Milk in the New England and Other Marketing Areas; Recommended Decision and Opportunity To File Written Exceptions on Proposed Amendments to Tentative Marketing Agreements and to Orders

7 CFR

part Marketing area AO Nos.

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

1001.. New England...................................... AO-14-A67

1002.. New York-New Jersey.............................. AO-71-A82

1004.. Middle Atlantic.................................. AO-160-A70

1005.. Carolina......................................... AO-388-A7

1006.. Upper Florida.................................... AO-356-A31

1007.. Georgia.......................................... AO-366-A37

1011.. Tennessee Valley................................. AO-251-A38

1012.. Tampa Bay........................................ AO-347-A34

1013.. Southeastern Florida............................. AO-286-A41

1030.. Chicago Regional................................. AO-361-A32

1032.. Southeastern Illinois-Eastern Missouri........... AO-313-A41

1033.. Ohio Valley...................................... AO-166-A64

1036.. Eastern Ohio-Western Pennsylvania................ AO-179-A59

1040.. Southern Michigan................................ AO-225-A46

1044.. Michigan Upper Peninsula......................... AO-299-A29

1046.. Louisville-Lexington-Evansville.................. AO-123-A65

1049.. Indiana.......................................... AO-319-A42

1050.. Central Illinois................................. AO-355-A29

1064.. Greater Kansas City.............................. AO-23-A62

1065.. Nebraska-Western Iowa............................ AO-86-A51

1068.. Upper Midwest.................................... AO-178-A49

1075.. Black Hills, South Dakota........................ AO-248-A33

1076.. Eastern South Dakota............................. AO-260-A33

1079.. Iowa............................................. AO-295-A45

1093.. Alabama-West Florida............................. AO-386-A15

1094.. New Orleans-Mississippi.......................... AO-103-A57

1096.. Greater Louisiana................................ AO-257-A44

1099.. Paducah, Kentucky................................ AO-183-A48

1106.. Southwest Plains................................. AO-210-A55

1108.. Central Arkansas................................. AO-243-A47

1124.. Pacific Northwest................................ AO-368-A24

1126.. Texas............................................ AO-231-A63

1131.. Central Arizona.................................. AO-271-A33

1134.. Western Colorado................................. AO-301-A24

1135.. Southwestern Idaho-Eastern Oregon................ AO-380-A14

1137.. Eastern Colorado................................. AO-326-A28

1138.. New Mexico-West Texas............................ AO-335-A39

1139.. Great Basin...................................... AO-309-A33

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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This document recommends adopting a proposal to have the Class

II milk price in all Federal orders be the basic formula price for the

second preceding month plus a fixed differential of $0.30. The Class II

price would, like the Class I price in all Federal orders, be announced

on or before the fifth day of the month and apply to milk marketed

during the following month. This recommended decision would also

eliminate the ``add-back'' provision that requires that the difference

between the Class II price and the Class III price be added to a

subsequent month's Class II price when the Class II price for the month

falls below the Class III price.

DATES: Comments are due on or before September 26, 1994.

ADDRESSES: Comments (six copies) should be filed with the Hearing

Clerk, Room 1083, South Building, United States Department of

Agriculture, Washington, DC 20250.

FOR FURTHER INFORMATION CONTACT: Gino M. Tosi, Marketing Specialist,

USDA/AMS/Dairy Division, Order Formulation Branch, Room 2971, South

Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 690-1366.

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.

The Regulatory Flexibility Act (5 U.S.C. 601-612) requires the

Agency to examine the impact of a proposed rule on small entities.

Pursuant to 5 U.S.C. 605(b), the Administrator of the Agricultural

Marketing Service has certified that this action will not have a

significant economic impact on a substantial number of small entities.

The amendments would promote more orderly marketing of milk by

producers and regulated handlers.

The amendments to the rules proposed herein have been reviewed

under Executive Order 12778, Civil Justice Reform. They are not

intended to have a retroactive effect. If adopted, the proposed

amendments would not preempt any state or local laws, regulations, or

policies, unless they present an irreconcilable conflict with this

rule.

The Agricultural Marketing Agreement Act of 1937, as amended (7

U.S.C. 601-674), provides that administrative proceedings must be

exhausted before parties may file suit in court. Under section

608c(15)(A) of the Act, any handler subject to an order may file with

the Secretary 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 and requesting a modification of an order or to

be exempted from the order. A handler is afforded the opportunity for a

hearing on the petition. After a hearing, the Secretary 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 principal place of business, has jurisdiction in equity to review

the Secretary's ruling on the petition, provided a bill in equity is

filed not later than 20 days after the date of the entry of the ruling.

Prior document in this proceeding:

Notice of Hearing: Issued December 14, 1993; published December 21,

1993 (58 FR 67380).

Preliminary Statement

Notice is hereby given of the filing with the Hearing Clerk of this

recommended decision with respect to proposed amendments to the

tentative marketing agreements and the orders regulating the handling

of milk in the New England and other marketing areas. This notice is

issued pursuant to the provisions of the Agricultural Marketing

Agreement Act and the applicable rules of practice and procedure

governing the formulation of marketing agreements and marketing orders

(7 CFR Part 900).

Interested parties may file written exceptions to this decision

with the Hearing Clerk, U.S. Department of Agriculture, Washington, DC

20250, by the 30th day after publication of this decision in the

Federal Register. Six copies of the exceptions should be filed. All

written submissions made pursuant to this notice will be made available

for public inspection at the office of the Hearing Clerk during regular

business hours (7 CFR 1.27(b)).

The proposed amendments and findings and conclusions set forth

below are based on the record of a public hearing held at Ramada Hotel-

Old Town, 901 N. Fairfax Street, Alexandria, Virginia, on January 6 and

7, 1994, pursuant to a notice of hearing issued December 14, 1993, and

published in the Federal Register, December 21, 1993 (58 FR 67380).

The material issues on the record of the hearing relate to:

1. Replacing the current Class II pricing formula used to establish

the Class II milk price in all Federal milk orders.

2. Determining whether emergency marketing conditions exist that

would warrant omission of a recommended decision under the rules of

practice and procedure (7 CFR 900.12(d)).

Findings and Conclusions

The following findings and conclusions on the material issues are

based on evidence presented at the hearing and the record thereof:

1. Class II milk price. A proposal to replace the Class II milk

price formula with the basic formula price for the second preceding

month plus a fixed differential of $0.30 should be adopted. Further,

this price will be announced by the fifth day of the preceding month.

Thus, for example, the Class II price delivered by producers in

September would be announced on August 5, and would be the M-W price

for July plus $0.30. Adoption of this proposal will result in the Class

II milk price and the Class I milk price being announced at the same

time and being applicable for all Federal milk orders. Adoption of this

proposal would eliminate the need to retain in Federal milk orders the

section providing for the basic Class II formula price. Adoption of

this proposal also eliminates the ``add-back'' provision of current

Class II pricing where, for a given month, if the Class II price is

less than the Class III price for the same month, the difference

between these prices are ``added-back'' in computing the second

succeeding month's Class II price.

For most Federal milk orders, the current Class II milk price is

the Minnesota-Wisconsin (M-W) price for the second preceding month as

adjusted by an ``updating'' product price formula (the basic Class II

formula price provisions of those orders), plus an amount by which the

simple average of the basic formula prices (M-W prices) for the most

recent 12-month period, plus ten cents, exceeds the same 12-month

period's average of the basic Class II formula prices. The Class II

milk price is announced by the 15th of the previous month. However, if

the announced Class II price for a given month is less than the Class

III price for the same month, the difference between these prices is

``added-back'' in computing the second succeeding month's Class II

price. This feature is often referred to as the ``add-back'' provision.

The purpose of the basic Class II formula price (Section 51a in

most orders) is to provide a mechanism for updating the M-W price for

the second preceding month so that the Class II price for the current

month can be based on the M-W price but still reflect more current

marketing conditions that might indicate forthcoming changes in the M-W

price. This updating is done by comparing movements of wholesale prices

for butter, nonfat dry milk, and Cheddar cheese during the first 15

days of the preceding month with such prices during the same period a

month earlier.

The current Class II differential, which is included in the Class

II milk price, in most orders is 10 cents. A 15-cent differential

applies under the three Florida orders, and a 25-cent differential

applies under the Pacific Northwest order.

