[Federal Register Volume 73, Number 234 (Thursday, December 4, 2008)]
[Rules and Regulations]
[Pages 73764-73768]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-28710]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1430

RIN 0560-AH83


Milk Income Loss Contract Program and Price Support Program for 
Milk

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: This rule amends the regulations for the Milk Income Loss 
Contract (MILC) Program, as authorized by the Food, Conservation, and 
Energy Act of 2008 (the 2008 Farm Bill), to extend the program from 
October 1, 2007, through September 30, 2012. This rule also increases 
the percentage rate for the payment calculation after fiscal year (FY) 
2008 and increases the payment quantity limitation of eligible pounds 
of milk per operation beginning in FY 2009. This rule also provides for 
an adjustment to the MILC payment rate if feed costs increase above a 
specified level. This rule is needed to extend the MILC program, which 
is designed to stabilize and generally enhance milk producer revenue, 
through FY 2012 and to make changes to that program authorized by the 
2008 Farm Bill. This rule also adjusts the milk price support program 
regulations to specify that support purchases will only be made from 
manufacturers and not from third parties such as brokers.

DATES: Effective Date: December 1, 2008.

FOR FURTHER INFORMATION CONTACT: Danielle Cooke, Special Programs 
Manager, Price Support Division, FSA, USDA, STOP 0512, 1400 
Independence Ave., SW., Washington, DC 20250-0512; telephone: (202) 
720-1919; fax: (202) 690-1536; e-mail: [email protected]. 
Persons with disabilities who require alternative means for 
communication (Braille, large print, audio tape, etc.) should contact 
the USDA Target Center at (202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Background

    This final rule implements changes in the MILC program enacted in 
section 1506 in Title I of the 2008 Farm Bill (Pub. L. 110-246, 7 
U.S.C. 8773). It, in effect, permits new contracts to extend the old 
MILC program first provided for in Section 1502 of the Food Security 
and Rural Investment Act of 2002 (Pub. L. 107-171, 7 U.S.C. 7982). That 
program, as amended by subsequent enactments, ended its coverage with 
milk marketed in September of 2007. The 2008 Farm Bill permits coverage 
starting with October 2007 marketings carrying through September 2012 
marketings. The ``old'' program, regulations were codified in 7 CFR 
part 1430. This rule, to provide for the ``new'' program, modifies 7 
CFR part 1430 to:
     Cover marketings during the new period and make changes to 
the payment rate formula used to calculate payments;
     Change the production limits for payments during specific 
periods;
     Add applicability of Adjusted Gross Income (AGI) 
provisions to eligibility requirements; and
     Add provisions to adjust the payment rate if feed costs 
exceed a specified level.
    With certain per year per operation eligibility pound limits, the 
MILC program provides payments to dairy operations when milk prices 
fall below a set benchmark. What constitutes an ``operation'' for 
purposes of the ``new'' program, including poundage limits, will be 
determined as before. All prior participants in the ``old'' program 
must sign new contracts. New participants (those not in the ``old'' 
program) cannot be affiliated with prior participants. Also, the rule, 
as required by the 2008 Farm Bill, beginning in FY 2009, sets new 
eligibility limits tied to the AGI of persons or entities seeking 
payment. Payees for the relevant year cannot have nonfarm income in 
excess of $500,000. AGI rules will cover multi-program regulations to 
be issued separately.
    As indicated, there is a per-operation per year pound limit to the 
MILC payment eligibility of operations. For FY 2009 (October 1, 2008, 
through September 30, 2009), FY 2010 (October 1, 2009, through 
September 30, 2010), FY 2011 (October 1, 2010, through September 30, 
2011), and FY 2012 (October 1, 2011, through September 30, 2012), the 
limit for each fiscal year is 2.985 million pounds. Further, no 
payments will be made for September 2012 marketings, as specified in 
the 2008 Farm Bill, if the operation's cumulative total for FY 2012 is 
over 2.4 million pounds and if the operation is under that amount the 
payable marketings for September will be limited to those that will not 
bring the total over 2.4 million pounds. Payments are computed, 
however, on a monthly basis. They are made only when the official 
Federal class I milk marketing order milk price per cwt. for Boston, 
Massachusetts is less than $16.94. When the Boston price is under the 
target, the payment for eligible production will be, for FYs 2009 
through 2012, 45 percent of the difference. Otherwise, for September 
2012 marketings the percentage will be 34 percent. The pay rate can be 
raised, by command of the 2008 Farm Bill; however, if the National 
Average Feed Dairy Feed Ration Cost as officially computed exceeds 
$7.35 per cwt. ($9.50 per cwt. for September 2012 marketings). If the 
triggering feed ration amount is exceeded, the benchmark $16.94 figure 
for the MILC payment rate calculation will be increased by the 
percentage amount which is 45 percent of the percentage amount by which 
the Feed Ration Cost exceeded its own benchmark ($7.35 or $9.50, 
depending on the month involved). Feed Ration Cost is calculated using 
the same procedures used to calculate the feed components of the 
estimated price of 16 percent Mixed Dairy Feed per pound as reported in 
the USDA Agricultural Prices publication. Entire month prices used to 
calculate feed price ratios for each month will be used. As to the 
calculation, if for example, the May 2009 Feed Ration Cost exceed by 14 
percent the $7.35 per cwt. benchmark, then the MILC payment benchmark 
for May 2009 marketings would be increased by 6.3 percent (45% of 14%)

