[Federal Register Volume 73, Number 212 (Friday, October 31, 2008)]
[Rules and Regulations]
[Pages 64868-64872]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25856]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1140 and 1145

[Docket No. AMS-DA-08-0031; DA-08-05]
RIN 0581-AC86


Dairy Forward Pricing Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule establishes a program for producers and 
cooperative associations of producers to voluntarily enter into forward 
price contracts with handlers for milk used for Class II, III, or IV 
purposes under the Agricultural Marketing Agreement Act of 1937 (AMAA). 
The program allows handlers regulated under the Federal milk marketing 
order program to pay producers and cooperative associations in 
accordance with the terms of a forward contract and not have to pay the 
minimum Federal order blend price for milk. This program is established 
in accordance with section 1502 of the Food, Conservation and Energy 
Act of 2008 (2008 Farm Bill).

DATES: Effective Date: November 3, 2008.

FOR FURTHER INFORMATION CONTACT: John R. Mengel, Chief Economist, USDA/
AMS/Dairy Programs, Office of the Chief Economist, STOP 0229-Room 2753, 
1400 Independence Ave., SW., Washington, DC 20250-0229, (202) 720-4664, 
e-mail address: [email protected].

SUPPLEMENTARY INFORMATION: This rule implements a program for producers 
and cooperative associations of producers to enter into forward price 
contracts with handlers for Class II, III, or IV milk under the AMAA. 
This program is required to be established by the 2008 Farm Bill. The 
program authorizes that under the AMAA, milk handlers pay producers or 
cooperative associations of producers a negotiated price, rather than 
the Federal order minimum blend price for producer milk if subject to 
conditions and terms of a forward contract, provided the volume of such 
milk does not exceed the handler's Class II, III, and IV utilization 
for the month on the order that regulates the milk. The program applies 
to producer milk regulated under Federal milk marketing orders that is 
not classified as Class I milk or milk otherwise intended for fluid use 
and that is in the current of interstate or foreign commerce or 
directly burdens, obstructs, or affects interstate or foreign commerce 
of Federally regulated milk. The Federal milk marketing order program 
consists of 10 Federal milk marketing orders (7 CFR 1001-1135). In 
accordance with the 2008 Farm Bill, the program prohibits forward 
contracts under the program from being entered into after September 30, 
2012, and no forward contracts entered into under the program may 
extend beyond September 30, 2015.

Background

    The Consolidated Appropriations Act of 2000 amended the 
Agricultural Marketing Agreement Act of 1937 \1\ to mandate the 
implementation of a Dairy Forward Pricing Pilot Program (DFPPP) through 
December 31, 2004. The law allowed proprietary handlers, and 
cooperative associations acting as milk handlers with respect to non-
member milk, regulated under the Federal milk marketing order program 
to forward contract for deliveries of milk from producers or 
cooperative associations of producers at prices exempt from minimum 
Federal milk marketing order blend prices.\2\ The 2000 Act required 
that the Department conduct a study on the DFPPP to be submitted to 
Congress concerning impacts on milk prices paid to producers.\3\ The 
study, covering the period from September 2000 to March 2002, indicated 
that participation in the DFPPP was relatively small in terms of 
numbers of producers, handlers, and milk quantities. On a monthly 
average basis, 3.9 percent of eligible producers, 5.7 percent of 
proprietary manufacturing plants, and 5.3 percent of pooled milk 
received from eligible producers participated. The study concluded the 
DFPPP to be effective in reducing price volatility. The average monthly 
price received for contract milk was $14.02, ranging from a low of 
$13.23 to a high of $14.86. The average monthly price of the same milk, 
had it not been under contract, was $14.51, ranging from a low of 
$12.04 to a high of $17.75. Thus, the study concluded that price 
volatility was substantially reduced for producers and handlers that 
participated in the Program. Subsequent reports published by the 
Department, covering the entire period of the Program from September 
2000 through December 2004, indicated results that were consistent with 
conclusions of the report submitted to Congress. The study and the 
final report on the DFPPP can be found at http://www.ams.usda.gov/dairy.
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    \1\ Section 23 of the Agricultural Adjustment Act (7 U.S.C. 601 
et seq.), reenacted with amendments by the Agricultural Marketing 
Agreement Act of 1937, as enacted by Public Law 106-113 (113 Stat. 
1501A-519).
    \2\ See Final Rule for Dairy Forward Pricing Pilot Program, July 
18, 2000; 65 FR 44408; 7 CFR Part 1140.
    \3\ See A Study of the Dairy Forward Pricing Pilot Program and 
Its Effect on Prices Paid to Producers for Milk, October 31, 2002. 
Prepared for the Senate Committee on Agriculture, Nutrition and 
Forestry and the House Committee on Agriculture; http://www.ams.usda.gov/dairy.
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    This Final Rule removes the regulations covering the DFPPP that 
appeared in 7 CFR Part 1140, (7 U.S.C. 601 et seq.; as amended by 
section 1001(a)(8) of Public Law 106-113) and establishes a new 7 CFR 
Part 1145, as mandated by the 2008 Farm Bill.
    The program does not invalidate, supersede, or otherwise change any 
existing contractual agreements between handlers and producers. 
Contracts eligible under this program are those contracts beginning no 
earlier than the effective date of this final rule.