The proposal recommended for adoption was proposed by the Milk

Industry Foundation and International Ice Cream Association (MIF/IICA)

and the National Milk Producers Federation (NMPF), Proposal One as

published in the hearing notice. The MIF/IICA are national trade

associations for processors of fluid milk, cultured dairy products, and

manufacturers of frozen desert products. The MIF comprises some 220

member companies who operate nearly 500 plants nationwide and process

about 80 percent of all the Class II cultured dairy products in the

United States. The IICA comprises some 186 member companies who operate

about 350 plants nationwide that manufacture, as well as distribute,

approximately 85 percent of the ice cream and related frozen products

consumed in the United States. The NMPF is the national farm commodity

organization that represents dairy producers and the dairy cooperative

marketing associations they own and operate. The Federation's members

produce a substantial majority of the U.S. milk supply and market milk

in all Federal milk order areas.

A second proposal, Proposal Two as published in the hearing notice,

was offered by Friendship Dairies, Inc. Like the proposal recommended

for adoption, this proposal would replace the Class II price formula

with the basic formula price for the second preceding month, but would

add a fixed differential of $0.10 instead of $0.30. Announcement of the

Class II milk price under this proposal would also be by the fifth day

of the preceding month. Friendship Dairies, Inc. (Friendship), is a

family owned and operated cultured dairy products manufacturer

regulated under the New York-New Jersey (Order 2) marketing area and

processes most of the 250 million pounds of milk which it receives

annually from about 175 independent producers and milk marketing

cooperatives in Class II products such as cottage cheese and yogurt.

A third proposal, Proposal Three as published in the hearing

notice, was offered by Women Involved in Farm Economics (WIFE). This

proposal would replace the Class II price formula with the basic

formula plus a fixed differential of $0.50. No witness from WIFE

testified. However, testimony was received by a witness from the

National Farmers Organization (NFO) in support of a $0.50 Class II

differential. The NFO represents about 4,000 member dairy farmers and

others who market their milk through NFO in at least 13 Federal milk

orders.

A fourth proposal, Proposal Four as published in the hearing

notice, would replace the Class II price formula with a Class II price

of $0.60 above the Class III or Class III-A price, whichever was

higher. This proposal received no evidence or testimony at the hearing

and is considered abandoned.

The fifth proposal, Proposal Five as published in the hearing

notice, proposed including the ``add-back'' provision in the Class II

price calculation. Retention of the ``add-back'' provision was proposed

by the Central Milk Producers Cooperative (CMPC), a federation of milk

cooperatives with operations in the Chicago Regional (Order 30)

marketing area. Its membership includes: Associated Milk Producers,

Inc., Bongards Creameries, Inc., Golden Guernsey Dairy Cooperative,

Independent Milk Producers Cooperative, Land O'Lakes, Inc., Manitowoc

Milk Producers Cooperative, Mid-America Dairymen, Inc., Midwest

Dairymen's Company, Milwaukee Cooperative Milk Producers, National

Farmers Organization, Southern Milk Sales, Inc., Wisconsin Dairies

Cooperative, Wisconsin Milk Producers Cooperative, Inc., and the

Woodstock Progressive Milk Producers Association. Members of CMPC

supply milk to bottlers with Class I and Class II utilization in

Federal Orders 30, 32, 40, 50, 68, and 79. They also supply milk to

primarily ``stand alone'' Class II plants in Federal Orders 30, 33, and

49. Certain CMPC members also operate plants processing Class I and

Class II products.

Testimony in support of adopting Proposal One, which would replace

the Class II price formula with the basic formula price for the second

preceding month plus a fixed differential of $0.30 and be announced by

the fifth day of the preceding month, included:

a. The proponents MIF/IICA and NMPF;

b. Prairie Farms Dairy, a large regional dairy cooperative that

processes and distributes a full line of Grade A dairy products, wholly

owns 15 dairy plants, manages one plant for Mid-America Dairymen, Inc.,

and jointly owns 11 plants with other cooperatives;

c. The Kroger Company, which operates seven fluid distributing

plants regulated under six Federal Orders. Kroger Company also operates

two nonpool ice cream manufacturing plants that distribute dairy

products in 22 Federal orders;

d. Crowley Foods, a major dairy products manufacturer that operates

six plants in Federal Orders 1, 2, and 4, four of which are involved in

the manufacture of Class II products; and

e. Dean Foods Company, which operates 34 fluid milk plants in 17

Federal orders, processing in excess of 4.5 billion pounds of milk per

year.

Except for supporting the fifth proposal, which would retain the

``add-back'' provision, the CMPC offered testimony in support of

replacing the Class II price formula with the basic price formula for

the second preceding month plus a fixed differential of $0.30, with

this price being announced by the fifth day of the preceding month.

Testimony offered by the proponent witness for the MIF/IICA cited

that price volatility in Federal order markets in the past few years

has resulted in the movement of Class II prices in a magnitude and

direction too often in the opposite direction of Class I and Class III

prices. The witness indicated that these more volatile and opposite-

moving price relationships have acted to severely limit Class II

processors in their ability to sell products on a forward contract

basis and have caused confusion to their customers who possess a

relatively limited knowledge of milk procurement and pricing. This

witness maintains that for efficient marketing and efficient pricing of

milk, both Class I and Class II prices should be reflecting movements

in the M-W price at the same time, in the same magnitude, and in the

same direction.

The MIF/IICA proponent witness offered testimony that revisited a

proposal that they submitted at the National Hearing in the fall of

1990 to change the method for establishing advance notice of the price

paid for Class II milk under Federal orders. At that hearing, the

proposal offered was to establish a Class II price by using the M-W

price for the second preceding month plus a fixed differential of

$0.15, explaining that the rationale for establishing a 15-cent

differential was based on a comparison of the Class II price with the

basic formula price over the decade of the 1980's. The proponent

witness observed that for the 10-year period of 1980 through 1990 the

Class II price averaged about $0.15 above the M-W price.

The witness also testified that because of the Food Security Act of

1985, and the subsequent 1990 Farm Bill, the groundwork was laid for

basing milk prices on market forces more than had been done in the

past. The MIF/IICA witness contends that the result has been more

volatile milk pricing which has rendered the current Class II price

formula ineffective in tracking the Class I price, and that the spread

between the Class II and the M-W price has increased from its longer-

term average.

The proponent witness testified that the Class II price has on

average approximated the basic formula price for the second preceding

month plus 30 cents. It is on this basis that, according to the

proponent witness, they are endorsing a Class II price based on the

basic formula price for the second preceding month plus a 30-cent fixed

differential. They maintain that this approach has the advantage of

being easily understood and is revenue-neutral when compared to the

current Class II price computation. They noted that it also allows for

the announcement of the Class II price for the month to be made a full

ten days earlier than under the current Class II pricing and

announcement structure.

From an economic point of view, the MIF/IICA proponent witness

stressed that while revising the price computation for determining the

Class II price is certainly needed, it is imperative not to have a

Class II price which would increase the probability of reducing an

already declining market for Class II product sales. Because the Class

II price has averaged nearly 30 cents above the basic formula price for

the second preceding month over the past six years, the witness

asserted that the level of the Class II price for raw milk to both

processors and producers would be maintained. The witness offered and

cited Federal order statistics that supported their position that Class

II product sales are steady-to-declining. The witness said this

underscores the economic need to maintain the cost of Class II milk at

its current level relative to the basic formula price.

Lastly, the MIF/IICA proponent witness testified that the changing

cost structure of milk components under Federal orders reinforces their

position of a fixed 30-cent differential added to the second preceding

month's basic formula price in determining the Class II milk price. The

witness noted that since 1990, the butter price has been reduced under

the Federal price support program while the cost of nonfat dry milk has

risen. Noting also that the butterfat differential computation was

changed in mid-1990, these two developments have significantly

increased the cost structure for Class II products, particularly for

lower to nonfat Class II products.

The NMPF witness offered testimony and evidence in support of the

testimony of the MIF/IICA position. The witness compared the actual

Class II price each month under the Chicago Regional order with what

the Class II price would have been under their alternative proposal for

the six-year period from 1988 to 1993. These comparisons on average,

the witness said, would neither have increased handler's costs nor have

changed prices received by dairy farmers. This proponent witness

maintained that this alternative proposal would have generated more

stable prices over the past six years and that the range between

monthly high and low prices would have been less than the actual Class

II price range. According to the witness, their proposal assures that

monthly fluctuations in Class I and Class II prices will be identical.

