Proposed Rule2023-25879
Milk in the Appalachian, Florida, and Southeast Marketing Areas; Final Decision on Proposed Amendments to Marketing Agreements and to Orders
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 1, 2023
Issuing agencies
Agriculture DepartmentAgricultural Marketing Service
Abstract
This proposed rule is the Secretary's final decision in this proceeding and recommends amendments to the transportation credit balancing fund provisions for the Appalachian and Southeast Federal milk marketing orders, and establishment of distributing plant delivery credits in the Appalachian, Florida, and Southeast Federal milk marketing orders. AMS will determine whether producers approve of the proposed amended orders, as required by regulation.
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[Federal Register Volume 88, Number 230 (Friday, December 1, 2023)]
[Proposed Rules]
[Pages 84038-84065]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-25879]
[[Page 84037]]
Vol. 88
Friday,
No. 230
December 1, 2023
Part II
Department of Agriculture
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Agricultural Marketing Service
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7 CFR Parts 1005, 1006, and 1007
Milk in the Appalachian, Florida, and Southeast Marketing Areas; Final
Decision on Proposed Amendments to Marketing Agreements and to Orders;
Proposed Rule
Federal Register / Vol. 88, No. 230 / Friday, December 1, 2023 /
Proposed Rules
[[Page 84038]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 1005, 1006, and 1007
[Doc. No. AMS-DA-23-0003; 23-J-0019]
Milk in the Appalachian, Florida, and Southeast Marketing Areas;
Final Decision on Proposed Amendments to Marketing Agreements and to
Orders
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule; final decision.
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SUMMARY: This proposed rule is the Secretary's final decision in this
proceeding and recommends amendments to the transportation credit
balancing fund provisions for the Appalachian and Southeast Federal
milk marketing orders, and establishment of distributing plant delivery
credits in the Appalachian, Florida, and Southeast Federal milk
marketing orders. AMS will determine whether producers approve of the
proposed amended orders, as required by regulation.
DATES: The representative period for ascertaining producer approval is
March 2023.
ADDRESSES: To review the hearing record, please see <a href="https://www.ams.usda.gov/rules-regulations/milk-appalachian-southeast-and-florida-areas-hearing-proposed-amendments">https://www.ams.usda.gov/rules-regulations/milk-appalachian-southeast-and-florida-areas-hearing-proposed-amendments</a>.
FOR FURTHER INFORMATION CONTACT: Erin Taylor, USDA/AMS/Dairy Programs,
Order Formulation and Enforcement Branch, STOP 0231-Room 2530, 1400
Independence Avenue SW, Washington, DC 20250-0231, (202) 720-7183,
email address: <a href="/cdn-cgi/l/email-protection#f3b6819a9ddda7928a9f9c81b386809792dd949c85"><span class="__cf_email__" data-cfemail="216453484f0f7540584d4e5361545245400f464e57">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: This final decision recommends amendments to
the transportation credit balancing fund (TCBF) provisions in the
Appalachian and Southeast Federal milk marketing orders (FMMOs) that
(1) update the components of the mileage rate calculation; (2) revise
the months of mandatory and discretionary payment; (3) revise the non-
reimbursed mileage factor; and (4) increase the maximum assessment rate
on Class I milk. This final decision also recommends establishment of
distributing plant delivery credit (DPDC) provisions in the
Appalachian, Florida, and Southeast FMMOs that make marketwide service
payments to qualifying handlers and cooperatives for milk shipments to
pool distributing plants from farms that are year-round, consistent
suppliers. AMS will determine if producers approve of the proposed
amended orders, as required by regulation. If at least two-thirds of
the producers or two-thirds of the milk represented in the vote approve
of the amended orders, AMS will issue a final rule implementing the
changes.
This administrative action is governed by sections 556 and 557 of
Title 5 of the United States Code and, therefore, is excluded from the
requirements of Executive Orders 12866, 13563, 14094, and 13175.
The amendments to the regulations as 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 of 1937, as amended (7
U.S.C. 601-674) (AMAA), provides that administrative proceedings must
be exhausted before parties may file suit in court. Under section
608c(15)(A) of the AMAA, any handler subject to an order may request
modification or exemption from such order by filing a petition with the
United States Department of Agriculture (USDA) 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, USDA
would rule on the petition. The AMAA 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 USDA'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.
Regulatory Flexibility Act and Paperwork Reduction Act
In accordance with the Regulatory Flexibility Act (RFA) (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 this
proposed rule will not have a significant economic impact on a
substantial number of small entities. The purpose of the RFA is to fit
regulatory actions to the scale of businesses subject to such actions
so that small businesses will not be unduly or disproportionately
burdened. Marketing orders and amendments thereto are unique in that
they are normally brought about through group action of essentially
small entities for their own benefit. A small dairy farm as defined by
the Small Business Administration (SBA) (13 CFR 121.201) is one that
has an annual gross revenue of $3.75 million or less, and a small dairy
products manufacturer is one that has no more than the number of
employees listed in the chart below:
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Size standards in
NAICS code NAICS U.S. industry title number of employees
----------------------------------------------------------------------------------------------------------------
311511..................................... Fluid Milk Manufacturing.................... 1,150
311512..................................... Creamery Butter Manufacturing............... 750
311513..................................... Cheese Manufacturing........................ 1,250
311514..................................... Dry, Condensed, and Evaporated Dairy Product 1,000
Manufacturing.
----------------------------------------------------------------------------------------------------------------
To determine which dairy farms are ``small businesses,'' the $3.75
million per year income limit was used to establish a milk marketing
threshold of 1,220,703 pounds per month. Although this threshold does
not factor in additional monies that may be received by dairy
producers, it should be an accurate standard for most ``small'' dairy
farmers. To determine a handler's size, if the plant is part of a
larger company operating multiple plants that collectively exceed the
750-employee limit for creamery butter; the 1,000-employee limit for
dry, condensed, and evaporated dairy product manufacturing; the 1,150-
employee limit for fluid milk manufacturing; or the 1,250-employee
limit for cheese manufacturing; the plant was considered a large
business even if the local plant does not exceed the 750, 1,000, 1,150,
or 1,250-employee limits, respectively.
During January 2023, the milk of 2,522 dairy farms was pooled on
the Appalachian (1,578), Florida (113), and Southeast (831) FMMOs. Of
the total, 1,491 farms on the Appalachian FMMO (94 percent), 69 on the
Florida FMMO (61 percent), and 787 on the Southeast FMMO (95 percent)
were considered small businesses.
[[Page 84039]]
During January 2023, there were a total of 17 plants associated
with the Appalachian FMMO (16 fully regulated plants and 1 partially
regulated plant), 7 plants associated with the Florida FMMO (all fully
regulated), and 16 plants associated with the Southeast FMMO (15 fully
regulated plants and 1 partially regulated plant). The number of plants
meeting the small business criteria under the Appalachian, Florida, and
Southeast FMMOs were estimated to be 2 (12 percent), 2 (29 percent),
and 2 (13 percent), respectively.
Currently, the Appalachian and Southeast orders provide
transportation credit balancing fund (TCBF) payments on supplemental
shipments of milk for Class I use provided the milk was from producers
located outside of the marketing areas who are not regular suppliers to
the market. Producer milk received at a pool distributing plant
eligible for a transportation credit under the orders is defined as
bulk milk received directly from a dairy farmer (1) from whom not more
than 50 percent of the dairy farmer's milk production, in aggregate, is
received as producer milk during the immediately preceding months of
March through May of each order; and (2) who produced milk on a farm
not located within the specified marketing areas of either order. Milk
deliveries from producers located outside the marketing area who are
consistent suppliers to the market, or from producers located inside
the marketing areas, are not eligible for transportation credits.
This decision continues to propose amendments to the Appalachian
and Southeast TCBF provisions. Specifically, the proposed amendments
would amend the non-reimbursed mileage level from 85 miles to 15
percent of total miles and update components of the mileage rate factor
to reflect more current market transportation costs.
The proposed amendments also would increase the maximum TCBF
assessment rates for the Appalachian and Southeast orders.
Specifically, the maximum transportation credit assessment rate for the
Appalachian and Southeast orders would increase to $0.30 and $0.60 per
hundredweight (cwt), respectively. The increases are intended to
minimize the proration and depletion of each Order's TCBF to provide
more adequate TCBF payments. This decision finds these assessment
levels necessary because of escalating transportation costs coupled
with the continued decline in milk production in the southeastern
region necessitating longer hauls to procure supplemental milk to meet
the Class I needs of the region.
This decision also continues to propose adoption of DPDCs in the
Appalachian, Florida, and Southeast FMMOs to provide transportation
assistance to handlers and cooperatives procuring year-round,
consistent milk supplies for the region. Currently, there are no
provisions in any of the three southeastern FMMOs to provide
transportation assistance to handlers and cooperatives for these types
of milk deliveries.
The proposed DPDCs would operate similar to the TCBF program: (1)
funded through an assessment on Class I producer milk; (2) payable to
handlers and cooperatives for procuring year-round milk supplies as
determined by location and delivery criteria; (3) payment provisions
identical to TCBF payments; and (4) contain provisions designed to
safeguard against excess assessment collections and prevent persistent
and pervasive uneconomic milk movements for the purpose of receiving a
DPDC payment.
The proposed TCBF and DPDC provisions would be applied identically
to large and small handlers and cooperatives regulated by the
Appalachian, Florida, and Southeast FMMOs. Since the proposed
amendments would apply to all regulated cooperatives and handlers
regardless of their size, the proposed amendments should not have a
significant economic impact on a substantial number of small entities.
A review of reporting requirements was completed under the
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). It was
determined that these proposed amendments would have no impact on
reporting, recordkeeping, or other compliance requirements because
those requirements would remain unchanged. No new forms are proposed,
and no additional reporting requirements would be necessary.
This final decision does not require additional information
collection that requires clearance by the Office of Management and
Budget beyond 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, since the information is already
provided, no new information collection requirements are needed, and
the current 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 the
industry average.
The Agricultural Marketing Service is committed to complying with
the E-Government Act, to promote the use of the internet and other
information technologies to provide increased opportunities for citizen
access to Government information and services, and for other purposes.
No other burdens are expected to fall on the dairy industry as a
result of overlapping Federal rules. This rulemaking proceeding does
not duplicate, overlap, or conflict with any existing Federal rules.
Prior Documents in This Proceeding
Notice of Hearing: Published in the Federal Register on January 30,
2023 (88 FR 5800).
Recommended Decision: Published in the Federal Register on July 18,
2023 (88 FR 46016).
Secretary's Decision
Notice is hereby given of the filing with the Hearing Clerk of this
final decision with respect to proposed amendments to the tentative
marketing agreements and the orders regulating the handling of milk in
the Appalachian, Florida, and Southeast marketing areas. This final
decision is issued pursuant to the provisions of the Agricultural
Marketing Agreement Act and the applicable rules of practice and
procedure governing the formulation of marketing agreements and
marketing orders (7 CFR part 900).
A public hearing was held upon proposed amendments to the marketing
agreement and the orders regulating the handling of milk in the
Appalachian, Florida, and Southeast marketing areas. The hearing was
held, pursuant to the provisions of the AMAA, 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 proposed amendments set forth below are based on the record of
a public hearing held in Franklin, Tennessee, from February 28-March 2,
2023, pursuant to a notice of hearing published January 30, 2023 (88 FR
5800).
The material issues on the record of hearing relate to:
1. Transportation Credit Balancing Fund Provisions
2. Distributing Plant Delivery Credits
[[Page 84040]]
Findings and Conclusions
The following findings and conclusions on the material issues are
based on evidence presented at the hearing and the record thereof:
Summary of Testimony and Post-Hearing Briefs
Several witnesses testified on behalf of the Dairy Cooperative
Marketing Association (DCMA). DCMA is a common marketing agency
operating in the southeast region of the United States (U.S.). Members
of DCMA include Appalachian Dairy Farmers Cooperative; Cobblestone Milk
Cooperative; Cooperative Milk Producers Association; Dairy Farmers of
America, Inc.; Lanco-Pennland Milk Producers; Lone Star Milk Producers
Association; Maryland & Virginia Milk Producers Association; Select
Milk Producers, Inc.; and Southeast Milk, Inc. According to DCMA, its
members market approximately 80 percent of the milk pooled in the three
southeastern orders and process and distribute a substantial percentage
of the region's Class I fluid milk products through cooperative-owned
distributing plants.
Several witnesses testified in support of Proposals 1 and 2 to
update the components of the TCBF and mileage rate factor (MRF)
contained in the Appalachian and Southeast FMMOs. A consultant witness
for DCMA testified milk production in the southeastern region of the
U.S. continues to decline as population increases. As a result, the
witness stated, the Appalachian and Southeast marketing areas must
continually seek supplemental supplies of milk from outside their
normal milksheds. The witness stressed that DCMA members must travel
farther distances to obtain supplemental milk while at the same time,
diesel and non-fuel costs for shipping supplemental milk have risen
sharply. The witness explained these marketing conditions result in
milk suppliers absorbing a larger percentage of the transportation
costs, diminishing the effectiveness of TCBF credits.
The DCMA witness presented a comparison of current and proposed MRF
components: base fuel rates; average truck miles-per-gallon (MPG); base
haul rates; and average tank sizes. From 2006 to 2020, the witness
stated input costs/factors increased by the following: 59 percent for
the base fuel rate, 13 percent for average MPG for transport equipment,
92 percent for the base haul rate (costs other than fuel), and 4
percent for the average tank load weight.
The DCMA witness testified that while both population and milk
consumption in the region are increasing, dairy farm numbers are
declining, necessitating milk traveling farther distances to serve the
market. The DCMA witness testified that over the 5-year period 2017-
2021, the USDA National Agricultural Statistics Service (NASS) total
farm count in the southeast decreased by 719 farms (declining 38
percent, 45 percent, and 56 percent in the Appalachian, Florida, and
Southeast FMMOs, respectively). Looking back from 2000 to 2022, DCMA
noted in its post-hearing brief that the Appalachian order lost 77
percent of its farms (2,813 to 650 farms), the Florida order lost 75
percent (194 to 49 farms), and the Southeast order lost 86 percent
(3,504 to 489 farms).
Regional milk production showed a similar decline of 12.8 percent
from 2017 to 2021, according to the DCMA witness. The witness noted
every state in the region experienced decreased production over the
five-year period; only North Carolina and Georgia had an annual milk
production increase from 2020 to 2021.
The DCMA witness used USDA data to describe sources of milk for
each of the southeastern Orders. According to the DCMA witness, USDA
data reveals in 2021, 46 percent of milk pooled on the Appalachian FMMO
was sourced from outside the marketing area. The witness calculated
that during the low production month of October, approximately 99 loads
of supplemental milk per day, on average for 2019-2021, were needed to
meet the pool distributing plant demand of the Appalachian FMMO. For
the Southeast and Florida FMMOs, the witness stated that during that
same time period, 56 and 18 percent, respectively, of pool distributing
plant demand was met from farms outside the marketing area. The witness
noted the supplemental milk meeting Florida demand primarily comes from
farms located in Georgia.
The DCMA witness testified the closure of fluid milk distributing
plants has increased marketing costs for the remaining dairy farms in
the southeast region. Citing USDA data, the DCMA witness said the
number of pool distributing plants regulated by the southeastern FMMOs
was down significantly when comparing 2000 to 2022; a reduction of 39
percent (26 to 16 plants), 33 percent (12 to 8 plants), and 54 percent
(32 to 15 plants) on the Appalachian, Florida, and Southeast FMMOs,
respectively. The witness argued fewer plants mean longer distances and
higher hauling costs to the dairy farms and cooperative handlers
delivering milk to the region. DCMA asserted in its post-hearing brief
the average miles to procure a load of supplemental milk in October
2020 was 774 miles; a 51 percent increase from 2003.
The DCMA witness presented data showing milk supply deficits in
Class I and Class II use in December 2020 and May 2021. Only in one
month (May 2021) did a southeastern order (Florida) have enough in-area
production to meet Class I milk needs of pool distributing plants. In
the other five monthly comparisons, in-area production ranged from 67
to 97 percent of demand. When DCMA accounted for Class II usage, the
witness testified, the ability for in-area production to meet the
additional demand was further diminished. The witness emphasized that
when demand is greater than in-area supply, the southeastern orders
must acquire milk from other FMMO areas to meet the demand.
Milk deficits, in addition to longer distances traveled, according
to the witness, causes the TCBF to be depleted at a rate faster than
the funds are replenished. The DCMA witness reviewed TCBF data on
supplemental milk being delivered to Appalachian and Southeast pool
distributing plants from 2020-2022. The witness said TCBF eligible
loads increased from 5,374 in 2020 to 6,642 loads in 2022 on the
Appalachian FMMO and from 15,869 loads in 2020 to 18,217 loads in 2022
for the Southeast FMMO. According to the witness, this import of large
volumes of supplemental milk into the two marketing areas would not
occur unless necessary to fill pool distributing plant demand.
In addition to longer hauling distances, explained the witness, the
TCBF factors have not been updated since 2006, and consequently fall
short of providing a reasonable partial reimbursement of current,
actual transportation costs. The DCMA witness described four supply and
demand scenarios, representative of actual arrangements, to demonstrate
the gap between the existing TCBF provisions and those proposed by
DCMA, using 2021 data. In the four scenarios outlined, the current TCBF
payment accounted for 25 to 58 percent of the amount calculated using
the DCMA proposed changes.
