[Federal Register Volume 73, Number 41 (Friday, February 29, 2008)]
[Proposed Rules]
[Pages 11194-11229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 08-881]



[[Page 11193]]

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Part II





Department of Agriculture





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Agricultural Marketing Service



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7 CFR Parts 1000, 1005, 1006 et al.



Milk in the Appalachian, Florida and Southeast Marketing Areas; 
Tentative Decision and Opportunity To File Written Exceptions on 
Proposed Amendments to Tentative Marketing Agreements and to Orders; 
Proposed Rule

  Federal Register / Vol. 73, No. 41 / Friday, February 29, 2008 / 
Proposed Rules  

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1000, 1005, 1006 and 1007

[AMS-DA-07-0059; AO-388-A22; AO-356-A43 and AO-366-A51; Docket No. DA-
07-03-A]


Milk in the Appalachian, Florida and Southeast Marketing Areas; 
Tentative Decision and Opportunity To File Written Exceptions on 
Proposed Amendments to Tentative Marketing Agreements and to Orders

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule; tentative partial decision.

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SUMMARY: This decision proposes to adopt on an interim final and 
emergency basis proposals that adjust the Class I pricing surface of 
the Appalachian, Southeast and Florida Federal milk marketing orders. 
In addition, this decision proposes to amend certain features of the 
diversion limit, touch-base standards and transportation credit 
provisions for the Appalachian and Southeast Federal milk marketing 
orders. Other proposals seeking to increase the maximum administrative 
assessment for the Appalachian, Florida and Southeast marketing orders 
is addressed in a separate decision. This decision requires determining 
if producers approve the issuance of the amended orders on an interim 
basis.

DATES: Comments must be submitted on or before April 29, 2008.

ADDRESSES: Comments (six copies) should be filed with the Hearing 
Clerk, United States Department of Agriculture, STOP 9200-Room 1031, 
1400 Independence Avenue, SW., Washington, DC, 20250-1031. You may send 
your comments by the electronic process available at the Federal 
eRulemaking portal: http://www.regulations.gov or by submitting 
comments to [email protected]. Reference should be made to the 
title of the action and docket number.

FOR FURTHER INFORMATION CONTACT: Gino M. Tosi, Associate Deputy 
Administrator, USDA/AMS/Dairy Programs, Order Formulation and 
Enforcement Branches, STOP 0231-Room 2971, 1400 Independence Avenue, 
SW., Washington, DC 20250-0231, (202) 690-1366, e-mail address: 
[email protected].

SUPPLEMENTARY INFORMATION: This tentative decision proposes to 
immediately adopt amendments that: (1) Adjust the Class I pricing 
surface in each county within the geographical marketing areas of the 
Appalachian, Florida and Southeast marketing orders; (2) make diversion 
limit standards identical for the Appalachian and Southeast orders: 25 
percent of deliveries to pool plants during the months of January, 
February, July, August, September, October and November, and 35 percent 
in the months of March, April, May, June and December; (3) reduce 
touch-base standards to one day each month for the Appalachian and 
Southeast orders; (4) add January and February as months when 
transportation credits are paid for the Appalachian and Southeast 
orders; (5) provide for the payment of transportation credits in the 
Appalachian and Southeast orders for full loads of supplemental milk; 
(6) provide more flexibility in the qualification requirements for 
supplemental milk producers to receive transportation credits for the 
Appalachian and Southeast orders; and (7) increase the monthly 
transportation credit assessment from $0.20 per cwt to $0.30 per cwt in 
the Southeast order. Other proposals seeking to increase the maximum 
administrative assessment for the Appalachian, Florida and Southeast 
orders are addressed in a separate decision.
    This administrative action is governed by the provisions of 
Sections 556 and 557 of Title 5 of the United States Code and, 
therefore, is excluded from the requirements of Executive Order 12866.
    The amendments to the rules proposed herein have been reviewed 
under Executive Order 12988, Civil Justice Reform. They are not 
intended to have a retroactive effect. If adopted, the proposed 
amendments would not preempt any state or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Agricultural Marketing Agreement Act of 1937, as amended (7 
U.S.C. 601-674) (AMAA), provides that administrative proceedings must 
be exhausted before parties may file suit in court. Under Section 
608c(15)(A) of the AMAA, any handler subject to an order may request 
modification or exemption from such order by filing with the Department 
of Agriculture (Department) a petition stating that the order, any 
provision of the order, or any obligation imposed in connection with 
the order is not in accordance with the law. A handler is afforded the 
opportunity for a hearing on the petition. After a hearing, the 
Department would rule on the petition. The AMAA 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 Department'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.

Regulatory Flexibility Act and Paperwork Reduction Act

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), the Agricultural Marketing Service has considered the economic 
impact of this action on small entities and has certified that this 
proposed rule would not have a significant economic impact on a 
substantial number of small entities. For the purpose of the Regulatory 
Flexibility Act, a dairy farm is considered a small business if it has 
an annual gross revenue of less than $750,000, and a dairy products 
manufacturer is a small business if it has fewer than 500 employees.
    For the purposes of determining which dairy farms are small 
businesses, the $750,000 per year criterion was used to establish a 
marketing guideline of 500,000 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.
    During May 2007, the time of the hearing, there were 2,744 dairy 
farmers pooled on the Appalachian order (Order 5). For the Southeast 
order (Order 7), 2,924 dairy farmers were pooled on the order. For the 
Florida order (Order 6), 283 dairy farmers were pooled on the order. Of 
these, 2,612 dairy farmers in Order 5 (or 95.2 percent), 2,739 dairy 
farmers in Order 7 (or 94 percent) and 153 dairy farmers in Order 6 (or 
54 percent) were considered small businesses.
    During May 2007, there were a total of 36 plants associated with 
the Appalachian order (22 fully regulated plants, 10 partially 
regulated plants, 2 producer-handlers and 2 exempt plants). A total of 
55 plants were associated with the Southeast order (33 fully regulated 
plants, 9 partially regulated plants, 2 producer-handlers and 11 exempt 
plants). A total of 25 plants were associated with the Florida order 
(13 fully regulated plants, 9 partially regulated plants, 1 producer-

[[Page 11195]]

handler and 2 exempt plants). The number of plants meeting small 
business criteria under the Appalachian, Southeast and Florida orders 
were 8 (or 22.2 percent), 18 (or 32.7 percent) and 11 (or 44 percent), 
respectively.
    The amendments proposed to be adopted in this tentative decision 
provide for the temporary increase in Class I prices in the 
Appalachian, Southeast and Florida orders. The minimum Class I prices 
of the three southeastern orders, as with all other Federal milk 
marketing orders, are set by using the higher of an advance Class III 
or Class IV price as determined by the Department and adding a 
location-specific differential, referred to as a Class I differential. 
Minimum Class I prices charged to regulated handlers are applied 
uniformly to both large and small entities. Class I price increases 
would generate higher marketwide pool values in all three southeastern 
orders by approximately $18-19 million for the Appalachian order, 
approximately $17.5 million for the Southeast order and approximately 
$38 million for the Florida order. In estimating the impact on minimum 
prices paid to dairy farmers, blend prices will increase by 
approximately $0.26 per cwt for the Appalachian order, approximately 
$0.64 per cwt for the Southeast order, and $1.19 per cwt to $1.22 per 
cwt for the Florida order.
    The amendments proposed to be adopted revise the Appalachian and 
Southeast orders by making the diversion limit standards for the orders 
identical--not to exceed 25 percent for the months of January, 
February, and July through November, and 35 percent for the months of 
March through June and for the month of December. Currently, the 
diversion limit standards of the Appalachian order for pool plants and 
cooperatives acting as handlers are not to exceed 25 percent for the 
months of July through November, and January and February; and 40 
percent for the months of December and March through June. For the 
Southeast order, the current diversion limit standards for pool plants 
and cooperatives acting as handlers are not to exceed 33 percent during 
the months of July through December, and 50 percent in the months of 
January through June.
    In addition, the proposed amendments for adoption would make 
identical the daily touch-base standards of at least one day's milk 
production each month of a dairy farmer in the Appalachian and 
Southeast orders. Currently, the Appalachian order has a touch-base 
standard of 6 days' production in any month of July through December 
and not less than 2 days' production for the months of January through 
June. Currently, the Southeast order has a touch-base standard of not 
less than 10 days' production for the months of July through December 
and not less than 4 days' production for the months of January through 
June.
    The changes proposed for adoption to the pooling standards serve to 
revise established criteria that determine those producers, producer 
milk and plants that have a reasonable association with and are 
consistently serving the fluid needs of the Appalachian and Southeast 
marketing areas. Criteria for pooling are established on the basis of 
performance levels that are considered adequate to meet the Class I 
needs and determine those producers who are eligible to share in the 
revenue that arises from the classified pricing of milk. The criteria 
for pooling are established without regard to the size of any dairy 
industry or entity. The criteria established are applied in an 
identical fashion to both large and small businesses and do not have 
any different economic impact on small entities as opposed to large 
entities.
    The proposed amendments for adoption add January and February to 
the months of July through December as months when transportation 
credits may be paid for the Appalachian and Southeast orders to those 
handlers who incur the costs of providing supplemental milk. The 
amendments also expand the payment of transportation credits for 
supplemental milk to include the full load of milk rather than the 
calculated Class I portion and provide more flexibility in the 
qualification requirements for supplemental milk producers to receive 
transportation credits for the Appalachian and Southeast orders. In 
addition, only the maximum monthly transportation credit assessment for 
the Southeast order is increased from the current $0.20 per cwt to 
$0.30 per cwt on all milk assigned to Class I use. The transportation 
credit provisions are applicable only to Appalachian and Southeast 
orders are applied in an identical fashion to both large and small 
businesses and will not have any different impact on those businesses 
producing manufactured milk products. The changes will not have a 
significant economic impact on a substantial number of small entities.
    The Agricultural Marketing Service is committed to complying with 
the E-Government Act, to promote the use of the Internet and other 
information technologies to provide increased opportunities for citizen 
access to Government information and services, and for other purposes.
    This notice does not require additional information collection that 
needs clearance by the Office of Management and Budget (OMB) beyond 
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 that 
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.
    Interested parties were invited to submit comments on the probable 
regulatory and informational impact of this proposed rule on small 
entities.

Prior Documents in This Proceeding

    Notice of Hearing: Issued May 3, 2007; published May 8, 2007 (72 FR 
25986).

Preliminary Statement

    Notice is hereby given of the filing with the Hearing Clerk of this 
tentative partial decision with respect to proposed amendments to the 
tentative marketing agreements and the orders regulating the handling 
of milk in the Appalachian and Southeast marketing areas. This notice 
is issued pursuant to the provisions of the Agricultural Marketing 
Agreement Act (AMAA) and the applicable rules of practice and procedure 
governing the formulation of marketing agreements and marketing orders 
(7 CFR part 900).
    Interested parties may file written exceptions to this decision 
with the Hearing Clerk, U.S. Department of Agriculture, STOP 9200--Room 
1031, 1400 Independence Avenue, SW., Washington DC 20250-9200, by April 
29, 2008. Six (6) copies of these exceptions should be filed. All 
written submissions made pursuant to this tentative partial decision 
will be made available for public inspection at the Office of the 
Hearing Clerk during regular business hours (7 CFR 1.27(b)).
    The hearing notice specifically invited interested persons to 
present evidence concerning the probable regulatory and informational 
impact of the proposals on small businesses.
    A public hearing was held upon proposed amendments to the marketing 
agreement and the orders regulating the handling of milk in the 
Appalachian, Southeast, and Florida marketing areas. The hearing was 
held, pursuant to the

[[Page 11196]]

provisions of the Agricultural Marketing Agreement Act of 1937 (AMAA), 
as amended (7 U.S.C. 601-674), and the applicable rules of practice and 
procedure governing the formulation of marketing agreements and 
marketing orders (7 CFR Part 900).
    The proposed amendments set forth below are based on the record of 
a public hearing held in Tampa, Florida, on May 21-23, 2007, pursuant 
to a notice of hearing issued May 3, 2007, published May 8, 2007 (72 FR 
25986).
    The material issues on the record of hearing relate to:
    1. Class I Prices--adjustments and pricing surface.
    2. Producer milk--diversion limit and touch-base standards.
    3. Transportation Credit Balancing Fund Provisions.
    4. Determination of whether emergency marketing conditions warrant 
the omission of a recommended decision and an opportunity to file 
written exceptions.

Findings and Conclusions

    The proposals, published in the hearing notice as Proposals 1, 2 
and 3, seeking to make various changes to the Appalachian, Southeast 
and Florida milk marketing orders (hereinafter these marketing areas 
and marketing orders will collectively be referred to as the 
southeastern marketing areas or orders as the case may be) are adopted 
immediately in this tentative decision. These adopted proposals form an 
integrated package of changes that simultaneously provide for: (1) The 
temporary increase in Class I prices and the Class I pricing surface in 
the three southeastern orders, and (2) for the Appalachian and 
Southeast orders--(a) more stringent diversion limit standards, (b) 
lower touch-base standards, and (c) other specific changes to both 
orders' transportation credit balancing fund provisions.
    While the summary of testimony is presented as three separate 
material issues, the discussion and findings on all three material 
issues are provided after the summary of briefs.
    The minimum Class I prices of the three southeastern orders, as 
with all other Federal milk marketing orders, are set by using the 
higher of an advance Class III or Class IV price as determined by the 
Department and adding a location-specific differential, referred to as 
a Class I differential. The Class I differentials are location-specific 
by county and parish for all States of the 48 contiguous United States. 
These Class I differentials are specified in 7 CFR Section 1000.52.
    The diversion limit standards of the Appalachian and Southeast milk 
orders are described in the Producer milk definition of the orders (7 
CFR 1005.13 and 7 CFR 1007.13, respectively) and specify the maximum 
volume of milk that may be diverted to a nonpool plant and have the 
diverted milk pooled and priced under each respective order. Currently, 
the diversion limit standards of the Appalachian order for cooperatives 
acting as handlers (and pool plant operators that are not cooperatives) 
are not to exceed 25 percent for the months of July through November, 
and January and February and 40 percent for the months of December and 
March through June. For the Southeast order, the current diversion 
limit standards for cooperatives acting as handlers (and pool plant 
operators who are not cooperatives) are not to exceed 33 percent during 
the months of July through December and 50 percent in the months of 
January through June. As adopted herein, the diversion limit standards 
of both orders are made identical--not to exceed 25 percent for the 
months of January, February, and July through November and 35 percent 
for the months of March through June and for the month of December. 
This represents a modest tightening of the diversion limit standards 
for the Appalachian order and a significant tightening of the diversion 
limit standards for the Southeast order.
    This decision adopts identical daily touch-base standards of at 
least one-day's milk production per month of a dairy farmer in order 
for the dairy farmer to be considered a producer under each respective 
order's Producer milk definition and for making a producer's milk 
eligible for diversion to nonpool plants. This represents a significant 
change from the current touch-base standards for the Appalachian order 
of 6 days' production in any month of July through December and not 
less than 2 days' production for the months of January through June, 
and for the Southeast order of not less than 10 days' production for 
the months of July through December and not less than 4 days' 
production for the months of January through June.
    Currently, only the Appalachian and Southeast orders of the three 
southeastern orders contain provisions for a transportation credit to 
partially offset handler costs of transporting supplemental milk for 
Class I use during certain times of the year from producers located 
outside of the two marketing areas. These producers are not part of the 
regular and consistent supply of Class I milk to the Appalachian and 
Southeast marketing areas.
    Transportation credit balancing funds were first established for 
the Appalachian and Southeast (or predecessor orders) in 1996 and 
operate independently of the producer-settlement funds. A monthly per 
hundredweight (cwt) assessment is charged to Class I handlers on a 
year-round basis on the volume of milk assigned to Class I use at a 
rate of $0.15 per cwt in the Appalachian order and $0.20 per cwt in the 
Southeast order. Payments from the transportation credit balancing fund 
are made during the months of July through December (when milk supplies 
are tightest) in both orders to those handlers who incur the costs of 
providing supplemental milk. The transportation credit balancing fund 
provisions of the two orders were amended on an interim basis in 
December 2006 (71 FR 62377).
    Changes adopted in this decision to the Appalachian and Southeast 
order transportation credit balancing fund provisions: (1) Extend the 
number of months in which transportation credit balancing funds may be 
paid from the current months of July through December to include the 
months of January and February, with the option of the month of June if 
requested, and approved by the Market Administrator; (2) expand the 
payment of transportation credits for supplemental milk to include the 
entire load of milk rather than the current calculated Class I 
utilization; (3) provide more flexibility in the qualification 
requirements for supplemental milk producers to receive transportation 
credits; and (4) increases the monthly transportation credit assessment 
rate from the current $0.20 per cwt to $0.30 per cwt. for the Southeast 
order.

1. Class I Prices--Adjustments and Pricing Surface

    A witness appearing on behalf of the proponents, Dairy Cooperative 
Marketing Association (DCMA), testified in support of temporarily 
increasing minimum Class I prices in the three southeastern milk 
marketing orders. The witness testified that all elements of their 
proposals for the three southeastern milk orders are offered as a 
``single package'' to address the needs of all the southeastern 
region's dairy industry stake holders and represents an integrated 
package of needed changes. It was the opinion of the witness that the 
supply of milk for fluid use in the southeastern marketing areas is 
threatened and that several simultaneous changes to the provisions of 
the three orders are needed to attract

[[Page 11197]]

a sufficient quantity of milk to meet the fluid needs of the markets.
    According to the witness, DCMA consists of nine Capper-Volstead 
cooperative members that include Arkansas Dairy Cooperative 
Association, Damascus, AR; Cooperative Milk Producers Association, 
Inc., Blackstone, VA; Dairy Farmers of America (DFA), Kansas City, MO; 
Dairymen's Marketing Cooperative, Inc., Mt. Grove, MO; Lone Star Milk 
Producers, Inc., Windthorst, TX; Maryland & Virginia Milk Producers 
Cooperative Association, Inc. (MD-VA), Reston, VA; Select Milk 
Producers, Inc., Artesia, NM; Southeast Milk, Inc. (SMI), Belleview, 
FL; and Zia Milk Producers, Inc., Roswell, NM. The witness testified 
that each of the DCMA members marketed and pooled their milk in one or 
more of the three southeastern milk marketing order areas during 2006.
    According to the DCMA witness, during December 2006 members of DCMA 
pooled more than 87 percent of cooperative and non-member producer milk 
on the Appalachian order, more than 87 percent of the cooperative and 
non-member producer milk on the Southeast order, and more than 96 
percent of the cooperative and non-member producer milk on the Florida 
order.
    The DCMA witness testified that their proposed changes to the Class 
I pricing surface better reflect the actual cost of transporting milk 
and the pattern in which milk produced outside of the marketing areas 
moves into the three marketing areas. According to the witness, the 
cost of procuring milk for fluid use for the southeast region has 
increased because local production is in serious decline and continues 
to decline at an increasing rate. The witness noted that the three 
southeastern orders collectively import more than one third of the 
region's milk supply during the most deficit months of the year to 
cover the fluid milk needs. Fluid demand exceeds 300 million pounds of 
milk each month in the three southeastern marketing areas, the witness 
said. The witness characterized the economic situation of the dairy 
industry in the region as dire and marketing conditions as disorderly. 
The witness asserted that producers currently experience inequitable 
prices for their milk, that handlers have unequal costs, and that there 
are insufficient economic incentives for the procurement of milk 
supplies.
    The DCMA witness characterized the southeastern region as having 
rapid population growth that is expected to continue to increase. The 
witness indicated that the U.S. Census Bureau population growth 
estimates for the States of Alabama, Arkansas, Florida, Georgia, 
Mississippi, Louisiana, North Carolina, South Carolina, and Tennessee 
have collectively increased by 8.4 percent from 2000 to 2006, while the 
population of the U.S. as a whole increased 6.2 percent.
    Using Market Administrator statistics on in-area milk production 
for the three southeastern marketing order areas, the DCMA witness 
contrasted population growth to the region's milk production to 
demonstrate that the dairy industry is in serious decline. The witness 
said that during 2006 milk was delivered into the three southeastern 
orders from at least 27 states. The witness explained that local in-
area milk production (milk produced within the geographic marketing 
area boundaries) during 2006 for both the Appalachian and Southeast 
areas supplied the entire Class I needs of these two areas only four 
months of the year and Florida's in-state milk production was 
insufficient to supply the Class I needs in every month of 2006. The 
witness estimated that the Appalachian and Southeast marketing areas 
are able to supply only about 76 percent of the milk necessary to meet 
Class I, Class II and reserve demands, while in Florida, in-area 
producers are able to supply only about 66 percent of the milk 
necessary to meet Class I and reserve demands on an annual basis.
    The DCMA witness asserted that minimum Federal order Class I prices 
have increased only twice in the past 22 years--as a part of the 1985 
Farm Bill and as part of Federal milk order reform made effective in 
January 2000. Specifically, the witness related that the Class I 
differential for Atlanta increased from $2.30 to $3.08 per cwt in 1985 
but was increased by only two cents to $3.10 in January 2000. According 
to the witness, under Federal order reform, some Class I differentials 
in distant milk surplus areas were increased more than in the milk-
deficit regions of the southeast.
    The DCMA witness also was of the opinion that changes to the Class 
I pricing surface resulted in a flattened pricing surface and narrowed 
producer blend price differences between orders. The witness testified 
that such changes diminished the economic incentives to move milk 
within the southeastern marketing areas as well as to move milk into 
the deficit southeastern region of the U.S. According to the witness, 
minimum Class I price differences and returns to producers are simply 
not high enough to move milk into these deficit markets without 
substantial over-order prices.
    The DCMA witness explained that since 1986 diesel fuel prices have 
risen more rapidly than Class I differentials (and thus Class I prices) 
in the southeastern region. Relying on data of the Energy Information 
Administration (EIA) of the U.S. Department of Energy, the witness 
noted that the U.S. average diesel fuel price increased by 187 percent 
from 1986 and 2006 (from $0.94 per gallon to $2.07 per gallon). The 
witness compared this increase to the 0.64 percent or $0.02 per cwt 
increase in the Class I differential for Atlanta since 1986.
    The DCMA witness testified that the slope of the Class I pricing 
surface should be changed to progressively increase Class I prices as 
milk moves to the east and south within the three marketing areas. The 
witness was of the opinion that changing the slope of the Class I price 
surface inside the three marketing areas in this way would better 
encourage milk to move within the two marketing areas. Additionally, 
the witness was of the opinion that pricing signals to producers would 
direct their supplies to the most milk-deficit portions of the regions. 
In this regard, the witness added that simply raising Class I prices 
uniformly throughout the three order marketing areas would not result 
in improved pricing signals to producers.
    The DCMA witness explained that in developing the proposed Class I 
price structure and adjustments to current Class I price levels, DCMA 
considered two alternatives. According to the witness, in one pricing 
alternative all the Class I price relationships between plants in the 
three southeastern orders could be retained. However, under this 
alternative, the witness explained, the Class I prices for the plants 
on the outer edges of the Appalachian and Southeast marketing area 
boundaries would increase considerably, resulting in significant 
changes in price relationships between those plants and plants 
regulated by adjoining Federal orders.
    The DCMA witness said that alternatively the slope of the Class I 
price surface within the three marketing areas could be altered to 
minimize plant-to-plant Class I price relationship changes. The witness 
testified that this approach would result in a pricing structure that 
better reflected actual milk movements from within and outside of the 
marketing areas. The witness pointed out that in either approach, 
plant-to-plant price relationships would change and that the method 
they chose provided the least change in plant-to-plant price 
relationships.

