Milk in the Carolina, Tennessee Valley, and Louisville-Lexington- Evansville Marketing Areas; Decision on Proposed Amendments to Marketing Agreements and to Orders

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7 CFR

part Marketing area AO Nos.

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1005.. Carolina...................... AO-388-A8

1011.. Tennessee Valley.............. AO-251-A39

1046.. Louisville-Lexington- AO-123-A66

Evansville.

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SUMMARY: This final decision proposes to amend the pooling standards of

the Tennessee Valley and Carolina orders; modifies the marketing areas

of the Tennessee Valley and Louisville-Lexington-Evansville orders;

changes the location adjustment under the Carolina order for plants

located in the Middle Atlantic marketing area; and changes the base-

paying months under the Carolina order. The decision is based upon

industry proposals presented at a public hearing in Charlotte, North

Carolina, on January 4, 1995.

FOR FURTHER INFORMATION CONTACT: Nicholas Memoli, Marketing Specialist,

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

Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 690-1932.

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 rule will not have a

significant economic impact on a substantial number of small entities.

The amended orders will promote more orderly marketing of milk by

producers and regulated handlers.

These proposed amendments have been reviewed under Executive Order

12778, Civil Justice Reform. This rule is not intended to have a

retroactive effect. If adopted, this proposed 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 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 documents in this proceeding;

Notice of Hearing: Issued November 21, 1994; published November 25,

1994 (59 FR 60574).

Recommended Decision: Issued August 17, 1995; published August 24,

1995 (60 FR 43986).

Preliminary Statement

A public hearing was held upon proposed amendments to the marketing

agreements and the orders regulating the handling of milk in the

Carolina, Tennessee Valley, and Louisville-Lexington-Evansville

marketing areas. The hearing was held pursuant to the provisions of the

Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-

674), and the applicable rules of practice (7 CFR Part 900), at

Charlotte, North Carolina, on January 4, 1995. Notice of such hearing

was issued on November 21, 1994, and published November 25, 1994 (59 FR

60574).

Upon the basis of the evidence introduced at the hearing and the

record thereof, the Administrator, on August 17, 1995, issued a

recommended decision containing notice of the opportunity to file

written exceptions thereto. Two comments were received in response to

the notice, both of which fully support the findings and conclusions of

the recommended decision.

The material issues, findings and conclusions, rulings, and general

findings of the recommended decision are hereby approved and adopted

and are set forth in full herein, with no material modifications.

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

1. Marketing area modifications to the Tennessee Valley and

Louisville-Lexington-Evansville orders;

2. Where to regulate a distributing plant that meets the pooling

standards of more than one order;

3. Supply plant pooling standards under the Tennessee Valley order;

4. Distributing plant pooling standards under the Carolina order;

5. Location adjustments under the Carolina order; and

6. Base-paying months under the Carolina order.

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. Marketing Area Modifications to the Tennessee Valley (Order 11) and

Louisville-Lexington-Evansville (Order 46) Orders

Six now-unregulated Kentucky counties between the Order 11 and

Order 46 marketing areas should be added to the Order 11 marketing area

and one county that is now part of the Order 46 marketing area should

be removed and added to the Order 11 marketing area.

A spokesman for Southern Belle Dairy Company, Inc., testified that

the six unregulated counties--Clay, Jackson, Laurel, McCreary, Owsley,

and Rockcastle--and the one Order 46

[[Page 65024]]

county--Pulaski--are in an area that is closely associated with the

Tennessee Valley marketing area. He pointed out, for example, that two

Order 11 pool plants--the Flav-O-Rich plant at London and the Southern

Belle plant at Somerset--are in Laurel and Pulaski Counties,

respectively.

The witness indicated that Southern Belle had sales in each of the

counties proposed to be added to the marketing area. He also introduced

data showing that 79 percent of the fluid milk sales in the seven-

county area came from the Southern Belle and Flav-O-Rich plants. He

said that a majority of the sales in Pulaski County also came from

Order 11 plants.

There was no opposition to this proposal either at the hearing or

in post-hearing briefs.

The six now-unregulated Kentucky counties should be added to the

Order 11 marketing area and Pulaski County should be removed from the

Order 46 marketing area and added to the Order 11 marketing area. This

seven-county area is closely associated with the Tennessee Valley

market and its addition to the Order 11 marketing area, in conjunction

with the pooling standards adopted in this decision, will add

regulatory stability for the plants with sales in this area. There are

no plants in this seven-county area other than the Southern Belle and

Flav-O-Rich plants and none outside of this area that would become

regulated as a result of the addition of this territory to the

Tennessee Valley marketing area.

A conforming change should be made in Sec. 1011.52(a)(3) to include

the counties of Jackson, Owsley, and Rockcastle with the other Kentucky

counties now included in the minus 32-cent location adjustment zone.

Although there are no plants located in these three counties, should a

plant be built there the appropriate location adjustment should be

minus 32 cents, the same location adjustment that is applicable in the

neighboring counties of Laurel, Pulaski, Clay, and Breathitt.

2. Where To Regulate a Distributing Plant That Meets the Pooling

Standards of More Than One Order

The pooling standards of the Tennessee Valley and Carolina orders

should be modified to fully regulate a distributing plant that is

located within their respective marketing areas and that meets the

pooling standards of Secs. 1011.7(a) or 1005.7(a), respectively, even

if the plant meets the pooling standards of another order and has more

route disposition in such other order's marketing area.

These amendments will allow a distributing plant at Kingsport,

Tennessee, that is located within the Tennessee Valley marketing area

and that meets all of the pooling standards of the Tennessee Valley

order to be regulated under that order rather than under the Carolina

order, despite the plant's having greater sales in the Carolina

marketing area. Similarly, they will allow a distributing plant located

at Somerset, Kentucky--which, as recommended under Issue No. 1, would

be part of the Order 11 marketing area--to be regulated under Order 11

even if the plant should develop greater sales in the marketing area of

Order 46 or some other order's marketing area. Finally, the amendments

will permit a plant located at Greenville, South Carolina (in the Order

5 marketing area), to be regulated under Order 5 even if the plant has

more sales in the Southeast marketing area (Order 7).

These amendments and the proposals which prompted them stem from

various pricing problems under these orders that have come about for a

variety of reasons, including the fact that the marketing areas may not

have grown as fast as handlers' distribution areas. The pricing

problems identified on the record of this proceeding relate to Land-O-

Sun Dairies, Inc., at Kingsport, Tennessee; Southern Belle Dairy

Company at Somerset, Kentucky; and Superbrand Dairy Products, Inc., at

Greenville, South Carolina.

