Milk in the Carolina and Certain Other Marketing Areas; Decision on Proposed Amendments to Marketing Agreements and Orders

7 CFR

part Marketing area Docket No.

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1005.. Carolina...................... AO-388-A9

1006.. Upper Florida................. AO-356-A32

1007.. Southeast..................... AO-366-A37

1011.. Tennessee Valley.............. AO-251-A40

1012.. Tampa Bay..................... AO-347-A35

1013.. Southeastern Florida.......... AO-286-A42

1046.. Louisville-Lexington- AO-123-A67

Evansville.

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AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This final decision proposes to amend certain location

adjustments under the Southeast Federal milk marketing order. The

decision denies a proposal to provide a fluid milk surcharge during the

period of November 1995 through March 1996 and a transportation credit

on bulk milk purchased for 6 Federal milk orders in the Southeastern

United States. The decision is based on the record of a public hearing

held in Atlanta, Georgia, on September 19, 1995.

FOR FURTHER INFORMATION CONTACT: Nicholas Memoli, Marketing Specialist,

Order Formulation Branch, USDA/AMS/Dairy Division, 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 proposed rule will not have a

significant economic impact on a substantial number of small entities.

The proposed amendments will promote orderly marketing of milk by

producers and regulated handlers.

The proposed amendments have been reviewed under Executive Order

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

retroactive effect. If adopted, the 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 August 11, 1995; published August 17,

1995 (60 FR 42815).

Supplemental Notice of Hearing: Issued September 8, 1995; published

September 13, 1995 (60 FR 47495).

Recommended Decision: Issued December 18, 1995; published December

27, 1995 (60 FR 66929).

Preliminary Statement

A public hearing was held upon proposed amendments to the marketing

agreements and 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 (7 CFR

Part 900), at Atlanta, Georgia, on September 19, 1995. Notice of such

hearing was issued on August 11, 1995, and September 8, 1995, and

published August 17, 1995 (60 FR 42815) and September 13, 1995 (60 FR

47495), respectively.

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

record thereof, the Administrator, on December 18, 1995, issued a

recommended decision containing notice of the opportunity to file

written exceptions thereto. Six comments were received in response to

the notice.

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. Under

Issue No. 1, two paragraphs have been added at the end of the

discussion and, under Issue No. 3, 12 paragraphs have been added at the

end of the issue to discuss the exceptions received.

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

1. Whether the location adjustment at Hammond, Louisiana, should be

increased by 7 cents under Order 7.

2. Whether the location adjustment at Mobile, Alabama, should be

reduced by 7 cents under Order 7.

3. Whether a transportation credit for supplemental milk should be

adopted for Orders 5, 6, 7, 11, 12 and 13.1

\1\ The Louisville-Lexington-Evansville order was dropped from

Proposals 4 and 5, as contained in the hearing notice, at the

hearing.

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4. Whether a fluid milk surcharge should be provided on a temporary

basis for Orders 5, 6, 7, 11, 12, and 13.

5. Whether emergency marketing conditions in the 6 regulated areas

warrant the omission of a recommended decision and the opportunity to

file written exceptions thereto.

Findings and Conclusions

The following findings and conclusions on the material issues are

[[Page 11757]]

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

1. Whether the Location Adjustment at Hammond, Louisiana, Should Be

Increased by 7 Cents Under Order 7

The location adjustment in the portion of Tangipahoa Parish,

Louisiana, south of State Highway 16, should be increased from plus 50

cents to plus 57 cents. The 7-cent price increase applies to both Class

I prices applicable to handlers and blend prices applicable to

producers. However, for the sake of simplicity, the price increase is

discussed in terms of the Class I differential price.

The vice-president of fluid milk marketing and economic analysis

for Mid-America Dairymen, Inc. (Mid-Am), proposed the 7-cent higher

location adjustment at Hammond, Louisiana, which is located in the

southern portion of Tangipahoa Parish. He stated that the 7-cent

location adjustment increase would provide a $3.65 Class I differential

price at Hammond, the same price applicable at Baton Rouge and New

Orleans.

The representative explained that Mid-Am is a cooperative owned by

approximately 18,000 dairy farmers and a major supplier of distributing

plants pooled on the Southeast Federal milk marketing order (Order 7).

He testified that in southeast Louisiana Mid-Am has a full supply

agreement with 5 of the 6 plants in the New Orleans/Baton Rouge/Hammond

area and a partial supply agreement with the 6th plant. In August 1995,

he indicated, Mid-Am represented 55.9 percent of both the Class I sales

and total producer milk pooled on Order 7.

The Mid-Am representative stated that the final decision for the

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

established a price of $3.58 at Hammond and a price of $3.65 at Baton

Rouge and New Orleans, Louisiana. The representative argued that the 7-

cent difference in price provides a competitive sales advantage to the

plant located in Hammond while its ability to procure milk is no

different than plants located in Baton Rouge.

According to the Mid-Am representative, the milk supply for plants

in Hammond and Baton Rouge comes from direct-ship milk produced in

Louisiana's ``Florida parishes'' (i.e., Tangipahoa, Washington, St.

Tammany, St. Helena, Livingston, East Feliciana, and East Baton Rouge).

He contended that the 7-cent lower price at Hammond is not justified

since the per hundredweight rate paid to local milk haulers who deliver

milk to Baton Rouge and Hammond is the same. He elaborated further that

the rate per hundredweight that is charged producers in the Florida

parishes is the same whether the producer's milk is delivered to

Hammond or Baton Rouge or even New Orleans. Thus, he asserted,

competing handlers in the New Orleans/Hammond/Baton Rouge area should

have the same Class I differential price because the cost of procuring

milk at each of these locations is the same.

The assistant operations manager for Fleming Dairy, which operates

two distributing plants in the Southern United States, testified in

support of the proposal to equalize Class I prices adjusted for

location at Hammond, Baton Rouge, and New Orleans, Louisiana.

