation of a uniform price.
     Reduces performance standards to make it easier for 
producers to associate with a market.
    At this time, it is impossible to determine if there would be 
any financial impact on producers, handlers, or consumers as a 
result of any of these suggested provision revisions. It is 
projected that there will be little impact on the overall program 
because the changes primarily provide for uniformity. There may be 
minimal impact on selected individual producers, handlers, or 
consumers, but this cannot be determined until more specific 
information is developed regarding the orders (i.e., marketing area 
and pricing). The suggested identical provisions will be applied to 
each of the suggested consolidated orders and determinations will be 
based on the marketing conditions of the given region.
    One suggested change in the report that may stimulate some 
debate is the definition of a producer-handler. The technical report 
suggests applying the most liberal standard to the producer-handler 
definition to prevent any producer-handler from becoming regulated 
as a result of milk order reform. Producer-handlers have been exempt 
from full regulation because they assume the full risks associated 
with being a producer and a distributor of milk produced with only 
occasional and small volumes of milk being purchased from other 
dairy farmers.

Appendix E: Summary of Basic Formula Price Report

    The basic formula price (BFP) is used to determine Federal order 
prices for milk used in manufactured products and, with the addition 
of differentials, to determine minimum Class I and II prices for 
milk pooled under the Federal orders. The current BFP is based on a 
survey of prices paid for manufacturing grade (Grade B) milk by 
plants in Minnesota and Wisconsin, updated by month-to-month changes 
in commodity prices (especially cheese). The continuing decline in 
the volume of Grade B milk produced in the upper Midwest and 
nationally is an indication that, in the near future, the M-W price 
series may not be statistically reliable as an indicator of the 
value of milk used in manufactured products.
    The BFP Committee has received input provided during a public 
BFP Forum held in Madison, Wisconsin, and from over 200 written 
public comments, and conducted a survey of transaction prices for 
manufactured dairy products. The Committee also has sponsored 
analysis by a group of university researchers, and conducted 
extensive study and analysis of its own. The BFP Committee evaluated 
alternatives to the BFP against the criteria of stability, 
predictability, simplicity, uniformity, transparency, sound 
economics and reduced regulation. Options identified by the 
Committee were grouped into the following categories:

Options Considered: Economic formulas
Product price and component formulas
Futures markets
California pricing
Cost of production
Informal rulemaking
Competitive pay price
Pooling differentials only

    At this time, the Committee has identified four options for 
further discussion and debate:
     A four-class, multiple component pricing plan to price 
butterfat, protein and lactose used in cheese (Class III), and 
butterfat and nonfat solids used in butter/powder (Class IV).
     A three-class, multiple component pricing plan to price 
protein used in cheese, butterfat used in butter, and other nonfat 
solids used in powder (Class III--one manufacturing class).
     A product price formula computed from the butter, 
powder and cheese shares of U.S. production, using seasonal product 
yields and a California cost-based make allowance; and
     A competitive pay price series using a national 
weighted average price paid for Grade A milk used in manufactured 
products, updated by a product price formula. The price series would 
contain an adjuster to attempt to remove the effect of current 
regulation and to reduce it to a level more comparable to the 
current BFP.
    As a basis for Class I prices, the BFP could be made more stable 
by using an economic formula or using a moving average of a 
manufacturing price. Class II prices could be based on components or 
continue to include a differential from the manufacturing price 
level.
    The BFP Committee is continuing to study and analyze 
alternatives in response to public comments.