Land-O-Sun Dairies, Inc., operates a plant at Kingsport, Tennessee,

which is in the Tennessee Valley marketing area. Because of this

plant's greater route disposition in the Carolina marketing area, it

has been regulated under that order. During the past three years

(January 1992-November 1994), the blend price at Kingsport under Order

5 has averaged 14 cents below the blend price at that location under

Order 11. In some months, the difference has been as high as 32 cents.

Although the Class I price at Kingsport is identical under both of

these orders, the Tennessee Valley order's higher Class I utilization--

e.g., 82.03 percent for Order 11 compared to 77.96 percent for Order 5

during the first 10 months of 1994--has led to a higher blend price

under that order at Kingsport during nearly every month for the past

three years.

A spokesman for Land-O-Sun testified that the Kingsport plant

handles approximately 12 million pounds of milk per month and that

about one-third of its Class I sales are distributed on routes within

the Tennessee Valley marketing area and the remaining two-thirds within

the Carolina marketing area.

The witness testified that Land-O-Sun purchases its raw milk supply

from 140 dairy farmers located in northeast Tennessee and southwest

Virginia within 100 miles of the Kingsport plant. He noted that this

area is also the supply area for other Order 11 pool plants. As a

result, he said, any blend price difference to producers in this common

supply area leads to market instability. Because the Order 11 blend

price is higher than the Order 5 blend price, he stated, Land-O-Sun is

forced to pay over-order prices to retain its producers. He indicated

that Land-O-Sun could not consistently pay these higher prices and

remain a viable business entity.

Southern Belle Dairy at Somerset, Kentucky, has been regulated

under Order 11 since 1989. In recent years, the plant has had nearly

equal sales in the Order 46 and Order 11 marketing areas. If regulation

of the plant had shifted to Order 46, the applicable Class I

differential price would be 19 cents lower than under Order 11 (i.e.,

$2.26 compared to $2.45), but the blend price difference would be even

more substantial. For example, in the past 35 months (January 1992-

November 1994), the Order 46 blend price averaged 30 cents below the

Order 11 blend price at Somerset. In some months during this period,

the difference in blend prices was as much as 67 cents.

At the hearing, a Southern Belle spokesman testified that the

handler sought the marketing stability that would be provided by

regulating the plant under Order 11 based upon its location within the

Order 11 marketing area. The spokesman stated that Southern Belle would

experience procurement problems if it could only pay its producers the

Order 46 blend price in competition with Order 11 handlers--such as the

Flav-O-Rich plant at London, Kentucky, 37 miles east of Somerset--which

also procure milk from the same supply area. He also cited the

marketing instability that would result from the plant shifting back

and forth between the two orders, particularly in view of the differing

base and excess payment plans to producers in each of these orders.

Superbrand Dairy Products at Greenville, South Carolina, has been

regulated under the Georgia order since May 1992 despite the fact that

it is located within the marketing area of the Carolina order and meets

the pooling standards of that order.

A spokesman for Mid-America Dairymen, Inc. (Mid-Am), which has a

full supply contract with the Superbrand plant, testified that the

Carolina order should be amended to

[[Page 65025]]

provide the same type of pooling standard that has been proposed for

the Tennessee Valley order and that was incorporated in the

Department's recommended [and final] decisions for the new Southeast

order.\1\ Inclusion of this provision in each of these orders will

provide regulatory compatibility throughout the Southeast, he said.

\1\Official notice is taken of the final decision for the

Southeast order issued on May 3, 1995 (60 FR 25014).

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The witness stated that the Mid-Am proposal would return the

Superbrand plant to its former status as a pool plant under Order 5. In

terms of its sales and procurement pattern, the plant is more closely

associated with the Carolina market, he added.

The Mid-Am spokesman testified that the proposed change in pooling

standards is a departure from the traditional method of determining

where a distributing plant should be regulated when it meets the

pooling standards of more than one order. The traditional method, he

explained, regulated a plant wherever it had the most sales. He said

that the principle behind that practice was to insure that all handlers

having sales in an order area were subject to the same regulatory

provisions as their competition. However, he added, with the advent of

large processing plants with sales distribution over wide geographic

areas, the traditional method of pooling distributing plants has become

obsolete.

There was no opposition to this proposal either at the hearing or

in post-hearing briefs.

For the most part, Federal milk orders have traditionally regulated

plants according to where they had the most sales. The reasoning behind

that policy has been to ensure that all handlers having sales in a

Federal order marketing area were subject to the same minimum prices

(adjusted for plant location) and other regulatory provisions as their

competition. When these provisions were first incorporated in orders,

markets were primarily local in nature. At any given location, it was

common for Class I prices to differ among orders, and it was common for

each order to have a unique set of provisions.

Most of the provisions in Federal milk orders today are

standardized. For example, all orders have uniform classification and

allocation provisions. Similarly, most Federal order Class I prices are

properly aligned. As noted above, for example, the Class I price at

Kingsport, Tennessee, is the same whether Land-O-Sun's plant is

regulated under Order 5 or Order 11; the Southern Belle plant at

Somerset, Kentucky, would be subject to a higher Class I price under

Order 11 than would apply at the plant under Order 46; and the

Superbrand plant at Greenville would be subject to the same Class I

price whether it was regulated under Order 5 or Order 7.

Consequently, it must be concluded that the competitive equity that

was, and continues to be, sought by having competing handlers subject

to the same rules and Class I prices can be achieved in these marketing

areas by pooling distributing plants under the orders applicable to the

marketing areas in which the plants are located. Specifically, the

pooling standards of the Tennessee Valley and Carolina orders should be

amended to fully regulate all distributing plants that meet the orders'

pooling standards and that are located within their respective

marketing areas.

Under the provisions adopted here for the Carolina and Tennessee

Valley orders, a plant that qualifies as a pool distributing plant and

which is located within the marketing area will be regulated under the

order applicable to that marketing area even if it meets the pooling

standards of another order and has greater sales in such other order's

marketing area. The nearby Southeast order, Louisville-Lexington-

Evansville order, and Upper Florida order contain provisions

(Secs. 1007.7(g)(4), 1046.7(e)(3), and 1006.7(d)(3), respectively) that

conform to the proposed provisions by yielding regulation of such

plants to the other order.