Also, according to the NMPF witness, under the current Class II pricing

formula, Class I and Class II prices could, and often did, move in

opposite directions in the same month. They maintained that consistent

movements in Class I and Class II prices would lessen confusion and

mitigate marketing problems that arise when Class I and Class II prices

move in opposite directions in the same month.

The NMPF proponent witness testified that their proposed

alternative for determining the Class II milk price is simple, easy to

understand, and can be calculated as soon as the basic formula price is

announced by the USDA. In addition to joining the MIF/IICA position in

support of Proposal One, this witness asserted that based on data for

the past six years, adoption of their proposal would result in no

changes in either Class II prices paid by handlers or prices received

by producers. Additionally, this witness observed that there would be

little overall price impact, but prices would be more stable, and

market conditions would improve.

A joint brief filed by the MIF/IICA and the NMPF reiterated their

testimony calling for adoption of Proposal One.

The witness for Prairie Farms Dairy, Inc., offered testimony in

support of the need to adopt the MIF/IICA and NMPF's Class II pricing

proposal. This witness offered testimony supporting the proponents'

observations of the pricing problems and business impacts that occur

when Class I and Class II prices move in different directions in the

same month. This witness attributes, in part, the decline in sales of

Class II products to the wide price swings of the Class II price and

how retailers have reacted to these swings. The Prairie Farms witness

asserted that adoption of the MIF/IICA and NMPF proposal would not

negatively affect farmers, that returns to processors would be more

constant, and that consumers would see a more stable average price on

Class II products, which might result in increased sales.

The Prairie Farms witness viewed the 10-cent differential as a

``nuisance'' differential and summarized their opinion in four major

points in support of Proposal One: (1) that the proposal is supported

by the majority of the dairy industry; (2) the proposal would result in

a 10-day earlier announcement of the Class II price along with the

Class I price, which would simplify price changes to customers in a

more timely manner; (3) that Class I and Class II prices will move in

the same direction and at the same magnitude; and (4) that Class II

price swings will be more moderate, resulting in more stable consumer

prices that hopefully will increase Class II product sales.

The witness representing Kroger Company testified to their support

for the MIF/IICA and NMPF proposal, offering that adoption of the

proposal will enable processors to intelligently inform their customers

of changes in costs for Class I and Class II products simultaneously.

This witness similarly expressed concern of a declining Class II

products market. In support of the fixed 30-cent differential feature

for Class II pricing, the Kroger witness maintained that the value of

Class II milk to dairy farmers is greater than the intended target

differential of ten cents contained in the current Class II pricing

formula. This witness also asserted that it is important to establish a

pricing level which recognizes these market realities. He maintained

that a 30-cent Class II differential added to the basic formula price

recognizes the increased value of Class II milk and establishes a

competitive price level for Class II products. The Kroger witness

testified that this proposal would, over time, establish revenue

neutrality with the current Class II pricing method.

The witness for Crowley Foods, testifying in support of the MIF/

IICA and NMPF proposal, voiced identical concerns about Class I and

Class II price relationships and went further to mention that the 30-

cent fixed differential also offers a happy medium between the price

concerns of producers and processors. Additionally, the Crowley Foods

witness said that announcing the Class II price an additional ten days

in advance of the current Class II price announcement would afford

improved promotional planning and ensure that Class II prices move in

tandem with fluid prices.

Testimony by the witness for Dean Foods offered his organization's

support for the MIF/IICA and NMPF proposal.

The witness representing the CMPC offered testimony in support of

Proposal One. However, CMPC sees the need to retain the ``add-back''

feature of Class II milk pricing. Hence, their support as proponents

for Proposal Five.

The CMPC witness emphasized the role of Class II products in the

market place, offering evidence that customers demand the same basic

product and equal service levels (and costs) for their Class II milk as

with Class I milk. However, this witness testified, the current Class

II pricing system does not generate adequate returns to pay for the

costs of service so closely associated with Class I.

This witness offered evidence in support for a 30-cent

differential, indicating it is the minimum justifiable differential

level. However, the witness tempered support for this level with

concern that in no event should such apparent increase in the Class II

differential be permitted to result in no real price increase, hence

their support for the fifth proposal for retention of the ``add-back.''

The impetus for retaining the add-back provision offered by the CMPC

witness drew from the Recommended Decision of October 31, 1989 (54 FR

33709) that concluded that Class II milk should not be less than the

value for Class III milk. Although the CMPC witness acknowledged that a

Class II differential increase without an add-back feature would lessen

the risk of loss to producers, they continue to assert that the add-

back provision provides the necessary guaranty against such loss.

The brief filed by CMPC elaborated further on their support for

retention of the add-back provision. In their view, the add-back

provides the month-to-month guaranty against lost revenue to producers.

This is necessary to retain, stated the CMPC brief, because producer

and handler prices are computed on a month-to month basis and not on

the basis of annual, or three year or six year average prices.

Support for Proposal One was offered in a brief filed on behalf of

the Southern Foods Group, Inc. (SFG), and Anderson-Erickson Dairy

Company (AE). The SFG owns and operates six fluid processing plants in

Texas and Louisiana and processes Class II products. The AE operates a

fluid processing plant and an ice cream plant in Des Moines, Iowa. In

the opinion of SFG/AE, only Proposal One provides the changes necessary

to correct the problems currently associated with Class II milk

pricing.

The SFG/AE brief points to producer and handler agreement that

Class II pricing needs to move in the same direction and at the same

rate as Class I prices and that advance pricing of Class II milk is

critical to the ability of the industry to sell finished Class II

products. They also point out that there is universal agreement that

the existing Class II price formula is unacceptable and that Class II

pricing should be based on the Minnesota-Wisconsin (M-W) price series.

On the basis of the record, the SFG/AE concludes that the Class II

price must be based on the second prior month's M-W plus a differential

of not more than thirty cents without an add-back.

Testimony offered in support of Proposal Two, which would establish

the Class II price as the basic formula price for the second preceding

month plus a fixed differential of $0.10 and have this price announced

by the fifth day of the preceding month, was received from:

a. The proponent, Friendship Dairies, Inc.;

b. Kraft General Foods, a large handler of producer milk that

operates plants that process Class II and Class III products in many

states; and

c. Galloway Company, a regulated handler under Federal Order 30

that primarily produces sweetened condensed milk, and ice cream mixes.

The proponent witness representing Friendship Dairies, Inc.,

offered testimony on the need for the Class II differential to be set

at ten cents, and for the ``add-back'' provision of current Class II

milk pricing to be eliminated. The testimony offered in support of

their proposal rested largely on prior decisions issued by the

Department which had determined that ten cents above the basic formula

price was the appropriate price (differential) level for Class II milk.

Additionally, this proponent witness agreed with other testimony that

eliminating the Class II product price formula and using the second

preceding month's basic formula price would more accurately reflect the

true direction or magnitude in the movement of the Class III price and

simplify the pricing of Class II milk. This witness emphasized that

this distortion was most attributable to the ``add-back'' provision.

The Friendship witness offered testimony that demonstrated that the

add-back provision resulted in price enhancement of the Class II price

above the intended 10-cent target differential. Additionally, this

witness testified that when the Class II price is dramatically higher

than the Class III-A price, the economic incentive exists for using

nonfat dry milk (NFDM) in place of fresh fluid milk. According to this

witness, while increasing the price of Class II milk may increase the

blend price producers receive in the short term, the long-term effect

will be to promote the use of NFDM for manufacturing Class II products.

Even if the Class II price had not increased, said the Friendship

witness, the decreasing value placed on butterfat has had the effect of

increasing the cost of a hundredweight of Class II skim milk. Because

the cost of milk is the single most significant factor affecting the

price of most finished Class II products, especially cottage cheese,

this absolute increase in cost is staggering and sales have declined,

said the witness. According to the witness, any resulting decline in

the use of milk for skim-based Class II products would yield a lower

price to dairy farmers and would compound the continuing shift of milk

value from the fat to skim component.

