[Federal Register Volume 65, Number 105 (Wednesday, May 31, 2000)]
[Rules and Regulations]
[Pages 34570-34581]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13507]


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NORTHEAST DAIRY COMPACT COMMISSION

7 CFR Parts 1306, 1307 and 1309


Over-Order Price Regulation

AGENCY: Northeast Dairy Compact Commission.

ACTION: Final rule.

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SUMMARY: The Northeast Dairy Compact Commission amends the over-order 
price regulation to establish a milk supply management plan. This new 
program addresses the requirement in the Northeast Interstate Dairy 
Compact that the Commission take such action as necessary and feasible 
to ensure that the over-order price regulation does not create an 
incentive for milk producers to generate additional supplies of milk. 
This rule establishes an assessment/refund plan under which the 
Commission will withhold 7.5 cents from the per hundredweight producer 
price in each month there is a Compact payment, so long as the 
resultant Compact producer price is at least 25 cents per 
hundredweight. The Commission will, on an annual basis, return the 
withheld funds to only those Compact eligible producers who increased 
their milk production at a rate of one percent or less, as compared to 
the prior year's milk production. The refund will be paid to eligible 
producers by distributing one-half of the assessed funds on an equal 
payment to each eligible producer and one-half on a per hundredweight 
basis of the total milk production for the program year, up to a 
maximum per hundredweight refund of $12,000. The program year will be 
from July 1 through June 30. This supply management plan is intended to 
ensure that the over-order price regulation does not create an 
incentive

[[Page 34571]]

to generate additional supplies of milk and that it continues to meet 
the Commission's primary mission to assure the continued viability of 
dairy farming in the northeast and to assure New England consumers of 
an adequate and local supply of milk.

EFFECTIVE DATE: July 1, 2000.

ADDRESSES: Northeast Dairy Compact Commission, 34 Barre Street, Suite 
2, Montpelier, Vermont 05602.

FOR FURTHER INFORMATION CONTACT: Kenneth M. Becker, Executive Director, 
Northeast Dairy Compact Commission at the above address or by telephone 
at (802) 229-1941, or by facsimile at (802) 229-2028.

SUPPLEMENTARY INFORMATION:

I. Background

    The Northeast Dairy Compact Commission (``Commission'') was 
established under authority of the Northeast Interstate Dairy Compact 
(``Compact''). The Compact was enacted into law by each of the six 
participating New England states as follows: Connecticut--Pub. L. 93-
320; Maine--Pub. L. 89-437, as amended, Pub. L. 93-274; Massachusetts--
Pub. L. 93-370; New Hampshire--Pub. L. 93-336; Rhode Island--Pub. L. 
93-106; Vermont--Pub. L. 93-57. In accordance with Article I, Section 
10 of the United States Constitution, Congress consented to the Compact 
in Pub. L. 104-127 (FAIR Act), Section 147, codified at 7 U.S.C. 7256. 
Subsequently, the United States Secretary of Agriculture, pursuant to 7 
U.S.C. 7256(1), authorized implementation of the Compact. In November 
1999, the Congressional consent to the Compact was extended through 
September 30, 2001. 7 U.S.C. 7256(3), as amended by Pub. L. 106-113 
Sec. 4.
    Pursuant to its rulemaking authority under Article V, Section 11 of 
the Compact, the Commission concluded an informal rulemaking process 
and voted to adopt a compact over-order price regulation on May 30, 
1997. \1\ The Commission has subsequently amended and extended the 
compact over-order price regulation. The current compact over-order 
price regulation is codified at 7 CFR Chapter XIII.
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    \1\ 62 FR 29626, May 30, 1997.
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    The Compact requires the Commission, when establishing a compact 
over-order price, to ``take such action as necessary and feasible to 
ensure that the over-order price does not create an incentive for 
producers to generate additional supplies of milk.'' Compact Article 
IV, Section 9(f). As required by this section, the Commission has taken 
several steps to monitor milk production in New England since 
implementation of the over-order price regulation. In 1997, the 
Commission contracted with two Universities to conduct various studies, 
including an assessment of the cost of milk production in New England 
and an analysis of milk supply in the Compact region. In 1998, the 
Commission's Committee on Regulations and Rulemaking held five regional 
meetings to obtain information from the region's farmers regarding the 
increase in milk production in the region and the Commission's 
responsibilities under Article IV, Section 9(f) of the Compact. The 
Commission also conducted an historical review of milk supply control 
methods that have been attempted in the past on a national or regional 
level. Finally, the Commission initiated a series of informal 
rulemaking proceedings.
    The Commission began informal rulemaking proceedings relating to 
milk supply management by issuing a notice on November 27, 1998. In 
that notice the Commission requested public comment and testimony on 
several subjects and issues, including whether additional supply 
management policies and provisions should be incorporated into the 
over-order price regulation. \2\ The Commission specifically solicited 
comments on four distinct methods of addressing milk supply management 
through the Compact producer price payment. The four options were: (1) 
to establish a cap that would limit the milk eligible for the Compact 
payments to up to 95,000 pounds of a producer's monthly milk 
production; (2) to establish a cap that would limit the milk eligible 
for the Compact payments at the 1998 production level for farms 
producing in excess of 600,000 pounds per month; (3) a refund/
assessment plan that would withhold an assessment from each Compact 
monthly pool and refund the assessed funds to only producers who did 
not increase their milk production during the program period; and (4) a 
split pool proposal that would withhold a certain amount from each 
monthly pool and then redistribute those funds to all eligible 
producers by dividing the total and paying a set percentage to all 
farms on an equal basis and the remainder on a per hundredweight basis.
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    \2\ 63 FR 65563, Nov. 27, 1998.
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    The Commission held a public hearing to receive testimony on 
December 11, 1998 in Boxborough, Massachusetts and comments were 
received until 5:00 p.m. on December 31, 1998. At its January 13, 1999 
meeting, the Commission voted to close the subjects and issues 
rulemaking proceeding and to refer the issues and comments and 
testimony received to the Committee on Regulations and Rulemaking for 
review and analysis. The Committee was directed to return to the 
Commission with its recommendations no later than the May 1999 meeting.
    The Committee presented its recommendations to the Commission at 
the April 7, 1999 meeting. The Commission voted to initiate an informal 
rulemaking proceeding and to propose a specific assessment and refund 
program to address its responsibilities under Article IV, Section 9(f) 
of the Compact.\3\ The assessment and refund program proposed assessing 
a flat rate of $250,000, or approximately four cents per hundredweight, 
from each producer pool. The assessment obligation would have carried 
forward to the next pool in any month without a Compact payment. The 
refund of the assessments would have been paid to only those producers 
who increased their milk production at a rate of one percent or less. 
The refund would be paid in two parts, the first at a flat rate to each 
eligible producer, and the second part to only those producers who 
reduced their milk production based on the hundredweight of milk that 
the current year's production was less than the prior year's 
production. The Commission held a public hearing on May 5, 1999 in 
Concord, New Hampshire and received comments until May 19, 1999.
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    \3\ 64 FR 19084, Apr. 19, 1999.
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    At its meeting on June 2, 1999, and after considering the testimony 
and comments submitted in the rulemaking proceeding, the Commission 
voted to reopen the proceeding and to propose as a second option a 
base/excess plan, in addition to a modified assessment/refund plan.\4\ 
The proposed base/excess plan would establish a monthly base production 
level for each producer, using the prior year's production in that 
month as the base. The producer would then only be eligible for Compact 
payments on the volume of milk produced in the current month up to the 
base volume of milk produced in the same month in the prior year. There 
would be no Compact payment on milk produced in excess of the base. The 
amended assessment and refund plan would establish an assessment of 
five cents per hundredweight against the producer pay price, but only 
in months with a Compact payment.
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    \4\ 64 FR 33027, June 21, 1999.