[[Page 73765]]

and upped by $1.07 to $18.01 for May 2009 marketings only.
    For purposes of applying the yearly pay limits on pounds per 
operation, the rule will continue to use a start month concept for each 
year. The operation must, with limitations set out in the rules, pick a 
start month for each fiscal year. Once the start month is picked, any 
marketing in the month and subsequent months of the fiscal year that 
generate a payment will count against the operation's fiscal year 
limit. (The special rule for September 2012 has been noted and will not 
be repeated here.) Generally under the rule, once signup is opened 
after October 1, 2008, an operation can pick any start month for FY 
2008. However, this point is moot because no payments were generated 
from that fiscal year. Provisions regarding FY 2008 are included in the 
rule for the sake of completeness. Likewise, under the rule, if the 
operation signs its new MILC contract within 30 days of the beginning 
of the application period for this new FY 2008 though 2012 program it 
can pick any preceding FY 2009 month as its start month for that 
period. Also, whenever the operation submits its FY 2008 through 2012 
contract, it can pick the month of the submission as the start month 
for the current fiscal year. Otherwise, for the fiscal year in which 
the contract is submitted, or for later fiscal years if the operation 
wants a different start month for a subsequent fiscal year, the rule 
will be that the month chosen or the start month must be chosen by the 
14th of the month preceding the month chosen. Once a month is chosen 
for a fiscal year, the corresponding month will be the start month for 
subsequent fiscal years unless affirmatively changed by the operation. 
No payment will be made for any fiscal year that has ended before the 
FY 2008 through 2012 program contract is submitted.
    Producers to be paid must:
    (1) Sign the contract,
    (2) Provide verifiable data,
    (3) Be actively engaged in milk production for the relevant period,
    (4) Meet the AGI test for payment, and
    (5) Pick the start month for each fiscal year (as indicated, the 
original start month will be the same for subsequent fiscal years 
unless changed by the operation).
    Dairy operations can apply at FSA county offices, via fax, or at 
http://www.fsa.usda.gov/dafp/psd/.
    This final rule includes changes in the dates marketed production 
must be submitted. Editorial changes to the previous regulations are 
made as well. While the statute in some places suggests that the 
program may carry beyond FY 2012, the statute and these regulations 
limit the covered marketings to those made no later than September, 
2012. Also, as before in the program contract, the regulations specify 
that the payment rules are subject to change, even after the contract 
is signed, to reflect statutory changes. Also, as indicated, payments 
are subject to the AGI limits being implemented through a separate 
rulemaking.

Dairy Product Price Support Program

    This rule amends Sec.  1430.2, ``Price Support Levels and Purchase 
Conditions,'' to ensure that the Dairy Product Price Support Program 
supports dairy producers by ensuring that manufacturers have sufficient 
incentive to pay the support rate to producers. CCC will only purchase 
dairy products from the manufacturer of the product. CCC will no longer 
purchase eligible dairy products from nonmanufacturers, as the program 
is not intended to provide a speculative market for third parties.