While the Friendship witness applauded the advance pricing feature

of Class II milk, he asserted that the add-back provision of current

Class II pricing effectively obliterates any benefits of advance

pricing, citing that prices have become volatile. This volatility has

caused confusion in the marketplace because Class II prices too often

move completely independent of the Class III and Class I price,

according to this witness. The result of this confusion, said the

witness, is manufacturers attempting to quote a price based upon a

forecast, only to rescind because of a large movement in prices due to

the add-back feature of current Class II milk pricing. This reality,

said the witness, has implications at the consumer level because

special featured prices on products that are offered to supermarket

chains to promote sales must be guaranteed well in advance so that

advertising and related promotional business can be planned. The

witness sees the result of current pricing practices as lower Class II

product sales and lower returns to dairy farmers.

The Friendship witness testified that their proposal achieves the

Department's intent that the Class II price be Class III plus ten

cents. The witness said that adoption of any other proposal would

deviate from this intent. Further, said the witness, supply and demand

conditions, at least in Order 2, do not warrant any increase in the

Class II price.

Support for the 10-cent differential level for Class II milk was

offered from Kraft General Foods (Kraft). The Kraft witness testified

that current Class II pricing has not achieved the targeted Class II

differential of ten cents above the Class III price. Rather, it has

exceeded the intended differential, and the difference has been

compounded in recent years. On a month-to-month basis, said Kraft, the

advance Class II price formula has resulted in gross distortions

between the Class II and Class III price in the amount of difference

and the direction of price movements.

The Kraft witness expressed disagreement with the MIF/IICA and NMPF

proposal only from the view that the appropriate differential level

should be ten cents and not thirty cents. The witness noted that

current Class II pricing has resulted in an effective Class II

differential level of almost thirty cents. This is not what should be

adopted as the Class II differential because the effective thirty cents

is a result of the failure of the formula used to compute the Class II

price, he said. According to the Kraft witness, it is one thing to

achieve enhancement of the minimum regulated price by mistake and quite

another to do so by design. Like the Friendship witness, the Kraft

witness drew heavily on previous decisions that reiterated that the

appropriate Class II price be the Class III price plus ten cents. This

witness was of the opinion that supply and demand conditions did not

warrant any increase in the current target differential.

Like the Friendship witness, the Kraft witness joined in the

concern that if the Class II differential level is increased above the

current intended 10-cent level, there would likely be increased

substitution of NFDM for fluid milk in Class II products. Kraft also

agreed with Friendship that the add-back provision should be

eliminated.

The witness from Galloway Company offered testimony in support of

Proposal Two. Much of this witness's testimony supported testimony of

the Friendship and Kraft witnesses and further elaborated on the

concern for the substitution of NFDM for fluid milk in the manufacture

of Class II products. Noting the wide price disparity between Class

III-A and Class II, this witness said that processors will make their

ingredient selection based on arbitrary and capricious pricing

regulations if the Class II price is increased. Increasing the Class II

price would not enhance producer revenue because of the ability to

substitute lower-priced ingredients in the manufacture of Class II

products.

A brief filed on behalf of Friendship, Kraft, Galloway Company, and

the Sorrento Cheese Company, Buffalo, New York, expressed opposition to

the 30-cent differential of Proposal One. This brief maintained that

the appropriate differential should be ten cents and that placing the

differential at thirty cents would be undue price enhancement of the

Class II price and would only institutionalize an unintended aberration

from the target differential. They contend that testimony of the

proponents of Proposal One is flawed because it is based on the Class

II prices that prevailed in 1990 when the M-W price recorded some of

its lowest prices in a decade and because of the effects of the add-

back provision.

This brief cites past decisions that affirm that the current target

10-cent differential is appropriate, although because of the add-back

provision, the target differential could not be met and this resulted

in high Class II prices. It further revisits past decisions wherein

concern was expressed that producer milk may not be made available for

Class II use if the price falls below the Class III price. While

experience has not borne this out, they say, caution still needs to be

exercised in the relationship of Class II prices to Class III-A prices

and substitution of powder for producer milk in the manufacture of

Class II products. Increasing the differential would only provide

additional stimulus to reduce handler purchases of producer milk. This

brief also counters arguments on the role of over-order premiums,

maintaining that such payments reflect the cost of services incurred by

producers (such as balancing and transportation) and not the value of

milk. They contend that such premiums should not be relevant to the raw

product value of milk.

Lastly, the brief asserts that Proposal One's differential of

thirty cents is an undue enhancement of the Class II price and has no

basis from an economic point-of-view. The view presented is that thirty

cents represents a differential of convenience between divergent views

and is not arrived at on the basis of supply and demand considerations

which, they say, any price change must be predicated upon.

In support of Proposal Three, a witness representing NFO testified

that in addition to supporting a 50-cent Class II differential, they

were also supporting the CMPC proposal that the add-back provision of

current Class II pricing be retained. This witness testified that the

record of the previous 43-day National Hearing in 1990 clearly

supported a Class II differential of at least fifty cents. The witness

indicated that if the classified pricing structure of Federal orders is

to be of value, then there has to be meaningful price differences

between classes. A class price break of only ten cents between Class

III and Class II was not meaningful in the view of this witness.

Additionally, said the NFO witness, handlers are already paying much

more than the effective 30-cent Class II differential to secure Class

II milk supplies, perhaps as much as $0.70 to $0.80 cents above Class

III is regularly being paid. According to this witness, this indicates

that the value of Class II milk is worth at least 50 cents over the

Class III price. The NFO brief further emphasized that 50 cents

establishes a differential level which is at least minimally

significant in a classified price sense. Since Federal milk orders have

three classes, then there should be a difference in the use value among

the three categories of products sufficient enough to justify separate

classes, said NFO.

Another reason offered by the NFO witness for a 50-cent Class II

differential is the devaluation of butterfat relative to the nonfat

component of milk. Because Class II products have a significant

butterfat content when viewed across all Class II products, Class II

milk producers have suffered losses in milk used in this class, and

this represents a reduction in costs to processors. This argument was

reiterated in their brief.

The NFO witness testified that even though they would like to see a

$1.00 Class II differential, a 50-cent level should be sufficient,

provided that the add-back be retained to maintain the intent that

Class II prices be equal to or above Class III prices. If the

differential level were set at $1.00, the NFO witness testified that

this would negate the need for an add-back because of the unlikelihood

that the Class III price would exceed the Class II price.

In their brief, the NFO revisited past decisions that affirmed the

establishment and intended role of the add-back provision. The NFO

reasserted that the add-back provides reinforcement to the principle

that Class II prices by definition should not be less than Class III

prices. The culprit in the volatility of Class II prices, according to

NFO, is the basic Class II formula price and not the add-back. However,

NFO did acknowledge that the add-back does play a role, albeit a minor

one, in Class II price volatility.

Opponents to retaining the add-back provision argued in submitted

briefs that it should be eliminated for a number of reasons. All

opponents agreed that if the Class II milk pricing method adopts using

the second preceding month's basic formula price and adding a fixed

differential, then the add-back can only serve to enhance the Class II

price.

The SFG/AE brief dismisses concern that producers won't deliver

milk for Class II use if the Class II price falls below the Class III

price. In addition to this not happening in the marketplace, SFG/AE

points out, it is also a function of when the price is announced.

Producers don't know until the month is over that the Class II price

was below the Class III price. Therefore, no purpose beyond price

enhancement is served by an add-back provision.

This theme is further developed in a brief filed on behalf of

Friendship. While CMPC views a ``loss'' to producer revenues without

retaining the add-back, there is in effect no ``loss'' Friendship

argues. Class II prices below Class III prices arise only during months

in which the cheese-driven M-W price is increasing, said Friendship. In

periods of falling M-W prices, the Class II differential will exceed

the target differential. Producers will not be denied the benefit of

the Class II differential--rather its payment is delayed by two months,

they said. In periods of M-W price volatility, the fact that Class I

and Class II differentials would be added to the M-W prices for the

second preceding month will actually serve to restrain, they said, the

extent to which such volatility is reflected in producer prices.

Further, the Friendship brief finds it inconsistent to call Class II

prices below Class III prices a ``loss'' because it is not balanced

against any concept of gain or a ``pay-back'' in months of a declining

M-W and the effective Class II differential at windfall levels above

the M-W.

