Milk in the New England and Other Marketing Areas; Notice of Hearing on Proposed Amendments to Tentative Marketing Agreements and Orders

Proposed Rules

Federal Register

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Proposed Rules

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part(s) 1001, 1002, 1004, 1005, 1006, 1007, 1012, 1013, 1030,

1032, 1033, 1036, 1040, 1044, 1046, 1049, 1050, 1064, 1065, 1068,

1076, 1079, 1106, 1124, 1126, 1131, 1134, 1135, 1137, 1138, and

1139.

[Docket No. AO-14-A68, et al.; DA-98-01]

Milk in the New England and Other Marketing Areas; Notice of

Hearing on Proposed Amendments to Tentative Marketing Agreements and

Orders

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7 CFR part Marketing area AO Nos.

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1001............. New England.................... AO-14-A68

1002............. New York-New Jersey............ AO-71-A83

1004............. Middle Atlantic................ AO-160-A72

1005............. Carolina....................... AO-388-A10

1006............. Upper Florida.................. AO-356-A33

1007............. Southeast...................... AO-366-A39

1012............. Tampa Bay...................... AO-347-A36

1013............. Southeastern Florida........... AO-286-A43

1030............. Chicago Regional............... AO-361-A33

1032............. Southern Illinois-Eastern AO-313-A42

Missouri.

1033............. Ohio Valley.................... AO-166-A66

1036............. Eastern Ohio-Western AO-179-A60

Pennsylvania.

1040............. Southern Michigan.............. AO-225-A47

1044............. Michigan Upper Peninsula....... AO-299-A30

1046............. Louisville-Lexington-Evansville AO-123-A68

1049............. Indiana........................ AO-319-A43

1050............. Central Illinois..............

lley.................... AO-166-A66

1036............. Eastern Ohio-Western AO-179-A60

Pennsylvania.

1040............. Southern Michigan.............. AO-225-A47

1044............. Michigan Upper Peninsula....... AO-299-A30

1046............. Louisville-Lexington-Evansville AO-123-A68

1049............. Indiana........................ AO-319-A43

1050............. Central Illinois............... AO-355-A30

1064............. Greater Kansas City............ AO-23-A63

1065............. Nebraska-Western Iowa.......... AO-86-A52

1068............. Upper Midwest.................. AO-178-A50

1076............. Eastern South Dakota........... AO-260-A34

1079............. Iowa........................... AO-295-A46

1106............. Southwest Plains............... AO-210-A56

1124............. Pacific Northwest.............. AO-368-A26

1126............. Texas.......................... AO-231-A64

1131............. Central Arizona................ AO-271-A34

1134............. Western Colorado............... AO-301-A25

1135............. Southwestern Idaho-Eastern AO-380-A16

Oregon.

1137............. Eastern Colorado............... AO-326-A29

1138............. New Mexico-West Texas.......... AO-335-A40

1139............. Great Basin.................... AO-309-A34

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AGENCY: Agricultural Marketing Service, USDA.

ACTION: Notice of public hearing on proposed rulemaking.

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SUMMARY: A public hearing is being held in response to industry

requests to consider flooring the level of the basic formula price for

the purpose of determining Class I and Class II prices through December

1998. Mid-America Dairymen, Inc., the proponent of the proposed

amendment, has requested

that this issue be handled on an emergency basis.

DATES: The hearing will convene at 9:30 a.m. on February 17, 1998.

hearing is being held in response to industry

requests to consider flooring the level of the basic formula price for

the purpose of determining Class I and Class II prices through December

1998. Mid-America Dairymen, Inc., the proponent of the proposed

amendment, has requested

that this issue be handled on an emergency basis.

DATES: The hearing will convene at 9:30 a.m. on February 17, 1998.

ADDRESSES: The hearing will be held at the Jefferson Auditorium, South

Agriculture Building, 1400 Independence Avenue, S.W., Washington, D.C.

20250.

