Milk in the Eastern Ohio-Western Pennsylvania Marketing Area; Revision of Cooperative Association Reserve Processing Plant Shipping Requirement

SUMMARY: This document reinstates the cooperative pool reserve

processing plant delivery requirement of 35 percent under the Eastern

Ohio-Western Pennsylvania Federal milk order (Order 36), as of January

1, 1996. A reduction from 35 to 25 percent was intended to be temporary

for the period July 1, 1993, through August 31, 1994. The current issue

of the Code of Federal Regulations shows the percentage requirement to

be 25 percent. The percentage of a cooperative association's member

milk that must be delivered to pool distributing plants to qualify the

cooperative's reserve processing plant for pooling continues to be 25

percent until December 31, 1995, rather than 35 percent. This action is

necessary to prevent uneconomic movements of milk for the purpose of

pooling much of the market's supply.

EFFECTIVE DATE: The amendment of Sec. 1036.7(d), published on July 30,

1993, and effective July 1, 1993 (58 FR 40724), will continue through

December 31, 1995, and will expire January 1, 1996. Amendments 2 and 3

are effective January 1, 1996.

FOR FURTHER INFORMATION CONTACT: Constance M. Brenner, Marketing

Specialist, USDA/AMS/Dairy Division, Order Formulation Branch, Room

2971, South Building, P.O. Box 96456, Washington, DC 20090-6456, (202)

720-2357.

SUPPLEMENTARY INFORMATION: Prior documents in this proceeding:

Revision of Rule: Issued July 22, 1993; published July 30, 1993 (58

FR 40724).

Notice of Proposed Temporary Revision: Issued June 27, 1994;

published July 1, 1994 (59 FR 33922).

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 rule will not have a

significant economic impact on a substantial number of small entities.

This rule lessens the regulatory impact of the order on certain milk

handlers and tends to ensure that dairy farmers will continue to have

their milk priced under the order and thereby receive the benefits that

accrue from such pricing.

The Department is issuing this final rule in conformance with

Executive Order 12866.

This final rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This rule is not intended to have a retroactive

effect. This rule will 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 provisions 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.

This revision is issued pursuant to the provisions of the

Agricultural Marketing Agreement Act and the provisions of

Sec. 1036.7(f) of the Eastern Ohio-Western Pennsylvania order.

Notice of proposed rulemaking was published in the Federal Register

(59 FR 33922) concerning a proposed relaxation of the cooperative

association reserve processing plant shipping requirement. The revision

was proposed to be effective for the months of September 1994 through

December 1995. The public was afforded the opportunity to comment on

the proposed notice by submitting written data, views and arguments by

August 1, 1994. Three comments supporting the proposed revision were

received. No opposing comments were received.

Statement of Consideration

This rule continues to ease the pooling requirements for

cooperative reserve processing plants by 10 percentage points, to 25

percent, for the period September 1, 1994, through December 31, 1995.

Under the revision the total minimum quantity of a cooperative

association's milk supply that is required to be delivered to

distributing plants in order for the cooperative's reserve supply plant

to maintain pool status is reduced from 35 percent to 25 percent.

In order for a cooperative association plant that does not qualify

as a pool distributing or pool supply plant to be a pool plant, the

Eastern Ohio-Western Pennsylvania order requires that the cooperative

must deliver to pool distributing plants a minimum of 35 percent of the

total quantity of milk marketed by the cooperative, either during the

month or during the 12-month period ending with the immediately

preceding month.

The Eastern Ohio-Western Pennsylvania milk order provides authority

for the Director of the Dairy Division to increase or decrease the

required shipping percentages for cooperative reserve supply plants by

up to 10 percentage points if such a revision is necessary to obtain

needed shipments or to prevent uneconomic shipments.

The revision was requested originally for the period July 1993

through August 1994 by Milk Marketing, Inc. (MMI), a cooperative

association that represents many of the market's producers. As printed

in the Federal Register, the revision became effective July 1, 1993,

with no termination date. The 1994 Code of Federal Regulations (CFR)

reflects the revised shipping standards, and without further amendatory

action, the 1995 CFR will also reflect the reduced 25-percent shipping

standard.