Orders 5 and 11 also should be modified to recognize another

order's primacy to regulate a plant that meets such other order's

pooling standards and that is within the other order's marketing area.

This is accomplished in Secs. 1005.7(e)(3) and 1011.7(e)(3).

A clarifying change should also be made to Secs. 1005.7(e)(5) and

1011.7(e)(5). At present, these paragraphs, which are designated as

Secs. 1005.7(d)(4) and 1011.7(d)(4), state that ``the term pool plant

shall not apply to a plant qualified pursuant to paragraph (b) of this

section which also meets the pooling requirements for the month under

another Federal order.'' A problem could arise with this language

because during certain months of the year a supply plant may qualify as

a pool plant by shipping less than 50 percent of its receipts to

distributing plants. For example, if a supply plant shipped 40 percent

of its receipts to pool distributing plants under Order 5 and 40

percent of its receipts to distributing plants under Order 11, both

orders, pursuant to the language quoted above, would yield regulation

of the plant to the other order, leaving the plant in a state of

regulatory limbo. To prevent this unlikely event from occurring, the

paragraph should be modified to read: ``The term pool plant shall not

apply to a plant qualified pursuant to paragraph (b) of this section if

the plant has automatic pooling status under another Federal order or

if the plant meets the pooling requirements of another Federal order

during the month and makes greater qualifying shipments to plants

regulated under such other order than to plants regulated under this

order.''

3. Supply Plant Pooling Standards Under the Tennessee Valley Order

The supply plant pooling provisions for the Tennessee Valley order

should be amended to provide automatic pooling status for a supply

plant which met the order's shipping standards during the preceding

months of July through February.

Armour Food Ingredients Company (Armour) proposed the change in

supply plant pooling standards. A spokesman for Armour testified that

the company operates a supply plant at Springfield, Kentucky, that has

been a pool plant under Order 11 since August 1992. He said that the

facility is a ``dual Grade A/Grade B plant.'' The Grade A part of the

plant is used to assemble Grade A milk from producers' farms for

transshipment to pool distributing plants, while the Grade B facility

is used to process surplus milk into Class III products, he explained.

The witness testified that Order 11 now requires Armour to ship

milk to distributing plants every month of the year. However, much less

milk is needed from Armour during the spring than during the other

months of the year, he said. Consequently, he concluded, Armour and its

distributing plant customers are incurring receiving and hauling costs

for no other purpose than to satisfy the order's shipping requirements.

The witness introduced an exhibit which showed that from August

1992 through October 1994 Armour shipped a monthly average of 71

percent of its receipts to pool distributing plants. The exhibit also

showed that when shipments of surplus milk from these same pool

distributing plants to Armour were subtracted from the receipts from

Armour, the distributing plants, on average, kept 34 percent of the

milk that was sent to them.

There was no opposition to this proposal either at the hearing or

in post-hearing briefs.

The provision proposed by Armour is included in many Federal milk

orders

[[Page 65026]]

because of the seasonal variation in milk production. This variation is

also evident in the Tennessee Valley market. In 1993, the average daily

production per producer in this market was 2,220 pounds. However, this

daily average reached a low of 1,941 pounds during the month of July

and peaked at 2,481 pounds during May. As a group, the months of March

through June had a daily average of 2,375 pounds, compared to 2,149

pounds during the months of July through February.

There is no merit in requiring supply plants to receive, reload,

and ship milk to distributing plants if the milk is not needed or if

closer milk is available directly from producers' farms. In addition to

the statistics suggesting that supply plant shipments during the months

of March through June are unnecessary, the lack of any contradictory

testimony from Order 11 distributing plant operators must be

interpreted as concurrence with the view that supply plant shipments

are simply not needed during the months of March through June. In view

of this evidence, the proposal should be adopted.

Section 1011.7(b)(3) of the Tennessee Valley order, as proposed to

be amended here, also should be modified to clarify what would happen

if a shipping requirement were instituted during the months of March

through June pursuant to Sec. 1011.7(b)(4). First, it should be

understood that a new supply plant or one that did not meet the order's

shipping requirements during the months of July through February would

be subject to the 40 percent supply plant shipping requirement now in

the order.

If the market is short of milk during the ``free-ride'' months of

March through June and the market administrator determines that

additional milk is needed from pool supply plants pursuant to

Sec. 1011.7(b)(4), any increase in shipping percentage would be added

to the percentage that is then applicable to the plant. For instance,

if the market administrator determines that a 10-percentage point

increase in shipments is needed, a plant that would have had to ship 40

percent of its receipts would be required to ship 50 percent. However,

a plant in ``free-ride'' status, which normally would not have had to

make any shipments, would have to ship 10 percent. The market

administrator's ability to require additional milk from supply plants,

even during the free-ride period of March through June, will help to

ensure that the market has adequate supplies of milk for fluid use

during all months of the year.

At the present time, Secs. 1005.7(b) and 1011.7(b) of the Carolina

and Tennessee Valley orders, respectively, authorize the Director of

the Dairy Division to adjust supply plant shipping standards to obtain

needed shipments of milk or to prevent uneconomic shipments. This

provision was not an issue at the hearing. However, in conjunction with

the other changes in pooling provisions that were adopted, the

recommended decision stated that authority to adjust supply plant

shipping standards should be given to the market administrator of

Orders 5 and 11. Although interested parties were invited to comment on

this, as on other recommendations, no comments were received in

opposition to this suggestion.

With all of the marketing information immediately available to him

or her, the market administrator is in an ideal position to sense the

changing needs of the market and to obtain industry views concerning

the desirability of adjusting supply plant shipping requirements. As a

result, the market administrator will be able to attend to the need for

such temporary revisions in a timely fashion and will be able to better

serve the changing needs of handlers and producers under the Carolina

and Tennessee Valley orders.

A similar conforming change also should be made in

Sec. 1011.13(e)(3) of the Tennessee Valley order for the same reasons.

This change will allow the market administrator to increase or

decrease, by 10 percentage points, the diversion limitations applicable

to a proprietary bulk tank handler.

4. Distributing Plant Pooling Standards Under the Carolina Order

Proposals to amend the Order 5 in-area route disposition

requirement for pool distributing plants should not be adopted.

At the present time, a distributing plant must dispose of at least

60 percent of its fluid milk product receipts in Class I during the

months of August through November, January, and February and at least

40 percent in each of the other months to qualify as a pool plant under

Order 5. In addition, at least 15 percent of the plant's route

disposition must be in the marketing area.