Executive Order 12866

    This rule has been determined to be not significant for purposes of 
Executive Order 12866, and therefore has not been reviewed by the 
Office of Management and Budget.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. It is not intended to have a retroactive effect. The 
adopted amendments do not preempt any state or local laws, regulations, 
or policies, unless they present an irreconcilable conflict with this 
rule. There are no administrative procedures which must be exhausted 
prior to judicial challenge to the provisions of this rule.

[[Page 64869]]

Regulatory Flexibility Act and Paperwork Reduction Act

    The legal basis for this rule is set forth in the 2008 Farm Bill, 
which directs the Secretary of USDA to establish a dairy forward 
pricing program. The 2008 Farm Bill directs USDA to establish a program 
under which milk producers and cooperative associations of producers 
are authorized to enter voluntarily into forward price contracts with 
milk handlers.
    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 
rule will not have a significant economic impact on a substantial 
number of small entities. For the purpose of the Regulatory Flexibility 
Act, a dairy farm is considered a small business if it has an annual 
gross revenue of less than $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 
production 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.
    Based on information available from March 2008, the milk of 47,850 
dairy farmers was pooled on the Federal milk marketing order system. Of 
the total, 44,979 dairy farmers, or 94 percent, were considered small 
businesses. During the same month, 317 handler plants were regulated by 
or reported their milk receipts to be pooled and priced on a Federal 
milk marketing order. Of the total, approximately 168 handler plants, 
or 53 percent, were considered small businesses.
    The Agricultural Marketing Service (AMS) 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.
    The reporting and recordkeeping requirements for this rule are 
minimal. Section 1601 of the 2008 Farm Bill provides that the 
promulgation of the regulations to establish a Dairy Forward Pricing 
Program shall be made without regard to the Paperwork Reduction Act of 
1995 (44 U.S.C. Chapter 35). Although exempted, the requirements of the 
Paperwork Reduction Act were considered in developing the provisions of 
this rule. The provisions implementing the Dairy Forward Pricing 
Program have been carefully reviewed and every effort has been made to 
minimize recordkeeping costs or requirements.
    Any handler that enters into a forward contract with a producer or 
cooperative association of producers must have written proof of such an 
arrangement. To meet other requirements for participation in this 
program, a handler must submit a copy of each forward contract with a 
producer or cooperative association of producers to the market 
administrator of the order which regulates the milk. Submitting this 
information to the milk market administrator is estimated to take five 
minutes or less. The handler must attach a disclosure statement to each 
forward contract, or otherwise make such statement part of the 
contract. The disclosure statement must be signed by each producer or 
cooperative representative entering into a forward contract. The 
disclosure statement explains that producers or cooperative 
associations of producers entering into forward contracts forfeit their 
rights to receive the minimum order price(s) for that portion of their 
milk that is subject to the contract for the duration of the contract 
period. Preparing the contract and attaching or including the 
disclosure statement is estimated to take twenty minutes or less per 
contract.
    Any handler participating in the program will continue to file all 
of the reports that are required under the applicable Federal milk 
marketing order, as authorized under the Agricultural Marketing 
Agreement Act of 1937. The information collection requirements 
contained in the Federal milk marketing order program have been 
previously approved by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1995 and have been assigned OMB Control 
Number 0581-0032. This includes reports of utilization of milk and 
monthly payroll reports that show information required by the orders. 
Taking into account the Dairy Forward Pricing Program, the monthly 
payroll report of each participating handler and the support statement 
sent from each participating handler to each participating producer 
must contain detailed accounting that distinguishes total rates used in 
making payment and volumes for milk under forward contract. While the 
resulting changes in burden are exempt from the Paperwork Reduction 
Act, slight modifications to the currently approved ``Handler's Report 
for Producer Payroll'' form will be submitted to the OMB.
    If a handler's contract milk exceeds the handler's eligible milk 
for any month in which the specified contract price(s) are below the 
order's minimum prices, the handler must designate which producer milk 
shall not be contract milk. Preparing this notification is estimated to 
take five minutes or less. If the handler does not designate the 
suppliers of the over-contracted milk, the market administrator shall 
prorate the over-contracted milk to each producer and cooperative 
association having a forward contract with the handler.
    The primary sources of data used to complete these reports are 
routinely used in most business transactions. The additional reporting 
requirements required by this rule typically only require a minimal 
amount of data processing time, and 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.
    USDA does not expect the forward contracting program to unduly 
burden small entities or impair their ability to compete in the 
marketplace. In its simplest form, a forward contract between a milk 
buyer and a milk producer (or cooperative) is an agreement to sell a 
stated quantity of milk for a specified period at a stated price. 
Producers and handler are able to ``lock-in'' prices, thereby 
minimizing risks associated with price and income volatility and 
enhancing their ability to obtain new or continued financing. By 
providing another tool to possibly reduce price risk, the program may 
aid small businesses in competing with larger entities that currently 
utilize futures and options markets, among other means, to reduce price 
volatility.
    As previously discussed, the analysis of the DFPPP found the 
Program to substantially reduce price volatility for those producers 
who used the Program throughout the duration. The study concluded that 
participation in the DFPPP was small in terms of numbers of producers, 
handlers, and milk quantities. On a monthly average basis, 3.9 percent 
of eligible producers, 5.7 percent of proprietary manufacturing plants 
and 5.3 percent of pooled milk received from eligible producers