Appendix F: Summary of Revised Preliminary Suggested Order 
Consolidation Report

    The ten marketing areas suggested in the initial preliminary 
consolidation report have increased to eleven and been modified to 
some extent in this revised preliminary report. Several of the 
initially suggested marketing areas were the subjects of numerous 
comments containing information that indicated that the boundaries 
of those areas should be re-evaluated. In addition, shifts in 
regulation and distributing plant distribution areas were known to 
have occurred. As a result, more detailed and updated (January 1997) 
data was obtained relating to the receipts of producer milk and 
distribution of fluid milk products by distributing plants in a 
number of the initially-suggested order marketing areas. As a 
result, changes were made in the suggested marketing areas of the 
Northeast, Appalachian, Southeast, Mideast, Upper Midwest, Central, 
Southwest, and Western regions, and a new Arizona-Las Vegas area was 
added.
    An analysis of the distribution and procurement patterns of the 
fluid processing plants, along with other factors, was used to 
determine which order areas were most closely related. Proposals 
submitted by the public were also taken into account. The primary 
criteria used in determining which markets exhibit a sufficient 
degree of association in terms of sales, procurement, and structural 
relationships to warrant consolidation continued to be:
    1. Overlapping route disposition.
    2. Overlapping areas of milk supply.
    3. Number of handlers within a market.
    4. Natural boundaries.
    5. Cooperative association service areas.
    6. Features common to existing orders, such as similar multiple 
component pricing plans.
    7. Milk utilization in common dairy products.
    In the initial preliminary report, it was observed that the Farm 
Bill requirement to consolidate existing marketing areas does not 
specify expansion of regulation to previously non-Federally 
regulated areas where such expansion would have the effect of 
regulating handlers not currently regulated. This revised 
preliminary report suggests that some currently non-Federally 
regulated area be added on the basis of comments supported by data, 
views and arguments filed by interested persons. Specifically, 
unregulated areas contiguous to the initial suggested consolidated 
Northeast and Mideast marketing areas are suggested for inclusion in 
those suggested order areas. Some handlers currently not subject to 
full Federal order regulation would become pool plants if the 
suggested areas are added. Handlers who would be affected will be 
notified of the possible change in their status, and encouraged to 
comment.
    As in the initial preliminary report, ``pockets'' of unregulated 
areas enclosed in the current marketing areas are included in the 
suggested consolidated marketing areas if their inclusion does not 
change the current regulatory status of a plant. However, in the 
process of consolidating marketing areas, some handlers who 
currently are partially regulated may become fully regulated because 
their sales in a combined marketing area will meet the pooling 
standards of a suggested consolidated order area. As a result, this 
report suggests that some unregulated areas contiguous to currently-
regulated areas be added to Federal order areas where additional 
handlers would be affected.
    The 11 modified suggested marketing areas (with those modified 
from the initial preliminary report, and the modifications, marked 
by *) and the major reasons for consolidation are:
    *1. NORTHEAST--current marketing areas of the New England, New 
York-New Jersey, and Middle Atlantic Federal milk orders, *with the 
addition of: contiguous unregulated areas of New Hampshire, Vermont 
and New York; the western non-Federally regulated portion of 
Massachusetts, the Western New York State order area, and 
Pennsylvania Milk Marketing Board Areas 2 and 3 in northeastern 
Pennsylvania.

[[Page 16295]]