[[Page 11198]]

    The DCMA witness also stressed the need for the proposed Class I 
price adjustments to remain aligned with the Class I price structure in 
adjoining marketing areas. The witness said that the proposed Class I 
pricing surface outside of the three southeastern marketing areas would 
not be changed. The witness was of the opinion that the proposed Class 
I price adjustments are reasonably aligned with Class I prices in 
adjoining marketing areas. Through an analysis of plant-to-plant 
movements of packaged milk, the witness indicated that DCMA's proposed 
Class I pricing structure provides pricing adjustments that are 
reasonable and improves the slope of the Class I pricing surface.
    The DCMA witness explained that both a most distant demand point 
and several supply locations were identified in developing the proposed 
Class I pricing surface. The witness indicated that Miami, Florida, was 
identified as the most distant demand point in the southeastern region 
from any alternative milk supply area. According to the witness, the 
five possible major supply locations and their distance to Miami were 
also identified. These locations included: Wayne County, Ohio; Jasper 
County, Indiana; Hopkins County, Texas; Lancaster County, Pennsylvania; 
and Franklin County, Pennsylvania.
    The witness indicated that of the five possible supply sources, 
Wayne County, Ohio, was determined as the least cost supply location 
with a calculated Class I price adjustment of $6.14 per cwt at Miami, 
Florida. The witness testified that Class I price adjustments were 
progressively adjusted to smaller and smaller Class I price adjustment 
values as plant location values in the southeastern region were 
adjusted by their distance from the supply locations.
    According to the DCMA witness, the plant-to-plant cost of moving 
packaged milk was analyzed. The witness testified that successive 
movements of packaged fluid milk from the outer edge of the Appalachian 
and Southeast marketing areas towards Miami, Florida, were analyzed. As 
with bulk milk movements, the witness explained, at each plant location 
the minimum cost of moving packaged milk was determined and compared to 
the minimum costs of moving bulk milk. The witness concluded that the 
bulk and plant-to-plant packaged milk movements were very similar.
    The DCMA witness testified that the calculated Class I pricing 
adjustments were re-adjusted so that plants located near to each other 
would have a similar Class I price adjustment. The witness also 
acknowledged that the proposed pricing structure could not maintain 
current Class I price relationships because the current Class I price 
surface does not reflect actual hauling costs. According to the 
witness, the west-to-east proposed increase in Class I price 
adjustments reflects higher hauling costs.
    The DCMA witness characterized the proposed adjustments to the 
calculated Class I price surface as being the result of ``smoothing.'' 
The witness explained that deviation from the calculated Class I price 
adjustment represents factoring best professional judgment in assuring 
that plants located near each other have the same Class I price 
adjustment and the need to maintain alignment with Class I prices in 
adjoining marketing areas.
    According to the DCMA witness, the proposed adjustments for plant 
locations regulated by the Appalachian order would increase in the 
range of $0.10 per cwt to $1.00 per cwt; plants regulated by the 
Southeast order would increase in the range of $0.10 per cwt to $1.15 
per cwt; and between $1.30 per cwt to $1.70 per cwt for plants 
regulated by the Florida order.
    Relying on Market Administrator data, the DCMA witness concluded 
that the proposed Class I price increases would generate higher 
marketwide pool values in all three southeastern orders. According to 
the witness, the estimated annual increase of the Appalachian order 
pool for 2004, 2005 and 2006 resulting from the proposed Class I prices 
alone would have totaled $19.3 million, $18.6 million and $18.3 
million, respectively. For the Southeast order, the witness said, the 
annual pool value increase would have totaled $16.8 million, $17.1 
million and $17.7 million, respectively. For the Florida order, the 
witness said, the annual increase in pool value would have totaled 
$36.4 million, $38.3 million and $39.2 million, respectively. In 
estimating the impact on minimum prices paid to dairy farmers, the 
witness said that average annual minimum uniform prices (as announced 
at current locations) would have been increased by approximately $0.25 
per cwt to $0.26 per cwt for the Appalachian order, approximately $0.64 
per cwt higher for the Southeast order, and $1.19 per cwt to $1.22 per 
cwt higher for the Florida order.
    The DCMA witness acknowledged and explained that changes in Class I 
price relationships between plant locations resulting from any changed 
Class I price surface would be inevitable. In this regard, the witness 
asserted that the price adjustment differences between plant locations 
under the DCMA proposal would not exceed the cost of moving Class I 
fluid milk products and therefore would not result in the uneconomic 
movement of milk.
    The DCMA witness concluded by testifying that orderly marketing 
would be improved with a Class I price structure that is more 
reflective of the true hauling costs to supply the milk-deficit 
southeastern region. The witness urged that the proposed Class I price 
adjustments and pricing surface be adopted immediately. The witness 
reiterated that the proposed Class I price adjustments be temporarily 
adopted pending any system-wide changes to the Class I differential 
level and pricing surface.
    A total of 11 dairy farmers whose milk is pooled on at least one of 
the three southeastern orders testified at the hearing in support of 
DCMA's package of proposals but suggested modifications on how the 
package should be changed.
    Three of the dairy farmers who testified were cooperative members 
of MD-VA, DFA and SMI (cooperatives previously described as member 
organizations of DCMA). These witnesses testified that the dairy 
industry in the southeastern region is in need of changes to the three 
marketing orders to respond to the decline in regional milk production. 
Their testimonies joined that of the DCMA witness supporting the DCMA 
package of proposals.
    A dairy farmer whose milk is marketed on the Southeast and Florida 
marketing orders testified on behalf of Cobblestone Milk Producers, 
Inc. and Mountain View Farms of Virginia in limited support of the 
Class I price surface feature of DCMA's package of proposals provided 
certain modifications were made. This witness agreed with proponents 
concerning the decline of milk production in the southeastern region 
and the need to import supplemental milk supplies. According to the 
witness, lower producer pay prices in the southeastern region have led 
to rapidly declining production that is not being replaced by new farms 
or the expansion of existing farms. It was the opinion of this witness 
that the projected increases in producer pay prices arising from the 
proposed increase in Class I prices would not be enough to affect 
production trends in the southeastern region. The witness expressed 
concern that Class I processors would demand their over-order premiums 
be lowered to compensate for increases in the three orders' minimum 
Class I prices. The witness requested that the proposed Class I price 
adjustments for the

[[Page 11199]]

Appalachian and Southeast marketing areas be increased but did not 
offer specific amounts.
    Four dairy farmers from North Carolina testified in general support 
of the proposed Class I price adjustments. Three of the witnesses 
represented organizations that were part of the Southeast Producers 
Steering Committee (SPSC), whose members include North Carolina Dairy 
Producers Association, Georgia Milk Producers Association, Upper South 
Milk Producers Association, Kentucky Dairy Development Council (KDDC), 
North Carolina Department of Agriculture and Consumer Services, and the 
North Carolina Farm Bureau Federation. All four witnesses were of the 
opinion that the proposed Class I price adjustments would not be 
adequate to increase prices paid to dairy farmers in order to stem the 
decline of milk production in the southeastern region. The witnesses 
were of the opinion that additional efforts should be made to enhance 
local milk production. One dairy farmer witness testifying on behalf of 
the KDDC, said that other adjustments needed to be made to the proposed 
Class I price adjustments because Kentucky dairy farmers would benefit 
less from the proposed adjustments than dairy farmers located in the 
Southeast and Florida marketing areas. Another North Carolina dairy 
farmer witness offered the opinion that Appalachian producers would 
need to receive at least a $1.00 to $1.50 per cwt increase in their 
mailbox price to stimulate local milk production. A third North 
Carolina dairy farmer witness stressed that more emphasis should be 
made to seek solutions that would increase local milk production rather 
than seeking better ways to import milk into the region from locations 
located far from the region. Another dairy farmer, also from North 
Carolina, expressed concern that over-order premiums might fall because 
of the proposed Class I prices adjustments. In addition, a SPSC 
witness, as well as others, called for a comprehensive study to 
identify problems and alternatives to the proposals regarding the 
decline of milk production in the southeastern region.
    A witness appearing on behalf of National Dairy Holdings (NDH) 
testified in limited opposition of the Class I price adjustments of the 
DCMA package. According to the witness, NDH is a national dairy 
processor with facilities located throughout the country. The witness 
indicated no specific opposition to Class I price increases but 
conditioned such increases on the fair distribution of the revenue to 
producers in the southeastern region. While the witness testified that 
NDH has no difficulty procuring milk for its plants located in the 
southeastern region, the witness acknowledged other testimony that 
identified milk production problems of the southeastern region and that 
the region's producers are in need of relief. The witness expressed 
concern on how the proposals would impact NDH's wholesale packaged milk 
sales. The witness also suggested that issues discussed at the hearing 
could be addressed by utilizing a point-of-sale or plant-point pricing 
method.
    A witness appearing on behalf of the Kroger Company (Kroger) 
testified in opposition to the proposed Class I price adjustments for 
the Appalachian and Southeast marketing orders. According to the 
witness, Kroger operates four fluid distributing plants that are 
regulated by the Appalachian and Southeast orders (Winchester Farms, 
Westover Dairy, Heritage Farms Dairy and Centennial Farms Dairy). The 
opinion of the witness was that the proposed Class I price adjustments 
would disrupt traditional pricing relationships which were established 
by the 1985 Farm Bill and would generate competitive discrepancies with 
adjoining markets.
    The Kroger witness testified that the proposed Class I price 
adjustments would place their plants in an unacceptable competitive 
situation with each other in the Appalachian and Southeast marketing 
areas. Specifically, the witness requested that the Class I price 
adjustments for Louisville, Kentucky, Lynchburg, Virginia, 
Murfreesboro, Tennessee, and Atlanta, Georgia be unchanged. The witness 
also indicated that Winchester, Kentucky be increased by no more than 
$0.10 per cwt in order to maintain competitive milk procurement price 
relationships with other Kroger plants located in the Cincinnati area 
of the Mideast milk marketing areas. The witness opposed the 
proponent's position that the proposal be considered on an emergency 
basis.
    A witness appearing on behalf of the Milk Industry Foundation (MIF) 
testified in opposition to the Class I price adjustments of DCMA's 
package of proposals. According to the witness, MIF is a member 
organization of the International Dairy Foods Association (IDFA) which 
represents 115 member companies that market approximately 85 percent of 
the nation's milk and dairy products. The witness testified that the 
proposed changes are not necessary because an adequate of supply of 
milk already exists for the Appalachian, Southeast and Florida orders. 
The witness stated that because the Federal order system is a national 
market, milk is available from anywhere in the country. The witness 
noted over-order premiums compensate those entities who supply the 
deficit regions. The witness was of the opinion that declining milk 
production in the southeastern region has been occurring for many years 
and as such does not warrant increasing Class I prices and accordingly 
does not warrant the Department to take emergency action.
    The MIF witness was of the opinion that Class I prices cannot be 
changed in one region of the country without affecting milk marketing 
in other regions. The witness said that the proposed Class I price 
adjustments would change the competitive relationships between plants 
located within and outside of the three southeastern marketing areas. 
The witness argued that Class I sales would be discouraged because all 
Class I plants in the three marketing areas would be required to pay a 
higher price for milk. The witness requested a comprehensive analysis 
of the national market before adopting the proposed Class I price 
adjustments.
    A witness appearing on behalf of Dean Foods Company (Dean) 
testified in opposition to the proposed Class I price adjustments of 
DCMA's package of proposals. The witness agreed with testimony of other 
witnesses indicating the deficit milk supply conditions in the three 
southeastern marketing areas and the need to increase prices paid to 
the region's local dairy farmers.
    The Dean witness was of the opinion that a comprehensive analysis 
of the potential impacts of changing the Class I price surface in the 
three marketing areas had not been conducted. The witness characterized 
DCMA's package of proposals as containing ``too many moving parts'' 
that makes it difficult to evaluate the impact of the proposed Class I 
price adjustment features. The witness was of the opinion that 
Appalachian and Southeast marketing area dairy farmers are in greater 
need of higher producer prices than dairy farmers in the Florida 
marketing area and noted that the proposed Class I price adjustments 
would benefit Appalachian and Southeast marketing area producers the 
least. In this regard, the witness worried that the prices received by 
dairy farmers across the southeastern region would be unfairly 
distributed if the proposed Class I price changes were adopted.
    The Dean witness was of the opinion that the proposed Class I 
pricing surface and Class I pricing adjustments would change how milk 
moves to and between plants located within and outside of the

[[Page 11200]]

three marketing areas. The Dean witness testified that the assumptions 
used by DCMA in laying the foundation for the proposed Class I price 
adjustments and Class I pricing structure are flawed. In this regard, 
the witness noted that the USDA 1999 Final Decision on Federal milk 
order reform indicated that the cost of hauling raw milk was linear, 
[cost increases as the distance milk is transported increases at a 
constant rate] but that the cost of hauling packaged milk was 
nonlinear. Accordingly, the Dean witness argued that the proposed Class 
I pricing changes could give distributing plants located outside the 
marketing area's incentive to change their route dispositions in order 
to become regulated on one of the three marketing orders.
    According to the Dean witness, distributing plants located outside 
the area could become regulated at the expense of plants located in the 
area. As a result, the witness concluded, Class I revenue generated by 
out-of-area distributing plants would be returned to dairy farmers 
located far outside of the three southeastern marketing areas. The 
witness offered that perhaps the greatest beneficiaries of the proposed 
Class I pricing changes could be producers located as far away as 
Illinois and Indiana.
    The Dean witness also criticized reliance on Wooster, Ohio (located 
in Wayne County) as a supply area for the southeastern region and being 
a basis of DCMA's proposed Class I price adjustments. The witness noted 
while DCMA identifies Wooster, Ohio, as a supply area for the 
southeastern region, a Pennsylvania State proceeding held in 2006 
indicated the testimony of a DFA witness saying that milk was not 
available in the Wooster, Ohio, area to supply Pennsylvania.
    The Dean witness offered nine modifications to DCMA's package of 
proposals. The witness explained that their proposed modifications to 
the package of proposals would not seek to provide higher Class I 
prices or change the Class I pricing surface. According to the witness, 
the Appalachian and Southeast marketing orders pooling provisions 
should be identical to those of the Florida marketing order (discussed 
further below).

2. Producer Milk--Diversion Limit and Touch-Base Standards

    The DCMA witness testified that the diversion limit standards of 
the Appalachian and Southeast orders should be identical. According to 
the witness, diversion to nonpool plants allows for the pooling of milk 
that is transferred from pool to nonpool plants without milk first 
needing to be delivered to pool plants. In setting a reasonable limit, 
the witness was of the opinion that diversion limit standards must take 
into account reserve supplies needed for Class I use, the balancing 
needs of the markets and the seasonality of production.
    The DCMA witness testified that milk-deficit Federal orders tend to 
have lower diversion limit standards relative to orders with 
substantial reserve milk supplies. The witness testified that while the 
Appalachian and Southeast order diversion limit standards generally 
reflect their milk-deficit marketing conditions, they are in need of 
tightening. Specifically, the DCMA witness proposed that the diversion 
limit standards be 25 percent during the months of January, February, 
and July through November, and 35 percent for the months of March 
through June and for the month of December.
    In explaining the analysis conducted in arriving at proposed new 
diversion limit standards for the Appalachian and Southeast orders, the 
DCMA witness testified that daily producer milk receipts by 
distributing plants regulated by the two orders from January 2004 
through December 2006 were compared to the day of the month when daily 
receipts at distributing plants were greatest. The witness explained 
that the differences between the day of greatest receipts and each 
day's actual receipts for the month at distributing plants were then 
summed. According to the witness, the resulting value represents the 
amount of additional milk that would need to be pooled as reserve milk 
to be able to satisfy Class I demands at a distributing plant on the 
day of their greatest need. The witness stated that the analysis showed 
approximately 12 to 13 percent of additional milk volume of 
distributing plant receipts would be the minimum reserve necessary to 
cover daily fluctuations in the demand for fluid milk at distributing 
plants. On an annual basis, the minimum average reserve needed as 
calculated is about 22 percent, the witness said.
    The witness explained that the proposed diversion limit standards 
of 25 percent for both orders for the months of January, February, and 
July through November, are based on the analysis described above and 
the need to provide for an additional reserve in the tightest supply 
months. The witness explained that the proposed diversion limit 
standards of 35 percent for the months of March through June and the 
month of December accommodate seasonal fluctuations in supply. The 
witness explained that this standard would allow regular producers who 
supply the Class I needs of the marketing areas in the tight supply 
months to pool all of their additional production in the flush months 
and accommodate the regular decline in Class I sales that occurs when 
schools close for the summer months. According to the witness, Class I 
plants also temporarily close or severely limit their receiving 
operations over the holiday period in December, resulting in 
substantial surplus milk.
    Relying on Market Administrator data, the DCMA witness estimated 
that the impact on the minimum uniform prices from lowering the 
diversion limit standards alone would raise blend prices approximately 
$0.02 per cwt and $0.07 per cwt annually for the Appalachian and 
Southeast orders, respectively. The witness indicated that a change in 
the blend price for any particular producer would vary based on the 
location the producer's milk was delivered.
    The DCMA witness stressed that the proposed changes in the two 
orders' diversion limit standards do not fully capture the true volume 
of milk likely to no longer be eligible to be pooled on the two orders. 
The witness explained that if the volume of producer milk delivered to 
pool plants were the same each month, then the volume of producer milk 
no longer pooled and priced by the orders would drop about 6.67 percent 
and 29.72 percent on the Appalachian and Southeast orders, 
respectively. The witness further explained that lowering the diversion 
limit standards should also result in increasing minimum order blend 
prices paid to producers. According to the witness, proposed changes to 
the diversion limit standards of the order, together with expected 
increases in revenue arising from Class I price adjustments and Class I 
pricing surface, will likely encourage local milk production, the 
movement of milk into the region from distant sources, or some 
combination of both.
    The DCMA witness testified that the package of proposals also 
includes the lowering of the touch-base standards of the Appalachian 
and Southeast orders and makes them identical. According to the 
witness, this would discourage uneconomic movements of milk and offer 
operational savings for cooperatives supplying the Class I needs of the 
marketing area.
    The DCMA witness explained that because of the continuing decline 
in local milk production, an increasing amount of milk that is produced 
further from the marketing areas is becoming a regular part of the 
supply of Class I milk. The witness characterized this milk of distant 
dairy farmers as the

[[Page 11201]]

reserve supply needed for balancing the Class I needs of the two 
marketing areas.
    The DCMA witness was of the opinion that reducing the touch-base 
standard to one day each month in both orders is necessary for the 
efficient pooling of reserve supplies. In this regard, the witness 
testified that lowering the touch-base standard would no longer result 
in displacing local milk already supplying the markets' Class I needs 
with the milk produced farther from the marketing areas that is shipped 
just to meet pooling standards. According to the witness, requiring 
producers to deliver more days to pool plants when the milk is not 
truly needed results in increasing the cost of supplying the Class I 
needs of the two markets.
    Eight dairy farmers testified in general support of DCMA's proposed 
changes to the two orders' diversion limit and touch-base standards. 
Some were of the general opinion that the regular reserve supply for 
the Appalachian and Southeast marketing areas should be pooled when not 
delivered to Class I plants. While all supported the pooling of milk 
that regularly supplies the Class I needs of the two marketing areas, 
several dairy farmers expressed caution that the diversion limits were 
not being lowered enough while touch-base standards were needlessly 
being lowered. According to these witnesses, this would encourage 
pooling milk not truly supplying the markets and result in lower blend 
prices paid to local dairy farmers. The dairy farmers testifying 
supported adopting needed changes on an emergency basis.
    A witness representing Dean testified that the proposed changes to 
the diversion limit and touch-base standards would not be sufficient to 
deter the uneconomic movement of milk or to enhance producer prices in 
the Appalachian and Southeast marketing areas. According to the 
witness, current diversion limit standards are in excess of the 
markets' balancing needs and should be lowered immediately.
    The Dean witness characterized the Appalachian and Southeast orders 
as being very similar to the Florida order in terms of milk consumption 
and production. The witness was of the opinion that the pooling 
standards of the Florida order work well and pooling milk not 
consistently serving the market's Class I needs rarely occurs. The 
witness specifically proposed that diversion limit standards be changed 
to 15 percent for the months of December through February, 20 percent 
for the months of March through June, and 10 percent for the months of 
July through November.
    According to the Dean witness, dairy farmers will receive higher 
blend prices if diversion limits are made even lower than proposed by 
DCMA. Relying on Market Administrator data, the witness stated that 
January 2004 had shown the highest ``need'' of reserve milk during 
2004-2006 for the Southeast order at approximately 22 percent of total 
milk pooled on the order. The witness contrasted this with October 2004 
where the ``needed'' reserve was approximately 7 percent. In this 
regard, the witness suggested that diversion limits could be reduced 
below that proposed by DCMA. According to the witness, if made too low, 
the Market Administrator has the authority to change the diversion 
limit standards if warranted.
    The Dean witness opposed DCMA's proposed one day per month touch-
base standard if DCMA's proposed diversion limit standards are adopted. 
The witness was of the opinion that inefficient movements of milk would 
result if the one day touch-base standard were adopted. However, the 
witness indicated support for a two-day touch-base standard provided 
the diversion limit standards of the Florida order are simultaneously 
adopted.
    The Dean witness explained that when touch-base requirements are 
low, locally produced milk can be displaced by milk located far from 
the marketing area because it needs to be transported to the marketing 
area fewer times to qualify for pooling and receiving a higher blend 
price. The witness was of the opinion that only milk that is necessary 
to serve the Class I needs of the market should be delivered to that 
market. According to the witness, reserve milk supplies located far 
from the market should not be pooled on the market if they are not 
delivered to the market.

