Milk in the Nebraska-Western Iowa Marketing Area; Proposed Suspension of Certain Provisions of the Order

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1065

[DA-98-10]

Milk in the Nebraska-Western Iowa Marketing Area; Proposed

Suspension of Certain Provisions of the Order

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed suspension of rule.

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SUMMARY: This document invites written comments on a proposal to

suspend 11 counties from the marketing area definition of the Nebraska-

Western Iowa Federal milk marketing order (Order 65) for the period of

November 1, 1998, through December 31, 1999. The action was requested

by Gillette Dairy (Gillette) of Rapid City, South Dakota, which

contends the suspension is necessary to maintain its milk supply and to

remain competitive in selling fluid milk products in the marketing

area.

DATES: Comments must be submitted on or before November 9, 1998.

ADDRESSES: Comments (two copies) should be filed with the USDA/AMS/

Dairy Programs, Order Formulation Branch, Room 2971, South Building,

P.O. Box 96456, Washington, DC 20090-6456. Comments may be faxed to

(202) 690-0552 or e-mailed to OFB__FMMO__C[email protected]. Reference

should be given to the title of action and docket number.

FOR FURTHER INFORMATION CONTACT: Clifford M. Carman, Marketing

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

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

720-9368, e-mail address [email protected].

SUPPLEMENTARY INFORMATION: The Department is issuing this proposed rule

in conformance with Executive Order 12866.

This proposed rule has been reviewed under Executive Order 12988,

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 the 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 request

modification or exemption from such order by filing 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 law. 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

[[Page 54384]]

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.

Small Business Consideration

In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et

seq.), the Agricultural Marketing Service is considering the economic

impact of this action on small entities. For the purpose of the

Regulatory Flexibility Act, a dairy farm is considered a ``small

business'' if it has an annual gross revenue of less than $500,000, and

a dairy products manufacturer is a ``small business'' if it has fewer

than 500 employees. For the purposes of determining which dairy farms

are ``small businesses,'' the $500,000 per year criterion was used to

establish a production guideline of 326,000 pounds per month. Although

this guideline does not factor in additional monies that may be

received by dairy producers, it should be an inclusive standard for

most ``small'' dairy farmers. For purposes of determining a handler's

size, if the plant is part of a larger company operating multiple

plants that collectively exceed the 500-employee limit, the plant will

be considered a large business even if the local plant has fewer than

500 employees.

For the month of April 1998, which is the most recent

representative month, 1,649 dairy farmers were producers under Order

65. Of these producers, 1,573 producers (i.e., 95%) were considered

small businesses having monthly milk production under 326,000 pounds. A

further breakdown of the monthly milk production of the producers on

the order during April 1998 was as follows: 1,001 produced less than

100,000 pounds of milk; 445 produced between 100,000 and 200,000; 127

produced between 200,000 and 326,000; and 76 produced over 326,000

pounds. During the same month, eight handlers were pooled under the

order. One was considered a small business.

Pursuant to authority contained in the Agricultural Marketing

Agreement Act of 1937, as amended (7 U.S.C. 601-674), this proposal

would suspend 11 counties in the western panhandle of Nebraska from the

marketing area definition of Order 65. The Nebraska counties are

Banner, Box Butte, Cheyenne, Dawes, Deuel, Garden, Kimball, Morrill,

Scotts Bluff, Sheridan, and Sioux.

Gillette, the proponent of the proposed action, estimates that its

sales in the counties represent 65% to 70% of total fluid milk sales in

the 11 counties. Gillette explains that a loss of sales in an

unregulated marketing area has resulted in its regulation under Order

65 without any appreciable increase in sales in the Order's marketing

area. The handler contends the proposed action is necessary to maintain

its milk supply and to remain competitive in selling fluid milk

products in the marketing area.

Gillette was pooled under Order 65 during the months of January

through May 1998. For the period of February through May 1998, Order 65

price data shows that the average uniform price to producers was $13.34

per hundredweight. If Gillette would not have been a regulated handler

under Order 65 during this period, the average uniform price to

producers would have been about $13.31 per hundredweight. Thus, the

regulation of Gillette for the February through May 1998 period

resulted in an increase in the average uniform price of 3 to 4 cents

per hundredweight.