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[[Page 34572]]

    The Commission held public hearings on July 7, 1999 in West 
Springfield, Massachusetts and August 4, 1999 in White River Junction, 
Vermont on the proposed base/excess and modified assessment/refund 
plans. The Commission received written comments through August 18, 
1999.
    At its September 1, 1999 meeting, the Commission voted to postpone 
deliberation on the proposed supply management rules pending resolution 
of legislation in Congress regarding reauthorization and expansion of 
the Compact. The Commission repeated this action at its October 6, 1999 
and November 10, 1999 meetings.
    Following Congressional reauthorization on November 29, 1999, the 
Commission began deliberations on the proposed supply management rules 
at its December 1, 1999 meeting. The Commission voted to reject the 
proposed base/excess plan, due to excessive administrative costs 
associated with that proposal, as demonstrated in the hearing record 
through testimony and comment, and to move forward with the analysis of 
the public comment on the proposed assessment/refund program. The 
Commission's Committee on Regulations and Rulemaking continued its 
analysis of the rulemaking record.
    At the February 2, 2000 Commission meeting, because so much time 
had passed since the last public comment period and new milk production 
statistics were available, the Commission voted to close the pending 
supply management proceedings and instructed the Committee on 
Regulations to hold a public meeting and to return to the Commission's 
March meeting with a new proposed rule to address the Commission's 
responsibilities under Article IV, Section 9(f) of the Compact. The 
Committee held a public meeting on February 23, 2000 to discuss the 
Commission's supply management options.
    On March 8, 2000 the Commission voted to propose a revised 
assessment/refund plan that would assess five cents against the 
producer price in each month with a Compact pool, and refund those 
funds to all producers who had maintained their milk production at or 
below one percent of the prior year's production. The refund would be 
distributed in two parts, with the first paid to all eligible producers 
at an equal payment to each producer and the second part on a per 
hundredweight basis of total milk production for the program year. The 
Commission held a public hearing on April 5, 2000 in Bedford, New 
Hampshire. \5\ The Commission accepted written comments until April 19, 
2000.
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    \5\ 65 FR 12146, Mar. 8, 2000.
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    Based on the comments received in the public meetings on supply 
management in April and May 1998 and February 2000 and oral testimony 
and written comments and exhibits received in the December 1998 
subjects and issues rulemaking proceeding, and the May, July and August 
1999 and April 2000 public hearings and proposed rulemaking 
proceedings, the Commission implements a supply management plan through 
an assessment and refund payment to producers who maintain their milk 
production up to one percent of the prior year's production level. The 
comments and testimony received as part of the public participation in 
the rulemaking proceedings and the milk supply management plan are 
described in detail below.

II. Summary of Public Comments and Testimony

A. Summary of 1998 Proceedings

    The Commission has closely monitored the milk supply in the New 
England states since the implementation of the over-order price 
regulation. In 1998, the Commission initiated a comprehensive 
investigation into the increase in milk production that occurred in the 
first three quarters of 1998 and to evaluate how best to address its 
obligations under Article IV, Section 9(f) of the Compact. These 
activities included holding five regional meetings of the Committee on 
Regulations and Rulemaking and the review and analysis of supply 
management options proposed for the United States Dairy Industry over 
the years. The Commission also initiated a subjects and issues 
rulemaking proceeding to obtain public comments and testimony regarding 
additional regulation of the New England milk supply.
    The Commission held five regional meetings of its Committee on 
Regulations and Rulemaking in April and May of 1998. These meetings 
were held in Vermont, Massachusetts, Saratoga Springs, New York, 
Connecticut and Maine. The Commission received oral and written 
comments in response to those meetings. A summary of the oral \6\ and 
written \7\ comments is included in the December 1998 rulemaking 
record. Additional letters and telephone calls were received by the 
Commission in response to the regional meetings of the Committee on 
Regulations and Rulemaking and the letters are also included in the 
record. \8\ The overwhelming opinion of dairy farmers was that the 
Compact over-order price was not responsible for the increase in milk 
supply, but rather that the favorable weather and grain prices and long 
term business plans were responsible. Still many individuals did 
express support for the adoption of a supply management plan by the 
Compact Commission.
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    \6\ Summary of Testimony Concerning the Issue of Increased Milk 
Production in the Region, Written Comments December 1998 rulemaking 
record, hereinafter ``WC 12/98'' at 22-38.
    \7\ Written Statements Submitted at the Public Hearings, WC 12/
98 at 57-163.
    \8\ Producer Letters and Phone Calls Concerning the Issue of 
Increased Milk Production, WC 12/98 at 164-257.
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    In addition, the Commission reviewed the supply management options 
proposed for the United States dairy industry. \9\ The review includes 
a discussion of Federal Milk Market Orders, The Dairy Price Support 
Program, Voluntary Supply Control Programs, such as the Milk Diversion 
Program, the Dairy Termination Program, and Refundable Assessment, as 
well as Mandatory Supply Control, such as allocating the ``right of 
production'' and a quota system. This review also includes a 
bibliography.
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    \9\ Supply Management Options Proposed for the US Dairy 
Industry: Historical Review, WC 12/98 at 44-56.
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    In December 1998, the Commission initiated a public hearing, at the 
request of the Massachusetts delegation to the Commission, to consider 
placing a limit on the amount of milk on which the Compact over-order 
producer price is paid. The purpose of the proposed limit, or cap, 
would be ``to increase the level of income stability for the average 
sized farmers and to limit the incentives for increased production in 
the Compact region.'' \10\ On November 27, 1998, the Commission 
published a notice of proposed rulemaking and requested testimony and 
comments on whether to amend the formula for distribution of monies 
from the producer-settlement fund, including whether to adopt a cap on 
the amount of milk, per producer, eligible for the Compact over-order 
producer price and whether additional supply management policies and 
provisions should be incorporated into the over-order price regulation. 
\11\ The Commission held a public hearing on December 11, 1998 in 
Boxborough, Massachusetts and received written