3. Transportation Credit Provisions

    The DCMA witness explained that on September 1, 2006, the Secretary 
issued a tentative partial decision (71 FR 54118) which amended the 
transportation credit provisions of the Appalachian and Southeast 
orders. Specifically, the witness noted that the decision established a 
fuel cost adjuster to determine a variable mileage rate factor used to 
compute the payout of transportation credits and higher maximum 
transportation credit assessments on Class I milk for the Appalachian 
and Southeast orders. To accompany these adopted changes that were 
implemented on December 1, 2006 (71 FR 62377), the witness proposed 
four other changes to the transportation credit provisions that are 
part of the package of changes proposed for the two southeastern 
orders.
    According to the DCMA witness, the four additional changes to the 
transportation credit provisions for both orders include: (1) Extending 
the months during which transportation credits may be paid to include 
the months of January and February with June being an optional 
transportation credit payment month; (2) expanding the payment of 
transportation credits to apply to the full load of milk, rather than 
the current calculated Class I portion of milk loads; (3) providing 
greater flexibility for supplemental milk producers to be eligible to 
receive transportation credit payments; and (4) raising the maximum 
monthly transportation credit assessment for the Southeast order from 
the current $0.20 per cwt to $0.30 per cwt.
    According to the DCMA witness, the need for supplemental milk in 
the Appalachian and Southeast orders has increased during the months of 
January and February. The witness offered evidence showing that during 
January 2004 through December 2006, January and February are months 
with increasing Class I use in the Appalachian and Southeast orders. 
The witness claimed that during January and February, local milk is not 
sufficient to supply the Class I milk needs. It is this combination of 
Class I need and available local producer supplies that show January 
and February as being more like the current transportation credit 
payment months of July through December than the flush months of March 
through May, the witness concluded. According to the witness, adding 
January and February as transportation credit payment months would give 
suppliers of supplemental milk an opportunity to recoup a portion of 
the hauling costs to supply the marketing areas with milk for fluid 
use.
    In explaining this proposed change, the DCMA witness said, in part, 
current transportation credit payment provisions result in 
reimbursements that are much lower than the real cost of hauling. The 
witness explained that the cost of hauling milk to Class I plants is 
the same regardless of the plant's use or the Class I utilization of 
the market. The witness was of the opinion that expanding the 
transportation credit payments to full loads of milk delivered only to 
pool distributing plants would enhance orderly marketing and better 
ensure that sufficient supplemental milk is delivered to pool 
distributing plants. The witness supported continuing transportation 
credit payments on supplemental milk deliveries to pool distributing 
plants only.

[[Page 11202]]

    The DCMA witness proposed simplifying the process for determining 
milk that is eligible for transportation credit payments. The witness 
noted that currently, a dairy farm must be located outside either the 
Appalachian or the Southeast marketing areas, the dairy farmer must not 
meet the Producer provision under the two orders during more than two 
of the immediately preceding months of February through May and not 
more than 50 percent of the milk production of the dairy farmer during 
those two months, in aggregate, can be received as producer milk under 
the order during those two months.
    The DCMA witness was of the opinion that the requirements for 
transportation credit payment eligibility should be changed to provide 
flexibility in meeting the criteria while limiting the receipt of 
transportation credits to only that milk which is truly supplemental 
and that is not part of the consistent and regular supply of milk 
serving the Class I needs of the two markets. Specifically, the witness 
proposed that: (1) A dairy farmer must not meet the Producer definition 
on the orders in more than 45 of the 92 days in the months March 
through May or (2) must have less than 50 percent of a producer's milk 
pooled on the orders during those three months combined. The witness 
argued that limiting the producer association with the orders to no 
more than half the time or to no more than half their milk production 
is sufficient in identifying a dairy farmer who is a supplemental 
supplier of milk to the marketing areas. These changes, the witness 
asserted, offer substantial cost savings to cooperatives that bear the 
burden of sourcing and supplying the supplemental milk needs of the 
markets from distant locations.
    The DCMA witness testified that the maximum transportation credit 
assessment for the Southeast order needs to be increased from the 
current $0.20 per cwt to $0.30 per cwt given the proposed expansion of 
the transportation credit payments on full loads of milk to Class I 
distributing plants regulated by the two orders. The witness was of the 
opinion that otherwise the current assessment rate would be 
insufficient to cover anticipated shortfalls in the transportation 
credit fund.
    While the DCMA witness proposed a higher transportation credit 
assessment rate for the Southeast order only, the witness projected 
that the proposed changes to Class I prices and the Class I pricing 
surface in the Appalachian and Southeast orders would lessen payments 
from the transportation credit balancing funds. The witness explained 
this may occur because the greater positive differences (increases) 
from adopting the proposed Class I price adjustments and Class I 
pricing surface. The witness did acknowledge that the additions of the 
months of January and February as transportation credit payment months 
would tend to increase transportation credit payouts.
    Relying on Market Administrator data, the DCMA witness estimated 
that for the months of July through December 2006 the Southeast order 
transportation credit payments would total $15,704,872 as a result of 
their proposal, and January and February 2006 payments would total 
approximately $2,900,000, resulting in an overall amount of 
approximately $18,604,872. At the current assessment rate of $0.20 per 
cwt, the witness concluded that transportation credit balancing funds 
would not have been sufficient to pay all transportation credit claims 
in 2006. At the proposed $0.30 per cwt assessment rate, the witness was 
of the opinion that sufficient revenue would be generated to satisfy 
all transportation credit claims.
    Relying on Market Administrator data for the Appalachian order, the 
witness said that during July of 2006 through January of 2007, 
transportation credit payments would have totaled approximately 
$4,073,312. According to the witness the month February 2006 would have 
included a payment of approximately $313,000, bringing the total 
estimated transportation credit total payments to $4,383,312. According 
to the witness, the current $0.15 per cwt assessment rate for the 
Appalachian order would have been sufficient and no increase in the 
assessment rate would be needed.
    The DCMA witness supported continuing to provide for Market 
Administrator discretion in setting the transportation credit 
assessment rates at less than the maximum allowed. The witness was of 
the opinion that doing so will prevent the needless collection of 
revenue when the transportations credit balancing funds are sufficient 
to meet claims.
    Four dairy farmers testified in support of DCMA's proposal to 
provide additional flexibility in determining which producers are 
supplying supplemental milk to the two marketing areas. As with other 
features of DCMA's proposals, these dairy farmers support adoption of 
these proposed changes on an emergency basis.
    The witness appearing on behalf of Dean expressed support for 
adding the months of January and February as transportation credit 
payment months for the Appalachian and Southeast orders on the 
condition that tighter diversion limits be adopted. The witness said 
these months should be considered as payment-eligible months because 
the tentative decision implemented in December 2006 eliminated the 
ability to divert milk on loads of milk seeking the payment of a 
transportation credit. However, the Dean witness opposed expanding 
transportation credit payment eligibility to entire loads of milk. In 
this regard, the witness expressed concern that this would essentially 
result in Class I sales funding the supply of supplemental milk in 
lower-valued Class II uses.

Post-Hearing Briefs

    Post-hearing briefs were filed by: Dairy Cooperative Marketing 
Association (DCMA), Southeast Producers Steering Committee (SPSC), Dean 
Foods Company and National Dairy Holdings (Dean/NDH), and the Milk 
Industry Foundation.
    The DCMA post-hearing brief reiterated support for adoption of 
their proposals on an emergency basis. The brief stated that their 
proposals were developed as an integrated package and that the package 
of proposals better assures the Appalachian, Southeast and Florida milk 
orders' ability to attract a sufficient quantity of milk for fluid use. 
The brief said this is accomplished by increasing the Class I prices in 
the three milk marketing orders, lowering the diversion limit and 
touch-base day standards, and modifying the transportation credit 
provisions. The brief reiterated the deficit milk supply situation in 
the southeastern region. The brief emphasized that procuring milk for 
Class I use for the region is a major challenge that is borne 
disproportionately by cooperative associations and their dairy farmer 
members.
    The DCMA brief explained that the Class I price adjustments and 
changes to the Class I pricing surface in the Appalachian, Southeast 
and Florida orders would accomplish two needed results. According to 
the brief, the changes would likely encourage local producers to 
increase milk production and provide pricing incentives for producers 
located outside the marketing areas to deliver milk to the three 
marketing areas for fluid use.
    The DCMA brief stated that while plant price relationships would 
inevitably change as a result of their proposals, the Class I prices 
proposed are strikingly similar to plant price differences adopted in 
the 1999 Order Reform Final Rule. The brief indicated that this is 
proof that their method of developing the proposed Class I price

[[Page 11203]]

adjustments and Class I pricing surface is valid and meets the 
requirements of a regulated Class I price system.
    The DCMA brief commented on the method used in developing their 
Class I pricing proposals as deviating from a model developed by 
Cornell University that was relied upon in the adoption of current 
Class I pricing structure. According to the brief, arguments regarding 
the cost differences between assembly and plant-to-plant milk 
deliveries as a direct function of the distance transported and not 
being the same as packaged milk movements when greater than 900 miles 
does not invalidate their proposed pricing structure. The brief 
characterized the proposed Class I pricing portion of the package of 
their proposals as containing all the elements used by the Department 
in the current Class I pricing structure. The brief also argued that 
DCMA's proposals generates Class I pricing relationships consistent 
with the objectives of marketing orders in assuring an adequate supply 
of milk for the three marketing areas, not encouraging the uneconomic 
movement of milk; and being reflective of the supply and demand 
conditions for milk within the marketing areas.
    The DCMA brief explained that lowering the diversion limit 
standards in the Appalachian and Southeast orders would serve to 
enhance producer blend prices while the decrease in the producer touch-
base days would act to encourage more efficient milk movements and 
offer cost savings to milk suppliers. The brief maintained that while 
some witnesses testified in support of even lower (tighter) diversion 
limits, no evidence to support such changes was presented. The brief 
added that diversion limit standards in both orders will effectively be 
much lower than the proposed standards because no diversions may 
accompany supplemental milk pooled on the order which receives a 
transportation credit payment. The brief also noted that DCMA's 
proposal for extending transportation credit pay-out months also 
effectively lowers pooling milk by diversion.
    The DCMA brief stated that extending the payment of transportation 
credits to include the months of January and February and to the entire 
loads of milk would offer the suppliers of supplemental milk greater 
assurance that more of the actual costs of hauling milk to the 
southeastern region would be covered. According to the brief, 
simplifying the criteria that determines if producers are supplemental 
suppliers of milk to the marketing areas offers both administrative and 
marketing efficiencies. Finally, the brief explained that the proposed 
increase in the transportation credit assessment for the Southeast milk 
order would ensure that transportation credit payment claims would be 
adequate to meet anticipated needs.
    The DCMA brief maintained that the record contains abundant 
evidence supporting the existence of emergency conditions in the three 
marketing areas affecting the ability to adequately supply fluid milk. 
The brief stressed that providing adjustments for higher Class I prices 
and modifying the Class I pricing surface, if even on a temporary 
basis, is necessary immediately. The brief indicated that milk 
production in the Southeastern states during the first quarter of 2007 
declined at a faster rate than the annual decline during 2006 and 2005, 
and that this increasing rate of milk production decline cannot be 
ignored. The brief reiterated the continuing increases in hauling costs 
and the longer distances milk must be shipped to provide sufficient 
supplies to meet fluid demands.
    A post-hearing brief was submitted on behalf of SPSC. The SPSC 
brief indicated support for the Class I portions of DCMA's proposals 
but was not fully supportive of the proposed diversion limit and touch-
base standards and transportation credit provisions. The brief agreed 
with the DCMA proposals to increase Class I prices in the Appalachian, 
Southeast and Florida orders on an emergency basis because it would 
promote milk production within the three marketing areas by enhancing 
local producer income--the primary suppliers of fluid milk for the 
three southeastern markets. The SPSC brief did express concern that 
even with expected higher blend prices to producers accruing from 
higher Class I prices, the current trend of lower local milk production 
may not be slowed.
    The SPSC brief indicated support to lower (tighten) diversion limit 
standards in the Appalachian and Southeast orders. However, the brief 
expressed the opinion that diversion limit standards for both orders 
could and should be reduced more than that proposed by the DCMA. The 
SPSC brief asserted that record evidence had not determined the 
appropriate base and reserve milk supply volumes or the proper 
diversion limit and touch-base standards for the Appalachian and 
Southeast orders or who should bear the costs of maintaining reserve 
milk supplies for the Southeastern region.
    The SPSC brief was of the opinion that record evidence also did not 
clearly indicate that the volume of milk pooled on the order for other 
than Class I use actually would be lowered by adopting DCMA's proposed 
diversion limit and touch-base standards. According to their brief, the 
majority of the producer milk removed under the DCMA proposals would 
occur in only a few months of the flush production months for the 
Appalachian order and in the months of January and February for the 
Southeast order. The brief expressed concern that milk could actually 
be added in both orders in the other months due to the decrease in 
touch-base days. The brief maintained that in-area producers and those 
who provide the primary supply of milk for fluid use on a regular basis 
should receive the greatest share of revenue attributable to that 
service. According to the brief, pooling more milk than needed would 
only continue to depress the income of the Southeastern producers.
    The SPSC brief found agreement with Dean's testimony that proposed 
a more aggressive lowering of diversion limit standards for the 
Appalachian and Southeast orders. The brief agreed with Dean's position 
that tighter diversion limits would sharply reduce the volumes of 
pooled milk in the two orders and the relative impact on producer pay 
prices would be more substantial. The brief indicated support for 
continuing to provide discretionary authority for the Market 
Administrators to tighten diversion limits and raise touch-base 
standards if necessary and without the need to resort to the formal 
rulemaking process.
    The SPSC brief indicated conditioned support for DCMA's proposed 
changes to the transportation credit provisions of the Appalachian and 
Southeast orders. However, the brief questioned the proper role of 
transportation credits in both marketing orders. The brief requested 
the Department consider the proper distinction between true pooled 
reserve milk and supplemental milk.
    A post-hearing brief submitted on behalf of Dean Foods Company and 
National Dairy Holdings, LLC (hereinafter referred to as Dean/NDH) 
agreed that the Southeastern region of the U.S. is a deficit milk 
production region and that the deficit is growing. The brief said that 
dairy farmers who regularly and consistently supply milk to fluid milk 
plants in the southeast region should be appropriately compensated for 
their raw milk and receive the blend price of the order they supply. 
However, the brief argued that adopting the proposed Class I price 
adjustments and the Class I price surface proposals is not supported by 
record evidence or by rule of law and should be denied. While the Dean/
NDH brief expressed agreement that long-

[[Page 11204]]

term problems exist regarding the viability of the southeastern region 
dairy industry, it doubted that correcting problems that have prevailed 
for some 25 years could be solved overnight through emergency 
rulemaking.
    According to the Dean/NDH brief, there is no evidence of an 
emergency that would warrant adopting the Class I price proposals by 
the omission of a Recommended Decision. To the extent that conditions 
warrant the need to rely on milk orders to return higher prices to 
dairy farmers, the brief asserted that an alternative method of 
returning higher prices can be achieved by simply lowering diversion 
limit standards of the orders.
    The Dean/NDH brief noted that Dean and NDH operate several fluid 
milk processing plants in the Southeastern region and noted that 
processors opposed the Class I price adjustments and Class I pricing 
surface changes. The brief argued that such changes may result in 
unintended consequences which may make the situation in the 
southeastern region worse.
    According to the Dean/NDH brief, adopting changes to Class I 
pricing may result in plants located outside the Appalachian and 
Southeast marketing areas gaining incentives to direct their fluid milk 
sales in the marketing areas and become pooled on those orders. The 
brief argued that while plants may gain in blend price changes by 
altering where they become pooled, the price surface may not change for 
their competitors. The brief also asserted that since January 2000, 
Class I prices were intentionally linked nationwide as part of Federal 
milk order reform and concluded that any change in Class I 
differentials or the Class I pricing surface, even at one price 
location, would change the economic incentive nationwide to serve that 
location. The brief contended, therefore that the entire national Class 
I price surface needs to be considered.
    According to the Dean/NDH brief, DCMA's Class I price proposals 
fail to rely on accepted economic models and fail to follow the 
Department's established policies for making adjustments to the Class I 
price surface. Specifically, the brief argued that the economic 
calculations failed to take into consideration ``shadow pricing,'' 
which the brief characterized as how a market could react to changes 
such that an additional price change would alter distribution. The 
brief also argued that the Class I price proposals fail to calculate 
unique prices for each location by considering relevant reserve supply 
areas and fail to account for differences in raw milk movements versus 
packaged milk movements.
    According to the Dean/NDH brief, the rationale for setting a target 
price for Miami, Florida, and then backing off that price and 
``smoothing'' the result is arbitrary and capricious. The brief 
contended that by determining Class I prices in this way, such 
methodology was not applied uniformly and thus cannot meet the 
standards of the Administrative Procedure Act. In addition, the brief 
noted that no evidence or economic data backs up the ``smoothing'' 
process as described by DCMA testimony.
    The Dean/NDH brief asserted that Wooster, Ohio, should not be 
identified as a supply area because it has never been relied upon as 
any kind of basing point for pricing milk and doing so now would be 
specifically contrary to testimony given at a Pennsylvania State 
hearing for a recent State of Pennsylvania's rulemaking. Accordingly, 
the brief contended that DCMA's entire Class I pricing proposals should 
be rejected.
    According to the Dean/NDH brief, although the Class I price changes 
sought are ``temporary,'' competitive impacts of such changes can be 
long-term and result in permanent harm to Class I handlers. The brief 
asserted that any decision should be considered permanent unless it has 
a specific sunset provision. According to the brief, no specific sunset 
provision had been proposed or discussed in the hearing record.
    The Dean/NDH brief pointed out that the dairy industry is also 
currently experiencing record high Class I prices for milk and high 
blend prices paid to dairy farmers obviate the need for emergency 
action. The brief noted that the May 2007 uniform price for Fulton 
County, Georgia, was $18.37 per cwt. According to the brief, this price 
is $1.37 per cwt higher than April 2007 and is $5.83 per cwt, or 45.3 
percent, higher than in May 2006. The brief also noted that the Class I 
price for June 2007 at Fulton County was $1.92 per cwt higher than May 
2007, and the July 2007 price increased by $3.07 per cwt. The brief 
indicated that even a proponent witness acknowledged that such higher 
prices are likely to continue through the fall 2007.
    The Dean/NDH brief agreed that diversion limit standards for the 
Appalachian and Southeast orders should be lowered on an emergency 
basis and made identical to those of the Florida milk order. The brief 
indicated that the Florida milk order currently functions well by 
having lower diversion limit standards and this has supported the 
prevailing over-order premiums. The brief opined that because of the 
order's tight pooling provisions, the need for transportation credits 
and the need for holding numerous formal rulemaking hearings has been 
avoided. According to the brief, the Florida order's tight diversion 
limit standards have continually assisted that order in retaining 
strong blend prices paid to dairy farmers and attracting sufficient 
amounts of milk supplies.
    The Dean/NDH brief asserted that pool revenues should be shared 
among only those producers who truly and regularly serve the Class I 
market and that diversion limit standards of the Appalachian and 
Southeast orders are not adequately identifying those true and regular 
suppliers. The brief asserted that both orders can be made more 
effective by requiring a genuine association of a milk supply with the 
market as intended by the AMAA.
    The Dean/NDH brief indicated that if Dean's proposal for adopting 
the diversion limit standards of the Florida order for the Appalachian 
and Southeast orders is adopted, Dean would support the DCMA's one-day 
per month touch-base proposals. As they do not view DCMA's diversion 
limit standards as being any change at all, they oppose any change to 
the touch-base standards of the Appalachian and Southeast orders.
    The Dean/NDH brief opposed the expansion of the payment of 
transportation credits to include the entire load of milk and stated 
that they should only be paid on Class I milk as currently provided 
under the Appalachian and Southeast orders. The brief expressed concern 
that adopting the proposed changes would create the wrong economic 
incentives. The brief noted that suppliers of milk to a Class I plant 
with a higher than market average of Class II use would be receiving a 
larger economic benefit than Class I plants with below market average 
Class II use. According to the brief, this would be contrary to 
assuring equal minimum milk prices among similar handlers.
    The Dean/NDH brief was of the opinion that transportation credits 
have been a key factor in contributing to the decline of the dairy 
industry in the southeastern region. In this regard, the brief noted 
the proponents acknowledgement that in some cases current touch-base 
provisions in conjunction with transportation credits cause inefficient 
movements of milk. The brief asserted that transportation credits, not 
touch-base standards, give rise to inefficient movements of milk.