Alternatively, the witness stated, Fleming would support a 7-cent price

reduction at Baton Rouge and New Orleans, which also would equalize the

Class I differential prices at these locations. He testified that equal

and uniform Class I differential prices are justified for these

locations for competitive reasons.

The Fleming witness indicated that 100 percent of the raw milk

supply delivered to its distributing plant in Baker, Louisiana,2

is produced by dairy farmers located within 45 miles of the plant. He

stated that a higher Class I price at one location compared to another

suggests a greater shortage or need to attract milk from distant supply

areas. However, the witness indicated, southern Louisiana has an

abundant supply of milk available and has had to regularly transfer

milk to Florida during short production months to supplement Florida's

raw milk requirements. Additionally, he argued, handlers located in

Hammond should not have a competitive advantage over Baton Rouge

handlers because both locations are approximately the same distance to

New Orleans, the primary population center of southern Louisiana.

\2\ Baker is 10 miles north of Baton Rouge. Both Baker and Baton

Rouge are in East Baton Rouge Parish, which is within Zone 12 of the

marketing area.

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According to the Fleming witness, the Secretary's Final Decision

issued May 3, 1995, justifying the lower price in Hammond compared to

Baton Rouge or New Orleans was based on mistaken conclusions of facts

and miscommunications within the newly enlarged cooperative association

(Mid-Am). The witness also stated that marketing conditions in the

Southern United States have changed since the merger hearing was held

in 1993. He explained that a single farmer-owned cooperative now

controls the milk supply for southern Louisiana, as opposed to three or

four competing cooperatives which previously supplied this area.

Accordingly, he agreed with Mid-Am that the difference in price for

these locations is not justified because there is no freight difference

in supplying New Orleans, Hammond, and Baton Rouge with raw milk. Thus,

he urged the Secretary to correct the price disparity at Hammond

immediately.

Fleming reiterated support for the 7-cent location adjustment

increase at Hammond, Louisiana, in its post-hearing brief. Gold Star

Dairy, Inc. (Gold Star), Little Rock, Arkansas, also supported the

proposed 7-cent location adjustment increase at Hammond in a post-

hearing brief. Gold Star stated that the 7-cent increase will correct

an unintended inequity problem in the Southeast order. There was no

opposition to the proposed increase at the hearing, in post-hearing

briefs, or in the exceptions to the recommended decision.

The proposed 7-cent higher location adjustment in the southern

portion of Tangipahoa Parish should be adopted to provide the same

prices at pool distributing plants located at Hammond and Baton Rouge,

Louisiana. These plants are located within a major production area of

the market and procure their milk supplies from the same nearby farms.

As a result, the rates paid to haulers to transport milk to Hammond

compared to Baton Rouge are the same because the mileage from

producers' farms to the various plants is essentially the same. Thus,

the value of producer milk delivered to Hammond should be no less than

the value of such milk delivered to Baton Rouge. Therefore, the

southern portion of Tangipahoa Parish should be moved to Zone 12, as

proposed in the recommended decision, to provide a 7-cent higher price

at Hammond.

In its exception to the recommended decision, Fleming again

emphasized its support for equalizing the prices at Baton Rouge,

Hammond, and New Orleans, but asked the Secretary to consider whether

it may be more appropriate to reduce the New Orleans and Baton Rouge

prices to the Hammond level rather than increase the Class I price at

Hammond to the price level applicable at New Orleans and Baton Rouge.

The suggestion of Fleming Dairy to reduce the New Orleans and Baton

Rouge prices to the level at Hammond may have merit. However, there was

no proposal on this record to reduce the price at New Orleans or Baton

Rouge. If there is any desire on the part of the industry for such a

reduction, it should be fully explored on the record, particularly

taking into consideration

[[Page 11758]]

what the impact of such a change might have on handlers in the adjacent

Texas marketing area. At the present time, there is close Class I price

alignment between Texas and Louisiana handlers. If a price reduction in

southern Louisiana is deemed to have merit, it should be considered in

conjunction with an overall evaluation of price levels in the area.

2. Whether the location adjustment at Mobile, Alabama, should be

reduced by 7 cents under Order 7.

The location adjustment at Mobile, Alabama, should be reduced from

plus 57 cents to plus 50 cents.

A witness appearing on behalf of Barber Pure Milk Company (Barber)

and Dairy Fresh Corporation (Dairy Fresh) proposed the 7-cent reduction

in the location adjustment at Mobile, Alabama. The witness stated that

Barber and Dairy Fresh operate pool distributing plants under Order 7.

He said the Barber plant at Mobile and the Dairy Fresh plant at

Prichard, Alabama, are located within 20 miles of the Mobile City Hall

and handle approximately 8.5 to 9.5 million pounds of milk per month.

The witness for Barber and Dairy Fresh contended that the Southeast

order, which became effective July 1, 1995, established pricing zones

that created cost inequities for the Barber Mobile plant and the Dairy

Fresh Prichard plant with other Order 7 pool plant handlers. He argued

that the final decision lowered the Class I price adjusted for location

for Barber and Dairy Fresh competitors while the price at Mobile

remained unchanged at $3.65. He claimed that the 7-cent difference is a

substantial amount and that Barber and Dairy Fresh cannot continue to

operate as viable business entities with the current pricing situation.

The proposed $3.58 Class I differential price is the price applicable

for most of Barber and Dairy Fresh's competitors and is sufficient to

attract an adequate supply of milk to the Mobile area, he asserted.

The Barber/Dairy Fresh witness also indicated that the market

structure in the Southeastern United States had changed since the

merger hearing was held in 1993. He stated that several plants had

closed or changed ownership and that one new large state-of-the-art

Class I plant had recently opened. Several cooperatives serving the

Southeast marketing area at the time of the hearing have now joined

Mid-Am, resulting in Mid-Am being the major supply organization in the

market, he added.