Notice and Comment

    These regulations are exempt from the notice and comment 
requirements of the Administrative Procedure Act (5 U.S.C. 553), as 
specified in section 1601(c) of the 2008 Farm Bill, which requires that 
the regulations be promulgated and administered without regard to those 
provisions, the Statement of Policy of the Secretary of Agriculture 
effective July 24, 1971 (36 FR 13804) relating to notices of proposed 
rulemaking and public participation in rulemaking. Therefore, these 
regulations are issued as final.

Executive Order 12866

    The Office of Management and Budget (OMB) designated this final 
rule as significant under Executive Order 12866 and, therefore, OMB 
reviewed this rule. A cost benefit assessment of this rule is 
summarized below and is available from the contact information listed 
above.

Summary of Economic Impacts

    The MILC program has paid about $2.5 billion to dairy operations 
over the five initial years of operation. Annual expenditures during 
the last two years of the program have totaled over $350 million in FY 
2006 and $160 million in FY 2007. Expenditures during the period 
authorized by the 2008 Farm Bill, are expected to be between $300 and 
$400 million based on estimated milk prices during the period. Dairy 
farm direct payments and Government expenditures will increase 
commensurately. MILC program impact on milk prices will reduce benefits 
to dairy farmers, which will result in consumers being able to buy 
dairy products at lower prices than if the program was not operating.

Regulatory Flexibility Act

    The Regulatory Flexibility Act is not applicable to this rule 
because CCC is not required to publish a notice of proposed rulemaking 
for this rule.

Environmental Review

    The environmental impacts of this rule were considered in a manner 
consistent with the provisions of the National Environmental Policy Act 
(NEPA), 42 U.S.C. 4321-4347, the regulations of the Council on 
Environmental Quality (40 CFR parts 1500-1508), and FSA regulations for 
compliance with NEPA (7 CFR part 799). The substantive changes to the 
MILC program, required by the 2008 Farm Bill that are identified in 
this final rule are non-discretionary. Therefore, FSA has determined 
that NEPA does not apply to this final rule and no environmental 
assessment or environmental impact statement will be prepared.

Executive Order 12988

    The final rule has been reviewed under Executive Order 12988. This 
rule preempts State laws that are inconsistent with its provisions. 
This rule is not retroactive as such, but does apply to marketings in a 
period that precedes this rule. Before any judicial action may be 
brought regarding this rule, all administrative remedies must be 
exhausted.

Executive Order 12372

    This program is not subject to Executive Order 12372, which 
requires consultation with State and local officials. See the notice 
related to 7 CFR part 3015, subpart V, published at 48 FR 29115 (June 
24, 1983).

Executive Order 13132

    The policies contained in this rule do not have any substantial 
direct effect on States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) does 
not apply to this rule because CCC is not

[[Page 73766]]

required to publish a notice of proposed rulemaking for this rule. 
Further, this rule imposes no unfunded mandates, as defined in UMRA, on 
any local, State, or tribal government or on the private sector.

Federal Assistance Programs

    The title and number of the Federal assistance program in the 
Catalog of Federal Domestic Assistance to which this final rule applies 
is 10.051--Commodity Loans and Loan Deficiency Payments.

Paperwork Reduction Act

    The regulations in this rule are exempt from requirements of the 
Paperwork Reduction Act (44 U.S.C. Chapter 35), as specified in section 
1601 of the 2008 Farm Bill, which provides that these regulations be 
promulgated and administered without regard to the Paperwork Reduction 
Act.

E-Government Act Compliance

    CCC 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.

List of Subjects in 7 CFR Part 1430

    Dairy products, Price support programs.

0
For the reasons discussed above, 7 CFR part 1430 is amended as set 
forth below.

PART 1430--DAIRY PRODUCTS

0
1. Revise the authority citation to read as follows:

    Authority: 7 U.S.C. 7981, 7982, and 8773; and 15 U.S.C. 714b and 
714c.