[[Page 64870]]

participated. The study concluded the DFPPP to be effective in reducing 
price volatility. The average monthly price received for contract milk 
was $14.02, ranging from a low of $13.23 to a high of $14.86. The 
average monthly price of the same milk, had it not been under contract, 
was $14.51, ranging from a low of $12.04 to a high of $17.75.

Discussion of Rules Applicable to Program

    Section 1502 of the 2008 Farm Bill requires the Secretary of 
Agriculture to establish a dairy forward pricing program. This section 
provides that a handler may forward contract for an amount of milk up 
to the volume of Class II, III, and IV milk pooled on the order by the 
handler under the AMAA, as amended, during a month and be exempt from 
the minimum Federal order blend price provisions for that milk. USDA, 
including Market Administrator personnel, does not determine the terms 
of forward contracts or enforce negotiated prices.
    For producers who consider forward contracting as a risk-management 
tool, the ``benchmark'' price for milk is the Federal order blend price 
that they would receive in the absence of a forward contract. It is 
reasonable to expect a producer to negotiate a forward contract that 
would approximate the minimum blend price plus applicable premiums 
averaged over the forward contract period. Over time, it is reasonable 
to expect to see forward contract prices paid to producers below the 
applicable minimum order blend price in some months and above the 
minimum order blend price in others.
    Participation in the dairy forward pricing program is voluntary for 
dairy farmers, dairy farmer cooperatives, and handlers. Handlers may 
not require producer participation in a forward pricing program as a 
condition for accepting milk. A producer or cooperative association may 
continue to have its milk priced under the minimum payment provisions 
of the applicable milk order.
    Producer milk under forward contract with a handler is exempt from 
the minimum blend price requirements offered through Federal milk 
orders provided the volume of such milk does not exceed the handler's 
Class II, III, and IV utilization for the month on the order which 
regulates the milk.
    Any ``handler'' defined in 7 CFR 1000.9 is eligible to enter into a 
forward contract(s) with producers or cooperatives of producers. As 
defined in that section, ``handler'' includes not only the operator of 
a pool plant or nonpool plant, but also a broker serving as a handler 
as provided in Sec.  1000.9(b), a proprietary handler, and a 
cooperative association acting as a handler with respect to non-member 
milk delivered to a pool plant or diverted to a nonpool plant. Nothing 
in this regulation affects any contractual arrangements between a 
cooperative association and its members.
    A handler's combined Class II, III, and IV producer milk 
utilization is defined in 7 CFR 1145 as the handler's ``eligible 
milk.'' In the case of a multi-plant handler, the handler's Class II, 
III, and IV producer milk utilization will be combined together for all 
of the handler's milk regulated under one milk marketing order. A 
handler will only be exempt from paying the milk marketing order's 
minimum blend price on its volume of ``eligible milk.'' If a handler 
enters into forward contracts for more than the eligible milk volume, 
(``over-contract'' milk) the handler must notify the Market 
Administrator. If the handler fails to notify the Market Administrator 
of payment adjustments, the Market Administrator will prorate the over-
contract milk to each producer and cooperative association having a 
contract with the handler.
    Although handlers participating in the program will not be required 
to pay producers and cooperative associations the minimum uniform blend 