[[Page 11205]]

    A post-hearing brief by MIF reiterated their opposition to adopting 
DCMA's proposals and asserted the absence of emergency marketing 
conditions that warrant emergency action. The brief noted awareness of 
declining milk production in the southeastern region but indicated this 
is not a sufficient basis for the adoption of the proposals on an 
emergency basis. The brief further argued that no emergency exists to 
warrant adoption of the proposals because the trends of declining milk 
production in the region and rising fuel costs have existed for many 
years.
    The MIF brief stressed that the key purpose of the Federal milk 
marketing order program is to ensure an adequate supply of milk for 
Class I needs. In this regard their brief noted that no witnesses 
testified on the inability to procure milk for Class I use. The brief 
reiterated that in a survey of their membership conducted before the 
hearing, no member indicated difficulty securing milk for Class I needs 
in the three southeastern marketing areas. The brief also mentioned 
that over-order premiums are paid by Class I handlers to secure milk 
for fluid use and the proponents testified that current over-over 
premiums currently offset higher fuel costs.
    The MIF brief noted that some southeastern dairy producers who 
testified at the hearing also participated in a herd-removal program 
called Cooperatives Working Together (CWT). In this regard, the brief 
cited this as an example that the concern for declining milk production 
in the southeastern region is misplaced.
    The MIF brief asserted Class I sales would suffer if higher Class I 
prices are adopted because higher costs will increase wholesale costs 
and result in higher retail prices paid by consumers. The brief noted 
that the current, general structure of Class I location differentials 
has been in place for 22 years and that milk bottlers have made 
significant investments in plants and equipment during this time.
    According to the MIF brief, plants could be disadvantaged in the 
marketplace solely because of increases in the Class I price relative 
to the Class I price of its competitors. The brief argued that a half-
penny difference per gallon could result in lost customers for a 
distributing plant and that a 2.5 cent increase is enough to lose a 
supermarket account. The brief asserted that increasing a Class I price 
by 10 cents ($0.0086 per gallon) could yield dire results for a Class I 
plant. The brief indicated that an unexpected consequence could be that 
plants distant to the three orders could become associated with one of 
the three orders due to differences between transportation costs and 
increased Class I prices resulting in out-of-area plants taking away 
sales from in-area plants.
    The MIF brief said that a comprehensive study and analysis on a 
national scale of all potential consequences and on demand for packaged 
milk was needed before any changes to Class I pricing are adopted. The 
brief reasserted the opinion that Class I prices could not be changed 
in the southeastern region alone because it changes marketing 
conditions in all marketing areas.

Discussion and Findings

    The record of this proceeding reveals that for many years milk 
production has been declining in the southeastern region and supplying 
the region with supplemental milk has demanded the sourcing of milk 
supplies from ever farther distances from the marketing areas. Not only 
has the decline in milk production been in absolute terms, but when 
balanced with population increases, milk production in the region has 
failed to satisfy fluid demands year-round.
    At issue in this proceeding is consideration of proposed changes to 
the Appalachian, Southeast, and Florida milk marketing orders aimed at 
assuring an adequate supply of milk for fluid use in the southeastern 
region of the U.S. As proposed by DCMA, the proposals are an integrated 
package of amendments to the three marketing orders that seek 
simultaneous changes with the aim of providing incentives for assuring 
a reliable supply of milk for fluid use. The package of proposals 
integrates: higher regulated minimum prices for Class I milk, changes 
to assure that the revenue accruing from higher minimum Class I prices 
will be shared with those producers who regularly and consistently 
serve the Class I needs of the region, cost savings for entities who 
have made the commitment to supply the region; and flexibility and 
incentives for supplying the Appalachian and Southeast marketing areas 
with supplemental milk by offsetting the cost of transportation.

Class I Prices and Class I Price Surface

    Temporary adjustments to the Class I prices for the three 
southeastern orders are adopted and result in a change to the Class I 
pricing surface. The changes are specified in the order language. 
Assuming no other changes to the three southeastern orders, increasing 
Class I prices will increase the value of each order's marketwide pool. 
The higher minimum prices will also attract milk to all locations and 
increase blend prices for dairy farmers whose milk is pooled on the 
three southeastern milk marketing orders.
    The basic foundation for deriving the temporary adjustments to 
Class I prices begins with DCMA's identification of potential supply 
areas and reliance on that potential supply area to yield the lowest 
Class I price adjustment based on the farthest point of milk demand. 
The potential supply point meeting this criteria was Wooster, Ohio, and 
the farthest demand point was identified as Miami, Florida. After 
identification of the nearest supply point and the demand point, the 
distance between these two points was relied upon to determine 
calculated price adjustments at all other county and parish locations 
within the marketing area boundaries of the three southeastern orders. 
The selection of Miami as the farthest point of milk consumption is 
consistent with recognition in the current pricing structure that Miami 
is the point with the highest Class I differential resulting in a Class 
I price designed to attract an adequate supply of milk for Class I 
uses.
    As the proposal indicated, the selection of Wooster, Ohio, (Wayne 
County) as a supply point is one of several that were considered by the 
proponents. The selection of Wooster was made after consideration of 
other supply points because it would represent the least-cost point 
from which a milk supply could potentially be sourced from locations in 
the southeastern region. All other supply points considered would have 
resulted in much higher Class I price adjustments.
    The Class I price adjustment at every county and parish location 
relies upon a mileage rate factor implemented in December 2006. This 
factor, representing approximately 80 percent of the cost of hauling 
bulk milk, is further reduced by 80 percent. While this formed DCMA's 
basic foundation for adjusting Class I prices, it is not the proposed 
Class I price adjustments at all locations in the southeastern region.
    The DCMA's proposed Class I price adjustments differ from those 
calculated. What the proponent's have described as ``smoothing'' of the 
Class I price adjustments is essentially price alignment. In this 
regard, it is clear that the proposed Class I price adjustments are 
different from strictly calculated values. The proposed Class I price 
adjustments provide reasonable alignment with the current Class I price 
surface beyond the geographical boundaries of the southeastern orders.
    Similarly, DCMA's Class I price adjustments differ from calculated

[[Page 11206]]

adjustments by adjusting calculated values to correspond to Class I 
processing plant locations. This establishes pricing zones that are 
conceptually identical to current pricing zones and assures that 
similarly situated Class I handlers will have the same minimum 
regulated Class I prices. Providing similar regulated prices for 
similarly situated handlers is consistent with the requirements of the 
AMAA. While conceptually identical, maintaining price alignment with 
adjoining milk marketing orders together with pricing zones, the 
proposed Class I price adjustments result in price relationships that 
are different from those that exist under the current pricing 
structure. Despite criticism that DCMA's adjustments change price 
relationships between plants of the same ownership, the key requirement 
that similarly located plants have similar regulated minimum prices is 
maintained.
    In an effort to examine both the level and the reasonableness of 
the Class I price adjustments that were zoned and aligned with 
adjoining orders, DCMA evaluated the cost of shipping packaged milk. 
According to the record, there are some differences between what the 
resulting Class I price adjustments would be under the cost analysis of 
shipping packaged milk. Nevertheless, the similarities between Class I 
price adjustments as proposed and the cost adjustment analysis of 
shipping packaged milk are similar. Because the Class I price 
adjustment at all locations does not exceed the value of milk at 
alternative locations, in either bulk or packaged form, the Class I 
price adjustments are reasonable. This method of evaluating the 
proposed Class I pricing changes by comparison to packaged milk 
movement forms a rational basis to conclude that the proposed changes 
to Class I pricing are reasonable. The adopted Class I price 
adjustments are presented in Figure 1. While the Class I differentials 
in the southeastern region are not changed in this decision, the Class 
I price adjustments have been added to the current Class I 
differentials for illustrative purposes. Figure 1 provides a graphic 
presentation of the combined value of Class I differentials plus the 
adjustment values adopted in this decision.
    On the basis of a pricing surface alone, the proposed Class I price 
adjustments will not likely result in the uneconomic movement of milk 
as asserted by opponents. The proposed pricing surface better reflects 
the economic conditions affecting the supply and demand for milk in the 
three southeastern marketing areas by providing greater pricing 
incentives indicative of actual milk movements and the cost of supply 
milk from alternative locations. The adopted Class I price adjustments 
results in a steeper Class I price surface that correlates with the 
higher location value fluid milk has in the southeastern region. The 
location value of milk is higher because of the cost involved in 
transporting milk to locations in the milk-deficit southeastern region 
from alternative milk-surplus locations.

[[Page 11207]]

[GRAPHIC] [TIFF OMITTED] TP29FE08.001

    Opponents to DCMA's Class I price adjustments assert that there is 
no reason to increase Class I prices because all Class I demands are 
being met under current order provisions. This decision rejects the 
assertion of an absence of a rationale to make changes to the pricing 
provisions of the three orders. The record of this proceeding reveals 
that it is the cooperative member organizations of DCMA who supply the 
majority of the Class I needs of the three marketing areas. In making 
the commitment to supply the fluid needs of the markets, the supplying 
cooperatives have largely reduced the burden of Class I handlers to 
source their supply. Similarly, it is the cooperative organizations 
that provide the service of balancing the three southeastern markets.
    Opponents to DCMA's Class I price adjustments noted that there is 
an adequate supply of milk to meet fluid demands. There is an adequate 
national supply of milk to meet the national demands for fluid milk. 
However, in the deficit areas of the southeastern

[[Page 11208]]

marketing areas, there must be sufficient incentives provided by the 
orders to encourage the movement of milk from reserve areas to these 
deficit markets. In this regard, the location value of milk needs to 
consider local milk supplies, local demand, and transportation costs. 
The adopted Class I price adjustments should provide the additional 
incentives needed to offset some of the costs associated with the 
decreases in local supply, increases in local demand, and increases in 
transportation costs.
    Opponents criticize DCMA's Class I amendments by identifying that 
other means and methods are available which would return greater 
revenue to dairy farmers instead of increasing minimum prices. Other 
changes adopted in this decision will, all other things being equal, 
tend to increase minimum regulated prices paid to producers. However, 
these changes are founded on only the very limited improvement gained 
from changes by lowering the diversion limit standards of the 
Appalachian and Southeast. These changes provide no additional revenue 
that also is needed so that Class I demand can be met at all times. In 
light of the chronic milk deficit conditions of the southeastern 
region, only higher minimum regulated prices can reasonably generate 
the additional revenue needed to assure that the Class I needs of the 
region can be continuously met. According to Market Administrator 
analyses, the estimated annual increase of the Appalachian order pool 
for 2004, 2005, and 2006 resulting from DCMA's proposed Class I price 
adjustments would have been $19.3 million, $18.6 million and $18.3 
million respectively. For the Southeast order, the annual pool value 
increase would have been $16.8 million, $17.1 million and $17.7 million 
respectively. For the Florida order, the annual increase in pool value 
would have been $36.4 million, $38.3 million, and $39.2 million, 
respectively. While alternative methods such as a tightening of pooling 
standards will, among other things, tend to enhance producer revenue to 
those producers who regularly and consistently supply the Class I needs 
of the market, this alone will not establish minimum regulated prices 
high enough to attract an adequate supply for chronic milk-deficit 
marketing areas from alternative distant locations.

Diversion Limit and Touch-Base Standards--Appalachian and Southeast 
Orders

    DCMA's proposed diversion limit and touch-base standards of the 
Appalachian and Southeast order are immediately adopted. The adopted 
changes make the diversion limit and touch-base standards of the two 
orders identical. Specifically adopted are diversion limit standards 
of: 25 percent of deliveries to pool plants during the months of 
January, February, July, August, September, October and November, and 
35 percent in the months of March, April, May, June and December. Both 
order's touch-base standard are amended to require at least one-days' 
milk production of a producer must be delivered to a pool plant during 
the month in order for a producer to be eligible to divert to nonpool 
plants.
    Based on record evidence, adoption of a one-day per month touch-
base standard for both orders and making the diversion limit standards 
of both orders identical accomplishes three important pooling standard 
objectives. Specifically, the changes: (1) Provide a standard necessary 
to identify producers supplying the markets' Class I needs; (2) provide 
the criteria to identify the milk of producers who may be eligible for 
receiving a transportation credit in supplying supplemental milk for 
Class I use; and (3) allows milk that is part of the milk supply that 
regularly and consistently services the markets' Class I needs to be 
pooled on the orders.
    Providing for the diversion of milk is a desirable and needed 
feature of an order because it facilitates the orderly and efficient 
disposition of milk when not needed for fluid use. When producer milk 
is not needed by the market for Class I use, some provisions should be 
made for that milk to be diverted to nonpool plants but still be pooled 
and priced under the order. The proposed lower diversion adjustments 
will likely reduce the volume of milk eligible to be pooled by 
diversion to a significant degree on the Southeast order and less so on 
the Appalachian order. Assuming all other conditions being equal, the 
adopted changes in diversion limit standards will result in higher 
blend prices paid to producers. This is a desirable outcome, especially 
for the Southeast order where the need to better identify the milk of 
those producers who regularly and consistently service the Class I 
needs of the Southeast marketing area is needed most. An examination of 
the Southeast order's utilization of milk belies the fact that the 
marketing area is chronically short of in-area milk production to meet 
the Class I demand of the marketing area. This can only be the result 
of pooling much more milk on the order than is necessary and that is 
part of the legitimate reserve supply of milk of the order that is 
available to service the Class I needs of the market.
    The record reveals that according to Market Administrator analyses, 
the estimated impact on minimum order uniform prices of the proposed 
diversion limit standards in both orders would have average annual 
increases in uniform prices of $0.02 per cwt for the Appalachian order 
and $0.07 per hundredweight for the Southeast. Increased blend prices 
will contribute in providing greater incentives to maintain milk 
production from current producers and provide greater economic 
incentives for producers located outside of the marketing area to be 
regular and consistent suppliers of Class I milk to these two marketing 
areas.
    Milk diverted to nonpool plants is milk not physically received at 
a pool plant. However, it is included as a part of the total producer 
milk receipts of the diverting plant or cooperative entity pooling milk 
for its own account. A diversion limit establishes the amount of 
producer milk that may be associated with the integral milk supply of a 
pool plant or cooperative acting in its capacity as a handler. With 
regard to the pooling issues of the Southeast order, the record reveals 
that current diversion limits contribute to the pooling of large 
volumes of milk on the order that does not regularly and consistently 
service Class I market needs. Therefore, lowering the diversion limit 
standards is appropriate to better assure that only milk which 
regularly and consistently services the market's Class I needs is 
pooled. Associating more milk than is actually part of the legitimate 
reserve supply available for Class I use unnecessarily reduces the 
potential blend price paid to dairy farmers who regularly and 
consistently service the markets' Class I needs. Without reasonable 
diversion limit standards, the orders' ability to provide for orderly 
marketing is weakened.
    Diversion limit standards that are too high can open the door for 
pooling more milk on the markets. The record supports concluding that a 
33 percent diversion limit for the Southeast order during the months of 
January through June and 50 percent for the months of July through 
December has not only resulted in lower blend prices harming local 
producers, it has resulted in Class I utilization rates that obscure 
that order as a deficit market.
    For the Appalachian and Southeast orders, the record reveals that 
since the average reserve requirements did not differ greatly over the 
36 month period (January 2004 through December 2006), having the same 
diversion limit standards for both orders are justifiable. In addition, 
by having identical diversion limits, the blend prices paid

[[Page 11209]]

to producers increase as milk is supplied to locations generally in an 
easterly and southern direction. To the extent that this diversion 
limit standard may warrant future adjustments, the orders already 
provide the Market Administrator authority to adjust diversion 
standards as marketing conditions may warrant. Given the total milk 
demands of the marketing areas revealed by the record, a minimum of 
about 12 to 13 percent of monthly pool distributing plant receipts 
would be needed to meet the minimum daily, weekly, monthly, and 
seasonal needs, as well as a modest margin for unanticipated changes in 
the supply and demand relationship for Class I milk needs. Accordingly, 
the proposed diversion standards for the orders are reasonable.
    Touch-base delivery standards define the minimum number of days of 
milk production each month that a dairy farmer must supply to a pool 
plant of an order to be associated with that market, and thus 
qualifying to have their milk pooled by diversion. On the basis of the 
record evidence, this decision finds reason to support adopting a one-
day touch-base standard for both orders. Concern has been voiced by 
conditional supporters of DCMA's package of proposed amendments for 
lowering the touch-base standards of the Appalachian and Southeast 
order because it represents an easing of a feature of the orders' 
pooling standards at a time when the opposite is needed if producer 
income in the two orders is to be improved. While this concern might be 
conceptually valid, the concern does not consider that the volume of 
milk pooled on the two orders will be appropriately restricted by the 
adopted diversion limit standards. In part, because the diversion limit 
standards of the orders are tightened, an easing of the touch-base 
standard can be made without fear of pooling the milk of producers who 
are not part of the regular and consistent supply of milk serving the 
Class I needs of the two marketing areas.
    While diversion limit standards are a key feature of the pooling 
standards of an order for defining the total volume of milk that can be 
pooled on an order, an argument could be made that perhaps a touch-base 
standard is not necessary at all if other pooling standard features are 
appropriately tailored. However, a touch-base standard for the 
Appalachian and Southeast orders remains a critical feature of both 
orders because some criteria are needed to identify producers who are 
suppliers of supplemental milk to the two marketing areas and who 
thereby may be eligible for receiving a transportation credit.
    Record evidence indicates that by reducing the touch-base days to 
one day per month, producers, especially cooperative member producers 
who bear the burden of supplying the vast majority of milk to the 
southeastern marketing areas, would avoid the cost of delivering their 
milk to pool plants when not necessarily needed. While a higher touch-
base standard tends to support the integrity of the order's performance 
standards, the current touch-base standards are resulting in the 
uneconomic movement of milk solely for the purpose of meeting a pooling 
standard. The current touch-base standards of the two orders too often 
result in the substitution of local milk with the milk of more distant 
producers thus displacing the milk of local producers supplying the 
market. The milk of local producers needlessly incurs the cost of being 
transported to more distant locations. As a result of the current 
touch-base standard, hauling and marketing costs are needlessly higher 
and the supply of milk from distant producers may still not be 
available to serve the Class I needs of the two marketing areas.
    For the reasons discussed above, this decision finds that the 
current diversion limit standards of the Appalachian and Southeast 
orders results in the pooling of more milk than can reasonably be 
considered as actually serving the market's Class I needs and are 
lowered to those proposed by DCMA. Additionally, the lowering of touch-
base days, in light of the tightening of the diversion limit standards, 
does not compromise the integrity of the orders' pooling standards. 
Together with the adopted diversion limit standards, a lower touch-base 
standard for the two orders offers operational cost savings to 
producers supplying the market with Class I milk while simultaneously 
providing for better identification of the milk of those producers who 
regularly and consistently service the markets' Class I needs.
    Until December 2006, the transportation credit balancing provisions 
of the Appalachian and Southeast orders allowed supplemental milk loads 
to be used as a platform from which to pool additional milk on the 
order through the diversion process. Official notice is taken of the 
tentative partial decision concerning milk in the Appalachian and 
Southeast marketing areas issued September 1, 2006, and published 
September 13, 2006 (71 FR 54118) and the Interim Rule issued October 
19, 2006 and published October 25, 2006 (71 FR 62337). In discussing 
the need for revised diversion limit standards for the Appalachian and 
Southeast orders it is necessary to consider the findings of that 
decision.
    The September 2006 decision referenced above established a zero 
diversion limit standard on supplemental milk supplies seeking a 
transportation credit payment. An important finding in that decision 
regarding diversions associated with supplemental milk was that pooling 
such diverted milk would provide additional revenue to help offset 
hauling costs not covered by the transportation credit rates in place 
for the Appalachian and Southeast orders at that time. The adoption of 
a variable mileage rate factor that reimburses hauling costs on 
supplemental milk at a level more reflective of actual costs was found 
to diminish the need to seek and generate such revenue to offset 
hauling costs at the expense of the local producers who are regularly 
and consistently supplying milk for Class I needs. This decision adopts 
tighter diversion limit standards, especially for the Southeast order. 
Together with providing for higher Class I prices, tighter diversion 
limit standards should result in more orderly marketing conditions 
because the need to pool much more milk on the orders than regularly 
and consistently serves the Class I needs of the markets needlessly 
lowers the blend price of producers who regularly and consistently 
service such Class I needs.

