[Federal Register Volume 80, Number 151 (Thursday, August 6, 2015)]
[Proposed Rules]
[Pages 47210-47235]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18704]



[[Page 47209]]

Vol. 80

Thursday,

No. 151

August 6, 2015

Part IV





Department of Agriculture





-----------------------------------------------------------------------





 Agricultural Marketing Service





-----------------------------------------------------------------------





7 CFR Part 1051





 Milk in California; Notice of Hearing on a Proposal To Establish a 
Federal Milk Marketing Order; Proposed Rule

  Federal Register / Vol. 80 , No. 151 / Thursday, August 6, 2015 / 
Proposed Rules  

[[Page 47210]]


-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1051

[Doc. No. AO-15-0071; AMS-DA-14-0095]


Milk in California; Notice of Hearing on a Proposal To Establish 
a Federal Milk Marketing Order

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Notice of public hearing on proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: A public hearing is being held to consider and take evidence 
on a proposal that would establish a Federal milk marketing order to 
regulate the handling of milk in California. The proposed marketing 
area would incorporate the entire state of California. USDA received 
four proposals from interested parties, some that include certain milk 
pricing and pooling provisions not found in current Federal milk 
orders. The proposals incorporate the same dairy product classification 
system used throughout the Federal milk marketing order system. 
Additional features would recognize California quota premium and fluid 
milk fortification values. The proposals noticed herein would not 
modify any existing Federal milk marketing orders.

DATES: The hearing will convene at 9:00 a.m. on Tuesday, September 22, 
2015.

ADDRESSES: The hearing will be held at the Clovis Veterans Memorial 
District Building, 808 Fourth Street, Clovis, California 93612; 
telephone (559) 299-0471. If still ongoing, the hearing will be held on 
October 22 and 23, 2015, at the Piccadilly Inn Airport Hotel, 5115 E. 
McKinley Avenue, Fresno, California 93727; telephone (559) 375-7760.

FOR FURTHER INFORMATION CONTACT: William Francis, Director, Order 
Formulation and Enforcement Division, USDA/AMS/Dairy Program, Stop 
0231--Room 2969-S, 1400 Independence Avenue SW., Washington, DC 20250-
0231; (202) 720-6274; email address: [email protected].
    Persons requiring a sign language interpreter or other special 
accommodations should contact Diane Hirsch, AMS Dairy Program, at (425) 
487-5601, email: [email protected], before the hearing begins.

SUPPLEMENTARY INFORMATION: 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.
    Notice is hereby given of a public hearing to be held at the Clovis 
Veterans Memorial District, Clovis, California, beginning at 9:00 a.m. 
on Tuesday, September 22, 2015, with respect to the proposed 
establishment of a marketing agreement and order (order) regulating the 
handling of milk in the State of California.
    The hearing is called pursuant to the provisions of the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674) (Act), and the applicable rules of practice and procedure 
governing the formulation of marketing agreements and marketing orders 
(7 CFR part 900).
    The purpose of the hearing is to:
    (a) Receive evidence with respect to the economic and marketing 
conditions which relate to the proposed marketing agreement and order, 
hereinafter set forth, and any appropriate modifications thereof;
    (b) Determine whether the handling of milk in the area proposed for 
regulation is in the current of interstate or foreign commerce or 
directly burdens, obstructs, or affects interstate or foreign commerce;
    (c) Determine whether there is need for a marketing agreement or 
order regulating the handling of milk in the area;
    (d) Determine the economic impact of the proposed order on the 
industry in the proposed marketing area and on the public affected by 
such program; and
    (e) Determine whether the proposed marketing agreement and order or 
appropriate modifications thereof would tend to effectuate the declared 
policy of the Act.
    Actions under the Federal milk order program are subject to the 
Regulatory Flexibility Act (5 U.S.C. 601-612) (RFA). The RFA seeks to 
ensure that, within the statutory authority of a program, the 
regulatory and information collection requirements are tailored to the 
size and nature of small businesses. For the purpose of the RFA, a 
dairy farm is 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 (13 CFR 121.201). Most 
parties subject to a milk order are considered small businesses. 
Accordingly, interested parties are invited to present evidence on the 
probable regulatory and informational impact of the hearing proposals 
on small businesses. Also, parties may offer modifications of these 
proposals for the purpose of tailoring their applicability to small 
businesses.

Executive Order 12988, Civil Justice Reform

    The marketing order proposed herein has been reviewed under 
Executive Order 12988, Civil Justice Reform. It is not intended to have 
a retroactive effect. If adopted, operation of state law is such that 
the state law may be suspended, in part or in whole, if a Federal order 
is implemented.

Preliminary Economic Analysis and Detailed Analysis Information

    A preliminary economic analysis as well as additional detailed 
analysis, data and information used in developing the preliminary 
economic analysis are presented at the AMS Dairy Programs Web site, 
www.ams.usda.gov/dairy.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under Section 8c(15)(A) of the 
Act, any handler subject to an order may request modification or 
exemption from such order by filing with the United States Department 
of Agriculture (USDA) 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, USDA would rule on the 
petition. The Act provides that the district court of the United States 
in any district in which the handler is an inhabitant, or has its 
principle place of business, has jurisdiction to review USDA's decision 
on the petition, provided a complaint is filed not later than 20 days 
after the date of the entry of the ruling.
    Interested parties who wish to introduce exhibits should provide 
the Administrative Law Judge at the hearing with four (4) copies of 
such exhibits for the official record. Additional copies should be made 
available for the use of other hearing participants. Any party that has 
submitted a proposal noticed herein, when participating as a witness, 
is required to make their testimony--if prepared as an exhibit--and any 
other exhibits, available to USDA officials prior to the start of the 
hearing on the day of their appearance. Individual dairy farmers are 
not subject to this requirement.
    The hearing will continue until such time as determined to have 
ended by the presiding Administrative Law Judge. The schedule for the 
next session will be announced at the time of adjournment. Such 
reconvening date and time will also be posted on the

[[Page 47211]]

AMS-Dairy Programs Web site at http://www.ams.usda.gov/dairy.
    The provisions of the proposed marketing order designated 7 CFR 
part 1051, as set forth below, have not received the approval of USDA.

List of Subjects in 7 CFR Part 1051

    Milk marketing orders.


0
1. The authority citation for 7 CFR part 1051 reads as follows:

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

0
2. Testimony is invited on the following proposals or appropriate 
modifications to such proposals.

Proposal Number 1

Submitted by California Dairies, Inc.; Dairy Farmers of America, Inc.; 
and Land O' Lakes, Inc.

0
3. This proposal seeks to add a new part 1051 to read as follows:

PART 1051--MILK IN THE CALIFORNIA MARKETING AREA

Sec.
Subpart A--Order Regulating Handling

General Provisions

1051.1 General Provisions.

Definitions

1051.2 California marketing area.
1051.3 Route disposition.
1051.4 Plant.
1051.5 Distributing plant.
1051.6 Supply plant.
1051.7 Pool plant.
1051.8 Nonpool plant.
1051.9 Handler.
1051.10 Producer-handler.
1051.11 [Reserved]
1051.12 Producer.
1051.13 Producer milk.
1051.14 Other source milk.
1051.15 Fluid milk product.
1051.16 Fluid cream product.
1051.17 CDFA, quota premium, quota nonfat solids, and non-quota 
milk.
1051.18 Cooperative association.
1051.19 Commercial food processing establishment.

Market Administrator

1051.25 Market administrator.

Administrative Provisions

1051.26 Continuity and separability of provisions.

Handlers

1051.27 Handler responsibility for records and facilities.
1051.28 Termination of obligations.

Reports

1051.30 Reports of receipts and utilization.
1051.31 Producer delivery and payroll reports.
1051.32 Other reports.
Subpart B--Milk Pricing

Classification of Milk

1051.40 Classes of utilization.
1051.41 [Reserved]
1051.42 Classification of transfers and diversions.
1051.43 General classification rules.
1051.44 Classification of producer milk.
1051.45 Market administrator's reports and announcements concerning 
classification.

Class Prices

1051.50 Class prices, component prices, and advanced pricing 
factors.
1051.51 Class I differential and price.
1051.52 Adjusted Class I differentials.
1051.53 Announcement of class prices, component prices, and advanced 
pricing factors.
1051.54 Equivalent price.

Marketwide Service Payments

1051.55 Transportation credits.
1051.56 Mileage rate for transportation credits.

Producer Prices

1051.60 Handler's value of milk.
1051.61 Computation of producer component prices and producer price 
differential.
1051.62 Announcement of producer prices.
Subpart C--Payments for Milk

Producer Payments

1051.70 Producer-settlement fund.
1051.71 Payments to the producer-settlement fund.
1051.72 Payments from the producer-settlement fund.
1051.73 Payments to producers and cooperative associations.
1051.74 [Reserved]
1051.75 Plant location adjustments for nonpool milk.
1051.76 Payments by a handler operating a partially regulated 
distributing plant.
1051.77 Adjustment of accounts.
1051.78 Charges on overdue accounts.

Administrative Assessment and Marketing Service Deduction

1051.85 Assessment for order administration.
1051.86 Deduction for marketing services.
Subpart D--Miscellaneous Provisions
1051.90 Dates.

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

Subpart A--Order Regulating Handling

General Provisions


Sec.  1051.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to this part 1051. In this part 1051, all references to sections 
in part 1000 refer to part 1000 of this chapter.

Definitions


Sec.  1051.2  California marketing area.

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


Sec.  1051.3  Route disposition.

    See Sec.  1000.3.


Sec.  1051.4  Plant.

    See Sec.  1000.4.


Sec.  1051.5  Distributing plant.

    See Sec.  1000.5.


Sec.  1051.6  Supply plant.

    See Sec.  1000.6.


Sec.  1051.7  Pool plant.

    Pool plant means a plant as specified in paragraphs (a) through (d) 
of this section, but excluding a plant specified in paragraph (f) of 
this section. The pooling standards described in paragraphs (d) of this 
section are subject to modification pursuant to paragraph (e) of this 
section:
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or Sec.  ___ .7(b) of 
any other Federal milk order, from which during the month 25 percent or 
more of the total quantity of fluid milk products physically received 
at the plant (excluding concentrated milk received from another plant 
by agreement for other than Class I use) are disposed of as route 
disposition or are transferred in the form of packaged fluid milk 
products to other distributing plants. At least 25 percent of such 
route disposition and transfers must be to outlets in the marketing 
area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 15 percent of the total quantity of 
fluid milk products physically received at the plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) into ultra-pasteurized or aseptically-processed fluid 
milk products.
    (c) A plant that is located in the marketing area which during the 
month receives milk from a producer located in the marketing area or 
from a cooperative marketing the milk of a producer

[[Page 47212]]

located in the marketing area pursuant to Sec.  1051.9(c).
    (1) A plant located in Churchill county Nevada that receives milk 
from producers located in Churchill County or in the marketing area or 
from a cooperative marketing the milk of a producer located in the 
marketing area or in Churchill County pursuant to Sec.  1051.9(c).
    (d) A supply plant located outside the marketing area (except a 
plant described in Sec.  1051.7(c)(1)) from which the quantity of bulk 
fluid milk products shipped to (and physically unloaded into) plants 
described in paragraph (a) and (b) of this section is not less than 50 
percent of the Grade A milk received from dairy farmers and handlers 
described in Sec.  1000.9(c), including milk diverted pursuant to Sec.  
1051.13, subject to the following conditions:
    (1) If milk is delivered directly from producers' farms that are 
located outside of the marketing area such producers must be grouped by 
state into reporting units and each reporting unit must independently 
meet the shipping requirements of this paragraph; and
    (2) Concentrated milk transferred from the supply plant located 
outside the marketing area to a distributing plant shall be excluded 
from the supply plant's shipments in computing the percentages in 
paragraphs (d)(1).
    (e) The applicable shipping percentages of paragraphs (d) of this 
section and Sec.  1051.13(d)(2), and (d)(3) may be increased or 
decreased, for all or part of the marketing area, by the market 
administrator if the market administrator finds that such adjustment is 
necessary to encourage needed shipments or to prevent uneconomic 
shipments. Before making such a finding, the market administrator shall 
investigate the need for adjustment either on the market 
administrator's own initiative or at the request of interested parties 
if the request is made in writing at least 15 days prior to the month 
for which the requested revision is desired effective. If the 
investigation shows that an adjustment of the shipping percentages 
might be appropriate, the market administrator shall issue a notice 
stating that an adjustment is being considered and invite data, views 
and arguments. Any decision to revise an applicable shipping or 
diversion percentage must be issued in writing at least one day before 
the effective date.
    (f) The term pool plant shall not apply to the following plants:
    (1) A producer-handler as defined under any Federal order;
    (2) An exempt plant as defined in Sec.  1000.8(e);
    (3) A plant located within the marketing area and qualified 
pursuant to paragraph (a) of this section which meets the pooling 
requirements of another Federal order, and from which more than 50 
percent of its route disposition has been in the other Federal order 
marketing area for 3 consecutive months;
    (4) A plant located outside any Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of another Federal order and has had greater route 
disposition in such other Federal order's marketing area for 3 
consecutive months;
    (5) A plant located in another Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of such other Federal order and does not have a 
majority of its route distribution in this marketing area for 3 
consecutive months or if the plant is required to be regulated under 
such other Federal order without regard to its route disposition in any 
other Federal order marketing area;
    (6) A plant qualified pursuant to paragraph (c) of this section 
which also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under the other Federal order than are made to plants regulated under 
the order in this part, or the plant has automatic pooling status under 
the other Federal order; and
    (g) Any plant that qualifies as a pool plant in each of the 
immediately preceding 3 months pursuant to paragraph (a) of this 
section or the shipping percentages in paragraph (c) of this section 
that is unable to meet such performance standards for the current month 
because of unavoidable circumstances determined by the market 
administrator to be beyond the control of the handler operating the 
plant, such as a natural disaster (ice storm, wind storm, flood), fire, 
breakdown of equipment, or work stoppage, shall be considered to have 
met the minimum performance standards during the period of such 
unavoidable circumstances, but such relief shall not be granted for 
more than 2 consecutive months.


Sec.  1051.8  Nonpool plant.

    See Sec.  1000.8.


Sec.  1051.9  Handler.

    See Sec.  1000.9.


Sec.  1051.10  Producer-handler.

    Producer-handler means a person who:
    (a) Operates a dairy farm and a distributing plant from which there 
is route disposition in the marketing area, and from which total route 
disposition and packaged sales of fluid milk products to other plants 
during the month does not exceed 3 million pounds;
    (b) Receives fluid milk from own farm production or milk that is 
fully subject to the pricing and pooling provisions of the order in 
this part or any other Federal order;
    (c) Receives at its plant or acquires for route disposition no more 
than 150,000 pounds of fluid milk products from handlers fully 
regulated under any Federal order. This limitation shall not apply if 
the producer-handler's own farm production is less than 150,000 pounds 
during the month;
    (d) Disposes of no other source milk as Class I milk except by 
increasing the nonfat milk solids content of the fluid milk products;
    (e) Provides proof satisfactory to the market administrator that 
the care and management of the dairy animals and other resources 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) and the processing 
and packaging operations are the producer-handler's own enterprise and 
at its own risk; and
    (f) Any producer-handler with Class I route dispositions and/or 
transfers of packaged fluid milk products in the marketing area 
described in Sec.  1131.2 of this chapter shall be subject to payments 
into the Order 1131 producer settlement fund on such dispositions 
pursuant to Sec.  1000.76(a) and payments into the Order 1131 
administrative fund provided such dispositions are less than three 
million pounds in the current month and such producer-handler had total 
Class I route dispositions and/or transfers of packaged fluid milk 
products from own farm production of three million pounds or more the 
previous month. If the producer-handler has Class I route dispositions 
and/or transfers of packaged fluid milk products into the marketing 
area described in Sec.  1131.2 of this chapter of three million pounds 
or more during the current month, such producer-handler shall be 
subject to the provisions described in Sec.  1131.7 of this chapter or 
Sec.  1000.76(a).


Sec.  1051.11  [Reserved]


Sec.  1051.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for

[[Page 47213]]

fluid consumption as Grade A milk and whose milk is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec.  1051.13; or
    (2) Received by a handler described in Sec.  1000.9(c).
    (b) Producer shall not include a dairy farmer described in 
paragraphs (b)(1) through (5) of this section. A dairy farmer described 
in paragraph (b)(5) of this section shall be known as a dairy farmer 
for other markets.
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to Sec.  
1051.13(d);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and that milk is allocated by request to a utilization other than 
Class I;
    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order; and
    (5) A dairy farmer who having had a Grade A permit has marketed 
milk as other than Grade A milk for more than 30 consecutive days shall 
not be a producer until 12 consecutive months have passed from the time 
non-Grade A status started.


Sec.  1051.13  Producer milk.

    Except as provided for in paragraph (e) of this section, Producer 
milk means the skim milk (or the skim equivalent of components of skim 
milk), including nonfat components, and butterfat in milk of a producer 
that is:
    (a) Received by the operator of a pool plant directly from a 
producer or a handler described in Sec.  1000.9(c). All milk received 
pursuant to this paragraph shall be priced at the location of the plant 
where it is first physically received;
    (b) Received by a handler described in Sec.  1000.9(c) in excess of 
the quantity delivered to pool plants;
    (c) Diverted by a pool plant operator to another pool plant. Milk 
so diverted shall be priced at the location of the plant to which 
diverted; or
    (d) Diverted by the operator of a pool plant or a cooperative 
association described in Sec.  1000.9(c) to a nonpool plant subject to 
the following conditions:
    (1) Milk of a dairy farmer shall not be eligible for diversion 
until at least five days' production of such dairy farmer is physically 
received as producer milk at a pool plant during the first month the 
dairy farmer is a producer. If a dairy farmer loses producer status 
under the order in this part (except as a result of a temporary loss of 
Grade A approval or as a result of the handler of the dairy farmer's 
milk failing to pool the milk under any order), the dairy farmer's milk 
shall not be eligible for diversion until at least five days' 
production of the dairy farmer has been physically received as producer 
milk at a pool plant during the first month the dairy farmer is re-
associated with the market;
    (2) The quantity of milk diverted by a handler described in Sec.  
1000.9(c) may not exceed 50 percent of the producer milk receipts 
reported by the handler pursuant to Sec.  1051.30(c), provided that not 
less than 50 percent of such receipts are delivered to plants described 
in Sec.  1051.7(a) or (b). These percentages are subject to any 
adjustments that may be made pursuant to Sec.  1051.7(e); and
    (3) The quantity of milk diverted to nonpool plants by the operator 
of a pool plant described in Sec.  1051.7(a) or (b) may not exceed 50 
percent of the Grade A milk received from dairy farmers (except dairy 
farmers described in Sec.  1051.12(b)), including milk diverted 
pursuant to Sec.  1051.13; and further, such milk is subject to the 
pooling requirements of Sec.  1051.7(d)(1); and
    (4) Diverted milk shall be priced at the location of the plant to 
which diverted.
    (e) Producer milk shall not include milk of a producer that is 
subject to inclusion and participation in a marketwide equalization 
pool under a milk classification and pricing program imposed under the 
authority of a State government maintaining marketwide pooling of 
returns.
    (f) The quantity of milk reported by a handler pursuant to either 
Sec.  1051.30(a)(1) or Sec.  1051.30(c)(1) may not exceed 115 percent 
of the producer milk receipts pooled by the handler during the prior 
month. Milk diverted to nonpool plants reported in excess of this limit 
shall be removed from the pool. Milk in excess of this limit received 
at pool plants, other than pool distributing plants, shall be 
classified pursuant to Sec.  1000.44(a)(3)(v) and Sec.  1000.44(b). The 
handler must designate, by producer pick-up, which milk is to be 
removed from the pool. If the handler fails to provide this 
information, the market administrator will make the determination. The 
following provisions apply:
    (1) Milk shipped to and physically received at pool distributing 
plants in excess of the previous month's pooled volume shall not be 
subject to the 115 percent limitation;
    (2) The market administrator may waive the 115 percent limitation:
    (i) For a new handler on the order, subject to the provisions of 
Sec.  1051.13(f)(3), or
    (ii) For an existing handler with significantly changed milk supply 
conditions due to unusual circumstances;
    (3) A bloc of milk may be considered ineligible for pooling if the 
market administrator determines that handlers altered the reporting of 
such milk for the purpose of evading the provisions of this paragraph.