or component prices for contract milk, they must continue to account to 
the pool for all milk they receive at the respective milk marketing 
order's minimum class prices. In the case of milk received by a 
transfer from a cooperative association's pool plant, a handler may 
forward contract for all such transferred milk that is not used in 
Class I.
    In many milk markets nonpool plants regularly receive pooled milk 
from milk producers who are not members of a cooperative association. 
This milk is actually pooled by a pool plant operator or by a 
cooperative association through its deliveries to a pool plant. The 
non-member milk delivered to a nonpool plant is reported under the milk 
marketing order program as producer milk diverted to a nonpool plant by 
the cooperative association on its monthly report of receipts and 
utilization to the milk market administrator. Alternatively, if a 
cooperative association is not involved in the transaction, such milk 
could be reported by a pool plant operator on its monthly report of 
receipts and utilization.
    Many nonpool plant operators who receive non-member milk that is 
pooled through another handler issue checks to the nonpool plant's non-
member producers. They submit their payrolls showing these payments to 
the market administrator. Nevertheless, these nonpool plant operators 
are not responsible under the milk marketing order program for paying 
their non-member producers the minimum Federal milk marketing order 
price; it is the handler (either the cooperative association or pool 
plant operator) that pools the milk for such nonpool plants that is 
responsible for an underpayment under the milk marketing order program.
    Accordingly, only producer milk that is subject to forward 
contracting with a handler in compliance with the Dairy Forward Pricing 
Program will be exempt from the order's minimum blend price provisions. 
In the case of non-member milk that is reported as producer milk by a 
cooperative association handler or pool plant operator, but payrolled 
by a nonpool plant operator, the cooperative association or pool plant 
operator, respectively, will be responsible for any underpayment to a 
nonmember producer in the event that milk under contract becomes 
subject to minimum milk marketing order pricing (as in the case of 
over-contract milk). In this way, cooperative association handlers, 
pool plant operators, and nonpool plant operators may continue the 
arrangements that have evolved to pool milk under the Federal milk 
marketing order program and all will be permitted to participate in the 
forward contracting program.
    Any handler participating in the program will continue to file all 
of the reports that are required under the applicable Federal milk 
marketing order. This includes reports of receipts and utilization of 
milk and monthly payroll reports that show all information required by 
the orders. The notable differences, however, between the forward 
pricing program implemented in this Final Rule and the DFPPP are that 
handlers participating in the forward pricing program must now provide 
more detailed accounting in their monthly payroll reports to the market 
administrator and remittance information provided to participating 
producers (7 CFR 1----.31, 1001.73(e), 1005.73(e), 1006.73(e), 
1007.73(e), 1030.73(f), 1032.73(f), 1033.73(e), 1124.73(f), 1126.73(e), 
1131.73(e)). In accordance with these provisions, the monthly payroll 
reports of participating handlers will be required to contain detailed 
accounting that distinguishes gross values paid for applicable volumes 
of contract versus non-contract milk for each producer. Handlers 
participating in the DFPPP were not required to provide such detailed 
accounting to the market administrator. Remittance information