    Reasons for consolidation include the existence of overlapping 
sales and procurement areas between New England and New York-New 
Jersey and between New York-New Jersey and Middle Atlantic. In 
several cases, handlers who would become regulated because their 
total sales in the combined areas would meet pooling standards are 
located in areas where they compete with handlers who would not be 
similarly regulated. Handler equity suggests that these handlers, 
too, should become regulated. Another important measure of 
association is evidenced by industry efforts to study and pursue 
consolidation of the three Federal orders, as well as some of the 
nonfederally regulated territory, prior to the 1996 Farm Bill.
    Sixteen additional distributing plants would be pooled as a 
result of the expansion of the consolidated area. Nine of these 
plants currently are partially regulated.
    *2. APPALACHIAN--current marketing areas of the Carolina and 
Tennessee Valley Federal milk orders, *with the addition of: all of 
the Louisville-Lexington-Evansville Federal order area (except one 
county--in the suggested Southeast area) and 26 currently-
unregulated counties in Indiana and Kentucky.
    More detailed and updated data showing overlapping sales and 
procurement areas between these marketing areas are major factors 
for supporting such a consolidation.
    3. FLORIDA--current marketing areas of the Upper Florida, Tampa 
Bay, and Southeastern Florida Federal milk orders.
    Natural boundary limitations and overlapping sales and 
procurement areas among the three orders are major reasons for 
consolidation, as well as a measure of association evidenced by 
cooperative association proposals to consolidate these three 
marketing areas. Further, the cooperative associations in this area 
have worked together for a number of years to accommodate needed 
movements of milk between the three Florida Federal orders.
    *4. SOUTHEAST--current marketing area of the Southeast Federal 
milk order, plus 1 county from the Louisville-Lexington-Evansville 
Federal milk order marketing area, plus 15 currently-unregulated 
Kentucky counties, *minus 2 currently-unregulated counties in 
northeast Texas (in the suggested Southwest area).
    Major reasons for this consolidation include sales and 
procurement area overlaps between the Southeast order and this 
county. There is minimal sales area overlap with handlers regulated 
under other Federal orders. Collection of additional data showed 
greater disposition in the two Texas counties from Texas handlers 
than from Southeast handlers. There are no handlers in these two 
counties that would be affected.
    *5. MIDEAST--current marketing areas of the Ohio Valley, Eastern 
Ohio-Western Pennsylvania, Southern Michigan, and Indiana Federal 
milk orders, plus Zone 2 of the Michigan Upper Peninsula Federal 
milk order, and currently-unregulated counties in Michigan, Indiana, 
and Ohio *with the addition of: Pennsylvania Milk Marketing Board 
Area 6 (in western/central Pennsylvania) and 2 currently-unregulated 
counties in New York, and *minus the Louisville-Lexington-Evansville 
order area, 12 counties in Illinois, and unregulated counties in 
Indiana and Kentucky that are being suggested for inclusion in the 
Appalachian area.
    Major criteria suggesting this consolidation include the overlap 
of fluid sales in the Ohio Valley marketing area by handlers from 
the other areas suggested to be consolidated. With the 
consolidation, most route disposition by handlers located within the 
suggested Mideast order would be within the marketing area. Also, 
nearly all milk produced within the area would be pooled under the 
consolidated order. The portion of the Michigan Upper Peninsula 
marketing area suggested to be included in the Mideast consolidated 
area has sales and milk procurement areas in common with the 
Southern Michigan area and has minimal association with the western 
end of the current Michigan Upper Peninsula marketing area.
    Collection of additional data and recent changes in marketing 
patterns indicate that the relationship between the Louisville-
Lexington-Evansville (L-L-E) area and the order areas initially 
included in the suggested Appalachian area is closer than 
relationship between L-L-E and the Mideast area.
    Seven distributing plants that would not have been pool plants 
as a result of the initially-suggested consolidation would become 
pool plants due to the suggested expansion of the consolidated area 
into Pennsylvania and New York. The number of pool plants also is 
affected by a shift of pool plants from one consolidated area to 
another because of the shift of territory from the initially-
suggested Mideast area to the revised suggested Appalachian area.
    *6. UPPER MIDWEST--current marketing areas of the Chicago 
Regional, Upper Midwest, Zones I and I(a) of the Michigan Upper 
Peninsula Federal milk orders, and unregulated portions of 
Wisconsin, *with the addition of: the Iowa, Eastern South Dakota, 
and most of the Nebraska-Western Iowa Federal order areas, plus 
currently-unregulated counties in Iowa and Nebraska.
    Major consolidation criteria include an overlapping procurement 
area between the Chicago Regional and Upper Midwest orders and 
overlapping procurement and route disposition area between the 
western end of the Michigan Upper Peninsula order and the Chicago 
Regional order. More-detailed and updated information revealed more 
significant overlapping procurement and route disposition areas 
between the Iowa, Eastern South Dakota and Nebraska-Western orders 
and Chicago Regional and Upper Midwest orders than had been observed 
in the initial study. In addition, a common pricing plan for 
producers, natural boundary limitations, and the prevalence of 
cheese as a major manufactured product for the substantial reserve 
milk supplies that exceed fluid milk needs exist in these orders. 
Some of the western Nebraska area is more closely associated with 
the Eastern Colorado area, however, and is suggested to remain with 
the Central consolidated area.
    Eleven additional handlers that would have been pooled under the 
consolidated Central order in the initial Preliminary Report would 
be pooled under a consolidated Upper Midwest order under this 
revised report.
    *7. CENTRAL--current marketing areas of the Southern Illinois-
Eastern Missouri, Central Illinois, Greater Kansas City, Southwest 
Plains, and Eastern Colorado Federal milk orders, 10 counties 
currently in the Nebraska-Western Iowa Federal order area, plus 55 
currently-unregulated counties in Kansas, Missouri, Illinois, 
Nebraska and Colorado, *plus the 12 counties in the current Southern 
Illinois-Eastern Missouri area that initially were suggested as part 
of the consolidated Mideast area, *minus the Eastern South Dakota, 
Iowa and most of the Nebraska-Western Iowa Federal order marketing 
areas.
    Major criteria suggesting this consolidation include the 
overlapping procurement and route disposition between the current 
orders. The suggested consolidation would result in a concentration 
of both the sales and supplies of milk within the consolidated 
marketing area. The suggested consolidation would combine several 
relatively small orders and provide for the release of market data 
without revealing proprietary information. In addition, most of the 
producers in these areas share membership in several common 
cooperatives.
    *8. SOUTHWEST--current marketing areas of Texas and New Mexico-
West Texas Federal milk orders, *with the addition of: two northeast 
Texas counties previously suggested to be added to the Southeast 
marketing area, and 47 currently-unregulated counties in southwest 
Texas, and *minus the Central Arizona marketing area.
    Major criteria suggesting consolidation include sales and 
procurement area overlaps and common cooperative association 
membership between the Texas and New Mexico-West Texas marketing 
areas, and similar marketing concerns with respect to trade with 
Mexico for both orders. Addition of the currently-unregulated Texas 
counties will result in the regulation of no additional handlers, 
and will reduce handlers' recordkeeping and reporting burden and the 
market administrator's administrative costs. In the initial 
consolidation report, the Central Arizona area was found to have a 
minimal association with the New Mexico-West Texas and Texas order 
areas. Further analysis showed that it has a much more significant 
degree of association with the Clark County, Nevada, portion of the 
current Great Basin order area.
    The revised suggested consolidated Southwest area would include 
4 fewer fully regulated pool plants as a result of the removal of 
the Central Arizona area.
    *9. ARIZONA-LAS VEGAS--*an eleventh marketing area composed of 
the current marketing area of the Central Arizona order and the 
Clark County, Nevada, portion of the current Great Basin marketing 
area, plus eight currently-unregulated Arizona counties.
    The major criterion suggesting consolidation is sales overlap 
between the sole Las Vegas, Nevada, handler and handlers regulated 
under the Central Arizona order in both Clark County, Nevada, and 
unregulated portions of northern Arizona. In addition,