Sec.  1051.14  Other source milk.

    See Sec.  1000.14.


Sec.  1051.15  Fluid milk product.

    See Sec.  1000.15.


Sec.  1051.16  Fluid cream product.

    See Sec.  1000.16.


Sec.  1051.17  CDFA, quota premium, quota nonfat solids, and non-quota 
milk.

    (a) CDFA refers to the California Department of Food and 
Agriculture, which is the agency of the State of California responsible 
for administration of the California dairy producer milk quota program 
as established in the California Food and Agriculture Code.
    (b) Quota premium means the value established pursuant to the 
California Food and Agriculture Code. Quota premium and quota premium 
value mean the value per pound of nonfat solids, as adjusted by the 
regional quota adjusters, where and as applicable.
    (c) Quota nonfat solids means the pounds of nonfat solids of a 
producer, as determined and reported by CDFA, which qualify for the 
quota premium.
    (d) Non-quota milk means pool milk not eligible for the quota 
premium.


Sec.  1051.18  Cooperative association.

    See Sec.  1000.18.


Sec.  1051.19  Commercial food processing establishment.

    See Sec.  1000.19.

Market Administrator


Sec.  1051.25  Market administrator.

    See Sec.  1000.25.

Administrative Provisions


Sec.  1051.26  Continuity and separability of provisions.

    See Sec.  1000.26.

[[Page 47214]]

Handlers


Sec.  1051.27  Handler responsibility for records and facilities.

    See Sec.  1000.27.


Sec.  1051.28  Termination of obligations.

    See Sec.  1000.28.

Reports


Sec.  1051.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 6th day 
after the end of the month, in the detail and on the prescribed forms, 
as follows:
    (a) Each handler that operates a pool plant shall report for each 
of its operations the following information:
    (1) Product pounds, pounds of butterfat, pounds of protein, and 
pounds of solids-not-fat other than protein (other solids) contained in 
or represented by:
    (i) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec.  1000.9(c) [qualified cooperative associations]; and
    (ii) Receipts of milk from handlers described in Sec.  1000.9(c);
    (2) Product pounds and pounds of butterfat contained in:
    (i) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (ii) Receipts of other source milk;
    (iii) Receipts of all condensed skim and dry powder; and
    (iv) Inventories at the beginning and end of the month of fluid 
milk products, bulk fluid cream products, condensed milk, and dry 
powder;
    (3) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph;
    (4) Such other information with respect to the receipts and 
utilization of skim milk, butterfat, milk protein, other nonfat solids, 
as the market administrator may prescribe, including the use of 
condensed skim or dry powder in fortification or reconstitution of 
Class I products.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. The 
report shall show also the quantity of any reconstituted skim milk in 
route disposition in the marketing area.
    (c) Each handler described in Sec.  1000.9(c) shall report:
    (1) The product pounds, pounds of butterfat, pounds of protein, and 
pounds of solids-not-fat other than protein (other solids) contained in 
receipts of milk from producers; and
    (2) The utilization or disposition of such receipts.
    (d) Each handler not specified in paragraphs (a) through (c) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.
    (e) Each handler shall report such additional information as deemed 
necessary by the market administrator.


Sec.  1051.31  Producer delivery and payroll reports.

    (a) On or before the 6th day after the end of each month, each 
handler that operates a pool plant pursuant to Sec.  1051.7 and each 
handler described in Sec.  1000.9(c) shall report to the market 
administrator its producer deliveries for the month, in the detail 
prescribed by the market administrator, showing for each producer the 
information described in Sec.  1051.73(f); and any other information 
deemed necessary by the Market Administrator.
    (b) On or before the 20th day after the end of each month, each 
handler that operates a pool plant pursuant to Sec.  1051.7 and each 
handler described in Sec.  1000.9(c) shall report to the market 
administrator its producer payroll for the month, in the detail 
prescribed by the market administrator, showing for each producer the 
information described in Sec.  1051.73(f) and any other information 
deemed necessary by the Market Administrator.
    (c) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec.  1000.76(b) shall report 
for each dairy farmer who would have been a producer if the plant had 
been fully regulated in the same manner as prescribed for reports 
required by paragraph (a) of this section.


Sec.  1051.32  Other reports.

    In addition to the reports required pursuant to Sec. Sec.  1051.30 
and 1051.31, each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Subpart B--Milk Pricing

Classification of Milk


Sec.  1051.40  Classes of utilization.

    See Sec.  1000.40.


Sec.  1051.41  [Reserved]


Sec.  1051.42  Classification of transfers and diversions.

    See Sec.  1000.42.


Sec.  1051.43  General classification rules.

    See Sec.  1000.43.


Sec.  1051.44  Classification of producer milk.

    See Sec.  1000.44.


Sec.  1051.45  Market administrator's reports and announcements 
concerning classification.

    See Sec.  1000.45.

Class Prices


Sec.  1051.50  Class prices, component prices, and advanced pricing 
factors.

    See Sec.  1000.50.


Sec.  1051.51  Class I differential and price.

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


Sec.  1051.52  Adjusted Class I differentials.

    See Sec.  1000.52.


Sec.  1051.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    See Sec.  1000.53.


Sec.  1051.54  Equivalent price.

    See Sec.  1000.54.

Marketwide Service Payments


Sec.  1051.55  Transportation credits.

    (a) Payments for transportation credits to handlers and cooperative 
associations shall be made as follows:
    (1) On or before the 13th day (except as provided in Sec.  1000.90) 
after the end of each month the market administrator shall pay to each 
handler, including cooperative associations acting as handlers that 
delivered and reported pursuant to Sec.  1051.30 (c), milk directly 
from producers' farms as specified in paragraph (b)(1) to plants as 
specified in (b)(1) and (2) of this section, an amount determined 
pursuant to paragraph (c) of this section.
    (2) Transportation credits paid pursuant to this section shall be 
subject to final verification by the market administrator pursuant to 
Sec.  1000.77; and
    (b) Transportation credits shall apply to the following:
    (1) Bulk milk delivered directly from dairy farms to pool plants 
described in (b)(2) in the following Transportation Zones:
    (i) Transportation Zone 1--deliveries to plants located in the 
counties of Los

[[Page 47215]]

Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura 
originating from dairy farms located in the counties of Riverside, San 
Diego, or San Bernardino;
    (ii) Transportation Zone 2--deliveries to plants located in the 
counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego 
and Ventura originating from dairy farms located in all counties within 
the marketing area except Riverside, San Diego, and San Bernardino;
    (iii) Transportation Zone 3--deliveries to plants located in the 
counties of Alameda, Contra Costa, Marin, Napa, Santa Clara, San 
Francisco, Santa Cruz, San Mateo, Sacramento, Solano and Sonoma 
Counties originating from dairy farms located in all counties within 
the marketing area;
    (2) Pool plant(s) which for the month have utilization of greater 
than 50 percent in Classes I and/or II. The utilization requirement may 
be met for the current month or it may be met on the basis of 
utilization during the preceding 12-month period ending with the 
current month.
    (c) Transportation credits shall be calculated at the following 
rates:
    (1) With respect to each delivery described in paragraph (b)(1) of 
this section, the market administrator shall:
    (i) Determine the shortest hard-surface highway mileage between the 
shipping farm and the receiving plant. The mileage determined by this 
calculation shall not be greater than 225;
    (ii) Multiply the pounds determined in Sec.  1051.55(b)(1) by the 
rate for the month computed pursuant to Sec.  1051.56(a)(6) for each 
Transportation Zone.


Sec.  1051.56  Mileage rate for transportation credits.

    (a) The market administrator shall compute the fuel adjustor rate 
and the hundredweight rate each moth as follows:
    (1) For the fuel adjustor rate compute the simple average rounded 
to three decimal places for the most recent 8 weeks of the Diesel (on 
Highway)--All Types Price per gallon as reported by the Energy 
Information Administration of the United States Department of Energy 
for the series California Number 2 Diesel Retail Prices;
    (2) From the result in paragraph (a)(1) in this section subtract 
$4.099 per gallon;
    (3) Divide the result in paragraph (a)(2) of this section by 5.8, 
and round to three decimal places to compute the fuel cost adjustment 
factor;
    (4) Divide the result in paragraph (a)(3) of this section by 520;
    (5) Round the result in paragraph (a)(4) of this section to five 
decimal places to compute the fuel adjustor rate.
    (6) Compute the per hundredweight rate as follows:
    (i) For Transportation Zone 1 the sum of $0.04497 plus the product 
of the miles determined in Sec.  1051.55(c)(1)(i) times the sum of 
$0.00318 plus the amount determined in Sec.  1051.56(a)(5);
    (ii) For Transportation Zone 2 the sum of $0.00485 plus the product 
of the miles determined in Sec.  1051.55(c)(1)(i) times the sum of 
$0.00546 plus the amount determined in Sec.  1051.56(a)(5);
    (iii) For Transportation Zone 3 the sum of $0.05441 plus the 
product of the miles determined in Sec.  1051.55(c)(1)(i) times the sum 
of $0.00571 plus the amount determined in Sec.  1051.56(a)(5);
    (b) The market administrator shall announce publicly on or before 
the 23rd day of the month (except as provided in Sec.  1000.90 of this 
chapter) the fuel adjustor rate pursuant to paragraph (a) of this 
section for the following month.

Producer Prices


Sec.  1051.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) with respect to 
milk that was not received at a pool plant by adding the amounts 
computed in paragraphs (a) through (i) of this section and subtracting 
from that total amount the values computed in paragraphs (i) and (j) of 
this section. Unless otherwise specified, the skim milk, butterfat, and 
the combined pounds of skim milk and butterfat referred to in this 
section shall result from the steps set forth in Sec.  1000.44(a), (b), 
and (c), respectively, and the nonfat components of producer milk in 
each class shall be based upon the proportion of such components in 
producer skim milk. Receipts of nonfluid milk products that are 
distributed as labeled reconstituted milk for which payments are made 
to the producer-settlement fund of another Federal order under Sec.  
1000.76(a)(4) or (d) shall be excluded from pricing under this section.
    (a) Class I value.
    (1) Multiply the pounds of skim milk in Class I by the Class I skim 
milk price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class I by the Class I butterfat price;
    (3) Deduct for each pound of milk solids-not-fat in nonfat dry milk 
used for fortifying Class I products during the current month a maximum 
charge equal to the current Class I solids not fat price [the Class I 
skim milk price in the $2.10 zone divided by 9], less the current Class 
IV solids not fat price established in Sec.  1051.53. In no case shall 
the deduction be less than zero cents ($0.00) nor more than nineteen 
and eighty-five hundredths cents ($0.1985); and
    (4) Deduct for each pound of milk solids-not-fat in condensed skim 
milk used for fortifying Class I products during the current month a 
maximum charge equal to the current Class I solids not fat price [the 
Class I skim milk price in the $2.10 zone divided by 9], less the 
current Class II solids not fat price established in Sec.  1051.53. In 
no case shall the deduction be less than zero cents ($0.00) nor more 
than nine and eighty-seven hundredths cents ($0.0987).
    (b) Class II value.
    (1) Multiply the pounds of nonfat solids in Class II skim milk by 
the Class II nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class II times the Class II butterfat price.
    (c) Class III value.
    (1) Multiply the pounds of protein in Class III skim milk by the 
protein price;
    (2) Add an amount obtained by multiplying the pounds of other 
solids in Class III skim milk by the other solids price; and
    (3) Add an amount obtained by multiplying the pounds of butterfat 
in Class III by the butterfat price.
    (d) Class IV value.
    (1) Multiply the pounds of nonfat solids in Class IV skim milk by 
the nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class IV by the butterfat price.
    (e) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec.  1000.44(a)(11) and the corresponding 
step of Sec.  1000.44(b) by the skim milk prices and butterfat prices 
applicable to each class.
    (f) Multiply the difference between the current month's Class I, 
II, or III price, as the case may be, and the Class IV price for the 
preceding month and by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to Sec.  
1000.44(a)(7) and the corresponding step of Sec.  1000.44(b).
    (g) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec.  1000.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I

[[Page 47216]]

pursuant to Sec.  1000.44(a)(3)(i) through (vi) and the corresponding 
step of Sec.  1000.44(b), excluding receipts of bulk fluid cream 
products from plants regulated under other Federal orders and bulk 
concentrated fluid milk products from pool plants, plants regulated 
under other Federal orders, and unregulated supply plants.
    (h) Multiply the difference between the Class I price applicable at 
the location of the nearest unregulated supply plants from which an 
equivalent volume was received and the Class III price by the pounds of 
skim milk and butterfat in receipts of concentrated fluid milk products 
assigned to Class I pursuant to Sec.  1000.43(d) and Sec.  
1000.44(a)(3)(i) and the corresponding step of Sec.  1000.44(b) and the 
pounds of skim milk and butterfat subtracted from Class I pursuant to 
Sec.  1000.44(a)(8) and the corresponding step of Sec.  1000.44(b), 
excluding such skim milk and butterfat in receipts of fluid milk 
products from an unregulated supply plant to the extent that an 
equivalent amount of skim milk or butterfat disposed of to such plant 
by handlers fully regulated under any Federal milk order is classified 
and priced as Class I milk and is not used as an offset for any other 
payment obligation under any order.
    (i) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of nonfluid milk products that are allocated to 
Class I use pursuant to Sec.  1000.43(d).
    (j) Compute the amount of credits applicable pursuant to Sec.  
1051.55.


Sec.  1051.61  Computation of producer component prices and producer 
price differential.

    For each month the market administrator shall compute producer 
component prices per pound for butterfat, protein, and other solids. 
The report of any handler who has not made payments required pursuant 
to Sec.  1051.71 for the preceding month shall not be included in the 
computation of the producer component prices, and such handler's report 
shall not be included in the computation for succeeding months until 
the handler has made full payment of outstanding monthly obligations. 
Subject to the conditions of this paragraph, the market administrator 
shall compute the producer component prices in the following manner:
    (a) Combine into one total the values computed pursuant to Sec.  
1051.60 for all handlers required to file reports prescribed Sec.  
1051.50;
    (1) Subtract the value of quota premium for the month as reported 
to the Market Administrator by CDFA;
    (b) Subtract the total values obtained by multiplying each 
handler's total pounds of protein, other solids, and butterfat 
contained in the milk for which an obligation was computed pursuant to 
Sec.  1051.60 by the protein price, other solids price, and the 
butterfat price, respectively;
    (c) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (d) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (1) The total hundredweight of producer milk; and
    (2) The total hundredweight for which a value is computed pursuant 
to Sec.  1051.60(g); and,
    (e) Subtract not less than 4 cents nor more than 5 cents from the 
price computed pursuant to paragraph (e) of this section. The result 
shall be known as the producer price differential for the month 
(applicable in Sec.  1000.76(a)(2)).
    (f) The producer butterfat protein, and other solids, prices shall 
be the result of the following computations.
    (1) The percentage contribution that the value of butterfat, 
protein, and other solids make to the Class III price shall be computed 
and announced by the Market Administrator on or before January 1 of the 
year for which the percentages will be applicable. The percentages will 
be computed as an average based on the prior fiscal year of December 
1st through November 30th.
    (2) The producer butterfat price shall be the result of adding the 
price computed in Sec.  1000.50(l) to the result of multiplying the 
percentage butterfat contribution announced in paragraph (f)(1) by the 
producer price differential value and dividing the result by the 
handler's total pounds of butterfat contained in the milk for which an 
obligation was computed pursuant to Sec.  1051.60, and rounded to the 
fourth decimal place.
    (3) The producer protein price shall be the result of adding the 
price computed in Sec.  1000.50(n) to the result of multiplying the 
percentage protein contribution announced in paragraph (f)(1) by the 
producer price differential value and dividing the result by the 
handler's total pounds of protein contained in the milk for which an 
obligation was computed pursuant to Sec.  1051.60, and rounded to the 
fourth decimal place.
    (4) The producer other solids price shall be the result of adding 
the price computed in Sec.  1000.50(o) to the result of multiplying the 
percentage other solids contribution announced in paragraph (f)(1) by 
the producer price differential value and dividing the result by the 
handler's total pounds of other solids contained in the milk for which 
an obligation was computed pursuant to Sec.  1051.60, and rounded to 
the fourth decimal place.


Sec.  1051.62  Announcement of producer prices.

    On or before the 11th day after the end of each month, the market 
administrator shall announce publicly the following prices and 
information:
    (a) The producer protein price;
    (1) The quota premium for nonfat solids;
    (b) The producer other solids price;
    (c) The producer butterfat price; and
    (d) The statistical uniform price for non-quota milk containing 3.5 
percent butterfat, shall be the sum of the producer protein price 
multiplied by 2.9915, the producer other solids price multiplied by 
5.6935, and the producer butterfat price multiplied by 3.5.

Subpart C--Payments for Milk

Producer Payments


Sec.  1051.70  Producer-settlement fund.

    See Sec.  1000.70.


Sec.  1051.71  Payments to the producer-settlement fund.

    Each handler shall make payment to the producer-settlement fund in 
a manner that provides receipt of the funds by the market administrator 
no later than the 13th day after the end of the month (except as 
provided in Sec.  1000.90). Payment shall be the amount, if any, by 
which the amount specified in paragraph (a) of this section exceeds the 
amount specified in paragraph (b) of this section:
    (a) The total value of milk to the handler for the month as 
determined pursuant to Sec.  1051.60.
    (b) The sum of:
    (1) An amount equal to the quota premium value of producer milk of 
the handler as reported by CDFA;
    (2) An amount obtained by multiplying the total pounds of protein, 
other solids, and butterfat contained in producer milk by the producer 
protein, producer other solids, and producer butterfat prices 
respectively; and
    (3) An amount obtained by multiplying the pounds of skim milk and 
butterfat for which a value was computed pursuant to Sec.  1051.60(i) 
by the producer price differential as

[[Page 47217]]

adjusted pursuant to Sec.  1051.75 for the location of the plant from 
which received.


Sec.  1051.72  Payments from the producer-settlement fund.

    No later than the 14th day after the end of each month (except as 
provided in Sec.  1000.90), the market administrator shall pay to each 
handler the amount, if any, by which the amount computed pursuant to 
Sec.  1051.71(b) exceeds the amount computed pursuant to Sec.  
1051.71(a); and to each cooperative 9(c) handler the quota premium 
value of its producer milk as reported by CDFA. If, at such time, the 
balance in the producer-settlement fund is insufficient to make all 
payments pursuant to this section, the market administrator shall 
reduce uniformly such payments and shall complete the payments as soon 
as the funds are available.