Milkco, Inc., testified in support of its proposal to change the

in-area route disposition standard of Order 5 from 15 percent to 10

percent. At the hearing, Milkco modified its proposal to the lesser of

1500 pounds daily or 10 percent of a plant's fluid milk receipts sold

as Class I.

A witness representing Milkco, Carolina Dairies, Hunter Farms,

Inc., Dairy Fresh, Inc., and Pine State Creamery testified that the

original proposal had been modified to include language similar to that

contained in the recommended decision of the proposed Southeast Federal

order.

The witness testified that the reason for proposing a change in the

in-area route disposition requirement was that partially regulated

handlers were constantly increasing their Class I distribution into the

Order 5 marketing area. He estimated that the average distribution for

1994 was between 25 million and 35 million pounds. He claimed that this

distribution is attributed to sales from partially regulated plants

located in Virginia.

The witness explained that the Virginia State Milk Commission

prices Class I sales made outside the State of Virginia at the Federal

order Class II price. He said that this creates a problem of

accountability for those Class I sales moving from Virginia to another

state. He claimed that the possibility exists that, in some instances,

not all of those sales may be accounted for and paid for at the

appropriate price.

The witness stated that the proposed amendment would provide

uniformity between Order 5 and surrounding orders. He also claimed that

the proposed change would not be burdensome to handlers located in

Virginia if these handlers are already paying prices equivalent to, or

greater than, the Order 5 Class I price.

The general manager for Carolina Virginia Milk Producers

Association (CVMPA) also testified in support of the revised proposal.

He stated that the proposal would provide uniformity between Order 5

and neighboring orders and that it would eliminate potential inequities

between Order 5 handlers and handlers regulated by the Virginia Milk

Commission.

The CVMPA representative asserted that the proposal would regulate

some partially regulated plants that may be subject to a lower price

for milk used in fluid milk products than fully regulated plants under

Order 5. He explained that handlers regulated under Order 5 must pay at

least the minimum Federal order class prices for their milk. He claimed

that plants located in Virginia and regulated by the Virginia Milk

Commission have a competitive advantage on raw milk costs compared to

handlers fully regulated under Order 5. The witness indicated that the

Class I price established and regulated by the Virginia Milk Commission

has historically been higher than the Order 5 price but that the

Commission

[[Page 65027]]

requires that only the Class II price be paid for sales out of the

State.

The CVMPA witness testified that sales from partially regulated

handlers located in Virginia into the Carolina marketing area have a

significant impact on the market. Since January 1992, he pointed out,

sales from these plants have ranged from one to three million pounds of

Class I sales or between .84 and 2.26 percent of total route

disposition in Order 5. He said that while these Class I sales from

Virginia partially regulated plants are confined to a small portion of

the marketing area, they have had a disruptive effect on the market in

eastern North Carolina.

The CVMPA representative testified that Federal orders contiguous

to the Carolina marketing area have more restrictive pool plant

requirements than the Carolina order. He noted that the Tennessee

Valley order's in-area route disposition requirement was 10 percent and

that the recommended Southeast order would fully regulate handlers if a

plant distributed either 10 percent of its total fluid milk receipts or

at least 1500 pounds of Class I sales per day in the marketing area.

Such requirements are appropriate for orders with relatively high Class

I utilization, he said.

Maryland & Virginia Milk Producers Cooperative Association, Inc.

(MVMPCA), proposed a change to the Order 5 in-area route disposition

requirement that would have exactly the opposite effect of Milkco's

proposal. The MVMPCA proposal would base the in-area requirement on 15

percent of ``dairy farmer receipts'' rather than 15 percent of ``total

route disposition.'' Because dairy farmer receipts would be larger than

total route disposition, the proposal would have the effect of making

it more difficult to qualify for full regulation under Order 5.

A spokesman for MVMPCA testified that the proposed change would

amend the Order 5 provision to conform more closely with the provisions

of the Middle Atlantic order (Order 4). He said that these definitions

should be more closely aligned to allow distributing plants in the

Commonwealth of Virginia, which are partially regulated under both

Orders 4 and 5, to be subject to the same in-area route distribution

standard under either Federal order.

Without alignment of these provisions, he said, there could be

results which are neither intended nor orderly. For instance, he

stated, a plant could have more route sales in Order 4 but become fully

regulated under Order 5.

The witness stated that there are currently three dairies partially

regulated in both Orders 4 and 5: Richfood at Richmond, Virginia; Land-

O-Sun Dairies, Inc., at Portsmouth, Virginia; and Marva Maid Dairy at

Newport News, Virginia. He said that these Virginia plants are the only

partially regulated distributing plants subject to Order 5 other than

the several plants which distribute long-shelf-life fluid milk products

in a broad geographic area over most of the United States.

Consequently, he concluded, the MVMPCA proposal would not have a

substantial impact upon any other plants.

A witness representing Richfood Dairy, Inc. (Richfood), Richmond,

Virginia, testified in opposition to Milkco's proposal to reduce the

Order 5 in-area route disposition requirement and in support of

Richfood's proposal to increase the requirement from 15 percent to 20

percent.

The witness stated that Richfood has about 83 percent of its fluid

milk product sales in that part of Virginia that is outside the Middle

Atlantic (Order 4) marketing area. The plant has approximately 12

percent of its sales in the Carolina marketing area, 4 percent in the

Order 4 marketing area, and the remaining 1 or 2 percent in the Ohio

Valley marketing area. Richfood's sales into the Carolina marketing

area account for about 1 percent of the market's total in-area sales,

according to the witness.

The Richfood witness stated that Richfood primarily has fluid milk

sales in the eastern Virginia market with some in the western Virginia

market. During October 1994, the witness noted, the eastern and western

markets' Class I prices were $16.29 and $16.02, respectively. He said

that these Virginia prices, based on the way in which Federal order

Class I prices are set, would represent October Class I differentials

of $4.56 for the eastern market and $4.29 for the western market.

Federal order Class I differentials of this magnitude, he emphasized,

are not even found in Miami, the highest priced location under the

Federal order system. These facts, he claimed, show that purchasers of

raw milk in Virginia do not have an unfair competitive advantage over

handlers regulated under a Federal order. He concluded that a plant

with 10 percent of its sales in the Carolina marketing area and 80

percent in Virginia should not be forced to be fully regulated under

Order 5.