[[Page 16296]]

both areas exchange significant volumes of bulk and packaged milk 
with Southern California.
    The suggested Arizona-Las Vegas marketing area would include 
five fully regulated handlers, with no additional handlers regulated 
because of the addition of the currently-unregulated northern 
Arizona area.
    *10. WESTERN--current marketing areas of the Western Colorado, 
Southwestern Idaho-Eastern Oregon, and Great Basin Federal milk 
orders, *minus Clark County, Nevada. Major criteria suggesting 
consolidation include overlapping sales between Southwestern Idaho-
Eastern Oregon and Great Basin, as well as a significant overlap in 
procurement for the two orders in five Idaho counties. The two 
orders also share a similar multiple component pricing plan. The 
Western Colorado order is included because it is a small market 
where data cannot be released without revealing confidential 
information unless combined with the adjacent Great Basin order.
    Collection of more-detailed data indicates that the strength of 
earlier relationships between the former Great Basin and Lake Mead 
orders that justified their 1988 merger have dwindled significantly, 
with the Las Vegas area now more closely related to southern 
California and competing most heavily with Central Arizona handlers.
    11. PACIFIC NORTHWEST--current marketing area of the Pacific 
Northwest Federal milk order plus 1 currently-unregulated county in 
Oregon. The degree of association with other marketing areas is 
insufficient to warrant consolidation.
    Following is a table summarizing relevant data for the 
consolidated markets.