The witness explained that one key change that has occurred since

the 1993 merger hearing is that Barber now receives its entire milk

supply from Mid-Am and approximately 2.8 million pounds are for its

Mobile plant. He added that Dairy Fresh purchases about 92 percent of

its milk from nonmembers and the remainder from Mid-Am. The milk supply

for both plants is from producers located in the same general area, he

said, while the Class I distribution area of the Mobile and Prichard

plants is primarily along the Gulf Coast stretching west from Mobile to

Hancock County, Mississippi, east from Mobile to Tallahassee, Florida,

and northeast from Mobile to Montgomery County, Alabama.

The witness argued that the proposed price change is needed to

equalize prices between Mobile-area handlers and handlers located in

the Upper Florida order. He urged the Department to lower the location

adjustment by 7 cents at Mobile, Alabama, thus changing the location

adjustment from a plus 57 cents to a plus 50 cents.

In its post-hearing brief and exception to the recommended

decision, Barber and Dairy Fresh reiterated their support for the

proposed 7-cent lower location adjustment. The brief pointed out that

witnesses at the hearing testified that 7 cents per hundredweight is a

significant amount for Class I milk. The handlers asserted that the

adoption of the proposal would align the Mobile price with the price

applicable in the northern portion of the Upper Florida order.

At the hearing, in its post-hearing brief, and in its exception to

the recommended decision, Gold Star Dairy opposed the 7-cent lower

location adjustment at Mobile, Alabama, but presented no testimony or

evidence to support its position. There was no other opposition

testimony.

The location adjustment at Mobile, Alabama, should be reduced by 7

cents to provide a price of $3.58 by eliminating the Zone 12 island

around Mobile in what is otherwise a Zone 11 region. The city of

Mobile, Alabama, is within Mobile County, which is in Zone 11 of the

Southeast order. Unlike the rest of Mobile County, the 20-mile radius

area surrounding the city of Mobile is now part of Zone 12, which is

priced 7 cents above Zone 11.

The record of this hearing indicates that changes in procurement

patterns have occurred since the 1993 hearing and that the original

reason for placing the Mobile handlers in the 7-cent higher pricing

zone--i.e., to insure the two Mobile handlers of an adequate supply of

milk--is no longer an overriding consideration. The record of this

hearing indicates that the Barber plant at Mobile now has a full supply

contract with Mid-America Dairymen, Inc., thereby eliminating any

concern that the handler had about obtaining an adequate supply of

milk.

Although the Dairy Fresh plant at Prichard still receives a

majority of its milk from nonmember producers, there was no testimony

at the hearing from any cooperative association representative or any

nonmember producer, no post-hearing briefs, and no exceptions filed in

response to the recommended decision to indicate that the plant would

not be able to maintain its milk supply with the proposed 7-cent lower

Class I price.

Accordingly, it must be concluded that no valid purpose is served

by pricing the Mobile area at its current $3.65 Class I differential

price. A 7-cent lower price at Mobile will properly align the prices at

Mobile with the Florida panhandle, which has a Class I differential

price of $3.58, as well as with counties directly east and west of

Mobile, which are also priced at $3.58. Most importantly, the record

indicated that the lower price at Mobile would not jeopardize the

supply of milk at the Barber or Dairy Fresh plants.

3. Whether a Temporary Transportation Credit for Supplemental Milk

Should Be Adopted for Orders 5, 6, 7, 11, 12, and 13.

The proposed amendment to provide a transportation credit for bulk

milk received by transfer from a plant regulated under another Federal

order for Orders 5, 6, 7, 11, 12, and 13 during the period of July 1995

through February 1996 should be denied. The cooperatives withdrew their

pre-hearing request to amend the Louisville-Lexington-Evansville

Federal milk marketing order.

The transportation credit was proposed by the Dairy Cooperative

Marketing Association, Inc. (DCMA), whose members include Arkansas

Dairy Cooperative, Associated Milk Producers, Inc., Carolina-Virginia

Milk Producers, Inc., Cooperative Milk Producers, Inc., Florida Dairy

Farmers Association, Inc., Mid-America Dairymen, Inc., and Tampa

Independent Dairy Farmers Association, Inc. These cooperatives

represent the vast majority of milk pooled in the 6 marketing areas.

A spokesman for DCMA testified that a shortage of milk in the

Southeast has been brought about by lower prices, rising costs, and

extreme weather conditions in most areas of the Southeast. According to

the spokesman, many factors, including extreme heat and drought

conditions, contributed to the decline in milk production in the

Southeast. He indicated that milk

[[Page 11759]]

production in Florida declined by 15 percent or more during 1995.

During August 1995, he noted, producer milk pooled on the 6 Federal

milk orders was down approximately 15 million pounds from volumes

pooled during August 1994 in comparable Federal orders.

The DCMA spokesman stated that the percentage of producer milk

allocated to Class I under the 6 orders has increased, while total

producer milk pooled under the orders has decreased. During July and

August 1995, the spokesman indicated, the pounds of milk purchased as

transfers from other Federal order plants exceeded 30 and 74 million,

respectively.

According to the witness, current milk production of producers

pooled on the 6 southeastern orders will be insufficient to meet fluid

requirements. He argued that the current Federal order minimum Class I

price structure has not and will not attract an adequate supply of

locally-produced milk.

Some handlers and/or cooperatives, he complained, will incur the

cost of obtaining needed supplemental supplies from distant marketing

areas. Additionally, he claimed, those producers who are responsible

for supplying the needs of the market will pay the cost of bringing in

supplemental milk. This will result in such producers not receiving

uniform prices for their milk, he said.

The DCMA spokesman stated that the proposal would provide a

temporary transportation credit to handlers who purchase supplemental

milk allocated to Class I use from plants regulated under other Federal

milk marketing orders. Milk received on a requested Class II or III

basis or milk that is simply allocated to Class II or III would not

receive the transportation credit, he said. He explained that the rate

of the hauling credit would be 3.9 cents per hundredweight per 10

miles, based on the distance between the shipping and receiving plants,

less any positive difference between the Class I differential

applicable at the receiving plant and the Class I differential

applicable at the shipping plant. The rate of 3.9 cents per

hundredweight per 10 miles is reflective of the actual cost of hauling

milk, he claimed.