[[Page 64871]]

from participating handlers to participating producers must clearly 
distinguish gross values and volumes for contract versus non-contract 
milk. These distinctions avoid any questions concerning compliance with 
Federal order minimum price requirements for participant milk not under 
contract.
    As with the DFPPP, handlers participating in the Federal order 
program must submit to the market administrator a copy of each contract 
for which it claims exemption from the order's minimum blend pricing 
provisions. The contract must denote the pricing terms for contract 
milk. The contract must be signed prior to the first day of the first 
month for which the contract applies and must be received by the market 
administrator by the 15th day of that month. For the first month that 
the program is effective, contracts must be signed on or after the day 
on which the program becomes effective. For example, if the program 
becomes effective on November 15, contracts for December milk must be 
signed between November 15 and November 30, and copies must be received 
by the market administrator by December 15.
    Each handler must give each contracting dairy farmer or cooperative 
association a disclosure statement informing them of the nature of the 
program and providing certain information that should be considered 
before entering into a forward contract. It is important that producers 
clearly understand on what basis they are being paid for contract milk. 
The disclosure statement must be signed on the same date as the 
contract by the dairy farmer or cooperative association representative 
and will have to be returned by the handler to the market administrator 
together with the contract. The disclosure is less than one page long 
and can easily be incorporated into the body of the forward contract 
itself or can be handled as a supplement that may be attached to the 
forward contract. Any contract that is submitted to the market 
administrator without the disclosure statement will be considered to be 
invalid for the purpose of being exempt from the order's minimum 
pricing and will be returned to the handler.
    Producers who are not members of a cooperative association should 
be aware that their milk weights and tests will continue to be handled 
in the same way by the milk market administrator even if they choose to 
enter into a forward contract which prices their milk on a different 
basis than the milk marketing order in which their milk is pooled. For 
example, if a producer in the Appalachian order, which prices the milk 
of dairy farmers on the basis of skim milk and butterfat, enters into a 
contract that prices milk on the basis of protein, butterfat, other 
solids and somatic cell count, the producer will only receive data from 
the milk market administrator on the skim and butterfat components to 
compare against the buying handler's test data. If the producer wants 
to verify other component tests, they must do so at their own expense.
    Handlers with forward contracts remain subject to all other milk 
marketing order provisions. Payments specified under a forward contract 
must be made on the same dates as order payments which they replace. If 
handlers paid producers under contract at different times than 
producers not under contract, disorderly conditions might occur. 
Payments for milk covered under forward contract are required to be 
made by the dates specified in Sec.  1145.2(e) of the regulations.

Final Action

    In accordance with the 2008 Farm Bill, this final rule establishes 
the dairy forward pricing program. These provisions are included in a 
new part 1145, which provides separate sections for Definitions, Rules 
Governing Forward Contracts and Enforcement of the program.
    Subtitle F of Title I of the 2008 Farm Bill at section 1601 
provides for an implementation timeframe and the promulgation of the 
regulations to establish a Dairy Forward Pricing Program without regard 
to the Paperwork Reduction Act (44 U.S.C. Chapter 35), the Statement of 
Policy of the Secretary of Agriculture, effective July 24, 1971 (36 FR 
13804), and the notice and comment provisions of section 553 of Title 
5, United States Code. Accordingly, these provisions are made final in 
this action and for the same reasons good cause exists for making this 
rule effective one day after publication in the Federal Register. To do 
otherwise would be impracticable, unnecessary, and contrary to the 
public interest. (5 U.S.C. 553; 5 U.S.C. 808)

List of Subjects

7 CFR Part 1140

    Contract, Forward contract, Forward pricing, Milk.

7 CFR Part 1145

    Contract, Forward contract, Forward pricing, Milk.


0
For the reasons set forth in the preamble and under the authority of 7 
U.S.C. 601 et seq., Title 7, chapter X of the Code of Federal 
Regulations is amended by removing a reserving part 1140 and adding a 
new part 1145 to read as follows:

PART 1140--[REMOVED AND RESERVED]

PART 1145--DAIRY FORWARD PRICING PROGRAM

Subpart A--Definitions
Sec.
1145. 1 Definitions.
Subpart B--Program Rules
1145.2 Program.
Subpart C--Enforcement
1145.3 Enforcement.