FOR FURTHER INFORMATION CONTACT: Constance M. Brenner, Marketing

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

2971, South Building, P.O. Box 96456, Washington, D.C. 20090-6456,

(202) 720-2357, e-mail address Connie__M__B[email protected].

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.

Notice is hereby given of a public hearing to be held at the

Jefferson Auditorium, South Agriculture Building, 1400 Independence

Avenue S.W., Washington, D.C. 20250, beginning at 9:30 a.m., on

Tuesday, February 17, 1998, with respect to proposed amendments to the

tentative marketing agreements and to the orders regulating the

handling of milk in the New England and other marketing areas.

The hearing is called 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 governing the

formulation of marketing agreements and marketing orders (7 CFR Part

900).

The purpose of the hearing is to receive evidence with respect to

the economic and marketing conditions which relate to the proposed

flooring of the basic formula price, with the proposed amendments set

forth hereinafter, and any appropriate modifications thereof, to the

tentative marketing agreements and to the orders

ormulation of marketing agreements and marketing orders (7 CFR Part

900).

The purpose of the hearing is to receive evidence with respect to

the economic and marketing conditions which relate to the proposed

flooring of the basic formula price, with the proposed amendments set

forth hereinafter, and any appropriate modifications thereof, to the

tentative marketing agreements and to the orders. In addition to

considering the specific proposal submitted by Mid-America Dairymen,

Inc. (now part of Dairy Farmers of America), testimony should be

addressed as to whether the $13.50 level proposed or some alternative

level would be more appropriate.

The proposed amendment, if adopted through December 1998, should be

considered an interim action because the entire pricing structure of

the Federal milk order program is under consideration as part of the

Federal order reform process required by the 1996 Farm Bill.

Evidence also will be taken to determine whether emergency

marketing conditions exist that would warrant omission of a recommended

decision under the rules of practice and procedure (7 CFR 900.12(d))

with respect to the proposal. Since this proposal will be heard on an

urgent basis, it is necessary to provide interested parties with less

than 15 days notice of the public hearing to ensure that the proposed

amendments, if found to be appropriate, will be effective as soon as

possible.

Initial Regulatory Flexibility Analysis

n many states with the

greatest declines in areas with high Class I utilization, that the

number of dairy farms continues to decline at a rapid rate, and the

milk-feed price relationships have dropped dramatically. The

cooperative states that the price floor is needed to maintain

productive capacity sufficient to meet current and anticipated future

needs of milk for Class I and Class II uses.

After receiving a hearing request and determining that the proposed

amendment would not violate the provisions of the Act and that the

issues raised for consideration warrant a public hearing, AMS is

authorized to hold a public hearing to consider adoption of the

proposed amendment.

This Act seeks to ensure that, within the statutory authority of a

program, the regulatory and informational requirements are tailored to

the size and nature of small businesses. For the purpose of the Act, a

dairy farm is 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.

USDA has identified as small businesses approximately 80,000 of the

83,000 dairy producers (farmers) that have their milk pooled under a

Federal order. Thus, small businesses represent approximately 96

percent of the dairy farmers in the United States

ollectively exceed the 500-employee

limit, the plant will be considered a large business even if the local

plant has fewer than 500 employees.

USDA has identified as small businesses approximately 80,000 of the

83,000 dairy producers (farmers) that have their milk pooled under a

Federal order. Thus, small businesses represent approximately 96

percent of the dairy farmers in the United States. On the processing

side, there are over 1,200 plants associated with Federal orders, and

of these plants, approximately 700 qualify as ``small businesses,''

representing about 55 percent of the total.

During August 1997, there were 524 fully regulated handlers, 134

partially regulated handlers and 111 producer-handlers submitting

reports under the Federal milk marketing order program. This volume of

milk pooled under Federal orders represents 69 percent of all milk

marketed in the U.S. and 72 percent of the milk of bottling quality

(Grade A) sold in the country. Producer deliveries of milk used in

Class I products (mainly fluid milk products) totaled 45.5 billion

pounds--43.5 percent of total Federal order producer deliveries. More

than 200 million Americans reside in Federal order marketing areas--77

percent of the total U.S. population.