The DCMA spokesman testified that the transportation credit should

be made effective beginning July 1, 1995, and extend through February

29, 1996. Applying the transportation credit retroactively is

appropriate, he argued, because of the substantial amount of

supplemental milk purchased during the months of July and August.

However, he recommended that the amount of money deducted from the pool

for transportation credits each month be limited to 150 percent of the

funds generated by the proposed Class I price surcharge for the month.

This approach would spread the price-reducing impact of the

transportation credits over the proposed 7-month period. DCMA

reiterated its position in a post-hearing brief.

The marketing specialist of the Southern Region of Associated Milk

Producers, Inc. (AMPI), testified in support of the DCMA's proposed

transportation credits for emergency relief. According to the

representative, AMPI's Southern Region represents approximately 3,000

Grade A dairy farmers located throughout the Southwest United States,

with the greatest concentration of milk production in Texas and New

Mexico. He indicated that AMPI also now has a substantial quantity of

producer milk marketed on the Southeast order each month that was

associated with the former Central Arkansas Federal milk order (Order

108).

The AMPI representative stated that AMPI assisted in supplying

supplemental milk to the Southeast during the extreme milk shortage. He

testified that from August 23 through September 10 AMPI delivered 10

loads of milk per day to Schepps Dairy, Dallas, Texas, to allow Mid-Am

to reroute an equivalent amount of milk to southeastern handlers from

the Mid-Am reload facility in Sulphur Springs, Texas. A total of 193

loads of milk were delivered to Schepps, he noted.

The AMPI spokesman stated that AMPI supplied approximately 8.8

million pounds of supplemental milk during July and August, which

includes milk delivered to Schepps, as well as milk transferred

directly into the Southeast marketing area. He said that AMPI charged

the purchasing handler or cooperative $2.00 per hundredweight for this

service and that the buyer paid the freight charge.

A representative for Fleming Dairy (Fleming), Nashville, Tennessee,

testified in support of the proposed transportation credit, but

recommended certain modifications. He agreed with the testimony of DCMA

that the Southeast had suffered an unusual milk supply crisis since

early August and that it would be equitable to provide a method to

reimburse those who have served the market by incurring extraordinary

costs to bring supplemental milk into the region from distant supply

markets. He said that Fleming is supplied primarily by independent

producers, but receives supplemental supplies from Mid-Am. During the

last week of August, he indicated, Fleming obtained milk supplies from

the New Mexico-West Texas and Upper Midwest marketing areas to meet its

fluid demand due to the insufficient supply of locally- produced milk.

According to the Fleming representative, some additional

supplemental milk may be required through October, but the period of

greatest crisis and demand is now over. Thus, he stated, Fleming would

favor a transportation credit through the month of October.

The Fleming spokesman testified that supplemental shipments of milk

in late summer and fall are a recurring feature of the southeastern

marketing areas, and transportation credits in some form would be

justified as a permanent feature of the orders for the months of July

through October. However, he recommended that the transportation credit

only apply for distances that exceed 100 miles. He said the Secretary

should determine whether the proposed 3.9-cent rate is justified.

The Fleming representative also observed that this is the first

year in which there has been a significant need for supplemental milk

in the southeast region from the north-central region since the

adoption of Class III-A pricing. The witness stated that the

transportation credit should not be granted to a handler or cooperative

association that has any milk assigned to Class III-A during the same

period of time. In addition, he said, Class III-A pricing should be

suspended for the Southeast region and neighboring marketing areas in

the northeast and north-central regions when there is a clear demand

for milk for Class I use that is not being met. Class III-A, he

stressed, was adopted to permit the orderly disposition of excess milk

when another use for the milk was not available, not as a bargaining

lever to extract high give-up costs when the need for fluid milk is

great.

Fleming's post-hearing brief reiterated its qualified support for

transportation credits. The brief stated that transportation credits

for past services of marketwide benefit are consistent with the 1985

amendments to the Agricultural Marketing Agreement Act. The

transportation credits, Fleming contended, are necessarily retroactive

because the application for credit comes only after a service has been

rendered.

The president of Southern Belle Dairy (Southern Belle) Somerset,

Kentucky, testified in opposition to the proposed transportation

credit. The representative stated that Southern Belle is a pool plant

regulated under the Tennessee Valley Federal milk order. He explained

[[Page 11760]]

that Southern Belle receives its milk supply from Southeastern Graded

Milk Producers, Milk Marketing, Inc., and Mid-America Dairymen, Inc. He

said Southern Belle also receives supplemental milk supplies from

Armour Foods.

According to the Southern Belle representative, during the crisis

period Southern Belle purchased 2 loads of milk in Buffalo, New York,

at a give-up charge of $5.50 per hundredweight. He said that, under the

DCMA proposal, Southern Belle would receive a transportation credit of

approximately $1,500, but claimed that the proposed 5-cent per

hundredweight surcharge to pay for the transportation credits would

force Southern Belle to pay an amount far in excess of its $1,500

credit.

In a post-hearing brief, Southern Belle reiterated its opposition

to the retroactive application of the transportation credit but did not

support or oppose the prospective issuance of the credit for

supplemental milk purchased during months of very short production. The

brief also argued that the record evidence shows that the ``crisis''

was due to Mid-Am's inability to properly manage its sales of milk and

to recover adequate over-order premiums to cover the costs of

purchasing supplemental milk supplies. Finally, Southern Belle argued

that the retroactive application of the proposed transportation credit

would encourage cooperatives to request relief for a problem that no

longer exists.

The general manager of Gold Star Dairy (Gold Star), Little Rock,

Arkansas, also testified in opposition to the proposed transportation

credit at the hearing. In its post-hearing brief, Gold Star opposed any

retroactive application of the transportation credit but did not

support or oppose the issuance of the credit for Class I milk purchased

during months of very short production.

Gold Star contended that there is no record evidence to support

DCMA'S argument that supplemental milk would be needed beyond October.