                                                               Consolidated Market Summary
                                                              [Based on October 1995 Data]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Number of fully       Total producer milk (1000     Combined class I use        Weighted average
                                                regulated distributing              lbs.)                     (percent)             utilization value
                                                        plants          --------------------------------------------------------------------------------
              Consolidated order              --------------------------
                                                 Initial      Revised    Initial report    Revised      Initial      Revised      Initial      Revised
                                                  report       report                     report \1\     report       report       report       report
--------------------------------------------------------------------------------------------------------------------------------------------------------
Northeast....................................           85           92       1,934,833    2,102,620         46.7         49.0       $13.44       $13.49
Appalachian..................................           25           29         320,198  \2\ 412,813         82.5         81.5        14.11        13.94
Florida......................................           18           16     \3\ 200,397      204,541         88.3         88.3        15.05        15.05
Southeast....................................           38           40     \4\ 443,921      442,705         84.3         84.3        14.26        14.25
Mideast......................................           68           68   \5\ 1,140,952    1,103,366         57.8         57.2        12.96        12.94
Upper Midwest................................           27           39   \6\ 1,046,539    1,354,209     \7\ 34.2     \8\ 37.6        12.59        12.62
Central......................................           42           30     \9\ 932,929      599,334         50.6         53.5        13.15        13.21
Southwest....................................           31           26         861,307      680,232         48.3         48.1        13.36        13.39
Arizona-Las Vegas............................          N/A            7             N/A  \10\ 181,07          N/A         48.9          N/A        13.26
                                                                                                   5
Western......................................           14           11         304,793      293,714    \11\ 31.7    \12\ 29.6        12.79        12.78
Pacific Northwest............................           23           21         501,257      493,207         36.3         35.6        12.45        12.44
                                              ----------------------------------------------------------------------------------------------------------
    Total....................................          371          379       7,687,126    7,867,816          N/A          N/A          N/A          N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------
Consolidated Market Summary Table Footnotes
 
\1\ Initial report producer deliveries, adjusted to include only those handlers who would be fully regulated (i.e. Status = 1) in the revised suggested
  marketing area, unless otherwise noted. When applicable, producer deliveries for currently non-Federally regulated plants which would be fully
  regulated in a revised suggested consolidated order are included in the appropriate suggested consolidated order.
\2\ Includes producer milk for one currently fully regulated plant which would be exempt (i.e. Status = 3B) in the Appalachian market in the revised
  preliminary report.
\3\ Excludes producer milk for one currently fully regulated F.O. 7 plant which would be regulated in the Florida market in the initial preliminary
  report.
\4\ Includes producer milk for one currently fully regulated F.O. 7 plant which would be regulated in the Florida market in the initial preliminary
  report.
\5\ Producer milk for F.O. 44 is included. Producer milk for a F.O. 32 handler who would be pooled under the initially-suggested Mideast market is
  included in the initially-suggested Central market.
\6\ Producer milk for F.O. 30 and F.O. 68 only.
\7\ A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 15.3% combined Class I
  utilization.
\8\ A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 19.7% combined Class I
  utilization.
\9\ Includes producer milk for a F.O. 32 handler that would be in the initially-suggested Mideast market.
\10\ Excludes producer milk for one currently fully regulated F.O. 139 plant and one currently unregulated plant which would be regulated in the Arizona-
  Las Vegas market in the revised preliminary report.
\11\ A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 21.8% combined Class I
  utilization.
\12\ A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 21.6% combined Class I
  utilization.

[FR Doc. 99-6547 Filed 4-1-99; 8:45 am]
BILLING CODE 3410-02-P