In order to accomplish the goal of imposing no additional

regulatory burdens on the industry, a review of the current reporting

requirements was completed pursuant to the Paperwork Reduction Act of

1995 (44 U.S.C. Chapter 35). In light of this review, it was determined

that this proposed amendment would have little or no impact on

reporting, recordkeeping, or other compliance requirements because

these would remain identical to the current Federal order program. No

new forms have been proposed, and no additional reporting would be

necessary.

This notice does not require additional information collection that

requires clearance by the OMB beyond the currently approved information

collection. The primary sources of data used to complete the forms are

routinely

nce requirements because

these would remain identical to the current Federal order program. No

new forms have been proposed, and no additional reporting would be

necessary.

This notice does not require additional information collection that

requires clearance by the OMB beyond the currently approved information

collection. The primary sources of data used to complete the forms are

routinely

used in most business transactions. Forms require only a minimal amount

of information which can be supplied without data processing equipment

or a trained statistical staff. Thus, the information collection and

reporting burden is relatively small. Requiring the same reports for

all handlers does not significantly disadvantage any handler that is

smaller than industry average.

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

result of overlapping Federal rules. This proposed rulemaking does not

duplicate, overlap or conflict with any existing Federal rules.

To ensure that small businesses are not unduly or

disproportionately burdened based on this proposed amendment,

consideration was given to mitigating negative impacts. Flooring the

BFP should not have any special impact on small handler entities.

Handlers similarly located would be subject to the same minimum Class I

prices, regardless of the size of their operations, and all handlers

would be subject to the same minimum prices for Class II milk. Such

handlers would also be subject to the same minimum prices to be paid to

producers. These features of minimum pricing should not raise barriers

to the ability of small handlers to compete in the marketplace. It is

similarly expected that small producers would not experience any

particular disadvantage to larger producers as a result of this

proposed amendment.

Interested parties are invited to present evidence on the probable

regulatory and informational impact of the hearing proposals on small

businesses

should not raise barriers

to the ability of small handlers to compete in the marketplace. It is

similarly expected that small producers would not experience any

particular disadvantage to larger producers as a result of this

proposed amendment.

Interested parties are invited to present evidence on the probable

regulatory and informational impact of the hearing proposals on small

businesses. Also, parties may suggest modifications of these proposals

for the purpose of tailoring their applicability to small businesses.

Preliminary Cost-Benefit Analysis

To help fulfill the objectives of a Regulatory Impact Analysis, a

preliminary cost-benefit analysis follows:

The BFP is used as the basis for establishing class prices paid by

handlers for milk in all Federal order markets and varies month-to-

month depending on market conditions for milk and milk products. The

BFP is the average price paid for manufacturing grade (Grade B) milk in

Minnesota and Wisconsin in the base month updated to the current month

with a cheese-butter-nonfat dry milk product price formula. The Class I

price is the BFP plus a Class I price differential that reflects the

added value needed to attract milk to fluid milk processing plants, as

well as the additional costs of producing and marketing milk for fluid

use. As a result, Class I prices vary among markets, being generally

higher in southern markets and lower in midwestern markets. The Class

II price, like the Class I price, is based on the BFP with a

differential of only thirty cents in all orders. The result of

establishing a floor under the BFP for purposes of computing the Class

I and II prices would be to maintain these prices at a level they

otherwise might not reach.

Dairy producers are expected to fare about the same in 1998 as they

did in 1997, according to recent estimates of the Dairy Interagency

Commodity Estimates Committee (ICEC)

rential of only thirty cents in all orders. The result of

establishing a floor under the BFP for purposes of computing the Class

I and II prices would be to maintain these prices at a level they

otherwise might not reach.