According to Gold Star's brief, the last year of shipments into the

southeast region from Wisconsin was in 1992, a year in which shipments

began in mid-August and extended to October. The brief also argued that

shipments from Wisconsin in 1995 probably have peaked already and that

no shipments will likely be needed after October.

Gold Star and Southern Belle argued that the Secretary does not

have the authority to issue rules that would have a retroactive effect.

Moreover, even if he did, they contend, such authority would invite the

post-crisis demand for modifications of the rules to alleviate problems

that may no longer exist.

A brief filed on behalf of Land-O-Sun Dairies, Inc. (Land-O-Sun),

opposed the proposed transportation credit. Land-O-Sun stated that it

operates pool plants regulated under Orders 5 and 11 in Spartanburg,

South Carolina, and Kingsport, Tennessee, respectively. The handler

also indicated it operates an Order 5 partially regulated plant in

Portsmouth, Virginia.

Land-O-Sun argued that the Secretary lacks the authority to grant

rules regarding transportation credits that would have a retroactive

effect absent the expressed statutory language. According to Land-O-

Sun, the Department of Health and Human Services (HHS) issued a rule in

1984 which applied to a cost reimbursement calculation method and tried

to recoup costs that were incurred prior to the effective date of the

1984 rule. However, Land-O-Sun noted, in the case of Bowen v.

Georgetown University Hospital, 488 U.S. 204 (1988), the Supreme Court

invalidated the retroactive feature of the HHS rule.

Land-O-Sun contends that the Agricultural Marketing Agreement Act,

as amended, is wholly silent on the issue of retroactive powers vested

in the Secretary. It argues that in 1986 the Secretary did not have the

authority to implement retroactively the Class I differentials mandated

by the 1985 Farm Bill and, by the same token, does not now have the

authority to implement the proposed transportation credits

retroactively.

Land-O-Sun argues that even if the Secretary had the authority to

impose the retroactive transportation credits, he should deny this

request because the problem should have been addressed through private

business agreements. The Land-O-Sun brief states that the proposed

credit penalizes both handlers who procured their own supplies and

producers not involved in bringing in supplemental supplies. Finally,

Land-O-Sun stated that there is significant competition between Order 5

plants and plants located in Florida, Georgia, Tennessee, Virginia, and

Kentucky and that the 5-cent higher surcharge for Order 5 compared to

Orders 7 and 11 would place Order 5 handlers at a competitive

disadvantage.

Milkco, Inc. (Milkco), a fully regulated handler under Order 5,

filed a post-hearing brief in opposition to the proposed transportation

credit because of its retroactive effect. Milkco stated that if a

transportation credit is granted, it should apply to the same months

that an emergency fluid milk surcharge would be applicable.

After carefully evaluating the record evidence and the post-hearing

briefs, we must conclude that during the summer of 1995 there was a

need for supplemental milk for Class I use in all of the 6 orders and

that this need was particularly acute for the Carolina and 3 Florida

orders. Furthermore, the record clearly shows that the burden of

bringing in supplemental milk to satisfy fluid milk demand fell, almost

exclusively, on the cooperative associations supplying these markets.

The record also shows that during the months of July and August 1995

over-order charges were either non-existent or--where they did exist--

appeared to be inadequate to compensate the cooperatives for the costs

which they incurred.

It may be true, as opponents argue, that price adjustments should

not be made to compensate for prior marketing costs. Any pool plant

operator that obtained milk on a direct-shipped basis--at whatever cost

it had to pay--during July through September of 1995 would not be

eligible for a credit under the DCMA proposal; yet the handler would

now be asked to pay a higher Class I price to subsidize someone else's

supplemental milk expense.

Opponents argued that the Secretary lacks the authority to

retroactively apply the proposals. Ultimately, this question can only

be clarified in a court of law. However, in this proceeding the

threshold question of whether or not the proposals are supported by the

record precludes any subsequent debate concerning their legality.

While the record clearly showed that a great deal of milk was

brought into the 6 markets, it lacked comparable data for earlier years

from which to measure the magnitude of this year's problem. As can be

seen in Table 1, for example, there was clearly much more bulk milk

imported to the Carolina and Florida markets for Class I use in August

of 1995 compared to August 1993, but this picture is less clear in

comparing the bulk imports for the Southeast market in August 1995

compared to August 1994, and the comparison is virtually impossible for

the Tennessee Valley market because of the restrictions on the data.

Also, while the record data unequivocally demonstrated a significant

drop in production for some of the markets involved in this proceeding,

it was less demonstrative for some of the other markets involved. For

example, while producer receipts in the Southeastern Florida market

were down by 8.5 percent in July (compared to July 1994), they were up

by 19 percent during July 1995 in the Tennessee Valley market.

Similarly, in

[[Page 11761]]

August 1995 producer receipts were down (compared to a year earlier) in

4 of the 6 markets, but they were up by 4 percent in Order 7 and by 2

percent in Order 11.

Table 1.--Millions of Pounds of Bulk Fluid Milk Products From Other Order Plants not Requested for Class II or

III Use, July-August, 1993-1995

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

7/93 8/93 7/94 8/94 7/95 8/95

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

Order 5.......................... 2.3 1.8 R R 1.7 12.3

Orders 6, 12, and 13............. 2.4 17.3 R 15.8 16.3 32.9

Order 7.......................... 4.1 12.3 6.9 27.6 10.5 29.7

Order 11......................... .8 R 0 R R 5.2

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

R=Data restricted. Less than 3 handlers involved.

The record also was lacking in detail with respect to cooperatives'

over-order charges. In the Florida markets, where such charges were in

effect during the summer months, there is no indication how much, if

any, of the premium is supposed to cover the cost of bringing

supplemental milk to the market. It was also unclear how this year's

transportation and give-up costs compared to prior years.

A transportation credit, with or without an accompanying surcharge,

might have merit in these seasonally-deficit markets where no other

means exist to recoup costs of servicing the market. However, the

specific proposals under consideration in this proceeding are not

supported by the weight of evidence in the record.