Transportation Credit Balancing Fund Provisions

    Changes to the Appalachian and Southeast order transportation 
credit balancing fund provisions proposed by DCMA are adopted 
immediately. Specifically, these changes include: (1) Extending the 
number of months that transportation credit balancing funds will be 
paid to include the months of January and February. The month of June 
will continue to be a month for the payment of transportation credits 
if requested and approved by the Market Administrator; (2) Expanding 
the payment of transportation credits for supplemental milk to include 
the full load of milk; (3) Providing more flexibility in determining 
the qualification requirements for supplemental milk producers to 
receive transportation credit payments; and (4) increasing the monthly 
transportation credit balancing fund assessment rate for the Southeast 
order from the current $0.20 per cwt to $0.30 per cwt.
    The transportation credit balancing fund provisions for both orders 
(and predecessor orders) were established in

[[Page 11210]]

1996 as a result of the consistent need to import supplemental milk for 
fluid use during certain times of the year when local production is not 
sufficient to meet the fluid needs of the markets. Specifically, the 
Market Administrator applies a monthly transportation credit balancing 
fund assessment on all dispositions of Class I milk. The assessment 
rate is currently $0.15 per cwt and $0.20 per cwt for the Appalachian 
and Southeast orders, respectively. Transportation credit payments are 
paid from each order's transportation credit balancing fund during the 
months of July through December to help offset the cost of transporting 
such supplemental milk for Class I use. The transportation credit 
balancing funds operate independently from the producer-settlement 
funds of the two orders. Milk from producers who are located outside of 
the two marketing areas and who not part of the regular and consistent 
supply of Class I milk is commonly referred to as supplemental milk.
    The record reveals that the seasonal swings in milk production can 
and does lead to inadequate milk supplies for fluid use in certain 
months and surplus supplies in other months. In the Appalachian and 
Southeast orders, the summer and fall (and sometimes winter) months are 
generally considered those months with inadequate (tight) milk supplies 
for fluid use, while the spring months are generally characterized as 
having sufficient supplies of milk for fluid uses. Transportation 
credits are used as a method to compensate handlers that provide 
supplemental milk during the tight supply months by offsetting some of 
the costs of transporting milk to the two marketing areas.
    Currently, the payment of transportation credits under the 
Appalachian and Southeast orders is only made during the months of July 
through December. A feature of DCMA's proposal seeks to extend such 
payments to also include the months of January and February. Record 
evidence demonstrates reliance on supplemental milk supplies for each 
order's marketing area and the months of January and February showing 
similar demand for supplemental milk supplies.
    Declining local milk production in the southeastern region of the 
country is well-known and is a chronic problem. Record evidence 
indicates milk production from producers located in both the 
Appalachian and Southeast marketing areas (pooled on any order) has 
continued to decrease since 2004. Specifically, evidence shows that 
annual milk production pooled on the Appalachian order has decreased 
from approximately 3.94 billion pounds in 2004 to about 3.77 billion 
pounds in 2006. For the Southeast order, milk production has declined 
from 5.0 billion pounds in 2004 to 4.76 billion pounds in 2006. 
Furthermore, record evidence illustrates that total milk production in 
the southeastern states of the U.S. has declined on average almost 2 
percent each year since 1986 and has decreased a total of 34.6 percent 
since 1986--from 18.29 billion pounds in 1986 to 11.96 billion pounds 
in 2006.
    In each of the years of 2004, 2005 and 2006, the months of July 
through January were deficit in terms of monthly in-area milk 
production (milk produced within the geographical boundaries of the two 
marketing areas) being consistently less than the monthly Class I 
producer milk pooled on the Appalachian and Southeast orders. The in-
area deficit in January for both orders for all three years combined 
totaled 8.4 million pounds. While February in-area milk production for 
all three years exceeded Class I demands, that surplus decreased from 
over 44 million pounds in 2004 to just under 14 million pounds in 
2006--a decrease of over 68 percent.
    Record evidence reveals that the months of January and February are 
likely to become months during which local in-area milk production will 
no longer satisfy Class I demands and the Appalachian and Southeast 
marketing areas will need to increasingly rely on supplemental milk 
supplies to satisfy Class I demands. Accordingly, expanding the 
transportation credit payment months to include the months of January 
and February for the payment of transportation credits is reasonable. 
June will continue to be an optional month for transportation credit 
payments, if requested, to be reviewed and authorized by the Market 
Administrator.
    Currently, transportation credits are paid on loads of milk at the 
lower of the receiving plant's Class I use or the marketwide Class I 
utilization. DCMA's proposals seek to change these criteria by having 
the entire load of supplemental milk eligible to receive a 
transportation credit. The major justification offered by DCMA is that 
the cost of transporting supplemental milk, regardless of the plant's 
use of that milk, is the same. This decision finds that a supplier of 
supplemental milk sources and assembles milk demanded by distributing 
plants for fluid uses, but no distributing plant disposes 100 percent 
of its milk receipts as Class I sales. The supplemental milk supplier 
does not know how a receiving plant will use the supplemental milk it 
receives. However, it is reasonable to conclude that plants do not seek 
supplemental milk supplies without first having the demand for Class I 
use. In other words, the need for supplemental milk supplies is fueled 
by Class I demands that cannot be satisfied in the absence of 
transportation credits. It is unlikely that supplemental milk suppliers 
would supply full milk loads to Class I plants if the demand for milk 
was not at least equal to its Class I disposition, even if it has some 
actual lower-valued use of milk.
    The current calculation of transportation credit payments in the 
Appalachian and Southeast orders contain a number of features to 
prevent offsetting the full cost of transporting supplemental milk into 
the marketing areas. It contains features preventing pooling milk on 
the orders that does not regularly and consistently supply the fluid 
needs of the two marketing areas. Most important is the feature denying 
the ability to pool milk by diversion on the basis of supplemental milk 
deliveries to plants in the two orders. Current transportation credit 
provisions prohibit pooling diverted milk on the Appalachian and 
Southeast orders on loads of supplemental milk seeking a transportation 
credit and this prohibition is continued by its adoption in this 
decision.
    It is too early to know what effect establishing a zero diversion 
limit standard on supplemental milk loads will have on the total volume 
of milk pooled because this prohibition was only implemented in 
December 2006 in both orders. Nevertheless, because supplemental milk 
can no longer form a basis from which to pool milk through the 
diversion process, it is reasonable to conclude that the marketwide 
Class I utilization of the orders will likely increase. However, this 
improvement alone will not likely result in offsetting the costs 
incurred by supplemental milk suppliers who both assemble and transport 
milk to plants regulated by the two orders to satisfy Class I demands.
    Record evidence reveals that the Appalachian and Southeast 
marketing areas experience differing costs in supplying supplemental 
milk to meet Class I needs that are reflected in the two orders having 
different transportation credit assessment rates. In recent years the 
transportation credit reimbursement on claims for the Southeast order 
have been prorated at greater rates and more often than those of the 
Appalachian order. As discussed in the September 13, 2006 published 
tentative decision for the Appalachian and Southeast orders (71 FR 
54118), the Appalachian marketing area receives the majority of its 
supplemental milk

[[Page 11211]]

supplies from the northern, Mid-Atlantic States. The Southeast 
marketing area receives the majority of its supply from the Midwest and 
southwestern states. The location of supplemental milk supplies for the 
Southeast marketing area therefore tends to be more distant from the 
marketing area than that for the Appalachian marketing area.
    The need to again raise the monthly transportation credit 
assessment rate for the Southeast order is in part explained by the 
continuing need of the Southeast marketing area to reach even farther 
to source milk supplies to satisfy fluid demands. Additionally, 
expanding the payment of transportation credits on the entire load of 
supplemental milk also will likely increase the payment of 
transportation credit claims. At the same time, payment of 
transportation credit claims will be offset by the adopted changes to 
the Class I pricing surface because the calculation for determining 
payment considers the change in Class I pricing values between the 
origin of supplemental milk and the point where it is delivered. As 
discussed above, the need for supplemental milk supplies is fueled by 
the marketing areas Class I demand.
    Precautionary measures are currently provided in the transportation 
credit provisions such that the rate of assessments beyond actual 
handler claims is unlikely. The transportation credit provisions 
provide the Market Administrators the authority to reduce or waive 
assessments as necessary to maintain sufficient fund balances to pay 
the transportation credits claims. Therefore, increasing the maximum 
transportation credit assessment rates will not result in an 
accumulation of funds beyond what is needed to pay transportation 
credit claims.
    The record supports concluding that local milk production is 
expected to continue declining within both marketing areas. This will 
result in an even greater reliance on supplemental milk to meet the 
fluid milk needs of the markets. Record evidence shows a constant 
increase in both the volume and distance of supplemental milk supplies, 
especially for the Southeast marketing area. As such, it is reasonable 
that future transportation credit claims will increase. In this regard, 
it is important to prevent exhausting the transportation credit 
balancing fund before the payment of claims on supplemental milk. Doing 
so is consistent with the fundamental purposes of the transportation 
credit provisions.
    The adopted increases in Class I prices will likely alter the 
payout of transportation credit claims because the differences in 
origin and delivery point Class I prices are increased. However, 
adoption of expanded transportation credit payment months to include 
January and February, as well as payments on the entire load of milk, 
will tend to offset the payout on transportation credit claims 
resulting from the adopted changes in Class I pricing.
    An increase in the transportation credit assessment for the 
Appalachian order was not requested because 100 percent of the 
transportation credit requests were paid in 2006 and in January 2007. 
Data show that even with adoption of the proposed Class I prices, 
pooling requirements and transportation credit provisions, the 
transportation credit assessment of $0.15 per cwt in the Appalachian 
order should continue to be sufficient to pay future transportation 
credit requests.
    The record indicates that the actual transportation credits paid in 
2006 for the Appalachian order totaled $3,313,590. Had the current 
mileage rate factor (MRF) been in effect for all of 2006, 
transportation credit payments for the Appalachian order would have 
totaled $4,433,854, including the actual payment for January 2007 and 
an estimated payment for February. Analysis suggests that with the 
current MRF and proposed Class I prices in place, the total 
transportation credits paid during 2006 would have been about $456,000 
less than the actual total transportation credit payments. Using Market 
Administrator data with the variable MRF based on 2006 calculated 
monthly averages ($0.044 per cwt per ten miles), paying of 
transportation credit claims on full loads of milk, and the proposed 
Class I price adjustments, the total transportation credits paid for 
2006 in the Appalachian order would have totaled $4,073,312. This is 
$360,000 less than what would have been paid with the MRF and the lower 
of a plant's Class I use or marketwide Class I utilization. 
Accordingly, the current $0.15 assessment rate for the Appalachian 
order appears to be sufficient to meet all claims even when paying 
transportation credits on full loads of milk delivered to Class I 
plants regulated by the order.
    The record indicates that for the past three years, the 
transportation credit balancing fund for the Southeast order has been 
insufficient to pay transportation credit claims. Record evidence 
indicates that during 2006, Southeast order transportation credit 
payments were prorated to 81, 36, 39 and 64 percent of the 
transportation credit claims for the months of September, October, 
November and December, respectively. Such transportation credit claims 
also have increased in number of pounds and in number of miles. 
Specifically, the total pounds claimed for the receipt of 
transportation credits has increased from 374 million pounds for July 
through December 2000 to 820 million pounds for July through December 
2006--an increase of 119 percent.
    Increasing the maximum transportation credit assessment for the 
Southeast order should not result in an unnecessary accumulation of 
funds. For the Southeast order, the record indicates that 
transportation credits paid in 2006 would have totaled $15,704,872 for 
the month of July through December and would have totaled $18,604,872 
by including the months of January and February. This analysis is based 
on using the same MRF of $0.044 as in the Appalachian order analysis, 
paying of transportation credit claims on full loads of milk, and with 
the proposed Class I price adjustments. However, the current assessment 
rate of $0.20 per cwt falls far short of the total revenue needed to 
pay all expected transportation credit claims. Even a $0.30 per cwt 
assessment may not generate sufficient revenue to meet all expected 
claims on full loads of supplemental milk. Nevertheless, it is a 
superior assessment rate than the current rate of $0.20 per cwt.
    Determining those producers eligible to receive a transportation 
credit on their supplemental milk deliveries requires that the dairy 
farm must be located outside either the Appalachian or the Southeast 
marketing areas, the producer must not meet the producer definition of 
the orders during more than 2 of the immediately preceding months of 
February through May and not more than 50 percent of the milk 
production of the dairy farmer during those two months, in aggregate, 
can be received as producer milk under the order during those 2 months.
    DCMA has proposed that these requirements for the Appalachian and 
Southeast orders be made more flexible without substantially changing 
the identification of milk that is not a regular part of the supply of 
milk to the two orders. Specifically proposed is that a dairy farmer 
must not be a producer on the orders of more than 45 of the 92 days in 
the months March through May or must have less than 50 percent of the 
producer's milk pooled on the orders during those three months 
combined.
    On the basis of record testimony, this is a reasonable change. 
Specifically, it represents a change that provides flexibility in 
identifying supplemental

[[Page 11212]]

milk producers and may result in lower operational costs to those 
producers incurring the costs of supplying supplemental milk to the 
Appalachian and Southeast marketing areas. Additionally, February is 
currently a month when a supplemental milk producer may not participate 
in either order's marketwide pool. Since this decision adopts providing 
for the month of February as a month in which transportation credit 
payments can be made, it is necessary to redefine the months in which a 
producer may not be pooled on either order. Accordingly, changing these 
features of the orders' transportation credit balancing fund provisions 
are reasonable.
    The adopted changes are detailed in the order language provided 
below.

4. Determining Whether Emergency Marketing Conditions Exist That Would 
Warrant Omission of a Recommended Decision and Opportunity To File 
Written Exceptions

    Evidence presented at the hearing and in post-hearing briefs 
establishes that several provisions of the three southeastern milk 
marketing orders are inadequate to meet the objectives of such orders. 
The inadequacies are contributing to a rapid decline in local milk 
production relative to population such that the orders are not setting 
prices that generate sufficient revenue to attract an adequate supply 
of milk for fluid use from local milk production, from sources outside 
of the marketing areas or some combination of both. The adopted changes 
to the Appalachian, Southeast, and Florida orders form an integrated 
package of simultaneous changes necessary to improve the marketing 
conditions of the southeastern region that no single change can be 
reasonably expected to accomplish. By increasing revenue through 
adjustment of minimum Class I prices, better defining the milk of those 
producers who consistently and regularly supply the Class I needs of 
the Appalachian and Southeast marketing areas, and providing for more 
flexible eligibility criteria and expanded payment of transportation 
credits to those who supply the Appalachian and Southeast marketing 
areas with supplemental milk supplies, the southeastern region will be 
better assured an adequate supply of milk for fluid uses. The record 
also contains requests by numerous parties that the adopted amendments 
should be implemented on an emergency basis. Consequently, it is 
determined that emergency marketing conditions exist that warrant 
omitting the issuance of a recommended decision. The record clearly 
establishes a basis as noted above for amending the orders on an 
interim basis. The opportunity to file written exceptions to the 
proposed amended orders remains.

Conforming Changes

    Conforming changes are hereby made to Part 1000.50 Class prices, 
component prices, and advanced pricing factors. Specifically, the Class 
I skim milk price and the Class I butterfat price provisions need to be 
changed in order to conform with the amendments adopted in this 
proceeding as provided for in Proposal 7 of the hearing notice. The 
changes to 7 CFR Part 1000.50 (b) and (c) include reference to the 
adjustments adopted to Class I prices specified in 7 CFR 1005.51(b), 
1006.51(b) and 1007.51(b).
    In view of these findings, an interim final rule amending the 
orders will be issued as soon as the procedures to determine the 
approval of producers are completed.

Rulings on Proposed Findings and Conclusions

    Briefs, proposed findings and conclusions were filed on behalf of 
certain interested parties. These briefs, proposed findings and 
conclusions, and the evidence in the record were considered in making 
the findings and conclusions set forth above. To the extent that the 
suggested findings and conclusions filed by interested parties are 
inconsistent with the findings and conclusions set forth herein, the 
claims to make such findings or reach such conclusions are denied for 
the reasons previously stated in this decision.

General Findings

    The findings and determinations hereinafter set forth supplement 
those that were made when the Appalachian, Florida and Southeast 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.
    The following findings are hereby made with respect to the 
aforesaid marketing agreements and orders:
    (a) The interim marketing agreements and the orders, as hereby 
proposed to be amended, and all of the terms and conditions thereof, 
will tend to effectuate the declared policy of the Act;
    (b) The parity prices of milk as determined pursuant to section 2 
of the Act are not reasonable with respect to the price of feeds, 
available supplies of feeds, and other economic conditions that affect 
market supply and demand for milk in the marketing area, and the 
minimum prices specified in the interim marketing agreements and the 
orders, as hereby proposed to be amended, are such prices as will 
reflect the aforesaid factors, ensure a sufficient quantity of pure and 
wholesome milk, and be in the public interest; and
    (c) The interim 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 upon which a hearing have been held.

Interim Marketing Agreement and Interim Order Amending the Order

    Annexed hereto and made a part hereof are two documents--an Interim 
Marketing Agreement regulating the handling of milk and an Interim 
Order amending the order regulating the handling of milk in the 
Appalachian, Florida and Southeast marketing areas, which have been 
decided upon as the detailed and appropriate means of effectuating the 
foregoing conclusions.
    It is hereby ordered, that this entire tentative partial decision 
and the interim orders and the interim marketing agreements annexed 
hereto be published in the Federal Register.

Determination of Producer Approval and Representative Period

    The month of June 2007 is hereby determined to be the 
representative period for the purpose of ascertaining whether the 
issuance of the order, as amended and as hereby proposed to be amended, 
regulating the handling of milk in the Appalachian, Florida and 
Southeast marketing areas is approved or favored by producers, as 
defined under the terms of the order as hereby proposed to be amended, 
who during such representative period were engaged in the production of 
milk for sale within the aforesaid marketing area.

List of Subjects in 7 CFR Parts 1005, 1006 and 1007

    Milk marketing order.

    Dated: February 25, 2008.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.

Interim Order Amending the Order Regulating the Handling of Milk in the 
Appalachian, Florida and Southeast Marketing Areas

    This interim order shall not become effective 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.

[[Page 11213]]

Findings and Determinations

    The findings and determinations hereinafter set forth supplement 
those that were made when the orders were first issued and when they 
were amended. The previous findings and determinations are hereby 
ratified and confirmed, except where they may conflict with those set 
forth herein.
    (a) Findings. A public hearing was held upon certain proposed 
amendments to the tentative marketing agreements and to the orders 
regulating the handling of milk in the Appalachian, Florida and 
Southeast marketing areas. The hearing was held pursuant to the 
provisions of the Agricultural Marketing Agreement Act of 1937, as 
amended (7 U.S.C. 601-674), and the applicable rules of practice and 
procedure (7 CFR part 900).
    Upon the basis of the evidence introduced at such hearing and the 
record thereof, it is found that:
    (1) The said orders as hereby amended, and all of the terms and 
conditions thereof, will tend to effectuate the declared policy of the 
Act;
    (2) The parity prices of milk, as determined pursuant to section 2 
of the Act, are not reasonable in view of the price of feeds, available 
supplies of feeds, and other economic conditions which affect market 
supply and demand for milk in the aforesaid marketing areas. The 
minimum prices specified in the orders as hereby amended are such 
prices as will reflect the aforesaid factors, insure a sufficient 
quantity of pure and wholesome milk, and be in the public interest; and
    (3) 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, a 
marketing agreement upon which a hearing has been held.

Order Relative to Handling

    It is therefore ordered, that on and after the effective date 
hereof, the handling of milk in the Appalachian, Florida and Southeast 
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:

List of Subjects in 7 CFR Parts 1000, 1005, 1006, and 1007

    Milk marketing orders.

    For the reasons set forth in the preamble, the Agricultural 
Marketing Service proposes to amend Chapter X of Title 7 of the Code of 
Federal Regulations as follows:
    1. The authority citation for 7 CFR parts 1000, 1005, 1006 and 1007 
continues to read as follows:

    Authority: 7 U.S.C. 601-674, and 7253.

PART 1000--[AMENDED]

    2. Amend Sec.  1000.50 by revising paragraphs (b) and (c) to read 
as follows:


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

* * * * *
    (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 adjustment to Class I prices specified in Sec.  
1005.51(b), Sec.  1006.51(b) and Sec.  1007.51(b), 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 adjustments to Class I prices specified in 
Sec.  1005.51(b), 1006.51(b) and 1007.51(b) divided by 100, plus the 
advanced butterfat price computed in paragraph (q)(3) of this section.
* * * * *

PART 1005--[AMENDED]

    3. Revise Sec.  1005.51 to read as follows:


Sec.  1005.51  Class I differential, adjustments to Class I prices, and 
Class I price.