[[Page 34573]]

comments and exhibits until December 31, 1998.
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    \10\ WC 12/98 at 39.
    \11\ 63 FR 65563, November 27, 1998.
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    In its November 27, 1998 notice of proposed rulemaking, the 
Commission specifically solicited comments on four proposals: the 
Massachusetts Cap Proposal, a Proposal to Cap the Largest Producers, a 
Split Pool Proposal, and a Refund/Assessment Option. \12\ These 
proposals were developed as a result of the Massachusetts delegation 
cap proposal and the comments submitted in response to the five 
regional meetings and the supply management option review.
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    \12\ 63 FR 65564, November 27, 1998.
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    The Commission's Regulations Administrator, Carmen Ross, prepared 
several comparison charts of the Massachusetts cap proposal and an 
additional split pool option, as an alternative method of addressing 
the concerns expressed by the Massachusetts delegation. \13\ In 
addition, Mr. Ross included data from the Market Administrator Order #1 
regarding the number of farms by size category and year for comparison 
purposes. \14\ Using this data, Mr. Ross compiled another chart 
summarizing the milk production by farm size. \15\
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    \13\ Carmen Ross, Tr. 14 and WC 12/98 at 2-16; 63 FR 65564.
    \14\ Ross, WC 12/98 at 17-19.
    \15\ Ross, WC 12/98 at 20.
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    The majority of the commenters addressed the cap proposal and 
supply management issues. Some commenters addressed the income 
distribution issues and others offered alternative proposals. A few 
commenters addressed the split pool and refund/assessment proposals.
1. Cap Proposals
    The vast majority of the commenters opposed the cap proposals and a 
few commenters supported the cap. Other commenters simply recommended 
that the producer payment regulations should not be changed.
    Most of the commenters who opposed a cap proposal were concerned 
that a cap would not be fair, would create a disincentive, would be 
divisive, and ultimately would not save the smaller farms, because 
farms go out of business for many reasons and not because of price in 
the short term. Many of these commenters emphasized the need for all 
size farms, that small farms benefit from the larger farms in their 
area, and the importance for individual farms to be able to decide how 
large, or small, they need or want to be.
2. Income Distribution
    The majority of the commenters opposed changing the basic producer 
pay formula and expressed support for the Commission's current 
methodology. Many of the commenters who opposed a change in the income 
distribution formula emphasized that many of the so-called larger farms 
are family farms run by two or more family members and supporting 
several related families, and gave the same reasons as those opposing a 
cap proposal for their opposition such as the importance of fairness in 
the regulation and the concern that divisiveness among farmers would 
result from changing the income distribution formula.
3. Supply Management
    Supply management was also opposed by a great majority of 
commenters, both at the hearing in Boxborough and at the Committee's 
hearings in the Spring of 1998. Many of those opposed to supply 
management also did not believe that the Compact was causing the 
increase in production in New England, but rather attributed the 
increase to warm weather and good quality feed at low prices. Others 
stated that they increased production as part of a long-term plan to 
expand. Many of the commenters, especially at the Spring 1998 meetings, 
expressed how helpful the Compact payments have been, but these same 
commenters also stated unequivocally that the Compact payments did not 
cause them to increase production. Other commenters questioned why 
supply management is needed when farms are still going out of business 
and New England continues to be dependent on milk from other states, 
primarily New York.
    Some commenters did support the Compact Commission instituting some 
form of supply management. A few commenters did think that the Compact 
payments are the cause of increased production in New England.
4. Split Pool Proposal and Refund/Assessment Proposal
    Few comments were received specifically addressing the split pool 
proposals or other two-tiered system, and these comments were offered 
only if the Commission determined that an amendment to the income 
distribution methodology was required. Similarly, the Refund and 
Assessment proposal received few comments.

B. Summary of 1999 Rulemaking Proceedings

    At the January 13, 1999 Commission deliberative meeting, the 
December 1998 supply management rulemaking record was referred to the 
Committee on Regulations and Rulemaking for analysis and review. The 
Committee reported its recommendations to the Commission at the April 
7, 1999 meeting and the Commission published a proposed rule on April 
19, 1999. \16\ The proposed rule would have established an assessment/
refund program under which the Commission would withhold up to $3 
million dollars per year, at the rate of $250,000 from each Compact 
monthly pool. In months without a Compact pool, the assessment would 
accrue to the next monthly pool. At the end of the calendar year, the 
Commission would refund the assessed funds to producers who had 
increased production of 1% or less, as compared to the prior year's 
production. One-half of the assessment would be refunded at a flat rate 
to each eligible producer. The remaining half would be refunded only to 
those producers who decreased production, on a per hundredweight 
payment based on the volume of reduced production. The Commission held 
a public hearing on May 5, 1999 in Bedford, New Hampshire and received 
written comments until May 19, 1999.
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    \16\ 64 FR 19084 (April 19, 1999).
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    The Commission received testimony from its Regulations 
Administrator, Carmen Ross, and four other witnesses at the May 5, 1999 
public hearing on the first proposed assessment/refund rule. Mr. Ross' 
testimony was an explanation of the Commission's proposed rule. \17\
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    \17\ Carmen Ross, May 1999 Transcript (``Tr. 5/99'') at 4-61.
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    One commenter generally supported the Commission's proposal, but 
offered an alternative approach involving an individual base for each 
farmer. Another commenter expressed the view that New England is not 
the cause of the national oversupply of milk. This commenter opposed a 
supply management plan, because the only producers to reduce production 
are those who had a bad year and felt the existing regulation works 
well. He expressed the view that the 2.8 percent of income that the 
Compact payments represent, is not enough to make management decisions. 
He felt that his farm is set up for a certain number of cows, and to 
reduce the number would start a domino effect of decreased production.
    One commenter presented testimony on behalf of three farmer 
cooperatives, in which he generally felt a supply management plan was 
not necessary, but as an alternative offered a plan to establish a base 
for each producer. This commenter felt by making Compact payments only 
up to the prior year's production level would address the incentive 
aspect of Article IV, Section 9(f) of the Compact. This commenter also 
opposed making refund payments

[[Page 34574]]

on the volume of reduced production. This opinion was shared by another 
commenter.
    The Commission also received eighteen written comments. Of these, 
eleven supported the Commission's actions to address milk supply issues 
and eight opposed any supply management plan. Of those opposing a 
supply management plan, the commenters expressed concern for how the 
plan would affect small or new farms or younger farmers trying to grow 
their businesses. Others felt that the Commission has already taken 
sufficient steps to ensure the Compact payments do not create an 
incentive to generate additional supplies of milk, through the payments 
to the Commodity Credit Corporation and refunding the balance to 
farmers who did not increase production, implementation of the 
diversion and transfer rule and by setting the Compact price at a floor 
of $16.94.
    Many of the commenters supporting the proposed assessment and 
refund plan felt that the assessment would have to be higher than four 
cents, some recommended up to twenty cents or twenty per cent of the 
monthly Compact producer price, to be effective. Another commenter felt 
the five cent assessment was adequate, but should be capped at $2.5 
million for the program year.
    Several commenters objected to the proposed plan to make part of 
the refund payment on the reduced volume of milk production, instead of 
the historical dairy pricing policy of payments based on total milk 
produced. Many commenters urged the Commission to match the base of 
comparison, not to the prior year's production volume, but rather to a 
producers contribution to a milk supply volume balanced to the New 
England consumer demand. Other commenters objected to the accrual of 
the assessment obligation to the next pool, in months with no Compact 
payment.
    At its June 2, 1999 meeting, the Commission considered the 
testimony and comments received and voted to modify the proposed 
assessment/refund rule and to alternatively propose a base/excess 
rule.\18\ The assessment/refund plan was modified to withhold five 
cents from each Compact pool, without an assessment accruing in months 
without a Compact pool. The modified proposal also included a $12,000 
cap on the amount of the refund to be paid out on a per hundredweight 
basis.\19\
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    \18\ 64 FR 33027 (June 21, 1999).
    \19\ The proposal also indicated the Commission would modify the 
rule relative to the Commodity Credit Corporation to return 
remaining funds from a CCC reserve account to the producer-
settlement fund. The current rule requires such funds to be returned 
to producers who did not increase their milk production and is not 
changed by this final rule.
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    The Commission also proposed, as an alternative, a base/excess 
plan. Under that proposal, all compact qualified producers would be 
assigned a base production level for each month. The base would be the 
equivalent of the volume of milk produced in the same month in the 
prior calendar year. Producers would then receive compact payments on 
only their base production volume, or actual production volume, 
whichever is less. Any amount of milk produced in excess of the base 
would not receive Compact payments. Adjustments to the base would be 
dependent on the rate of increased production in the Compact region as 
compared to the national average. The Commission held public hearings 
on July 7, 1999 in West Springfield, Massachusetts and on August 4, 
1999 in White River Junction, Vermont. Both of these public hearings 
were held in the evening to accommodate summer farm work schedules and 
to encourage farmers to attend. Comments were received through August 
18, 1999.
    The Commission received testimony from twenty-seven witnesses in 
those two public hearings and received eleven additional written 
comments. Of these commenters, one commenter supported a supply 
management plan, and suggested that supply be matched to consumer 
demand and twenty-eight opposed the Commission taking any action 
regarding supply management, but nine would support the base/excess 
plan, if the Commission felt it was necessary. The reasons given for 
opposing a supply management plan included that it is not necessary 
because milk production is due to weather conditions and feed quality 
and price, the Commission has already taken sufficient actions and that 
milk supply is a national problem and the small amount of money 
represented by the Compact payments to New England milk producers 
cannot effect the national milk supply.
    Two of the witnesses appeared at the request of the Commission. 
They were David Walker, Federal Order #4 Market Administrator and Eric 
Rasmussen, Federal Order #1 Market Administrator. These witnesses 
testified to their administrative experience with plans similar to 
those proposed by the Commission. Mr. Walker explained the heavy 
administrative aspect of implementing a base/excess plan and Mr. 
Rasmussen explained the experience with administering and auditing 
functions his office performed for the Commission in the 1999 refund of 
the balance in the Commodity Credit Corporation escrow account to 
producers who did not increase their milk production.
    The Commission notes that the commenters participating in the 
rulemaking proceedings described above provided comments of exceptional 
quality. Many commenters thoroughly analyzed the charts presented by 
the Commission and of those who presented alternative proposals, many 
produced their own charts and compared the results to the charts 
presented by the Commission. The Commission appreciates the thoughtful 
participation and assistance offered by these commenters and has found 
the opinions, data and comments of great value.