The DCMA witness presented recent data to support the proposed
changes contained in Proposals 1 and 2. Regarding the base diesel fuel
price, the witness stated DCMA supports continued use of the Energy
Information Administration of the United States Department of Energy
(EIA) data--
[[Page 84041]]
specifically, the Lower Atlantic and Gulf Coast EIA regions. The
witness reviewed EIA diesel fuel prices and found that May 4 through
November 9, 2020, as a 28-week period of relatively stable diesel
prices, averaged $2.262 per gallon. The current MRF calculation uses a
base diesel price of $1.42 per gallon. According to the witness, the
price difference illustrates the need to update the factors, and DCMA
supports adopting $2.26 as the base diesel fuel price.
The DCMA witness next evaluated the MPG of combination trucks and
supported using U.S. Department of Transportation MPG fuel efficiency
data. The most recently published data (2019) showed an MPG rate of
6.0478. The DCMA witness estimated a calculation for 2022 using the
five-year change in MPG from 2014-2019 of 0.0430 per year. The witness
added this amount annually to the 2019 published rate of 6.0478,
yielding a per gallon estimate of 6.1770 in 2022, which DCMA rounded to
6.2. The witness testified DCMA members supported a 6.2 MPG assumption
as a reasonable fleet average across operations with varying transport
tanks and varying ages of equipment. Additionally, the witness said a
higher MPG assumption would lower a TCBF payment and therefore guard
against handlers engaging in uneconomic milk shipments to qualify for
higher TCBF payments.
The DCMA witness entered data substantiating their proposed base
haul rate of $3.67 per loaded mile. According to the witness, DCMA
surveyed member haul rates during September and October 2020,
representing months of heavy supplemental milk purchases which are
included in the May to November 2020 time period used to determine the
proposed average diesel fuel price. The witness said the aggregated
survey results represented 2,951 supplemental milk hauls from nine
states considered traditional sources of supplemental milk to pool
distributing plants geographically spread across the three southeastern
FMMOs. According to the DCMA witness, the average rate per loaded mile
was $3.67, representing an average distance of 818 miles, an average
tanker load size of 49,700 pounds, and an average total haul bill of
$3,003. The survey results, said the witness, support the DCMA-proposed
base haul rate of $3.67 per loaded mile. The surveyed tank size of
49,700 pounds was used to justify increasing the reference load in the
MRF calculation. DCMA noted in its post-hearing brief that costs have
increased from its calculated 2020 rate, up to as much as $5.10 to
$5.25 per loaded mile.
Using the proposed TCBF provisions, DCMA estimated TCBF payments
from 2020 through 2022 using USDA data and compared the results with
what TCBF payments would have been under current provisions, assuming
all claims could have been paid in full. According to the witness,
under those assumptions, current TCBF payments represent 59 percent, on
average, of what payments would have been using DCMA's proposed updated
factors. The witness emphasized the analysis demonstrates how current
TCBF provisions are not representative of current transportation costs
and should be updated.
Using actual TCBF pounds from 2020-2022, the witness offered an
analysis to determine necessary assessment levels under the proposed
TCBF provisions. To do so, the witness provided data of TCBF
assessments and payments from 2020-2022, including proration. The
witness used USDA data to show the impact of various scenarios on the
levels of assessment and payments based on two alternative DCMA-
proposed MRFs, in comparison to actual TCBF claims and payments. The
analysis showed assessment rates needed to fully pay all claims in 2020
could be up to $0.18 and $0.88 per cwt in the Appalachian and Southeast
FMMOs, respectively. Based on the analysis, the witness testified DCMA
proposes to double the maximum assessment rate in each order, to $0.30
and $0.60 per cwt in the Appalachian and Southeast FMMOs, respectively.
DCMA noted in its post-hearing brief a maximum rate of $0.30 per cwt in
the Appalachian FMMO would cover full claims immediately and allow room
for increases in claims without necessitating proration for some time.
Also, according to the brief, a maximum of $0.60 per cwt in the
Southeast FMMO will allow for most of the current supplemental milk
transportation credits to be paid, with reduced occurrences of
proration.
The DCMA witness also elaborated on the proposal to make February
an optional, not mandatory, payment month. Since less supplemental milk
is needed in February, the witness said it was appropriate for February
to no longer be a mandatory payment month so those funds could instead
be used in later months when supplemental milk needs are greater. The
witness presented data to demonstrate the possible benefits of
converting February from a mandatory to an optional payment month. The
witness stated the impact of including February as a mandatory payment
month is only apparent when payments are prorated, which is not
projected to occur in the Appalachian order. For the Southeast FMMO,
the witness entered data that showed more dollars would have been
directed to the months it was needed in 2020 and 2021, resulting in
fewer prorated payment months, had February been an optional payment
month rather than a mandatory payment month. The witness reiterated
that under DCMA's proposal, a handler could petition the market
administrator to request February TCBF payments by providing supporting
data and rationale.
Last, the DCMA witness explained the flat mileage deduction of 85
miles for loads delivered directly from farms to distributing plants
should be changed to a percentage basis, initially set at 15 percent.
DCMA argued the change would more equitably reimburse short and long
hauls, thus reducing the potential disorderly incentive to import
supplemental milk from greater distances. The witness noted the current
85-mile deduction represented 10.4 percent of the 818-mile average haul
observed in the DCMA survey and concluded that a 15-percent deduction
is an appropriate initial rate.
In its post-hearing brief, DCMA noted there was only nominal
opposition from industry participants to its proposals to amend the
transportation credit balancing funds. DCMA reiterated testimony by
witnesses supporting its proposals: a decreased supply of milk, fewer
plants to process local milk, increased distances to bring in milk, and
an increased population in the region. Compounding market disruptions,
DCMA argues in its brief, is the increase in the cost of moving milk
since the TCBF reimbursement rates were implemented in 2006.
The post-hearing brief touched on changes in the movement of milk
as a result of these factors, including movements that often lose value
going ``against the grain,'' from south to west or south to north.
These movements, the proponents argue, are prime examples of disorderly
marketing since the Federal Order Class I price grid is intended to
reflect lower prices at supply areas and higher prices at demand
points. The region's loss of plants, the proponents argue, has caused
the Federal order provisions to be out of sync with the marketplace.
The DCMA witness also offered testimony supporting adoption of
Proposals 3, 4, and 5, to establish a distributing plant delivery
credit (DPDC) in the Appalachian, Florida, and Southeast FMMOs for
marketwide service payments to handlers acquiring consistent, year-
round milk supplies for
[[Page 84042]]
pool distributing plants. The DCMA witness reviewed data for each of
the southeastern orders showing 54 percent, 82 percent, and 44 percent
of Class I demand is met with in-area milk production from the
Appalachian, Florida, and Southeast orders respectively. According to
the witness, in-area milk supplies face the same cost factors as
supplemental supplies. However, because there is no transportation
compensation for obtaining in-area milk supplies, the cost burden falls
on the handlers supplying Class I demand, primarily DCMA cooperatives
and their members. The witness asserted that local milk production
should be on equal footing for transportation assistance as
supplemental milk supplies, as local deliveries promote transportation
efficiency. The witness reiterated earlier market statistics showing
declines of in-area milk production, farms, and pool distributing
plants throughout the southeastern region as justification for adopting
DPDC for year-round, consistent milk supplies.
The DCMA witness described the situation in the Florida order,
which currently has no transportation credit assistance. According to
the witness, a significant amount of milk production is located in
central Florida, which is typically delivered to a plant in Miami over
200 miles away. Because Miami-Dade County has the highest Class I
differential zone in the country, the Class I differential provides
some financial incentive to move milk in that direction. However, when
demand at the Miami plant is met, the central Florida milk must move
north to a lower Class I differential zone. While the distances may be
similar, there is no transportation assistance provided through the
differentials to cover the transportation cost. Therefore, the witness
said, a DPDC in the Florida FMMO is warranted.
The witness explained the compounding transportation situation in
the southeastern Orders by presenting a map of pool distributing plants
in 2000 vs. 2022, which showed a decrease from 73 plants in January
2000 to 39 in 2022, a 47 percent reduction. The witness said the
decline in farms and plants in the region will continue to lead to
increased delivery miles and costs and will put availability of local
milk supplies at risk.
The DCMA witness explained the DPDC funds would be separate from
the producer settlement fund, be payable to handlers providing the
marketwide service of meeting Class I demand with consistent, year-
round milk supplies, and not impact the Federal order minimum announced
producer blend prices. According to the witness, the proposed
provisions establish maximum allowable assessments on Class I milk
specific to each Order and guidelines for the market administrator on
how to set or waive the rate and investigate misuse, for example, if a
handler consistently moves milk uneconomically to collect payment.
The DCMA witness outlined proposed DPDC eligibility criteria.
According to the witness, with fewer farms and pool distributing
plants, milk regularly crosses state and Federal order borders of the
three southeastern orders; therefore, milk from one Order should
qualify for payments when delivered to another Order. For the
Appalachian and Florida orders, the witness proposed producer milk
originating in certain counties outside of the respective Federal order
boundaries that are considered part of the milksheds be eligible for a
DPDC payment. For the Appalachian order, DCMA included select
unregulated counties in Virginia and West Virginia that provide milk to
a fully regulated Appalachian order pool distributing plant in the same
unregulated area. The counties are also, according to DCMA, the regular
source of milk to Appalachian order pool distributing plants in North
and South Carolina. Under these circumstances, DCMA argues, the
counties are parts of the regular procurement area for the Appalachian
order, and the handlers obtaining milk supplies from these counties
should be entitled to receive DPDC for those shipments.
The provisions proposed by DCMA also permit milk from an order pool
supply plant to qualify for DPDCs in all three orders. According to
DCMA, a pool supply plant located in the Appalachian marketing area
assembles milk delivered in farm pick-up trucks from smaller producers.
The milk is then shipped in larger transports to Appalachian order pool
distributing plants. Transporting via supply plant is a necessary
method for these producers whose milk is a consistent supply to the
market. According to DCMA's proposal, DPDCs would apply only on the
mileage from the supply plant to the order's distributing plant.
The Georgia counties included in the DCMA Proposal 4, according to
testimony by its witnesses, are a year-round integral part of the
supply for the Florida order; therefore, DCMA believes handlers
acquiring milk from those areas should be eligible for DPDCs.
According to the DCMA witness, its members, who supply a majority
of the milk on the three Orders, face similar cost factors for both
regular and supplemental supplies. Therefore, the witness said, it is
appropriate for the DPDC payment provisions to be the same as the TCBF
provisions.
The DCMA witness estimated the maximum assessment rates needed to
fund DPDC payments in each of the three Orders. DCMA's analysis
concluded maximum assessment rates of $0.60, $0.85, and $0.50 per cwt
on Class I milk pooled on the Appalachian, Florida, and Southeast
FMMOs, respectively, were warranted. The DCMA witness explained the
assessment rates should initially be set $0.05 lower than the maximum
rates to be initially conservative when implementing this new fund. The
proposed provisions allow for the market administrator to review and
adjust assessment rates in each FMMO, if necessary, after a year of
operation.
The witness next discussed the impact changes to the TCBF
provisions and establishment of DPDC could have on plant
competitiveness in the region. Ultimately, the witness argued, an
analysis shows the DCMA proposed assessment levels do not put in-area
pool distributing plants at a competitive disadvantage compared to out-
of-area plants.
The witness concluded by emphasizing the need for emergency hearing
procedures, especially due to the current inflationary economic
environment, the fact that transportation costs have not been updated
for 15 years, and the changing market structure in the southeastern
region. The consequence of not using emergency hearing procedures, the
witness claimed, would be more farms going out of business.
A witness from Dairy Farmers of America (DFA), one of the nine
cooperative members of DCMA, testified in support of DCMA Proposals 1
through 5. DFA's Southeast Council encompasses the Appalachian,
Florida, and Southeast FMMOs, where they have 830 dairy farm members.
The witness offered testimony regarding the impact adopting Proposals 1
through 5 could have on the competitiveness of packaged milk delivered
into the southeastern marketing areas. The witness analyzed
transportation rates for 60 routes within the southeast FMMOs and the
surrounding areas to determine how the cost of transporting packaged
fluid milk into the marketing areas compared to the proposed TCBF and
DCDP assessments contained in Proposals 1 through 5. According to the
witness, the results indicate that even with the proposed assessments
on Class I milk, packaged fluid milk moving into the marketing areas
would not have a
[[Page 84043]]
cost advantage over Class I products produced by plants regulated by
the three FMMOs and subject to the proposed assessments.
Another witness appearing on behalf of DFA offered testimony on
diesel fuel price volatility. To highlight diesel fuel price
volatility, the DFA witness charted U.S. EIA monthly retail on-highway
diesel fuel prices, both for the U.S. and states comprising the
southeast region since 2006 alongside the projection for February 2023
to December 2025. According to the data, since January 2, 2006, diesel
fuel prices in the southeast region have averaged $3.19 per gallon,
ranging from $1.96 gallon (February 2016) to $5.73 per gallon (June
2022). The witness explained that record low U.S. oil supplies, reduced
oil refining capacity, and geopolitical events are all factors driving
diesel fuel price volatility and large price ranges. On the demand
side, the witness said variability in fuel consumption, the overall
health of the U.S. economy and China's rebound from COVID-19 have all
contributed.
A witness appearing on behalf of Maryland and Virginia Milk
Producers Cooperative (MDVA), a dairy cooperative with approximately
930 dairy farmer members located in 10 states and a member of DCMA,
testified in support of Proposals 1 through 5, and specifically on the
marketing conditions within the Appalachian marketing area. The witness
testified their members' milk is marketed on the Appalachian,
Southeast, Northeast, and Mideast orders. MDVA owns and operates two
fluid processing facilities within the Appalachian order and supplies
milk to several other processors in the region.
The witness testified milk production has sharply declined in the
southeast region, down 32 percent over the last 15 years. MDVA
therefore relies on supplemental milk from other regions to meet its
year-round obligations. The witness testified that during peak demand
in late summer and early fall, MDVA requires approximately 25 loads per
day of supplemental milk to fulfill demand. The witness stated the MDVA
average distance to the market for supplemental supplies from the
northeast is 450 miles, and current transportation cost is $4.90 to
$5.25 per loaded mile, which equates to roughly $4.43 per cwt of milk.
The witness testified that roughly $2.93 per cwt of its cost to
transport supplemental milk to the market is not covered by the gain in
Class I differential between the supply and demand zones.
In recent years, according to the witness, equipment parts, oil,
labor, insurance, and fuel costs have increased. Since TCBF factors
have not been updated since 2006, the percentage of the transportation
cost covered by the TCBF has decreased. As hauling bills must be paid,
the witness said the cooperative relies on either deductions from dairy
farmer milk checks or over-order premiums to cover the additional cost.
The witness testified regarding MDVA's difficult experience in
obtaining and maintaining over order premiums. The witness spoke to the
concern of Class I handlers maintaining raw product cost equity with
their competitors. The witness said Class I handlers are reluctant to
pay over order premiums in the current market environment because they
are not assured competitors are also incurring the same cost. In the
witness's experience, Class I handlers are more willing to pay for
additional transportation costs if it is announced by the FMMO and
enforced uniformly on all Class I handlers.
The witness testified Proposals 1 and 2 would align MRF components
with current freight rates and adopting those proposals is imperative
to maintaining supplemental milk supplies needed to meet Class I
demand. Without these updates, the witness stated, handlers will be
less willing to provide supplemental milk supplies to the Appalachian
order during periods of large deficits, which would negatively impact
the region's processing capacity. The witness noted that since the
early 2000s, 11 pool distributing plants have closed within MDVA's core
area of the Appalachian order. The result is increased distances to the
next closest plant, and with it, increased costs to balance Class I
demand.
The MDVA witness testified raw milk loads are shuffled based on
customer orders to ensure adequate available supplies without exceeding
silo capacity. With fewer plants in the network, there are fewer
opportunities to use the next plant's silo capacity; this makes the
ability to ``stair step'' milk through the region to align supply with
demand more difficult and more costly. The witness stated sometimes
milk must travel north to find a balancing plant, typically a more
costly option.
According to the witness, Class I differentials are not adequately
compensating dairy farmers for milk movements within the Appalachian
marketing area, which Proposal 3 would address. For example, the
witness said, when producer milk is delivered to a plant 200 miles away
in a 30 cent-higher differential zone, the change in Class I
differential zone only covers about 15 percent of the cost of moving
the milk within the market. The witness stated Proposal 3 provides
additional compensation and incentives to move milk within the Order
and offsets some of the deficiencies in the current Class I
differentials.
The witness discussed the challenges of providing supplemental milk
to the Appalachian order, such as filling the school milk pipeline and
weather-related events such as a snowstorm, which stress already
complicated milk marketing and transportation systems. The witness
testified to MDVA's efforts last year in meeting increased school
demand by assembling, reloading, and then transferring to Class I
plants approximately 80 loads of milk from its pool supply plant in
Strasburg, Virginia, at great expense to the cooperative. The witness
testified that based on their knowledge the MDVA's plant in Strasburg,
Virginia, is the only pool supply plant currently operating in this
manner in the southeast for the Appalachian, Florida, and Southeast
orders. The plant is sourced primarily by small farms in Maryland and
Pennsylvania, and much of the milk collected at Strasburg is then
reshipped to Appalachian and Southeast FMMO pool distributing plants.
The witness opined these deliveries meet the region's Class I demand
and should be eligible for DPDC.
The witness also testified in support of extending DPDC eligibility
to include unregulated counties in Virginia that supply its plant in
Newport News, Virginia, a year-round pool distributing plant on the
Appalachian FMMO.