It is clear from the record that there is universal endorsement for

changing how Class II milk is priced under Federal orders. The record

supports the conclusion that the basic Class II price formula that

``updates'' the second preceding month's M-W in establishing the Class

II price is not functioning as intended; is no longer necessary and

contributes, in part, to price volatility; and results in a distorted

relationship with other class prices. The record is also clear on the

unanimous support for retaining the advance-pricing of Class II milk

and that the Class II price should be announced at the same time as

Class I prices by using the second preceding month's M-W price and

adding a fixed differential. The only issues of disagreement regarding

Class II milk pricing are what is the appropriate Class II differential

and whether or not the ``add-back'' provision should be retained.

Class II Differential

Most handlers and producers agree that the appropriate differential

value for Class II milk is at least thirty cents above the Class III

price. The record testimony and evidence supports this conclusion on

the basis that this differential value is representative of the

additional value of milk used in this class; that it has been the

effective differential paid for Class II milk on average since 1987;

and that handlers regularly pay over-order premiums to secure milk for

Class II uses above and beyond the service feature of over-order

premiums.

Past decisions regarding the pricing of Class II milk concluded

that the basic Class II formula price and target differential of ten

cents should not be changed. The most recent past decision concluded

that the target differential of ten cents should be maintained because

supply and demand conditions revealed that there were adequate reserves

of Class III milk to meet Class II needs. That decision on the 43-day

National Hearing of 1990 recognized that many in the industry believed

that Class II prices should move in the same magnitude and direction as

Class I. That decision and this hearing clearly reveal that Class I and

Class II products are frequently processed together and marketed by

handlers in common distribution channels. However, with a basic

differential of ten cents, the decision on the 1990 43-day National

Hearing continued the existing theory of coordinating the Class II

price with the current month's Class III price because Class III

products could be used as a source of ingredients for Class II

products. In this regard, the need to coordinate the Class II price

with the Class III price was the operative principle in the pricing of

Class II milk. It was for these reasons that the updating product price

formula (represented by the basic Class II formula price) was intended

and retained.

This decision makes a clear break from the past in that Class II

milk pricing will function in a manner consistent with Class I pricing

largely in recognition of the similarity of the distribution and

marketing channels shared by milk used in both classes. The record

testimony and evidence in this hearing support the conclusion that

current Class II pricing results in prices that do not always move in

the same direction and magnitude as Class I prices even though both

products tend to move in the same marketing channels. Linking the Class

II pricing method to that of Class I should better reflect and respond

to market conditions as well as simplify the procedure.

As indicated in the brief by CMPC, the Class II price is driven

largely by changes in the basic formula price--the M-W price. As this

price changes through movements in the hard product price markets, so

will the Class II price. Therefore, any change in the Class II price is

due primarily to hard product market forces, and not due to the level

of the differential which will not change from month-to-month.

By establishing the Class II milk price at the second preceding

month's M-W and adding a fixed differential, as with Class I prices,

the intent of providing coordination with Class I prices is achieved.

Additionally, a consistent and predictable relationship between Class I

and Class II prices is also achieved. However, because of the need to

retain advance pricing for orderly marketing, there may be times when

the current month's Class III price will be greater than the Class II

price. Inversely, it is also true, that there may be times when the

Class II price is more than 30-cents greater than the current month's

Class III price. Nevertheless, the intended target differential is

maintained, as with Class I pricing, albeit with a lag as exists with

Class I pricing. This is a reality that both producers and handlers

must accept with the retention of advanced pricing and have accepted

with regard to the Class I price for many years.

The record on this hearing expressed concern for the substitution

of NFDM for fresh producer milk used to make Class II products because

the price relationship between the Class II price and, for most Federal

orders, the Class III-A price, may provide the economic incentive to do

so. In this regard, there was a call on one hand to have the Class II

price be coordinated with the movement in Class I price and at the same

time have the Class II price also be coordinated with lower-class

prices. The impossibility of this is clear. In addition, both handlers

and producers will know, in advance, the prices for both Class I and

Class II milk at the same time. Delivery, procurement, and processing

decisions can be made with surety of what prices will be. However, the

Class III or Class III-A price will not be known until after the month

has ended. It would seem that without knowing what the Class III or

Class III-A price will be in advance, the argument that NFDM will

substitute for producer milk is weakened. This is not to say that

substitution will not occur, because the record reveals that it does.

Substitution may occur if a handler predicts the future price

relationship between the Class II price and Class III or Class III-A

price, and predicts that the future relationship will provide the

economic incentive for substitution. Economic prediction, in and of

itself, is not a proper basis for determining the appropriate value the

milk has in Class II uses.

Significantly different conclusions were reached between the

proponents of retaining the current 10-cent target differential, the

proponents for a 30-cent differential, and the proponents for a 50-cent

differential on the basis of the changing value of milk components. The

10-cent proponents argue that the increasing value of skim to butterfat

effectively has raised the costs of Class II products. The 30-cent

proponents argue that the changing cost structure provides, in part,

the rationale for maintaining what the recent past's average

differential has been. The proponents for a 50-cent differential argue

that because the utilization of butterfat to manufacture Class II

products is relatively high, processors enjoy a price decrease. The

arguments presented on the changing cost structure of milk components

is not an issue for the purposes of establishing the Class II price.

Rather, it is a butterfat differential issue that has already been

decided upon in other rulemaking decisions.

As indicated in the brief submitted by SFG/AE, Federal order

statistics reveal that there is an abundant supply of milk for all

class uses of producer milk. As indicated in this brief, and in the

brief filed on behalf of Friendship, Kraft, Sorrento Cheese Company,

and Galloway Company, a price increase must be predicated upon supply

and demand considerations. Establishing the Class II differential for

any given month at thirty cents above the second preceding month's

basic formula price is not intended to effectuate a price increase or a

price decrease for Class II milk. Rather it is a recognition of the

effective differential that has been functioning for a long period of

time. The record provides no evidence on any difficulty in procuring

milk for Class II use under the current pricing structure. However, the

record does indicate that the pricing structure creates problems

regarding the timing and certainty of prices, in part, because of its

reliance on the basic Class II pricing formula used to update the M-W.

An analysis of the record evidence and officially noticed materials

does point to the fact that the Class II price has averaged nearly

thirty cents above the basic formula price for the second preceding

month since 1987. Additionally, an analysis of the effective

differential (the difference between the current month's Class III

price and Class II price since adoption of the add-back provision) for

the four-year period of 1990 through 1993 indicates that the Class II

differential has averaged thirty cents above the Class III price. It is

because of these market realities that there exists so strong an

agreement between producers and processors that the true differential

level of thirty cents for Class II milk is warranted. Some describe

this differential level as the appropriate level, some the minimum

justifiable differential, and by some, a differential level that

represents the maximum that can be called for on the basis of supply

and demand considerations.

The Add-Back Provision

Only two proponents, CMPC who supported a 30-cent differential, and

NFO, who advocated a 50-cent differential, called for retention of the

add-back provision. The add-back provision of current Class II milk

pricing was established in December 1989 as part of a decision to have

true advanced pricing for Class II milk. Prior to that time, the Class

II milk price that was announced was a tentative price which could be

retroactively updated when the Class III price for the month was

greater than the tentative Class II price. In this way, the Class II

price was ``floored'' by the Class III price. The intent of the add-

back provision was to maintain in principle this relationship between

Class II and Class III prices.

The decision on the 43-day National Hearing of 1990 recognized

that, at the time of the hearing, the effective Class II differential

had averaged about 4 cents higher than the intended differential of ten

cents per hundredweight. This decision also affirmed the intent of the

add-back was to ensure that producers not receive less than the Class

III value for Class II milk in the blend price when the basic formula

price exceeded the announced Class II price so that returns to

producers would not be reduced. In this way, the Class II price was

coordinated with the current month's Class III price.

Now that there exists much more pricing data under the current

Class II pricing method, it is clear that the effect of the add-back

provision resulted in a Class II price that can never achieve the

intended target differential. While the goal of the add-back was to

provide a degree of coordination with the Class III price, it did not

attempt price coordination with the Class III price in months when the

effective Class II differential was well above the targeted

differential. Retention of the add-back feature for any proposal

presented at this hearing would have similar results.