Sec.  1051.73  Payments to producers and to cooperative associations.

    (a) Each handler shall pay each producer for producer milk for 
which payment is not made to a cooperative association pursuant to 
paragraph (b) of this section, as follows:
    (1) Partial payment. For each producer who has not discontinued 
shipments as of the date of this partial payment, payment shall be made 
so that it is received by each producer on or before the 30th day of 
the month (except as provided in Sec.  1000.90) for milk received 
during the first 15 days of the month from the producer at not less 
than the lowest announced class price for the preceding month, less 
proper deductions authorized in writing by the producer.
    (2) Final payment. For milk received during the month, payment 
shall be made so that it is received by each producer no later than the 
15th day after the end of the month (except as provided in Sec.  
1000.90) in an amount equal to not less than the sum of:
    (i) The pounds of butterfat received times the producer butterfat 
price for the month;
    (ii) The value of quota premium for nonfat solids of producer milk 
of the producer as reported to the Market Administrator by CDFA [net of 
any deductions if applicable for degraded volumes of nonfat solids 
otherwise entitled to a quota premium];
    (iii) The pounds of protein received times the producer protein 
price for the month;
    (iv) The pounds of other solids received times the producer other 
solids price for the month;
    (v) Less any payment made pursuant to paragraph (a)(1) of this 
section;
    (vi) Less proper deductions authorized in writing by such producer, 
and plus or minus adjustments for errors in previous payments to such 
producer subject to approval by the market administrator; and
    (vii) Less deductions for marketing services pursuant to Sec.  
1000.86.
    (b) Payments for milk received from cooperative association 
members. On or before the day prior to the dates specified in 
paragraphs (a)(1) and (a)(2) of this section (except as provided in 
Sec.  1000.90), each handler shall pay to a cooperative association for 
milk from producers who market their milk through the cooperative 
association and who have authorized the cooperative to collect such 
payments on their behalf an amount equal to the sum of the individual 
payments otherwise payable for such producer milk pursuant to 
paragraphs (a)(1) and (a)(2) of this section.
    (c) Payment for milk received from cooperative association pool 
plants or from cooperatives as handlers pursuant to Sec.  1000.9(c). On 
or before the day prior to the dates specified in paragraphs (a)(1) and 
(a)(2) of this section (except as provided in Sec.  1000.90), each 
handler who receives fluid milk products at its plant from a 
cooperative association in its capacity as the operator of a pool plant 
or who receives milk from a cooperative association in its capacity as 
a handler pursuant to Sec.  1000.9(c), including the milk of producers 
who are not members of such association and who the market 
administrator determines have authorized the cooperative association to 
collect payment for their milk, shall pay the cooperative for such milk 
as follows:
    (1) For bulk fluid milk products and bulk fluid cream products 
received from a cooperative association in its capacity as the operator 
of a pool plant and for milk received from a cooperative association in 
its capacity as a handler pursuant to Sec.  1000.9(c) during the first 
15 days of the month, at not less than the lowest announced class 
prices per hundredweight for the preceding month;
    (2) For the total quantity of bulk fluid milk products and bulk 
fluid cream products received from a cooperative association in its 
capacity as the operator of a pool plant, at not less than the total 
value of such products received from the association's pool plants, as 
determined by multiplying the respective quantities assigned to each 
class under Sec.  1000.44, as follows:
    (i) The hundredweight of Class I skim milk times the Class I skim 
milk price for the month plus the pounds of Class I butterfat times the 
Class I butterfat price for the month. The Class I price to be used 
shall be that price effective at the location of the receiving plant;
    (ii) The pounds of nonfat solids in Class II skim milk by the Class 
II nonfat solids price;
    (iii) The pounds of butterfat in Class II times the Class II 
butterfat price;
    (iv) The pounds of nonfat solids in Class IV times the nonfat 
solids price;
    (v) The pounds of butterfat in Class III and Class IV milk times 
the butterfat price;
    (vi) The pounds of protein in Class III milk time the protein 
price;
    (vii) The pounds of other solids in Class III milk times the other 
solids price; and
    (viii) Add together the amounts computed in paragraphs (c)(2)(i) 
through (vii) of this section and from that sum deduct any payment made 
pursuant to paragraph (c)(1) of this section;
    (3) For the total quantity of milk received during the month from a 
cooperative association in its capacity as a handler under Sec.  
1000.9(c) as follows:
    (i) The pounds of butterfat received times the producer butterfat 
price for the month;
    (ii) The pounds of protein received times the producer protein 
price for the month;
    (iii) The pounds of other solids received times the producer other 
solids price for the month; and
    (iv) Add together the amounts computed in paragraphs (c)(3)(i) 
through (iii) of this section and from that sum deduct any payment made 
pursuant to paragraph (c)(1) of this section.
    (d) If a handler has not received full payment from the market 
administrator pursuant to Sec.  1051.72 by the payment date specified 
in paragraph (a), (b) or (c) of this section, the handler may reduce 
pro rata its payments to producers or to the cooperative association 
(with respect to receipts described in paragraph (b) of this section, 
prorating the underpayment to the volume of milk received from the 
cooperative association in proportion to the total milk received from 
producers by the handler), but not by more than the amount of the 
underpayment. The payments shall be completed on the next scheduled 
payment date after receipt of the balance due from the market 
administrator.
    (e) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to

[[Page 47218]]

the producer-settlement fund, and in the event that the handler 
subsequently locates and pays the producer or a lawful claimant, or in 
the event that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer- settlement fund to the handler or to the lawful 
claimant, as the case may be.
    (f) In making payments to producers pursuant to this section, each 
handler shall furnish each producer, except a producer whose milk was 
received from a cooperative association handler described in Sec.  
1000.9(a) or (c), a supporting statement in a form that may be retained 
by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and payroll number of the producer;
    (2) The daily and total pounds, and the month and dates such milk 
was received from that producer;
    (3) The total pounds of butterfat, protein, and other solids 
contained in the producer's milk;
    (4) The pounds of quota nonfat solids in the producer's milk;
    (5) The minimum rate or rates at which payment to the producer is 
required pursuant to the order in this part;
    (6) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (7) The amount, or rate per hundredweight, or rate per pound of 
component, and the nature of each deduction claimed by the handler; and
    (8) The net amount of payment to the producer or cooperative 
association.


Sec.  1051.74  [Reserved]


Sec.  1051.75  Plant location adjustments for nonpool milk.

    For purposes of making payments for nonpool milk, a plant location 
adjustment shall be determined by subtracting the Class I price 
specified in Sec.  1051.51 from the Class I price at the plant's 
location. The difference, plus or minus as the case may be, shall be 
used to adjust the payments required pursuant to Sec.  1000.76.


Sec.  1051.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec.  1000.76.


Sec.  1051.77  Adjustment of accounts.

    See Sec.  1000.77.


Sec.  1051.78  Charges on overdue accounts.

    See Sec.  1000.78.

Administrative Assessment and Marketing Service Deduction


Sec.  1051.85  Assessment for order administration.

    On or before the payment receipt date specified under Sec.  
1051.71, each handler shall pay to the market administrator its pro 
rata share of the expense of administration of the order at a rate 
specified by the market administrator that is no more than 8 cents per 
hundredweight with respect to:
    (a) Receipts of producer milk (including the handler's own 
production) other than such receipts by a handler described in Sec.  
1000.9(c) that were delivered to pool plants of other handlers;
    (b) Receipts from a handler described in Sec.  1000.9(c);
    (c) Receipts of concentrated fluid milk products from unregulated 
supply plants and receipts of nonfluid milk products assigned to Class 
I use pursuant to Sec.  1000.43(d) and other source milk allocated to 
Class I pursuant to Sec.  1000.44(a)(3) and (8) and the corresponding 
steps of Sec.  1000.44(b), except other source milk that is excluded 
from the computations pursuant to Sec.  1051.60(h) and (i); and
    (d) Route disposition in the marketing area from a partially 
regulated distributing plant that exceeds the skim milk and butterfat 
subtracted pursuant to Sec.  1000.76(a)(1)(i) and (ii).


Sec.  1051.86  Deduction for marketing services.

    See Sec.  1000.86.

Subpart D--Miscellaneous Provisions


Sec.  1051.90  Dates

    See Sec.  1000.90.

Proposal Number 2

Submitted by the Dairy Institute of California.

0
4. This proposal seeks to add a new part 1051 to read as follows:

PART 1051--MILK IN THE CALIFORNIA MARKETING AREA

Subpart A--Order Regulating Handling

Sec.

General Provisions

1051.1 General Provisions.

Definitions

1051.2 California marketing area.
1051.3 Route disposition.
1051.4 Plant.
1051.5 Distributing plant.
1051.6 Supply plant.
1051.7 Pool plant.
1051.8 Nonpool plant.
1051.9 Handler.
1051.10 Producer-handler.
1051.11 California quota program and producer quota.
1051.12 Producer.
1051.13 Producer milk.
1051.14 Other source milk.
1051.15 Fluid milk product.
1051.16 Fluid cream product.
1051.17 [Reserved]
1051.18 Cooperative association.
1051.19 Commercial food processing establishment.

Market Administrator, Continuing Obligations, and Handler 
Responsibilities

1051.25 Market administrator.
1051.26 Continuity and separability of provisions.
1051.27 Handler responsibility for records and facilities.
1051.28 Termination of obligations.

Handler Reports

1051.30 Reports of receipts and utilization.
1051.31 Producer and payroll reports.
1051.32 Other reports.
Subpart B--Milk Pricing

Classification of Milk

1051.40 Classes of utilization.
1051.41 [Reserved]
1051.42 Classification of transfers and diversions.
1051.43 General classification rules.
1051.44 Classification of producer milk.
1051.45 Market administrator's reports and announcements concerning 
classification.

Class Prices

1051.50 Class prices, component prices, and advanced pricing 
factors.
1051.51 Class I differential and price.
1051.52 Adjusted Class I differentials.
1051.53 Announcement of class prices, component prices, and advanced 
pricing factors.
1051.54 Equivalent price.
1051.55 Transportation credits and transportation allowances.

Producer Price Differential

1051.60 Handler's value of milk.
1051.61 Computation of producer price differential.
1051.62 Announcement of producer prices.
1051.68 Payments to producers under the California Quota Program.
Subpart C--Payments for Milk

Producer Payments

1051.70 Producer-settlement fund.
1051.71 Payments to the producer-settlement fund.
1051.72 Payments from the producer-settlement fund.
1051.73 Partial payments to producers and to cooperative 
associations.
1051.74 [Reserved]
1051.75 Plant location adjustments for producer milk and nonpool 
milk.
1051.76 Payments by a handler operating a partially regulated 
distributing plant.
1051.77 Adjustment of accounts.
1051.78 Charges on overdue accounts.

[[Page 47219]]

Administrative Assessment and Marketing Service Deduction

1051.85 Assessment for order administration.
1051.86 Deduction for marketing services.
Subpart D--Miscellaneous Provisions
1051.90 Dates.

    Authority: 7 U.S.C. 601--608

Subpart A--Order Regulating Handling

General Provisions


Sec.  1051.1  General provisions.

    The terms, definitions, and provisions in part 1000 of this chapter 
apply to this part 1051 unless otherwise specified. In this part 1051, 
all references to sections in part 1000 refer to part 1000 of this 
chapter.

Definitions


Sec.  1051.2  California marketing area.

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


Sec.  1051.3  Route Distribution

    See Sec.  1000.3.


Sec.  1051.4  Plant

    See Sec.  1000.4.


Sec.  1051.5  Distributing plant.

    See Sec.  1000.5.


Sec.  1051.6  Supply plant.

    See Sec.  1000.6.


Sec.  1051.7  Pool plant.

    Pool plant means a plant, unit of plants, or system of plants as 
specified in paragraphs (a) through (f) of this section, but excluding 
a plant specified in paragraph (h) of this section. The pooing 
standards described in paragraphs (c) and (f) of this section are 
subject to modification pursuant to paragraph (g) of this section:
    (a) A distributing plant, other than a plant qualified as a pool 
plant pursuant to paragraph (b) of this section or Sec.  ___.7(b) of 
any other Federal milk order, from which during the month 15 percent or 
more of the total quantity of fluid milk products physically received 
at the plant (excluding concentrated milk received from another plant 
by agreement for other than Class I use) are disposed of as route 
disposition or are transferred in the form of packaged fluid milk 
products to other distributing plants. At least 25 percent of such 
route disposition and transfers must be to outlets in the marketing 
area.
    (b) Any distributing plant located in the marketing area which 
during the month processed at least 15 percent of the total quantity of 
fluid milk products physically received at the plant (excluding 
concentrated milk received from another plant by agreement for other 
than Class I use) into ultra-pasteurized or aseptically-processed fluid 
milk products.
    (c) A supply plant from which the quantity of bulk fluid milk 
products shipped to (and physically unloaded into) plants described in 
paragraph (c)(1) of this section is not less than 10 percent of the 
Grade A milk received from dairy farmers (except dairy farmers 
described in Sec.  1051.12(b)) and handlers described in Sec.  
1051.9(c) or (d), including milk diverted pursuant to Sec.  1051.13, 
subject to the following conditions:
    (1) Qualifying shipments may be made to plants described in 
paragraphs (c)(1)(i) through (iv) of this section, except that whenever 
shipping requirements are increased pursuant to paragraph (f) of this 
section, only shipments to pool plants described in paragraphs (a), 
(b), and (d) of this section shall count as qualifying shipments for 
the purpose of meeting the increased shipments:
    (i) Pool plants described in Sec.  1051.7(a), (b), and (d);
    (ii) Plants of producer-handlers;
    (iii) Partially regulated distributing plants, except that credit 
for such shipments shall be limited to the amount of such milk 
classified as Class I at the transferee plant; and
    (iv) Distributing plants fully regulated under other Federal 
orders, except that credit for shipments to such plants shall be 
limited to the quantity shipped to (and physically unloaded into) pool 
distributing plants during the month and credits for shipments to other 
order plants shall not include any such shipments made on the basis of 
agreed-upon Class II, Class III, or Class IV utilization.
    (2) The percentage of Grade A milk received from dairy farmers by a 
supply plant described in paragraph (c) of this section that must be 
shipped to (and physically unloaded into) plants described in paragraph 
(c)(1)(i) through (iv) of this section shall be adjusted upward or 
downward based on the average Class I utilization percentage of all 
producer milk under the order for the three prior months for which such 
information is available, as described in paragraphs (c)(2)((i) through 
(viii) of this section. The market administrator shall announce any 
adjustment to the supply plant shipping percentages pursuant to this 
paragraph at least 15 days prior to the month that such adjustments 
shall be effective as follows:
    (i) If the average Class I utilization percentage as described in 
paragraph (c)(2) of this section is between 15 percent and 19.9 
percent, the required shipping percentage for a supply plant described 
in paragraph (c) of this section shall be 15 percent.
    (ii) If the average Class I utilization percentage as described in 
paragraph (c)(2) of this section is between 20 percent and 24.9 
percent, the required shipping percentage for a supply plant described 
in paragraph (c) of this section shall be 20 percent.
    (iii) If the average Class I utilization percentage as described in 
paragraph (c)(2) of this section is between 25 percent and 29.9 
percent, the required shipping percentage for a supply plant described 
in paragraph (c) of this section shall be 25 percent.
    (iv) If the average Class I utilization percentage as described in 
paragraph (c)(2) of this section is between 30 percent and 34.9 
percent, the required shipping percentage for a supply plant described 
in paragraph (c) of this section shall be 30 percent.
    (v) If the average Class I utilization percentage as described in 
paragraph (c)(2) of this section is between 35 percent and 39.9 
percent, the required shipping percentage for a supply plant described 
in paragraph (c) of this section shall be 35 percent.
    (vi) If the average Class I utilization percentage as described in 
paragraph (c)(2) of this section is between 40 percent and 44.9 
percent, the required shipping percentage for a supply plant described 
in paragraph (c) of this section shall be 40 percent.
    (vii) If the average Class I utilization percentage as described in 
paragraph (c)(2) of this section is between 45 percent and 49.9 
percent, the required shipping percentage for a supply plant described 
in paragraph (c) of this section shall be 45 percent.
    (viii) If the average Class I utilization percentage as described 
in paragraph (c)(2) of this section is 50 percent or greater, the 
required shipping percentage for a supply plant described in paragraph 
(c) of this section shall be 50 percent.
    (3) A supply plant under this paragraph and handlers described in 
Sec. Sec.  1051.9 (c) or 1051.9 (d) that receives quota milk from 
producers must make qualifying shipments of no less than 60 percent of 
such milk, or an equivalent