The witness testified that if a handler does not bring in enough
supplemental milk, the plant will not have milk for consumers, and
consumers will see empty shelves. Consequently, the region's processors
face pressure because retailers could go outside of the Order to
purchase packaged milk and handlers could lose customers.
The witness stressed that the proposals should be considered on an
emergency basis so cooperatives and their dairy farmer-members
supplying the region's Class I demand can begin to receive cost
recovery that they have been unable to obtain on their own. Without
this assistance, the witness opined, more producers in the region would
exit the business, further reducing local milk supplies, and negatively
impacting local Class I processors.
A witness appearing on behalf of Southeast Milk, Inc. (SMI), a
member of DCMA, testified in support of Proposals 1 through 5, and
their adoption on an emergency basis. SMI is a dairy cooperative with
approximately 135
[[Page 84044]]
dairy farmer members pooled on all three southeastern orders.
The SMI witness testified specifically in support of Proposal 4 to
adopt DPDCs for the Florida FMMO. Milk produced in and pooled on the
Florida FMMO has steadily declined since 2016, according to the
witness. The witness cited USDA data showing 87 percent of the Order's
milk in 2019 was produced in Florida, compared to 76 percent in 2022.
The witness noted that of 24 states in NASS's monthly milk production
report, Florida had the largest year-over-year milk production decline
in 2022, a decrease of 10.9 percent. In 2022, the state of Florida
reported its lowest milk volume since 1984.
According to the witness, reasons for declining milk production in
Florida include higher freight costs (a high percent of dairy feed,
supplies, and fertilizer are imported into the state), environmental
challenges, opportunity costs, urbanization, and lower margins. The
witness argued the implementation of Proposal 4 would ease the
transportation burden cooperatives face in supplying the Class I market
and help slow the decline of Florida milk production.
The SMI witness stressed that less milk produced in Florida means
more milk from outside the state is needed to supply the Order's fluid
milk needs. The witness testified, based on SMI marketings and personal
industry knowledge, a significant portion of milk sourced from outside
the marketing area comes from the 49 South Georgia counties included in
Proposal 4. While South Georgia historically served as the reserve milk
supply for the Florida market, as production has declined in Florida
and increased in Georgia, South Georgia is now a regular milk supplier
to Florida pool distributing plants. The witness said that at a
minimum, South Georgia milk must travel 225 miles from the Florida-
Georgia border to the closest pool distributing plant. As these South
Georgia counties now serve as a regular source of producer milk for the
Florida order, the SMI witness testified, Proposal 4 is needed to
provide some level of reimbursement of hauling expense for the distance
the milk travels to Florida pool distributing plants.
Similar to other witnesses, the SMI witness discussed the common
occurrence of milk moving against the Class I differential surface
because there are fewer pool distributing plants. According to the
witness, in January 2023 all of SMI's Appalachian order milk moved from
a higher ($4.00) to a lower ($3.60) zone. Of the cooperative's milk
pooled on the Southeast and Florida FMMOs, 44 percent and 14 percent,
respectively, moved from higher to lower Class I differential zones,
the witness said. The SMI witness concluded that implementation of
Proposal 4 will assist the cooperative in recouping transportation
costs for milk, especially for milk that receives no additional
assistance through changes in Class I differential zones.
The SMI witness entered transportation costs it has experienced, as
SMI owns and operates its own milk hauling fleet. Cost data included
average annual diesel fuel prices (up 129 percent from 2020 to 2022),
average annual milk hauler wages (up 38 percent from CY2018 to CY2023
YTD), and other increases to purchase new trucking equipment. The
witness also spoke to other increases such as, but not limited to,
employee benefits, insurance premiums, and equipment maintenance. For
January 2023, the witness stated, SMI hauling costs are nearly double
what would have been covered by the TCBF under the proposed provisions
in Proposals 4, 5, and 6. SMI, the witness testified, attempts to
improve efficiency of milk hauling and to control expenses, but those
efforts only offset a portion of the higher milk hauling expenses. The
cost to haul milk from SMI member farms to pool distributing plants
greatly exceeds the proposed DPDC.
This witness also addressed the cooperative's efforts to recover
some of the increased costs through over-order premiums. While SMI does
collect some over-order premiums, the witness said they do not cover
all the costs of servicing the fluid market. Buyers are concerned about
competitors and seek to ensure equal raw product cost which, according
to the witness, is the key to orderly milk marketing. The witness
testified processors prefer to pay through the Federal order system
because it provides assurance of equal footing with competitors.
The witness noted that Proposal 4 does not change diversion
requirements. Diverted milk would not be eligible to receive the DPDC;
only milk delivered to a pool distributing plant could receive the
credit.
Finally, regarding the request to consider the proposals on an
emergency basis, the SMI witness testified that adopting DPDCs would
provide cooperatives, handlers, and subsequently their dairy farmer-
members, with much needed cost assistance to continue serving the
Florida market.
A third DFA witness testified regarding the marketing conditions in
the Southeast FMMO. The witness said the volume of Class I milk pooled
on the Southeast order has been declining, but at a slower pace than
the in-area milk production decline. This results in increasing volumes
of milk being delivered to Southeast order pool distributing plants
from outside the marketing area at greater expense, a cost primarily
borne by the farmers that supply the market.
The DFA witness stated the cost of milk hauling has increased over
the last several years, and clearly has increased since Class I
differentials were last updated. The witness said the location of
supplemental milk sources varies based on the location of the plant and
the distance to the plant. The witness testified there are currently 15
pool distributing plants regulated on the Southeast order, 13 of which
likely receive substantial quantities of supplemental milk. According
to the witness, the distance to move milk to most of these plants is
considerable. The witness said the Southeast order plants in Georgia
are generally most-practically served with supplemental milk supplies
from the north, and occasionally with milk from the Central and
Southwest marketing areas.
The witness testified that hauling costs for moving milk from the
Southwest to Southeast order are between roughly $4.85 and $5.10 per
loaded mile. In a sample milk haul, incorporating the Class I
differential and location value impacts, a blend price gain moving milk
into the Southeast order would cover about 45 percent of the cost of
hauling. The witness concluded that the expected TCBF payment would
cover approximately 16 percent of the real cost of hauling.
The witness emphasized that while the TCBF payment only covers a
portion of the cost of hauling, handlers and cooperatives are
guaranteed to receive it. Since over-order prices are rarely sufficient
to cover the large differences in hauling costs, dairy farmers are left
to pay the remainder, the witness stressed. The witness spoke of the
difficulty in negotiating and maintaining over-order premiums with a
Class I plant. Factors like the location of the receiving plant and the
distance the plant is to a viable supplemental milk source, the plant's
relative access to local supplies, and its net need for supplemental
milk cause additional costs to vary by plant. The witness emphasized
that unequal costs of milk is a recognized source of market disorder.
The witness also testified on hauling capacity challenges faced by
supplemental suppliers. Challenges include supply chain shortages for
trucks and trailers, lack of qualified and willing truck drivers, rules
on allowable
[[Page 84045]]
hours for trucks to run each day, and truck scheduling challenges.
Hauling schedules are so tight, the witness noted, even the smallest
variation in the daily delivery schedule can disrupt logistics for
several days and create additional costs that are borne by the
cooperative suppliers.
The DFA witness concluded that Proposals 1 and 2 would benefit
consumers with an unimpeded and orderly flow of milk into the region
and regulated Class I processors with a continued supply and orderly
pricing of milk. Without a properly functioning transportation credit
system, the witness argued, the region's milk supply would be
threatened.
The third DFA witness also testified in support of Proposals 3, 4,
and 5, specifically, why raw milk produced in the state of Georgia and
transported throughout the southeastern orders should be eligible for
the proposed DPDCs. The witness referenced a map comparing U.S. milk
production in 2021 and 2022 showing that of the southeastern states,
Georgia was the only state with significant milk production growth.
Yet, the witness said, the growth of milk production in Georgia does
not compensate for the decline in milk production in Florida alone.
Meanwhile, Florida and Georgia are experiencing record population
growth, according to the witness, which increases demand for fluid
milk.
The DFA witness said the DFA milk supply in Georgia's southern
counties delivers daily to Florida pool distributing plants, serving
the market's Class I demand. In 2022, the witness testified, 31 percent
of the DFA milk in the southern Georgia counties shipped to Florida
pool distributing plants.
In addition to Florida, the DFA witness said, Georgia milk
production regularly serves the Class I demand and reduces the need for
additional milk to serve the region from longer distances and at higher
costs. Unfortunately, the witness explained, many of these Georgia milk
movements have no Class I differential value gain and cause the
cooperative to incur substantial transportation costs. DPDCs, the
witness testified, would provide much-needed relief to cooperatives and
their local dairy farmer-members who provide consistent milk supplies.
The witness noted Proposals 3, 4, and 5 would not change pooling
provisions on any of the three FMMOs and would continue to allow
diversions on pounds on which a DPDC is requested. The witness
supported this provision because there are times during the week,
month, and year when milk production is not delivered to pool
distributing plants within the local milkshed. However, milk still
needs to be marketed, and it is sometimes necessary to divert
production to a non-pool plant, according to the witness, and those
producers still expect to receive the FMMO blend price.
This DFA witness spoke to the difficulty in recovering
transportation costs through over-order premiums as opposed to the FMMO
system. The witness testified that for transparency and fairness,
buyers prefer to have costs come through the FMMO system and FMMO price
announcements.
Finally, the DFA witness testified to the urgency of a decision on
the proposals to provide cost recovery to cooperatives handlers and
their dairy farmer-members. According to the witness, dairy farmers are
going out of business every day, even with higher milk prices in 2022.
The witness expects there will be as many going out of business in 2023
as there were in 2022. Many farms are relying on the possibility of
additional transportation assistance in the form of TCBF and DPDC
payments to their cooperatives. The witness concluded that any delay
would cause closure of more businesses, which would place more burden
on the remaining local farms.
A Georgia DFA producer-member testified on current dairy market
conditions in the region. The witnessed expressed support of updating
the Appalachian and Southeast FMMOs' TCBF provisions and implementing a
similar program (DPDCs) for locally produced milk in the Appalachian,
Florida, and Southeast FMMOs.
The witness further elaborated on the rise in on-farm input costs
that farms in the region face. According to the witness, the largest
cost increases from 2021 to 2022 included nitrogen fertilizer (289
percent), diesel fuel (89 percent), corn (93 percent), interest (80
percent), and medicine and supplies (70 percent). The dairy farmer
witness went on to explain that not only have the dairy farm's input
costs risen, but so have the cost to haul milk. The witness explained
the two plants closest to their dairy farm closed and now the milk must
travel nearly 6 times as far, 292 miles, to a plant in Orlando, FL. The
witness said that the cost to haul milk went from $1.32 per cwt in 2021
to between $2.37 and $2.45 per cwt in 2022. The witness claimed these
cost increases have tightened margins and impeded the dairy farm's
ability to grow.
The witness said the southeastern U.S. has the most significant
milk deficit in the country, and it is exacerbated with the
simultaneous rise in population and decline in dairy farm and milk
production numbers. The witness testified the financial costs of
importing supplemental milk and increasing hauls to fluid milk plants
(due to plant closures) are primarily the burden of the region's dairy
farmers, through their cooperatives, to ensure the market's Class I
demand is met. According to the witness, adoption of Proposals 1
through 5 would help correct this imbalance by providing transportation
assistance reflective of current market conditions.
Finally, the witness closed by urging USDA to implement updates to
the transportation credit programs expediently. The witness cited
weakening projected price relative to rising input costs as the primary
driver for expediting the process.
A Missouri DFA dairy farmer member testified in support of
Proposals 1 through 5. The witness said because their farm is located
within the Southeast FMMO marketing area, it is not eligible for TCBF
payments. The witness explained that dairy farmers (mostly small
businesses) in the state have struggled in recent years. The witness
shared data showing how milk production in Missouri declined nearly 50
percent, and the number of dairy herds decreased nearly 70 percent from
2006 to 2022.
The witness claims that with fewer dairy farms, there is a bigger
burden on those still in business to supply the market. As a result of
plant closings, the witness said their milk must travel further to find
a market. The witness testified their annual hauling costs increased,
on average, $9,000 in the most recent two-year period. With input costs
rising across the board--feed, fuel, fertilizer, crop inputs, and
labor--the witness testified to a financial strain faced on their farm
and other similar operations in the region. The witness opined the
proposals should be considered on an expedited basis, as this issue is
of immediate importance.
A North Carolina dairy farmer representing MDVA testified in
support of Proposals 1 through 5. The witness said their hauling costs
have increased roughly 50 percent in the past decade and their local
market has shifted farther away from Charleston, South Carolina, to
Asheville, North Carolina.
The witness explained there are times their milk and other MDVA
members' milk is not delivered to its closet plant because the
cooperative is managing the milk movements of both the members' local
supply and the supplemental supply it procures to ensure the region's
Class I demand is met. In these instances, the extra hauling cost is
borne by all cooperative members through a
[[Page 84046]]
hauling subsidy paid for by all members. The witness asserted that
adoption of the DPDC would provide financial help to the cooperatives
and their members.
The witness claimed that the current Class I differentials and
current TCBF provisions do not generate enough dollars to cover the
true cost of moving milk. According to the witness, dairy farmers in
the southeastern region, many of whom are not eligible for a TCBF
payment, are doubly burdened. Members not only pay the higher
transportation costs to ship their milk to a plant, said the witness,
but they also share the transportation costs of procuring needed
supplemental milk. The witness urged the rulemaking be conducted on an
emergency basis to provide much needed cost relief to the region's
cooperative handlers and their dairy farmer members.
A Tennessee dairy farmer-member representing the Appalachian Dairy
Farmers Cooperative (ADFC), a member of DCMA, testified in support of
Proposals 3, 4, and 5. The witness testified 97 percent of the 71 dairy
farmer-members of ADFC producers are small dairies, as are nearly all
other dairies in the area. The witness said the area has lost 80
percent of its dairies in the past 20 years, including 70 members of
ADFC in the past 5 years.
The witness stated that, while not only having to pay to transport
their own milk, ADFC dairy farmer-members also bear the transportation
cost of bringing in supplemental milk to ensure Class I demand is met.
These costs have significantly increased in part, the witness said,
because it is difficult to find haulers. The witness estimated the cost
to produce milk represents about 80 percent of their milk check, and
hauling costs (which have doubled in the last five years) account for
an additional 8 percent.
The witness testified USDA should treat the issues before it is
urgent, and use expedited emergency hearing procedures.
In its post hearing brief, DCMA summarized its arguments supporting
Proposals 3, 4, and 5 implementing DPDCs in the Appalachian, Florida,
and Southeast orders, to reimburse handlers for a portion of the cost
of delivering in-area and nearby milk. DCMA reiterated in its post-
hearing brief that, for the Appalachian and Southeast orders, the
respective marketing areas are considered in-area sources of milk. DCMA
argued in its brief that those sources are not eligible for TCBF but
should be eligible for DPDC.
In its post hearing brief, DCMA argued it is not possible to obtain
transportation relief in the southeast area without adoption of the
proposed DPDC. DCMA synthesized points made in its and other witness'
testimonies that cooperatives are unable to obtain reimbursement from
the market. According to the brief, the main alternative, over-order
premiums, are difficult to maintain and challenging to increase. On the
other hand, DCMA argued, incorporating a program for transportation
costs within FMMO provisions would treat all suppliers and buyers
equitably. Their brief indicated cooperatives and handlers are
generally more able to pass through Class I costs to buyers that are
specifically outlined on FMMO price announcements as would be the case
under their proposals.
DCMA concluded in its brief that adoption of DPDCs would provide
their customers with the price transparency they prefer through rates
published on FMMO price announcements, assuring them of uniform raw
milk costs with competing Class I handlers while enabling cooperatives
that provide the market with Class I milk to receive transportation
cost reimbursement reflective of current market conditions.
In its post-hearing brief, Select Milk Producers, Inc. (Select), a
DCMA member cooperative, emphasized support for the FMMO system and its
role in promoting efficient milk movements, producer operations, and
milk procurement. The brief reiterated support of the transportation
credit system in the Southeast due to unique conditions and that
program provisions should be updated. Select indicated support for
considering the regulatory changes on an emergency basis, and therefore
omitting a recommended decision, as transportation credit regulations
do not directly impact milk prices. While Proposals 3, 4, and 5 would
include additions to their respective Orders, they are operationally
and methodologically similar to existing transportation credit
provisions and therefore have little economic and regulatory impact,
according to the brief.
The dairy farmer proponent of Proposal 11 submitted a post-hearing
brief opposing Proposals 1 through 5. In the brief, the farmer opined
that doing nothing would lead to a better outcome than adopting the
proposals. The dairy farmer argued the distance milk travels should not
be treated as a performance standard and receive special treatment. If
changes are to be made, however, the farmer insisted on the uniform
treatment of all milk.
A witness from Prairie Farms testified in opposition to the
proposed DPDC because payments would only apply to out-of-area milk
from a select list of counties, instead of all out-of-area counties
that regularly deliver to pool distributing plants. The witness claimed
giving privilege to a few counties in Georgia, Virginia, and West
Virginia, as written in Proposals 3 through 5, is not fair and
equitable, especially when year-round deliveries of out-of-area milk is
necessary to meet the fluid milk needs of the southeastern FMMOs.
In its post-hearing brief, Prairie Farms summarized its opposition
to Proposals 3, 4, and 5 and maintained the record contains abundant
evidence showing a growing milk deficit persisting in the southeastern
U.S. The record demonstrates that pool distributing plants in the
southeastern FMMOs need out-of-area milk on a year-round basis, but
Proposals 3, 4, and 5 do not offer any assistance in obtaining year-
round transportation assistance on out-of-area milk. They believe
qualifying some out-of-area counties to participate in DPDC, but not
others, even if they consistently supply milk to pool distributing
plants in the region, is discriminatory.