C. Summary of Current Proceeding

    The Commission proposed the instant rule on March 8, 2000.\20\ The 
Commission proposed a revised assessment and refund plan that would 
withhold five cents from the producer price in each Compact monthly 
pool. The Commission would refund the assessment on an annual basis to 
those producers who had increased production at a rate of one percent 
or less, as compared to the prior calendar year's production. One-half 
of the assessed funds would be distributed to all eligible producers at 
a flat rate and one-half would be distributed based on the total volume 
of milk produced for the year, up to a maximum per hundredweight refund 
of $12,000. This proposed rule responded to previous comments by 
deleting the provision that would have the assessment accrue to the 
next pool, in months without a Compact payment and by paying the per 
hundredweight refund to all eligible producers, instead of only those 
who actually decreased production, and by making that payment on the 
total volume of milk produced, rather than on the volume of reduced 
production.
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    \20\ 65 FR 12146, Mar. 8, 2000.
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    The Commission received testimony from three witnesses and three 
written comments. All those commenting supported a supply management 
plan. Three commenters felt the assessment should be higher than the 
proposed five cents, and suggested at least ten cents, and one 
commenter supported the proposal but only if the assessment is no more 
than five cents.

D. Analysis of Comments Received

    The Commission concludes that the adopted milk supply management 
plan

[[Page 34575]]

is both necessary and feasible and is therefore required by Article IV, 
Section 9(f) of the Compact. The Commission further concludes that its 
responsibility under that section is met with this program and the 
other actions previously taken by the Commission to ensure that the 
over-order price regulation does not create an incentive to producers 
to generate additional supplies of milk, while assuring the viability 
of dairy farming in the northeast.
    The Commission does not disagree with the many commenters who noted 
that a national milk supply management program should be considered and 
not just a program applicable in the northeast. However, the Commission 
notes its peculiar responsibility relative to milk supply in the 
northeast under the Compact and concludes that this program is 
appropriate.
    The Commission also does not disagree with the numerous commenters 
that milk supply is greatly effected by weather conditions and feed 
quality and cost. Nevertheless, the Commission is charged with taking 
action that is necessary and feasible relative to milk supply and 
concludes that the assessment/refund plan adopted by this amendment 
meets that obligation.
    The Commission also recognizes the many statements from producers 
that the Compact has not caused them to increase their milk production. 
The Commission does not disagree with their statements that good 
weather, good quality feed and low feed cost contributed to the milk 
production increase in the New England states in 1998 and 1999. 
However, the Commission also defers to the results of its commissioned 
study that concludes that even taking those factors into account, one 
percent of the milk production increase between July 1997 and June 1998 
is attributable to the Compact payments.\21\
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    \21\ Executive Summary, Milk Market Impacts of the Northeast 
Dairy Compact, Department of Community Development and Applied 
Economics, University of Vermont November 1999.
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    The Commission concludes that the assessment and refund plan is 
sufficient to meet the requirements of Article IV, Section 9(f) of the 
Compact. Many commenters suggested that the proposed rate of five cents 
per hundredweight was insufficient and some suggested up to twenty 
percent of the Compact producer price be set as the assessed rate. The 
Commission agrees that five cents may be insufficient, but that ten 
cents is more than necessary in light of current milk production data 
that shows New England production below the national average. 
Therefore, the Commission concludes that 7.5 cents reduction in the 
producer price for twelve months is sufficient to result in a supply 
management refund pool that will encourage producers to stabilize their 
milk production at one percent or less. A stable milk supply in New 
England is a goal for the Compact and will assure consumers of an 
adequate and local supply of milk. Therefore, the Commission adopts an 
assessment rate of 7.5 cents against the producer price in each month 
there is a Compact payment.
    However, the Commission is concerned that when federal milk prices 
are high, that is a signal that more milk is needed, and therefore will 
not impose the 7.5 cents assessments when it would result in a producer 
pay price of less than 25 cents.
    The Commission agrees with the numerous commenters that the refund 
should be paid on total production, and not on reduced production. The 
Commission understands the opposition of some commenters to the two-
tier refund design of the supply management plan. However, the 
Commission recognizes the different impacts on different size farms and 
different pressures on farms in more populated states. The Commission 
concludes that the two-tier refund design will best assure a local 
supply of milk throughout New England.
    The milk supply management plan implemented by this rule is a 
voluntary plan. This rule does not require young or new farmers to 
restrict their business growth plans. However, it does provide an 
incentive for farmers to stabilize their production.
    The Commission has been very cognizant of the repeated requests 
from those participating in the public meetings and hearings that any 
plan be equitable and fair to all farmers. The Commission adopts this 
supply management plan after much careful consideration and 
deliberation and concludes that this plan allows many factors to be 
balanced while providing equity and fairness to all farmers through 
this voluntary supply management plan.