    Authority: 7 U.S.C. 8772.

Subpart A--Definitions


Sec.  1145.1  Definitions.

    (a) Program means the dairy forward pricing program as established 
by Section 1502 of Public Law No. 110-246.
    (b) Eligible milk means the quantity of milk equal to the 
contracting handler's Class II, III and IV utilization of producer 
milk, in product pounds, during the month, combining all plants of a 
single handler regulated under the same Federal milk marketing order.
    (c) Forward contract means an agreement covering the terms and 
conditions for the sale of Class II, III or IV milk from a producer 
defined in 7 CFR 1001.12, 1005.12, 1006.12, 1007.12, 1030.12, 1032.12, 
1033.12, 1124.12, 1126.12, 1131.12 or a cooperative association of 
producers defined in 7 CFR 1000.18, and a handler defined in 7 CFR 
1000.9.
    (d) Contract milk means the producer milk regulated under a Federal 
milk marketing order covered by a forward contract.
    (e) Disclosure statement means the following statement which must 
be signed by each producer or cooperative representative entering into 
a forward contract with a handler before the Federal milk marketing 
order administrator will recognize the contract as satisfying the 
provisions of this program.
    Attachment to Sec.  1145.1, paragraph (e):

Disclosure Statement

    I am voluntarily entering into a forward contract with [insert 
handler's name]. I have been given a copy of the contract. By signing 
this form, I understand that I am forfeiting my right to receive the 
Federal milk marketing order's minimum prices for that portion of the 
milk which is under contract for the duration of the contract. I also

[[Page 64872]]

understand that this contract milk will be priced in accordance with 
the terms and conditions of the contract.

Printed Name:----------------------------------------------------------
Signature:-------------------------------------------------------------
Date:------------------------------------------------------------------
Address:---------------------------------------------------------------
Producer Number:-------------------------------------------------------

    (f) Other definitions. The definition of any term in Parts 1000-
1131 of this chapter apply to, and are hereby made a part of this part, 
as appropriate.

Subpart B--Program Rules


Sec.  1145.2  Program.

    (a) Any handler defined in 7 CFR 1000.9 may enter into forward 
contracts with producers or cooperative associations of producers for 
the handler's eligible volume of milk. Milk under forward contract in 
compliance with the provisions of this part will be exempt from the 
minimum payment provisions that would apply to such milk pursuant to 7 
CFR 1001.73, 1005.73, 1006.73, 1007.73, 1030.73, 1032.73, 1033.73, 
1124.73, 1126.73 and 1131.73 for the period of time covered by the 
contract.
    (b) No forward price contract may be entered into under the program 
after September 30, 2012, and no forward contract entered into under 
the program may extend beyond September 30, 2015.
    (c) Forward contracts must be signed and dated by the contracting 
handler and producer (or cooperative association) prior to the 1st day 
of the 1st month for which they are to be effective and must be 
received by the Federal milk market administrator by the 15th day of 
that month. The disclosure statement must be signed on the same date as 
the contract by each producer entering into a forward contract, and 
this signed disclosure statement must be attached to or otherwise 
included in each contract submitted to the market administrator.
    (d) In the event that a handler's contract milk exceeds the 
handler's eligible milk for any month in which the specified contract 
price(s) are below the order's minimum prices, the handler must 
designate which producer milk shall not be contract milk. If the 
handler does not designate the suppliers of the over-contracted milk, 
the market administrator shall prorate the over-contracted milk to each 
producer and cooperative association having a forward contract with the 
handler.
    (e) Payments for milk covered by a forward contract must be made on 
or before the dates applicable to payments for milk that are not under 
forward contract under the respective Federal milk marketing order.
    (f) Nothing in this part shall impede the contractual arrangements 
that exist between a cooperative association and its members.

Subpart C--Enforcement


Sec.  1145.3  Enforcement.

    A handler may not require participation in a forward pricing 
contract as a condition of the handler receiving milk from a producer 
or cooperative association of producers. USDA will investigate all 
complaints made by producers or cooperative associations alleging 
coercion by handlers to enter into forward contracts and based on the 
results of the investigation will take appropriate action.

    Dated: October 24, 2008.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. E8-25856 Filed 10-30-08; 8:45 am]
BILLING CODE 3410-02-P