Exceptions to the recommended decision. Five comments were received

with respect to the proposed transportation credit and the proposed

fluid milk surcharge.

Southern Belle reiterated its opposition to the proposed Class I

price increase and the retroactive application of transportation

credits, but stated that ``it took no position'' on the prospective

issuance of transportation credits for Class I milk during months of

very short production.

Gold Star Dairy also restated its opposition to the proposed Class

I price increase and the retroactive application of transportation

credits. The exception stated that, even though the proposed

transportation credits were not adopted, the Secretary should clarify

his position regarding the issuance of retroactive rules. Land O' Sun

Dairies, Inc., took a similar position in its exception.

Fleming Dairy stated in its exception that Land O' Sun Dairy was

incorrect in asserting that the proposed transportation credits from

future producer settlement funds constitute unlawful retroactive

rulemaking. According to Fleming, the proposal would mitigate burdens

of the past by credits from future pools. While supportive of the DCMA

proposal, Fleming suggested that the transportation credit for mileage

be limited to 3.4 cents per 10 miles and that such credit only apply

beyond 100 miles distance from the transferor plant to the transferee

plant.

In response to the request of Gold Star and Land O' Sun for a

clarification of the Secretary's position regarding the legality of the

retroactive application of transportation credits, no good purpose

would be served in a hypothetical discussion of this issue when there

is insufficient record evidence to support any credits.

A proposal was made for a transportation credit applicable to past

marketings to be paid for through a surcharge based upon current and

future marketings.

Dairy Cooperative Marketing Association, Inc., also excepted to the

denial of the proposed transportation credit and fluid milk surcharge.

DCMA argued that a marketwide service provision is justified under

the Act if it can be shown that marketwide services are being performed

in a market and the cost for such services are not being borne equally

by all producers in the market. It stated that the rationale for

denying the transportation credits and Class I surcharge is

inconsistent with past agency decisions with respect to other markets.

The rationale for denying this proposal was not the concept of

transportation credits, but the factual record herein. Proponents

claimed that an unusual milk shortage necessitated a temporary

emergency action. Yet, the record failed to sufficiently support this

claim. The evidence, as noted above, was inconsistent from month to

month, year to year, and order to order.

In its exception, DCMA states that ``the Administrator concluded,

as an apparent expression of policy, that transportation credits are

only available where no other means exist to recoup costs of servicing

the market.'' DCMA incorrectly interprets this statement to mean that

transportation credits can only be adopted if all other means of

recouping costs, including cooperative over-order charges, have been

exhausted. The statement included in the recommended decision and in

this final decision reads: ``A transportation credit, with or without

an accompanying surcharge, might have merit for these seasonally

deficit markets where no other means exist to recoup costs of servicing

the market.'' The clause ``where no other means exist to recoup costs

of servicing the market'' was intended to be interpreted as a

nonrestrictive clause adding information about the markets at issue

herein rather than serving to identify or define a precondition

necessary for adoption of any proposal. In the past year, some of the

cooperative associations in the Southeast apparently have been unable

to maintain over-order charges at a level necessary to recoup all of

their costs for servicing these markets.

DCMA is correct in asserting that any decision regarding

transportation credits need not be based upon the level of over-order

payments in effect in a market. However, the proposal before the

Secretary was not only for temporary transportation credits for past

months, but also for a Class I surcharge to pay for them. In these

circumstances, the level of over-order payments becomes a relevant

consideration. For example, if some handlers are already paying a

cooperative association an over-order charge for balancing the market,

but their competitors, who obtain milk from nonmember producers or

other cooperatives, are not, it is inequitable for the aforementioned

handlers to be subject to an additional surcharge under the order for a

service for which they have already paid, at least in part. Similarly,

if some handlers already paid extra charges to non-order producer

sources, it would be inequitable to charge them an additional surcharge

(as well as denying them any transportation credits). If all parties

had advance notice of the proposed

[[Page 11762]]

transportation credit and surcharge, all could have made arrangements

for their supplemental milk supplies with equal knowledge concerning

how they would be impacted by the order's provisions and with equal

knowledge in making their contractual. The situation before the

Secretary, however, was one in which the importation of supplemental

milk had already occurred, handlers had dealt with the shortage in

different ways and had incurred different costs, and the proposed

solution to the problem would have compensated some handlers for their

costs but not others.

There is nothing wrong with the concept of a transportation credit

or a marketwide service payment, and a surcharge on Class I milk to pay

for the credits may be entirely justified as well. Where the concept,

however, cannot be effectuated until the shipments have been made, an

increased number of factual circumstances should be considered. A

reconstruction of what had happened and who was deserving of

reimbursement was not clearly developed in the record.

4. Whether a Fluid Milk Surcharge Should Be Provided on a Temporary

Basis for Orders 5, 6, 7, 11, 12, and 13

The proposal to impose a Class I surcharge in each of the 6 orders

to pay for the proposed transportation credits should not be adopted.

A spokesman for DCMA proposed a fluid milk surcharge for the 6

Federal milk marketing orders for the period of November 1, 1995,

through March 31, 1996. The spokesman requested that the proposed

amendment not be considered for the Louisville-Lexington-Evansville

Federal milk order. The DCMA spokesman estimated that a temporary fluid

milk surcharge would generate enough money to fund the out-of-pocket

transportation costs incurred by handlers during the period of July 1,

1995, through March 31, 1996. This money would be returned to dairy

farmers through the blend price by the added specified rate to the

Class I differential for each order, he stated.

The representative testified that DCMA's revised proposal would

provide a fluid milk surcharge of 5 cents per hundredweight for Orders

7 and 11, 10 cents per hundredweight for Order 5, 20 cents per

hundredweight for Order 6, 25 cents for Order 12, and 30 cents for

Order 13.

According to the DCMA representative, these proposed temporary

surcharges are designed to help assure that an adequate supply of milk

will be made available to meet the fluid needs of the 6 orders. The

representative proposed that the fluid milk surcharge for each order

become effective November 1, 1995, and extend through March 1996. The

November 1 effective date is needed to provide adequate advance notice,

he stated.