III. Milk Supply Management Plan

    The milk supply management plan implemented by this rule is 
designed to meet the Commission's responsibilities under Article IV, 
Section 9(f) of the Compact. That provision provides that ``[w]hen 
establishing a compact over-order price, the commission shall take such 
action as necessary and feasible to ensure that the over-order price 
does not create an incentive for producers to generate additional 
supplies of milk.'' The supply management plan is relatively 
straightforward to administer and implement and therefore the 
Commission concludes that it is a feasible method of addressing supply 
management. The proposed supply management plan is necessary to ensure 
that the Compact Over-order price does not create an incentive for 
producers to generate additional supplies of milk, as required by 
Article IV, Section 9(f) of the Compact.
    Since promulgation of the Compact Over-order Price Regulation in 
1997, the Commission has closely monitored milk production levels in 
New England. One of the main goals in initially promulgating the Over-
order Price Regulation was to at least stabilize the dairy industry 
supplying the New England consumer milk markets and to increase the 
local supply of milk.\22\
---------------------------------------------------------------------------

    \22\ 62 FR 23039-40, April 28, 1997; 62 FR 29635, May 30, 1997; 
62 FR 62814, Nov. 25, 1997.
---------------------------------------------------------------------------

    The Commission received the results of a study, conducted by the 
University of Vermont, of the milk supply in the first year of the 
Compact Over-order Price Regulation. The study concluded that the Over-
order Price Regulation was meeting its initial goal of stabilizing the 
milk supply and that one percent of the increase in milk supply between 
July 1997 and June 1998 was due to the Compact payments.\23\ This study 
analyzed the milk supply in New England and factored in many variables, 
including weather and feed quality and prices in concluding that the 
Compact Over-order Price Regulation was increasing milk supply by one 
percent, a stated goal of the Commission in implementing the price 
regulation in 1997. The study does not include an analysis of the 
impact of the price regulation after June 1998.
---------------------------------------------------------------------------

    \23\ Impacts of the Northeast Interstate Dairy Compact on New 
England Milk Supply, Charles F. Nicholson, Budy Resosudarmo and Rick 
Wackernagel, Department of Community Development and Applied 
Economics, The University of Vermont.
---------------------------------------------------------------------------

    Table 1 shows the total volume of milk in the Compact pool between 
July 1997 and December 1999. The volume of milk includes milk produced 
outside of New England, and distributed within New England, and does 
not include milk excluded pursuant to the Compact limitations on 
qualification of diverted and transferred milk.

[[Page 34576]]



                  Table 1.--Volume of Milk in the Compact Pool July 1997 Through December 1999
                                               [In million pounds]
----------------------------------------------------------------------------------------------------------------
                              Month                                    1997            1998            1999
----------------------------------------------------------------------------------------------------------------
Jan.............................................................  ..............           544.2           568.3
Feb.............................................................  ..............           508.1           528.3
Mar.............................................................  ..............           561.2           563.0
Apr.............................................................  ..............           541.8           568.5
May.............................................................  ..............           580.8           599.0
June............................................................  ..............           552.1           569.2
July............................................................           531.0           567.9           564.3
Aug.............................................................           532.2           551.3           559.8
Sept............................................................           503.9           529.5           530.4
Oct.............................................................           517.3           544.3           545.9
Nov.............................................................           498.0           527.3           525.3
Dec.............................................................           535.1           566.0           560.7
    Average.....................................................           519.6           547.9           556.9
----------------------------------------------------------------------------------------------------------------

    Table 2 shows the volume of milk that has been depooled, or 
excluded from qualification for Compact payments, pursuant to the 
Compact limitations on diverted and transferred milk.\24\ The 
limitations on diverted and transferred milk became effective in 
January 1999 and applied to the first Compact pool in April 1999. The 
applicable regulations are codified at 7 CFR 1301.23(d) and 1304.2(c).
---------------------------------------------------------------------------

    \24\ 63 FR 65517, Nov. 27, 1998.

  Table 2.--Volume of Depooled Milk January 1999 Through December 1999
                           [In million pounds]
------------------------------------------------------------------------
                                                               Depooled
                           Month                                 Milk
------------------------------------------------------------------------
Jan........................................................  ...........
Feb........................................................  ...........
Mar........................................................  ...........
Apr........................................................          4.3
May........................................................          1.2
June.......................................................           .9
July.......................................................          1.5
Aug........................................................          4.8
Sept.......................................................          4.7
Oct........................................................          2.0
Nov........................................................          2.2
Dec........................................................          1.4
                                                            ------------
    Total..................................................         23.0
------------------------------------------------------------------------

    Table 3 shows the total volume of milk qualified for Compact 
payments, after exclusions pursuant to the diverted and transferred 
milk limitations, by quarter. Table 3 also shows the percent increase 
in milk volume over the same quarter in the prior year.

                   Table 3.--Compact Producer Milk by Quarter, July 1997 through December 1999
----------------------------------------------------------------------------------------------------------------
                                                     1997         1998         1999
                    Quarter                        million      million      million     1997/1998    1998/1999
                                                    pounds       pounds       pounds     (percent)    (percent)
----------------------------------------------------------------------------------------------------------------
Jan-Mar........................................  ...........      1,613.5      1,659.6  ...........          2.9
Apr-June.......................................  ...........      1,674.7      1,736.7  ...........          3.7
Jul-Sep........................................      1,567.1      1,648.7      1,654.5          5.2          0.4
Oct-Dec........................................      1,550.4      1,637.6      1,631.9          5.6         -0.4
    Average....................................     1,558.75      1,643.6      1,670.7          5.4          1.6
----------------------------------------------------------------------------------------------------------------

    Table 4 shows the federal blend price, the Compact producer price 
and the percent of total producer price attributed to Compact payments.

                    Table 4.--Total Producer Price and Percent Attributed to Compact Payments
----------------------------------------------------------------------------------------------------------------
                                                               Federal
                                                                blend       Compact       Total      % of total
                           Month                                price       producer     producer      due to
                                                              (zone 21)      price        price        compact
----------------------------------------------------------------------------------------------------------------
July 1997..................................................        11.97         1.28        13.25          9.66

[[Page 34577]]

 
August.....................................................        12.26         1.31        13.57          9.65
September..................................................        12.54         1.36        13.90          9.78
October....................................................        13.60         0.81        14.41          5.62
November...................................................        14.10         0.44        14.54          3.03
December...................................................        14.06         0.40        14.46          2.77
----------------------------------------------------------------------------------------------------------------
January 1998...............................................        14.02         0.34        14.36          2.37
February...................................................        14.30         0.04        14.34          0.28
March......................................................        14.10         0.16        14.26          1.12
April......................................................        13.96         0.14        14.10          1.00
May........................................................        13.38         0.33        13.71          2.41
June.......................................................        13.68         0.71        14.39          2.41
July.......................................................        13.14         1.02        14.16          7.20
August.....................................................        15.00         0.24        15.24          1.57
September..................................................        16.47         0.00        16.47          0
October....................................................        16.76         0.00        16.76          0
November...................................................        16.67         0.00        16.67          0
December...................................................        17.18         0.00        17.18          0
----------------------------------------------------------------------------------------------------------------
January 1999...............................................        17.29         0.00        17.29          0
February...................................................        15.82         0.00        15.82          0
March......................................................        15.69         0.00        15.69          0
April......................................................        11.76         1.43        13.19         10.8
May........................................................        12.42         0.82        13.24          6.2
June.......................................................        12.79         0.73        13.52          5.4
July.......................................................        12.97         1.01        13.98          7.22
August.....................................................        13.64         0.70        14.34          4.88
September..................................................        15.34         0.21        15.55          1.35
October....................................................        15.47         0.00        15.47          0
November...................................................        15.41         0.00        15.41          0
December...................................................        12.15         1.00        13.15          7.60
    Average................................................        14.26         0.49        14.75          3.32
----------------------------------------------------------------------------------------------------------------