There are three handlers other than Gillette that possibly have

sales into the 11 Nebraska counties. The handlers are Meadow Gold of

Lincoln, Nebraska; Roberts Dairy in Omaha, Nebraska; and Meadow Gold in

Greeley, Colorado. Roberts Dairy hauls milk for Nebraska Dairy, Inc.,

which is a distribution facility that is owned by the same principal

company that owns Gillette. However, the dairy appears to be a separate

entity from Gillette. Market information indicates that if these three

handlers have sales into the 11 counties the volume is relatively

small. Because these handlers have relatively small sales, if any, into

the 11 counties, the proposed rule is projected to not have a

significant economic impact. The exact impact of the proposed rule on

these handlers would be dependent upon the specific sales the handlers

chose to pursue.

The July 1996 population estimate and the December 1992 fluid milk

per capita consumption data show that the 11 Nebraska counties

represent a small amount of the population and fluid milk consumption

in the State of Nebraska and in the entire Order 65 marketing area. The

11 counties represent about 6% of the population and fluid milk

consumption in the State of Nebraska and about 5% of the population and

fluid milk consumption in the Order 65 marketing area.

Gillette was a fully regulated handler under the Black Hills, South

Dakota, Federal milk marketing order prior to its termination at the

request of the Black Hills Milk Producers. After termination of the

Black Hills order, Gillette for some time was a partially regulated

handler under three Federal milk marketing orders: Eastern South Dakota

(Order 76), Eastern Colorado (Order 137), and Order 65. From January

1998 through May 1998, Gillette was a fully regulated handler under

Order 65 because its fluid milk sales in the marketing area represented

more than 15 percent of its receipts.

When Gillette was a partially regulated handler, it paid to the

producers supplying its plant at least the full Class use value of its

milk each month. Thus, Gillette had no further obligation to the

producer settlement funds of the orders under which it was a partially

regulated handler. However, as a fully regulated handler, Gillette is

required to pay the difference between its Class use value and the

marketwide Class use value to the Order 65 producer settlement fund.

This payment, Gillette contends, increases its cost for milk and

reduces the amount it can pay its producers.

A review of the current reporting requirements was completed

pursuant to the paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35),

and it was determined that this proposed suspension would have little

impact on reporting, recordkeeping, or other compliance requirements

because these would remain almost identical to the current system. No

new forms would need to be proposed.

No other burdens are expected to fall upon the dairy industry as a

result of overlapping Federal rules. This proposed regulation does not

duplicate, overlap or conflict with any existing Federal rules.

Interested parties are invited to submit comments on the probable

regulatory and informational impact of this proposed rule on small

entities. Specifically, interested parties should address the potential

impact of the proposed action on both Order 65 producers and producers

who supply Gillette as well as the competition that exists for fluid

milk sales in the 11 counties between regulated and unregulated

handlers. Also, parties may suggest modifications of this proposal for

the purpose of tailoring their applicability to small businesses.

Notice is hereby given that, pursuant to the provisions of the

Agricultural Marketing Agreement Act, the suspension of the following

provisions of the order regulating the handling of milk in the

Nebraska-Western Iowa Federal milk marketing area is being considered

for the period of November 1, 1998, through December 31, 1999:

In Sec. 1065.2, the words ``Banner, Box Butte, Cheyenne, Dawes,

Deuel, Garden, Kimball, Morrill, Scotts Bluff, Sheridan, Sioux''.

[[Page 54385]]

All persons who want to submit written data, views or arguments

about the proposed suspension should send two copies of their views to

the USDA/AMS/Dairy Programs, Order Formulation Branch, Room 2971, South

Building, P.O. Box 96456, Washington, DC 20090-6456, by the 30th day

after publication of this notice in the Federal Register. The comment

period is limited to 30 days due to the request for immediate action by

the proponent of this proposed action.

All written submissions made pursuant to this notice will be made

available for public inspection in the Dairy Programs during regular

business hours (7 CFR 1.27(b)).

Statement of Consideration

The proposed rule would suspend 11 counties from the marketing area

definition of the Nebraska-Western Iowa Federal milk marketing order.