The assistant operations manager for Fleming testified in support

of the proposed fluid milk surcharge. He stated that Fleming favors a

surcharge to offset the cost of the transportation credit for the

extraordinary supplemental milk costs incurred by cooperatives during

the months of July through October, but said that the surcharge and the

transportation credit should be coordinated for each market. Fleming

reiterated its qualified support for the proposed fluid milk surcharge

in its post-hearing brief.

The controller of Coburg Dairy (Coburg), an Order 5 pool plant

located in North Charleston, South Carolina, testified in support of

the proposed fluid milk surcharge at a rate of 10 cents per

hundredweight for Order 5. The witness indicated that Coburg purchases

its raw milk supply from Edisto Milk Producers Association, a

cooperative which purchases raw milk from Carolina Virginia Milk

Producers Association and from brokers. He stated that Coburg has

distribution throughout South Carolina, southeastern Georgia, and parts

of North Carolina.

The director of milk procurement and marketing for Dean Foods

Company (Dean Foods) testified in opposition to DCMA's proposed fluid

milk surcharge. According to the witness, Dean Foods is the largest

fluid milk processor in the United States and owns and operates plants

in Kentucky, Florida, and Athens, Tennessee.

The witness for Dean Foods stated that weather conditions in the

southeast region caused milk supply shortages in the region in late

August and early September. As a result, he indicated, supplemental

milk was purchased from outside the region. The witness claimed that

there has been and continues to be a shortage of milk in portions of

the southeast region and that Dean Foods had adjusted its bottling

schedule to accommodate the temporary shortage. However, he said, the

Dean Foods plant at Athens, Tennessee, currently has an adequate supply

of milk available to meet the plant's needs.

According to the witness, Dean Foods and other processors in the

State of Florida agreed in June to accept a 73-cent per hundredweight

increase in over-order premiums to help producers recover some of the

costs for transporting supplemental milk into the region. Dean Dairies

in Florida has agreed to a 40-cent increase for the month of October,

he indicated. The witness also testified that processors in Florida

have been paying from $1.00 to $1.75 per hundredweight in over-order

premiums. Additionally, he stated, Dean Foods, Athens, Tennessee,

agreed to 15-cent and 20-cent per hundredweight increases in over-order

premiums for the months of September and October, respectively.

The witness for Dean Foods stressed that negotiations between

buyers and sellers of milk remain the best mechanism to recover the

costs associated with purchasing supplemental milk. He argued that the

Federal Order system was not designed to remedy short-term aberrations

in the market or provide relief to cooperatives for poor business

decisions.

The general manager for Gold Star also testified in opposition to

the proposed fluid milk surcharge for the 6 Federal milk marketing

orders. The witness indicated that Gold Star is a handler regulated

under the Southeast order but that a significant portion of its sales

are in the Texas marketing area. If the surcharge were imposed, Gold

Star would be at a competitive disadvantage compared to handlers

regulated under the Texas order, he claimed, because those handlers

would not be subject to the surcharge. These arguments were reiterated

in Gold Star's post-hearing brief.

The representatives of Gold Star and Southern Belle claimed that

the proposed fluid milk surcharge would have an impact on each

handler's fluid milk sales. The representatives argued that in an

industry where most sales are determined on fractions of a cent per

gallon, the handlers would not be able to pass the cost on to its

customers in areas where its competing handlers would not be subject to

the surcharge. The Southern Belle representative stated that Southern

Belle competes with handlers located in Ohio, Kentucky, West Virginia,

Indiana, and Virginia, all of whom would not be subject to the

surcharge.

Southern Belle also filed a post-hearing brief in opposition to the

proposed fluid milk surcharge. Southern Belle stated that the crisis,

if there was one, is now over for the Tennessee Valley marketing area.

Southern Belle also indicated that it acquired its own supplemental

milk without the assistance of cooperatives and no longer needs any

supplemental milk. The handler added that it should not be required to

pay an additional amount for its milk to compensate producers or

cooperatives for services that it did not receive and will not need.

Tillamook County Creamy Association (Tillamook), a cooperative

[[Page 11763]]

association located in Tillamook, Oregon, opposed the proposed fluid

milk surcharge at the hearing and in its post-hearing brief. Tillamook

contended that the continued existence of Class III-A pricing was and

is a major contributing factor to any perceived problem of production

and delivery of Grade A milk into the Southeast during the past summer.

Tillamook indicated that the amount of milk allocated to Class III-

A in Orders 5, 11, and 46 was about 1.4 million pounds in August 1995

compared to 270 thousand pounds in August 1994, and further noted that

Federal Order 7 had approximately 2.1 million pounds of milk allocated

to Class III-A in August 1995. Additionally, Tillamook pointed out that

record data indicates that while handlers and cooperatives located in

the Southeast were purchasing supplemental milk supplies from as far as

Minnesota and El Paso, significant volumes of milk were being allocated

to Class III-A in Federal Orders 4 (Middle Atlantic marketing area), 33

(Ohio Valley marketing area), 36 (Eastern Ohio-Western Pennsylvania

marketing area), 40 (Southern Michigan marketing area), and 126 (Texas

marketing area).

Tillamook recommended that the Secretary suspend Class III-A

pricing nationwide to free up milk needed for fluid use in the

Southeast and to continue uniform pricing throughout the Federal order

program. The cooperative claimed that the fluid milk surcharge benefits

a small portion of the dairy industry, while the suspension or

alteration of Class III-A on an emergency basis would increase all

dairy farmers' income. Therefore, Tillamook urged the Secretary to deny

the proposed fluid milk surcharge and grant relief on Class III-A

immediately.