A Prairie Farms witness testified in support of Proposals 6 through
10. According to the witness, Prairie Farms is a Capper-Volstead
cooperative with 682 dairy farmer members in Illinois, Indiana, Iowa,
Kentucky, Michigan, Minnesota, Missouri, Ohio, and Wisconsin, and also
markets milk for non-cooperative members in Texas. Prairie Farms
operates Class I, II and III plants throughout the central U.S.,
including nine plants regulated on the Appalachian and Southeast FMMOs.
The witness asserted the milk supply in the southeast region has
been declining for many years, while population has increased,
resulting in milk being imported from outside the region to meet
demand. The witness explained this region was historically short in
certain seasons, but now faces a year-round shortfall. Describing the
lack of flexibility of the current TCBF program, the witness emphasized
the importance of simplicity to allow the system to better adjust to
future supply and demand changes.
The witness cited USDA data on milk production in the southeastern
states in 1997 and 2021, showing that production has declined in
greater proportion compared to the decline in consumption. The witness
concluded that the data shows the 11 Southeastern states currently
produce 73.3 percent of their fluid milk needs, down significantly from
1997.
The witness continued by showing the shortfall of milk in the
region that currently exists in the spring flush months of March,
April, and May.
[[Page 84047]]
However, as the current system exists, the witness said, if a handler
pools too much of a producer's milk on the Appalachian and Southeast
orders in the spring, they are not eligible to claim a TCBF payment on
that producer's milk in the fall, despite the market's need for the
milk in the spring. The witness supported eliminating the location and
delivery criteria in the current TCBF provisions, as contained in
Proposals 6 and 7, that currently prevent handlers from qualifying for
a fall TCBF payment for producers whose milk is pooled in the spring.
The change proposed by Prairie Farms would allow handlers to receive a
TCBF payment on milk shipments from these producers.
The witness provided examples of origin to destination locations
milk travels as incentivized (or disincentivized) by the existing
transportation credit system. One example showed a delivery traveling
21 miles further than necessary, to receive approximately $300 more in
a TCBF payment. A second example showed milk traveling 21 miles farther
increased the TCBF payment by nearly $700. The witness contended that
without the current pool qualification provisions, there would not be
financial incentive for these inefficient movements to occur.
According to the witness, removing the current TCBF location
qualification provisions would allow producer milk located in the
marketing area to be eligible for TCBF payments using the same
calculations as milk from outside the marketing area. The witness
testified transportation credits available only on milk produced
outside the Appalachian and Southeast FMMOS does not incentivize
efficient in-area milk movements. Rather, the witness said it would be
more equitable and incentivize efficient milk movements for all milk
delivered to pool distributing plants, regardless of where it
originated, to be eligible for TCBF payments. This, the witness stated,
is especially true as the milk supply shrinks in the Southeast and the
population increases.
Regarding Proposals 8, 9, and 10, the Prairie Farms witness
explained the proposed Assembly Performance Credits (APC) would
compensate handlers for assembly, dispatch, and delivery costs incurred
on all producer milk received at pool distributing plants. According to
the witness, the proposed $0.50 APC assessment is based on the
proponents' internal data on the costs of supplying milk to the
Appalachian, Southeast, and Central FMMO pool distributing plants, and
could be adjusted at the discretion of the market administrator.
According to the witness, the APC is fair and equitable for both
handlers and producers since a uniform assessment rate is applied for
the Class I milk, and a uniform credit is received on the producer milk
delivered to the distributing plants, regardless of origin.
The witness explained how the APC would offset some milk dispatch
costs, which include day-to-day variations in storage capacity and
demand on the plant side. As APC payments would not change depending on
mileage, the witness said there would not be an incentive to maximize
distance.
The witness also addressed the impact of rising costs on Prairie
Farms' members. According to the witness, Prairie Farms pays it members
FMMO blend prices; therefore, rising costs that are decoupled from FMMO
pricing ultimately reduce the cooperative earnings and, consequently,
the patronage to their member producers and other cooperative members
that supply Prairie Farms plants. The witness spoke to the difficulty
in recouping these additional costs through the marketplace, largely
because customers claim a lack of visibility and confidence in over-
order premiums.
In closing, the witness testified that the combination of the year-
round uniformly applied APCs and seasonal TCBF payments applied to all
in-area and out-of-area milk will promote efficient producer milk
deliveries. The Prairie Farms witness said the APC should be viewed as
a marketwide benefit because it would increase returns to cooperatives
and their members, which will assist in maintaining and growing the
local milk supply, thus resulting in less reliance on supplemental milk
supplies to meet Class I demand.
The witness stated that Prairie Farms' preference is for USDA to
adopt APCs instead of DPDCs. However, the witness testified that an
acceptable alternative would be expanding the list of out-of-area
counties eligible for DPDCs to address their concern for handlers
acquiring out-of-area milk on a year-round basis to supply the Class I
market. In testimony, the witness supported including the same
restrictions on diversions for in-area milk as those contained in the
TCBF provisions, or removing diversion restrictions in both programs.
Prairie Farms requested the rulemaking be conducted on an expedited
basis as the milk supply issues of the southeastern FMMOs are critical.
In its post-hearing brief, DCMA argued in opposition to Proposals 6
through 10, stating the proposals would not address the marketing
challenges in the Southeastern FMMOs and are not supported by a
substantial number of producers in the Southeastern marketing areas.
DCMA argued the record does not contain cost justification or analysis
supporting any of the changes contained in Proposals 6 through 10. DCMA
stated that if location and delivery eligibility provisions were
eliminated, as contained in Proposals 6 and 7, TCBF payments would be
drastically reduced due to lack of funds. According to DCMA, adoption
of Proposals 6 and 7 would double the volume of eligible pounds and
would likely result in a payment of less than 10 percent of actual
costs. DCMA continued in its brief that even if Proposals 6 and 7
incorporated the new assessment rate and updated the MRF as proposed,
the pro rata percentage would result in a very low payment. DCMA argued
the proponent of Proposals 6 and 7 had not analyzed the impact of the
proposals, and, as a result, the record lacks support for their
adoption.
DCMA's post-hearing brief similarly opposed Proposals 8 through 10,
arguing the proponent provided no substantial cost-justification for
the proposed $0.50 assessment rate. DCMA wrote that the proponent's
testimony regarding wide variances in assembly, dispatch, and delivery
costs was not supported by any detailed costs. Further, DCMA wrote the
record lacks analysis and justification for the proposed assessment and
APC payment calculation credit. DCMA argued that by directing new
revenues to all producer milk irrespective of its location, the APC
proposals continue the disparate treatment of in-area versus out-of-
area milk supplies, and do not recognize the unique costs and
challenges of in-area milk deliveries. DCMA argued a substantial
proportion of the new revenues generated by the APC credit would be
allocated to out-of-area producers and not toward supporting the
delivery of local in-area producer milk.
A Tennessee dairy farmer testified in support of Proposal 11 which
would prohibit milk diverted from a pool distributing plant from
receiving any form of transportation credit. The witness discussed milk
diversions as milk associated with a pool plant, but not received at a
pool distributing plant on a particular day. According to the witness,
in the deficit market of the Southeast, diversions are another revenue-
source for the cost of moving milk, similar to transportation credits.
The witness opined a handler's ability to divert milk should be as
limited as possible.
[[Page 84048]]
The witness testified changes should be made to the Southeast order
to make the value of milk at the plant more transparent and reflective
of the true cost. To achieve this, the witness proposed an aggregated,
audited publication of the price plants pay for milk in the region. The
witness advocated for publication of over-order premiums so dairy
farmers could use that information when negotiating with handlers.
According to the witness, when transportation credits were adopted
in 1996, they were intended to be used for supplemental milk; however,
now they are used to regularly supply the market. The witness said that
while a handler can collect transportation credits to haul milk,
payments do not reflect the full cost of the haul. The remainder of the
cost, according to the witness, is deducted from the local producer's
milk check which ultimately leads to less local milk production and
greater reliance on more costly supplemental milk deliveries.
A witness representing the Milk Innovation Group (MIG), a group
consisting of fluid processors and producers (Anderson Erickson Dairy,
Aurora Organic Dairy, Danone North America, Fairlife, HP Hood, Organic
Valley/CROPP Cooperative, and Shamrock Foods), testified regarding the
proposed APCs. The witness said MIG members support allocating more
Class I dollars to producers that are supplying the Class I plants to
keep a local milk supply for their plants.
The MIG witness expressed concern over efforts to increase minimum
regulated Class I prices through any transportation cost-related
assessment on Class I milk as fluid milk sales continue to rapidly
decline. While the witness opposed the APC $0.50 per cwt assessment on
Class I milk, they were supportive of the APC concept which they
believe would better align the Class I supply chain since it is funded
out of the pool, not an additional payment on top of the pool that
would artificially raise Class I prices. The witness cited current
Upper Midwest FMMO assembly credit provisions as a possible
alternative.
MIG's post-hearing brief reiterated its opposition to Proposals 6,
7, and 8 due to the price-enhancing nature of the provisions while
fluid milk sales continue to decline. MIG maintained FMMOs do not and
cannot serve to enhance producer prices, but rather operate to set the
minimum price necessary to avoid disorderly marketing and ensure a
sufficient supply of fluid milk. MIG concluded that proponents of
Proposals 6 through 8 fail to consider consumers when they seek to
increase Class I prices without justification, especially during a time
of rapid inflation.
In its post-hearing brief, DCMA rejected MIG's argument to fund a
transportation assistance program out of existing marketwide pool
revenues. DCMA argued that type of funding mechanism would not support
the costs to produce milk for or move milk to the region's pool
distributing plants. According to DCMA, re-shuffling existing pool
revenues would have no effect and provide no actual cost assistance.
DCMA concluded that new revenues are needed to target the cost of
delivering milk to the demand points in the marketing areas, as offered
in DCMA's proposals.
Comments and Exceptions
The recommended decision provided a 60-day comment period which
ended September 18, 2023. Five comments were filed in response to the
recommended decision. Two comments were outside the scope of this
decision. Three comments are addressed in the applicable sections of
this final decision.
Discussion and Findings
The purpose of this proceeding is consideration of changes to the
transportation credit provisions of the Appalachian and Southeast FMMOs
for supplemental milk, and adoption of distributing plant delivery
credits (DPDC) or assembly performance credits (APCs) for milk
deliveries to pool distributing plants in the Appalachian, Florida, and
Southeast FMMOs.
The Appalachian and Southeast FMMOs currently contain
transportation credit provisions for supplemental Class I milk
deliveries. The provisions were first adopted through a 1996 proceeding
(62 FR 39738) to address the need for supplemental milk to meet the
Class I needs of the two FMMOs. These transportation credit provisions
provide payments to handlers to cover a portion of the cost of hauling
supplemental milk supplies into the Appalachian and Southeast marketing
areas during months when these deliveries are most needed to ensure
Class I demand is met (January, February, and July through December).
The provisions were amended in 2006 (71 FR 62377) and 2008 (73 FR
14153) to, among other things, adopt a mileage rate factor. The MRF is
adjusted monthly by changes in the price of diesel fuel to ensure
current fuels costs are reflected in payments on eligible shipments,
amend the qualification requirements for supplemental milk and increase
the maximum TCBF assessment rates. The Florida FMMO currently has no
transportation credit provisions.
The current transportation credit provisions are tailored to
distinguish between producers who regularly supply the market and those
primarily delivering milk when the market is most at deficit
(considered supplemental suppliers). Under the current provisions, only
milk from producers who are located outside of the marketing areas and
are not regular suppliers to the market are eligible to receive
transportation credits. Producer milk received at a pool distributing
plant eligible for a transportation credit under the orders is defined
as bulk milk received directly from a dairy farmer who: (1) not more
than 50 percent of the dairy farmer's milk production, in aggregate, is
received as producer milk during the immediately preceding months of
March through May of each order; and (2) produced milk on a farm not
located within the specified marketing areas of either order. Milk
deliveries from producers located outside the marketing area who are
consistent suppliers to the market or from producers located inside the
marketing areas are not eligible to receive transportation credits.
The policy objective of the AMAA is ``. . . to establish and
maintain such orderly marketing conditions for agricultural commodities
in interstate commerce . . .'' (7 U.S.C. 602(1)). The AMAA further
instructs the Secretary to maintain ``. . . an orderly flow of the
supply thereof to market throughout its normal marketing season to
avoid unreasonable fluctuations in supplies and prices.'' (7 U.S.C.
602(4)). In the Appalachian and Southeast FMMOs, this policy objective
is achieved, in part, through transportation credit provisions that
ensure an adequate fluid (Class I) milk supply.
The record reveals that all three orders (Appalachian, Florida, and
Southeast) lack in-area milk production to meet the region's Class I
demand. Record evidence illustrates this long-standing regional issue
which the current transportation credits aim to address through
economic incentives for supplemental milk deliveries to the region's
pool distributing plants when most needed. While the current
transportation credit provisions have been successful in ensuring Class
I demand is met, the record reveals the reimbursement levels do not
reflect the current transportation cost environment. As a result,
handlers and cooperatives who provide the marketwide service of
delivering milk to the Class I market
[[Page 84049]]
incur transportation costs that they cannot recover.
The 2006 Final Decision (79 FR 12985) details the region's milk
deficit at that time and recommended changes to existing transportation
credit provisions to account for reasonable transportation cost
reimbursement for supplemental milk deliveries to Class I plants in the
region. Record evidence from the current proceeding reveals the
region's milk deficit has continued to worsen. According to the record,
the number of licensed dairy farms located within the Appalachian,
Florida, and Southeast FMMOs have declined approximately 38, 50, and 57
percent, respectively, from 2017 to 2022. Data shows 2021 in-area milk
production in the Appalachian, Florida, and Southeast FMMOs represented
54, 82, and 44 percent of their respective milksheds. Put another way,
in 2021, 54 percent of the milk pooled on the Appalachian FMMO was
produced within the geographic boundaries of the order. Consequently, a
significant volume, 46 percent, of the Order's needs had to be met from
milk produced outside the marketing area.
An objective of the FMMO system is meeting Class I demand, and the
record reveals a consistent lack of in-area milk production to meet
demand. In the Appalachian FMMO, from 2019 to 2021, the average daily
in-area milk production deficit ranged from 3.3 to 4.9 million pounds
below pool distributing plant demand. In other words, on an average
day, pool distributing plants needed anywhere from 3.3 to 4.9 million
pounds of milk (67 to 99 tanker loads) from outside the marketing area
to meet pool distributing plant demand. The same daily deficit in the
Florida FMMO ranged from 100,000 pounds to 1.4 million pounds (2 to 28
tankerloads), and 3.8 to 6.5 million pounds (77 to 131 tankerloads) in
the Southeast FMMO.\1\
---------------------------------------------------------------------------
\1\ Assuming 49,700-pound tanker.
---------------------------------------------------------------------------
The record also reveals that while handlers and cooperatives are
delivering supplemental milk to meet pool distributing plant demand,
they are not able to recoup a significant portion of the transportation
costs incurred. Cooperative witnesses testified they perform this
service despite the financial loss because the consequences of not
fulfilling the market's Class I needs outweigh the loss from
transportation costs. They spoke of the importance of meeting pool
distributing plant demand to ensure these plants remain an open and
available market outlet for local producers.
Cooperative handler witnesses testified that their efforts to
ensure Class I market needs are met come at a cost to the cooperative
and its members. The inability to recover the additional transportation
costs through negotiations with milk buyers was a common theme of the
testimony. The record shows that not only are local producers paying
directly for the increased transportation costs of their milk, but the
cooperative often charges a hauling fee to offset the additional cost
of bringing in supplemental supplies, which is not covered by either
the current transportation credit provisions nor the differences in
Class I differential zones between the supply and demand counties.
The record reveals a significant reduction in the number of Class I
plants in each of the Southeastern orders and an increase in the
distance milk travels to a Class I plant. According to record data, in
January 2000, there were 73 Class I plants located in the 3 marketing
areas (pool distributing plants and partially regulated distributing
plants). By December 2022, the record reveals only 39 plants, a
reduction of 46 percent. Consequently, as testified to by several
cooperatives and in-area producer witnesses, the average miles traveled
and transportation costs for both in-area and supplemental milk
movements have increased.
As highlighted above, the record evidence clearly demonstrates the
continued milk deficit problem in the three Southeastern orders and its
impact on producers, cooperatives, and handlers serving the markets.
The overarching issue in this proceeding, which all the proposals seek
to tackle, is how to best address the chronic milk deficit problem.
Under consideration in this proceeding are two different approaches.
The first, offered by DCMA, would amend the current TCBF provisions of
the Appalachian and Southeast FMMOs for supplemental milk to reflect
current cost factors (Proposals 1 and 2) and simultaneously adopt DPDCs
in all three Southeastern orders to aid in moving year-round,
consistent milk supplies located within and nearby the marketing areas
to meet Class I demand (Proposals 3 through 5). Taken together, these
proposals would offer partial transportation cost reimbursement for
most milk deliveries to pool distributing plants in the region.
The second approach, offered by Prairie Farms, Inc., would adopt
new year-round APCs in all three southeastern orders (Proposals 6
through 8) for all milk deliveries to pool distributing plants in the
region, while also making changes to the current TCBF provisions to
remove location and delivery eligibility criteria (Proposals 9 and 10).
