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

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URL: https://www.frixlaw.com/law-library/documents/fr%3A99-2430

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** February 2, 1999
- **Citation:** 64 FR 4957

## Text

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1065

[DA-98-10]

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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Suspension of rule.

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SUMMARY: This document suspends 11 counties from the marketing area
definition of the Nebraska-Western Iowa Federal milk marketing order
(Order 65) beginning on February 1, 1999, and extending for an
indefinite period until the implementation of a final rule
consolidating Federal milk orders, as required by the 1996 Farm Bill,
or an action to subsequently terminate the suspension. 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.

EFFECTIVE DATE: February 1, 1999.

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;
telephone: (202) 720-9368; e-mail address:
[email protected].

SUPPLEMENTARY INFORMATION: Prior document in this proceeding:
Notice of Proposed Suspension: Issued September 23, 1998; published
October 9, 1998 (63 FR 54383).
The Department is issuing this rule in conformance with Executive
Order 12866.
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule is not intended to have a retroactive
effect. This rule will not preempt any state or local laws,
regulations, or policies, unless they present an irreconcilable
conflict with this rule.
The Agricultural Marketing Agreement Act of 1937, as amended (7
U.S.C. 601-674), provides that administrative proceedings must be
exhausted before parties may file suit in court. Under section
608c(15)(A) of the Act, any handler subject to an order may 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 the 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
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 has considered the economic
impact of this action on small entities and has certified that this
rule will not have a significant economic impact on a substantial
number of 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 with data including Gillette Dairy, 1,649 dairy
farmers were producers under Order 65. Of these producers, 1,573
producers (i.e., 95 percent) 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, 8 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 suspension
will remove 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 this suspension, estimates that its
sales in the counties represent 65 to 70 percent 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 suspension is necessary to maintain its
milk supply and to remain competitive in selling fluid milk products in
the marketing area.
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 percent of the population and fluid milk
consumption in the State of Nebraska and about 5 percent of the
population and fluid milk consumption in the Order 65 marketing area.
There are three handlers other than Gillette that possibly have
sales into the 11 Nebraska counties. The handlers are

[[Page 4958]]

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.
The suspension should not have a significant economic impact on
handlers because of the relatively small number of sales by handlers
other than Gillette in this 11-county area. In addition, the population
in the 11-county area constitutes a small percentage of the population
and fluid milk consumption in the State of Nebraska. This milk has not
been historically associated with Order 65. Therefore, the removal of
the 11 counties from the marketing area definition of Order 65 should
not have a significant adverse impact on other order producers and
other handlers.
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 suspension will have little impact on
reporting, recordkeeping, or other compliance requirements because
these would remain almost identical to the current system. No new forms
will need to be proposed.
No other burdens are expected to fall upon the dairy industry as a
result of overlapping Federal rules. This regulation does not
duplicate, overlap or conflict with any existing Federal rules.

Statement of Consideration

This suspension is issued pursuant to the provisions of the
Agricultural Marketing Agreement Act and of the order regulating the
handling of milk in the Nebraska-Western Iowa marketing area. The
action suspends 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.
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 about 6 percent of the population and fluid milk consumption
in the State of Nebraska and about 5 percent of the population and
fluid milk consumption in the Order 65 marketing area.
Gillette Dairy, the proponent of this suspension, was a fully
regulated handler under the Black Hills, South Dakota, Federal milk
marketing order prior to its termination (effective October 1, 1996) 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 3 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. In recent months (i.e., June
through November 1998), Gillette has been a partially regulated plant
under Order 65 due to an increase in total milk receipts. During this
period, Gillette has reduced its distribution in the 11-county area in
an effort to avoid reducing the amount it pays its supplier, the Black
Hills Milk Producers.
As a partially regulated handler, Gillette pays to the producers
supplying its plant at least the full class-use value of its milk each
month. Thus, Gillette has no further obligation to the producer-
settlement fund 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.
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 had not 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.
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 percent
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.
Notice was published in the Federal Register on October 9, 1998 (63
FR 54383) concerning the proposed suspension of part of the marketing
area definition of Order 65. Interested persons were afforded an
opportunity to file written data, views, and arguments thereon. Six
comments were received in support of the proposed suspension; two were
received in opposition to it.
Gillette and Black Hills Milk Producers reiterated their support
for the proposed suspension. Gillette anticipates that in the months
ahead, as milk prices decline and milk production increases seasonally,
the price spread between the Class I price and the blend price will
increase. The handler states the impact will cause it to pay more into
the producer-settlement fund while reducing its payment to Black Hills
Milk

[[Page 4959]]