In a post-hearing brief, Milkco opposed the revised proposal for a

fluid milk surcharge for the 6 Federal milk orders, specifically the

10-cent surcharge for Order 5. Milkco indicated that it has

approximately 44.5 percent of its total Class I sales in the Southeast

and Tennessee Valley marketing areas. It stated that the proposed

amendment would require it to pay 5 cents per hundredweight more than

handlers regulated under Orders 7 and 11. Accordingly, Milkco

contended, the amount of the surcharge should be the same for Orders 5,

7, and 11.

The Agricultural Marketing Agreement Act, as amended, clearly

authorizes the Secretary to include provisions for payments to handlers

that provide facilities to furnish additional supplies of milk needed

by the market, but the Act does not provide for an automatic increase

in the Class I price to offset such payments. If there had been a

stronger record supporting adoption of the proposed transportation

credit, the balance might have weighed in favor of taking the action

for a temporary period of time. However, the evidence presented by the

handler opposition to the proposals, in conjunction with the lack of

clarity in the record concerning the magnitude of the problem and any

needed increase in Class I prices, leads us to conclude that the

transportation credit should not be adopted and, consequently, the

Class I surcharge to pay for the transportation credit need not and

should not be adopted either.

5. Whether Emergency Marketing Conditions in the 6 Regulated Areas

Warrant the Omission of a Recommended Decision and the Opportunity To

File Written Exceptions Thereto

Proponents of Proposals 1-2 and 4-5 requested that the Secretary

handle these issues on an expedited basis by omitting a recommended

decision and the opportunity to file exceptions thereto. This request

was denied in the recommended decision and the issue is now moot.

Non-material Issues: Correction to Sec. 1007.50(d). Paragraph (d)

of Section 50 of the Southeast order should be corrected to reflect the

appropriate order language. The changes resulting from the 27-market

Class III-A proceeding (DA-91-13) and included in the December 31,

1993, Federal Register at 58 FR 63286 were adopted by reference at 60

FR 25036 in the final decision for the Southeast order. However, in the

process of preparing the final decision and final order for the

Southeast marketing area, the revised language in Sec. 1007.50(d) was

inadvertently overlooked.

Correction to Sec. 1007.92(c). A typographical error in paragraph

(c) of Section 92 of the Southeast order also should be corrected. The

word ``four,'' where it appears for the third and final time, should be

changed to read ``three.'' There are 6 months in the base-building

period of the order, but the market administrator only uses the high 4

production months to compute a base. If a producer does not have 4

complete months of production for one of the reasons stated in that

paragraph, the producer must notify the market administrator that he or

she does not have 4 complete months of production because during

``three'' or more months his/her production was reduced. Instead of

stating ``three or more'' months, however, the order now states ``four

or more''. Therefore, the word ``four'', where it appears for the third

time, should be changed to ``three'' to remove the inconsistency that

now exists.

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 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.

The following findings are hereby made with respect to the

Southeast tentative marketing agreement and order:

(a) The tentative marketing agreement and the order, 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 aforesaid marketing area, and the

minimum prices specified in the tentative marketing agreement and the

order, 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 agreement and the order, 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, a marketing

agreement upon which a hearing has been held.

Rulings on Exceptions

In arriving at the findings and conclusions, and the regulatory

provisions of this decision, each of the

[[Page 11764]]

exceptions received was carefully and fully considered in conjunction

with the record evidence. To the extent that the findings and

conclusions and the regulatory provisions of this decision are at

variance with any of the exceptions, such exceptions are hereby

overruled for the reasons previously stated in this decision.

Marketing Agreement and Order

Annexed hereto and made a part hereof is an order amending the

order regulating the handling of milk in the Southeast marketing area,

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

effectuating the foregoing conclusions. A marketing agreement that

reflects the attached order verbatim is available upon request from the

market administrator.

It is hereby ordered that this entire decision and the order

amending the order be published in the Federal Register.

Determination of Producer Approval and Representative Period

December 1995 is hereby determined to be the representative period

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

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

of milk in the Southeast marketing area is approved or favored by

producers, as defined under the terms of the order (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 marketing

area.

List of Subjects in 7 CFR Part 1007

Milk marketing orders.

Dated: March 18, 1996.

Michael V. Dunn,

Assistant Secretary, Marketing and Regulatory Programs.

Order Amending the Order Regulating the Handling of Milk in the

Southeast Marketing Area

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 Southeast order was first issued and when

it was 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 Southeast order 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 Southeast marketing area. The minimum

prices specified in the order 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 Southeast order as hereby amended regulates 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, a

marketing agreement 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 the Southeast marketing area shall be

in conformity to and in compliance with the terms and conditions of the

Southeast order, as amended, and as hereby amended, as follows:

The provisions of the proposed marketing agreement and order

amending the Southeast order contained in the recommended decision

issued by the Administrator, Agricultural Marketing Service, on

December 18, 1995, and published in the Federal Register on December

27, 1995 (60 FR 66929), shall be and are the terms and provisions of

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

PART 1007--MILK IN THE SOUTHEAST MARKETING AREA

1. The authority citation for 7 CFR Part 1007 continues to read as

follows:

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

Sec. 1007.2 [Amended]

2. In Sec. 1007.2, Zone 11, the words ``(more than 20 miles from

the Mobile city hall)'' are removed following the word ``Mobile'' and

the words ``(north of State Highway 16)'' are added following the word

``Tangipahoa''.

3. In Sec. 1007.2, Zone 12, the words ``Alabama counties: Mobile

(within 20 miles of the Mobile city hall).'' are removed and the words

``Tangipahoa (south of State Highway 16)'' are added following the word

``St. Mary,''.

Sec. 1007.50 [Amended]

4. In Sec. 1007.50(d), the words ``value per hundredweight of 3.5

percent milk and rounded to the nearest cent, and subject to the

adjustments set forth in paragraph (c) of this section for the

applicable month'' are removed and the words ``times 35 and rounded to

the nearest cent'' are added in their place.

5. In Sec. 1007.92(c), the word ``four'', where it appears for the

third and final time, is changed to read ``three''.

[FR Doc. 96-6985 Filed 3-21-96; 8:45 am]

BILLING CODE 3410-02-P