MMI requested continued revision of the cooperative association

shipping requirements for the period September 1, 1994, through

December 31, 1995, and a proposed revision was issued. Comments

supporting the revision were received from MMI and two other

cooperative associations with members whose milk is pooled under Order

36. MMI, Eastern Milk Producers Cooperative Association, Inc.

(Eastern), and Dairylea Cooperative, Inc. (Dairylea), stated that the

revision is needed to prevent unnecessary and uneconomic movements of

milk because of the current severe milk supply-demand imbalance in the

Eastern Ohio-Western Pennsylvania marketing area.

MMI's comments included a description of milk marketing conditions

for June 1994 that show milk production for the market increased over 4

percent from the same month of the previous year, representing 12

million additional pounds of milk in the Order 36 pool. For the same

month, Class I sales decreased by nearly 2.5 percent from June 1993,

representing a reduction of approximately 3.4 million pounds of Class I

sales. As a result of the market's increasing production and declining

Class I use, nearly 15.5 million pounds of milk had to be used in

manufactured products than in the same month the previous year.

The comments filed by Eastern stated that the trends observable for

June are expected to continue for the foreseeable future, creating

additional pooling difficulties for cooperative handlers pooling milk

under Order 36. Dairylea stated that continuation of the revision would

prevent unnecessary, uneconomic movements of milk.

According to comments filed, milk supplies historically pooled

under the order currently are continuing to lose their markets and

having to find new outlets for their production. Apparently, Order 36

and nearby pool distributing and pool supply plants are releasing some

of their milk suppliers to find their own markets for milk. Such

institutional changes in the sources of supply for various plants may

result in market instability and disorder.

Milk production in the Eastern Ohio-Western Pennsylvania marketing

area appears to be increasing while Class I use is declining. As a

result, greater volumes of milk must be diverted to manufacturing uses

than in prior years. The last full year before the 1990 proceeding that

resulted in the amendments that took effect October 1, 1993, was 1989.

During the short production months (September through November) of

1989, the percentage of Order 36 producer milk needed for Class I use

was over 60 percent, with less than 30 percent of the market's milk

used in Class III. For the same period of 1992, the percentage of

producer milk used in Class I was just 55 percent, with the Class III

percentage increasing to nearly 36 percent. The trend continued during

the same months of 1993, with less than 55 percent of the producer milk

pooled during September, October and November used in Class I.

The increased production and decline in Class I sales, coupled with

the market's changing handler-producer relationships, necessitates a

continuation in the reduction of the percentage of milk that must be

delivered by a cooperative association to pool distributing plants in

order to assure the pool status of the cooperative's member milk.

The revision effective July 1, 1993, should continue in effect for

a period long enough to allow the institutional shifts currently in

process to work themselves out, and for the cooperative associations to

assure themselves of an adequate fluid market for their producer milk.

Therefore, the revision should remain in place through December 1995.

After consideration of all relevant material, including the

proposal set forth, and other available information, it is hereby found

and determined that the diversion limitation percentage set forth in

Sec. 1036.7(d) should be maintained at the present 25-percent level

through December 31, 1995.

List of Subjects in 7 CFR Part 1036

Milk marketing orders.

For the reasons set forth in the preamble, Title 7, Part 1036, is

amended as follows:

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

AREA

1. The authority notice for 7 CFR part 1036 continues to read as

follows:

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

Sec. 1036.7 [Amended]

2. Section 1036.7(d) is amended by changing the words ``25

percent'' to ``35 percent'', effective January 1, 1996.

3. Section 1036.7(d)(2) is amended by changing the words ``25-

percent'' to ``35 percent'', effective January 1, 1996.

Dated: September 8, 1994.

Richard M. McKee,

Director, Dairy Division.

[FR Doc. 94-22919 Filed 9-21-94; 8:45 am]

BILLING CODE 3410-02-P