    In addition to the public comment and testimony discussed above, 
the Commission considered the data shown in Tables 1 through 4, and 
published as part of the proposed rule, and the data and conclusions 
provided in the University of Vermont Milk Supply studies, as well as 
milk production data published by the United States Department of 
Agriculture (USDA) National Agricultural Statistics Service (NASS) and 
milk supply and demand data and estimates published by the USDA World 
Agricultural Outlook Board (WAOB), to design a feasible supply 
management plan. The supply management plan adopted by the Commission, 
and approved by producers, is designed (1) to ensure that the over-
order price does not create an incentive for producers to generate 
additional supplies of milk, and (2) to be consistent with the 
Commission's primary responsibility of assuring the viability of dairy 
farming in the northeast, and to assure consumers of an adequate, local 
supply of pure and wholesome milk. Compact Article I, Section 1 and 
Article IV, Section 9(f). The Commission concludes that establishing a 
voluntary supply management plan, that includes an allowance for an 
annual increase of one percent, will meet these dual objectives.
    In implementing this program the Commission notes that the Compact 
producer price, since the inception of the price regulation in July 
1997, has averaged only 3.3% of the total producer pay price, and 
therefore the Commission recognizes there are some limitations on the 
ability to affect producer decisions through the Compact price. The 
Commission also acknowledges that weather and other circumstances, such 
as feed quality, that affect milk production and supply, are unaffected 
by the Compact price.
    The Commission finds, based on the University of Vermont studies, 
that changes in production technology, such as genetic advances and 
improvements to feeding systems, milking systems and other farm 
management practices, led to a 2% growth rate in average annual milk 
production per cow in New England for the ten-year period between 1988 
and 1998.\25\ Those same studies also found that milk production 
increased at a rate of 1.3% in the Compact region, between July 1997 
and June 1998, of which 1% was attributable to the Compact producer 
price.
---------------------------------------------------------------------------

    \25\ Impacts of the Northeast Interstate Dairy Compact on New 
England Milk Supply, Charles F. Nicholson, Budy Resosudarmo and Rick 
Wackernagel, Department of Community Development and Applied 
Economics, The University of Vermont.
---------------------------------------------------------------------------

    Therefore, the Commission recognizes that milk production is 
partially determined by price and partially determined by weather and 
other factors that are uncontrolled by the producer and unaffected by 
price levels. The Commission intends the supply management plan to 
affect, through the incentive aspects of the Compact price, the 
producer decisions regarding milk production that are directly related 
to the Compact price.
    On the demand side, the Commission notes that USDA projects 
commercial disappearance of dairy products to grow at approximately 1% 
annually for the next decade.\26\ The Commission finds that a 1% annual 
growth in demand justifies the conservative allowance of a 1% annual 
increase in supply to encourage a stable milk production level

[[Page 34578]]

consistent with demand for milk in New England and to accomplish the 
expressed goals of the Compact.
---------------------------------------------------------------------------

    \26\ ``USDA Agricultural Baseline Projections to 2009,'' Staff 
Report WAOB-2000-1, Office of the Chief Economist, USDA.
---------------------------------------------------------------------------

    The Commission also concludes that the 1% allowance is supported by 
the relative equilibrium between milk supply and demand in New England 
since the implementation, on January 1, 1999, \27\ of the rule limiting 
Compact payments on milk diverted and transferred out of the region. 
Pursuant to that rule, some milk has been excluded from the monthly 
Compact pool, as reflected in Table 2. However, the low percentage of 
depooled milk (e.g. 0.15% in June 1999 and 0.7% in April 1999) 
indicates a relative equilibrium between supply and demand in the New 
England milk market.
---------------------------------------------------------------------------

    \27\ 63 FR 65517 (Nov. 27, 1998).
---------------------------------------------------------------------------

    This demonstrates that since the inception of the compact price 
regulation in July 1997, including the 1% increase in milk supply in 
New England attributable to the Compact producer price, as determined 
by the University of Vermont studies, a relative equilibrium between 
milk supply and demand in New England has been achieved.
    The Commission finds, based on the public comment and testimony in 
this proceeding and the findings in prior rulemaking proceedings 
regarding price level, that the established level Compact Class I price 
of $16.94 per hundredweight will continue to be sufficient to ensure an 
adequate supply of milk to New England consumers. The Commission 
acknowledges that those producers who increase production greater than 
one percent will receive slightly less compact price at the end of the 
program year. However, those who maintain a stable level of milk 
production will receive slightly more. The Commission concludes that 
the adopted supply management program, as applied to all producers 
supplying the New England market, will ensure that the Compact producer 
price does not create an incentive to generate additional supplies of 
milk.
    The supply management plan assesses 7.5 cents per hundredweight 
from the producer price in each monthly Compact pool. By taking an 
equal rate from each producer pool, the Commission intends that the 
impact on the monthly producer pay price will be minimized and 
predictable, thereby continuing to ensure a sufficient and stable pay 
price to producers to cover their costs of production. These funds will 
be accumulated in a separate interest-bearing account throughout the 
twelve-month plan year in a supply management-settlement fund.
    At the conclusion of the plan year, producers will have 45 days to 
submit an application to the Commission for a refund from the supply 
management-settlement fund. Producers will be eligible for the refund 
if they maintained their milk production volume at a rate of increase 
of 1%, or less, compared to the prior year's production. One-half of 
the supply management-settlement fund will be distributed to eligible 
producers on a per producer basis, with each producer receiving an 
equal payment. The amount of the flat rate refund will be determined by 
dividing the total number of eligible producers into one-half the value 
of the supply management-settlement fund.
    In addition, eligible producers will receive a refund amount based 
on a price per hundredweight of their total volume of milk produced in 
the plan year, up to a maximum of $12,000. The second-half of the 
supply management-settlement fund will be distributed on the per 
hundredweight basis. The amount of this half of the refund will be 
determined by dividing the total volume of milk produced by eligible 
producers into one-half the value of the supply management-settlement 
fund to determine the rate per hundredweight each eligible producer 
will receive.
    The assessment/refund program will provide a reward to those 
producers who stabilize their milk production and will create an 
incentive for all producers to maintain a stable, local supply of milk 
for the New England milk market.
    All producers will share equally in the burden of funding this 
program through a reduction in the producer pay price. Only those 
producers who reduce or maintain their production level at 1% or less 
will be eligible for a refund. However, the program will not otherwise 
restrict the milk production of those producers who, for business 
reasons unrelated to the compact payments, choose to increase their 
milk production at a rate greater than 1% per year. All producers, and 
in particular, young and new farmers must be permitted to operate their 
businesses according to their own plan. With improvements in genetics 
and farm efficiency, milk production volume on an individual farm will 
increase even if the same herd size is maintained. Therefore, the 
Commission has designed this supply management plan to be voluntary in 
nature.
    It is the intention and judgment of the Commission that the 
combination of this supply management assessment/refund plan and the 
rules limiting compact payments on diverted and transferred milk will 
operate in coordination to regulate the supply of milk in New England 
relative to the consumer demand and to ensure that the compact payments 
do not create an incentive to generate supplies of milk in excess of 
the tolerance levels prescribed for diverted and transferred milk.