Subpart A--Price Support Program for Milk

0
2. Amend Sec.  1430.2, paragraph (a)(2), by adding a sentence at the 
end to read as follows:


Sec.  1430.2  Price support levels and purchase conditions.

    (a) * * *
    (2) * * * Purchases may only be made from eligible offerers which 
must be the manufacturer of the product offered and must meet all other 
conditions set by CCC.
* * * * *

Subpart B--Milk Income Loss Contract Program

0
3. Amend Sec.  1430.202 by removing the definitions for ``Fiscal 
Year,'' and ``Transition Period,'' revising the definitions of ``Dairy 
operation,'' ``Eligible production,'' ``Participating State,'' and 
``United States,'' and adding the definition for ``Fiscal Year or FY'' 
to read as follows:


Sec.  1430.202  Definitions.

* * * * *
    Dairy operation means any person or group of persons who as a 
single unit as determined by CCC, produce and market milk commercially 
produced from cows, and whose production facilities are located in the 
United States. In administering this program, for purposes of 
determining what is a ``dairy operation'' and its eligibility under 
this program, those determinations will be made in the same manner as 
was done for the Dairy Market Loss Assistance (DMLA) contracts in the 
State in which the dairy is located. New MILC operations, which is to 
say those operations that did not participate in the MILC program for 
marketings prior to FY 2008, must be unaffiliated with any other DMLA 
or MILC operations.
* * * * *
    Eligible production means milk that was produced at a time relevant 
to this program by cows in the United States and marketed commercially 
by a producer in a participating State.
* * * * *
    Fiscal Year or FY means the year beginning October 1 and ending the 
following September 30. Fiscal years will be designated for this part 
by year by reference to the calendar year in which it ends. For 
example, FY 2009 is from October 1, 2008, through September 30, 2009 
(inclusive).
* * * * *
    Participating State means each of the 50 States in the United 
States of America, the District of Columbia, and the Commonwealth of 
Puerto Rico, or any other territory or possession of the United States.
* * * * *
    United States means the 50 States of the United Sates of America, 
the District of Columbia, and the Commonwealth of Puerto Rico, or any 
other territory or possession of the United States.
* * * * *

0
4. Amend Sec.  1430.203 as follows:
0
a. In paragraphs (a) and (f) remove the words ``December 1, 2001, 
through September 30, 2007'' and add, in their place, the words 
``October 1, 2007, through September 30, 2012;''
0
b. Amend paragraph (f) by removing the period at the end and adding a 
semicolon in its place; and
0
c. Revise paragraph (g) and add paragraphs (h) and (i) to read as 
follows:


Sec.  1430.203  Eligibility.

* * * * *
    (g) Meet all adjusted gross income eligibility requirements of part 
1400 of this chapter as regards any person or entity seeking to receive 
payment under this part. No person or entity may, generally, receive 
any payment for FY 2009 marketings and subsequent marketings if their 
nonfarm yearly income for the relevant base period for the relevant 
marketings as determined under the adjusted gross income rules (as in 
effect when the payment is sought) is over $500,000 as determined under 
this subpart. Further, for entities an otherwise due payment will be 
reduced commensurately to the extent that any person with an interest 
in the entity, as determined under the adjusted gross income rules had 
such income over that limit for the relevant period;
    (h) Have submitted a contract during the applicable contract period 
for FYs 2008 through 2012:
    (1) Except for 2009, and subject to the start month provision of 
Sec.  1430.205, must have for any fiscal year or month for which 
payment is sought to be paid submitted the FY 2008 through 2012 
contract before the end of that fiscal year or month or
    (2) For FY 2008 payments, if payments are generated under this part 
for that fiscal year, must have submitted a contract for the FY 2008 
through 2012 program by October 1, 2009 and for FY 2009 the contract 
must have been submitted by the month for which payment is first sought 
except to the extent that Sec.  1430.205 explicitly permits the 
operation to pick a start month in advance of the month in which the 
contract is submitted; and
    (i) Must not, if it did not participate in the preceding MILC 
program for fiscal years prior to FY 2008, be affiliated with any other 
dairy operation.

0
5. In Sec.  1430.205 revise paragraphs (a) through (d) and (g) to read 
as follows:


Sec.  1430.205  Selection of starting month.