The add-back provision similarly does not balance prices paid by

handlers in months when producers receive more (and at times much more)

than the intended target differential. In this view, the add-back

feature only works to the price advantage of the producer who, because

of the unintended effect of a pricing provision, enjoys all protection

from market price changes that handlers do not.

To retain the add-back provision under the proposal recommended for

adoption herein could only result in increasing the minimum Class II

milk price. An analysis of what the Class II price would have been with

and without an add-back provision reveals that in 1990 the add-back

would have enhanced the effective Class II differential by 19 cents;

for 1991 it would have enhanced the Class II differential by 24 cents;

for 1992 it would have enhanced the Class II differential by 15 cents;

and for 1993 the Class II differential would have been enhanced by 34

cents. Additionally, because this decision makes a clear break from the

past in that Class II prices are more importantly coordinated with the

Class I price, there remains no rational argument for its retention.

The need for advance pricing, as well as the need for coordination with

Class I price movements, means moving away from price coordination with

the current month's Class III price. Both objectives can not be

simultaneously satisfied.

2. Need for Emergency Action. On the basis of the record evidence

and testimony, no emergency conditions could be ascertained that would

warrant the omission of a recommended decision.

Rulings on Proposed Findings and Conclusions

Briefs and proposed findings and conclusions were filed on behalf

of certain interested parties. These briefs, proposed findings and

conclusions, and the evidence in the record were considered in making

the findings and conclusions set forth above. To the extent that the

suggested findings and conclusions filed by interested parties are

inconsistent with the findings and conclusions set forth herein, the

requests to make such findings or reach such conclusions are denied for

the reasons previously stated in this decision.

General Findings

The findings and determinations hereinafter set forth supplement

those that were made when the New England and other orders were first

issued and when they were amended. The previous findings and

determinations are hereby ratified and confirmed, except where they may

conflict with those set forth herein.

(a) The tentative marketing agreements and the orders, as hereby

proposed to be amended, and all of the terms and conditions thereof,

will tend to effectuate the declared policy of the Act;

(b) The parity prices of milk as determined pursuant to section 2

of the Act are not reasonable in view of the price of feeds, available

supplies of feeds, and other economic conditions which affect market

supply and demand for milk in the marketing areas, and the minimum

prices specified in the tentative marketing agreements and the orders,

as hereby proposed to be amended, are such prices as will reflect the

aforesaid factors, insure a sufficient quantity of pure and wholesome

milk, and be in the public interest; and

(c) The tentative marketing agreements and the orders, as hereby

proposed to be amended, will regulate the handling of milk in the same

manner as, and will be applicable only to persons in the respective

classes of industrial and commercial activity specified in, marketing

agreements upon which a hearing has been held; and

(d) All milk and milk products handled by handlers, as defined in

the tentative marketing agreements and the orders as hereby proposed to

be amended, are in the current of interstate commerce or directly

burden, obstruct, or affect interstate commerce in milk or its

products.

Recommended Marketing Agreements and Orders Amending the Orders

The recommended marketing agreements are not included in this

decision because the regulatory provisions thereof would be the same as

those contained in the orders, as hereby proposed to be amended. The

following order amending the orders, as amended, regulating the

handling of milk in the New England and other marketing areas is

recommended as the detailed and appropriate means by which the

foregoing conclusions may be carried out.

List of Subjects in 7 CFR Parts 1001, 1002, 1004, 1005, 1006, 1007,

1011, 1012, 1013, 1030, 1032, 1033, 1036, 1040, 1044, 1046, 1049, 1050,

1064, 1065, 1068, 1075, 1076, 1079, 1093, 1094, 1096, 1099, 1106, 1108,

1124, 1126, 1131, 1134, 1135, 1137, 1138, 1139

Milk marketing orders.

For the reasons set forth in the preamble, the following

provision(s) in Title 7, Parts 1001 through 1139 are amended as

follows:

1. The authority citation for 7 CFR Parts 1001 through 1139

continues to read as follows:

Authority: Sec. 1-19, 48 Stat 31, as amended; 7 U.S.C. 601-674.

PART 1001--MILK IN THE NEW ENGLAND MARKETING AREA

Sec. 1001.211 [Removed and Reserved]

1. Section 1001.21 is removed and reserved.

2. Section 1001.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1001.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

3. Section 1001.51 is amended by revising the section heading,

removing the paragraph designation ``(a)'' without revising the text of

the paragraph, and by removing paragraph (b), to read as follows:

Sec. 1001.51 Basic formula price.

* * * * *

4. Section 1001.54 is revised to read as follows:

Sec. 1001.54 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I and Class II prices for the

following month, and the Class III and Class III-A prices for the

preceding month.

PART 1002--MILK IN THE NEW YORK-NEW JERSEY MARKETING AREA

Sec. 1002.19 [Removed]

1. Section 1002.19 is removed and reserved.

2. Section 1002.50 is amended by revising paragraph (c) to read as

follows:

Sec. 1002.50 Class prices.

* * * * *

(c) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

3. Section 1002.51 is amended by revising the section heading,

removing the paragraph designation ``(a)'' without revising the text of

the paragraph, and by removing paragraph (b), to read as follows:

Sec. 1002.51 Basic formula price.

* * * * *

4. Section 1002.56 is amended by revising the introductory text,

removing the introductory text of paragraph (a), redesignating

paragraph (a)(1) as paragraph (a), revising paragraph (b),

redesignating paragraph (a)(2) as paragraph (c), redesignating

paragraph (a)(3) as paragraph (d), redesignating paragraph (a)(4) as

paragraph (e), redesignating paragraph (a)(5) as paragraph (f), and

redesignating paragraph (a)(6) as paragraph (g), to read as follows:

Sec. 1002.56 Announcement of class prices and butterfat differential.

* * * * *

The market administrator shall announce publicly on or before the

fifth day of each month, the following:

* * * * *

(b) The Class II price for the following month applicable at the

201-210 mile zone and at the 1-10 mile zone.

* * * * *

PART 1004--MILK IN THE MIDDLE ATLANTIC MARKETING AREA

Sec. 1004.21 [Removed]

1. Section 1004.21 is removed and reserved.

2. Section 1004.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1004.50 Class and component prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

3. Section 1004.51 is amended by revising the section heading,

removing the paragraph designation ``(a)'' without revising the text of

the paragraph, and by removing paragraph (b), to read as follows:

Sec. 1004.51 Basic formula price.

* * * * *

4. Section 1004.53 is amended by revising the introductory text,

removing the introductory text of paragraph (a), redesignating

paragraph (a)(1) as paragraph (a), revising paragraph (b),

redesignating paragraph (a)(2) as paragraph (c), and redesignating

paragraph (a)(3) as paragraph (d) to read as follows:

Sec. 1004.53 Announcement of class prices and component prices.

The market administrator shall announce publicly on or before the

fifth day of each month, the following:

* * * * *

(b) The Class II price for the following month;

* * * * *

PART 1005--MILK IN THE CAROLINA MARKETING AREA

Sec. 1005.20 [Removed]

1. Section 1005.20 is removed.

2. Section 1005.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1005.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1005.52 [Removed and Reserved]

3. Section 1005.52 is removed and reserved.

4. Section 1005.54 is revised to read as follows:

Sec. 1005.54 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1006--MILK IN THE UPPER FLORIDA MARKETING AREA

Sec. 1006.19 [Reserved]

1. Section 1006.19 is removed and reserved.

2. Section 1006.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1006.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1006.51a [Removed]

3. Section 1006.51a is removed.

4. Section 1006.53 is revised to read as follows:

Sec. 1006.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the basic formula price for the preceding

month.

PART 1007--MILK IN THE GEORGIA MARKETING AREA

Sec. 1007.20 [Removed and Reserved]

1. Section 1007.20 is removed and reserved.

2. Section 1007.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1007.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1007.51a [Removed and Reserved]

3. Section 1007.51a is removed.

4. Section 1007.53 is revised to read as follows:

Sec. 1007.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1011--MILK IN THE TENNESSEE VALLEY MARKETING AREA

Sec. 1011.20 [Removed]

1. Section 1011.20 is removed.

2. Section 1011.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1011.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1011.51a [Removed]

3. Section 1011.51a is removed.

4. Section 1011.53 is revised to read as follows:

Sec. 1011.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A price for the

preceding month.