    (a) 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.  1005.50(a) for Mecklenburg County, North Carolina.
    (b) Adjustment to Class I prices. Class I prices shall be 
established pursuant to Sec.  1000.50(a), (b) and (c) using the 
following adjustments:

----------------------------------------------------------------------------------------------------------------
                                                                                                 Class I price
                  State                             County/Parish                  FIPS            adjustment
----------------------------------------------------------------------------------------------------------------
GA.......................................  CATOOSA........................              13047               0.60
GA.......................................  CHATTOOGA......................              13055               0.60
GA.......................................  DADE...........................              13083               0.60
GA.......................................  FANNIN.........................              13111               0.60
GA.......................................  MURRAY.........................              13213               0.60
GA.......................................  WALKER.........................              13295               0.60
GA.......................................  WHITFIELD......................              13313               0.60
IN.......................................  CLARK..........................              18019               0.10
IN.......................................  CRAWFORD.......................              18025               0.10
IN.......................................  DAVIESS........................              18027               0.10
IN.......................................  DUBOIS.........................              18037               0.10
IN.......................................  FLOYD..........................              18043               0.10
IN.......................................  GIBSON.........................              18051               0.10
IN.......................................  GREENE.........................              18055               0.10
IN.......................................  HARRISON.......................              18061               0.10
IN.......................................  KNOX...........................              18083               0.10
IN.......................................  MARTIN.........................              18101               0.10
IN.......................................  ORANGE.........................              18117               0.10
IN.......................................  PERRY..........................              18123               0.10
IN.......................................  PIKE...........................              18125               0.10
IN.......................................  POSEY..........................              18129               0.10
IN.......................................  SCOTT..........................              18143               0.10
IN.......................................  SPENCER........................              18147               0.10
IN.......................................  SULLIVAN.......................              18153               0.10
IN.......................................  VANDERBURGH....................              18163               0.10
IN.......................................  WARRICK........................              18173               0.10
IN.......................................  WASHINGTON.....................              18175               0.10
KY.......................................  ADAIR..........................              21001               0.20

[[Page 11214]]

 
KY.......................................  ANDERSON.......................              21005               0.40
KY.......................................  BATH...........................              21011               0.40
KY.......................................  BELL...........................              21013               0.50
KY.......................................  BOURBON........................              21017               0.40
KY.......................................  BOYLE..........................              21021               0.40
KY.......................................  BREATHITT......................              21025               0.70
KY.......................................  BRECKINRIDGE...................              21027               0.10
KY.......................................  BULLITT........................              21029               0.10
KY.......................................  BUTLER.........................              21031               0.20
KY.......................................  CARROLL........................              21041               0.10
KY.......................................  CARTER.........................              21043               0.40
KY.......................................  CASEY..........................              21045               0.20
KY.......................................  CLARK..........................              21049               0.40
KY.......................................  CLAY...........................              21051               0.50
KY.......................................  CLINTON........................              21053               0.50
KY.......................................  CUMBERLAND.....................              21057               0.50
KY.......................................  DAVIESS........................              21059               0.10
KY.......................................  EDMONSON.......................              21061               0.20
KY.......................................  ELLIOTT........................              21063               0.40
KY.......................................  ESTILL.........................              21065               0.40
KY.......................................  FAYETTE........................              21067               0.40
KY.......................................  FLEMING........................              21069               0.40
KY.......................................  FRANKLIN.......................              21073               0.10
KY.......................................  GALLATIN.......................              21077               0.10
KY.......................................  GARRARD........................              21079               0.40
KY.......................................  GRAYSON........................              21085               0.20
KY.......................................  GREEN..........................              21087               0.20
KY.......................................  HANCOCK........................              21091               0.10
KY.......................................  HARDIN.........................              21093               0.10
KY.......................................  HARLAN.........................              21095               0.50
KY.......................................  HART...........................              21099               0.20
KY.......................................  HENDERSON......................              21101               0.10
KY.......................................  HENRY..........................              21103               0.10
KY.......................................  HOPKINS........................              21107               0.20
KY.......................................  JACKSON........................              21109               0.70
KY.......................................  JEFFERSON......................              21111               0.10
KY.......................................  JESSAMINE......................              21113               0.40
KY.......................................  KNOTT..........................              21119               0.50
KY.......................................  KNOX...........................              21121               0.50
KY.......................................  LARUE..........................              21123               0.40
KY.......................................  LAUREL.........................              21125               0.50
KY.......................................  LEE............................              21129               0.40
KY.......................................  LESLIE.........................              21131               0.50
KY.......................................  LETCHER........................              21133               0.50
KY.......................................  LINCOLN........................              21137               0.40
KY.......................................  MC CREARY......................              21147               0.50
KY.......................................  MC LEAN........................              21149               0.40
KY.......................................  MADISON........................              21151               0.40
KY.......................................  MARION.........................              21155               0.40
KY.......................................  MEADE..........................              21163               0.10
KY.......................................  MENIFEE........................              21165               0.40
KY.......................................  MERCER.........................              21167               0.40
KY.......................................  MONTGOMERY.....................              21173               0.40
KY.......................................  MORGAN.........................              21175               0.40
KY.......................................  MUHLENBURG.....................              21177               0.20
KY.......................................  NELSON.........................              21179               0.10
KY.......................................  NICHOLAS.......................              21181               0.40
KY.......................................  OHIO...........................              21183               0.20
KY.......................................  OLDHAM.........................              21185               0.10
KY.......................................  OWEN...........................              21187               0.10
KY.......................................  OWSLEY.........................              21189               0.70
KY.......................................  PERRY..........................              21193               0.50
KY.......................................  POWELL.........................              21197               0.40
KY.......................................  PULASKI........................              21199               0.50
KY.......................................  ROCKCASTLE.....................              21203               0.70
KY.......................................  ROWAN..........................              21205               0.40
KY.......................................  RUSSELL........................              21207               0.50
KY.......................................  SCOTT..........................              21209               0.10
KY.......................................  SHELBY.........................              21211               0.10
KY.......................................  SPENCER........................              21215               0.10
KY.......................................  TAYLOR.........................              21217               0.20
KY.......................................  TRIMBLE........................              21223               0.10
KY.......................................  UNION..........................              21225               0.10

[[Page 11215]]

 
KY.......................................  WASHINGTON.....................              21229               0.40
KY.......................................  WAYNE..........................              21231               0.50
KY.......................................  WEBSTER........................              21233               0.20
KY.......................................  WHITLEY........................              21235               0.50
KY.......................................  WOLFE..........................              21237               0.40
KY.......................................  WOODFORD.......................              21239               0.40
NC.......................................  ALAMANCE.......................              37001               0.30
NC.......................................  ALEXANDER......................              37003               0.45
NC.......................................  ALLEGHANY......................              37005               0.45
NC.......................................  ANSON..........................              37007               0.50
NC.......................................  ASHE...........................              37009               0.45
NC.......................................  AVERY..........................              37011               0.45
NC.......................................  BEAUFORT.......................              37013               0.40
NC.......................................  BERTIE.........................              37015               0.20
NC.......................................  BLADEN.........................              37017               0.70
NC.......................................  BRUNSWICK......................              37019               0.70
NC.......................................  BUNCOMBE.......................              37021               0.45
NC.......................................  BURKE..........................              37023               0.45
NC.......................................  CABARRUS.......................              37025               0.30
NC.......................................  CALDWELL.......................              37027               0.45
NC.......................................  CAMDEN.........................              37029               0.20
NC.......................................  CARTERET.......................              37031               0.40
NC.......................................  CASWELL........................              37033               0.30
NC.......................................  CATAWBA........................              37035               0.30
NC.......................................  CHATHAM........................              37037               0.30
NC.......................................  CHEROKEE.......................              37039               0.45
NC.......................................  CHOWAN.........................              37041               0.20
NC.......................................  CLAY...........................              37043               0.45
NC.......................................  CLEVELAND......................              37045               0.30
NC.......................................  COLUMBUS.......................              37047               0.70
NC.......................................  CRAVEN.........................              37049               0.40
NC.......................................  CUMBERLAND.....................              37051               0.30
NC.......................................  CURRITUCK......................              37053               0.20
NC.......................................  DARE...........................              37055               0.40
NC.......................................  DAVIDSON.......................              37057               0.30
NC.......................................  DAVIE..........................              37059               0.30
NC.......................................  DUPLIN.........................              37061               0.30
NC.......................................  DURHAM.........................              37063               0.30
NC.......................................  EDGECOMBE......................              37065               0.20
NC.......................................  FORSYTH........................              37067               0.30
NC.......................................  FRANKLIN.......................              37069               0.30
NC.......................................  GASTON.........................              37071               0.30
NC.......................................  GATES..........................              37073               0.20
NC.......................................  GRAHAM.........................              37075               0.45
NC.......................................  GRANVILLE......................              37077               0.30
NC.......................................  GREENE.........................              37079               0.40
NC.......................................  GUILFORD.......................              37081               0.30
NC.......................................  HALIFAX........................              37083               0.30
NC.......................................  HARNETT........................              37085               0.10
NC.......................................  HAYWOOD........................              37087               0.45
NC.......................................  HENDERSON......................              37089               0.45
NC.......................................  HERTFORD.......................              37091               0.20
NC.......................................  HOKE...........................              37093               0.30
NC.......................................  HYDE...........................              37095               0.40
NC.......................................  IREDELL........................              37097               0.30
NC.......................................  JACKSON........................              37099               0.45
NC.......................................  JOHNSTON.......................              37101               0.20
NC.......................................  JONES..........................              37103               0.40
NC.......................................  LEE............................              37105               0.30
NC.......................................  LENOIR.........................              37107               0.40
NC.......................................  LINCOLN........................              37109               0.30
NC.......................................  MC DOWELL......................              37111               0.45
NC.......................................  MACON..........................              37113               0.45
NC.......................................  MADISON........................              37115               0.45
NC.......................................  MARTIN.........................              37117               0.40
NC.......................................  MECKLENBURG....................              37119               0.30
NC.......................................  MITCHELL.......................              37121               0.45
NC.......................................  MONTGOMERY.....................              37123               0.30
NC.......................................  MOORE..........................              37125               0.30
NC.......................................  NASH...........................              37127               0.30
NC.......................................  NEW HANOVER....................              37129               0.70
NC.......................................  NORTHAMPTON....................              37131               0.30
NC.......................................  ONSLOW.........................              37133               0.30

[[Page 11216]]

 
NC.......................................  ORANGE.........................              37135               0.30
NC.......................................  PAMLICO........................              37137               0.40
NC.......................................  PASQUOTANK.....................              37139               0.20
NC.......................................  PENDER.........................              37141               0.70
NC.......................................  PERQUIMANS.....................              37143               0.20
NC.......................................  PERSON.........................              37145               0.30
NC.......................................  PITT...........................              37147               0.40
NC.......................................  POLK...........................              37149               0.30
NC.......................................  RANDOLPH.......................              37151               0.30
NC.......................................  RICHMOND.......................              37153               0.50
NC.......................................  ROBESON........................              37155               0.70
NC.......................................  ROCKINGHAM.....................              37157               0.45
NC.......................................  ROWAN..........................              37159               0.30
NC.......................................  RUTHERFORD.....................              37161               0.30
NC.......................................  SAMPSON........................              37163               0.30
NC.......................................  SCOTLAND.......................              37165               0.30
NC.......................................  STANLY.........................              37167               0.30
NC.......................................  STOKES.........................              37169               0.45
NC.......................................  SURRY..........................              37171               0.45
NC.......................................  SWAIN..........................              37173               0.45
NC.......................................  TRANSYLVANIA...................              37175               0.45
NC.......................................  TYRRELL........................              37177               0.40
NC.......................................  UNION..........................              37179               0.50
NC.......................................  VANCE..........................              37181               0.30
NC.......................................  WAKE...........................              37183               0.30
NC.......................................  WARREN.........................              37185               0.30
NC.......................................  WASHINGTON.....................              37187               0.40
NC.......................................  WATAUGA........................              37189               0.45
NC.......................................  WAYNE..........................              37191               0.40
NC.......................................  WILKES.........................              37193               0.45
NC.......................................  WILSON.........................              37195               0.20
NC.......................................  YADKIN.........................              37197               0.30
NC.......................................  YANCEY.........................              37199               0.45
SC.......................................  ABBEVILLE......................              45001               0.50
SC.......................................  AIKEN..........................              45003               0.70
SC.......................................  ALLENDALE......................              45005               1.00
SC.......................................  ANDERSON.......................              45007               0.50
SC.......................................  BAMBERG........................              45009               0.70
SC.......................................  BARNWELL.......................              45011               0.70
SC.......................................  BEAUFORT.......................              45013               1.00
SC.......................................  BERKELEY.......................              45015               1.00
SC.......................................  CALHOUN........................              45017               0.70
SC.......................................  CHARLESTON.....................              45019               1.00
SC.......................................  CHEROKEE.......................              45021               0.50
SC.......................................  CHESTER........................              45023               0.50
SC.......................................  CHESTERFIELD...................              45025               0.30
SC.......................................  CLARENDON......................              45027               0.70
SC.......................................  COLLETON.......................              45029               1.00
SC.......................................  DARLINGTON.....................              45031               0.70
SC.......................................  DILLON.........................              45033               0.70
SC.......................................  DORCHESTER.....................              45035               1.00
SC.......................................  EDGEFIELD......................              45037               0.30
SC.......................................  FAIRFIELD......................              45039               0.30
SC.......................................  FLORENCE.......................              45041               0.70
SC.......................................  GEORGETOWN.....................              45043               0.70
SC.......................................  GREENVILLE.....................              45045               0.50
SC.......................................  GREENWOOD......................              45047               0.50
SC.......................................  HAMPTON........................              45049               1.00
SC.......................................  HORRY..........................              45051               0.70
SC.......................................  JASPER.........................              45053               1.00
SC.......................................  KERSHAW........................              45055               0.30
SC.......................................  LANCASTER......................              45057               0.50
SC.......................................  LAURENS........................              45059               0.50
SC.......................................  LEE............................              45061               0.70
SC.......................................  LEXINGTON......................              45063               0.70
SC.......................................  MC CORMICK.....................              45065               0.50
SC.......................................  MARION.........................              45067               0.70
SC.......................................  MARLBORO.......................              45069               0.70
SC.......................................  NEWBERRY.......................              45071               0.30
SC.......................................  OCONEE.........................              45073               0.50
SC.......................................  ORANGEBURG.....................              45075               0.70
SC.......................................  PICKENS........................              45077               0.50
SC.......................................  RICHLAND.......................              45079               0.70

[[Page 11217]]

 
SC.......................................  SALUDA.........................              45081               0.30
SC.......................................  SPARTANBURG....................              45083               0.50
SC.......................................  SUMTER.........................              45085               0.70
SC.......................................  UNION..........................              45087               0.50
SC.......................................  WILLIAMSBURG...................              45089               0.70
SC.......................................  YORK...........................              45091               0.50
TN.......................................  ANDERSON.......................              47001               0.40
TN.......................................  BLOUNT.........................              47009               0.40
TN.......................................  BRADLEY........................              47011               0.60
TN.......................................  CAMPBELL.......................              47013               0.40
TN.......................................  CARTER.........................              47019               0.40
TN.......................................  CLAIBORNE......................              47025               0.40
TN.......................................  COCKE..........................              47029               0.40
TN.......................................  CUMBERLAND.....................              47035               0.40
TN.......................................  GRAINGER.......................              47057               0.40
TN.......................................  GREENE.........................              47059               0.40
TN.......................................  HAMBLEN........................              47063               0.40
TN.......................................  HAMILTON.......................              47065               0.60
TN.......................................  HANCOCK........................              47067               0.40
TN.......................................  HAWKINS........................              47073               0.40
TN.......................................  JEFFERSON......................              47089               0.40
TN.......................................  JOHNSON........................              47091               0.40
TN.......................................  KNOX...........................              47093               0.40
TN.......................................  LOUDON.........................              47105               0.40
TN.......................................  MC MINN........................              47107               0.60
TN.......................................  MARION.........................              47115               0.60
TN.......................................  MEIGS..........................              47121               0.60
TN.......................................  MONROE.........................              47123               0.60
TN.......................................  MORGAN.........................              47129               0.40
TN.......................................  POLK...........................              47139               0.60
TN.......................................  RHEA...........................              47143               0.40
TN.......................................  ROANE..........................              47145               0.40
TN.......................................  SCOTT..........................              47151               0.10
TN.......................................  SEQUATCHIE.....................              47153               0.40
TN.......................................  SEVIER.........................              47155               0.40
TN.......................................  SULLIVAN.......................              47163               0.40
TN.......................................  UNICOI.........................              47171               0.40
TN.......................................  UNION..........................              47173               0.40
TN.......................................  WASHINGTON.....................              47179               0.40
VA.......................................  ALLEGHANY......................              51005               0.10
VA.......................................  AMHERST........................              51009               0.40
VA.......................................  AUGUSTA........................              51015               0.10
VA.......................................  BATH...........................              51017               0.10
VA.......................................  BEDFORD........................              51019               0.40
VA.......................................  BLAND..........................              51021               0.40
VA.......................................  BOTETOURT......................              51023               0.10
VA.......................................  BUCHANAN.......................              51027               0.10
VA.......................................  CAMPBELL.......................              51031               0.40
VA.......................................  CARROLL........................              51035               0.40
VA.......................................  CRAIG..........................              51045               0.10
VA.......................................  DICKENSON......................              51051               0.40
VA.......................................  FLOYD..........................              51063               0.40
VA.......................................  FRANKLIN.......................              51067               0.40
VA.......................................  GILES..........................              51071               0.10
VA.......................................  GRAYSON........................              51077               0.40
VA.......................................  HENRY..........................              51089               0.40
VA.......................................  HIGHLAND.......................              51091               0.10
VA.......................................  LEE............................              51105               0.40
VA.......................................  MONTGOMERY.....................              51121               0.40
VA.......................................  PATRICK........................              51141               0.40
VA.......................................  PITTSYLVANIA...................              51143               0.40
VA.......................................  PULASKI........................              51155               0.40
VA.......................................  ROANOKE........................              51161               0.40
VA.......................................  ROCKBRIDGE.....................              51163               0.10
VA.......................................  ROCKINGHAM.....................              51165               0.10
VA.......................................  RUSSELL........................              51167               0.40
VA.......................................  SCOTT..........................              51169               0.40
VA.......................................  SMYTH..........................              51173               0.40
VA.......................................  TAZEWELL.......................              51185               0.40
VA.......................................  WASHINGTON.....................              51191               0.40
VA.......................................  WISE...........................              51195               0.40
VA.......................................  WYTHE..........................              51197               0.40
VA.......................................  BEDFORD CITY...................              51515               0.40

[[Page 11218]]

 
VA.......................................  BRISTOL CITY...................              51520               0.40
VA.......................................  BUENA VISTA CITY...............              51530               0.10
VA.......................................  CLIFTON FORGE CITY.............              51560               0.10
VA.......................................  COVINGTON CITY.................              51580               0.10
VA.......................................  DANVILLE CITY..................              51590               0.40
VA.......................................  GALAX CITY.....................              51640               0.40
VA.......................................  HARRISONBURG CITY..............              51660               0.10
VA.......................................  LEXINGTON CITY.................              51678               0.10
VA.......................................  LYNCHBURG CITY.................              51680               0.40
VA.......................................  MARTINSVILLE CITY..............              51690               0.40
VA.......................................  NORTON CITY....................              51720               0.40
VA.......................................  RADFORD CITY...................              51750               0.40
VA.......................................  ROANOKE CITY...................              51770               0.40
VA.......................................  SALEM CITY.....................              51775               0.40
VA.......................................  STAUNTON CITY..................              51790               0.10
VA.......................................  WAYNESBORO CITY................              51820               0.10
WV.......................................  MC DOWELL......................              54047               0.10
WV.......................................  MERCER.........................              54055               0.10
----------------------------------------------------------------------------------------------------------------

    4. Amend Sec.  1005.13 by revising paragraph (d)(1) through (4) to 
read as follows:


Sec.  1005.13  Producer Milk.

* * * * *
    (d) * * *
    (1) In any month of July through December, not less than 1 day's 
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 1 day's 
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 35 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 35 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 handler 
described in Sec.  1000.9(c);
* * * * *
    5. Amend Sec.  1005.81 by revising (a) to read as follows:


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.  1009.90), 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 $0.15 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-February period. In the event that during any 
month of the June-February 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.
* * * * *
    6. Amend Sec.  1005.82 by revising paragraphs (a)(1), (b), (c)(1), 
removing paragraph (c)(2)(i), revising paragraphs (d)(2) (iii), 
(d)(3)(v), and redesignating paragraphs (c)(2)(ii), (c)(2)(iii), 
(c)(2)(iv) as (c)(2)(i), (c)(2)(ii) and (c)(2)(iii), and revising newly 
redesignated paragraphs (c)(2)(i) and (c)(2)(iii) to read as follows:


Sec.  1005.82  Payments from the transportation credit balancing fund.

    (a) * * *
    (1) On or before the 13th day (except as provided in Sec.  1000.90) 
after the end of each of the months of January, February and 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 prorata 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.
* * * * *
    (b) The Market Administrator may extend the period during which 
transportation credits are in effect (i.e., the transportation credit 
period) to the month of 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 Deputy Administrator of the Dairy 
Programs and all handlers in

[[Page 11219]]

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) * * *
    (1) Bulk milk received at a pool distributing plant from a plant 
regulated under another Federal order, except Federal Order 1007; and
* * * * *
    (2) * * *
    (i) The dairy farmer was not a ``producer'' under this order for 
more than 45 days during the immediately preceding months of March 
through May, or not more than 50 percent of the production of the dairy 
farmer during those 3 months, in aggregate, was received as producer 
milk under this order during those 3 months; and
* * * * *
    (iii) The market administrator may increase or decrease the milk 
production standard specified in paragraph (c)(2)(i) of this section 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.
    (d) * * *
    (2) * * *
    (iii) Subtract the applicable Class I price specified in Sec.  
1000.50(a) for the county in which the shipping plant is located from 
the Class I price applicable for the county in which the receiving 
plant is located;
* * * * *
    (3) * * *
    (v) Subtract the Class I price specified in Sec.  1000.50(a) 
applicable for the county in which the origination point is located 
from the Class I price applicable at the receiving pool plant's 
location;
* * * * *

PART 1006--[AMENDED]

    7. Revise Sec.  1006.51 to read as follows:


Sec.  1006.51  Class I differential, adjustments to Class I prices, and 
Class I price.