In practice, this would make the same milk deliveries eligible for both
APC and TCBF payments.
As explained in the summary of testimony, all milk deliveries to a
pool distributing plant would be eligible to receive an APC. The
payment rate would be determined by the assessments collected on all
Class I milk pooled during the month (proposed to be $0.50 per cwt),
divided by all milk deliveries to pool distributing plants. The
resulting per cwt payment would not be tied to mileage but would offer
partial reimbursement to handlers and cooperatives for the assembly,
dispatch, and delivery costs of moving milk to meet Class I demand.
Proponents argued the APC is a better method of cost reimbursement
compared to DPDC because it would not encourage inefficient milk
movements that could occur with mileage-based cost reimbursement. They
also likened the proposed APCs to assembly credits currently in the
Upper Midwest (UMW) FMMO, which they contended are sufficient to
attract milk away from pool supply plants to pool distributing plants.
The record of this proceeding does not contain adequate evidence to
support adoption of an APC. The hearing evidence does not contain data
demonstrating how the $0.50 per cwt proposed assessment rate is
representative of any of the costs (assembly, dispatch, and delivery)
the APC is purported to offset. Furthermore, while proponents
referenced use of an assembly credit in the UMW order, marketing
conditions in the three southeastern orders are vastly different. The
UMW order has abundant milk supplies locally to meet Class I demand,
with a 2022 average Class I utilization rate of 7 percent.\2\ In
contrast, the average 2022 Class I utilization rates of producer milk
were 70 percent, 83 percent, and 72 percent, in the Appalachian,
Florida, and Southeast orders, respectively. While the UMW assembly
credit provisions offer financial incentives for milk movements from
pool supply plants to pool distributing plants, the abundance of milk
produced, and relatively low percentage of Class I use in the marketing
area, does not necessitate long hauls like those regularly occurring in
the three orders at issue in this proceeding.
---------------------------------------------------------------------------
\2\ Upper Midwest Federal Milk Marketing Order Statistics.
---------------------------------------------------------------------------
As documented in this hearing record, the market conditions in the
[[Page 84050]]
southeastern region are vastly different than other regions of the
country. Local milk supplies cannot meet Class I demand, necessitating
the procurement of significant supplemental supplies from outside the
marketing areas. While proponents assert the APC would provide full
cost reimbursement for the first 50-60 miles traveled, the proposal
does not address the reality that supplemental milk supplies travel
over 700 miles, on average, to meet Class I demand. The record does not
indicate that a non-mileage-based reimbursement mechanism, such as
proposed through the APC, would ensure Class I demand would be met.
Accordingly, Proposals 6, 7 and 8 continue to not be recommended for
adoption.
Regarding the current TCBF provisions, it is appropriate from time
to time to evaluate whether the provisions continue to meet their
purpose, and if so, reflect the current transportation cost
environment. The TCBF provisions have existed for over 25 years to
assist with moving milk to pool distributing plants in the milk deficit
Southeastern FMMOs. This decision finds the milk supply/demand
imbalance in the Appalachian and Southeast orders continues to persist
and the TCBF provisions of those two orders continue to provide
necessary transportation cost assistance to ensure Class I needs are
met.
Witnesses from multiple DCMA member cooperatives testified that
while TCBF payments help offset some of the cost to procure
supplemental milk supplies, they have been unable to recoup the
remaining transportation cost from the market and are therefore
incurring significant financial losses. Hearing evidence indicates
current transportation credits cover approximately 58 percent of actual
costs, assuming assessments collected do not necessitate prorating
claims. However, in the Southeast FMMO where payments are often
prorated, hearing evidence suggests costs covered were as low as 40
percent in 2021. The cooperative witnesses questioned their ability to
continue to provide adequate supplemental milk supplies in the future
without some financial relief in the form of updated provisions to
better reflect actual costs.
Ensuring Class I demand is met is essential to the FMMO system in
meeting its objective of maintaining orderly marketing conditions. The
record reveals a significant decrease in the number of pool-
distributing plants operating in the region that provide market access
to local producers. Provisions that do not encourage sufficient milk
supplies to meet Class I needs may hasten more plant closures,
jeopardizing the delicate balance of orderly marketing in the region.
Therefore, given the continued demonstrated need for supplemental
supplies in the Appalachian and Southeast orders, this decision finds
it appropriate for handlers providing the marketwide service of
obtaining supplemental milk to receive adequate transportation cost
reimbursement, reflective of current market conditions. Accordingly,
this decision continues to propose amendments to the TCBF provisions to
reflect current transportation cost factors and increase the assessment
rates charged in order to generate funds needed, as described in
Proposals 1 and 2.
TCBF provisions using a MRF with a fuel cost adjustor were adopted
in 2006 and have not been updated since their adoption. Hearing
evidence shows that in the 16 subsequent years, transportation costs
have increased and are no longer adequately reflected in the
provisions. The three main components that determine a transportation
credit payment are: mileage rate factor, reimbursable miles, and
eligible milk. This decision continues to propose changes to the
mileage rate and reimbursable miles components, as well as the
mandatory payment months and maximum assessment rates.
Mileage Rate Factor
The MRF contains five components, four of which this decision
continues to recommend be amended: reference diesel fuel price,
reference haul cost, reference truck fuel use, and reference load size.
The average diesel fuel cost factor was not proposed to be amended in
this proceeding and will remain the simple average for the most recent
four weeks of diesel prices for the Lower Atlantic and Gulf Coast
Districts, as announced by the U.S. Department of Energy, Energy
Information Administration.
Reference Diesel Fuel Price
The current transportation credit provisions contain a reference
diesel fuel price of $1.42 per gallon, which was adopted in 2006 and
represented relatively stable EIA-announced regional diesel fuel prices
between October and November 2003 (79 FR 12995). Since that time, the
record indicates diesel fuel prices have increased. In the three most
recent years (2020-2022), the annual average price of diesel in the
Lower Atlantic region was $2.480, $3.174, and $4.920 per gallon.\3\
Similar cost increases were also seen in the Gulf Coast region.
Proponents advanced a reference diesel fuel price of $2.26 per gallon,
representing the EIA average of the two regions during May through
early November 2020. EIA-announced diesel fuel prices were relatively
stable during this time and correspond to the DCMA-surveyed
supplemental hauling costs entered into evidence and used to justify
the proposed base haul rate.
---------------------------------------------------------------------------
\3\ Official Notice <a href="https://www.eia.gov/petroleum/gasdiesel/">https://www.eia.gov/petroleum/gasdiesel/</a>.
---------------------------------------------------------------------------
This decision continues to propose a reference diesel fuel price of
$2.26 per gallon. As the milage rate calculation accounts for current
fuel costs through the average fuel cost calculation, it is appropriate
to update the reference diesel fuel price to reflect more current
marketing conditions. Moreover, as will be discussed, this time period
corresponds to the non-fuel related costs that would be reimbursed
through the proposed base haul rate.
Reference Haul Cost
Evidence reveals non-fuel costs, such as, but not limited to,
purchasing and maintaining equipment, labor, benefits, and overhead,
which are represented in the reference haul cost (currently $1.91 per
loaded mile), have increased substantially. While monthly variability
in diesel fuel prices is captured in the mileage rate factor, changes
in non-fuel related costs are not captured and have not been updated
since 2006, which was based on 2003 data (79 FR 12985, 12995). The
proponents propose increasing the base haul rate to $3.67 per loaded
mile. DCMA member costs were entered into the record based on a survey
of costs for 2,951 supplemental loads that were charged to its
cooperative members from September through October 2020. During that
time, the survey average base haul rate per loaded mile was $3.67,
representing an average distance of 818 miles and an average load size
was 49,700. Several witnesses testified to the increases in
transportation costs, a large portion being non-fuel related costs.
Based on record evidence this decision continues to propose a base
haul rate of $3.67 per loaded mile. This rate more accurately reflects
current costs incurred to deliver supplemental milk to the southeastern
region. Ensuring adequate transportation cost relief is appropriate to
ensure Class I demand of the region continues to be met.
Reference Truck Fuel Use
The reference truck fuel use assumption (adopted in 2006), which
represents the average number of miles traveled per gallon of fuel use
in
[[Page 84051]]
transporting milk, is currently 5.5. Record evidence indicates truck
fuel economy has improved. Evidence indicates the most current
published Department of Transportation combination truck fuel economy
data (2019) shows an average MPG fuel use of 6.0478. Proponents entered
additional information on fuel economy gains through 2022 to estimate a
current fuel economy rate of 6.1770 MPG and proposed a rate of 6.2 MPG.
This decision continues to propose a 6.2 MPG fuel consumption rate.
This slightly higher rate would result in a lower TCBF payment,
promoting efficiencies and discouraging uneconomic movements of milk.
Reference Load Size
The current TCBF reference load size is 48,000 pounds. However,
data entered into the record indicates tanker load sizes have
increased. DCMA survey data indicate an average load size on
supplemental milk supplies was 49,700 pounds. This decision continues
to find 49,700 pounds a reasonable reference load size. Slightly higher
reference truck fuel use (6.2 MPG) and reference load size (49,700
pounds) assumptions would serve as precautionary measures to decrease
the likelihood TCBF payments would be in excess of actual costs
incurred.
Reimbursable Miles
Also under consideration in this proceeding is amending the miles
eligible to receive a TCBF payment. Currently, the first 85 miles of a
supplemental milk shipment is not eligible for a TCBF payment.
Proponents seek to change the ineligibility to a percentage basis, 15
percent of the miles shipped, making 85 percent of miles eligible for a
TCBF payment. DCMA survey data indicate an average haul on its
supplemental milk shipments of 818 miles. Under current TCBF
provisions, the first 85 miles did not receive a TCBF payment, meaning
those average supplemental loads received payment on 733 miles, or 89.6
percent of miles traveled. A closer haul, for example 409 miles, would
receive payment on 324 miles (79 percent of miles traveled). Under the
proposed changes, both scenarios would receive payment on 85 percent of
miles traveled.
The analysis indicates a flat 85-mile exemption penalizes shorter
milk hauls, which should instead be encouraged as the more efficient
movement. Moving to a percentage exemption would establish more
equitable treatment of long and short hauls, and consequently encourage
more efficient supplemental milk deliveries. Therefore, this decision
continues to propose a 15 percent mileage exemption, which could be
adjusted by the market administrator if requested and found appropriate
after an investigation.
Below is an example of the TCBF MRF calculation given the
recommended provisions discussed above:
------------------------------------------------------------------------
EIA Weekly Retail On-Highway Diesel Fuel Prices \2\
-------------------------------------------------------------------------
Lower Atlantic Gulf Coast
------------------------------------------------------------------------
3/27/2023......................... 4.087 3.882
4/3/2023.......................... 4.078 3.887
4/10/2023......................... 4.055 3.883
4/17/2023......................... 4.056 3.876
------------------------------------------------------------------------
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Monthly average diesel fuel price: \3\..................................................................................................... $3.976 per gallon.
Reference diesel fuel price:............................................................................................................... - 2.260 per gallon.
------------
Fuel price difference: \4\................................................................................................................. 1.716 per gallon.
Reference truck fuel use:.................................................................................................................. / 6.2 miles per gallon.
------------
Fuel cost adjustment factor: \5\........................................................................................................... 0.277 per loaded mile.
Reference haul cost:....................................................................................................................... + 3.670 per loaded mile.
------------
Fuel-adjusted haul cost: \6\............................................................................................................... 3.947 per loaded mile.
Reference load size:....................................................................................................................... / 497 cwt.
------------
May 2023 Mileage Rate Factor: \7\.......................................................................................................... 0.00794 dollars per cwt per mile.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ As announced on April 19, 2023, with the Announcement of Advanced Class Prices.
\2\ Dollars per gallon. Reported every Monday by the Energy Information Administration of the U.S. Department of Energy.
\3\ Calculated by rounding down to three decimal places the average of the four most recent weeks of retail on-highway diesel fuel prices for the Lower Atlantic and Gulf Coast EIA regions
combined prior to the Advanced Class Price announcement.
\4\ Calculated by subtracting the reference diesel fuel price of $2.26 per gallon from the calculated average diesel fuel price for the month.
\5\ Calculated by dividing the fuel price difference by 6.2 miles per gallon fuel use and rounding down to three decimal places.
\6\ Calculated by adding fuel cost adjustment factor for the month to the reference haul cost of $3.67 per loaded mile.
\7\ Calculated by dividing the fuel-adjusted haul cost by the number of hundredweights (cwt's) on the reference load size (49,700 pounds = 497 cwt's) and rounding down to five decimal places.
Payment Months
Testimony was received regarding a proposal to change February from
a mandatory to a discretionary TCBF payment month. Under current
provisions, TCBF payments are mandatory for the months of January,
February, and July through December. Payments may be made for the month
of June, if requested by stakeholders and found appropriate by the
market administrator to ensure an adequate supply of milk for fluid
use. Proponents contend making February a discretionary payment month
would allow TCBF monies to be used when supplemental milk supplies are
most needed. Data entered into the record demonstrate how payments from
the TCBF in the Southeast FMMO often exceed assessments, resulting in
payment proration for a significant number of payment months. This
decision continues to propose February as a discretionary payment month
to allow funds that would have been paid during the month to instead be
available to pay in later months, thus lowering the frequency and/or
degree of prorated payments. Stakeholders would have the
[[Page 84052]]
ability to petition the market administrator to make February a payment
month if determined TCBF monies were needed to ensure an adequate Class
I supply.
TCBF Assessment Rates
If there are often insufficient funds to pay TCBF claims, the
provisions fall short of providing for more orderly milk supplies to
meet Class I needs. The maximum allowable TCBF assessment rates in the
Appalachian and Southeast FMMOs are $0.15 and $0.30 per cwt,
respectively. The assessments are collected every month on Class I
pooled milk. Both FMMOs use the same formulas for determining payments.
The record reveals under the current TCBF provisions, the
assessments collected in the Southeast FMMO are routinely prorated
because of the larger volumes and greater distances supplemental milk
travels to supply its Class I demand. The lowest proration in the past
14 years was in October 2022, when Southeast FMMO TCBF payments were
prorated to 25.9 percent of claims because of lack of funds, despite
the assessment level being set at its maximum, $0.30 per cwt.
Conversely, in the Appalachian FMMO, where in-area production
supplies a higher percentage of Class I demand and less supplemental
milk is needed, the current assessment level is $0.07 per cwt, which is
less than the maximum allowable rate of $0.15 per cwt. This rate has
been adequate to make full payment on eligible milk shipments in recent
years.
Analysis of the proposed provisions indicate adoption would result
in higher payments from the TCBF. The record indicates the assessment
levels needed to pay claims based on the proposed TCBF provisions could
be as high as $0.18 per cwt and $0.88 per cwt in the Appalachian and
Southeast FMMOs, respectively. Therefore, this decision continues to
propose an increase in the maximum allowable TCBF assessment rates to
ensure adequate funds and reduce the need to prorate payments.
Specifically, this decision proposes to adopt a maximum TCBF assessment
rates of $0.30 per cwt and $0.60 per cwt in the Appalachian and
Southeast FMMOs, respectively. The rates should ensure adequate funds
to make full payments on eligible shipments, or lessen the instances of
prorated payments, particularly in the regularly short Southeast. There
was no opposition at the hearing to the proposed assessments rates;
further data supports these maximum rates as reasonable starting
points. The market administrator maintains the authority to evaluate
collections and lower assessment rates if warranted.
Comments and exceptions submitted by DCMA supported the changes to
the TCBF provisions contained in the recommended decision and explained
above. A second commentor from Maryland also supported the TCBF
amendments. Therefore, this decision makes no changes to the original
recommendation.
Distributing Plant Delivery Credits
Promoting efficient, orderly milk movements to make certain Class I
demand is met is an objective of the FMMO program. The hearing record
details the unique marketing conditions of the southeastern region and
the difficulty in obtaining supplies to meet Class I demand. As
detailed above, the situation is not new; the region has used
transportation assistance provisions for supplemental milk supplies to
ensure Class I demand is met for decades. Just as handlers delivering
supplemental milk to meet Class I demand provide a marketwide service,
the same is true of handlers ensuring regular milk supplies are
delivered to Class I plants in the milk deficit southeastern region.
Currently, no provisions within the Appalachian, Florida, or
Southeast FMMOs provide transportation assistance for the region's
regular supply, even though this supply is a vital piece of meeting
Class I demand. As discussed in detail previously, plant closures, the
reduction of in-area milk production, and higher transportation costs
which have impacted the region's supplemental milk supplies have also
impacted its regular milk supplies. Without some transportation cost
assistance, the record indicates the milk supply deficit in the region
will continue, most likely at an accelerated rate, putting more
pressure on supplemental supplies to meet Class I demand. This is not
only costly but puts increased pressure and strain on local dairy
farmers, as revealed in the hearing record. Finding available
supplemental supplies depends on many factors, such as the availability
of milk in other markets, driver and truck availability for longer,
supplemental hauls, and transportation costs.
Cooperative handler witnesses testified regarding the difficulty of
obtaining and maintaining over-order premiums to recoup increased
transportation costs. Consequently, as described in the hearing record,
cooperative producer-members whose milk is a regular supply to the
market are bearing the cost burden of the marketwide service provided
by their cooperative through an additional deduction on their milk
check.
Both cooperative handlers and independent Class I handlers
testified the most efficient deliveries to meet Class I demand are from
more local milk supplies. As the FMMOs seek to provide for efficient
milk movements, such deliveries should be encouraged. The entire market
benefits from ensuring Class I demand is met and the responsibility for
bearing the cost should not fall solely to the handlers, primarily
cooperative handlers, who provide this marketwide service.