PART 1012--MILK IN THE TAMPA BAY MARKETING AREA

Sec. 1012.19 [Removed and Reserved]

1. Section 1012.19 is removed and reserved.

2. Section 1012.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1012.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1012.51a [Removed]

3. Section 1012.51a is removed.

4. Section 1012.53 is revised to read as follows:

Sec. 1012.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the basic formula price for the preceding

month.

PART 1013--MILK IN THE SOUTHEASTERN FLORIDA MARKETING AREA

Sec. 1013.19 [Removed and Reserved]

1. Section 1013.19 is removed and reserved.

2. Section 1013.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1013.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1013.51a [Removed]

3. Section 1013.51a is removed.

4. Section 1013.53 is revised to read as follows:

Sec. 1013.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III price for the preceding month.

PART 1030--MILK IN THE CHICAGO REGIONAL MARKETING AREA

Sec. 1030.20 [Removed and Reserved]

1. Section 1030.20 is removed and reserved.

2. Section 1030.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1030.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1030.51a [Removed]

3. Section 1030.51a is removed.

4. Section 1030.53 is revised to read as follows:

Sec. 1030.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1032--MILK IN THE SOUTHERN ILLINOIS-EASTERN MISSOURI MARKETING

AREA

Sec. 1032.20 [Removed]

1. Section 1032.20 is removed.

2. Section 1032.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1032.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1032.51a [Removed]

3. Section 1032.51a is removed.

4. Section 1032.53 is revised to read as follows:

Sec. 1032.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III price for the preceding month.

PART 1033--MILK IN THE OHIO VALLEY MARKETING AREA

Sec. 1033.20 [Removed and Reserved]

1. Section 1033.20 is removed and reserved.

2. Section 1033.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1033.50 Class and component prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

3. Section 1033.51 is amended by revising the section heading,

removing the paragraph designation ``(a)'' without revising the text of

the paragraph, and by removing paragraph (b), to read as follows:

Sec. 1033.51 Basic formula price.

* * * * *

4. Section 1033.53 is amended by revising the introductory text,

removing the introductory text of paragraph (a), redesignating

paragraph (a)(1) as paragraph (a), revising paragraph (b),

redesignating paragraph (a)(2) as paragraph (c), redesignating

paragraph (a)(3) as paragraph (d), redesignating paragraph (a)(4) as

paragraph (e) and redesignating paragraph (a)(5) as paragraph (f), to

read as follows:

Sec. 1033.53 Announcement of class and component prices.

The market administrator shall announce publicly on or before the

fifth day of each month, the following:

* * * * *

(b) The Class II price for the following month;

* * * * *

PART 1036--MILK IN THE EASTERN OHIO-WESTERN PENNSYLVANIA MARKETING

AREA

Sec. 1036.20 [Removed and Reserved]

1. Section 1036.20 is removed and reserved.

2. Section 1036.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1036.50 Class and component prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1036.51a [Removed]

3. Section 1036.51a is removed.

4. Section 1036.53 is amended by revising the introductory text,

removing the introductory text of paragraph (a), redesignating

paragraph (a)(1) as paragraph (a), revising paragraph (b),

redesignating paragraph (a)(2) as paragraph (c), redesignating

paragraph (a)(3) as paragraph (d), redesignating paragraph (a)(4) as

paragraph (e) and redesignating paragraph (a)(5) as paragraph (f), to

read as follows:

Sec. 1036.53 Announcement of class and component prices.

The market administrator shall announce publicly on or before the

fifth day of each month, the following:

* * * * *

(b) The Class II price for the following month;

* * * * *

PART 1040--MILK IN THE SOUTHERN MICHIGAN MARKETING AREA

Sec. 1040.20 [Removed]

1. Section 1040.20 is removed.

2. Section 1040.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1040.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1040.51a [Removed]

3. Section 1040.51a is removed.

4. Section 1040.53 is revised to read as follows:

Sec. 1040.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1044--MILK IN THE MICHIGAN UPPER PENINSULA MARKETING AREA

Sec. 1044.20 [Removed and Reserved]

1. Section 1044.20 is removed and reserved.

2. Section 1044.22 is amended by revising paragraph (i)(1)(i) and

removing paragraph (i)(3), to read as follows:

Sec. 1044.22 Additional duties of the market administrator.

* * * * *

(i) * * *

(1) * * *

(i) The Class I price and Class II price for the following month;

* * * * *

3. Section 1044.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1044.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

4. Section 1044.51 is amended by revising the section heading,

removing the paragraph designation ``(a)'' without revising the text of

the paragraph, and by removing paragraph (b), to read as follows:

Sec. 1044.51 Basic formula price.

* * * * *

PART 1046--MILK IN THE LOUISVILLE-LEXINGTON-EVANSVILLE MARKETING

AREA

Sec. 1046.201 [Removed]

1. Section 1046.20 is removed.

2. Section 1046.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1046.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1046.51a [Removed]

3. Section 1046.51a is removed.

4. Section 1046.53 is revised to read as follows:

Sec. 1046.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1049--MILK IN THE INDIANA MARKETING AREA

Sec. 1049.20 [Removed]

1. Section 1049.20 is removed.

2. Section 1049.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1049.50 Class and component prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1049.51a [Removed]

3. Section 1049.51a is removed.

4. Section 1049.53 is amended by revising the introductory text,

removing the introductory text of paragraph (a), redesignating

paragraph (a)(1) as paragraph (a), revising paragraph (b),

redesignating paragraph (a)(2) as paragraph (c), redesignating

paragraph (a)(3) as paragraph (d), redesignating paragraph (a)(4) as

paragraph (e) and redesignating paragraph (a)(5) as paragraph (f), to

read as follows:

Sec. 1049.53 Announcement of class and component prices.

The market administrator shall announce publicly on or before the

fifth day of each month, the following:

* * * * *

(b) The Class II price for the following month;

* * * * *

PART 1050--MILK IN THE CENTRAL ILLINOIS MARKETING AREA

Sec. 1050.20 [Removed]

1. Section 1050.20 is removed.

2. Section 1050.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1050.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1050.51a [Removed]

3. Section 1050.51a is removed.

4. Section 1050.53 is revised to read as follows:

Sec. 1050.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III price for the preceding month.

PART 1064--MILK IN THE GREATER KANSAS CITY MARKETING AREA

Sec. 1064.20 [Removed]

1. Section 1064.20 is removed.

2. Section 1064.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1064.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1064.51a [Removed]

3. Section 1064.51a is removed.

4. Section 1064.53 is revised to read as follows:

Sec. 1064.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III price for the preceding month.

PART 1065--MILK IN THE NEBRASKA-WESTERN IOWA MARKETING AREA

Sec. 1065.20 [Removed]

1. Section 1065.20 is removed.

2. Section 1065.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1065.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1065.51a [Removed]

3. Section 1065.51a is removed.

4. Section 1065.53 is revised to read as follows:

Sec. 1065.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1068--MILK IN THE UPPER MIDWEST MARKETING AREA

Sec. 1068.20 [Removed]

1. Section 1068.20 is removed.

2. Section 1068.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1068.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1068.51a [Removed]

3. Section 1068.51a is removed.

4. Section 1068.53 is revised to read as follows:

Sec. 1068.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1075--MILK IN THE BLACK HILLS, SOUTH DAKOTA MARKETING AREA

Sec. 1075.20 [Removed]

1. Section 1075.20 is removed.

2. Section 1075.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1075.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

3. Section 1075.51 is amended by revising the section heading,

removing the paragraph designation ``(a)'' without revising the text of

the paragraph, and by removing paragraph (b), to read as follows:

Sec. 1075.51 Basic formula price.

* * * * *

4. Section 1075.53 is revised to read as follows:

Sec. 1075.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III price for the preceding month.

PART 1076--MILK IN THE EASTERN SOUTH DAKOTA MARKETING AREA

Sec. 1076.20 [Removed]

1. Section 1076.20 is removed.

2. Section 1076.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1076.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

1076.51a [Removed]

3. Section 1076.51a is removed.

4. Section 1076.53 is revised to read as follows:

Sec. 1076.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III price for the preceding month.