[[Page 47220]]

volume (including milk diverted pursuant to Sec.  1051.13), to plants 
described in Sec.  1051.7(a), (b), or (d).
    (4) During the months of July through February, the operator of a 
supply plant under this paragraph shall make qualifying shipments of up 
to 85 percent of the quota milk, or an equivalent volume of non-quota 
milk it physically receives from producers in its own plants (including 
milk diverted pursuant to Sec.  1051.13) to pool distributing plants 
for Class I uses if requested by the operator of such pool distributing 
plant or as directed by the market administrator, subject to the 
following conditions:
    (i) The operator of such a supply plant is not obligated to ship 
milk in excess of Class I usage to the pool distributing plant.
    (ii) The maximum percentage of quota milk that must be shipped to 
(and physically unloaded into) pool distributing plants and the month 
during which such milk must be shipped may be adjusted by the market 
administrator subject to market conditions.
    (5) Concentrated milk transferred from the supply plant to a 
distributing plant for an agreed-upon use other than Class I shall be 
excluded from the supply plant's shipments in computing the supply 
plant's shipping percentage.
    (d) Two or more plants operated by the same handler and located in 
the marketing area may qualify for pool status as a unit by meeting the 
total and in-area route disposition requirements of a pool distributing 
plant specified in paragraph (a) of the is section and subject to the 
following additional requirements:
    (1) At least one of the plants in the unit must qualify as a pool 
plant pursuant to paragraph (a) of this section;
    (2) Other plants in the unit must process Class I or Class II 
products, using 50 percent or more of the total Grade A fluid milk 
products received in bulk from at such plant or diverted therefrom by 
the plant operator in Class I or Class II products; and
    (3) The operator of the unit has filed a written request with the 
market administrator prior to the first day of the month for which such 
status is desired to be effective. The unit shall continue from month-
to-month thereafter without further notification. The handler shall 
notify the market administrator in writing prior to the first day of 
any month for which termination or any change of the unit is desired.
    (e) A system of 2 or more supply plants operated by one or more 
handlers may qualify for pooling by meeting the shipping requirements 
of paragraph (c) of this section in the same manner as a single plant 
subject to the following additional requirements:
    (1) Each plant in the system is located within the marketing area. 
Cooperative associations or other handlers may not use shipments 
pursuant to Sec.  1051.9(c) or Sec.  1051.9(d) to qualify supply plants 
located outside the marketing area;
    (2) The handler(s) establishing the system submits a written 
request to the market administrator on or before July 15 requesting 
that such plants qualify as a system for the period of August through 
July of the following year. Such request will contain a list of the 
plants participating in the system in the order, beginning with the 
last plant, in which the plants will be dropped from the system if the 
stem fails to qualify. Each plant that qualifies as a pool plant within 
a system shall continue each month as a plant in the system through the 
following July unless the handler(s) establishing the system submits a 
written request to the market administrator that the plant be deleted 
from the system or that the system be discontinued. Any plant that has 
been so deleted from a system, or that has failed to qualify in any 
month, will not be part of any system for the remaining months through 
July. The handler(s) that established a system may add a plant operated 
by such handler(s) to a system if such plant has been a pool plant each 
of the 6 prior months and would otherwise be eligible to be in a 
system, upon written request to the market administrator no later than 
the 15th day of the prior month. In the event of an ownership change or 
the business failure of a hander that is a participant in a system, the 
system may be reorganized to reflect such changes if a written request 
to file a new marketing agreement is submitted to the market 
administrator; and
    (3) If a system fails to qualify under the requirements of this 
paragraph, the handler responsible for qualifying the system shall 
notify the market administrator which plant or plants will be deleted 
from the system so that the remaining plants may be pooled as a system. 
If the handler fails to do so, the market administrator shall exclude 
one or more plants, beginning at the bottom of the list of plants in 
the system and continuing up the list as necessary until the deliveries 
are sufficient to qualify the remaining plants in the system.
    (f) The applicable shipping percentages of paragraphs (c) and (e) 
of this section and Sec.  1051.13.(d)(2) and (d)(3) may be increased or 
decreased, for all of part of the marketing area, by the market 
administrator if the market administrator finds that such adjustment is 
necessary to encourage needed shipments or to prevent uneconomic 
shipments. Before making such a finding, the market administrator shall 
investigate the need for adjustment either on the market 
administrator's own initiative or at the request of interested parties 
if the request is made in writing at least 15 days prior to the month 
for which the requested revision is desired effective. If the 
investigation shows that an adjustment of the shipping percentages 
might be appropriate, the market administrator shall issue a notice 
stating that an adjustment is being considered and invited data, views, 
and arguments. Any decision to revise an applicable shipping or 
diversion percentage must be issued in writing at least one day before 
the effective date.
    (g) The term pool plant shall not apply to the following plants:
    (1) A producer-handler as defined under any Federal order;
    (2) An exempt plant as defined in Sec.  1000.8(e);
    (3) A plant located within the marketing area and qualified 
pursuant to paragraph (a) of this section which meets the pooling 
requirements of another Federal order, and from which more than 50 
percent of its route disposition has been in the other Federal order 
marketing area for 3 consecutive months;
    (4) A plant located outside any Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of another Federal order and has had greater route 
disposition in such other Federal order's marketing area for 3 
consecutive months;
    (5) A plant located in another Federal order marketing area and 
qualified pursuant to paragraph (a) of this section that meets the 
pooling requirements of such other Federal order and does not have a 
majority of its route distribution in this marketing area for 3 
consecutive months, or if the plant is required to be regulated under 
such other Federal order without regard to its route disposition in any 
other Federal order marketing area;
    (6) A plant qualified pursuant to paragraph (c) of this section 
which also meets the pooling requirements of another Federal order and 
from which greater qualifying shipments are made to plants regulated 
under the other Federal order than are made to plants regulated under 
the order in this part, or the plant has automatic pooling status under 
the other Federal order;
    (7) That portion of a regulated plant designated as a nonpool plant 
that is physically separate and operated

[[Page 47221]]

separately from the pool portion of a regulated plant as a nonpool 
plant must be requested in advance and in writing by the handler and 
must be approved by the market administrator.
    (h) Any plant that qualifies as a pool plant in each of the 
immediately preceding 3 months pursuant to paragraph (a) of this 
section or the shipping percentages in paragraph (c) of this section 
that is unable to meet such performance standards for the current month 
because of unavoidable circumstances determined by the market 
administrator to be beyond the control of the handler operating the 
plant, such as a natural disaster (ice storm, wind storm, flood, fire, 
breakdown of equipment, or work stoppage, shall be considered to have 
met the minimum performance standards during the period of such 
unavoidable circumstances, but such relief shall not be granted for 
more than 2 consecutive months.


Sec.  1051.8  Nonpool plant.

    See Sec.  1000.8.


Sec.  1051.9  Handler.

    Handler means:
    (a) Any person who operates a pool plant or a nonpool plant.
    (b) Any person who receives packaged fluid milk products from a 
plant for resale and distribution to retail or wholesale outlets, any 
person who as a broker negotiates a purchase or sale of fluid milk 
products or fluid cream products from or to any pool or nonpool plant, 
and any person who by purchase or direction causes milk of producers to 
be picked up at the farm and/or moved to a plant. Persons who qualify 
as handlers only under this paragraph are not subject to the payment 
provisions of Sec. Sec.  1051.70, 1051.71, 1051.72, 1051.73, 1051.76, 
and 1051.85.
    (c) Any cooperative association with respect to milk that it 
receives for its account from the farm of a producer and delivers to 
pool plants or diverts to nonpool plants pursuant to Sec.  1051.13. The 
operator of a pool plant receiving milk from a cooperative association 
may be the handler for such milk if both parties notify the market 
administrator of this agreement prior to the time that the milk is 
delivered to the pool plant and the plant operator purchases the milk 
on the basis of farm bulk tank weights and samples.
    (d) Any person, except a cooperative association, who operates a 
pool plant or nonpool plant with respect to milk that it receives for 
its account from the farm of a producer in a tank truck owned and 
operated by, or under the control of, such person and which is 
delivered during the month for the account of such person to the pool 
plant of another handler or diverted pursuant to Sec.  1051.13, subject 
to the following conditions:
    (1) Such person (who, if qualified pursuant to this paragraph, 
shall be known as a ``proprietary bulk tank handler'') must operate a 
plant located in the marketing area at which milk is processed only 
into Class II, Class III, or Class IV products;
    (2) Prior to operating as a handler pursuant to this paragraph, 
such person must submit to the market administrator a statement signed 
by the applicant and the operator of the pool plant to which the milk 
will be delivered specifying that the applicant will be the responsible 
handler for the milk.


Sec.  1051.10  Producer-handler.

    Producer handler means a person who operates a dairy farm and a 
distributing plant from which there is route disposition in the 
marketing area, from which total route disposition and packaged sales 
of fluid milk products to other plants during the month does not exceed 
3 million pounds, and who the market administrator has designated a 
producer-handler after determining that all of the requirements of this 
section have been met.
    (a) Requirements for designation. Designation of any person as a 
producer-handler by the market administrator shall be contingent upon 
meeting the conditions set forth in paragraphs (a)(1) through (5) of 
this section. Following the cancellation of a previous producer-handler 
designation, a person seeking to have their producer-handler 
designation reinstated must demonstrate that these conditions have been 
met for the preceding month:
    (1) The care and management of the dairy animals and the other 
resources and facilities designated in paragraph (b)(1) of this section 
necessary to produce all Class I milk handled (excluding receipts from 
handlers fully regulated under any Federal order) are under the 
complete and exclusive control, ownership, and management of the 
producer-handler and are operated as the producer-handler's own 
enterprise and at its sole risk.
    (2) The plant operation designated in paragraph (b)(2) of this 
section at which the producer-handler processes and packages, and from 
which it distributes, its own milk production is under the complete and 
exclusive control, ownership, and management of the producer-handler 
and is operated as the producer-handler's own enterprise and at its 
sole risk.
    (3) The producer-handler neither receives at its designated milk 
production resources and facilities nor receives, handles, processes, 
or distributes at or through any of its designated milk handling, 
processing, or distributing resources and facilities other source milk 
products for reconstitution into fluid milk products or fluid milk 
products derived from any source other than:
    (i) Its designated milk production resources and facilities (own 
farm production);
    (ii) Pool handlers and plants regulated under any Federal order 
within the limitation specified in paragraph (c)(2) of this section; or
    (iii) Nonfat milk solids which are used to fortify fluid milk 
products.
    (4) The producer-handler is neither directly nor indirectly 
associated with the business control or management of, nor has a 
financial interest in, another handler's operation; nor is any other 
handler so associated with the producer-handler's operation.
    (5) No milk produced by the herd(s) or on the farm(s) that supply 
milk to the producer-handler's plant operation is:
    (i) Subject to inclusion and participation in a marketwide 
equalization pool under a milk classification and pricing program under 
the authority of a State government maintaining marketwide pooling of 
returns, or
    (ii) Marketed in any part as Class I milk to the non-pool 
distributing plant of any other handler.
    (b) Designation of resources and facilities. Designation of a 
person as a producer-handler shall include the determination of what 
shall constitute milk production, handling, processing, and 
distribution resources and facilities, all of which shall be considered 
an integrated operation, under the sole and exclusive ownership of the 
producer-handler.
    (1) Milk production resources and facilities shall include all 
resources and facilities (milking herd(s), buildings housing such 
herd(s), and the land on which such buildings are located) used for the 
production of milk which are solely owned, operated, and which the 
producer-handler has designated as a source of milk supply for the 
producer-handler's plant operation. However, for purposes of this 
paragraph, any such milk production resources and facilities which do 
not constitute an actual or potential source of milk supply for the 
producer-handler's operation shall not be considered a part of the 
producer-handler's milk production resources and facilities.

[[Page 47222]]

    (2) Milk handling, processing, and distribution resources and 
facilities shall include all resources and facilities (including store 
outlets) used for handling, processing, and distributing fluid milk 
products which are solely owned by, and directly operated or controlled 
by the producer-handler or in which the producer-handler in any way has 
an interest, including any contractual arrangement, or over which the 
producer-handler directly or indirectly exercises any degree of 
management control.
    (3) All designations shall remain in effect until canceled pursuant 
to paragraph (c) of this section.
    (c) Cancellation. The designation as a producer-handler shall be 
canceled upon determination by the market administrator that any of the 
requirements of paragraph (a)(1) through (5) of this section are not 
continuing to be met, or under any of the conditions described in 
paragraphs (c)(1), (2), or (3) of this section. Cancellation of a 
producer-handler's status pursuant to this paragraph shall be effective 
on the first day of the month following the month in which the 
requirements were not met or the conditions for cancellation occurred.
    (1) Milk from the milk production resources and facilities of the 
producer-handler, designated in paragraph (b)(1) of this section, is 
delivered in the name of another person as producer milk to another 
handler.
    (2) The producer-handler handles fluid milk products derived from 
sources other than the milk production facilities and resources 
designated in paragraph (b)(1) of this section, except that it may 
receive at its plant, or acquire for route disposition, fluid milk 
products from fully regulated plants and handlers under any Federal 
order if such receipts do not exceed 150,000 pounds monthly. This 
limitation shall not apply if the producer-handler's own-farm 
production is less than 150,000 pounds during the month.
    (3) Milk from the milk production resources and facilities of the 
producer-handler is subject to inclusion and participation in a 
marketwide equalization pool under a milk classification and pricing 
plan operating under the authority of a State government.
    (d) Public announcement. The market administrator shall publicly 
announce:
    (1) The name, plant location(s), and farm location(s) of persons 
designated as producer-handlers;
    (2) The names of those persons whose designations have been 
cancelled; and
    (3) The effective dates of producer-handler status or loss of 
producer-handler status for each. Such announcements shall be 
controlling with respect to the accounting at plants of other handlers 
for fluid milk products received from any producer-handler.
    (e) Burden of establishing and maintaining producer-handler status. 
The burden rests upon the handler who is designated as a producer-
handler to establish through records required pursuant to Sec.  1000.27 
that the requirements set forth in paragraph (a) of this section have 
been and are continuing to be met, and that the conditions set forth in 
paragraph (c) of this section for cancellation of the designation do 
not exist.
    (f) Any producer-handler with Class I route dispositions and/or 
transfers of packaged fluid milk products in the marketing area 
described in Sec.  1131.2 of this chapter shall be subject to payments 
into the Order 1131 producer settlement fund on such dispositions 
pursuant to Sec.  1051.76(a) and payments into the Order 1131 
administrative fund, provided such dispositions are less than three 
million pounds in the current month and such producer-handler had total 
Class I route dispositions and/or transfers of packaged fluid milk 
products from own farm production of three million pounds or more the 
previous month. If the producer-handler has Class I route dispositions 
and/or transfers of packaged fluid milk products into the marketing 
area described in Sec.  1131.2 of this chapter of three million pounds 
or more during the current month, such producer-handler shall be 
subject to the provisions described in Sec.  1131.7 of this chapter or 
Sec.  1051.76(a).
    (g) No handler operating a pool distributing plant shall be 
considered a producer-handler, unless it meets all of the conditions 
specified in Sec.  1051.10(a) through (e), regardless of whether or not 
the handler owns producer quota pursuant to Sec.  1051.11.


Sec.  1051.11  California quota program and producer quota.

    (a) California Quota Program means the applicable provisions of the 
California Food and Agriculture Code, and related provisions of the 
pooling plan administered by the California Department of Food and 
Agriculture (CDFA).
    (b) Producer Quota is an individual producer's quota holdings of 
butterfat and nonfat milk solids components as defined by CDFA.
    (1) Quota milk means the producer's quota holdings of butterfat and 
the skim equivalent of the producer's holdings of nonfat milk solids 
components that qualify as producer milk under Sec.  1051.13. The skim 
equivalent of a producer's nonfat solids components and butterfat that 
qualify as producer milk under the order, and which are in excess of 
the producer's quota holdings of these components are designated as 
overquota butterfat and overquota nonfat milk solids, respectively.
    (2) The market administrator shall keep a record of each producer's 
quota holdings and shall obtain monthly updates from CDFA concerning 
any changes to each producer's quota holdings.
    (3) The market administrator shall report monthly the amount of 
each California producer's milk fat and nonfat solids components that 
were qualified as producer milk under the order to CDFA.
    (4) Each handler shall report monthly by 9 days after the end of 
the month the disposition of quota and overquota butterfat and nonfat 
milk solids components for that month.


Sec.  1051.12  Producer.

    (a) Except as provided in paragraph (b) of this section, producer 
means any person who produces milk approved by a duly constituted 
regulatory agency for fluid consumption as Grade A milk and whose milk 
is:
    (1) Received at a pool plant directly from the producer or diverted 
by the plant operator in accordance with Sec.  1051.13; or
    (2) Received by a handler described in Sec.  1051.9(c) or (d).
    (b) Producer shall not include:
    (1) A producer-handler as defined in any Federal order;
    (2) A dairy farmer whose milk is received at an exempt plant, 
excluding producer milk diverted to the exempt plant pursuant to Sec.  
1051.13(d);
    (3) A dairy farmer whose milk is received by diversion at a pool 
plant from a handler regulated under another Federal order if the other 
Federal order designates the dairy farmer as a producer under that 
order and that milk is allocated by request to a utilization other than 
Class I; and
    (4) A dairy farmer whose milk is reported as diverted to a plant 
fully regulated under another Federal order with respect to that 
portion of the milk so diverted that is assigned to Class I under the 
provisions of such other order.


Sec.  1051.13  Producer milk.

    Except as provided for in paragraph (e) of this section, Producer 
milk means the skim milk (or the skim equivalent of components of skim 
milk), including nonfat components, and butterfat in milk of a producer 
that is:

[[Page 47223]]

    (a) Received by the operator of a pool plant directly from a 
producer or a handler described in Sec.  1051.9(c) or (d). All milk 
received pursuant to this paragraph shall be priced at the location of 
the plant where it is first physically received;
    (b) Received by a handler described in Sec.  1051.9(c) or (d) in 
excess of the quantity delivered to pool plants;
    (c) Diverted by a pool plant operator to another pool plant. Milk 
so diverted shall be priced at the location of the plant to which 
diverted; or
    (d) Diverted by the operator of a pool plant or a cooperative 
association described in Sec.  1051.9(c) or (d) to a nonpool plant 
located in the marketing area, subject to the following conditions:
    (1) Milk of a dairy farmer shall not be eligible for diversion 
unless at least the lessor of one day's production or 48,000 pounds of 
milk of such dairy farmer is physically received as producer milk at a 
pool plant during the first month the dairy farmer is a producer. If a 
dairy farmer loses producer status under the order in this part (except 
as a result of a temporary loss of Grade A approval or as a result of 
the handler of the dairy farmer's milk failing to pool the milk under 
any order), the dairy farmer's milk shall not be eligible for diversion 
unless at least the lessor of one day's production, or 48,000 pounds of 
milk of the dairy farmer has been physically received as producer milk 
at a pool plant during the first month the dairy farmer is re-
associated with the market;
    (2) The quantity of milk diverted by a handler described in Sec.  
1051.9(c) and (d) may not exceed a percentage equal to 100 percent 
minus the supply plant shipping percentage specified in Sec.  1051.7(c) 
(or as adjusted pursuant to Sec.  1051.7(c)(2)) of the producer milk 
receipts reported by the handler pursuant to Sec.  1051.30(c), provided 
that not less than 10 percent of such receipts are delivered to plants 
described in Sec.  1051.7(c)(1)(i) through (iii). These percentages are 
subject to any adjustments that may be made pursuant to Sec.  
1051.7(c)(2)(i) through (viii) or any additional adjustments made 
pursuant to Sec.  1051.7 (f); and
    (3) The quantity of milk diverted to nonpool plants by the operator 
of a pool plant described in Sec.  1051.7(a) or (b) may not exceed a 
percentage equal to 100 percent minus the supply plant shipping 
percentage specified in Sec.  1051.7(c) (or as adjusted pursuant to 
Sec.  1051.7 (c)(2)) of the Grade A milk received from dairy farmers 
(except dairy farmers described in Sec.  1051.12(b)) including milk 
diverted pursuant to Sec.  1051.13; and
    (4) Diverted milk shall be priced at the location of the plant to 
which diverted.
    (e) Producer milk shall not include milk of a producer that is 
subject to inclusion and participation in a marketwide equalization 
pool under a milk classification and pricing program imposed under the 
authority of a State government maintaining marketwide pooling of 
returns.
    (f) The quantity of milk reported by a handler pursuant to either 
Sec.  1051.30(a)(1) or Sec.  1051.30(c)(1) for April through February 
may not exceed 125 percent, and for March may not exceed 135 percent, 
of the producer milk receipts pooled by the handler during the prior 
month. Milk diverted to nonpool plants reported in excess of this limit 
shall be removed from the pool. Milk in excess of this limit received 
at pool plants, other than pool distributing plants, shall be 
classified pursuant to Sec.  1051.44(a)(3)(v) and Sec.  1051.44(b). The 
handler must designate, by producer pick-up, which milk is to be 
removed from the pool. If the handler fails to provide this 
information, the market administrator will make the determination. The 
following provisions apply:
    (1) Milk shipped to and physically received at pool distributing 
plants in excess of the previous month's pooled volume shall not be 
subject to the 125 or 135 percent limitation;
    (2) Producer milk qualified pursuant to Sec. 13 of any other 
Federal Order and continuously pooled in any Federal Order for the 
previous six months shall not be included in the computation of the 125 
or 135 percent limitation;
    (3) The market administrator may waive the 125 or 135 percent 
limitation:
    (i) For a new handler on the order, subject to the provisions of 
Sec.  1051.13(f)(4), or
    (ii) For an existing handler with significantly changed milk supply 
conditions due to unusual circumstances;
    (4) A bloc of milk may be considered ineligible for pooling if the 
market administrator determines that handlers altered the reporting of 
such milk for the purpose of evading the provisions of this paragraph.


Sec.  1051.14  Other source milk.