The hearing record clearly demonstrates the unique supply/demand
imbalance in the southeast region. Similar market conditions do not
exist in the eight FMMOs outside the region. Consequently, the
marketing conditions of the southeastern region warrant unique
provisions to ensure Class I demand is met.
The record reveals that milk from both within and nearby the
marketing areas is considered part of the region's consistent, regular
supply. Accordingly, this decision continues to recommend
transportation assistance for milk that serves the region's Class I
demand year-round basis on the Appalachian, Florida, and Southeast
FMMOs. Therefore, this decision continues to propose adoption of
Proposals 3 and 5, with slight modification, and Proposal 4.
Comments and exceptions, filed separately by DCMA and Prairie
Farms, expressed support for the DPDC as contained in the recommended
decision. Their comments mentioned clarification on several items that
are discussed below.
There are four main components of the proposed DPDC provisions,
which will be addressed below: eligibility, payment rates, assessment
levels, and allowance for market administrator discretion. Taken
together, these provisions should assist in efficient, more orderly
deliveries of year-round Class I milk supplies of the marketing areas.
Proposals 3, 4, and 5, as proposed by DCMA, would allow DPDC
payments on milk deliveries from counties where DCMA members procure
year-round milk supplies. For the Appalachian FMMO, this would be
counties comprising the marketing areas of the Appalachian and
Southeast FMMOs, plus specified counties in Virginia and West Virginia.
For the Florida FMMO, DPDC eligible milk shipments could come from the
counties comprising the Florida FMMO and specified counties in Georgia.
In the Southeast FMMO, DPDC eligible milk shipments could
[[Page 84053]]
come from the counties comprising the Southeast and Appalachian
marketing areas.
As raised by Prairie Farms in testimony and post-hearing brief,
there are additional nearby counties from which the cooperative
procures year-round Class I milk supplies for the Southeast FMMO that
would not be eligible for DPDC payments under the DCMA proposals. While
Prairie Farms offered APCs as an alternative, they indicated the DPDC
provisions would be acceptable if they were modified to include
deliveries from adjacent states.
The record of this proceeding supports extending eligibility to
some additional counties to provide equitable transportation cost
assistance for milk shipments that are part of the year-round supply.
However, the need for equitable treatment must be balanced with
preventing milk further from the marketing area from becoming eligible
for DPDC payments as it would undermine the transportation assistance
the provisions are attempting to provide for local, more efficient milk
deliveries.
While this decision continues to recommend elimination of the TCBF
85-mile exemption and moving to a percentage deduction, the record
indicates 85 miles has been accepted by the industry as representing
the local haul that is the producer's responsibility. Based on evidence
in the record, this decision continues to find it reasonable that milk
deliveries serving the Class I needs of the Appalachian and Southeast
FMMOs from counties within 85 miles of the respective marketing area
boundaries be eligible for DPDC payments. The additional counties
eligible under this expanded mileage range should increase the producer
milk receipts eligible to receive a DPDC payment to include a majority
of the year-round milk supplies of the two marketing areas and promote
more orderly, efficient marketing of those deliveries.
Under the DPDC provisions originally proposed by DCMA, an analysis
indicates approximately 76, 99, and 44 percent of the producer milk
receipts delivered to pool plants would be eligible to receive DPDCs in
the Appalachian, Florida, and Southeast FMMOs. The DPDC provisions
recommended in this decision, including the additional counties for the
Appalachian and Southeast FMMOs, would increase the eligible producer
milk receipts to 86 and 56 percent, respectively.
Specifically, for the Appalachian FMMO, milk from counties within
the Appalachian and Southeast marketing areas, plus specified counties
generally within 85 miles of the marketing area boundary would be
eligible to receive a DPDC. Therefore, this decision continues to
recommend a modified Proposal 3.
Prairie Farms filed a comment in support of using the 85-mile range
as appropriate for determining counties located outside the marketing
areas that are eligible for DPDCs and an acceptable alternative for
their proposed APCs.
Under the modified DPDC, as proposed in this decision, milk
eligibility would extend to milk shipments originating from the
following counties and cities:
Illinois: Alexander, Bond, Champaign, Christian, Clark, Clay,
Clinton, Coles, Crawford, Cumberland, Douglas, Edgar, Edwards,
Effingham, Fayette, Franklin, Gallatin, Hamilton, Hardin, Jackson,
Jasper, Jefferson, Johnson, Lawrence, Macon, Marion, Massac, Monroe,
Montgomery, Moultrie, Perry, Piatt, Pope, Pulaski, Randolph, Richland,
St. Clair, Saline, Shelby, Union, Vermilion, Wabash, Washington, Wayne,
White, and Williamson.
Indiana: Bartholomew, Boone, Brown, Clay, Clinton, Dearborn,
Decatur, Delaware, Fayette, Fountain, Franklin, Hamilton, Hancock,
Hendricks, Henry, Jackson, Jefferson, Jennings, Johnson, Lawrence,
Madison, Marion, Monroe, Montgomery, Morgan, Ohio, Owen, Parke, Putnam,
Randolph, Ripley, Rush, Shelby, Switzerland, Tippecanoe, Tipton, Union,
Vermillion, Vigo, Warren, and Wayne.
Kentucky: Boone, Boyd, Bracken, Campbell, Floyd, Grant, Greenup,
Harrison, Johnson, Kenton, Lawrence, Lewis, Magoffin, Martin, Mason,
Pendleton, Pike, and Robertson.
Maryland: Allegany, Frederick, Garrett, Montgomery, and Washington.
Ohio: Adams, Athens, Brown, Butler, Clark, Clermont, Clinton,
Darke, Fairfield, Fayette, Franklin, Gallia, Greene, Hamilton,
Highland, Hocking, Jackson, Lawrence, Madison, Meigs, Miami,
Montgomery, Morgan, Perry, Pickaway, Pike, Preble, Ross, Scioto,
Vinton, Warren, and Washington.
Pennsylvania: Bedford, Fayette, Franklin, Fulton, Greene, and
Somerset.
Virginia counties: Albemarle, Amelia, Appomattox, Arlington,
Brunswick, Buckingham, Caroline, Charles City, Charlotte, Chesterfield,
Clarke, Culpeper, Cumberland, Dinwiddie, Essex, Fairfax, Fauquier,
Fluvanna, Frederick, Gloucester, Goochland, Greene, Greensville,
Halifax, Hanover, Henrico, Isle Of Wight, James City, King And Queen,
King George, King William, Lancaster, Loudoun, Louisa, Lunenburg,
Madison, Mathews, Mecklenburg, Middlesex, Nelson, New Kent,
Northumberland, Nottoway, Orange, Page, Powhatan, Prince Edward, Prince
George, Prince William, Rappahannock, Richmond, Shenandoah,
Southampton, Spotsylvania, Stafford, Surry, Sussex, Warren,
Westmoreland, and York.
Virginia cities: Alexandria City, Charlottesville City, Chesapeake
City, Colonial Heights City, Emporia City, Fairfax City, Falls Church
City, Franklin City, Fredericksburg City, Hampton City, Hopewell City,
Manassas City, Manassas Park City, Newport News City, Norfolk City,
Petersburg City, Poquoson City, Portsmouth City, Richmond City, Suffolk
City, Virginia Beach City, Williamsburg City, and Winchester City.
West Virginia: Barbour, Berkeley, Boone, Braxton, Cabell, Calhoun,
Clay, Doddridge, Fayette, Gilmer, Grant, Greenbrier, Hampshire, Hardy,
Harrison, Jackson, Jefferson, Kanawha, Lewis, Lincoln, Logan, Marion,
Mason, Mineral, Mingo, Monongalia, Monroe, Morgan, Nicholas, Pendleton,
Pleasants, Pocahontas, Preston, Putnam, Raleigh, Randolph, Ritchie,
Roane, Summers, Taylor, Tucker, Tyler, Upshur, Wayne, Webster, Wetzel,
Wirt, Wood, and Wyoming.
For the Southeast FMMO, milk from counties within the Southeast and
Appalachian marketing areas, plus specified counties generally within
85 miles of the marketing area boundary would be eligible to receive a
DPDC. Therefore, this decision continues to recommend a modified
Proposal 5 to extend eligibility to milk shipments originating from the
following counties and cities:
Illinois: Alexander, Bond, Clay, Clinton, Crawford, Edwards,
Effingham, Fayette, Franklin, Gallatin, Hamilton, Hardin, Jackson,
Jasper, Jefferson, Johnson, Lawrence, Marion, Massac, Monroe,
Montgomery, Perry, Pope, Pulaski, Randolph, Richland, St. Clair,
Saline, Union, Washington, Wayne, White, Williamson, Calhoun, Greene,
Jersey, Macoupin, Madison, and Wabash.
Kansas: Allen, Anderson, Bourbon, Chautauqua, Cherokee, Coffey,
Crawford, Douglas, Elk, Franklin, Greenwood, Jefferson, Johnson,
Labette, Leavenworth, Linn, Lyon, Miami, Montgomery, Neosho, Osage,
Shawnee, Wabaunsee, Wilson, Woodson, and Wyandotte.
Missouri: Audrain, Bates, Benton, Boone, Callaway, Camden, Cass,
Clay, Cole, Cooper, Franklin, Gasconade, Henry, Hickory, Howard,
Jackson, Jefferson, Johnson, Lafayette, Lincoln, Maries, Miller,
Moniteau, Montgomery, Morgan, Osage, Pettis, Phelps, Pike, Platte,
Pulaski, Ray, St Charles, St Clair,
[[Page 84054]]
Ste Genevieve, St Louis, St. Louis City, Saline, and Warren.
Oklahoma: Adair, Atoka, Bryan, Cherokee, Choctaw, Coal, Craig,
Creek, Delaware, Haskell, Hughes, Latimer, Le Flore, McCurtain,
Mcintosh, Mayes, Muskogee, Nowata, Okfuskee, Okmulgee, Osage, Ottawa,
Pawnee, Pittsburg, Pushmataha, Rogers, Sequoyah, Tulsa, Wagoner, and
Washington.
Texas: Anderson, Angelina, Bowie, Camp, Cass, Chambers, Cherokee,
Delta, Fannin, Franklin, Galveston, Gregg, Hardin, Harris, Harrison,
Henderson, Hopkins, Houston, Hunt, Jasper, Jefferson, Kaufman, Lamar,
Liberty, Marion, Montgomery, Morris, Nacogdoches, Newton, Orange,
Panola, Polk, Rains, Red River, Rusk, Sabine, San Augustine, San
Jacinto, Shelby, Smith, Titus, Trinity, Tyler, Upshur, Van Zandt,
Walker, and Wood.
The record does not reflect there are additional counties that
supply year-round Class I milk to the Florida marketing area, other
than the Georgia counties DCMA proposed be included. Therefore, this
decision continues to propose adoption of Proposal 4 without
modification.
This decision also continues to recommend that handlers and
cooperatives sourcing year-round milk supplies to meet Class I needs
from additional counties in the states listed above could request
eligibility for DPDC. If the market administrator finds those counties
provide milk to the Class I market on a year-round basis, they would be
eligible to receive a DPDC. Accounting for the eligibility expansion to
the counties listed above and providing flexibility for additional
counties within those states to be eligible, if requested and approved,
should address the objections presented by Prairie Farms at the
hearing.
DCMA witnesses testified that it was not the intention of its
proposals to allow the milk outside the marketing area that is eligible
for the DPDC to also receive payment from the TCBF. This decision
continues to recommend limitations in the eligibility requirements for
the TCBF so producer milk originating from the counties listed above
that are outside of the Appalachian and Southeast FMMO are only
eligible to receive either a DPDC or TCBF payment.
Proposals 3, 4 and 5 also contain a provision allowing milk
shipments from pool supply plants to pool distributing plants to be
eligible for DPDC payments. The record reflects that a pool supply
plant on the Appalachian order assembles milk from smaller farms at the
plant and then ships the assembled larger tanker load of milk to pool
distributing plants regulated by the order. This supply plant provides
milk shipments to meet the demands of the Appalachian order's pool
distributing plants and should be eligible for a DPDC for the
transportation cost incurred between the two plants. While testimony
was only offered regarding a pool supply plant on the Appalachian FMMO,
the DCMA proposals contain the same provision for the Southeast and
Florida FMMOs. As this decision seeks to provide transportation
assistance to handlers providing the marketwide service of meeting
Class I demand in all three FMMOs, it is appropriate to allow these
deliveries from pool supply plants to pool distributing plants to be
eligible for DPDC payments.
In DCMA's comments and exceptions, filed in response to the
recommended decision, DCMA requested clarification of eligibility for
TCBF and DPDC payments for the additional counties included in the
recommended decision. DCMA sought clarification on whether deliveries
from a farm in one of the listed counties outside of the marketing
areas are eligible for both TCBF and DPDC payments in a given year if
all other eligibility criteria are met. If a farm is eligible for both
credits, DCMA inquired as to who determines which credit applies.
Additionally, DCMA sought guidance on situations in which farms could
be eligible for both credits in different FMMOs.
Similarly, comments and exceptions filed by Prairie Farms requested
clarification as to whether a producer located in the listed counties
outside the Southeast and Appalachian FMMOs would be eligible for a
TCBF payment and a DPDC in the same months, but not for both credits on
the same milk.
The current TCBF provisions in the Appalachian and Southeast FMMOs
have a qualifying period each year during the months of March, April,
and May. The language in 1005.82(c)(2)(i) and 1007.82(c)(2)(i) outline
the requirements for a dairy farmer to qualify as a supplemental
supplier and thus be eligible for payments from the TCBF in each
respective FMMO. To be eligible for a TCBF payment, the dairy farmer
must not be a producer under the order for more than 45 days during the
three-month qualifying period or not more than 50 percent of the
production of the dairy farmer can be producer milk under the Order
during the three-month period. The producer milk of a producer located
in a county eligible for a DPDC outside of the Appalachian and
Southeast FMMO marketing areas would be eligible for the current TCBF
if the producer meets the above requirements. If the producer fails to
meet the requirements for TCBF eligibility (e.g., more than 50 percent
production is producer milk in either the Appalachian or Southeast
Order), then the producer's milk would be eligible for payment from the
DPDC from the respective order.
The qualification for payment from the DPDC in each individual FMMO
stands on its own. Therefore, a producer located in a county eligible
for the Appalachian and Southeast FMMO DPDCs and located outside of the
marketing areas could receive payments from both DPDC funds on
different milk shipments.
In its comment, DCMA also requested clarification on the location
of a supply plant for DPDC eligibility, including for farms and supply
plants in the additional counties included in the recommended decision.
The recommended decision proposed order language specified that only
milk transferred from a pool supply plant regulated on that specific
FMMO may be eligible for a DPDC. The pool supply plant provisions in
each of the three FMMOs (Sec. Sec. 1005.7(c) and (d), Sec. Sec.
1006.7(c) and (d), and Sec. Sec. 1007.7(c) and (d)) specify the
eligibility requirements to qualify as a supply plant in each order.
The inclusion of the additional counties located outside of the
marketing areas for DPDC eligibility has no impact on pool supply plant
qualifications. Producer milk must be physically received at the pool
supply plant then transferred to a pool distributing plant to be
eligible for DPDC payment. The location of producers would have no
impact on the plant's eligibility unless the market administrator
determines such transactions are encouraging uneconomic movements of
milk.
This decision also slightly amends the computation of DPDC eligible
miles. The recommended order language contained in the recommended
decision determines eligible milk as the distance between the shipping
farm and the receiving plant. Upon further review, this decision finds
it more appropriate to lessen the administrative burden by using the
distance between the county seat and the receiving plant to determine
eligible milk. A DCMA witness testified at the hearing that using
either the farm location or the county seat would be appropriate. The
proposed order language has been modified to reflect this change.
Similar to the recommended TCBF provisions, this decision continues
to recommend DPDCs provide reimbursement on 85 percent of the
[[Page 84055]]
delivery mileage. The proposed regulations would allow the market
administrator to adjust the mileage range to between 75 and 95 percent
if requested by stakeholders and warranted by market conditions. Such
an adjustment could be warranted, for example, if the combination of
Class I differential adjustments and DPDC payments were found to be
reimbursing in excess of transportation costs. Granting the market
administrator authority to adjust the mileage rate would provide a
safeguard against payments in excess of costs.
This decision continues to propose adoption of DPDC payment rates
identical to the TCBF, which have been detailed above. The record
indicates the similarity in transportation cost factors between
supplemental and year-round supplies. Therefore, this decision
continues to find it appropriate to recommend identical payment
provisions.
The record contains information regarding the funding needed to
make DPDC payments on eligible year-round milk supplies. Establishing
maximum assessment rates and allowing the market administrator
flexibility to lower those rates is an efficient way to administer the
provisions, as has been demonstrated in the administration of the
current Appalachian TCBF. As such, this decision continues to propose
to adopt DPDC maximum assessments of $0.60, $0.85, and $0.50 per cwt,
in the Appalachian, Florida, and Southeast FMMOs, respectively.
In its comments and exceptions, Prairie Farms requested the initial
assessment rate be set at the maximum of $0.60 rather than an initial
assessment rate of $0.55, as proposed in the recommended decision for
the Southeast FMMO. In contrast, DCMA supported the initial assessment
rate in the recommended decision in its comments to the recommended
decision.
After evaluating the record evidence, this decision finds the
expanded area eligible for the DPDC from DCMA's original proposal will
likely increase the volume of eligible milk. Thus, a higher assessment
rate may be needed initially to cover eligible claims, especially in
the Southeast FMMO where milk deficits are more pronounced. To provide
consistency between the DPDC provisions of the three orders, the
assessment rate should be set at the maximum level for the first month.