    (a) A dairy operation that enters into a MILC contract with CCC 
must designate the starting month for each fiscal year for the 
calculation of payments and pound limits for the operation. Once a 
start month is chosen for a fiscal year the corresponding month will be 
the start month for each subsequent fiscal year unless changed by an 
affirmative request in writing on a form approved by CCC. The 
production start month must be selected on or before the 14th of the 
month

[[Page 73767]]

before the month for which payment is sought. If such date falls on a 
weekend, the start month selection must be made on the last business 
day preceding the weekend. A dairy operation cannot select as the start 
month for payment a month which:
    (1) Has already begun, except as provided in paragraph (c)(1) of 
this section;
    (2) Has already passed; or
    (3) During which no milk production was produced by the dairy 
operation.
    (b) For FY 2009, if the operation signs its FY 2008 through 2012 
MILC contract within 30 days of the beginning of the application period 
it can pick any preceding FY 2009 month as its start month for that 
period or can use the normal rule of paragraph (c) of this section to 
pick the start month.
    (c) Except as provided in paragraph (b) of this section, the start 
month for a fiscal year may only be
    (1) For the fiscal year in which the contract is submitted, the 
month the contract is submitted or
    (2) For a fiscal year that has not yet begun, any month, provided 
that a month may not be selected after the 14th of the preceding month.
    (d) Dairy operations may change the production start month on or 
before the 14th day of the month previously selected.
* * * * *
    (g)(1) MILC production start month selections made during the 
signup period designated by CCC may be made as provided in paragraph 
(b) of this section, otherwise MILC production start month selections 
must be made in accordance with paragraph (c) of this section. If a 
payment rate is not in effect during the production start month 
selected by the dairy operation, payments to the dairy operation will 
be issued based on the next consecutive month with a payment rate in 
effect following the MILC production start month selected by the dairy 
operation. Production in months in which the pay formula does not 
produce a payment will not count against the fiscal year's poundage 
limit for the operation.
    (2) Dairy operations with MILC production start months that begin 
with the month a MILC contract is submitted to FSA or that begin with 
the first month of the fiscal year with an effective payment rate will 
receive payments made by CCC consecutively on a monthly basis, if 
otherwise provided for in this part, until the earlier of the 
following:
    (i) The maximum payment quantity for the fiscal year or month is 
reached as determined in accordance with Sec.  1430.207 or
    (ii) The end of the applicable fiscal year.
* * * * *
0
6. Amend Sec.  1430.207 by revising paragraph (b) and by adding 
paragraph (c) to read as follows:


Sec.  1430.207  Dairy operation payment quantity.

* * * * *
    (b) The maximum quantity of eligible production for which dairy 
operations, per separate and distinct operation, are eligible for 
payment per fiscal year under this subpart will be:
    (1) 2,400,000 pounds (24,000 cwt.) for FY 2008 (October 1, 2007, 
through September 30, 2008);
    (2) 2,985,000 pounds (29,850 cwt.) for FY 2009 (October 1, 2008 
through September 30, 2009), FY 2010 (October 1, 2009, through 
September 30, 2010), FY 2011 (October 1, 2010, through September 30, 
2011) and FY 2012 (October 1, 2011, through September 30, 2012), 
provided further an operation may receive payment for September, 2012, 
marketings only if its pre-September FY 2012 marketings did not exceed 
2,400,000 pounds in which case new marketings that would not put the 
operation's FY 2012 marketings over 2,400,000 pounds will be eligible 
for payments otherwise permitted in this rule.
    (c) In accordance with these regulations, the Deputy Administrator 
will determine what is a separate and distinct operation. That decision 
will be final.
0
7. In Sec.  1430.208 revise paragraphs (b) through (e) and add 
paragraph (f) to read as follows:


Sec.  1430.208  Payment rate and dairy operation payment.