The administrator of the Virginia State Milk Commission (the

Commission) testified in opposition to Milkco's original proposal. The

administrator stated that pooling Virginia plants that have less than

15 percent of their total sales in a Federal order marketing area would

be disruptive to the Commission's ability to price and pool milk in the

Virginia marketing areas. He argued that there are less intrusive ways

to accomplish class price integrity for pooling producer milk.

The witness stated that the Commission was willing to assist the

Department to ensure proper reporting and pricing within Federal milk

marketing areas to alleviate the concerns of those who have doubts that

Virginia's out-of-area prices are being enforced. The witness explained

that the Commission has the ability to report sales by Virginia plants

into Federal orders in a timely and accurate manner, and is willing to

provide such information to the appropriate Federal order market

administrator to help enforce proper pricing.

Neither Milkco's proposal, which would make it easier to fully

regulate an out-of-area plant, nor MVMPCA's or Richfood's proposal,

which would make it harder to fully regulate an out-of-area plant,

should be adopted.

Proponents of Milkco's proposal argued that the amount of sales

into the Carolina marketing area from partially regulated plants

located in Virginia is constantly increasing due to the presence of

these plants. Record evidence does not support this argument. For

instance, route disposition in Order 5 by partially regulated plants

during the months of July through October 1994 was lower than for the

same period of 1993. In addition, statistics show that in-area route

disposition into Order 5 from partially regulated plants located in

Virginia have been at a relatively constant level over the past two

years. For example, in 1993 and 1994, the average share of total Order

5 Class I route disposition from these plants was 2.05 and 1.95

percent, respectively.

No evidence presented at the hearing supported the arguments

advanced by Milkco and CVMPA concerning the alleged competitive

advantage that partially regulated plants in Virginia have in the

Carolina marketing area. The record is devoid of any data to support

this claim.

With respect to proponents' arguments that changes in Order 5 would

bring this order into conformance with the Middle Atlantic order or the

Southeast order, marketing conditions in the Carolina order do not

warrant any change to the in-area route disposition requirement for

this reason. Moreover, it is not clear why differences in the in-area

route disposition requirements of these orders would matter in most

circumstances. The only area where this

[[Page 65028]]

issue seems to be particularly acute is in Virginia. Even in Virginia,

however, there is an insufficient basis to conclude that any

competitive advantage exists that would warrant undermining of the

Virginia State Milk Commission regulation.

The in-area route disposition requirement is a locally tailored

standard that indicates when a plant is sufficiently associated with a

market to warrant full regulation under the order regulating that

marketing area. Whether the standard should be 10 percent or 15 percent

depends upon particular circumstances in that area and the demonstrated

need for one standard or the other. Based on the testimony and data in

this hearing record, the present 15 percent in-area route disposition

requirement under Order 5 should remain unchanged.

MVMPCA submitted comments in support of the findings and

conclusions of the recommended decision regarding the Order 5 in-area

route disposition requirement.

5. Location Adjustments Under the Carolina Order

The location adjustment under the Carolina order for a location

within the Middle Atlantic Federal order marketing area should be

determined by subtracting the Order 4 Class I price at that location

from the base zone Class I price specified in Order 5.

At the present time, the Order 5 location adjustment for a plant

located in the State of Maryland is based upon the shortest hard-

surfaced highway distance, as determined by the market administrator,

that such plant is from Greensboro, North Carolina. Once that distance

is determined, it is broken down into 10-mile increments (except for

the last increment, which may be smaller than 10 miles), which are then

multiplied by 2.5 cents to determine the location adjustment. Thus, for

example, the location adjustment for a plant that is located 295 miles

from Greensboro would be 75 cents (i.e., 30 x 2.5 = .75).

Maryland and Virginia Milk Producers Cooperative Association

proposed a change in the location adjustment applicable to its butter/

powder plant at Laurel, Maryland. Initially, the cooperative proposed

treating the Laurel plant as if it were within the State of Virginia;

this would result in a zero location adjustment at Laurel. However, at

the hearing a spokesman for the cooperative stated that it would

support an alternative proposal that would subtract the Order 4 Class I

differential price at Laurel (i.e., $3.03) from the Order 5 Class I

price at Greensboro (i.e., $3.08), which results in a location

adjustment of minus 5 cents. The witness stated that ``our only caveat

to this pricing formula is that the Order 5 language should be amended

so that the price at Strasburg, Virginia, is established on the same

basis as the price at Laurel, Maryland.''

The cooperative's spokesman testified that MVMPCA supplies the

Kroger Westover Dairy Order 5 pool distributing plant at Lynchburg,

Virginia, on a year-round basis. In addition, he said that since 1992

the cooperative has supplied supplemental milk to nine other Order 5

distributing plants on a seasonal basis.

The witness said that MVMPCA has served as a seasonal balancing

agent in supplying Order 5 plants. He introduced an exhibit showing

that MVMPCA's monthly sales to Order 5 plants reach a peak during the

short production months of July through October.

The witness stated that when producers' milk is not needed by Order

5 plants, it is diverted to MVMPCA's butter-powder plant at Laurel,

which serves as a major balancing plant for the Middle Atlantic region.

The witness also noted that there is another balancing facility for

Order 5 surplus milk--the Valley Milk butter/powder plant located at

Strasburg, Virginia--which is approximately 80 miles west of Laurel and

outside of any Federal order marketing area. He said that Order 5 now

prices milk in an inequitable manner by providing a base zone uniform

price for milk that is diverted to Strasburg, but a minus 75-cent

location adjustment for milk that is diverted to Laurel.

There was no opposition to this proposal either at the hearing or

in the post-hearing briefs that were filed.

MVMPCA's argument and alternative proposal for pricing milk at

Laurel is persuasive and should be adopted. The location adjustment at

Laurel clearly should not be minus 75 cents. It should be minus 5

cents, the difference between the Order 5 base zone Class I price and

the Order 4 Class I price at Laurel.

The appropriate Federal order Class I price at Laurel, Maryland, is

the price established for that location under the Middle Atlantic

Federal order, which encompasses Laurel. Thus, if a distributing plant

located at Laurel were to become regulated under Order 5, its Class I

price would be the same as the price that would apply under Order 4.

This would ensure competitive pricing among competing handlers.

Determining location adjustments for plants in this manner helps to

assure the proper alignment of Class I prices throughout the Federal

order system and to minimize procurement problems for plants that are

located in one Federal order marketing area but regulated under a

different order.

The evidence introduced by MVMPCA shows that its producers

supplying the Order 5 market are located as far south as the Virginia/

North Carolina border and as far north as Cumberland County, Maryland.