Accordingly, this decision recommends the initial assessment rate for
the DPDC be increased to the maximum rate for all three FMMOs. The
initial assessment rates are therefore removed from the proposed order
language.
Included in its comment, DCMA requested DPDC assessment rates be
announced and published monthly by the market administrator in the same
manner and schedule as the TCBF. AMS agrees with this request. The
assessments for both the DPDC and TCBF will be specified on the monthly
price announcements released by the market administrator.
In its comment, DCMA additionally filed a request to correct Sec.
1006.84(f)(1)(iv) to be consistent with Appalachian and Southeast FMMO
proposed provisions, specifically replacing ``the difference'' with
``any positive difference'' in the recommended provisions of the
Florida DPDC. AMS agrees this discrepancy was an error; accordingly,
AMS is making the corresponding correction to section 1006.84(f)(1)(iv)
in this final decision.
Finally, this decision continues to propose inclusion of DPDC
provisions to authorize the market administrator to monitor milk
movements and DPDC claims to disqualify shipments from eligibility if,
after an investigation, it was determined the shipments indicate
persistent and pervasive uneconomic milk movements. Uneconomic milk
movements run counter to the program's objectives to provide for more
orderly marketing and encourage efficient milk movements. Such
movements should be discouraged and should not receive the benefit of
transportation cost assistance offered through DPDCs. Therefore, this
decision continues to recommend the proposed oversight provisions.
In summary, the chronic milk supply problem in the Appalachian,
Florida, and Southeast orders is well documented and this decision
continues to recommend adoption of a series of amendments and new
provisions to provide transportation assistance to handlers who provide
the marketwide service of meeting the markets' Class I demand. Through
these recommendations, most milk delivered to a pool distributing plant
(both supplemental and year-round supplies) would be eligible for one
type of transportation payment. This decision does not support adoption
of Proposal 9 and 10 that would remove the location and delivery
eligibility requirements of the current TCBF provisions, thus making
milk eligible to receive both credits. Accordingly, Proposals 9 and 10
are not recommended for adoption.
This decision does not recommend adoption of Proposal 11 which
would prohibit diversions on milk receiving any form of transportation
assistance from the Appalachian, Florida, and Southeast FMMOs. The
Appalachian and Southeast FMMOs already contain this prohibition on
milk receiving TCBF payments. This rulemaking is considering whether to
extend the prohibition to milk receiving DPDCs.
The record indicates that while a vast majority of the milk
regulated by the three Southeastern FMMOs is delivered to pool plants,
there are instances, even given the region's chronic milk shortage,
when milk is not needed by pool distributing plants and is instead
delivered to nonpool plants. Witnesses for cooperatives who would be
eligible to receive DPDC payments testified that the ability to pool
diversions provides for the orderly disposition of year-round milk
supplies regulated by the Orders.
The record reveals that pool distributing plants' demand fluctuates
on a weekly, monthly, and annual basis for many reasons, such as
weekends, holidays, or the closing of schools for the summer. Previous
FMMO rulemakings that have amended or established diversion limits
discuss the appropriateness of allowing for the milk of producers who
are consistent and reliable suppliers serving the Class I needs of the
market to be pooled and priced even when that milk is not immediately
needed for Class I use. FMMOs allow milk diverted to nonpool plants to
be pooled and priced by the Order, to ensure its orderly and efficient
disposition.
By design, the recommended DPDC provisions establish criteria for
identifying consistent, year-round milk supplies eligible to receive a
payment. This decision has discussed at length the need for
transportation assistance in the region to ensure an adequate supply of
Class I milk. Diversion limits are one feature that provides for the
orderly disposition of this consistent supply of Class I milk.
Prohibiting the diversion of milk receiving a DPDC would not provide
for more orderly marketing and would interfere with the orderly
disposition of the region's consistent Class I milk supplies.
Accordingly, this decision does not recommend adoption of Proposal 11.
This decision does not find that adoption of Proposals 1, 2, 3, 4
and 5 would have a negative competitive impact on pool distributing
plant handlers in the three Southeastern Orders. If adopted, the
proposed maximum assessment rates for the TCBF and DPDC combined would
be $0.90, $0.85, and $1.10 per cwt, in the Appalachian, Florida, and
Southeast FMMOs, respectively. These rates reflect correction of a
clerical error in the recommended decision where the Florida and
Southeast FMMO rates were
[[Page 84056]]
listed incorrectly. Evidence shows packaged milk coming into the region
from common supply points would incur costs--a combination of
applicable Class I differentials and transportation costs--in excess of
the combined TCBF and DPDC assessments on Class I milk. Thus, adoption
of the maximum assessment rates would not impact competitive
relationships among handlers who supply the region with fluid milk
products.
To compare how the proposed assessments could impact the wholesale
price of milk used in Class I products, the proposed change in
assessment levels was analyzed. The difference in current assessment
levels and the maximum assessment levels proposed in this decision is
$0.83, $0.85, and $0.80 per cwt, in the Appalachian, Florida, and
Southeast FMMOs, respectively. The differences per cwt converted to
gallons are $0.071, $0.073, and $0.069 per cwt, in the Appalachian,
Florida, and Southeast FMMOs, respectively. These assessment level and
per gallon differences reflect correction of a clerical error in the
recommended decision. The extent to which the increased Class I
assessments would pass through to retail milk prices is unknown.
Compared to average regional retail prices for conventional whole milk
in 2022, retail prices would increase by 1 to 3 percent if the total
increase were fully passed through.
Some witness testimony and post-hearing briefs argued that because
of declining fluid milk sales, FMMOs should not be amended in a way
that would raise consumer prices. While impact on consumers is
important to consider, it must be balanced with the reality that
supplying the southeastern U.S. with milk to meet consumer Class I
demand is costly. This record details how transportation costs have
increased and handlers and cooperatives supplying the Class I market
have been unable to recoup those costs in the marketplace. FMMOs are
not providing for orderly marketing if supplies of the Class I market--
in this case cooperatives who supply more than 80 percent of the
region's milk--are asked to continue to serve the Class I market
without any practical way to cover costs of moving milk to service the
Class I market. Such a chronic situation, as documented by this hearing
record, does not serve producers or consumers, if in the long run
cooperative producers no longer service the Class I market and
consumers are ultimately faced with increased costs due to the
necessity of out-of-area milk being hauled longer distances to supply
fluid milk in the grocery store.
Emergency Procedures
DCMA requested this rulemaking be conducted on an emergency basis,
warranting omission of a recommended decision. Numerous witnesses
testified regarding why the unique marketing conditions of the
southeastern region, necessitating supplemental milk supplies from
further distances in order to fill the gap between the region's
increasing Class I demand and declining in-area milk production, are
cause for emergency rulemaking measures. As discussed previously this
decision, the record indicates transportation costs for Class I milk
deliveries in the southeastern region of the U.S. have risen
significantly and are being borne primarily by the cooperatives that
supply the market.
The overarching issue in this proceeding is determining what
combination of current and possibly new transportation assistance
provisions would best address the chronic milk deficit problem in the
region. In doing so, this decision continues to recommend modifications
to the current TCBF provisions of the Appalachian and Southeast FMMOs
to reflect the current transportation cost conditions for supplemental
Class I milk deliveries into the marketing areas. This decision also
finds it appropriate to establish new DPDCs in the Appalachian,
Florida, and Southeast FMMOs to provide transportation cost assistance
for milk deliveries within and nearby the marketing areas. In making
this recommendation, the decision continues to recommend modifications
to what was originally proposed by DCMA. The decision also denies
adoption of four alternative proposals submitted by industry
stakeholders.
Rulings on Proposed Findings and Conclusions
Briefs, proposed findings, and conclusions were filed on behalf of
certain interested parties. These briefs, proposed findings,
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
claims 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 Appalachian, Florida, and Southeast
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
aforenamed marketing agreements and orders:
a. The tentative marketing agreements and the orders, as hereby
proposed to be amended, and all of the terms and conditions thereof,
will tend to effectuate the declared policy of the Act;
b. The parity prices of milk as determined pursuant to section 2 of
the Act are not reasonable with respect to the price of feeds,
available supplies of feeds, and other economic conditions that affect
market supply and demand for milk in the marketing area, and the
minimum prices specified in the proposed marketing agreements and the
orders are such prices as will reflect the aforesaid factors, ensure a
sufficient quantity of pure and wholesome milk, and be in the public
interest; and
c. The proposed marketing agreements and the orders 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, the marketing agreements upon which a hearing
has been held.
d. All milk and milk products handled by handlers, as defined in
the marketing agreements and the orders as hereby proposed to be
amended, are in the current of interstate commerce or directly burden,
obstruct, or affect interstate commerce in milk or its products.
Recommended Marketing Agreements and Orders
The recommended marketing agreements are not included in this
decision because the regulatory provisions thereof would be the same as
those contained in the orders, as hereby proposed to be amended. The
following orders regulating the handling of milk in Appalachian,
Florida, and Southeast marketing areas continue to be recommended as
the detailed and appropriate means by which the foregoing conclusions
may be carried out.
Determination of Producer Approval and Representative Period
March 2023 is hereby determined to be the representative period for
the purpose of ascertaining whether the issuance of the orders, as
amended and as hereby proposed to be amended the transportation credit
balancing fund provisions for the Appalachian and Southeast Federal
milk marketing
[[Page 84057]]
orders, and establishment of distributing plant delivery credits in the
Appalachian, Florida, and Southeast Federal milk marketing orders, is
approved or favored by producers, as defined under the terms of the
orders (as amended and as hereby proposed to be amended), who during
such representative period were engaged in the production of milk for
sale within the aforesaid marketing areas.
List of Subjects in 7 CFR Parts 1005, 1006, and 1007
Milk marketing orders.
Erin Morris,
Associate Administrator, Agricultural Marketing Service.
Order Amending the Order Regulating the Handling of Milk in the
Appalachian, Florida, and Southeast Marketing Areas
(This order shall not become effective unless and until the
requirements of Sec. 900.14 of the rules of practice and procedure
governing proceedings to formulate marketing agreements and marketing
orders have been met.)
Findings and Determinations
The findings and determinations hereinafter set forth supplement
those that were made when the orders were first issued and when they
were amended. The previous findings and determinations are hereby
ratified and confirmed, except where they may conflict with those set
forth herein.
(a) Findings. A public hearing was held upon certain proposed
amendments to the marketing agreement and to the orders regulating the
handling of milk in the Appalachian, Florida, and Southeast marketing
areas. The hearing was held pursuant to the provisions of the AMAA, 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).
Upon the basis of the evidence introduced at such hearing and the
record thereof, it is determined that:
(1) The said orders as hereby amended, and all of the terms and
conditions thereof, will tend to effectuate the declared policy of the
AMAA;
(2) The parity prices of milk, as determined pursuant to section 2
of the AMAA, 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. The
minimum prices specified in the orders as hereby amended are such
prices as will reflect the aforesaid factors, ensure a sufficient
quantity of pure and wholesome milk, and be in the public interest; and
(3) The said orders as hereby amended regulate the handling of milk
in the same manner as, and are applicable only to persons in the
respective classes of industrial or commercial activity specified in,
marketing agreements upon which a hearing has been held.
Order Relative to Handling
It is therefore ordered, that on and after the effective date
hereof, the handling of milk in the Appalachian, Florida, and Southeast
marketing areas shall be in conformity to and in compliance with the
terms and conditions of the orders, as amended, and as hereby amended,
as follows:
PART 1005--MILK IN THE APPALACHIAN MARKETING AREA
0
1. The authority citation for part 1005 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
2. Amend Sec. 1005.30 by:
0
a. Redesignating paragraphs (a)(5) through (9) as paragraphs (a)(7)
through (11);
0
b. Adding new paragraphs (a)(5) and (6);
0
c. Redesignating paragraph (c)(3) as (c)(4) and revising it; and
0
d. Adding new paragraph (c)(3).
The additions and revision read as follows:
Sec. 1005.30 Reports of receipts and utilization.
(a) * * *
(5) Receipts of producer milk described in Sec. 1005.84(e),
including the identity of the individual producers whose milk is
eligible for the distributing plant delivery credit pursuant to that
paragraph and the date that such milk was received;
(6) For handlers submitting distributing plant delivery credit
requests, transfers of bulk unconcentrated milk to nonpool plants,
including the dates that such milk was transferred;
* * * * *
(c) * * *
(3) With respect to milk for which a cooperative association is
requesting a distributing plant delivery credit pursuant to Sec.
1005.84, all of the information required in paragraphs (a)(5) and (6)
of this section.
(4) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1005.82, all of
the information required in paragraphs (a)(7) through (9) of this
section.
* * * * *
0
3. Amend Sec. 1005.32 by revising paragraph (a) to read as follows:
Sec. 1005.32 Other reports.
(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1000.9(a) and (c) of this chapter shall
report to the market administrator any adjustments to distributing
plant delivery credit requests as reported pursuant to Sec.
1005.30(a)(5) and (6), and any adjustments to transportation credit
requests as reported pursuant to Sec. 1005.30(a)(7) through (9).
* * * * *
0
4. Amend Sec. 1005.81 by revising the first sentence of paragraph (a)
to read as follows:
Sec. 1005.81 Payments to the transportation credit balancing fund.
(a) On or before the 12th day after the end of the month (except as
provided in Sec. 1000.90 of this chapter), each handler operating a
pool plant and each handler specified in Sec. 1000.9(c) of this
chapter shall pay to the market administrator a transportation credit
balancing fund assessment determined by multiplying the pounds of Class
I producer milk assigned pursuant to Sec. 1005.44 by $0.30 per
hundredweight or such lesser amount as the market administrator deems
necessary to maintain a balance in the fund equal to the total
transportation credits disbursed during the prior June-February period.
* * *
* * * * *
0
5. Amend Sec. 1005.82 by:
0
a. Revising the first sentence of paragraph (a)(1), the first sentence
of paragraph (b), and paragraph (d)(3)(iii); and
0
b. Adding paragraph (d)(3)(viii).
The revisions and addition read as follows:
Sec. 1005.82 Payments from the transportation credit balancing fund.
(a) * * *
(1) On or before the 13th day (except as provided in Sec. 1000.90
of this chapter) after the end of each of the months of January and
July through December and any other month in which transportation
credits are in effect pursuant to paragraph (b) of this section, the
market administrator shall pay to each handler that received, and
reported pursuant to Sec. 1005.30(a)(7), bulk milk transferred from a
plant fully regulated under another Federal order as described in
paragraph (c)(1) of this section or that received, and reported
[[Page 84058]]
pursuant to Sec. 1005.30(a)(8), milk directly from producers' farms as
specified in paragraph (c)(2) of this section, a preliminary amount
determined pursuant to paragraph (d) of this section to the extent that
funds are available in the transportation credit balancing fund. * * *
* * * * *
(b) The market administrator may extend the period during which
transportation credits are in effect (i.e., the transportation credit
period) to the month of February or June if a written request to do so
is received fifteen (15) days prior to the beginning of the month for
which the request is made and, after conducting an independent
investigation, finds that such extension is necessary to assure the
market of an adequate supply of milk for fluid use. * * *
* * * * *
(d) * * *
(3) * * *
(iii) Subtract 15 percent (15%) of the miles from the mileage so
determined;
* * * * *
(viii) The market administrator may revise the factor described in
paragraph (d)(3)(iii) of this section (the mileage adjustment factor)
if a written request to do so is received fifteen (15) days prior to
the beginning of the month for which the request is made and, after
conducting an independent investigation, finds that such revision is
necessary to assure orderly marketing, efficient handling of milk in
the marketing area, and an adequate supply of milk for fluid use. The
market administrator may increase the mileage adjustment factor by as
much as ten percentage points, up to twenty-five percent (25%) or
decrease it by as much as ten percentage points, to a minimum of five
percent (5%). Before making such a finding, the market administrator
shall notify all handlers in the market that a revision is being
considered and invite written data, comments, and arguments. Any
decision to revise the mileage rate factor must be issued in writing
prior to the first day of the month for which the revision is to be
effective.
0
6. Amend Sec. 1005.83 by revising paragraphs (a)(2) through (5) to
read as follows:
Sec. 1005.83 Mileage rate for the transportation credit balancing
fund.
(a) * * *
(2) From the result in paragraph (a)(1) in this section subtract
$2.26 per gallon;
(3) Divide the result in paragraph (a)(2) of this section by 6.2,
and round down to three decimal places to compute the fuel cost
adjustment factor;
(4) Add the result in paragraph (a)(3) of this section to $3.67;
(5) Divide the result in paragraph (a)(4) of this section by 497;
* * * * *
0
7. Add Sec. 1005.84 before the undesignated center heading
``Administrative Assessment and Marketing Service Deduction'' to read
as follows:
Sec. 1005.84 Distributing plant delivery credits.
(a) Distributing plant delivery credit fund. The market
administrator shall maintain a separate fund known as the Distributing
Plant Delivery Credit Fund into which shall be deposited the payments
made by handlers pursuant to paragraph (b) of this section and out of
which shall be made the payments due handlers pursuant to paragraph (d)
of this section. Payments due a handler shall be offset against
payments due from the handler.