PART 1079--MILK IN THE IOWA MARKETING AREA

Sec. 1079.20 [Removed]

1. Section 1079.20 is removed.

2. Section 1079.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1079.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1079.51a [Removed]

3. Section 1079.51a is removed.

4. Section 1079.53 is revised to read as follows:

Sec. 1079.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1093--MILK IN THE ALABAMA-WEST FLORIDA MARKETING AREA

Sec. 1093.20 [Removed]

1. Section 1093.20 is removed.

2. Section 1093.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1093.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1093.51a [Removed]

3. Section 1093.51a is removed.

4. Section 1093.53 is revised to read as follows:

Sec. 1093.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A price for the

preceding month.

PART 1094--MILK IN THE NEW ORLEANS-MISSISSIPPI MARKETING AREA

Sec. 1094.20 [Removed]

1. Section 1094.20 is removed.

2. Section 1094.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1094.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1094.51a [Removed]

3. Section 1094.51a is removed.

4. Section 1094.53 is revised to read as follows:

Sec. 1094.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1096--MILK IN THE GREATER LOUISIANA MARKETING AREA

Sec. 1096.20 [Removed]

1. Section 1096.20 is removed.

2. Section 1096.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1096.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1096.51a [Removed]

3. Section 1096.51a is removed.

4. Section 1096.53 is revised to read as follows:

Sec. 1096.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1099--MILK IN THE PADUCAH, KENTUCKY MARKETING AREA

Sec. 1099.20 [Removed]

1. Section 1099.20 is removed.

2. Section 1099.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1099.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1099.51a [Removed]

3. Section 1099.51a is removed.

4. Section 1099.53 is revised to read as follows:

Sec. 1099.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1106--MILK IN THE SOUTHWEST PLAINS MARKETING AREA

Sec. 1106.20 [Removed]

1. Section 1106.20 is removed.

2. Section 1106.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1106.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1099.51a [Removed]

3. Section 1106.51a is removed.

4. Section 1106.53 is revised to read as follows:

Sec. 1106.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1108--MILK IN THE CENTRAL ARKANSAS MARKETING AREA

Sec. 1108.20 [Removed]

1. Section 1108.20 is removed.

2. Section 1108.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1108.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1108.51a [Removed]

3. Section 1108.51a is removed.

4. Section 1108.53 is revised to read as follows:

Sec. 1108.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1124--MILK IN THE PACIFIC NORTHWEST MARKETING AREA

1. Section 1124.19 is revised to read as follows:

Sec. 1124.19 Butterfat differential.

The butterfat differential is the number that results from

subtracting the computation in paragraph (b) of this section from the

computation in paragraph (a) of this section and rounding to the

nearest one-tenth cent:

(a) Multiply 0.138 times the monthly average Chicago Mercantile

Exchange Grade A (92-score) butter price as reported by the Dairy

Division;

(b) Multiply 0.0028 times the average price per hundredweight, at

test, for manufacturing grade milk, f.o.b. plants in Minnesota and

Wisconsin, as reported by the Department for the month.

2. Section 1124.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1124.50 Class and component prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

3. Section 1124.51 is amended by revising the section heading,

removing the paragraph designation ``(a)'' without revising the text of

the paragraph, and by removing paragraph (b), to read as follows:

Sec. 1124.51 Basic formula price.

* * * * *

4. Section 1124.53 is amended by revising paragraph (a), removing

paragraph (b), and redesignating paragraph (c) as paragraph (b), to

read as follows:

Sec. 1124.53 Announcement of class and component prices.

* * * * *

(a) On or before the 5th day of each month, the Class I price and

the Class II price for the following month, and the Class III and Class

III-A price for the preceding month.

* * * * *

PART 1126--MILK IN THE TEXAS MARKETING AREA

Sec. 1126.20 [Removed and Reserved]

1. Section 1126.20 is removed and reserved.

2. Section 1126.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1126.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1126.51 [Removed]

3. Section 1126.51a is removed.

4. Section 1126.53 is revised to read as follows:

Sec. 1126.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1131--MILK IN THE CENTRAL ARIZONA MARKETING AREA

Sec. 1131.20 [Removed and Reserved]

1. Section 1131.20 is removed and reserved.

2. Section 1131.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1131.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1131.51a [Removed]

3. Section 1131.51a is removed.

4. Section 1131.53 is revised to read as follows:

Sec. 1131.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A prices for the

preceding month.

PART 1134--MILK IN THE WESTERN COLORADO MARKETING AREA

Sec. 1134.9 [Removed and Reserved]

1. Section 1134.19 is removed and reserved.

2. Section 1134.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1134.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1134.51a [Removed]

3. Section 1134.51a is removed.

4. Section 1134.53 is revised to read as follows:

Sec. 1134.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III price for the preceding month.

PART 1135--MILK IN THE SOUTHWESTERN IDAHO-EASTERN OREGON MARKETING

AREA

1. Section 1135.19 is revised to read as follows:

Sec. 1135.19 Butterfat differential.

The butterfat differential is the number that results from

subtracting the computation in paragraph (b) of this section from the

computation in paragraph (a) of this section and rounding to the

nearest one-tenth cent:

(a) Multiply 0.138 times the monthly average Chicago Mercantile

Exchange Grade A (92-score) butter price as reported by the Dairy

Division;

(b) Multiply 0.0028 times the average price per hundredweight, at

test, for manufacturing grade milk, f.o.b. plants in Minnesota and

Wisconsin, as reported by the Department for the month.

2. Section 1135.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1135.50 Class and component prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

3. Section 1135.51 is amended by revising the section heading,

removing the paragraph designation ``(a)'' without revising the text of

the paragraph, and by removing paragraph (b), to read as follows:

Sec. 1135.51 Basic formula prices.

* * * * *

4. Section 1135.53 is amended by revising paragraph (a), removing

paragraph (b), and redesignating paragraph (c) as paragraph (b), to

read as follows:

Sec. 1135.53 Announcement of class and component prices.

* * * * *

(a) On or before the 5th day of each month, the Class I price and

the Class II price for the following month, and the Class III and Class

III-A prices for the preceding month.

* * * * *

PART 1137--MILK IN THE EASTERN COLORADO MARKETING AREA

Sec. 1137.19 [Removed and Reserved]

1. Section 1137.19 is removed and reserved.

2. Section 1137.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1137.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1137.51 [Removed]

3. Section 1137.51a is removed.

4. Section 1137.53 is revised to read as follows:

Sec. 1137.53 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III price for the preceding month.

PART 1138--MILK IN THE NEW MEXICO-WEST TEXAS MARKETING AREA

1138.20 [Removed and Reserved]

1. Section 1138.20 is removed and reserved.

2. Section 1138.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1138.50 Class prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

Sec. 1138.52 [Removed and Reserved]

3. Section 1138.52 is removed and reserved.

4. Section 1138.54 is revised to read as follows:

Sec. 1138.54 Announcement of class prices.

The market administrator shall announce publicly on or before the

fifth day of each month the Class I price and the Class II price for

the following month, and the Class III and Class III-A price for the

preceding month.

PART 1139--MILK IN THE GREAT BASIN MARKETING AREA

Sec. 1139.19 [Removed and Reserved]

1. Section 1139.19 is removed and reserved.

2. Section 1139.50 is amended by revising paragraph (b) to read as

follows:

Sec. 1139.50 Class prices and component prices.

* * * * *

(b) Class II price. The Class II price shall be the basic formula

price for the second preceding month plus $0.30.

* * * * *

3. Section 1139.51 is amended by revising the section heading,

removing the paragraph designation ``(a)'' without revising the text of

the paragraph, and by removing paragraph (b), to read as follows:

Sec. 1139.51 Basic formula price.

* * * * *

4. Section 1139.53 is amended by revising paragraph (a), removing

paragraph (b), and redesignating paragraph (c) as paragraph (b), to

read as follows:

Sec. 1139.53 Announcement of class and component prices.

* * * * *

(a) The 5th day of each month, the Class I price and the Class II

price for the following month.

* * * * *

Dated: August 22, 1994.

Lon Hatamiya,

Administrator.

[FR Doc. 94-20990 Filed 8-25-94; 8:45 am]

BILLING CODE 3410-02-P