The exhibit, for example, shows that MVMPCA has producers in Halifax

County, Virginia, just north of the Order 5 base zone. When producer

milk from Halifax is delivered to a distributing plant at Lynchburg or

to a North Carolina handler in the base zone, the milk is priced at the

base zone price. Yet, under present order provisions, if the milk is

not needed for fluid use by an Order 5 distributing plant and must be

diverted to MVMPCA's butter-powder plant at Laurel, 247 miles away, it

receives 75 cents less than the base zone price. Consequently, not only

does MVMPCA receive a much lower price for this milk, it also absorbs

the hauling cost to get the milk to Laurel.

A location adjustment of minus 5 cents at Laurel will narrow the

difference to 5 cents between the Laurel and Strasburg plants. This

adjustment should alleviate the inequity that now exists in pricing

between the two plants. To further reduce the difference in price by

imposing a minus 5-cent location adjustment at Strasburg, as suggested

by MVMPCA, would entail changing location adjustments throughout the

State of Virginia, which goes beyond the scope of the hearing

proposals.

MVMPCA filed comments supporting the Order 5 proposed location

adjustment change.

6. Base-Paying Months Under the Carolina Order

Maryland & Virginia Milk Producers Cooperative Association, Inc.,

originally submitted a proposal to delete the month of June from the

base-paying period of the Order 5 base and excess payment plan. At the

hearing, however, the cooperative modified its proposal to add the

month of February as well as delete the month of June. As modified, the

base-paying months would be February through May.

The MVMPCA witness stated that the purpose of the base-excess plan

is to provide producers with an incentive to level their production on

a seasonal basis. He indicated that the plan encourages production

during the months when milk is needed for fluid use and discourages

production during flush production months. Under current marketing

conditions, he contended, June is not a surplus month but a month

[[Page 65029]]

when supplemental supplies are frequently needed by Order 5

distributing plants. Likewise, he asserted that February is a month of

substantial surplus production and should be added to the base-paying

period rather than remain a base neutral month.

During 1992 and 1993, the MVMPCA witness noted, daily average

production per Order 5 producer from May to June declined about 8

percent, from 4,259 pounds per day to 3,978, and from 4,424 to 4,076,

respectively. However, he indicated that daily average production in

Order 5 in February 1993 of 4,684 pounds was the highest production

month of the year, and production in February 1992 was the third

highest month.

The witness also testified that a collateral consequence of

including June as a base-paying month is that when supplemental

supplies are needed under Order 5, unnecessary and inefficient

movements of milk are required to avoid the penalty of absorbing the

excess price for supplies of milk that are required for the market's

Class I needs. The witness explained that when supplemental milk is

needed during the month of June, MVMPCA avoids the penalty of receiving

only the excess price for milk delivered directly from producers' farms

by instead delivering plant milk from its Laurel plant. To do this,

however, the cooperative must receive the milk at Laurel, reload it

onto a tank truck, and ship it to an Order 5 distributing plant. He

said that the modified proposal would eliminate unnecessary and

inefficient movements of milk for the sole purpose of avoiding the

order's excess price.

There was no opposition to this proposal either at the hearing or

in post-hearing briefs.

The modified proposal to change the base-paying period from March

through June to February through May should be adopted. The removal of

June and the addition of February to the base-paying period will bring

the base-paying months into closer conformity with the Class I needs of

the market.

For the past three years, the average Class I utilization in

January has been 77.8 percent while the June Class I utilization has

averaged 79.8 percent for this same time period. By comparison, the

average Class I utilization for the months of February through May has

been 75.6, 75.7, 73.9, and 75.1 percent, respectively. The record also

shows that June is a month in which supplemental supplies of milk are

needed to meet the Class I needs of the market.

On the basis of the statistical data and the testimony presented at

the hearing, the month of February should be included in the base-

paying period and June deleted to change the base-paying period to

February through May. These changes should result in a base and excess

plan that better serves the needs of the market and that will avoid the

unnecessary and inefficient movements of needed supplemental milk

described by MVMPCA.

Several conforming changes in order language have been made in

response to the addition of February and the removal of June as a base-

paying month. In Sec. 1005.32(a), dealing with ``other reports,'' the

words ``March through June'' should be changed to ``February through

May''. In the introductory text of Sec. 1005.61(a) and in

Sec. 1005.61(a)(5), the words ``July through February'' must be changed

to ``June through January'', and in Sec. 1005.61(b) the words ``March

through June'' must be changed to ``February through May''. In

Secs. 1005.90, 1005.91, and 1005.93(b) the words ``March through June''

must be changed to ``February through May'', and the words ``February

1'' in Sec. 1005.93(b) and Sec. 1005.94 should be changed to ``January

1'' to maintain the existing relationship between the start of the

base-paying period and the time when transfers must be completed

without the imposition of conditions concerning the receipt or transfer

of additional base. Finally, ``March 1'' should be changed to

``February 1'' in Sec. 1005.93(e).

MVMPCA submitted comments in support of the proposed modifications

to the Order 5 base-excess plan.

Motion for a New Hearing

Purity Dairy and Fleming Dairy, both of Nashville, Tennessee,

argued that the remedies proposed at this hearing were not sufficient

to address some major problems. They maintain that while the proposed

amendments would temporarily correct some problems, in the long run

these remedies would only make the problems worse. They urged the

Secretary to hold a new hearing to consider a merger of Orders 5, 11,

and 46 or the merger of Orders 5 and 11 with the proposed Southeast

marketing area.

A major study of Orders 5, 11, and 46 and other marketing areas is

currently underway at Cornell University. One of the purposes of this

study is to develop recommendations for a merged order in this area.

There have been several major changes in cooperative

representation, supply arrangements, and plant ownership in these

markets. Milk has been shifting among the markets. The alleged problem

in south central Kentucky of misaligned uniform prices causing Purity

and Fleming to be at a competitive disadvantage for milk supplies has

been corrected by the association of additional milk with Order 11,

which has lowered that order's Class I utilization. There is no point

in considering a merger of orders in this area until such time as

producers and handlers propose such a merger. For all of these reasons,

the motion to hold a new hearing is denied.

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 aforesaid 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 area, 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;

(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

[[Page 65030]]

(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.

Rulings on Exceptions

No exceptions were received in opposition to the proposed

amendments set forth in the recommended decision.