Dairy producers are expected to fare about the same in 1998 as they

did in 1997, according to recent estimates of the Dairy Interagency

Commodity Estimates Committee (ICEC). The 1998 all-milk price was

projected in November 1997 to be slightly lower than the 1997 all-milk

price; $13.10 per hundredweight in 1998 compared with $13.35 in 1997.

This preliminary analysis was based on the $13.10 estimate. However,

the 1998 estimate was updated in January 1998 to $13.35. As a result,

the actual impact of a floor under the BFP could be expected to be less

than shown in this preliminary analysis. Further analysis will be based

on more recent price estimates.

A BFP floor for computing Class I and II prices would apply only to

the 70 percent of the milk marketed in the United States that is

marketed under Federal milk orders. USDA's preliminary analysis

indicated that flooring Class I and Class II prices with a $13.50

minimum BFP would increase the U.S. all-milk price by $0.40 to $0.50

per hundredweight. Prices to producers delivering to Federal order

markets could increase by an average of $0.60 to $0.75 per

hundredweight.

Producers delivering to markets with higher Class I use, such as

the three Florida markets and the Southeast market, would benefit more

(as much as $1.10-$1.30 per hundredweight) than those delivering to

markets with lower Class I utilization. The attached table provides

estimates of change in the all-milk prices for all Federal order

markets, assuming BFP floors of $13.50 and $12.83 per hundredweight

(the October 1997 BFP).

th higher Class I use, such as

the three Florida markets and the Southeast market, would benefit more

(as much as $1.10-$1.30 per hundredweight) than those delivering to

markets with lower Class I utilization. The attached table provides

estimates of change in the all-milk prices for all Federal order

markets, assuming BFP floors of $13.50 and $12.83 per hundredweight

(the October 1997 BFP).

Change in the All-Milk Price.--Alternatives Flooring BFP at $13.50 or

$12.83 for Class I and Class II Pricing Calendar Year 1998

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Change in all-milk price per

hundredweight

Marketing area -------------------------------

$13.50 Floor $12.83 Floor

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New England............................. $0.20 $0.11

New York-New Jersey..................... .74 .40

Middle Atlantic......................... .81 .45

Carolina................................ 1.28 .70

Louis.-Lex.-Evans....................... 1.22 .67

Southeast............................... 1.21 .66

Upper Florida........................... 1.18 .64

Tampa Bay............................... 1.28 .70

Southeastern Florida.................... 1.30 .71

Michigan Upper Peninsula................ 1.13 .62

Southern Michigan....................... .90 .49

E. Ohio--W. Pennsylvania................ .88 .48

Ohio Valley............................. 1.14 .63

Indiana................................. 1.20 .66

Chicago Regional........................ .29 .16

Upper Midwest........................... .26 .14

Iowa.................................... .50 .27

Nebraska-Western Iowa................... .64 .35

Eastern South Dakota.................... .93 .51

Central Illinois........................ 1.09 .60

S. Illinois-E. Missouri................. 1.05 .57

4 .63

Indiana................................. 1.20 .66

Chicago Regional........................ .29 .16

Upper Midwest........................... .26 .14

Iowa.................................... .50 .27

Nebraska-Western Iowa................... .64 .35

Eastern South Dakota.................... .93 .51

Central Illinois........................ 1.09 .60

S. Illinois-E. Missouri................. 1.05 .57

Southwest Plains........................ .75 .41

Eastern Colorado........................ .72 .39

Greater Kansas City..................... 1.10 .60

Texas................................... .89 .48

New Mexico-West Texas................... .42 .23

Southwestern Idaho-E. Oregon............ .11 .06

Great Basin............................. .60 .33

Western Colorado........................ 1.23 .67

Central Arizona......................... .65 .35

Pacific Northwest....................... .42 .23

Federal Order Average................... .65-.75 .35-.45

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In addition to increasing income to dairy producers, adoption of a

BFP floor would also result in increased prices of fluid milk products

to consumers. Increased Class I milk prices would be reflected in

retail prices for fluid milk, which may result in reduced per capita

consumption and an increase in total consumer expenditures for dairy

products.