Producers. The cooperative states that the sharing of the cost of
regulation with Gillette in addition to the low milk prices and high
feed costs has caused several dairymen to discontinue dairying.
Associated Milk Producers, Inc. (North Central Region), in its
comment letter, stated that because population, consumption, and milk
supply in the 11 counties is fairly evenly balanced the proposed action
would have a marginal effect on Order 65 blend prices. In addition, the
other supporters who filed comments (i.e, the South Dakota Department
of Agriculture, 5 United States Senators, and the Rapid City Area
Chamber of Commerce) state that the action would eliminate the payments
by Gillette into the producer-settlement fund (i.e., $500,000 during
the first 6 months of 1998 or $83,000 per month) when regulated under
Order 65. Thus, they claim that this cost directly affects the
producers supplying the dairy and has been a contributing factor to
producers discontinuing their dairy farm operations.
Dairy Farmers of America (DFA) and Meadow Gold Dairies expressed
opposition to the proposed action and contend that it would create an
inequitable marketing situation between handlers and producers. DFA is
a cooperative that represents about 39 percent of the producers on
Order 65 and 927 producers in other affected markets. DFA argues that
the proposal would lower the returns of DFA member producers supplying
the handlers affected by this action. The cooperative also contends
that the proposal would lower the blend prices to these DFA producers
in Order 65.
According to DFA, the proposal would provide Gillette with a
financial advantage over competing handlers because Gillette competes
with handlers over a broad geographic area (in counties in Nebraska,
Colorado, and Wyoming). DFA asserts that the action would prohibit the
sharing of revenues from the sale of milk by Gillette to DFA members
and the Federal Order 65 producers. In addition, the cooperative claims
that the action would assist Gillette in expanding its business further
into Order 65 and the Eastern Colorado order (Order 137). The proposed
action, it concludes, would adversely impact cooperatives' ability to
negotiate over-order premiums in the future due to the perceived
inequity in the marketplace.
Two additional letters were submitted after the comment period
ended. Sinton Dairy filed a comment in opposition to the proposed
action and Gillette submitted another letter in response to the issues
addressed by DFA. Both comment letters were dated and received after
the comment expiration date and cannot be given due consideration.
After careful consideration of the comments submitted, it is
concluded that there is sufficient basis to grant the request for
suspension of the 11 counties from the Order 65 marketing area for an
indefinite period of time until the implementation of Federal order
reform. Statistics clearly show that the majority (i.e., 65 to 70
percent) of the fluid milk sales into the 11-county area is by
Gillette. Moreover, the 11 counties represent about 6 percent of the
population and fluid milk consumption in the State of Nebraska and
about 5 percent of the population and fluid milk consumption in the
Order 65 marketing area. In addition, this milk has not been
historically associated with the Order 65. Therefore, the removal of
the 11 counties from the marketing area definition of Order 65 should
not have an adverse impact on other order producers and other handlers.
However, if the counties were to remain as part of the Order 65
marketing area definition, the effect could be severely disruptive for
the Black Hills Milk Producers.
At this time, the Federal order reform process is expected to be
completed by October 1, 1999. In the proposed federal order reform rule
that was issued on January 21, 1998 (63 FR 4802), the proposed Central
order marketing area, which included most of the existing Order 65
marketing area, did not include the 11 counties suspended in this
action. However, this recommendation, together with all of the
provisions in the proposed rule, is currently under consideration.
After consideration of all relevant material, including the
proposal in the notice, the comments received, and other available
information, it is hereby found and determined that for the period of
February 1, 1999, and extending for an indefinite period until the
implementation of a final rule consolidating Federal milk orders as
required by the 1996 Farm Bill, or a subsequent action to terminate the
suspension, the following provisions of the order do not tend to
effectuate the declared policy of the Act:
In Sec. 1065.2(a), the words ``Banner, Box Butte, Cheyenne, Dawes,
Deuel, Garden, Kimball, Morrill, Scotts Bluff, Sheridan, and Sioux.''
It is hereby found and determined that 30 days' notice of the
effective date hereof is impractical, unnecessary, and contrary to the
public interest in that:
(a) The suspension is necessary to reflect current marketing
conditions and to assure orderly marketing conditions in the marketing
area;
(b) This suspension does not require of persons affected
substantial or extensive preparation prior to the effective date; and
(c) Notice of the proposed suspension was given interested parties
and they were afforded opportunity to file written data, views or
arguments concerning this suspension. Several comments supporting the
suspension, and one comment opposing it, were received.
Therefore, good cause exists for making this suspension effective
less than 30 days from the date of publication in the Federal Register.

List of Subjects in 7 CFR Part 1065

Milk marketing orders.

For the reasons set forth in the preamble, 7 CFR Part 1065 is
amended as follows:

PART 1065--MILK IN THE NEBRASKA-WESTERN IOWA MARKETING AREA

1. The authority citation for 7 CFR Part 1065 continues to read as
follows:

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

Sec. 1065.2 [Suspended in part]

2. In Sec. 1065.2(a), the words ``Banner, Box Butte, Cheyenne,
Dawes, Deuel, Garden, Kimball, Morrill, Scotts Bluff, Sheridan, Sioux''
are suspended.

Dated: January 26, 1999.
Enrique E. Figueroa,
Administrator, Agricultural Marketing Service.
[FR Doc. 99-2430 Filed 2-1-99; 8:45 am]
BILLING CODE 3410-02-P

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-2430. Public record. Not legal advice.