IV. Technical Amendments to the Over-Order Price Regulation

    The Commission amends section 1306.3 and adds a new Part 1309 to 
provide the necessary regulations to implement the supply management 
assessment/refund plan. The Commission also makes corresponding 
technical changes required by the specific amendments and additions to 
the current regulations.
    The Commission amends section 1306.3, by first redesignating 
existing paragraphs (e) through (g) as paragraphs (f) through (h) and 
adding a new paragraph (e). The new paragraph specifies that the 
Commission will withhold 7.5 cents from each monthly producer pool to 
fund the supply management-settlement fund, but only if the resultant 
over-order producer price is at least 25 cents.
    A new Part 1309 is added to provide the regulations to implement 
the supply management plan. Section 1309.1 defines producer 
qualifications for the refund program and designates the plan year as 
between July 1 and June 30. Section 1309.2 defines the procedure for 
computing the refund prices to be paid to qualified producers. Section 
1309.3 provides the authority for the establishment of a supply 
management-settlement fund and specifies that assessed funds will be 
returned to the producer-settlement fund if the supply management plan 
year is six months or less. Finally, section 1309.4 would describe the 
procedure for issuing payments to producers eligible for a refund under 
the supply management plan.

V. Summary of Required Findings

    Article V, Section 12 of the Compact directs the Commission to make 
four findings of fact before an amendment of the Over-Order Price 
Regulation can become effective. Each required finding is discussed 
below.

A. Whether the Public Interest Will Be Served by the Amendments

    The first finding considers whether the amendment of the Over-order 
Price Regulation serves the public interest. The Commission previously 
determined that an Over-order Price Regulation

[[Page 34579]]

serves the public interest,\28\ and the Commission reaffirms that 
determination. The Commission also finds that the public interest will 
be served by amendment of the Over-order Price Regulation to establish 
a milk supply management plan to ensure that the price regulation does 
not create an incentive to generate additional supplies of milk.
---------------------------------------------------------------------------

    \28\ 62 FR 29638, May 30, 1997; 62 FR 62825, Nov. 25, 1997.
---------------------------------------------------------------------------

    The Commission emphasizes that the amendments establishing a milk 
supply management plan do not impact on the New England milk consumers. 
The Over-order Price Regulation is structured so that assessments and 
obligations are based on Class I milk distributed in the New England 
market. The milk supply management plan affects only the distribution 
of the obligations collected to milk producers, and is therefore, cost-
neutral to New England consumers.

B. The Impact on the Price Level Needed To Assure a Sufficient Price to 
Producers and an Adequate Local Supply of Milk

    The second finding considers the impact of the amendments on the 
level of producer price needed to cover costs of production and to 
assure an adequate local supply of milk for the inhabitants of the 
regulated area.\29\
---------------------------------------------------------------------------

    \29\ As noted in prior rulemaking proceedings, the Commission 
limits its assessment to issues relating to the fluid milk market. 
See e.g., 62 FR 29632, May 30, 1997 and 62 FR 62812, Nov. 25, 1997.
---------------------------------------------------------------------------

    The Commission reaffirms its prior findings regarding the 
sufficiency of pay prices for milk needed to meet the New England 
market demand.\30\ In adopting these amendments, the Commission notes 
that the primary impact of the assessment/refund plan will be to reduce 
the pay price to those producers whose milk production increased 
greater than one percent over the prior year's production level by 7.5 
cents per hundredweight from the Compact Class I price of $16.94. 
Therefore, the Commission concludes that the amendments will not 
negatively impact on the price level paid to producers that is needed 
to assure an adequate local supply of milk for New England consumers. 
The Commission concludes that the over-order price regulation, 
including these amendments, will assure a sufficient price to producers 
and an adequate local supply of milk.
---------------------------------------------------------------------------

    \30\ See e.g., 62 FR 29632-29637, May 30, 1997 and 62 FR 62812-
622817, Nov. 25, 1997.
---------------------------------------------------------------------------

    In reaching this conclusion, the Commission recognizes the vital 
role the Compact producer price has made in stabilizing the milk 
production in the New England region since implementation in July 1997 
and the importance of ensuring that the Compact price does not create 
an incentive to producers to generate excessive amounts of milk. The 
Commission also recognizes that the historical supply of milk making up 
the New England milkshed requires substantial contributions of milk 
from outside the New England states.
    The Commission notes that the Compact payments to producers are 
intended to assure the continued viability of dairy farming in the 
northeast. Compact Article 1, Section 1. The Over-order Price 
Regulation, as amended, balances this purpose with the equally 
important purpose of assuring an adequate, local supply of pure and 
wholesome milk for the Compact area consumers. Compact Article 1, 
Section 1. The Compact specifically charges the Commission to also 
``take such action as necessary and feasible to ensure that the over-
order price does not create an incentive for producers to generate 
additional supplies of milk.'' Compact Article IV, Section 9(f). The 
Commission concludes that the amended regulation meets all three of 
these objectives and best preserves the integrity of the Compact by 
appropriately balancing these objectives.

C. Whether the Major Provisions of the Order, Other Than Those Fixing 
Minimum Milk Prices, Are in the Public Interest and Are Reasonably 
Designed To Achieve the Purposes of the Order

    The third finding requires a determination of whether the 
provisions of the regulation other than those establishing minimum milk 
prices are in the public interest. The amendments establish a voluntary 
milk supply management plan. Therefore, the matter of the public 
interest is addressed under the first required finding and not under 
this finding. In any event, the Commission finds that the price 
regulation, as hereby amended, is in the public interest in the manner 
contemplated by this finding.

D. Whether the Terms of the Proposed Amendment Are Approved by 
Producers.

    The fourth finding, requiring a determination of whether the 
amendment has been approved by producer referendum pursuant to Article 
V, Section 13 of the Compact is invoked in this instance given that the 
amendments will affect the level of the price regulation on the 
producer side. In this final rule, as in the previous final rules, the 
Commission makes this finding premised upon certification of the 
results of the producer referendum. The procedure for the producer 
referendum and certification of the results is set forth in 7 CFR part 
1371.
    Pursuant to 7 CFR 1371.3, and the referendum procedure certified by 
the Commission, a referendum was held during the period of May 12, 2000 
through May 22, 2000. All producers who were producing milk pooled in 
the Federal Order #1, or for consumption in New England during December 
1999, the representative period determined by the Commission, were 
deemed eligible to vote. Ballots were mailed to these producers on or 
before May 12, 2000 by the Federal Order #1 Market Administrator. The 
ballots included an official summary of the Commission's action. 
Producers were notified that, to be counted, their ballots had to be 
returned to the Commission offices by 5:00 p.m. on May 22, 2000. The 
ballots were opened and counted in the Commission offices on May 23, 
2000 under the direction and supervision of Robert Starr, designated 
``Referendum Agent.''
    Ten Cooperative Associations were notified of the procedures 
necessary to block vote. Cooperatives were required to provide prior 
written notice of their intention to block vote to all members on a 
form provided by the Commission, and to certify to the Commission that 
(1) timely notice was provided, and (2) that they were qualified under 
the Capper-Volstead Act. Cooperative Associations were further notified 
that the Cooperative Association block vote had to be received in the 
Commission office by 5:00 p.m. on May 22, 2000. Certified and notarized 
notification to its members of the Cooperative's intent to block vote 
or not to block vote had to be mailed by May 16, 2000 with notice 
mailed to the Commission offices no later than May 18, 2000.

