Milk in the New England and New York-New Jersey Marketing Areas; Termination of Certain Provisions of the Orders

SUMMARY: This rule terminates the seasonal production incentive plans

for paying producers under the New England and New York-New Jersey

Federal milk orders. This termination was requested by cooperative

associations that represent producers who supply about one-half of the

milk regulated under the orders. The seasonal incentive plans have been

suspended during each of the last three years and are no longer

effective in carrying out their intended purpose.

EFFECTIVE DATE: April 7, 1994.

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: Prior document in this proceeding:

Notice of Proposed Termination or Suspension: Issued February 15,

1994; published February 24, 1994 (59 FR 8873).

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 orders on dairy farmers

and will not affect milk handlers.

The Department is issuing this 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 order of termination is issued pursuant to the provisions of

the Agricultural Marketing Agreement Act and of the orders regulating

the handling of milk in the New England and New York-New Jersey

marketing areas.

Notice of proposed rulemaking was published in the Federal Register

on February 24,1994 (59 FR 8873) concerning a proposed termination or

suspension of certain provisions of the orders. Interested persons were

afforded opportunity to file written data, views and arguments.

Comments supporting the proposed termination were received from

Dairylea Cooperative, Inc, and Agri-Mark, two of the cooperatives who

proposed termination. One comment was received from a dairy farmer who

opposed termination.

After consideration of all relevant material, including the

proposal in the notice, the comments received and other available

information, it is hereby found and determined that the following

provisions of the orders do not tend to effectuate the declared policy

of the Act:

1. In Sec. 1001.62, paragraphs (c) and (d); and

2. In Sec. 1002.61, paragraphs (d) and (e).

Statement of Consideration

This rule terminates the seasonal plans for paying producers under

the New England and New York-New Jersey Federal orders. These seasonal

payment plans provide for making deductions from prices paid to

producers during the normal flush-production months of March through

June and returning to producers the deducted amounts during the normal

short-production months of August through November. The plans are

intended to provide an incentive for dairy farmers to level out their

production during the year.

The termination of the payment plans was requested by cooperative

associations that represent dairy farmers who supply handlers regulated

under the orders. Collectively, these cooperatives represent about 51

percent of the producers associated with the New England marketing area

and about 48 percent of the producers associated with the New York-New

Jersey marketing area. The cooperative associations proposing the

terminations are Agri-Mark, Inc.; Allied Federated Cooperatives, Inc.;

Atlantic Dairy Cooperative, Inc.; Dairylea Cooperative, Inc., and its

members cooperatives: Cortland Bulk Milk Producers Cooperative, Oneida-

Madison Milk Producers Cooperative Association, Inc., and Steamburg

Milk Producers Cooperative Association, Inc., and its affiliated

cooperatives: Deer River Bulk Milk Cooperative, Inc., and Jefferson

Bulk Milk Cooperative, Inc.; Eastern Milk Producers Cooperative

Association, Inc., and its affiliated cooperatives: Chateaugay Co-

operative Marketing Association, Inc., Konhokton Milk Producers Co-

operative Association, Inc., Middlebury Milk Producers Cooperative

Association, Inc., and Sullivan County Co-operative Dairy Association,

Inc.; and Upstate Milk Cooperatives, Inc.

Proponents contend that the ``Louisville'' seasonal payment plans

are no longer effective or necessary to reduce the seasonal spring-to-

fall swings in milk production as was intended when they were first

provided for in these orders some 25 years ago. Proponents indicated

that the seasonal payment plans are largely ineffective because of a

general lack of awareness about the plans in the dairy farming

community. They also contend that the price differentials are too low

relative to milk prices to provide an incentive for dairy farmers to

modify their seasonal production patterns. The proponents further

indicated concern about the impact of reducing returns to producers

during the spring months when producer milk prices are already

generally lower than during other times of the year.

In addition, it has been noted that the seasonal incentive payment

plans are no longer necessary or effective since they have been

suspended for the past three years. The proponents point out that these

past suspension actions were supported by the need for dairy farmers to

have additional monies available during the spring months during which

prices to producers decline precipitously. Proponents expect that milk

prices will decline in the spring months of 1994 and in the spring

months of future years. They also maintain that retaining the payment

plans will continue to put cash flow pressures on dairy farmers during

a time of increased cash needs for spring planting.