    Other source milk means all skim milk and butterfat contained in or 
represented by:
    (a) Receipts of fluid milk products and bulk fluid cream products 
from any source other than producers, handlers described in Sec.  
1051.9(c) and (d), or pool plants;
    (b) Products (other than fluid milk products, fluid cream products, 
and products produced at the plant during the same month) from any 
source which are reprocessed, converted into, or combined with another 
product in the plant during the month; and
    (c) Receipts of any milk product (other than a fluid milk product 
or a fluid cream product) for which the handler fails to establish a 
disposition.


Sec.  1051.15  Fluid milk products.

    See Sec.  1000.15.


Sec.  1051.16  Fluid cream product.

    See Sec.  1000.16.


Sec.  1051.17  [Reserved]


Sec.  1051.18  Cooperative association.

    See Sec.  1000.18.


Sec.  1051.19  Commercial food processing establishment.

    See Sec.  1000.19.

Market Administrator, Continuing Obligations, and Handler 
Responsibilities


Sec.  1051.25  Market administrator.

    See Sec.  1000.25.


Sec.  1051.26  Continuity and separability of provisions.

    See Sec.  1000.26.


Sec.  1051.27  Handler responsibility for records and facilities.

    See Sec.  1000.27.


Sec.  1051.28  Termination of obligations.

    See Sec.  1000.28.

Handler Reports


Sec.  1051.30  Reports of receipts and utilization.

    Each handler shall report monthly so that the market 
administrator's office receives the report on or before the 9th day 
after the end of the month, in the detail and on the prescribed forms, 
as follows:
    (a) Each handler that operates a pool plant shall report for each 
of its operations the following information:
    (1) Product pounds, pounds of butterfat, pounds of protein, pounds 
of solids-not-fat other than protein (other solids), and the value of 
the somatic cell adjustment pursuant to Sec.  1051.50(r), contained in 
or represented by:
    (i) Receipts of producer milk, including producer milk diverted by 
the reporting handler, from sources other than handlers described in 
Sec.  1051.9(c) or (d); and
    (ii) Receipts of milk from handlers described in Sec.  1051.9(c) or 
(d);
    (2) Product pounds and pounds of butterfat contained in:

[[Page 47224]]

    (i) Receipts of fluid milk products and bulk fluid cream products 
from other pool plants;
    (ii) Receipts of other source milk; and
    (iii) Inventories at the beginning and end of the month of fluid 
milk products and bulk fluid cream products;
    (3) The utilization or disposition of all milk and milk products 
required to be reported pursuant to this paragraph; and
    (4) Such other information with respect to the receipts and 
utilization of skim milk, butterfat, milk protein, other nonfat solids, 
and somatic cell information, as the market administrator may 
prescribe.
    (b) Each handler operating a partially regulated distributing plant 
shall report with respect to such plant in the same manner as 
prescribed for reports required by paragraph (a) of this section. 
Receipts of milk that would have been producer milk if the plant had 
been fully regulated shall be reported in lieu of producer milk. The 
report shall show also the quantity of any reconstituted skim milk in 
route disposition in the marketing area.
    (c) Each handler described in Sec.  1000.9(c) or (d) shall report:
    (1) The product pounds, pounds of butterfat, pounds of protein, 
pounds of solids-not-fat other than protein (other solids), and the 
value of the somatic cell adjustment pursuant to Sec.  1051.50(r), 
contained in receipts of milk from producers; and
    (2) The utilization or disposition of such receipts.
    (d) Each handler not specified in paragraphs (a) through (c) of 
this section shall report with respect to its receipts and utilization 
of milk and milk products in such manner as the market administrator 
may prescribe.


Sec.  1051.31  Producer and payroll reports.

    (a) On or before the 6th day after the end of each month, each 
handler that operates a pool plant pursuant to Sec.  1051.7 and each 
handler described in Sec.  1051.9 (c) or (d) shall report to the market 
administrator its producer deliveries for the month, in the detail 
prescribed by the market administrator, showing for each producer the 
information described in Sec.  1051.73(e)(1) through (4).
    (b) On or before the 20th day after the end of each month, each 
handler that operates a pool plant pursuant to Sec.  1051.7 and each 
handler described in Sec.  1051.9 (c) and (d) shall report to the 
market administrator its producer payroll for the month, in the detail 
prescribed by the market administrator, showing for each producer the 
information described in Sec.  1051.73(e).
    (c) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec.  1051.76(b) shall report 
for each dairy farmer who would have been a producer if the plant had 
been fully regulated in the same manner as prescribed for reports 
required by paragraph (a) of this section.


Sec.  1051.32  Other reports.

    In addition to the reports required pursuant to Sec. Sec.  1051.30 
and 1051.31, each handler shall report any information the market 
administrator deems necessary to verify or establish each handler's 
obligation under the order.

Subpart B--Milk Pricing

Classification of Milk


Sec.  1051.40  Classes of utilization.

    Except as provided in Sec.  1051.42, all skim milk and butterfat 
required to be reported pursuant to Sec.  1051.30 shall be classified 
as follows:
    (a) Class I milk shall be all skim milk and butterfat:
    (1) Disposed of in the form of fluid milk products, except as 
otherwise provided in this section;
    (2) In packaged fluid milk products in inventory at the end of the 
month; and
    (3) In shrinkage assigned pursuant to Sec.  1051.43(b).
    (b) Class II milk shall be all skim milk and butterfat:
    (1) In fluid milk products in containers larger than 1 gallon and 
fluid cream products disposed of or diverted to a commercial food 
processing establishment if the market administrator is permitted to 
audit the records of the commercial food processing establishment for 
the purpose of verification. Otherwise, such uses shall be Class I;
    (2) Used to produce:
    (i) Cottage cheese, lowfat cottage cheese, dry curd cottage cheese, 
ricotta cheese, pot cheese, Creole cheese, and any similar soft, high-
moisture cheese resembling cottage cheese in form or use;
    (ii) Milkshake and ice milk mixes (or bases), frozen desserts, and 
frozen dessert mixes distributed in half-gallon containers or larger 
and intended to be used in soft or semi-solid form;
    (iii) Aerated cream, frozen cream, sour cream, sour half-and-half, 
sour cream mixtures containing non-milk items; yogurt, including yogurt 
containing beverages with 20 percent or more yogurt by weight and 
kefir, and any other semi-solid product resembling a Class II product;
    (iv) Custards, puddings, pancake mixes, coatings, batter, and 
similar products;
    (v) Buttermilk biscuit mixes and other buttermilk for baking that 
contain food starch in excess of 2 percent of the total solids, 
provided that the product is labeled to indicate the food starch 
content;
    (vi) Products especially prepared for infant feeding or dietary use 
(meal replacements) that are packaged in hermetically sealed containers 
and products that meet the compositional standards of Sec.  1000.15(a) 
but contain no fluid milk products included in Sec.  1000.15(a).
    (vii) Candy, soup, bakery products and other prepared foods which 
are processed for general distribution to the public, and intermediate 
products, including sweetened condensed milk, to be used in processing 
such prepared food products;
    (viii) A fluid cream product or any product containing artificial 
fat or fat substitutes that resembles a fluid cream product, except as 
otherwise provided in paragraph (c) of this section; and
    (ix) Any product not otherwise specified in this section; and
    (3) In shrinkage assigned pursuant to Sec.  1051.43(b).
    (c) Class III milk shall be all skim milk and butterfat:
    (1) Used to produce:
    (i) Cream cheese and other spreadable cheeses, and hard cheese of 
types that may be shredded, grated, or crumbled;
    (ii) Plastic cream, anhydrous milkfat, and butteroil; and
    (2) In shrinkage assigned pursuant to Sec.  1051.43(b).
    (d) Class IV milk shall be all skim milk and butterfat:
    (1) Used to produce:
    (i) Butter; and
    (ii) Evaporated or sweetened condensed milk in a consumer-type 
package; and
    (iii) Any milk product in dried form;
    (2) In inventory at the end of the month of fluid milk products and 
fluid cream products in bulk form;
    (3) In the skim milk equivalent of nonfat milk solids used to 
modify a fluid milk product that has not been accounted for in Class I 
and in the skim milk equivalent of nonfat milk solids used to modify a 
fluid milk product to meet the State of California's fluid milk 
standards as described in the California Food and Agricultural Code; 
and
    (4) In shrinkage assigned pursuant to Sec.  1051.43(b).
    (e) Other uses. Other uses include skim milk and butterfat used in 
any product described in this section that is dumped, used for animal 
feed,

[[Page 47225]]

destroyed, or lost by a handler in a vehicular accident, flood, fire, 
or similar occurrence beyond the handler's control. Such uses of skim 
milk and butterfat shall be assigned to the lowest priced class for the 
month to the extent that the quantities destroyed or lost can be 
verified from records satisfactory to the market administrator.


Sec.  1051.41  [Reserved]


Sec.  1051.42  Classification of transfers and diversions.

    (a) Transfers and diversions to pool plants. Skim milk or butterfat 
transferred or diverted in the form of a fluid milk product or 
transferred in the form of a bulk fluid cream product from a pool plant 
to another pool plant shall be classified as Class I milk unless the 
handlers both request the same classification in another class. In 
either case, the classification shall be subject to the following 
conditions:
    (1) The skim milk and butterfat classified in each class shall be 
limited to the amount of skim milk and butterfat, respectively, 
remaining in such class at the receiving plant after the computations 
pursuant to Sec.  1051.44(a)(9) and the corresponding step of Sec.  
1051.44(b);
    (2) If the transferring plant received during the month other 
source milk to be allocated pursuant to Sec.  1051.44(a)(3) or the 
corresponding step of Sec.  1051.44(b), the skim milk or butterfat so 
transferred shall be classified so as to allocate the least possible 
Class I utilization to such other source milk; and
    (3) If the transferring handler received during the month other 
source milk to be allocated pursuant to Sec.  1051.44(a)(8) or (9) or 
the corresponding steps of Sec.  1051.44(b), the skim milk or butterfat 
so transferred, up to the total of the skim milk and butterfat, 
respectively, in such receipts of other source milk, shall not be 
classified as Class I milk to a greater extent than would be the case 
if the other source milk had been received at the receiving plant.
    (b) Transfers and diversions to a plant regulated under another 
Federal order. Skim milk or butterfat transferred or diverted in the 
form of a fluid milk product or transferred in the form of a bulk fluid 
cream product from a pool plant to a plant regulated under another 
Federal order shall be classified in the following manner. Such 
classification shall apply only to the skim milk or butterfat that is 
in excess of any receipts at the pool plant from a plant regulated 
under another Federal order of skim milk and butterfat, respectively, 
in fluid milk products and bulk fluid cream products, respectively, 
that are in the same category as described in paragraph (b)(1) or (2) 
of this section:
    (1) As Class I milk, if transferred as packaged fluid milk 
products;
    (2) If transferred or diverted in bulk form, classification shall 
be in the classes to which allocated under the other order:
    (i) If the operators of both plants so request in their reports of 
receipts and utilization filed with their respective market 
administrators, transfers in bulk form shall be classified as other 
than Class I to the extent that such utilization is available for such 
classification pursuant to the allocation provisions of the other 
order;
    (ii) If diverted, the diverting handler must request a 
classification other than Class I. If the plant receiving the diverted 
milk does not have sufficient utilization available for the requested 
classification and some of the diverted milk is consequently assigned 
to Class I use, the diverting handler shall be given the option of 
designating the entire load of diverted milk as producer milk at the 
plant physically receiving the milk. Alternatively, if the diverting 
handler so chooses, it may designate which dairy farmers whose milk was 
diverted during the month will be designated as producers under the 
order physically receiving the milk. If the diverting handler declines 
to accept either of these options, the market administrator will 
prorate the portion of diverted milk in excess of Class II, III, and IV 
use among all the dairy farmers whose milk was received from the 
diverting handler on the last day of the month, then the second-to-last 
day, and continuing in that fashion until the excess diverted milk has 
been assigned as producer milk under the receiving order; and
    (iii) If information concerning the classes to which such transfers 
or diversions were allocated under the other order is not available to 
the market administrator for the purpose of establishing classification 
under this paragraph, classification shall be Class I, subject to 
adjustment when such information is available.
    (c) Transfers and diversions to producer-handlers and to exempt 
plants. Skim milk or butterfat that is transferred or diverted from a 
pool plant to a producer-handler under any Federal order or to an 
exempt plant shall be classified:
    (1) As Class I milk if transferred or diverted to a producer-
handler;
    (2) As Class I milk if transferred to an exempt plant in the form 
of a packaged fluid milk product; and
    (3) In accordance with the utilization assigned to it by the market 
administrator if transferred or diverted in the form of a bulk fluid 
milk product or transferred in the form of a bulk fluid cream product 
to an exempt plant. For this purpose, the receiving handler's 
utilization of skim milk and butterfat in each class, in series 
beginning with Class IV, shall be assigned to the extent possible to 
its receipts of skim milk and butterfat, in bulk fluid cream products, 
and bulk fluid milk products, respectively, pro rata to each source.
    (d) Transfers and diversions to other nonpool plants. Skim milk or 
butterfat transferred or diverted in the following forms from a pool 
plant to a nonpool plant that is not a plant regulated under another 
order, an exempt plant, or a producer-handler plant shall be 
classified:
    (1) As Class I milk, if transferred in the form of a packaged fluid 
milk product; and
    (2) As Class I milk, if transferred or diverted in the form of a 
bulk fluid milk product or transferred in the form of a bulk fluid 
cream product, unless the following conditions apply:
    (i) If the conditions described in paragraphs (d)(2)(i)(A) and (B) 
of this section are met, transfers or diversions in bulk form shall be 
classified on the basis of the assignment of the nonpool plant's 
utilization, excluding the milk equivalent of both nonfat milk solids 
and concentrated milk used in the plant during the month, to its 
receipts as set forth in paragraphs (d)(2)(ii) through (viii) of this 
section:
    (A) The transferring handler or diverting handler claims such 
classification in such handler's report of receipts and utilization 
filed pursuant to Sec.  1051.30 for the month within which such 
transaction occurred; and
    (B) The nonpool plant operator maintains books and records showing 
the utilization of all skim milk and butterfat received at such plant 
which are made available for verification purposes if requested by the 
market administrator;
    (ii) Route disposition in the marketing area of each Federal milk 
order from the nonpool plant and transfers of packaged fluid milk 
products from such nonpool plant to plants fully regulated thereunder 
shall be assigned to the extent possible in the following sequence:
    (A) Pro rata to receipts of packaged fluid milk products at such 
nonpool plant from pool plants;
    (B) Pro rata to any remaining unassigned receipts of packaged fluid 
milk products at such nonpool plant

[[Page 47226]]

from plants regulated under other Federal orders;
    (C) Pro rata to receipts of bulk fluid milk products at such 
nonpool plant from pool plants; and
    (D) Pro rata to any remaining unassigned receipts of bulk fluid 
milk products at such nonpool plant from plants regulated under other 
Federal orders;
    (iii) Any remaining Class I disposition of packaged fluid milk 
products from the nonpool plant shall be assigned to the extent 
possible pro rata to any remaining unassigned receipts of packaged 
fluid milk products at such nonpool plant from pool plants and plants 
regulated under other Federal orders;
    (iv) Transfers of bulk fluid milk products from the nonpool plant 
to a plant regulated under any Federal order, to the extent that such 
transfers to the regulated plant exceed receipts of fluid milk products 
from such plant and are allocated to Class I at the receiving plant, 
shall be assigned to the extent possible in the following sequence:
    (A) Pro rata to receipts of fluid milk products at such nonpool 
plant from pool plants; and
    (B) Pro rata to any remaining unassigned receipts of fluid milk 
products at such nonpool plant from plants regulated under other 
Federal orders;
    (v) Any remaining unassigned Class I disposition from the nonpool 
plant shall be assigned to the extent possible in the following 
sequence:
    (A) To such nonpool plant's receipts from dairy farmers who the 
market administrator determines constitute regular sources of Grade A 
milk for such nonpool plant; and
    (B) To such nonpool plant's receipts of Grade A milk from plants 
not fully regulated under any Federal order which the market 
administrator determines constitute regular sources of Grade A milk for 
such nonpool plant;
    (vi) Any remaining unassigned receipts of bulk fluid milk products 
at the nonpool plant from pool plants and plants regulated under other 
Federal orders shall be assigned, pro rata among such plants, to the 
extent possible first to any remaining Class I utilization and then to 
all other utilization, in sequence beginning with Class IV at such 
nonpool plant;
    (vii) Receipts of bulk fluid cream products at the nonpool plant 
from pool plants and plants regulated under other Federal orders shall 
be assigned, pro rata among such plants, to the extent possible to any 
remaining utilization, in sequence beginning with Class IV at such 
nonpool plant; and
    (viii) In determining the nonpool plant's utilization for purposes 
of this paragraph, any fluid milk products and bulk fluid cream 
products transferred from such nonpool plant to a plant not fully 
regulated under any Federal order shall be classified on the basis of 
the second plant's utilization using the same assignment priorities at 
the second plant that are set forth in this paragraph.


Sec.  1051.43  General classification rules.

    In determining the classification of producer milk pursuant to 
Sec.  1051.44, the following rules shall apply:
    (a) Each month the market administrator shall correct for 
mathematical and other obvious errors all reports filed pursuant to 
Sec.  1051.30 and shall compute separately for each pool plant, for 
each handler described in Sec.  1051.9(c) or (d), the pounds of skim 
milk and butter fat, respectively, in each class in accordance with 
Sec. Sec.  1051.40 and 1051.42 and paragraph (b) of this section.
    (b) Shrinkage and Overage. For purposes of classifying all milk 
reported by a handler pursuant to Sec.  1051.30, the market 
administrator shall determine the shrinkage or overage of skim milk and 
butterfat for each pool plant and each handler described in Sec.  
1051.9(c) or (d) by subtracting total utilization from total receipts. 
Any positive difference shall be shrinkage, and any negative difference 
shall be overage.
    (1) Shrinkage incurred by pool plants qualified pursuant to Sec.  
1051.7 shall be assigned to the lowest-priced class to the extent that 
such shrinkage does not exceed:
    (i) Two percent, except for a pool plant qualified pursuant to 
Sec.  1051.7(b)--two percent plus any additional percentage calculated 
pursuant to Sec.  1051.43(b)(1)(v), of the total quantity of milk 
physically received at the plant directly from producers' farms on the 
basis of farm weights and tests;
    (ii) Plus 1.5 percent, except for a pool plant qualified pursuant 
to Sec.  1051.7(b)--1.5 percent plus any additional percentage 
calculated pursuant to Sec.  1051.43(b)(1)(v), of the quantity of bulk 
milk physically received on a basis other than farm weights and tests, 
excluding concentrated milk received by agreement for other than Class 
I use;
    (iii) Plus 0.5 percent, except for a pool plant qualified pursuant 
to Sec.  1051.7(b)--0.5 percent plus any additional percentage 
calculated pursuant to Sec.  1051.43(b)(1)(v), of the quantity of milk 
diverted by the plant operator to another plant on a basis other than 
farm weights and tests; and
    (iv) Minus 1.5 percent of the quantity of bulk milk transferred to 
other plants, excluding concentrated milk transferred by agreement for 
other than Class I use.
    (v) The additional percentage to be added pursuant to subparagraphs 
(i), (ii), and (iii) for a pool plant qualified pursuant to Sec.  
1051.7(b) is the percentage of ultra-pasteurized or aseptically 
processed fluid milk and cream products of the total fluid milk and 
cream products produced by the plant during the month times 0.03, 
rounded to the nearest tenth of a percent.
    (2) A handler described in Sec.  1051.9(c) or (d) that delivers 
milk to plants on a basis other than farm weights and tests shall 
receive a lowest-priced-class shrinkage allowance of 0.5 percent of the 
total quantity of such milk picked up at producers' farms.
    (3) Shrinkage in excess of the amounts provided in paragraphs 
(b)(1) and (2) of this section shall be assigned to existing 
utilization in series starting with Class I. The shrinkage assigned 
pursuant to this paragraph shall be added to the handler's reported 
utilization and the result shall be known as the gross utilization in 
each class.
    (c) If any of the water but none of the nonfat solids contained in 
the milk from which a product is made is removed before the product is 
utilized or disposed of by the handler, the pounds of skim milk in such 
product that are to be considered under this part as used or disposed 
of by the handler shall be an amount equivalent to the nonfat milk 
solids contained in such product plus all of the water originally 
associated with such solids. If any of the nonfat solids contained in 
the milk from which a product is made are removed before the product is 
utilized or disposed of by the handler, the pounds of skim milk in such 
product that are to be considered under this part as used or disposed 
of by the handler shall be an amount equivalent to the nonfat milk 
solids contained in such product plus all of the water and nonfat 
solids originally associated with such solids, determined on a protein 
equivalent basis.
    (d) Skim milk and butterfat contained in receipts of bulk 
concentrated fluid milk and nonfluid milk products that are 
reconstituted for fluid use shall be assigned to Class I use, up to the 
reconstituted portion of labeled reconstituted fluid milk products, on 
a pro rata basis (except for any Class I use of specific concentrated 
receipts that is established by the handler) prior to any assignments 
underSec.  1051.44. Any remaining skim milk and butterfat in 
concentrated receipts shall be assigned to uses under Sec.  1051.44 on 
a pro rata basis, unless a specific use of such receipts is established 
by the handler.