Marketing Agreement and Order

Annexed hereto and made a part hereof are two documents, a

Marketing Agreement regulating the handling of milk, and an Order

amending the orders regulating the handling of milk in the Carolina,

Tennessee Valley, and Louisville-Lexington-Evansville marketing areas,

which have been decided upon as the detailed and appropriate means of

effectuating the foregoing conclusions.

It is hereby ordered that this entire decision and the two

documents annexed hereto be published in the Federal Register.

Determination of Producer Approval and Representative Period

August 1995 is hereby determined to be the representative period

for the purpose of ascertaining whether the issuance of the orders, as

amended and as hereby proposed to be amended, regulating the handling

of milk in the aforesaid marketing areas is approved or favored by

producers, as defined under the terms of the individual orders (as

amended and as hereby proposed to be amended), who during such

representative period were engaged in the production of milk for sale

within the aforesaid marketing areas.

List of Subjects in 7 CFR Parts 1005, 1011, and 1046

Milk marketing orders.

Dated: December 4, 1995.

Shirley R. Watkins,

Acting Assistant Secretary, Marketing and Regulatory Programs.

Order Amending the Orders Regulating the Handling of Milk in the

Carolina, Tennessee Valley, and Louisville-Lexington-Evansville

Marketing Areas

This order shall not become effective unless and until the

requirements of Sec. 900.14 of the rules of practice and procedure

governing proceedings to formulate marketing agreements and marketing

orders have been met.

Findings and Determinations

The findings and determinations hereinafter set forth supplement

those that were made when the 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) Findings. A public hearing was held upon certain proposed

amendments to the tentative marketing agreements and to the orders

regulating the handling of milk in the aforesaid marketing areas. The

hearing was held pursuant to the provisions of the Agricultural

Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), and the

applicable rules of practice and procedure (7 CFR Part 900).

Upon the basis of the evidence introduced at such hearing and the

record thereof, it is found that:

(1) The said orders as hereby amended, and all of the terms and

conditions thereof, will tend to effectuate the declared policy of the

Act;

(2) 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 aforesaid marketing areas. The

minimum prices specified in the orders as hereby 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;

(3) The said orders as hereby amended regulate the handling of milk

in the same manner as, and is applicable only to persons in the

respective classes of industrial or commercial activity specified in,

marketing agreements upon which a hearing has been held; and

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

the order as hereby amended, are in the current of interstate commerce

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

its products.

Order Relative to Handling

It is therefore ordered, that on and after the effective date

hereof, the handling of milk in each of the specified orders' marketing

areas shall be in conformity to and in compliance with the terms and

conditions of each of the orders, as amended, and as hereby amended, as

follows:

The provisions of the proposed marketing agreements and orders

amending each of the specified orders contained in the recommended

decision issued by the Administrator, Agricultural Marketing Service,

on August 17, 1995, and published in the Federal Register on August 24,

1995 (60 FR 43986), shall be and are the terms and provisions of this

order, amending the orders, and are set forth in full herein.

PART 1005--MILK IN THE CAROLINA MARKETING AREA

1. The authority citation for 7 CFR parts 1005, 1011, and 1046

continues to read as follows:

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

2. In Sec. 1005.7, the reference ``(d)'' in the introductory text

is revised to read ``(e)'', in paragraph (b) the words ``Director of

the Dairy Division'' and ``Director'' are revised to read ``market

administrator'' wherever they appear, paragraph (d) is redesignated as

paragraph (e) and revised, and a new paragraph (d) is added to read as

follows:

Sec. 1005.7 Pool plant.

* * * * *

(d) A plant located within the marketing area (other than a

producer-handler plant or a governmental agency plant) that meets the

qualifications described in paragraph (a) of this section regardless of

its quantity of route disposition in any other Federal order marketing

area.

(e) The term ``pool plant'' shall not apply to the following

plants:

(1) A producer-handler plant;

(2) A governmental agency plant;

(3) A plant with route disposition in this marketing area that is

located within the marketing area of another Federal order and that is

fully regulated under such order;

(4) A plant qualified pursuant to paragraph (a) of this section

which is not located within any Federal order marketing area but which

also meets the pooling requirements of another Federal order and from

which there is a greater quantity of route disposition, except filled

milk, during the month in such other Federal order marketing area than

in this marketing area; and

(5) A plant qualified pursuant to paragraph (b) of this section if

the plant has automatic pooling status under another Federal order or

if the plant meets the pooling requirements of another Federal order

during the month and makes greater qualifying shipments to plants

regulated under such other order than to plants regulated under this

order.

[[Page 65031]]

Sec. 1005.32 [Amended]

3. In Sec. 1005.32(a), the words ``March through June'' are revised

to read ``February through May'' wherever they appear.

4. In Sec. 1005.53, paragraph (a)(6) is redesignated as paragraph

(a)(7) and revised, and a new paragraph (a)(6) is added to read as

follows:

Sec. 1005.53 Plant location adjustments for handlers.

(a) * * *

(6) For a plant located within the Middle Atlantic Federal Order

Marketing Area (part 1004), the adjustment shall be computed by

subtracting the base zone Class I price specified in Sec. 1005.50(a)

from the Class I price applicable at such plant under the Middle

Atlantic Federal Order; and

(7) For a plant located outside the areas specified in paragraphs

(a)(1) through (a)(6) of this section, the adjustment shall be a minus

2.5 cents for each 10 miles or fraction thereof (by the shortest hard-

surfaced highway distance as determined by the market administrator)

that such plant is from the nearer of the city halls in Greenville,

South Carolina, or Charlotte or Greensboro, North Carolina.

Sec. 1005.61 [Amended]

5. In Sec. 1005.61 paragraphs (a) introductory text and (a)(5), the

words ``July through February'' are revised to read ``June through

January'' and in paragraph (b) introductory text the words ``March

through June'' are revised to read ``February through May''.

Secs. 1005.90 and 1005.91 [Amended]

6. In Secs. 1005.90 and 1005.91, the words ``March through June''

are revised to read ``February through May'' wherever they appear.

Sec. 1005.93 [Amended]

7. In Sec. 1005.93 paragraph (b), the words ``March through June''

are revised to read ``February through May'' wherever they appear, the

words ``February 1'' are revised to read ``January 1'', and in

paragraph (e) the words ``March 1'' are revised to read ``February 1''.

Sec. 1005.94 [Amended]

8. In Sec. 1005.94, the words ``February 1'' are revised to read

``January 1''.