    (a) The Class I differential shall be the differential established 
for Hillsborough County, Florida, which is reported in Sec.  000.52. 
The Class I price shall be the price computed pursuant to Sec.  006.50 
(a) for Hillsborough County, Florida.
    (b) Adjustment to Class I prices. Class I prices shall be 
established pursuant to Sec.  000.50 (a), (b) and (c) using the 
following adjustments:

----------------------------------------------------------------------------------------------------------------
                                                                                                 Class I  price
                  State                             County/Parish                  FIPS            adjustment
----------------------------------------------------------------------------------------------------------------
FL.......................................  ALACHUA........................              12001               1.30
FL.......................................  BAKER..........................              12003               1.30
FL.......................................  BAY............................              12005               0.60
FL.......................................  BRADFORD.......................              12007               1.30
FL.......................................  BREVARD........................              12009               1.40
FL.......................................  BROWARD........................              12011               1.70
FL.......................................  CALHOUN........................              12013               0.60
FL.......................................  CHARLOTTE......................              12015               1.50
FL.......................................  CITRUS.........................              12017               1.40
FL.......................................  CLAY...........................              12019               1.30
FL.......................................  COLLIER........................              12021               1.70
FL.......................................  COLUMBIA.......................              12023               1.30
FL.......................................  DADE...........................              12025               1.70
FL.......................................  DE SOTO........................              12027               1.80
FL.......................................  DIXIE..........................              12029               1.30
FL.......................................  DUVAL..........................              12031               1.30
FL.......................................  FLAGLER........................              12035               1.00
FL.......................................  FRANKLIN.......................              12037               0.90
FL.......................................  GADSDEN........................              12039               0.90
FL.......................................  GILCHRIST......................              12041               1.30
FL.......................................  GLADES.........................              12043               1.50
FL.......................................  GULF...........................              12045               0.90
FL.......................................  HAMILTON.......................              12047               1.30
FL.......................................  HARDEE.........................              12049               1.80
FL.......................................  HENDRY.........................              12051               1.70
FL.......................................  HERNANDO.......................              12053               1.40
FL.......................................  HIGHLANDS......................              12055               1.80
FL.......................................  HILLSBOROUGH...................              12057               1.40
FL.......................................  HOLMES.........................              12059               0.60
FL.......................................  INDIAN RIVER...................              12061               1.80
FL.......................................  JACKSON........................              12063               0.60
FL.......................................  JEFFERSON......................              12065               0.90
FL.......................................  LAFAYETTE......................              12067               1.30
FL.......................................  LAKE...........................              12069               1.40
FL.......................................  LEE............................              12071               1.70
FL.......................................  LEON...........................              12073               0.90
FL.......................................  LEVY...........................              12075               1.00
FL.......................................  LIBERTY........................              12077               0.90
FL.......................................  MADISON........................              12079               1.30
FL.......................................  MANATEE........................              12081               1.80
FL.......................................  MARION.........................              12083               1.00
FL.......................................  MARTIN.........................              12085               1.50
FL.......................................  MONROE.........................              12087               1.70

[[Page 11220]]

 
FL.......................................  NASSAU.........................              12089               1.30
FL.......................................  OKEECHOBEE.....................              12093               1.80
FL.......................................  ORANGE.........................              12095               1.40
FL.......................................  OSCEOLA........................              12097               1.40
FL.......................................  PALM BEACH.....................              12099               1.70
FL.......................................  PASCO..........................              12101               1.40
FL.......................................  PINELLAS.......................              12103               1.40
FL.......................................  POLK...........................              12105               1.40
FL.......................................  PUTNAM.........................              12107               1.30
FL.......................................  SAINT JOHNS....................              12109               1.30
FL.......................................  SAINT LUCIE....................              12111               1.80
FL.......................................  SARASOTA.......................              12115               1.80
FL.......................................  SEMINOLE.......................              12117               1.40
FL.......................................  SUMTER.........................              12119               1.40
FL.......................................  SUWANNEE.......................              12121               1.30
FL.......................................  TAYLOR.........................              12123               1.30
FL.......................................  UNION..........................              12125               1.30
FL.......................................  VOLUSIA........................              12127               1.40
FL.......................................  WAKULLA........................              12129               0.90
FL.......................................  WASHINGTON.....................              12133               0.60
----------------------------------------------------------------------------------------------------------------

PART 1007--[AMENDED]

    8. Revise Sec.  1007.51 to read as follows:


Sec.  1007.51   Class I differential, adjustments to Class I prices, 
and Class I price.

    (a) 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.  1007.50(a) 
for Fulton County, Georgia.
    (b) Adjustment to Class I prices. Class I prices shall be 
established pursuant to Sec.  1000.50(a), (b) and (c) using the 
following adjustments:

----------------------------------------------------------------------------------------------------------------
                                                                                                 Class I  price
                  State                             County/Parish                  FIPS            adjustment
----------------------------------------------------------------------------------------------------------------
AL.......................................  AUTAUGA........................              01001               0.50
AL.......................................  BALDWIN........................              01003               0.50
AL.......................................  BARBOUR........................              01005               0.55
AL.......................................  BIBB...........................              01007               0.30
AL.......................................  BLOUNT.........................              01009               0.20
AL.......................................  BULLOCK........................              01011               0.70
AL.......................................  BUTLER.........................              01013               0.55
AL.......................................  CALHOUN........................              01015               0.30
AL.......................................  CHAMBERS.......................              01017               0.70
AL.......................................  CHEROKEE.......................              01019               0.30
AL.......................................  CHILTON........................              01021               0.70
AL.......................................  CHOCTAW........................              01023               0.50
AL.......................................  CLARKE.........................              01025               0.35
AL.......................................  CLAY...........................              01027               0.70
AL.......................................  CLEBURNE.......................              01029               0.70
AL.......................................  COFFEE.........................              01031               0.85
AL.......................................  COLBERT........................              01033               0.30
AL.......................................  CONECUH........................              01035               0.55
AL.......................................  COOSA..........................              01037               0.70
AL.......................................  COVINGTON......................              01039               0.55
AL.......................................  CRENSHAW.......................              01041               0.55
AL.......................................  CULLMAN........................              01043               0.20
AL.......................................  DALE...........................              01045               0.85
AL.......................................  DALLAS.........................              01047               0.50
AL.......................................  DE KALB........................              01049               0.40
AL.......................................  ELMORE.........................              01051               0.50
AL.......................................  ESCAMBIA.......................              01053               0.55
AL.......................................  ETOWAH.........................              01055               0.30
AL.......................................  FAYETTE........................              01057               0.20
AL.......................................  FRANKLIN.......................              01059               0.30
AL.......................................  GENEVA.........................              01061               0.85
AL.......................................  GREENE.........................              01063               0.30
AL.......................................  HALE...........................              01065               0.30
AL.......................................  HENRY..........................              01067               0.85
AL.......................................  HOUSTON........................              01069               0.85
AL.......................................  JACKSON........................              01071               0.40
AL.......................................  JEFFERSON......................              01073               0.30
AL.......................................  LAMAR..........................              01075               0.20
AL.......................................  LAUDERDALE.....................              01077               0.30
AL.......................................  LAWRENCE.......................              01079               0.30

[[Page 11221]]

 
AL.......................................  LEE............................              01081               0.70
AL.......................................  LIMESTONE......................              01083               0.30
AL.......................................  LOWNDES........................              01085               0.70
AL.......................................  MACON..........................              01087               0.70
AL.......................................  MADISON........................              01089               0.30
AL.......................................  MARENGO........................              01091               0.50
AL.......................................  MARION.........................              01093               0.20
AL.......................................  MARSHALL.......................              01095               0.40
AL.......................................  MOBILE.........................              01097               0.50
AL.......................................  MONROE.........................              01099               0.35
AL.......................................  MONTGOMERY.....................              01101               0.70
AL.......................................  MORGAN.........................              01103               0.30
AL.......................................  PERRY..........................              01105               0.30
AL.......................................  PICKENS........................              01107               0.30
AL.......................................  PIKE...........................              01109               0.55
AL.......................................  RANDOLPH.......................              01111               0.70
AL.......................................  RUSSELL........................              01113               0.70
AL.......................................  SAINT CLAIR....................              01115               0.30
AL.......................................  SHELBY.........................              01117               0.30
AL.......................................  SUMTER.........................              01119               0.30
AL.......................................  TALLADEGA......................              01121               0.30
AL.......................................  TALLAPOOSA.....................              01123               0.70
AL.......................................  TUSCALOOSA.....................              01125               0.30
AL.......................................  WALKER.........................              01127               0.20
AL.......................................  WASHINGTON.....................              01129               0.35
AL.......................................  WILCOX.........................              01131               0.50
AL.......................................  WINSTON........................              01133               0.20
AR.......................................  ARKANSAS.......................              05001               0.00
AR.......................................  ASHLEY.........................              05003               0.10
AR.......................................  BAXTER.........................              05005               0.10
AR.......................................  BENTON.........................              05007               0.10
AR.......................................  BOONE..........................              05009               0.10
AR.......................................  BRADLEY........................              05011               0.30
AR.......................................  CALHOUN........................              05013               0.30
AR.......................................  CARROLL........................              05015               0.10
AR.......................................  CHICOT.........................              05017               0.10
AR.......................................  CLARK..........................              05019               0.00
AR.......................................  CLAY...........................              05021               0.10
AR.......................................  CLEBURNE.......................              05023               0.10
AR.......................................  CLEVELAND......................              05025               0.30
AR.......................................  COLUMBIA.......................              05027               0.10
AR.......................................  CONWAY.........................              05029               0.10
AR.......................................  CRAIGHEAD......................              05031               0.10
AR.......................................  CRAWFORD.......................              05033               0.10
AR.......................................  CRITTENDEN.....................              05035               0.10
AR.......................................  CROSS..........................              05037               0.10
AR.......................................  DALLAS.........................              05039               0.00
AR.......................................  DESHA..........................              05041               0.30
AR.......................................  DREW...........................              05043               0.30
AR.......................................  FAULKNER.......................              05045               0.10
AR.......................................  FRANKLIN.......................              05047               0.10
AR.......................................  FULTON.........................              05049               0.10
AR.......................................  GARLAND........................              05051               0.10
AR.......................................  GRANT..........................              05053               0.00
AR.......................................  GREENE.........................              05055               0.10
AR.......................................  HEMPSTEAD......................              05057               0.30
AR.......................................  HOT SPRING.....................              05059               0.00
AR.......................................  HOWARD.........................              05061               0.00
AR.......................................  INDEPENDENCE...................              05063               0.10
AR.......................................  IZARD..........................              05065               0.10
AR.......................................  JACKSON........................              05067               0.10
AR.......................................  JEFFERSON......................              05069               0.00
AR.......................................  JOHNSON........................              05071               0.10
AR.......................................  LAFAYETTE......................              05073               0.10
AR.......................................  LAWRENCE.......................              05075               0.10
AR.......................................  LEE............................              05077               0.10
AR.......................................  LINCOLN........................              05079               0.30
AR.......................................  LITTLE RIVER...................              05081               0.30
AR.......................................  LOGAN..........................              05083               0.10
AR.......................................  LONOKE.........................              05085               0.10
AR.......................................  MADISON........................              05087               0.10
AR.......................................  MARION.........................              05089               0.10
AR.......................................  MILLER.........................              05091               0.10

[[Page 11222]]

 
AR.......................................  MISSISSIPPI....................              05093               0.30
AR.......................................  MONROE.........................              05095               0.10
AR.......................................  MONTGOMERY.....................              05097               0.10
AR.......................................  NEVADA.........................              05099               0.30
AR.......................................  NEWTON.........................              05101               0.10
AR.......................................  OUACHITA.......................              05103               0.30
AR.......................................  PERRY..........................              05105               0.10
AR.......................................  PHILLIPS.......................              05107               0.00
AR.......................................  PIKE...........................              05109               0.00
AR.......................................  POINSETT.......................              05111               0.30
AR.......................................  POLK...........................              05113               0.10
AR.......................................  POPE...........................              05115               0.10
AR.......................................  PRAIRIE........................              05117               0.10
AR.......................................  PULASKI........................              05119               0.10
AR.......................................  RANDOLPH.......................              05121               0.10
AR.......................................  SAINT FRANCIS..................              05123               0.10
AR.......................................  SALINE.........................              05125               0.10
AR.......................................  SCOTT..........................              05127               0.10
AR.......................................  SEARCY.........................              05129               0.10
AR.......................................  SEBASTIAN......................              05131               0.10
AR.......................................  SEVIER.........................              05133               0.00
AR.......................................  SHARP..........................              05135               0.10
AR.......................................  STONE..........................              05137               0.10
AR.......................................  UNION..........................              05139               0.10
AR.......................................  VAN BUREN......................              05141               0.10
AR.......................................  WASHINGTON.....................              05143               0.10
AR.......................................  WHITE..........................              05145               0.10
AR.......................................  WOODRUFF.......................              05147               0.10
AR.......................................  YELL...........................              05149               0.10
FL.......................................  ESCAMBIA.......................              12033               0.55
FL.......................................  OKALOOSA.......................              12091               0.55
FL.......................................  SANTA ROSA.....................              12113               0.55
FL.......................................  WALTON.........................              12131               0.55
GA.......................................  APPLING........................              13001               1.15
GA.......................................  ATKINSON.......................              13003               1.15
GA.......................................  BACON..........................              13005               1.15
GA.......................................  BAKER..........................              13007               0.85
GA.......................................  BALDWIN........................              13009               0.70
GA.......................................  BANKS..........................              13011               0.70
GA.......................................  BARROW.........................              13013               0.70
GA.......................................  BARTOW.........................              13015               0.30
GA.......................................  BEN HILL.......................              13017               1.15
GA.......................................  BERRIEN........................              13019               1.15
GA.......................................  BIBB...........................              13021               0.70
GA.......................................  BLECKLEY.......................              13023               1.00
GA.......................................  BRANTLEY.......................              13025               1.15
GA.......................................  BROOKS.........................              13027               1.15
GA.......................................  BRYAN..........................              13029               1.15
GA.......................................  BULLOCH........................              13031               1.00
GA.......................................  BURKE..........................              13033               0.70
GA.......................................  BUTTS..........................              13035               0.70
GA.......................................  CALHOUN........................              13037               0.85
GA.......................................  CAMDEN.........................              13039               1.15
GA.......................................  CANDLER........................              13043               1.00
GA.......................................  CARROLL........................              13045               0.70
GA.......................................  CHARLTON.......................              13049               1.15
GA.......................................  CHATHAM........................              13051               1.15
GA.......................................  CHATTAHOOCHEE..................              13053               0.70
GA.......................................  CHEROKEE.......................              13057               0.30
GA.......................................  CLARKE.........................              13059               0.70
GA.......................................  CLAY...........................              13061               0.85
GA.......................................  CLAYTON........................              13063               0.70
GA.......................................  CLINCH.........................              13065               1.15
GA.......................................  COBB...........................              13067               0.70
GA.......................................  COFFEE.........................              13069               1.15
GA.......................................  COLQUITT.......................              13071               1.15
GA.......................................  COLUMBIA.......................              13073               0.70
GA.......................................  COOK...........................              13075               1.15
GA.......................................  COWETA.........................              13077               0.70
GA.......................................  CRAWFORD.......................              13079               0.70
GA.......................................  CRISP..........................              13081               0.85
GA.......................................  DAWSON.........................              13085               0.30
GA.......................................  DECATUR........................              13087               1.15

[[Page 11223]]

 
GA.......................................  DE KALB........................              13089               0.70
GA.......................................  DODGE..........................              13091               0.85
GA.......................................  DOOLY..........................              13093               0.85
GA.......................................  DOUGHERTY......................              13095               0.85
GA.......................................  DOUGLAS........................              13097               0.70
GA.......................................  EARLY..........................              13099               0.85
GA.......................................  ECHOLS.........................              13101               1.15
GA.......................................  EFFINGHAM......................              13103               1.00
GA.......................................  ELBERT.........................              13105               0.70
GA.......................................  EMANUEL........................              13107               1.00
GA.......................................  EVANS..........................              13109               1.15
GA.......................................  FAYETTE........................              13113               0.70
GA.......................................  FLOYD..........................              13115               0.30
GA.......................................  FORSYTH........................              13117               0.70
GA.......................................  FRANKLIN.......................              13119               0.70
GA.......................................  FULTON.........................              13121               0.70
GA.......................................  GILMER.........................              13123               0.30
GA.......................................  GLASCOCK.......................              13125               0.90
GA.......................................  GLYNN..........................              13127               1.15
GA.......................................  GORDON.........................              13129               0.30
GA.......................................  GRADY..........................              13131               1.15
GA.......................................  GREENE.........................              13133               0.70
GA.......................................  GWINNETT.......................              13135               0.70
GA.......................................  HABERSHAM......................              13137               0.30
GA.......................................  HALL...........................              13139               0.70
GA.......................................  HANCOCK........................              13141               0.70
GA.......................................  HARALSON.......................              13143               0.70
GA.......................................  HARRIS.........................              13145               0.70
GA.......................................  HART...........................              13147               0.70
GA.......................................  HEARD..........................              13149               0.70
GA.......................................  HENRY..........................              13151               0.70
GA.......................................  HOUSTON........................              13153               0.70
GA.......................................  IRWIN..........................              13155               1.15
GA.......................................  JACKSON........................              13157               0.70
GA.......................................  JASPER.........................              13159               0.70
GA.......................................  JEFF DAVIS.....................              13161               1.15
GA.......................................  JEFFERSON......................              13163               0.70
GA.......................................  JENKINS........................              13165               1.00
GA.......................................  JOHNSON........................              13167               1.00
GA.......................................  JONES..........................              13169               0.70
GA.......................................  LAMAR..........................              13171               0.70
GA.......................................  LANIER.........................              13173               1.15
GA.......................................  LAURENS........................              13175               1.00
GA.......................................  LEE............................              13177               0.85
GA.......................................  LIBERTY........................              13179               1.15
GA.......................................  LINCOLN........................              13181               0.70
GA.......................................  LONG...........................              13183               1.15
GA.......................................  LOWNDES........................              13185               1.15
GA.......................................  LUMPKIN........................              13187               0.30
GA.......................................  MC DUFFIE......................              13189               0.70
GA.......................................  MC INTOSH......................              13191               1.15
GA.......................................  MACON..........................              13193               0.70
GA.......................................  MADISON........................              13195               0.70
GA.......................................  MARION.........................              13197               0.70
GA.......................................  MERIWETHER.....................              13199               0.70
GA.......................................  MILLER.........................              13201               0.85
GA.......................................  MITCHELL.......................              13205               1.15
GA.......................................  MONROE.........................              13207               0.70
GA.......................................  MONTGOMERY.....................              13209               1.15
GA.......................................  MORGAN.........................              13211               0.70
GA.......................................  MUSCOGEE.......................              13215               0.70
GA.......................................  NEWTON.........................              13217               0.70
GA.......................................  OCONEE.........................              13219               0.70
GA.......................................  OGLETHORPE.....................              13221               0.70
GA.......................................  PAULDING.......................              13223               0.70
GA.......................................  PEACH..........................              13225               0.70
GA.......................................  PICKENS........................              13227               0.30
GA.......................................  PIERCE.........................              13229               1.15
GA.......................................  PIKE...........................              13231               0.70
GA.......................................  POLK...........................              13233               0.70
GA.......................................  PULASKI........................              13235               0.85
GA.......................................  PUTNAM.........................              13237               0.70
GA.......................................  QUITMAN........................              13239               0.85

[[Page 11224]]