[[Page 47227]]

Sec.  1051.44  Classification of producer milk.

    For each month the market administrator shall determine for each 
handler described in Sec.  1051.9(a) for each pool plant of the handler 
separately and for each handler described in Sec.  1051.9(c) and (d) of 
this section the classification of producer milk by allocating the 
handler's receipts of skim milk and butterfat to the handler's gross 
utilization of such receipts pursuant to Sec.  1051.43(b)(3) as 
follows:
    (a) Skim milk shall be allocated in the following manner:
    (1) Subtract from the pounds of skim milk in Class I the pounds of 
skim milk in:
    (i) Receipts of packaged fluid milk products from an unregulated 
supply plant to the extent that an equivalent amount of skim milk 
disposed of to such plant by handlers fully regulated under any Federal 
order is classified and priced as Class I milk and is not used as an 
offset for any other payment obligation under any order;
    (ii) Packaged fluid milk products in inventory at the beginning of 
the month. This paragraph shall apply only if the pool plant was 
subject to the provisions of this paragraph or comparable provisions of 
another Federal order in the immediately preceding month;
    (iii) Fluid milk products received in packaged form from plants 
regulated under other Federal orders; and
    (iv) To the extent that the receipts described in paragraphs 
(a)(1)(i) through (iii) of this section exceed the gross Class I 
utilization of skim milk, the excess receipts shall be subtracted 
pursuant to paragraph (a)(3)(vi) of this section.
    (2) Subtract from the pounds of skim milk in Class II the pounds of 
skim milk in the receipts of skim milk in bulk concentrated fluid milk 
products and in other source milk (except other source milk received in 
the form of an unconcentrated fluid milk product or a fluid cream 
product) that is used to produce, or added to, any product in Class II 
(excluding the quantity of such skim milk that was classified as Class 
IV milk pursuant to Sec.  1051.40(d)(3)). To the extent that the 
receipts described in this paragraph exceed the gross Class II 
utilization of skim milk, the excess receipts shall be subtracted 
pursuant to paragraph (a)(3)(vi) of this section.
    (3) Subtract from the pounds of skim milk remaining in each class, 
in series beginning with Class IV, the pounds of skim milk in:
    (i) Receipts of bulk concentrated fluid milk products and other 
source milk (except other source milk received in the form of an 
unconcentrated fluid milk product);
    (ii) Receipts of fluid milk products and bulk fluid cream products 
for which appropriate health approval is not established and from 
unidentified sources;
    (iii) Receipts of fluid milk products and bulk fluid cream products 
from an exempt plant;
    (iv) Fluid milk products and bulk fluid cream products received 
from a producer-handler as defined under the order in this part, or any 
other Federal order;
    (v) Receipts of fluid milk products from dairy farmers for other 
markets; and
    (vi) The excess receipts specified in paragraphs (a)(1)(iv) and 
(a)(2) of this section.
    (4) Subtract from the pounds of skim milk remaining in all classes 
other than Class I, in sequence beginning with Class IV, the receipts 
of fluid milk products from an unregulated supply plant that were not 
previously subtracted in this section for which the handler requests 
classification other than Class I, but not in excess of the pounds of 
skim milk remaining in these other classes combined.
    (5) Subtract from the pounds of skim milk remaining in all classes 
other than Class I, in sequence beginning with Class IV, receipts of 
fluid milk products from an unregulated supply plant that were not 
previously subtracted in this section, and which are in excess of the 
pounds of skim milk determined pursuant to paragraphs (a)(5)(i) and 
(ii) of this section;
    (i) Multiply by 1.25 the pounds of skim milk remaining in Class I 
at this allocation step; and
    (ii) Subtract from the result in paragraph (a)(5)(i) the pounds of 
skim milk in receipts of producer milk and fluid milk products from 
other pool plants.
    (6) Subtract from the pounds of skim milk remaining in all classes 
other than Class I, in sequence beginning with Class IV, the pounds of 
skim milk in receipts of bulk fluid milk products from a handler 
regulated under another Federal order that are in excess of bulk fluid 
milk products transferred or diverted to such handler, if other than 
Class I classification is requested, but not in excess of the pounds of 
skim milk remaining in these classes combined.
    (7) Subtract from the pounds of skim milk remaining in each class, 
in series beginning with Class IV, the pounds of skim milk in fluid 
milk products and bulk fluid cream products in inventory at the 
beginning of the month that were not previously subtracted in this 
section.
    (8) Subtract from the pounds of skim milk remaining in each class 
at the plant receipts of skim milk in fluid milk products from an 
unregulated supply plant that were not previously subtracted in this 
section and that were not offset by transfers or diversions of fluid 
milk products to the unregulated supply plant from which fluid milk 
products to be allocated at this step were received. Such subtraction 
shall be pro rata to the pounds of skim milk in Class I and in Classes 
II, III, and IV combined, with the quantity prorated to Classes II, 
III, and IV combined being subtracted in sequence beginning with Class 
IV.
    (9) Subtract from the pounds of skim milk remaining in each class 
the pounds of skim milk in receipts of bulk fluid milk products from a 
handler regulated under another Federal order that are in excess of 
bulk fluid milk products transferred or diverted to such handler that 
were not subtracted in paragraph (a)(6) of this section. Such 
subtraction shall be pro rata to the pounds of skim milk in Class I and 
in Classes II, III, and IV combined, with the quantity prorated to 
Classes II, III, and IV combined being subtracted in sequence beginning 
with Class IV, with respect to whichever of the following quantities 
represents the lower proportion of Class I milk:
    (i) The estimated utilization of skim milk of all handlers in each 
class as announced for the month pursuant to Sec.  1051.45(a); or
    (ii) The total pounds of skim milk remaining in each class at this 
allocation step.
    (10) Subtract from the pounds of skim milk remaining in each class 
the pounds of skim milk in receipts of fluid milk products and bulk 
fluid cream products from another pool plant according to the 
classification of such products pursuant to Sec.  1051.42(a).
    (11) If the total pounds of skim milk remaining in all classes 
exceed the pounds of skim milk in producer milk, subtract such excess 
from the pounds of skim milk remaining in each class in series 
beginning with Class IV.
    (b) Butterfat shall be allocated in accordance with the procedure 
outlined for skim milk in paragraph (a) of this section.
    (c) The quantity of producer milk in each class shall be the 
combined pounds of skim milk and butterfat remaining in each class 
after the computations pursuant to paragraphs (a) and (b) of this 
section.

[[Page 47228]]

Sec.  1051.45  Market administrator's reports and announcements 
concerning classification.

    (a) Whenever required for the purpose of allocating receipts from 
plants regulated under other Federal orders pursuant to Sec.  
1051.44(a)(9) and the corresponding step of Sec.  1051.44(b), the 
market administrator shall estimate and publicly announce the 
utilization (to the nearest whole percentage) in Class I during the 
month of skim milk and butterfat, respectively, in producer milk of all 
handlers. The estimate shall be based upon the most current available 
data and shall be final for such purpose.
    (b) The market administrator shall report to the market 
administrators of other Federal orders as soon as possible after the 
handlers' reports of receipts and utilization are received, the class 
to which receipts from plants regulated under other Federal orders are 
allocated pursuant to Sec. Sec.  1051.43(d) and 1051.44 (including any 
reclassification of inventories of bulk concentrated fluid milk 
products), and thereafter any change in allocation required to correct 
errors disclosed on the verification of such report.
    (c) The market administrator shall furnish each handler operating a 
pool plant who has shipped fluid milk products or bulk fluid cream 
products to a plant fully regulated under another Federal order the 
class to which the shipments were allocated by the market administrator 
of the other Federal order on the basis of the report by the receiving 
handler and, as necessary, any changes in the allocation arising from 
the verification of such report.
    (d) The market administrator shall report to each cooperative 
association which so requests, the percentage of producer milk 
delivered by members of the association that was used in each class by 
each handler receiving the milk. For the purpose of this report, the 
milk so received shall be prorated to each class in accordance with the 
total utilization of producer milk by the handler.

Class Prices


Sec.  1051.50  Class prices, component prices, and advanced pricing 
factors.

    Class prices per hundredweight of milk containing 3.5 percent 
butterfat, component prices, and advanced pricing factors shall be as 
follows. The prices and pricing factors described in paragraphs (a), 
(b), (e), (g), (h), and (s) of this section shall be based on a 
weighted average of the most recent 2 weekly prices announced by the 
United States Department of Agriculture's Agricultural Marketing 
Service (AMS) in the National Dairy Product Sales Report (NDPSR) before 
the 24th day of the month. These prices shall be announced on or before 
the 23rd day of the month and shall apply to milk received during the 
following month. The prices described in paragraphs (i) through (r) of 
this section shall be based on a weighted average for the preceding 
month of Western Dairy Product weekly prices described in paragraphs 
(n) through (q) of this section as determined and announced by AMS in 
the NDPSR on or before the 5th day of the month and shall apply to milk 
received during the preceding month. The price described in paragraph 
(f) of this section shall be derived from the Class II skim milk price 
announced on or before the 23rd day of the month preceding the month to 
which it applies and the butterfat price announced on or before the 5th 
day of the month following the month to which it applies.
    (a) Class I price. The Class I price per hundredweight, rounded to 
the nearest cent, shall be 0.965 times the Class I skim milk price plus 
3.5 times the Class I butterfat price.
    (b) Class I skim milk price. The Class I skim milk price per 
hundredweight shall be the adjusted Class I differential specified in 
Sec.  1051.52, plus the adjustments to Class I prices specified in 
Sec. Sec.  1005.51(b), 1006.51(b) and 1007.51(b) plus the higher of the 
advanced pricing factors computed in paragraph (s)(1) or (2) of this 
section.
    (c) Class I nonfat solids price. The Class I nonfat solids price 
per pound shall be the Class I skim milk price per hundredweight 
multiplied by 0.76, with the resulting number divided by 9.
    (d) Class I fluid carrier price. The Class I fluid carrier is that 
portion of Class I skim milk that is not nonfat milk solids. The Class 
I fluid carrier price per pound shall be the Class I skim milk price 
per hundredweight multiplied by 0.24, with the resulting number divided 
by 91.
    (e) Class I butterfat price. The Class I butterfat price per pound 
shall be the adjusted Class I differential specified in Sec.  1051.52 
divided by 100, plus the adjustments to Class I prices specified in 
Sec. Sec.  1005.51(b), 1006.51(b) and 1007.51(b) divided by 100 plus 
the advanced butterfat price computed in paragraph (s)(3) of this 
section.
    (f) The Class II price per hundredweight, rounded to the nearest 
cent, shall be 0.965 times the Class II skim milk price plus 3.5 times 
the Class II butterfat price.
    (g) Class II skim milk price. The Class II skim milk price per 
hundredweight shall be the advanced Class IV skim milk price computed 
in paragraph (s)(2) of this section plus 70 cents.
    (h) Class II nonfat solids price. The Class II nonfat solids price 
per pound, rounded to the nearest one-hundredth cent, shall be the 
Class II skim milk price divided by 9.
    (i) Class II butterfat price. The Class II butterfat price per 
pound shall be the butterfat price plus $0.007.
    (j) Class III price. The Class III price per hundredweight, rounded 
to the nearest cent, shall be 0.965 times the Class III skim milk price 
plus 3.5 times the butterfat price.
    (k) Class III skim milk price. The Class III skim milk price per 
hundredweight, rounded to the nearest cent, shall be the protein price 
per pound times 3.1 plus the other solids price per pound times 5.9.
    (l) Class IV price. The Class IV price per hundredweight, rounded 
to the nearest cent, shall be 0.965 times the Class IV skim milk price 
plus 3.5 times the butterfat price.
    (m) Class IV skim milk price. The Class IV skim milk price per 
hundredweight, rounded to the nearest cent, shall be the nonfat solids 
price per pound times 9.
    (n) Butterfat price. The butterfat price per pound, rounded to the 
nearest one-hundredth cent, shall be the Western Dairy Product Price 
for butter survey price reported by the Department for the month, less 
the Western Butter Manufacturing Cost, with the result multiplied by 
1.211.
    (1) The Western Dairy Product Price for butter shall be computed at 
the weighted average of the Grade AA butter prices reported to AMS 
under the mandatory price reporting program by plants manufacturing 
butter that are located in the states of Arizona, California, Idaho, 
Nevada, Oregon, Utah, and Washington. The weekly price described in 
this paragraph shall be reported in the National Dairy Product Sales 
Report (NDPSR). In the event that a Western Dairy Product Price for 
butter cannot be reported, then the price used in the calculations set 
forth in Sec.  1051.50(n) shall be the national weighted average of the 
preceding month's weekly prices for Grade AA butter as determined and 
announced by AMS in the NDPSR on or before the 5th day of the month and 
shall apply to all milk received during the preceding month, less 2.08 
cents per pound.
    (2) The Western Butter Manufacturing Cost shall be the cost 
obtained from a survey of butter manufacturing plants in the western 
region described in Sec.  1051.50(n)(1), which shall be conducted by 
AMS consistent with the methodology used by the California Department 
of Food and Agriculture in developing its manufacturing cost for

[[Page 47229]]

California butter plants, with the cost for California butter plants, 
with the further addition of butter marketing costs. In the event that 
a Western Butter Manufacturing Cost is not available, the butter 
manufacturing cost used in the calculation set forth in Sec.  
1051.50(n) shall be 17.24 cents.
    (o) Nonfat solids price. The nonfat solids price per pound, rounded 
to the nearest one-hundredth cent, shall be the Western Dairy Product 
Price nonfat dry milk survey price reported by AMS under the mandatory 
reporting program, less the Western Nonfat Dry Milk Manufacturing Cost 
and multiplying the result by 0.99.
    (1) The Western Dairy Product Price for nonfat dry milk shall be 
computed at the weighted average of the Grade A and Extra Grade nonfat 
dry milk prices reported to AMS under the mandatory price reporting 
program by plants manufacturing nonfat dry milk that are located in the 
states of Arizona, California, Idaho, Nevada, Oregon, Utah, and 
Washington. The weekly price described in this paragraph shall be 
reported in the National Dairy Product Sales Report (NDPSR). In the 
event that a Western Dairy Product Price for nonfat dry milk cannot be 
reported, then the price used in the calculations set forth in Sec.  
1051.50(o) shall be the national weighted average of the preceding 
month's weekly prices for Grade A and Extra Grade nonfat dry milk as 
determined and announced by AMS in the NDPSR on or before the 5th day 
of the month and shall apply to all milk received during the preceding 
month, less 2.57 cents per pound.
    (2) The Western Nonfat Dry Milk Manufacturing Cost shall be the 
cost obtained from a survey of nonfat dry milk manufacturing plants in 
the western region described in Sec.  1051.50(o)(1), which shall be 
conducted by the Department consistent with the methodology used by the 
California Department of Food and Agriculture in developing its 
manufacturing cost for California nonfat dry milk plants, with the 
further addition of nonfat dry milk marketing costs. In the event that 
a Western Nonfat Dry Milk Manufacturing Cost is not available, the 
nonfat dry milk manufacturing cost used in the calculation set forth in 
Sec.  1051.50(o) shall be 19.97 cents.
    (p) Protein price. The protein price per pound, rounded to the 
nearest one-hundredth cent, shall be computed as follows:
    (1) Compute the Western Dairy Product Price for Cheddar Cheese as 
the weighted average of the weekly 40-pound block cheddar cheese prices 
reported to AMS under the mandatory price reporting program by plants 
manufacturing cheddar cheese that are located in the states of Arizona, 
California, Idaho, Nevada, Oregon, Utah, and Washington. The weekly 
price described in this paragraph shall be reported in the National 
Dairy Product Sales Report (NDPSR). In the event that a Western Dairy 
Product Price for 40-pound cheddar cheese blocks cannot be reported, 
then the price used in the calculations set forth in Sec.  
1051.50(p)(2) shall be the national weighted average of the preceding 
month's weekly prices for 40-pound cheddar cheese blocks as determined 
and announced by AMS in the NDPSR on or before the 5th day of the month 
and shall apply to all milk received during the preceding month, less 
3.40 cents per pound.
    (2) Subtract the Western States Cheese Manufacturing Cost from the 
price computed pursuant to paragraph (p)(1) of this section and 
multiply the result by 1.383;
    (3) The Western Cheddar Cheese Manufacturing Cost shall be the per 
pound cost obtained from a survey of cheddar cheese manufacturing 
plants in the western region described in Sec.  1051.50(p)(1), which 
shall be conducted by the Department consistent with the methodology 
used by the California Department of Food and Agriculture in developing 
its manufacturing cost for California cheddar cheese plants, with the 
further addition of 40-pound block cheddar cheese marketing costs. In 
the event that a Western Cheddar Cheese Manufacturing Cost is not 
available, the cheddar cheese manufacturing cost used in the 
calculations set forth in Sec.  1051.50(p)(2) and Sec.  
1051.50(p)(4)(i) shall be 22.91 cents.
    (4) Add to the amount computed pursuant to paragraph (p)(2) of this 
section an amount computed as follows:
    (i) Subtract the Western States Cheese Manufacturing Cost from the 
price computed pursuant to paragraph (p)(1) of this section and 
multiply the result by 1.572; and
    (ii) Subtract 0.9 times the butterfat price computed pursuant to 
paragraph (n) of this section from the amount computed pursuant to 
paragraph (p)(4)(i) of this section; and
    (iii) Multiply the amount computed pursuant to paragraph (p)(4)(ii) 
of this section by 1.17.
    (q) Other solids price. The other solids price per pound, rounded 
to the nearest one-hundredth cent, shall be computed as follows:
    (1) Subtract the Western Dry Whey Manufacturing Cost per pound from 
the per pound Western Dairy Product Price for dry whey and multiply the 
result by 1.03
    (2) The Western Dairy Product Price for dry whey shall be computed 
at the weighted average of the weekly dry whey prices reported to AMS 
under the mandatory price reporting program by plants manufacturing dry 
whey that are located in the states of Arizona, California, Idaho, 
Nevada, Oregon, Utah, and Washington. The weekly price described in 
this paragraph shall be reported in the National Dairy Product Sales 
Report (NDPSR). In the event that a Western Dairy Product Price for dry 
whey cannot be reported, then the price used in the calculations set 
forth in Sec.  1051.50(q)(1) shall be the national weighted average of 
the preceding month's weekly prices for dry whey as determined and 
announced by AMS in the NDPSR on or before the 5th day of the month and 
shall apply to all milk received during the preceding month, less 0.84 
cents per pound.
    (3) The Western Dry Whey Manufacturing Cost shall be the per pound 
cost obtained from a survey of dry whey manufacturing plants in the 
western region described in Sec.  1051.50(q)(2), which shall be 
conducted by the Department consistent with the methodology used by the 
California Department of Food and Agriculture in developing its 
manufacturing cost for California dairy products, with the further 
addition of dry whey marketing costs. In the event that a Western Dry 
Whey Manufacturing Cost is not available, the dry whey manufacturing 
cost used in the calculation set forth in Sec.  1051.50(q)(1) shall be 
23.10 cents.
    (r) Somatic cell adjustment. The somatic cell adjustment per 
hundredweight of milk shall be determined as follows:
    (1) Multiply 0.0005 by the weighted average price computed pursuant 
to paragraph (p)(1) of this section and round to the 5th decimal place;
    (2) Subtract the somatic cell count of the milk (reported in 
thousands) from 350; and
    (3) Multiply the amount computed in paragraph (r)(1) of this 
section by the amount computed in paragraph (r)(2) of this section and 
round to the nearest full cent.
    (s) Advanced pricing factors. For the purpose of computing the 
Class I skim milk price, the Class II skim milk price, the Class II 
nonfat solids price, and the Class I butterfat price for the following 
month, the following pricing factors shall be computed using the 
weighted average of the 2 most recent NDPSR U.S. average weekly survey 
prices