Legislative and Background Requirements

The amendments to the rules proposed herein have been reviewed

under Executive Order 12988, Civil Justice Reform. They are not

intended to have a retroactive effect. If adopted, the proposed

amendments would not preempt any state or local laws, regulations, or

policies, unless they present an irreconcilable conflict with this

rule.

The Agricultural Marketing Agreement Act provides that

administrative proceedings must be exhausted before parties may file

suit in court

Order 12988, Civil Justice Reform. They are not

intended to have a retroactive effect. If adopted, the proposed

amendments would not preempt any state or local laws, regulations, or

policies, unless they present an irreconcilable conflict with this

rule.

The Agricultural Marketing Agreement Act provides that

administrative proceedings must be exhausted before parties may file

suit in court. Under section 8c(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.

Request for Public Input

Interested parties who wish to introduce exhibits should provide

the Presiding Officer at the hearing with 6 copies of such exhibits for

the Official Record. Also, it would be helpful if additional copies are

available for the use of other participants at the hearing.

List of Subjects in 7 CFR Parts 1001 through 1139

Milk marketing orders.

The authority citation for 7 CFR Parts 1001 through 1139 continues

to read as follows:

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

The proposed amendments, as set forth below, have not received the

approval of the Secretary of Agriculture.

Proposed by Mid-America Dairymen, Inc.:

Proposal No. 1: Through December 1998, amend the introductory text

of Sec. ____.51 of 7 CFR Parts 1001 through 1139 to read as follows:

Sec. ____.51 Basic formula price.

through 1139 continues

to read as follows:

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

The proposed amendments, as set forth below, have not received the

approval of the Secretary of Agriculture.

Proposed by Mid-America Dairymen, Inc.:

Proposal No. 1: Through December 1998, amend the introductory text

of Sec. ____.51 of 7 CFR Parts 1001 through 1139 to read as follows:

Sec. ____.51 Basic formula price.

* * * For the purpose of computing the Class I and Class II prices,

the resulting price shall be not less than $13.50.

* * * * *

Proposed by Dairy Programs, Agricultural Marketing Service:

Proposal No. 2: Make such changes as may be necessary to make the

entire marketing agreements and the orders conform with any amendments

thereto, that may result from this hearing.

Copies of this notice of hearing and the orders may be procured

from the Market Administrator of each of the aforesaid marketing areas,

or from the Hearing Clerk, Room 1083, South Building, United States

Department of Agriculture, Washington, D.C. 20250, or may be inspected

there.

Copies of the transcript of testimony taken at the hearing will not

be available for distribution through the Hearing Clerk's Office. If

you wish to purchase a copy, arrangements may be made with the reporter

at the hearing.

From the time that a hearing notice is issued and until the

issuance of a final decision in a proceeding, Department employees

involved in the decisionmaking process are prohibited from discussing

the merits of the hearing issues on an ex parte basis with any person

having an interest in the proceeding. For this particular proceeding,

the prohibition applies to employees in the following organizational

units:

Office of the Secretary of Agriculture

Office of the Administrator, Agricultural Marketing Service

Office of the General Counsel

Dairy Programs, Agricultural Marketing Service (Washington office) and

the Offices of all Market Administrators.

person

having an interest in the proceeding. For this particular proceeding,

the prohibition applies to employees in the following organizational

units:

Office of the Secretary of Agriculture

Office of the Administrator, Agricultural Marketing Service

Office of the General Counsel

Dairy Programs, Agricultural Marketing Service (Washington office) and

the Offices of all Market Administrators.

Procedural matters are not subject to the above prohibition and may

be discussed at any time.

Dated: January 21, 1998.

Enrique E. Figueroa,

Acting Administrator, Agricultural Marketing Service.

[FR Doc. 98-1813 Filed 1-23-98; 8:45 am]

BILLING CODE 3410-02-U