PART 1011--MILK IN THE TENNESSEE VALLEY MARKETING AREA

9. Section 1011.2 is amended by revising paragraph (b) to read as

follows:

Sec. 1011.2 Tennessee Valley marketing area

* * * * *

(b) In Kentucky, the counties of Bell, Breathitt, Clay, Harlan,

Jackson, Knott, Knox, Laurel, Leslie, Letcher, McCreary, Owsley, Perry,

Pulaski, Rockcastle, and Whitley.

* * * * *

10. In Sec. 1011.7, the reference ``(d)'' in the introductory text

is revised to read ``(e)'', paragraph (b) is revised, paragraph (d) is

redesignated as paragraph (e) and revised, and a new paragraph (d) is

added to read as follows:

Sec. 1011.7 Pool plant.

* * * * *

(b) A plant, other than a plant described in paragraph (a) of this

section, from which fluid milk products, except filled milk, are

shipped to plants described in paragraph (a) of this section subject to

the following additional conditions:

(1) During the months of August through November, January and

February, such shipments must equal not less than 60 percent (40

percent during the months of December and March through July) of the

total quantity of milk approved by a duly constituted regulatory agency

for fluid consumption that is received during the month at such plant

from handlers described in Sec. 1011.9 (c) and (d) and from dairy

farmers, including milk that is diverted from the plant pursuant to

Sec. 1011.13 but excluding milk diverted to the plant;

(2) The operator of a plant described in this paragraph may include

milk diverted from the plant to plants described in paragraph (a) of

this section for up to one-half of the shipments required pursuant to

this paragraph;

(3) A plant which meets the shipping requirements specified in this

paragraph during the months of July through February shall be a pool

plant during the following months of March through June unless the milk

received at the plant does not continue to meet the requirements of a

duly constituted regulatory agency, the plant fails to meet a shipping

requirement instituted pursuant to paragraph (b)(4) of this section, or

a written application is filed by the plant operator with the market

administrator on or before the first day of any such month requesting

that the plant be designated a nonpool plant for such month and for

each subsequent month through June during which it would not otherwise

qualify as a pool plant; and

(4) The shipping requirements described in paragraph (b)(1) and

(b)(3) of this section may be increased or decreased up to 10

percentage points by the market administrator if he or she finds that

revision is necessary to obtain needed shipments or to prevent

uneconomic shipments. Before making such a finding, the market

administrator shall investigate the need for revision either at his or

her own initiative or at the request of interested persons. If the

investigation shows that a revision may be appropriate, the market

administrator shall issue a notice stating that the revision is being

considered and invite data, views, and arguments.

* * * * *

(d) A plant located within the marketing area (other than a

producer-handler plant or a governmental agency plant) that meets the

qualifications described in paragraph (a) of this section regardless of

its quantity of route disposition in any other Federal order marketing

area.

(e) The term ``pool plant'' shall not apply to the following

plants:

(1) A producer-handler plant;

(2) A governmental agency plant;

(3) A plant with route disposition in this marketing area that is

located within the marketing area of another Federal order and that is

fully regulated under such order;

(4) A plant qualified pursuant to paragraph (a) of this section

which is not located within any Federal order marketing area but which

also meets the pooling requirements of another Federal order and from

which there is a greater quantity of route disposition, except filled

milk, during the month in such other Federal order marketing area than

in this marketing area; and

(5) A plant qualified pursuant to paragraph (b) of this section if

the plant has automatic pooling status under another Federal order or

if the plant meets the pooling requirements of another Federal order

during the month and makes greater qualifying shipments to plants

regulated under such other order than to plants regulated under this

order.

Sec. 1011.13 [Amended]

11. In Sec. 1011.13 paragraph (e)(3), the words ``Director of the

Dairy Division'' and ``Director'' are revised to read ``market

administrator'' wherever they appear.

12. Section 1011.52(a)(3) is revised to read as follows:

Sec. 1011.52 Plant location adjustments for handlers.

(a) * * *

(3) For such milk which is physically received at a plant located

within the Kentucky counties of Bell, Breathitt, Clay, Harlan, Jackson,

Knott, Knox, Laurel, Leslie, Letcher, McCreary, Owsley, Perry, Pulaski,

Rockcastle, and

[[Page 65032]]

Whitley, the Class I price shall be decreased by 32 cents; and

* * * * *

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

AREA

Sec. 1046.2 [Amended]

13. In Sec. 1046.2, in the list of Kentucky counties, the word

``Pulaski'' is removed.

[Note: The following appendix will not be published in the Code

of Federal Regulations.]

Appendix--Marketing Agreement Regulating the Handling of Milk in

Certain Specified Marketing Areas

The parties hereto, in order to effectuate the declared policy

of the Act, and in accordance with the rules of practice and

procedure effective thereunder (7 CFR Part 900), desire to enter

into this marketing agreement and do hereby agree that the

provisions referred to in paragraph I hereof as augmented by the

provisions specified in paragraph II hereof, shall be and are the

provisions of this marketing agreement as if set out in full herein.

I. The findings and determinations, order relative to handling,

and the provisions of Secs. ____________\1\ to ____________, all

inclusive, of the order regulating the handling of milk in the said

marketing areas (7 CFR part ________\2\) which is annexed hereto;

and

\1\First and last sections of order.

\2\Appropriate Part number.

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

II. The following provisions: Sec. ____________\3\ Record of

milk handled and authorization to correct typographical errors.

\3\Next consecutive section number.

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

(a) Record of milk handled. The undersigned certifies that he/

she handled during the month of ____________\4\, ____________

hundredweight of milk covered by this marketing agreement.

\4\Appropriate representative period for the order.

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

(b) Authorization to correct typographical errors. The

undersigned hereby authorizes the Director, or Acting Director,

Dairy Division, Agricultural Marketing Service, to correct any

typographical errors which may have been made in this marketing

agreement.

Sec. ____________\3\ Effective date. This marketing agreement

shall become effective upon the execution of a counterpart hereof by

the Secretary in accordance with Section 900.14(a) of the aforesaid

rules of practice and procedure.

In Witness Whereof, The contracting handlers, acting under the

provisions of the Act, for the purposes and subject to the

limitations herein contained and not otherwise, have hereunto set

their respective hands and seals.

Signature

By (Name)--------------------------------------------------------------

(Title)----------------------------------------------------------------

(Address)--------------------------------------------------------------

(Seal)

Attest

[FR Doc. 95-30670 Filed 12-15-95; 8:45 am]

BILLING CODE 3410-02-P