In the comments, Agri-Mark reiterated its support for the

termination of the seasonal payment plans. The cooperative's primary

support for termination involves the volatility of milk prices at low

levels for the past several years. Agri-Mark maintains that if the

Louisville seasonal payment plan had been in effect, about $20 million

would have been removed from producer payments in the spring planting

months and would have resulted in cash flow difficulties for many

farms. Agri-Mark said that even those farmers who have contra-seasonal

milk production would have reduced income during the spring and summer

months.

In further support for the termination of the seasonal payment

plans, Agri-Mark indicated that actual seasonal price movements in the

marketplace, to some extent, accomplished the fall price incentives

originally intended by the Louisville payment plan. The cooperative

noted that during the past three years, while the Louisville plans were

suspended, the blend price in the August-November period averaged

slightly more that $1.00 above the March-June period in both the New

England and New York-New Jersey orders. Agri-Mark expects this pattern

to generally continue.

One comment in opposition to this termination was received from a

dairy farmer who supplies the New York-New Jersey marketing area. This

farmer expressed the view that the Louisville payment plan is still

effective in reducing the variability of milk production even though

the Louisville plan differential levels are too low to be as meaningful

as they were in earlier years when the differential level represented a

greater percentage of the price of milk. The farmer also expressed the

view that withholding money from a producer's milk check in the spring

months when cash is needed for meeting spring planting costs was not

particularly burdensome.

The ``Louisville'' seasonal incentive payment plan has been in

effect in the New England and New York-New Jersey orders since the late

1960's when there was significant variability between milk production

in the spring and fall months. Market statistics reveal that this

variability was as much as 30 percent when the plans were first

implemented in the orders, and there was considerable institutional and

economic pressure to reduce this seasonality of production because of

the high costs of marketing seasonal surpluses of milk. It is

reasonable to conclude from a review of current-day statistics that the

plans have played a role in reducing this variability, as commented

upon by the producer in opposition to the termination action. However,

the seasonality of milk production has not changed much since 1980, and

there are certainly a number of other reasons for this in addition to

the ``small'' Louisville differentials relative to the per

hundredweight price of milk from the 1960's and 1970's versus today.

Without question, it is also reasonable to attribute, in part, the

narrowing of production seasonality to advances in production

practices, including improvement in feeding programs, breeding and

other management practices.

One of the most important consideration in this termination action

is the fact that the plans have not been operational for the last three

years and thus have had no impact on the seasonality of milk

production. The prior suspension actions, as well as this request to

terminate the payment plans, were supported by a significant number of

producers who were concerned about their prices being reduced any more

than what would normally occur because of seasonally lower prices in

the spring. The seasonal variability in the basic formula price for

milk (the M-W price) in today's marketplace already provides an

incentive for producers to make their own individual production

decisions in response to the seasonal price changes. Since the payment

plans have not been operational or effective, they should be

terminated.

Therefore, the seasonal incentive payment plans of the two markets

are hereby terminated.

It is hereby found and determined that thirty days' notice of the

effective date hereof is impractical, unnecessary and contrary to the

public interest in that:

(a) The termination is necessary to reflect current marketing

conditions and to assure orderly marketing conditions in the marketing

area;

(b) This termination does not require of persons affected

substantial or extensive preparation prior to the effective date; and

(c) Notice of proposed rulemaking was given interested parties and

they were afforded opportunity to file written data, views or arguments

concerning this suspension.

Therefore, good cause exists for making this order effective upon

publication in the Federal Register.

List of Subjects in 7 CFR Parts 1001 and 1002

Milk marketing orders.

For the reasons set forth in the preamble, the following provisions

in title 7, parts 1001 and 1002, are amended as follows:

1. The authority citation for 7 CFR parts 1001 and 1002 continues

to read as follows:

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

674.

PART 1001--MILK IN THE NEW ENGLAND MARKETING AREA

Sec. 1001.62 [Amended]

2. In Sec. 1001.62, paragraphs (c) and (d) are removed and

reserved.

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

Sec. 1002.61 [Amended]

3. In Sec. 1002.61, paragraphs (d) and (e) are removed and

reserved.

Dated: April 4, 1994.

Patricia Jensen,

Acting Assistant Secretary, Marketing and Inspection Services.

[FR Doc. 94-8409 Filed 4-6-94; 8:45 am]

BILLING CODE 3410-02-P