The counties, which are located in the western panhandle of Nebraska,

include Banner, Box Butte, Cheyenne, Dawes, Deuel, Garden, Kimball,

Morrill, Scotts Bluff, Sheridan, and Sioux.

The July 1996 population estimate, which represents the most recent

population statistics, shows that the total population for the Order 65

marketing area is 2,000,529 (i.e., 412,167 for Iowa counties and

1,588,362 for Nebraska counties). The population estimate for the

entire State of Nebraska is 1,652,093, while the population for the 11

Nebraska counties is 91,194. In addition, the December 1992 Federal

Milk Order Statistics Report (Per Capita Sales of Fluid Milk Products

in Federal Order Markets) indicates that the Nebraska fluid milk per

capita consumption is about 20 pounds per person per month. It is

estimated that the fluid milk consumption per month within the 11

Nebraska counties is 1,823,880 (20 lbs. * 91,194).

The July 1996 population estimate and the December 1992 fluid milk

per capita consumption data show that the 11 Nebraska counties

represent a small amount of the population and fluid milk consumption

in the State of Nebraska and in the entire Order 65 marketing area. The

11 counties represent about 6% of the population and fluid milk

consumption in the State of Nebraska and about 5% of the population and

fluid milk consumption in the Order 65 marketing area.

Gillette was a fully regulated handler under the Black Hills, South

Dakota, Federal milk marketing order prior to its termination at the

request of the Black Hills Milk Producers. After termination of the

Black Hills order, Gillette for some time was a partially regulated

handler under three Federal milk marketing orders: Eastern South Dakota

(Order 76), Eastern Colorado (Order 137), and Order 65. From January

1998 through May 1998, Gillette was a fully regulated handler under

Order 65 because its fluid milk sales in the marketing area represented

more than 15 percent of its receipts.

When Gillette was a partially regulated handler, it paid to the

producers supplying its plant at least the full Class use value of its

milk each month. Thus, Gillette had no further obligation to the

producer settlement funds of the orders under which it was a partially

regulated handler. However, as a fully regulated handler, Gillette is

required to pay the difference between its Class use value and the

marketwide Class use value to the Order 65 producer settlement fund.

This payment, Gillette contends, increases its cost for milk and

reduces the amount it can pay its producers.

According to Gillette, marketing conditions in Order 65 have

changed significantly since the order was promulgated. Gillette

estimates that its sales in the 11 counties represent 65% to 70% of

total fluid milk sales in the counties. Gillette explains that a loss

of sales in an unregulated marketing area has resulted in its

regulation under Order 65 because such sales represented at least 15

percent of its receipts, but without any appreciable increase in sales

in the Order's marketing area. Furthermore, the handler states that

since its milk supply comes from the Black Hills Milk Producers there

is no balancing of milk supply for the plant from Order 65 or any other

Federal milk marketing order.

Black Hills Milk Producers also requested that the counties be

removed from the Order 65 marketing area definition. The cooperative

representing the producers explained that it is dependent on Gillette's

survival. It states that the regulation of Gillette under Order 65 has

caused its producers hardship by costing them as much as $1.00 per

hundredweight during some months. According to the cooperative, this

cost results from an agreement that it has with Gillette in which it

refunds to Gillette an amount equal to half of the handler's obligation

to the producer settlement fund when Gillette is fully regulated.

Although the producers pay this amount to Gillette, Order 65 price data

for the February through May 1998 period indicates that their monthly

pay prices were above the Order 65 uniform price.

The Federal Order Reform Proposed Rule, which was issued on January

21, 1998 (63 FR 4802), recommended excluding the 11 Nebraska counties

from the consolidated Central order. The recommendation currently is

under consideration. However, Gillette has requested that the proposed

action be considered immediately.

Accordingly, it may be appropriate to suspend the aforesaid

provisions for the period of November 1, 1998, through December 31,

1999.

List of Subjects in 7 CFR Part 1065

Milk marketing orders.

The authority citation for 7 CFR Part 1065 continues to read as

follows:

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

Dated: September 23, 1998.

Richard M. McKee,

Deputy Administrator, Dairy Programs.

[FR Doc. 98-27179 Filed 10-8-98; 8:45 am]

BILLING CODE 3410-02-P