Notice of Referendum Results

    On May 23, 2000 the duly authorized referendum agent verified all 
ballots according to procedures and criteria established by the 
Commission. A total of 3983 ballots were mailed to eligible producers. 
All producer ballots and cooperative block vote ballots received by the 
Commission were opened and counted. Producer ballots and cooperative 
block vote ballots were verified or disqualified based on criteria 
established by the Commission, including timeliness, completeness, 
appearance of authenticity, appropriate certifications by cooperative 
associations and other steps taken to avoid duplication of ballots.

[[Page 34580]]

    Block votes cast by Cooperative Associations were then counted. 
Producer votes against their cooperative associations block vote were 
then counted for each cooperative association. These votes were 
deducted from the cooperative association's total and were counted 
appropriately. Ballots returned by cooperative members who cast votes 
in agreement with their cooperative block vote were disqualified as 
duplicative of the cooperative block vote.
    Votes of independent producers, not members of any cooperative 
association, were then counted.
    The referendum agent then certified the following:

A total of 3983 ballots were mailed to eligible producers.
A total of 1700 ballots were returned to the Commission.
A total of 24 ballots were disqualified--late, incomplete or duplicate.
A total of 1648 ballots were verified.
A total of 1513 verified ballots were cast in favor of the price 
regulation.
A total of 135 verified ballots were cast in opposition to the price 
regulation.

    Accordingly, notice is hereby provided that of the verified ballots 
cast, 1648, 91.8%, or 1513, a minimum of two-thirds were in the 
affirmative.
    Therefore, the Commission concludes that the terms of the proposed 
amendment are approved by producers.

VI. Required Findings of Fact

    Pursuant to Compact Article V, Section 12, the Compact Commission 
hereby finds:
    (1) That the public interest will be served by the amendment of 
minimum milk price regulation to dairy farmers under Article IV to 
establish a milk supply management plan through an assessment and 
refund program.
    (2) That a level price of $16.94 (Class I, Suffolk County, 
Massachusetts) to dairy farmers under Article IV will assure that 
producers supplying the New England market receive a price sufficient 
to cover their costs of production and will elicit an adequate supply 
of milk for the inhabitants of the regulated area and for manufacturing 
purposes.
    (3) That the major provisions of the order, other than those fixing 
minimum milk prices, are in the public interest and are reasonably 
designed to achieve the purposes of the order.
    (4) That the terms of the proposed amendments are approved by 
producers pursuant to a producer referendum required by Article V. 
section 13.

List of Subjects in 7 CFR Parts 1306, 1307 and 1309

    Milk.

Codification in Code of Federal Regulations

    For reasons set forth in the preamble, the Northeast Dairy Compact 
Commission amends 7 CFR parts 1306 and 1307 and adds a new part 1309 as 
follows:

PART 1306--COMPACT OVER-ORDER PRODUCER PRICE

    1. The authority citation for part 1306 continues to read as 
follows:

    Authority: 7 U.S.C. 7256.

    2. In Sec. 1306.3 redesignate paragraphs (e) through (g) as 
paragraphs (f) through (h) and add a new paragraph (e) to read as 
follows:


Sec. 1306.3  Computation of basic over-order producer price.

* * * * *
    (e) Subtract 7.5 cents per hundredweight from the basic over-order 
producer price computed pursuant to this section and deposit that 
amount in the supply management-settlement fund, provided that the 
resultant over-order producer price is at least 25 cents.
* * * * *

PART 1307--PAYMENTS FOR MILK

    3. The authority citation for part 1307 continues to read as 
follows:

    Authority: 7 U.S.C. 7256.

    4. Section 1307.1 is amended in paragraphs (a), (b) and (c) by 
removing ``1306.3(f)'' and adding ``1306.3(h)'' in its place and by 
adding in paragraph (c) ``1306.3(d)'' after ``1306.3(c),''.

    5. A new part 1309 is added to read as follows:

PART 1309--SUPPLY MANAGEMENT REFUND PROGRAM

Sec.
1309.1   Producer qualification for supply management refund 
program.
1309.2   Computation of supply management refund prices.
1309.3   Supply management-settlement fund.
1309.4   Payment to producers of supply management refund.

    Authority: 7 U.S.C. 7256.


Sec. 1309.1  Producer qualification for supply management refund 
program.

    A dairy farmer who is a qualified producer pursuant to 
Sec. 1301.11(a) or (b) of this chapter for the entire refund year, July 
1 through June 30, and the dairy farmer's milk production during the 
refund year is less than or the increase is not more than 1% of the 
milk production of the preceding refund year.


Sec. 1309.2  Computation of supply management refund prices.

    The compact commission shall compute the supply management refund 
prices applicable to all qualified milk as follows:
    (a) Combine into one total the values, including all interest 
earned, deducted pursuant to Sec. 1306.3(e) of this chapter for the 
refund year;
    (b) Subtract 50% from the total value computed pursuant to 
paragraph (a) of this section to be used for the per farm payments to 
producers who submitted documentation pursuant to Sec. 1309.4(a);
    (c) Divide the resulting amount by the sum of all milk production 
reported by producers qualified pursuant to Sec. 1309.1 and who 
submitted documentation pursuant to Sec. 1309.4(a).


Sec. 1309.3  Supply management-settlement fund.

    (a) The compact commission shall establish and maintain a separate 
fund known as the supply management-settlement fund. It shall deposit 
into the fund all amounts deducted pursuant to Sec. 1306.3(e) of this 
chapter. It shall pay from the fund all amounts due producers pursuant 
to Sec. 1309.4;
    (b) All amounts subtracted under Sec. 1309.2(c), including interest 
earned thereon, shall remain in the supply management-settlement fund 
as an obligated balance until it is withdrawn for the purpose of 
effectuating Sec. 1309.4;
    (c) The compact commission shall place all monies subtracted under 
Sec. 1306.3(e) of this chapter in an interest-bearing bank account or 
accounts in a bank or banks duly approved as a Federal depository for 
such monies, or invest them in short-term U.S. Government securities;
    (d) If, after payments to producers of supply management refund 
pursuant to Sec. 1309.4 there is a surplus in the fund, it is to be 
returned to the producer-settlement fund.
    (e) The supply management program will continue through the 
operation of the compact over-order price regulation. If the refund 
year is six months or less, the supply management-settlement fund is to 
be returned to the producer-settlement fund.


Sec. 1309.4  Payment to producers of supply management refund.

    (a) All producers who are qualified pursuant to Sec. 1309.1 shall 
become eligible to receive payment of the supply management refund 
computed pursuant to Sec. 1309.2 by submitting to

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the compact commission documentation that the producer milk production 
during the refund year is less than or the increase is not more than 1% 
of the milk production of the preceding calendar year. Such 
documentation shall be filed with the commission not later than 45 days 
after the end of the refund year.
    (b) The commission will make payment to all producers qualified 
pursuant to Sec. 1309.1 and eligible pursuant to paragraph (a) of this 
section in the following manner:
    (1) A per farm payment computed by dividing the amount subtracted 
pursuant to Sec. 1309.2(b) by the total eligible producers; and
    (2) The value determined by multiplying the supply management 
refund price computed pursuant to Sec. 1309.2(e) by the producer's milk 
pounds, not to exceed $12,000.

    Dated: May 24, 2000.
Kenneth M. Becker,
Executive Director.
[FR Doc. 00-13507 Filed 5-30-00; 8:45 am]
BILLING CODE 1650-01-P