 
GA.......................................  RABUN..........................              13241               0.30
GA.......................................  RANDOLPH.......................              13243               0.85
GA.......................................  RICHMOND.......................              13245               0.70
GA.......................................  ROCKDALE.......................              13247               0.70
GA.......................................  SCHLEY.........................              13249               0.70
GA.......................................  SCREVEN........................              13251               1.00
GA.......................................  SEMINOLE.......................              13253               1.15
GA.......................................  SPALDING.......................              13255               0.70
GA.......................................  STEPHENS.......................              13257               0.30
GA.......................................  STEWART........................              13259               0.55
GA.......................................  SUMTER.........................              13261               0.85
GA.......................................  TALBOT.........................              13263               0.70
GA.......................................  TALIAFERRO.....................              13265               0.70
GA.......................................  TATTNALL.......................              13267               1.15
GA.......................................  TAYLOR.........................              13269               0.70
GA.......................................  TELFAIR........................              13271               1.15
GA.......................................  TERRELL........................              13273               0.85
GA.......................................  THOMAS.........................              13275               1.15
GA.......................................  TIFT...........................              13277               1.15
GA.......................................  TOOMBS.........................              13279               1.15
GA.......................................  TOWNS..........................              13281               0.30
GA.......................................  TREUTLEN.......................              13283               1.00
GA.......................................  TROUP..........................              13285               0.70
GA.......................................  TURNER.........................              13287               0.85
GA.......................................  TWIGGS.........................              13289               0.70
GA.......................................  UNION..........................              13291               0.30
GA.......................................  UPSON..........................              13293               0.70
GA.......................................  WALTON.........................              13297               0.70
GA.......................................  WARE...........................              13299               1.15
GA.......................................  WARREN.........................              13301               0.70
GA.......................................  WASHINGTON.....................              13303               0.70
GA.......................................  WAYNE..........................              13305               1.15
GA.......................................  WEBSTER........................              13307               0.55
GA.......................................  WHEELER........................              13309               1.15
GA.......................................  WHITE..........................              13311               0.30
GA.......................................  WILCOX.........................              13315               0.85
GA.......................................  WILKES.........................              13317               0.70
GA.......................................  WILKINSON......................              13319               0.70
GA.......................................  WORTH..........................              13321               0.85
KY.......................................  ALLEN..........................              21003               0.20
KY.......................................  BALLARD........................              21007               0.30
KY.......................................  BARREN.........................              21009               0.20
KY.......................................  CALDWELL.......................              21033               0.20
KY.......................................  CALLOWAY.......................              21035               0.30
KY.......................................  CARLISLE.......................              21039               0.30
KY.......................................  CHRISTIAN......................              21047               0.20
KY.......................................  CRITTENDEN.....................              21055               0.20
KY.......................................  FULTON.........................              21075               0.30
KY.......................................  GRAVES.........................              21083               0.30
KY.......................................  HICKMAN........................              21105               0.30
KY.......................................  LIVINGSTON.....................              21139               0.30
KY.......................................  LOGAN..........................              21141               0.20
KY.......................................  LYON...........................              21143               0.20
KY.......................................  MC CRACKEN.....................              21145               0.30
KY.......................................  MARSHALL.......................              21157               0.30
KY.......................................  METCALFE.......................              21169               0.20
KY.......................................  MONROE.........................              21171               0.50
KY.......................................  SIMPSON........................              21213               0.20
KY.......................................  TODD...........................              21219               0.20
KY.......................................  TRIGG..........................              21221               0.20
KY.......................................  WARREN.........................              21227               0.20
LA.......................................  ACADIA.........................              22001               0.30
LA.......................................  ALLEN..........................              22003               0.30
LA.......................................  ASCENSION......................              22005               0.20
LA.......................................  ASSUMPTION.....................              22007               0.20
LA.......................................  AVOYELLES......................              22009               0.00
LA.......................................  BEAUREGARD.....................              22011               0.30
LA.......................................  BIENVILLE......................              22013               0.00
LA.......................................  BOSSIER........................              22015               0.10
LA.......................................  CADDO..........................              22017               0.10
LA.......................................  CALCASIEU......................              22019               0.30
LA.......................................  CALDWELL.......................              22021               0.00
LA.......................................  CAMERON........................              22023               0.20

[[Page 11225]]

 
LA.......................................  CATAHOULA......................              22025               0.00
LA.......................................  CLAIBORNE......................              22027               0.10
LA.......................................  CONCORDIA......................              22029               0.00
LA.......................................  DE SOTO........................              22031               0.00
LA.......................................  EAST BATON ROUGE...............              22033               0.20
LA.......................................  EAST CARROLL...................              22035               0.20
LA.......................................  EAST FELICIANA.................              22037               0.30
LA.......................................  EVANGELINE.....................              22039               0.30
LA.......................................  FRANKLIN.......................              22041               0.00
LA.......................................  GRANT..........................              22043               0.00
LA.......................................  IBERIA.........................              22045               0.20
LA.......................................  IBERVILLE......................              22047               0.20
LA.......................................  JACKSON........................              22049               0.00
LA.......................................  JEFFERSON......................              22051               0.20
LA.......................................  JEFFERSON DAVIS................              22053               0.30
LA.......................................  LAFAYETTE......................              22055               0.20
LA.......................................  LAFOURCHE......................              22057               0.20
LA.......................................  LA SALLE.......................              22059               0.00
LA.......................................  LINCOLN........................              22061               0.10
LA.......................................  LIVINGSTON.....................              22063               0.20
LA.......................................  MADISON........................              22065               0.00
LA.......................................  MOREHOUSE......................              22067               0.10
LA.......................................  NATCHITOCHES...................              22069               0.00
LA.......................................  ORLEANS........................              22071               0.20
LA.......................................  OUACHITA.......................              22073               0.10
LA.......................................  PLAQUEMINES....................              22075               0.20
LA.......................................  POINTE COUPEE..................              22077               0.30
LA.......................................  RAPIDES........................              22079               0.00
LA.......................................  RED RIVER......................              22081               0.00
LA.......................................  RICHLAND.......................              22083               0.20
LA.......................................  SABINE.........................              22085               0.00
LA.......................................  SAINT BERNARD..................              22087               0.20
LA.......................................  SAINT CHARLES..................              22089               0.20
LA.......................................  SAINT HELENA...................              22091               0.30
LA.......................................  SAINT JAMES....................              22093               0.20
LA.......................................  SAINT JOHN THE BAPTIST.........              22095               0.20
LA.......................................  SAINT LANDRY...................              22097               0.30
LA.......................................  SAINT MARTIN...................              22099               0.20
LA.......................................  SAINT MARY.....................              22101               0.20
LA.......................................  SAINT TAMMANY..................              22103               0.30
LA.......................................  TANGIPAHOA.....................              22105               0.20
LA.......................................  TENSAS.........................              22107               0.00
LA.......................................  TERREBONNE.....................              22109               0.20
LA.......................................  UNION..........................              22111               0.10
LA.......................................  VERMILION......................              22113               0.20
LA.......................................  VERMILION......................              22113               0.20
LA.......................................  VERNON.........................              22115               0.00
LA.......................................  WASHINGTON.....................              22117               0.30
LA.......................................  WEBSTER........................              22119               0.10
LA.......................................  WEST BATON ROUGE...............              22121               0.20
LA.......................................  WEST CARROLL...................              22123               0.10
LA.......................................  WEST FELICIANA.................              22125               0.30
LA.......................................  WINN...........................              22127               0.00
MS.......................................  ADAMS..........................              28001               0.00
MS.......................................  ALCORN.........................              28003               0.30
MS.......................................  AMITE..........................              28005               0.40
MS.......................................  ATTALA.........................              28007               0.20
MS.......................................  BENTON.........................              28009               0.30
MS.......................................  BOLIVAR........................              28011               0.10
MS.......................................  CALHOUN........................              28013               0.10
MS.......................................  CARROLL........................              28015               0.20
MS.......................................  CHICKASAW......................              28017               0.10
MS.......................................  CHOCTAW........................              28019               0.20
MS.......................................  CLAIBORNE......................              28021               0.10
MS.......................................  CLARKE.........................              28023               0.50
MS.......................................  CLAY...........................              28025               0.20
MS.......................................  COAHOMA........................              28027               0.30
MS.......................................  COPIAH.........................              28029               0.10
MS.......................................  COVINGTON......................              28031               0.00
MS.......................................  DE SOTO........................              28033               0.00
MS.......................................  FORREST........................              28035               0.40
MS.......................................  FRANKLIN.......................              28037               0.00
MS.......................................  GEORGE.........................              28039               0.40

[[Page 11226]]

 
MS.......................................  GREENE.........................              28041               0.40
MS.......................................  GRENADA........................              28043               0.10
MS.......................................  HANCOCK........................              28045               0.30
MS.......................................  HARRISON.......................              28047               0.30
MS.......................................  HINDS..........................              28049               0.00
MS.......................................  HOLMES.........................              28051               0.20
MS.......................................  HUMPHREYS......................              28053               0.20
MS.......................................  ISSAQUENA......................              28055               0.20
MS.......................................  ITAWAMBA.......................              28057               0.30
MS.......................................  JACKSON........................              28059               0.30
MS.......................................  JASPER.........................              28061               0.10
MS.......................................  JEFFERSON......................              28063               0.00
MS.......................................  JEFFERSON DAVIS................              28065               0.00
MS.......................................  JONES..........................              28067               0.40
MS.......................................  KEMPER.........................              28069               0.30
MS.......................................  LAFAYETTE......................              28071               0.30
MS.......................................  LAMAR..........................              28073               0.40
MS.......................................  LAUDERDALE.....................              28075               0.10
MS.......................................  LAWRENCE.......................              28077               0.00
MS.......................................  LEAKE..........................              28079               0.20
MS.......................................  LEE............................              28081               0.30
MS.......................................  LEFLORE........................              28083               0.10
MS.......................................  LINCOLN........................              28085               0.00
MS.......................................  LOWNDES........................              28087               0.20
MS.......................................  MADISON........................              28089               0.20
MS.......................................  MARION.........................              28091               0.40
MS.......................................  MARSHALL.......................              28093               0.00
MS.......................................  MONROE.........................              28095               0.20
MS.......................................  MONTGOMERY.....................              28097               0.20
MS.......................................  NESHOBA........................              28099               0.20
MS.......................................  NEWTON.........................              28101               0.10
MS.......................................  NOXUBEE........................              28103               0.30
MS.......................................  OKTIBBEHA......................              28105               0.20
MS.......................................  PANOLA.........................              28107               0.30
MS.......................................  PEARL RIVER....................              28109               0.40
MS.......................................  PERRY..........................              28111               0.40
MS.......................................  PIKE...........................              28113               0.40
MS.......................................  PONTOTOC.......................              28115               0.30
MS.......................................  PRENTISS.......................              28117               0.30
MS.......................................  QUITMAN........................              28119               0.30
MS.......................................  RANKIN.........................              28121               0.10
MS.......................................  SCOTT..........................              28123               0.10
MS.......................................  SHARKEY........................              28125               0.20
MS.......................................  SIMPSON........................              28127               0.10
MS.......................................  SMITH..........................              28129               0.10
MS.......................................  STONE..........................              28131               0.40
MS.......................................  SUNFLOWER......................              28133               0.10
MS.......................................  TALLAHATCHIE...................              28135               0.10
MS.......................................  TATE...........................              28137               0.00
MS.......................................  TIPPAH.........................              28139               0.30
MS.......................................  TISHOMINGO.....................              28141               0.30
MS.......................................  TUNICA.........................              28143               0.00
MS.......................................  UNION..........................              28145               0.30
MS.......................................  WALTHALL.......................              28147               0.40
MS.......................................  WARREN.........................              28149               0.00
MS.......................................  WASHINGTON.....................              28151               0.10
MS.......................................  WAYNE..........................              28153               0.40
MS.......................................  WEBSTER........................              28155               0.20
MS.......................................  WILKINSON......................              28157               0.40
MS.......................................  WINSTON........................              28159               0.20
MS.......................................  YALOBUSHA......................              28161               0.10
MS.......................................  YAZOO..........................              28163               0.20
MO.......................................  BARRY..........................              29009               0.20
MO.......................................  BARTON.........................              29011               0.20
MO.......................................  BOLLINGER......................              29017               0.20
MO.......................................  BUTLER.........................              29023               0.20
MO.......................................  CAPE GIRARDEAU.................              29031               0.20
MO.......................................  CARTER.........................              29035               0.20
MO.......................................  CEDAR..........................              29039               0.20
MO.......................................  CHRISTIAN......................              29043               0.20
MO.......................................  CRAWFORD.......................              29055               0.40
MO.......................................  DADE...........................              29057               0.20
MO.......................................  DALLAS.........................              29059               0.20

[[Page 11227]]

 
MO.......................................  DENT...........................              29065               0.40
MO.......................................  DOUGLAS........................              29067               0.20
MO.......................................  DUNKLIN........................              29069               0.50
MO.......................................  GREENE.........................              29077               0.20
MO.......................................  HOWELL.........................              29091               0.20
MO.......................................  IRON...........................              29093               0.40
MO.......................................  JASPER.........................              29097               0.20
MO.......................................  LACLEDE........................              29105               0.20
MO.......................................  LAWRENCE.......................              29109               0.20
MO.......................................  MC DONALD......................              29119               0.20
MO.......................................  MADISON........................              29123               0.20
MO.......................................  MISSISSIPPI....................              29133               0.50
MO.......................................  NEW MADRID.....................              29143               0.50
MO.......................................  NEWTON.........................              29145               0.20
MO.......................................  OREGON.........................              29149               0.20
MO.......................................  OZARK..........................              29153               0.20
MO.......................................  PEMISCOT.......................              29155               0.50
MO.......................................  PERRY..........................              29157               0.20
MO.......................................  POLK...........................              29167               0.20
MO.......................................  REYNOLDS.......................              29179               0.20
MO.......................................  RIPLEY.........................              29181               0.20
MO.......................................  SAINT FRANCOIS.................              29187               0.40
MO.......................................  SCOTT..........................              29201               0.20
MO.......................................  SHANNON........................              29203               0.20
MO.......................................  STODDARD.......................              29207               0.20
MO.......................................  STONE..........................              29209               0.20
MO.......................................  TANEY..........................              29213               0.20
MO.......................................  TEXAS..........................              29215               0.20
MO.......................................  VERNON.........................              29217               0.20
MO.......................................  WASHINGTON.....................              29221               0.40
MO.......................................  WAYNE..........................              29223               0.20
MO.......................................  WEBSTER........................              29225               0.20
MO.......................................  WRIGHT.........................              29229               0.20
TN.......................................  BEDFORD........................              47003               0.30
TN.......................................  BENTON.........................              47005               0.30
TN.......................................  BLEDSOE........................              47007               0.60
TN.......................................  CANNON.........................              47015               0.30
TN.......................................  CARROLL........................              47017               0.10
TN.......................................  CHEATHAM.......................              47021               0.30
TN.......................................  CHESTER........................              47023               0.10
TN.......................................  CLAY...........................              47027               0.30
TN.......................................  COFFEE.........................              47031               0.60
TN.......................................  CROCKETT.......................              47033               0.30
TN.......................................  DAVIDSON.......................              47037               0.30
TN.......................................  DECATUR........................              47039               0.30
TN.......................................  DE KALB........................              47041               0.30
TN.......................................  DICKSON........................              47043               0.30
TN.......................................  DYER...........................              47045               0.10
TN.......................................  FAYETTE........................              47047               0.10
TN.......................................  FENTRESS.......................              47049               0.30
TN.......................................  FRANKLIN.......................              47051               0.40
TN.......................................  GIBSON.........................              47053               0.10
TN.......................................  GILES..........................              47055               0.40
TN.......................................  GRUNDY.........................              47061               0.60
TN.......................................  HARDEMAN.......................              47069               0.10
TN.......................................  HARDIN.........................              47071               0.10
TN.......................................  HAYWOOD........................              47075               0.30
TN.......................................  HENDERSON......................              47077               0.30
TN.......................................  HENRY..........................              47079               0.10
TN.......................................  HICKMAN........................              47081               0.30
TN.......................................  HOUSTON........................              47083               0.30
TN.......................................  HUMPHREYS......................              47085               0.30
TN.......................................  JACKSON........................              47087               0.30
TN.......................................  LAKE...........................              47095               0.10
TN.......................................  LAUDERDALE.....................              47097               0.30
TN.......................................  LAWRENCE.......................              47099               0.40
TN.......................................  LEWIS..........................              47101               0.30
TN.......................................  LINCOLN........................              47103               0.40
TN.......................................  MC NAIRY.......................              47109               0.10
TN.......................................  MACON..........................              47111               0.30
TN.......................................  MADISON........................              47113               0.30
TN.......................................  MARSHALL.......................              47117               0.30
TN.......................................  MAURY..........................              47119               0.30

[[Page 11228]]

 
TN.......................................  MONTGOMERY.....................              47125               0.30
TN.......................................  MOORE..........................              47127               0.40
TN.......................................  OBION..........................              47131               0.10
TN.......................................  OVERTON........................              47133               0.30
TN.......................................  PERRY..........................              47135               0.30
TN.......................................  PICKETT........................              47137               0.30
TN.......................................  PUTNAM.........................              47141               0.30
TN.......................................  ROBERTSON......................              47147               0.30
TN.......................................  RUTHERFORD.....................              47149               0.30
TN.......................................  SHELBY.........................              47157               0.10
TN.......................................  SMITH..........................              47159               0.30
TN.......................................  STEWART........................              47161               0.30
TN.......................................  SUMNER.........................              47165               0.30
TN.......................................  TIPTON.........................              47167               0.10
TN.......................................  TROUSDALE......................              47169               0.30
TN.......................................  VAN BUREN......................              47175               0.60
TN.......................................  WARREN.........................              47177               0.60
TN.......................................  WAYNE..........................              47181               0.40
TN.......................................  WEAKLEY........................              47183               0.10
TN.......................................  WHITE..........................              47185               0.30
TN.......................................  WILLIAMSON.....................              47187               0.30
TN.......................................  WILSON.........................              47189               0.30
----------------------------------------------------------------------------------------------------------------

    9. Amend Sec.  1007.13 by revising paragraphs (d) (1) through (4) 
to read as follows:


Sec.  1007.13  Producer Milk.

* * * * *
    (d) * * *
    (1) In any month of January through June, not less than 1 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 1 days' 
production of the producer whose milk 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 35 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 35 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.  1007.7(e)) during the 
month, excluding the quantity of producer milk received from a handler 
described in Sec.  1000.9(c);
* * * * *
    10. Amend Sec.  1007.81 by revising paragraph (a) to read as 
follows:


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.  1007.44 by $0.30 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-February period to reflect any changes in the 
current mileage rate versus the mileage rate(s) in effect during the 
prior June-February period. In the event that during any month of the 
June-February 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.
* * * * *
    11. Amend Sec.  1007.82 by revising paragraphs (a)(1), (b), (c)(1), 
removing paragraph (c)(2)(i), revising paragraphs (d)(2)(iii), 
(d)(3)(v), and redesignating paragraphs (c)(2)(ii), (c)(2)(iii), 
(c)(2)(iv) as (c)(2)(i), (c)(2)(ii) and (c)(2)(iii), and revising newly 
redesignated paragraphs (c)(2)(i) and (c)(2)(iii) to read as follows:


Sec.  1007.82  Payments from the transportation credit balancing fund.

    (a) * * *
    (1) On or before the 13th day (except as provided in Sec.  1000.90) 
after the end of each of the months of January, February and 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.
* * * * *
    (b) The market administrator may extend the period during which 
transportation credits are in effect (i.e.,

[[Page 11229]]

the transportation credit period) to the month of 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 Deputy 
Administrator of Dairy Programs 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) * * *
    (1) Bulk milk received at a pool distributing plant from a plant 
regulated under another Federal order, except Federal Order 1005; and
* * * * *
    (2) * * *
    (i) The dairy farmer was not a ``producer'' under this order for 
more than 45 days during the immediately preceding months of March 
through May, or not more than 50 percent of the production of the dairy 
farmer during those 3 months, in aggregate, was received as producer 
milk under this order during those 3 months; and
* * * * *
    (iii) The market administrator may increase or decrease the milk 
production standard specified in paragraph (c)(2)(i) of this section 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.
    (d) * * *
    (2) * * *
    (iii) Subtract the applicable Class I price specified in Sec.  
1000.50(a) for the county in which the shipping plant is located from 
the Class I price applicable for the county in which the receiving 
plant is located;
    (3) * * *
    (v) Subtract the Class I price specified in Sec.  1000.50(a) 
applicable for the county in which the origination point is located 
from the Class I price applicable at the receiving pool plant's 
location;
* * * * *

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix--Marketing Agreement Regulating the Handling of Milk in 
Certain Marketing Areas

    The parties hereto, in order to effectuate the declared policy 
of the Act, and in accordance with the rules of practice and 
procedure effective thereunder (7 CFR part 900), desire to enter 
into this marketing agreement and do hereby agree that the 
provisions referred to in paragraph I hereof, as augmented by the 
provisions specified in paragraph II hereof, shall be and are the 
provisions of this marketing agreement as if set out in full herein.
    I. The findings and determinations, order relative to handling, 
and the provisions of Sec.  -------- to--------\ 1\ all inclusive, 
of the order regulating the handling of milk in the ------------\2\ 
marketing area (7 CFR Part--------\3\) which is annexed hereto; and
---------------------------------------------------------------------------

    \1\ First and last section of order.
    \2\ Name of order.
    \3\ Appropriate Part number.
---------------------------------------------------------------------------

    II. The following provisions: Sec.  --------\ 4\ Record of milk 
handled and authorization to correct typographical errors.
---------------------------------------------------------------------------

    \4\ Next consecutive section number.
---------------------------------------------------------------------------

    (a) Record of milk handled. The undersigned certifies that he/
she handled during the month of --------\5\, -------- hundredweight 
of milk covered by this marketing agreement.
---------------------------------------------------------------------------

    \5\ Appropriate representative period for the order.
---------------------------------------------------------------------------

    (b) Authorization to correct typographical errors. The 
undersigned hereby authorizes the Deputy Administrator, or Acting 
Deputy Administrator, Dairy Programs, Agricultural Marketing 
Service, to correct any typographical errors which may have been 
made in this marketing agreement.
    Effective date. This marketing agreement shall become effective 
upon the execution of a counterpart hereof by the Department in 
accordance with Sec. 900.14(a) of the aforesaid rules of practice 
and procedure.
    In Witness Whereof, The contracting handlers, acting under the 
provisions of the Act, for the purposes and subject to the 
limitations herein contained and not otherwise, have hereunto set 
their respective hands and seals.

Signature

By (Name)--------------------------------------------------------------

(Title)----------------------------------------------------------------
(Address)--------------------------------------------------------------

(Seal)

Attest-----------------------------------------------------------------

[FR Doc. 08-881 Filed 2-25-08; 1:04 pm]
BILLING CODE 3410-02-P