[[Page 47230]]

announced before the 24th day of the month:
    (1) An advanced Class III skim milk price per hundredweight, 
rounded to the nearest cent, shall be computed as follows:
    (i) Following the procedure set forth in paragraphs (p) and (q) of 
this section, but using the weighted average of the 2 most recent NDPSR 
U.S. average weekly survey prices announced before the 24th day of the 
month, compute a protein price and another solids price;
    (ii) Multiply the protein price computed in paragraph (s)(1)(i) of 
this section by 3.1;
    (iii) Multiply the other solids price per pound computed in 
paragraph (s)(1)(i) of this section by 5.9; and
    (iv) Add the amounts computed in paragraphs (s)(1)(ii) and (iii) of 
this section.
    (2) An advanced Class IV skim milk price per hundredweight, rounded 
to the nearest cent, shall be computed as follows:
    (i) Following the procedure set forth in paragraph (o) of this 
section, but using the weighted average of the 2 most recent NDPSR U.S. 
average weekly survey prices announced before the 24th day of the 
month, compute a nonfat solids price; and
    (ii) Multiply the nonfat solids price computed in paragraph 
(s)(2)(i) of this section by 9.
    (3) An advanced butterfat price per pound, rounded to the nearest 
one-hundredth cent, shall be calculated by computing a weighted average 
of the 2 most recent U.S. average NDPSR AA Butter survey prices 
announced before the 24th day of the month, subtracting 17.15 cents 
from this average, and multiplying the result by 1.211.


Sec.  1051.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Los Angeles County, California, which is reported in Sec.  1051.52. The 
Class I price shall be the price computed pursuant to Sec.  1051.51(a) 
for Los Angeles County, California.


Sec.  1051.52  Adjusted Class I differentials.

    See Sec.  1000.52.


Sec.  1051.53  Announcement of class prices, component prices, and 
advanced pricing factors.

    (a) On or before the 5th day of the month, the market administrator 
for each Federal milk marketing order shall announce the following 
prices (as applicable to that order) for the preceding month:
    (1) The Class II price;
    (2) The Class II butterfat price;
    (3) The Class III price;
    (4) The Class III skim milk price;
    (5) The Class IV price;
    (6) The Class IV skim milk price;
    (7) The butterfat price;
    (8) The nonfat solids price;
    (9) The protein price;
    (10) The other solids price; and
    (11) The somatic cell adjustment rate.
    (b) On or before the 23rd day of the month, the market 
administrator for each Federal milk marketing order shall announce the 
following prices and pricing factors for the following month:
    (1) The Class I price;
    (2) The Class I skim milk price;
    (3) The Class I nonfat solids price;
    (4) The Class I fluid carrier price;
    (5) The Class I butterfat price;
    (6) The Class II skim milk price;
    (7) The Class II nonfat solids price; and
    (8) The advanced pricing factors described in Sec.  1051.50(s).


Sec.  1051.54  Equivalent price.

    If for any reason a price or pricing constituent required for 
computing the prices described in Sec.  1051.50 is not available, the 
market administrator shall use a price or pricing constituent 
determined by the Deputy Administrator, Dairy Programs, Agricultural 
Marketing Service, to be equivalent to the price or pricing constituent 
that is required.


Sec.  1051.55  Transportation credits and transportation allowances.

    (a) Each handler operating a pool distributing plant described in 
Sec.  1051.7(a) or (b) or a pool distributing plant that is part of a 
unit described in Sec.  1051.7(d) that physically receives bulk milk, 
skim milk, or condensed skim milk from another pool plant shall receive 
a transportation credit for such milk computed as follows:
    (1) Determine the hundredweight of milk eligible for the credit as 
follows;
    (i) The number of hundredweights of milk received from sources 
described in Sec.  1051.55 (a)(2) or the number of hundredweights of 
milk utilized in the plant for the processing and packaging of fluid 
milk products, whichever is less.
    (2) Determine the transportation credit rate for milk received at 
the pool distributing plants specified in Sec.  1051.55 (a) as follows;
    (i) For plants located in the counties of Orange, Riverside, San 
Bernardino, San Diego, or Ventura Counties receiving milk from plants 
located in Los Angeles County, $0.54 hundredweight,
    (ii) For plants located in the counties of Los Angeles, Orange or 
Ventura receiving milk from plants located in Fresno, Kings, or Tulare 
Counties, $0.89 per hundredweight,
    (iii) For plants located in the counties of Riverside, San 
Bernardino or San Diego receiving milk from plants located in Fresno, 
Kings or Tulare Counties, $0.97 per hundredweight,
    (iv) For plants located in the counties of Alameda, San Francisco, 
Santa Clara, Solano, or Sonoma Counties from plants located in Merced 
or Stanislaus Counties, $0.75 per hundredweight,
    (v) For plants located in the county of Sacramento from plants 
located in Merced or Stanislaus Counties, $0.68 per hundredweight.
    (3) Multiply the applicable rate as specified in Sec.  1051.55 
(a)(2) by the number of hundredweights of eligible milk as specified in 
Sec.  1051.55 (a)(1). The resulting transportation credit calculated 
under this section shall be deducted from the reporting handler's value 
of milk as specified in Sec.  1051.60 (a)(4).
    (b) Each handler operating an eligible pool plant, and handler that 
transfers or diverts bulk milk from a pool plant to an eligible pool 
plant, and each handler described in Sec.  1051.9(c) or Sec.  1051.9(d) 
that delivers producer milk to an eligible pool plant as described in 
Sec.  1051.55 (b)(1) shall receive a transportation allowance on milk 
eligible for the allowance pursuant to paragraph (b)(2) of this 
section. The allowance shall be computed by multiplying the 
hundredweight of milk eligible for the allowance by the rates described 
below:
    (1) Pool plants that are eligible to receive transportation 
allowances are those that are located in the deficit receiving areas 
specified in Sec.  1051.55 (b)(2) and that have a combined Class I and 
Class II utilization percentage for the month that is 50 percent or 
greater.
    (i) For a handler that transfers or diverts bulk milk from a pool 
plant to an eligible pool plant, only that milk which is shipped to 
(and physically unloaded into) an eligible pool plant shall qualify as 
eligible for transportation allowances.
    (ii) For a handler described in Sec.  1051.9(c) or Sec.  1051.9(d) 
that delivers producer milk to an eligible pool plant, only that milk 
which is shipped to (and physically unloaded into) an eligible pool 
plant shall qualify as eligible for transportation allowances.
    (2) The transportation allowance rates for milk shipped to (and 
physically unloaded into) eligible plants shall be as follows:
    (i) For plants located in the Southern California Receiving Area, 
consisting of the counties of Los Angeles, Orange, Riverside, San 
Bernardino, San Diego,

[[Page 47231]]

and Ventura, receiving milk delivered from San Bernardino County; for 
shipments of more than 93 miles, $0.16 hundredweight.
    (ii) For plants located in the Southern California Receiving Area, 
consisting of the counties of Los Angeles, Orange, Riverside, San 
Bernardino, San Diego, and Ventura, receiving milk delivered from 
Riverside County; for shipments of more than 93 miles, $0.36 
hundredweight.
    (iii) For plants located in the located in the Southern California 
Receiving Area, consisting of the counties of Los Angeles, Orange, 
Riverside, San Bernardino, San Diego, and Ventura Counties receiving 
milk delivered from counties other than Riverside or San Bernardino: 
For shipments of more than 79 miles but not greater than 99 miles, 
$0.16 hundredweight; for shipments of more than 99 but not greater than 
119 miles, $0.37 per hundredweight; for shipments of more than 119 
miles, $0.54 per hundredweight.
    (iv) For plants located in the located in the Bay Area Receiving 
Area, consisting of the counties of Alameda, Contra Costa, Santa Clara, 
Santa Cruz, San Francisco and San Mateo, receiving milk delivered from 
any county: for shipments of 79 miles or less, $0.31 per hundredweight; 
for shipments of more than 79 miles but not greater than 199 miles, 
$0.37 hundredweight; for shipments of more than 199 miles, $0.45 per 
hundredweight.
    (v) For plants located in the located in the North Bay Area 
Receiving Area, consisting of the counties of Marin, Napa, Solano and 
Sonoma, receiving milk delivered from any county: for shipments of 45 
miles or less, $0.23 per hundredweight; for shipments of more than 45 
miles but not greater than 96 miles, $0.27 hundredweight; for shipments 
of more than 96 miles, $0.36 per hundredweight.
    (vi) For plants located in the located in the Sacramento Receiving 
Area, consisting of Sacramento County, receiving milk delivered from 
any county: for shipments of 59 miles or less, $0.17 per hundredweight; 
for shipments of more than 59, $0.23 hundredweight.
    (c) The transportation allowances and credits rates shall be 
increased or decreased by the market administrator to reflect per 
hundredweight changes in the actual transportation costs as published 
by the California Department of Food and Agriculture in its Hauling 
Rate Survey.
    (d) For purposes of this section, the distances to be computed 
shall be determined by the market administrator using the shortest 
available state and/or Federal highway mileage. Mileage determinations 
are subject to redetermination at all times. In the event a handler 
requests a redetermination of the mileage pertaining to any plant, the 
market administrator shall notify the handler of such redetermination 
within 30 days after the receipt of such request. Any financial 
obligations resulting from a change in mileage shall not be retroactive 
for any periods prior to the redetermination by the market 
administrator.

Producer Price Differential


Sec.  1051.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1051.9(c) and Sec.  
1051.9(d) with respect to milk that was not received at a pool plant by 
adding the amounts computed in paragraphs (a) through (i) of this 
section and subtracting from that total amount the values computed in 
paragraphs (j) and (k) of this section. Unless otherwise specified, the 
skim milk, butterfat, and the combined pounds of skim milk and 
butterfat referred to in this section shall result from the steps set 
forth in Sec.  1051.44(a), (b), and (c), respectively, and the nonfat 
components of producer milk in each class shall be based upon the 
proportion of such components in producer skim milk. Receipts of 
nonfluid milk products that are distributed as labeled reconstituted 
milk for which payments are made to the producer-settlement fund of 
another Federal order under Sec.  1051.76(a)(4) or (d) shall be 
excluded from pricing under this section.
    (a) Class I value.
    (1) Multiply the pounds of nonfat solids in Class I by the Class I 
nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of fluid 
carrier in Class I by the Class I fluid carrier price; and
    (3) Add an amount obtained by multiplying the pounds of butterfat 
in Class I by the Class I butterfat price; and
    (4) Subtract the value of the handler's transportation credits as 
calculated in Sec.  1051.55(a)(1) through (a)(3); and
    (5) Deduct for each pound of milk nonfat solids in nonfat dry milk 
used for fortifying Class I products to meet the State of California's 
fluid milk standards as described in Sec.  1051.40(d)(3) a 
fortification allowance to be computed as follows:
    (i) Subtract the current Class IV nonfat solids price from the 
current Class I nonfat solids price
    (ii) Subtract the value calculated in Sec.  1051.60 (a)(5)(i) from 
zero cents ($0.00).
    (iii) The fortification allowance for each pound of nonfat milk 
solids in the nonfat dry milk used in fortification as described in 
this section shall be zero cents ($0.00) or the value calculated in in 
Sec.  1051.60 (a)(5)(ii), whichever is greater.
    (6) Deduct for each pound of milk nonfat solids in condensed skim 
milk used for fortifying Class I products to meet the State of 
California's fluid milk standards as described in Sec.  1051.40(d)(3) a 
fortification allowance to be computed as follows:
    (i) Subtract the current Class IV nonfat solids price from the 
current Class I nonfat solids price
    (ii) Subtract the value calculated in Sec.  1051.60 (a)(6)(i) from 
9.87 cents ($0.0987).
    (iii) The fortification allowance for each pound of nonfat milk 
solids in condensed skim milk used in fortification as described in 
this section shall be zero cents ($0.00) or the value calculated in in 
Sec.  1051.60 (a)(6)(ii), whichever is greater.
    (b) Class II value.
    (1) Multiply the pounds of nonfat solids in Class II skim milk by 
the Class II nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class II times the Class II butterfat price.
    (c) Class III value.
    (1) Multiply the pounds of protein in Class III skim milk by the 
protein price;
    (2) Add an amount obtained by multiplying the pounds of other 
solids in Class III skim milk by the other solids price; and
    (3) Add an amount obtained by multiplying the pounds of butterfat 
in Class III by the butterfat price.
    (d) Class IV value.
    (1) Multiply the pounds of nonfat solids in Class IV skim milk by 
the nonfat solids price; and
    (2) Add an amount obtained by multiplying the pounds of butterfat 
in Class IV by the butterfat price.
    (e) Compute an adjustment for the somatic cell content of producer 
milk by multiplying the values reported pursuant to Sec.  1051.30(a)(1) 
and (c)(1) by the percentage of total producer milk allocated to Class 
II, Class III, and Class IV pursuant to Sec.  1051.44(c);
    (f) Multiply the pounds of skim milk and butterfat overage assigned 
to each class pursuant to Sec.  1051.44(a)(11) and the corresponding 
step of Sec.  1051.44(b) by the skim milk prices and butterfat prices 
applicable to each class.

[[Page 47232]]

    (g) Multiply the difference between the current month's Class I, 
II, or III price, as the case may be, and the Class IV price for the 
preceding month and by the hundredweight of skim milk and butterfat 
subtracted from Class I, II, or III, respectively, pursuant to Sec.  
1051.44(a)(7) and the corresponding step of Sec.  1051.44(b);
    (h) Multiply the difference between the Class I price applicable at 
the location of the pool plant and the Class IV price by the 
hundredweight of skim milk and butterfat assigned to Class I pursuant 
to Sec.  1051.43(d) and the hundredweight of skim milk and butterfat 
subtracted from Class I pursuant to Sec.  1051.44(a)(3)(i) through (vi) 
and the corresponding step of Sec.  1051.44(b), excluding receipts of 
bulk fluid cream products from plants regulated under other Federal 
orders and bulk concentrated fluid milk products from pool plants, 
plants regulated under other Federal orders, and unregulated supply 
plants.
    (i) Multiply the difference between the Class I price applicable at 
the location of the nearest unregulated supply plants from which an 
equivalent volume was received and the Class III price by the pounds of 
skim milk and butterfat in receipts of concentrated fluid milk products 
assigned to Class I pursuant to Sec.  1051.43(d) and Sec.  
1051.44(a)(3)(i) and the corresponding step of Sec.  1051.44(b) and the 
pounds of skim milk and butterfat subtracted from Class I pursuant to 
Sec.  1051.44(a)(8) and the corresponding step of Sec.  1051.44(b), 
excluding such skim milk and butterfat in receipts of fluid milk 
products from an unregulated supply plant to the extent that an 
equivalent amount of skim milk or butterfat disposed of to such plant 
by handlers fully regulated under any Federal milk order is classified 
and priced as Class I milk and is not used as an offset for any other 
payment obligation under any order.
    (j) For reconstituted milk made from receipts of nonfluid milk 
products, multiply $1.00 (but not more than the difference between the 
Class I price applicable at the location of the pool plant and the 
Class IV price) by the hundredweight of skim milk and butterfat 
contained in receipts of nonfluid milk products that are allocated to 
Class I use pursuant to Sec.  1051.43(d).
    (k) Subtract the value of the handler's transportation allowances 
calculated pursuant to Sec.  1051.55(a)(i) and (a)(ii).


Sec.  1051.61  Computation of producer price differential.

    For each month the market administrator shall compute a producer 
price differential per hundredweight. The report of any handler who has 
not made payments required pursuant to Sec.  1051.71 for the preceding 
month shall not be included in the computation of the producer price 
differential, and such handler's report shall not be included in the 
computation for succeeding months until the handler has made full 
payment of outstanding monthly obligations. Subject to the conditions 
of this paragraph, the market administrator shall compute the producer 
price differential in the following manner:
    (a) Combine into one total the values computed pursuant to Sec.  
1051.60 for all handlers required to file reports prescribed in Sec.  
1051.30;
    (b) Subtract the total values obtained by multiplying each 
handler's total pounds of protein, other solids, and butterfat 
contained in the milk for which an obligation was computed pursuant to 
Sec.  1051.60 by the protein price, other solids price, and the 
butterfat price, respectively, and the total value of the somatic cell 
adjustment pursuant to Sec.  1051.30(a)(1) and (c)(1);
    (c) Add an amount equal to the minus location adjustments and 
subtract an amount equal to the plus location adjustments computed 
pursuant to Sec.  1051.75;
    (d) Add an amount equal to not less than one-half of the 
unobligated balance in the producer-settlement fund;
    (e) Divide the resulting amount by the sum of the following for all 
handlers included in these computations:
    (1) The total hundredweight of producer milk; and
    (2) The total hundredweight for which a value is computed pursuant 
to Sec.  1051.60(i); and
    (f) Subtract not less than 4 cents nor more than 5 cents from the 
price computed pursuant to paragraph (e) of this section. The result 
shall be known as the producer price differential for the month.