* * * * *
    (b) A per-hundredweight payment rate will be determined for the 
applicable month by:
    (1) Subtracting from $16.94 the Class I milk price per cwt. in 
Boston;
    (2) Multiplying the difference by 34 percent for marketings during 
the period beginning on October 1, 2007, and ending on September 30, 
2008;
    (3) Multiplying the difference by 45 percent for marketings during 
the period beginning on October 1, 2008, and ending on August 31, 2012; 
and
    (4) Multiplying the difference by 34 percent for marketings in 
September 2012.
    (c) The payment rate as calculated as specified in paragraph (b) of 
this section, will be adjusted to compensate for feed prices when the 
National Average Dairy Feed Ration Cost for a month is greater than the 
levels set in paragraphs (c)(1) and (c)(2) of this section. The 
National Average Dairy Feed Ration Cost per cwt. for each month will be 
calculated using the same procedures used to calculate the feed 
components of the estimated price of 16 percent Mixed Dairy Feed per 
pound noted on page 33 of the USDA monthly Agricultural Prices 
publication (including the data and factors noted in footnote 4). The 
payment rate adjustment for Entire Month feed prices will be determined 
by increasing $16.94 by the percentage that is 45 percent of the 
percentage by which the National Average Dairy Feed Ration Cost exceeds 
$7.35 per cwt. (except that $7.35 will be $9.50 for September 2012 
marketings.)
    (d) Each eligible dairy operation payment will be calculated, as 
determined by the Secretary, by:
    (1) Converting whole pounds of milk to hundredweight and
    (2) Multiplying the payment rate determined in paragraphs (b) and 
(c) of this section by the quantity of eligible production marketed by 
the operation during the applicable month as determined according to 
Sec.  1430.205 and other provisions of this subpart.
    (3) Payments to dairy operations will be based on calculated 
payment rates rounded seven places to the right of the decimal.
    (e) Payments under this subpart may be made to a dairy operation 
only up to the maximum production limitations set in Sec.  1430.207(b) 
of eligible production per applicable fiscal year.
    (f) Dairy operations receiving benefits under this subpart, will 
receive earned payments on a monthly basis according to the MILC 
contract, to the extent practicable, not later than 60 days after the 
later of production evidence and all supporting documents for the 
applicable month are received by CCC or the entire month National 
Average Dairy Feed Ration Cost is made available by USDA, as 
applicable. Payments issued by CCC more than 60 days after the later of 
all production evidence and supporting documentation are received by 
CCC or the entire month National Average Dairy Feed Ration Cost is made 
available by USDA, whichever is later, will be subject to prompt 
payment interest as allowed by law. However, CCC will endeavor where 
possible to make payments within 60 days of the end of the marketing 
month.


Sec.  1430.209  [Amended]

0
8. Amend Sec.  1430.209 in paragraph (a) by removing the words 
``October 1, 2005, and ending September 30, 2007'' and adding in their 
place the words ``October 1, 2007, and ending September 30, 2012.''

[[Page 73768]]

Sec.  1430.211  [Amended]

0
9. Amend Sec.  1430.211 in paragraph (a) by removing the words 
``September 30, 2007'' and adding, in their place, the words 
``September 30, 2012.''

0
10. Amend Sec.  1430.212 by revising the section heading and adding 
paragraph (c) to read as follows:


Sec.  1430.212  Contract Modifications and Statutory Changes in 
Program.

* * * * *
    (c) Payments otherwise due under this subpart or the program will 
be adjusted or denied to the extent provided for by a statutory change 
in program eligibilities or requirements of any kind irrespective of 
whether the program contract preceded the statutory change. Operations 
will be given the option of accepting the changes or terminating the 
contract.

0
11. Amend Sec.  1430.213 by revising paragraph (a) to read as follows:


Sec.  1430.213  Reconstitutions.

    (a) A dairy operation receiving MILC benefits may reorganize or 
restructure such that the constitution or makeup of its operation is 
reconstituted in another organizational framework. However, any 
operation that reorganizes or restructures after October 1, 2007, is 
subject to a review by FSA to determine if the operation was 
reorganized or restructured for the sole purpose of receiving multiple 
or additional MILC payments.
* * * * *

    Signed in Washington, DC, on December 1, 2008.
Teresa C. Lasseter,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. E8-28710 Filed 12-1-08; 4:15 pm]
BILLING CODE 3410-05-P