Sec.  1051.62  Announcement of producer prices.

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


Sec.  1051.68  Payments to producers under the California Quota 
Program.

    Notification shall be given by the market administrator to 
producers of intent to make payment of producer returns attributable to 
producers who participate in the California Quota Program in accordance 
with Sec.  1051.72. Producers who participate in the California Quota 
Program shall be identified as follows:
    Any producer whose farm is located in California and whose milk is 
received at a plant located in California unless such producer 
irrevocably notifies the market administrator in writing before the 
first day of any month for which he first elects to receive payment at 
the applicable prices announced under Sec.  1051.62(h).

Subpart C--Payments for Milk

Producer Payments


Sec.  1051.70  Producer-settlement fund.

    See Sec.  1000.70.


Sec.  1051.71  Payments to the producer-settlement fund.

    Each handler shall make payment to the producer-settlement fund in 
a manner that provides receipt of the funds by the market administrator 
no later than the 15th day after the end of the month (except as 
provided in Sec.  1000.90). Payment shall be the amount, if any, by 
which the amount specified in paragraph (a) of this section exceeds the 
amount specified in paragraph (b) of this section:
    (a) The total value of milk to the handler for the month as 
determined pursuant to Sec.  1051.60.
    (b) The aggregate amount paid to producers and cooperative 
associations pursuant to Sec.  1051.73.


Sec.  1051.72  Payments from the producer-settlement fund.

    (a) The market administrator shall compute the amount due each 
producer for milk received during the month from such producer by a 
handler(s) who made payments for such month pursuant to Sec.  1051.71 
in an amount equal to not less than the sum of:
    (1) The hundredweight of producer milk received times the producer 
price differential for the month as adjusted pursuant to Sec.  1051.75;
    (2) The pounds of butterfat received times the butterfat price for 
the month;
    (3) The pounds of protein received times the protein price for the 
month;

[[Page 47233]]

    (4) The pounds of other solids received times the other solids 
price for the month;
    (5) The hundredweight of milk received times the somatic cell 
adjustment for the month;
    (6) Less any payment made pursuant to Sec.  1051.73;
    (7) Less proper deductions authorized in writing by such producer, 
and plus or minus adjustments for errors in previous payments to such 
producer subject to approval by the market administrator; and
    (8) Less deductions for marketing services pursuant to Sec.  
1000.86.
    (b) On or before the 18th day after the end of each month, the 
market administrator shall pay direct to each producer who has not 
authorized a cooperative association to receive payment for such 
producer or for milk not subject to the California Quota Program 
pursuant to Sec.  1051.68, the amount calculated for such producer 
pursuant to paragraph (a) of this section subject to the provisions of 
Sec.  1051.86.
    (c) On or before the 16th day after the end of each month, the 
market administrator, subject to the provisions of Sec.  1051.86, shall 
pay:
    (1) To each cooperative association authorized to receive payments 
due producers who market their milk through such cooperative 
association, and which is not subject to the California Quota Program 
pursuant to Sec.  1051.68, an amount equal to the aggregate of the 
payments calculated pursuant to paragraph (a) of this section for all 
producers certified to the market administrator by such cooperative 
association to receive such payments; and
    (2) To the California Department of Food & Agriculture's Milk 
Pooling Branch, for each producer and cooperative association for milk 
subject to the California Quota Program pursuant to Sec.  1051.68, the 
aggregate of the payments otherwise due such individual producers and 
cooperative associations pursuant to paragraph (b) and subparagraph 
(c)(1) of this section.
    (d) If, at such time, the balance in the producer-settlement fund 
is insufficient to make all payments pursuant to this section, the 
market administrator shall reduce uniformly such payments under this 
section and shall complete the payments as soon as the funds are 
available.


Sec.  1051.73  Partial payments to producers and to cooperative 
associations.

    (a) Each handler shall pay each producer for producer milk for 
which payment is not made to a cooperative association pursuant to 
paragraph (b) of this section and who has not discontinued shipments as 
of the date of this partial payment, for milk received during the first 
15 days of the month from the producer at not less than the lowest 
announced class price for the preceding month, less proper deductions 
authorized in writing by the producer; payment shall be made so that it 
is received by each producer on or before the 26th day of the month 
(except as provided in Sec.  1000.90).
    (b) Payments for milk received from cooperative association 
members. On or before the day prior to the date specified in paragraph 
(a) of this section (except as provided in Sec.  1000.90), each handler 
shall pay to a cooperative association for milk from producers who 
market their milk through the cooperative association and who have 
authorized the cooperative to collect such payments on their behalf an 
amount equal to the sum of the individual payments otherwise payable 
for such producer milk pursuant to paragraph (a) of this section.
    (c) Payment for milk received from cooperative association pool 
plants, from cooperatives as handlers pursuant to Sec.  1051.9(c), or 
from handlers pursuant to Sec.  1051.9(d). On or before the day prior 
to the date specified in paragraph (a) of this section (except as 
provided in Sec.  1000.90), each handler who receives fluid milk 
products at its plant from a cooperative association in its capacity as 
the operator of a pool plant or who receives milk from a cooperative 
association in its capacity as a handler pursuant to Sec.  1051.9(c), 
including the milk of producers who are not members of such association 
and who the market administrator determines have authorized the 
cooperative association to collect payment for their milk, or from a 
handler pursuant to Sec.  1051.9(d) shall pay the cooperative or such 
handler for bulk fluid milk products and bulk fluid cream products 
received from a cooperative association in its capacity as the operator 
of a pool plant and for milk received from a handler pursuant to Sec.  
1051.9(c) or (d) during the first 15 days of the month, at not less 
than the lowest announced class prices per hundredweight for the 
preceding month.;
    (d) If a handler claims that a required payment to a producer 
cannot be made because the producer is deceased or cannot be located, 
or because the cooperative association or its lawful successor or 
assignee is no longer in existence, the payment shall be made to the 
producer-settlement fund, and in the event that the handler 
subsequently locates and pays the producer or a lawful claimant, or in 
the event that the handler no longer exists and a lawful claim is later 
established, the market administrator shall make the required payment 
from the producer-settlement fund to the handler or to the lawful 
claimant, as the case may be.
    (e) In making payments to producers pursuant to this section, each 
handler shall furnish each producer, except a producer whose milk was 
received from a cooperative association handler described in Sec.  
1051.9(a) or (c), a supporting statement in a form that may be retained 
by the recipient which shall show:
    (1) The name, address, Grade A identifier assigned by a duly 
constituted regulatory agency, and payroll number of the producer;
    (2) The daily and total pounds, and the month and dates such milk 
was received from that producer;
    (3) The total pounds of butterfat, protein, and other solids 
contained in the producer's milk;
    (4) The somatic cell count of the producer's milk;
    (5) The minimum rate or rates at which payment to the producer is 
required pursuant to the order in this part;
    (6) The rate used in making payment if the rate is other than the 
applicable minimum rate;
    (7) The amount, or rate per hundredweight, or rate per pound of 
component, and the nature of each deduction claimed by the handler; and
    (8) The net amount of payment to the producer, cooperative 
association, and producer settlement fund with respect to such 
producer.


Sec.  1051.74  [Reserved]


Sec.  1051.75  Plant location adjustments for producer milk and nonpool 
milk.

    For purposes of making payments for producer milk and nonpool milk, 
a plant location adjustment shall be determined by subtracting the 
Class I price specified in Sec.  1051.51 from the Class I price at the 
plant's location. The difference, plus or minus as the case may be, 
shall be used to adjust the payments required pursuant to Sec. Sec.  
1051.73 and 1051.76.


Sec.  1051.76  Payments by a handler operating a partially regulated 
distributing plant.

    On or before the 25th day after the end of the month (except as 
provided in Sec.  1000.90), the operator of a partially regulated 
distributing plant, other than a plant that is subject to marketwide 
pooling of producer returns under a State government's milk 
classification and pricing program, shall pay to the

[[Page 47234]]

market administrator for the producer-settlement fund the amount 
computed pursuant to paragraph (a) of this section or, if the handler 
submits the information specified in Sec. Sec.  1051.30(b) and 
1051.31(b), the handler may elect to pay the amount computed pursuant 
to paragraph (b) of this section. A partially regulated distributing 
plant that is subject to marketwide pooling of producer returns under a 
State government's milk classification and pricing program shall pay 
the amount computed pursuant to paragraph (c) of this section.
    (a) The payment under this paragraph shall be an amount resulting 
from the following computations:
    (1) From the plant's route disposition in the marketing area:
    (i) Subtract receipts of fluid milk products classified as Class I 
milk from pool plants, plants fully regulated under other Federal 
orders, and handlers described in Sec.  1051.9(c) or (d)of this 
chapter, except those receipts subtracted under a similar provision of 
another Federal milk order;
    (ii) Subtract receipts of fluid milk products from another nonpool 
plant that is not a plant fully regulated under another Federal order 
to the extent that an equivalent amount of fluid milk products disposed 
of to the nonpool plant by handlers fully regulated under any Federal 
order is classified and priced as Class I milk and is not used as an 
offset for any payment obligation under any order; and
    (iii) Subtract the pounds of reconstituted milk made from nonfluid 
milk products which are disposed of as route disposition in the 
marketing area;
    (2) For orders with multiple component pricing, compute a Class I 
differential price by subtracting Class III price from the current 
month's Class I price. Multiply the pounds remaining after the 
computation in paragraph (a)(1)(iii) of this section by the amount by 
which the Class I differential price exceeds the producer price 
differential, both prices to be applicable at the location of the 
partially regulated distributing plant except that neither the adjusted 
Class I differential price nor the adjusted producer price differential 
shall be less than zero;
    (3) For orders with skim milk and butterfat pricing, multiply the 
remaining pounds by the amount by which the Class I price exceeds the 
uniform price, both prices to be applicable at the location of the 
partially regulated distributing plant except that neither the adjusted 
Class I price nor the adjusted uniform price differential shall be less 
than the lowest announced class price; and
    (4) Unless the payment option described in paragraph (d) is 
selected, add the amount obtained from multiplying the pounds of 
labeled reconstituted milk included in paragraph (a)(1)(iii) of this 
section by any positive difference between the Class I price applicable 
at the location of the partially regulated distributing plant (less 
$1.00 if the reconstituted milk is labeled as such) and the Class IV 
price.
    (b) The payment under this paragraph shall be the amount resulting 
from the following computations:
    (1) Determine the value that would have been computed pursuant to 
Sec.  1051.60 for the partially regulated distributing plant if the 
plant had been a pool plant, subject to the following modifications:
    (i) Fluid milk products and bulk fluid cream products received at 
the plant from a pool plant, a plant fully regulated under another 
Federal order, and handlers described in Sec.  1051.9(c) or Sec.  
1051.9(d) of this chapter shall be allocated at the partially regulated 
distributing plant to the same class in which such products were 
classified at the fully regulated plant;
    (ii) Fluid milk products and bulk fluid cream products transferred 
from the partially regulated distributing plant to a pool plant or a 
plant fully regulated under another Federal order shall be classified 
at the partially regulated distributing plant in the class to which 
allocated at the fully regulated plant. Such transfers shall be 
allocated to the extent possible to those receipts at the partially 
regulated distributing plant from the pool plant and plants fully 
regulated under other Federal orders that are classified in the 
corresponding class pursuant to paragraph (b)(1)(i) of this section. 
Any such transfers remaining after the above allocation which are in 
Class I and for which a value is computed pursuant to Sec.  1051.60 for 
the partially regulated distributing plant shall be priced at the 
statistical uniform price or uniform price, whichever is applicable, of 
the respective order regulating the handling of milk at the receiving 
plant, with such statistical uniform price or uniform price adjusted to 
the location of the nonpool plant (but not to be less than the lowest 
announced class price of the respective order); and
    (iii) If the operator of the partially regulated distributing plant 
so requests, the handler's value of milk determined pursuant to Sec.  
1051.60 shall include a value of milk determined for each nonpool plant 
that is not a plant fully regulated under another Federal order which 
serves as a supply plant for the partially regulated distributing plant 
by making shipments to the partially regulated distributing plant 
during the month equivalent to the requirements of Sec.  1051.7(c) 
subject to the following conditions:
    (A) The operator of the partially regulated distributing plant 
submits with its reports filed pursuant to Sec. Sec.  1051.30(b) and 
1051.31(b) similar reports for each such nonpool supply plant;
    (B) The operator of the nonpool plant maintains books and records 
showing the utilization of all skim milk and butterfat received at the 
plant which are made available if requested by the market administrator 
for verification purposes; and
    (C) The value of milk determined pursuant to Sec.  1051.60 for the 
unregulated supply plant shall be determined in the same manner 
prescribed for computing the obligation of the partially regulated 
distributing plant; and
    (2) From the partially regulated distributing plant's value of milk 
computed pursuant to paragraph (b)(1) of this section, subtract:
    (i) The gross payments that were made for milk that would have been 
producer milk had the plant been fully regulated;
    (ii) If paragraph (b)(1)(iii) of this section applies, the gross 
payments by the operator of the nonpool supply plant for milk received 
at the plant during the month that would have been producer milk if the 
plant had been fully regulated; and
    (iii) The payments by the operator of the partially regulated 
distributing plant to the producer-settlement fund of another Federal 
order under which the plant is also a partially regulated distributing 
plant and, if paragraph (b)(1)(iii) of this section applies, payments 
made by the operator of the nonpool supply plant to the producer-
settlement fund of any order.
    (c) The operator of a partially regulated distributing plant that 
is subject to marketwide pooling of returns under a milk classification 
and pricing program that is imposed under the authority of a State 
government shall pay on or before the 25th day after the end of the 
month (except as provided in Sec.  1000.90) to the market administrator 
for the producer-settlement fund an amount computed as follows:
    After completing the computations described in paragraphs (a)(1)(i) 
and (ii) of this section, determine the value of the remaining pounds 
of fluid milk products disposed of as route disposition in the 
marketing area by multiplying the hundredweight of such

[[Page 47235]]

pounds by the amount, if greater than zero, that remains after 
subtracting the State program's class prices applicable to such 
products at the plant's location from the Federal order Class I price 
applicable at the location of the plant.
    (d) Any handler may elect partially regulated distributing plant 
status for any plant with respect to receipts of nonfluid milk 
ingredients that are reconstituted for fluid use. Payments may be made 
to the producer-settlement fund of the order regulating the producer 
milk used to produce the nonfluid milk ingredients at the positive 
difference between the Class I price applicable under the other order 
at the location of the plant where the nonfluid milk ingredients were 
processed and the Class IV price. This payment option shall apply only 
if a majority of the total milk received at the plant that processed 
the nonfluid milk ingredients is regulated under one or more Federal 
orders and payment may only be made to the producer-settlement fund of 
the order pricing a plurality of the milk used to produce the nonfluid 
milk ingredients. This payment option shall not apply if the source of 
the nonfluid ingredients used in reconstituted fluid milk products 
cannot be determined by the market administrator.


Sec.  1051.77  Adjustment of accounts.

    See Sec.  1000.77.


Sec.  1051.78  Charges on overdue accounts.

    See Sec.  1000.78.

Administrative Assessment and Marketing Service Deduction


Sec.  1051.85  Assessment for order administration.

    On or before the payment receipt date specified under Sec.  
1051.71, each handler shall pay to the market administrator its pro 
rata share of the expense of administration of the order at a rate 
specified by the market administrator that is no more than 8 cents per 
hundredweight with respect to:
    (a) Receipts of producer milk (including the handler's own 
production) other than such receipts by a handler described in Sec.  
1051.9(c) or (d) that were delivered to pool plants of other handlers;
    (b) Receipts from a handler described in Sec.  1051.9(c) or (d);
    (c) Receipts of concentrated fluid milk products from unregulated 
supply plants and receipts of nonfluid milk products assigned to Class 
I use pursuant to Sec.  1051.43(d) and other source milk allocated to 
Class I pursuant to Sec.  1051.44(a)(3) and (8) and the corresponding 
steps of Sec.  1051.44(b), except other source milk that is excluded 
from the computations pursuant to Sec.  1051.60 (h) and (i); and
    (d) Route disposition in the marketing area from a partially 
regulated distributing plant that exceeds the skim milk and butterfat 
subtracted pursuant to Sec.  1051.76(a)(1)(i) and (ii).


Sec.  1051.86  Deduction for marketing services.

    See Sec.  1000.86.

Subpart D--Miscellaneous Provisions


Sec.  1051.90  Dates.

    See Sec.  1000.90.

Proposal Number 3

Submitted by the California Producer Handlers Association

0
5. This proposal would preserve the entire ``Quota'' system that is 
currently in place under the terms of the California Pooling Act, 
California state marketing order and milk pooling plan administered by 
the California Department of Food and Agriculture (CDFA). Specifically, 
should USDA recommend a California Federal milk marketing order, this 
proposal argues that any provisions incorporated to ``recognize quota'' 
as outlined in the 2014 Farm Bill, would include provisions that 
recognize, in the same manner that is done currently by CDFA, the 
exempt quota held by current producer-distributors operating in the 
State. Should USDA recommend administering all aspects of the 
California quota program, CPHA also proposes to remove the degrees of 
family consanguinity as it pertains to the ownership of exempt quota to 
allow for the continuation of exempt quota transfers within a family.

Proposal Number 4

Submitted by Ponderosa Dairy

0
6. This proposal would add a new paragraph (e) to Sec.  1051.76 as 
described under either Proposal 1 or Proposal 2 above, to read as 
follows:


Sec.  1051.76  Payments by a handler operating a partially regulated 
distributing plant.

* * * * *
    (e) Any handler may elect partially regulated distributing plant 
status for any plant located within the California marketing area with 
respect to receipts of milk from farms located outside of the 
California marketing area. Such plant shall with respect to such 
receipts make an election as provided for in Sec.  1051.76 and shall 
meet the reporting and payment requirements in paragraph (a) or 
paragraph (b) of this section with respect to such receipts.

Proposal No. 5

Proposed by Dairy Program, Agricultural Marketing Service

    Make such changes as may be necessary to ensure that all provisions 
of any potential marketing agreement or order that may result from this 
hearing conform with each other.
    Copies of this notice of hearing may be obtained online at http://www.ams.usda.gov/dairy, or from the Hearing Clerk, United States 
Department of Agriculture, STOP 9200--Room 1031, 1400 Independence 
Avenue SW., Washington, DC 20250-9200.
    Copies of the transcript of testimony and exhibits taken at the 
hearing will be made available for viewing at http://www.ams.usda.gov/dairy after the hearing adjourns. If you wish to purchase a copy, 
arrangements may be made with the reporter at the hearing.
    When a Notice of Hearing is issued, USDA employees gain knowledge 
that a hearing will be held. From this time and until the issuance of a 
Final Decision in this proceeding, USDA employees involved in the 
decisional process are prohibited from discussing the merits of the 
hearing issues on an ex parte basis with any person having an interest 
in the proceeding. The prohibition applies to employees in the 
following organizational units: Office of the Secretary of Agriculture; 
Office of the Administrator, AMS; Office of the General Counsel; and 
the AMS Dairy Program (Washington, DC office), and the offices of all 
Market Administrators. Procedural matters are not subject to the above 
prohibition and may be discussed at any time.

    Dated: July 27, 2015.
Rex A. Barnes,
Associate Administrator.
[FR Doc. 2015-18704 Filed 8-5-15; 8:45 am]
BILLING CODE 3410-02-P