(b) Payments to the distributing plant delivery credit fund. On or
before the 12th day after the end of the month (except as provided in
Sec. 1000.90 of this chapter), each handler operating a pool plant and
each handler specified in Sec. 1000.9(c) of this chapter shall pay to
the market administrator a distributing plant delivery credit fund
assessment determined by multiplying the pounds of Class I producer
milk assigned pursuant to Sec. 1005.44 by a per hundredweight
assessment rate of $0.60 or such lesser amount as the market
administrator deems necessary to maintain a balance in the fund equal
to the total distributing plant delivery credit disbursed during the
prior calendar year. If the distributing plant delivery credit fund is
in an overfunded position, the market administrator may completely
waive the distributing plant delivery credit assessment for one or more
months. In determining the distributing plant delivery credit
assessment rate, in the event that during any month of that previous
calendar year the fund balance was insufficient to cover the amount of
credits that were due, the assessment should be based upon the amount
of credits that would have been disbursed had the fund balance been
sufficient.
(c) Assessment rate announcement. The market administrator shall
announce publicly on or before the 23rd day of the month (except as
provided in Sec. 1000.90 of this chapter), the assessment rate per
hundredweight pursuant to paragraph (b) of this section for the
following month.
(d) Payments from the distributing plant delivery credit fund.
Payments from the distributing plant delivery credit fund to handlers
and cooperative associations requesting distributing plant delivery
credits shall be made as follows:
(1) On or before the 13th day (except as provided in Sec. 1000.90
of this chapter) after the end of each month, the market administrator
shall pay to each handler that received, and reported pursuant to Sec.
1005.30(a)(5), bulk unconcentrated milk directly from producers' farms,
or receipts of bulk unconcentrated milk by transfer from a pool supply
plant as defined in Sec. 1005.7(c) or (d), a preliminary amount
determined pursuant to paragraph (f) of this section to the extent that
funds are available in the distributing plant delivery credit fund. If
an insufficient balance exists to pay all of the credits computed
pursuant to this section, the market administrator shall distribute the
balance available in the distributing plant delivery credit fund by
reducing payments pro rata using the percentage derived by dividing the
balance in the fund by the total credits that are due for the month.
The credits resulting from this initial proration shall be subject to
audit adjustment pursuant to paragraph (d)(3) of this section.
(2) The market administrator shall accept adjusted requests for
distributing plant delivery credits on or before the 20th day of the
month following the month for which such credits were requested
pursuant to Sec. 1005.32(a). After such date, a preliminary audit will
be conducted by the market administrator, who will recalculate any
necessary proration of distributing plant delivery credit payments for
the preceding month pursuant to the process provided in paragraph
(d)(1) of this section. Handlers will be promptly notified of an
overpayment of credits based upon this final computation and remedial
payments to or from the distributing plant delivery credit fund will be
made on or before the next payment date for the following month.
(3) Distributing plant delivery credits paid pursuant to paragraphs
(d)(1) and (2) of this section shall be subject to final verification
by the market administrator pursuant to Sec. 1000.77 of this chapter.
Adjusted payments to or from the distributing plant delivery credit
fund will remain subject to the final proration established pursuant to
paragraph (d)(2) of this section.
(4) In the event that a qualified cooperative association is the
responsible party for whose account such milk is received and written
documentation of this fact is provided to the market administrator
pursuant to Sec. 1005.30(c)(3) prior to the date payment is due, the
distributing plant delivery
[[Page 84059]]
credits for such milk computed pursuant to this section shall be made
to such cooperative association rather than to the operator of the pool
plant at which the milk was received.
(5) The market administrator shall provide monthly, to producers
who are not members of a qualified cooperative association, a statement
of the amount per hundredweight of distributing plant delivery credit
which the distributing plant handler receiving their milk is entitled
to claim.
(e) Eligible milk. Distributing plant delivery credits shall apply
to the following milk:
(1) Bulk unconcentrated fluid milk received directly from dairy
farms at a pool distributing plant as producer milk subject to the
following conditions:
(i) The farm on which the milk was produced is located within the
specified marketing areas of the order in this part or the marketing
area of Federal Order 1007 (7 CFR part 1007).
(ii) The farm on which the milk was produced is located in the
following counties:
(A) Illinois: Alexander, Bond, Champaign, Christian, Clark, Clay,
Clinton, Coles, Crawford, Cumberland, Douglas, Edgar, Edwards,
Effingham, Fayette, Franklin, Gallatin, Hamilton, Hardin, Jackson,
Jasper, Jefferson, Johnson, Lawrence, Macon, Marion, Massac, Monroe,
Montgomery, Moultrie, Perry, Piatt, Pope, Pulaski, Randolph, Richland,
St Clair, Saline, Shelby, Union, Vermilion, Wabash, Washington, Wayne,
White, and Williamson.
(B) Indiana: Bartholomew, Boone, Brown, Clay, Clinton, Dearborn,
Decatur, Delaware, Fayette, Fountain, Franklin, Hamilton, Hancock,
Hendricks, Henry, Jackson, Jefferson, Jennings, Johnson, Lawrence,
Madison, Marion, Monroe, Montgomery, Morgan, Ohio, Owen, Parke, Putnam,
Randolph, Ripley, Rush, Shelby, Switzerland, Tippecanoe, Tipton, Union,
Vermillion, Vigo, Warren, and Wayne.
(C) Kentucky: Boone, Boyd, Bracken, Campbell, Floyd, Grant,
Greenup, Harrison, Johnson, Kenton, Lawrence, Lewis, Magoffin, Martin,
Mason, Pendleton, Pike, and Robertson.
(D) Maryland: Allegany, Frederick, Garrett, Montgomery, and
Washington.
(E) Ohio: Adams, Athens, Brown, Butler, Clark, Clermont, Clinton,
Darke, Fairfield, Fayette, Franklin, Gallia, Greene, Hamilton,
Highland, Hocking, Jackson, Lawrence, Madison, Meigs, Miami,
Montgomery, Morgan, Perry, Pickaway, Pike, Preble, Ross, Scioto,
Vinton, Warren, Washington.
(F) Pennsylvania: Bedford, Fayette, Franklin, Fulton, Greene, and
Somerset.
(G) Virginia counties: Albemarle, Amelia, Appomattox, Arlington,
Brunswick, Buckingham, Caroline, Charles City, Charlotte, Chesterfield,
Clarke, Culpeper, Cumberland, Dinwiddie, Essex, Fairfax, Fauquier,
Fluvanna, Frederick, Gloucester, Goochland, Greene, Greensville,
Halifax, Hanover, Henrico, Isle Of Wight, James City, King And Queen,
King George, King William, Lancaster, Loudoun, Louisa, Lunenburg,
Madison, Mathews, Mecklenburg, Middlesex, Nelson, New Kent,
Northumberland, Nottoway, Orange, Page, Powhatan, Prince Edward, Prince
George, Prince William, Rappahannock, Richmond, Shenandoah,
Southampton, Spotsylvania, Stafford, Surry, Sussex, Warren,
Westmoreland, York.
(H) Virginia cities: Alexandria City, Charlottesville City,
Chesapeake City, Colonial Heights City, Emporia City, Fairfax City,
Falls Church City, Franklin City, Fredericksburg City, Hampton City,
Hopewell City, Manassas City, Manassas Park City, Newport News City,
Norfolk City, Petersburg City, Poquoson City, Portsmouth City, Richmond
City, Suffolk City, Virginia Beach City, Williamsburg City, and
Winchester City.
(I) West Virginia: Barbour, Berkeley, Boone, Braxton, Cabell,
Calhoun, Clay, Doddridge, Fayette, Gilmer, Grant, Greenbrier,
Hampshire, Hardy, Harrison, Jackson, Jefferson, Kanawha, Lewis,
Lincoln, Logan, Marion, Mason, Mineral, Mingo, Monongalia, Monroe,
Morgan, Nicholas, Pendleton, Pleasants, Pocahontas, Preston, Putnam,
Raleigh, Randolph, Ritchie, Roane, Summers, Taylor, Tucker, Tyler,
Upshur, Wayne, Webster, Wetzel, Wirt, Wood, and Wyoming.
(iii) The market administrator may include additional counties from
the states listed in paragraph (e)(1)(ii) of this section upon the
request of a pool handler and provision of satisfactory proof that the
county is a source of regular supply of milk to order distributing
plants.
(iv) Producer milk eligible for a payment under this section cannot
be eligible for payment from the transportation credit balancing fund
as specified in Sec. 1005.82(c)(2).
(v) The quantity of milk described herein shall be reduced by the
quantity of any bulk unconcentrated fluid milk products transferred
from a pool distributing plant to a nonpool plant or transferred to a
pool supply plant on the same calendar day as producer milk was
received at such plant for which a distributing plant delivery credit
is requested.
(2) Bulk unconcentrated fluid milk transferred from a pool plant
regulated pursuant to Sec. 1005.7(c) or (d) to a pool distributing
plant regulated pursuant to Sec. 1005.7(a) or (b). The quantity of
milk described herein shall be reduced by the quantity of any bulk
unconcentrated fluid milk products transferred from a pool distributing
plant to a nonpool plant or transferred to a pool supply plant on the
same calendar day as milk was received by transfer from a pool supply
plant at such pool distributing plant for which a distributing plant
delivery credit is requested.
(f) Credit computation. Distributing plant delivery credits shall
be computed as follows:
(1) With respect to milk delivered directly from the farm to a
distributing plant:
(i) Determine the shortest hard-surface highway distance between
the shipping farm's county seat and the receiving plant and multiply
the miles by an adjustment rate of not greater than ninety-five percent
(95%) and not less than seventy-five percent (75%);
(ii) Subtract the Class I price specified in Sec. 1000.50(a) of
this chapter for the county in which the shipping farm is located from
the Class I price applicable for the county in which the receiving pool
distributing plant is located;
(iii) Multiply the adjusted miles so computed in paragraph
(f)(1)(i) of this section by the monthly mileage rate factor for the
month computed pursuant to paragraph (h) of this section;
(iv) Subtract any positive difference in Class I prices computed in
paragraph (f)(1)(ii) of this section from the rate determined in
paragraph (f)(1)(iii) of this section;
(v) Multiply the remainder computed in paragraph (f)(1)(iv) of this
section by the hundredweight of milk described in paragraph (e)(1) of
this section.
(2) With respect to milk delivered from a pool supply plant to a
distributing plant:
(i) Determine the shortest hard-surface highway distance between
the transferring pool plant and the receiving plant, and multiply the
miles by an adjustment rate not greater than ninety-five percent (95%)
and not less than seventy-five percent (75%);
(ii) Subtract the Class I price specified in Sec. 1000.50(a) of
this chapter for the transferring pool plant from the Class I price
applicable for the county in which the receiving pool distributing
plant is located;
(iii) Multiply the adjusted miles so computed in paragraph
(f)(2)(i) of this section by the mileage rate factor for the month
computed pursuant to paragraph (h) of this section;
[[Page 84060]]
(iv) Subtract any positive difference in Class I prices computed in
paragraph (f)(2)(ii) of this section from the rate determined in
paragraph (f)(2)(iii) of this section;
(v) Multiply the remainder computed in paragraph (f)(2)(iv) of this
section by the hundredweight of milk described in paragraph (e)(2) of
this section.
(g) Mileage percentage rate adjustment. The monthly percentage rate
adjustment within the range of permissible percentage adjustments
provided in paragraphs (f)(1)(i) and (f)(2)(i) of this section shall be
determined by the market administrator, and publicly announced prior to
the month for which effective. In determining the percentage adjustment
to the actual mileages of milk delivered from farms and milk
transferred from pool plants the market administrator shall evaluate
the general supply and demand for milk in the marketing area, any
previous occurrences of sustained uneconomic movements of milk, and the
balances in the distributing plant delivery credit fund. The adjustment
percentage pursuant to paragraphs (f)(1)(i) and (f)(2)(i) of this
section to the actual miles used for computing distributing plant
delivery credits and announced by the market administrator shall always
be the same percentage.
(h) Mileage rate for the distributing plant delivery credit fund.
The mileage rate for the distributing plant delivery credit fund shall
be the mileage rate computed by the market administrator pursuant to
Sec. 1005.83.
(i) Oversight of milk movements. The market administrator shall
regularly monitor and evaluate the requests for distributing plant
delivery credits to determine that such credits are not encouraging
uneconomic movements of milk, and that the credits continue to assure
orderly marketing and efficient handling of milk in the marketing area.
In making such determinations, the market administrator will include in
the evaluation the general supply and demand for milk. If the market
administrator finds that uneconomic movements are occurring, and such
movements are persistent and pervasive, or are not being made in a way
that assures orderly marketing and efficient handling of milk in the
marketing area, after good cause shown, the market administrator may
disallow the payments of distributing plant delivery credit on such
milk. Before making such a finding, the market administrator shall give
the handler of such milk sufficient notice that an investigation is
being considered and shall provide notice that the handler has the
opportunity to explain why such movements were necessary, or the
opportunity to correct such movements prior to the disallowance of any
distributing plant delivery credits. Any disallowance of distributing
plant delivery credit pursuant to this provision shall remain
confidential between the market administrator and the handler.
PART 1006--MILK IN THE FLORIDA MARKETING AREA
0
8. The authority citation for part 1006 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
9. Amend Sec. 1006.30 by:
0
a. Redesignating paragraphs (a)(5) and (6) as (a)(7) and (8);
0
b. Adding new paragraphs (a)(5) and (6); and
0
c. Adding paragraph (c)(3).
The additions read as follows:
Sec. 1006.30 Reports of receipts and utilization.
(a) * * *
(5) Receipts of producer milk described in Sec. 1006.84(e),
including the identity of the individual producers whose milk is
eligible for the distributing plant delivery credit pursuant to that
paragraph and the date that such milk was received;
(6) For handlers submitting distributing plant delivery credit
requests, transfers of bulk unconcentrated milk to nonpool plants,
including the dates that such milk was transferred.
* * * * *
(c) * * *
(3) With respect to milk for which a cooperative association is
requesting a distributing plant delivery credit pursuant to Sec.
1006.84, all of the information required in paragraphs (a)(5) and (6)
of this section.
* * * * *
0
10. Revise Sec. 1006.32 to read as follows:
Sec. 1006.32 Other reports.
(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1000.9(a) and (c) of this chapter shall
report to the market administrator any adjustments to distributing
plant delivery credit requests as reported pursuant to Sec.
1006.30(a)(5) and (6).
(b) In addition to the reports required pursuant to Sec. Sec.
1006.30 and 1006.31 and paragraph (a) of this section, each handler
shall report any information the market administrator deems necessary
to verify or establish each handler's obligation under the order.
0
11. Add an undesignated center heading preceding the undesignated
center heading ``Administrative Assessment and Marketing Service
Deduction'' to read as follows:
Marketwide Service Payments.
0
12. Add Sec. 1006.84 preceding the undesignated center heading
``Administrative Assessment and Marketing Service Deduction'' to read
as follows:
Sec. 1006.84 Distributing plant delivery credits.
(a) Distributing plant delivery credit fund. The market
administrator shall maintain a separate fund known as the Distributing
Plant Delivery Credit Fund into which shall be deposited the payments
made by handlers pursuant to paragraph (b) of this section and out of
which shall be made the payments due handlers pursuant to Sec.
1005.84(b) of this chapter. Payments due a handler shall be offset
against payments due from the handler.
(b) Payments to the distributing plant delivery credit fund. On or
before the 12th day after the end of the month (except as provided in
Sec. 1000.90 of this chapter), each handler operating a pool plant and
each handler specified in Sec. 1000.9(c) of this chapter shall pay to
the market administrator a distributing plant delivery credit fund
assessment determined by multiplying the pounds of Class I producer
milk assigned pursuant to Sec. 1006.44 by a per hundredweight
assessment rate of $0.85 or such lesser amount as the market
administrator deems necessary to maintain a balance in the fund equal
to the total distributing plant delivery credit disbursed during the
prior calendar year. If the distributing plant delivery credit fund is
in an overfunded position, the market administrator may completely
waive the distributing plant delivery credit assessment for one or more
months. In determining the distributing plant delivery credit
assessment rate, in the event that during any month of that previous
calendar year the fund balance was insufficient to cover the amount of
credits that were due, the assessment should be based upon the amount
of credits that would have been disbursed had the fund balance been
sufficient.
(c) Assessment rate announcement. The market administrator shall
announce publicly on or before the 23rd day of the month (except as
provided in Sec. 1000.90 of this chapter) the assessment rate per
hundredweight pursuant to paragraph (b) of this section for the
following month.
(d) Payments from the distributing plant delivery credit fund.
Payments from the distributing plant delivery credit fund to handlers
and cooperative
[[Page 84061]]
associations requesting distributing plant delivery credits shall be
made as follows:
(1) On or before the 13th day (except as provided in Sec. 1000.90
of this chapter) after the end of each month, the market administrator
shall pay to each handler that received, and reported pursuant to Sec.
1006.30(a)(5), bulk unconcentrated milk directly from producers' farms,
or receipts of bulk unconcentrated milk by transfer from a pool supply
plant as defined in Sec. 1006.7(c) or (d), a preliminary amount
determined pursuant to paragraph (f) of this section to the extent that
funds are available in the distributing plant delivery credit fund. If
an insufficient balance exists to pay all of the credits computed
pursuant to this section, the market administrator shall distribute the
balance available in the distributing plant delivery credit fund by
reducing payments pro rata using the percentage derived by dividing the
balance in the fund by the total credits that are due for the month.
The credits resulting from this initial proration shall be subject to
audit adjustment pursuant to paragraph (d)(3) of this section.
(2) The market administrator shall accept adjusted requests for
distributing plant delivery credits on or before the 20th day of the
month following the month for which such credits were requested
pursuant to Sec. 1006.32(a). After such date, a preliminary audit will
be conducted by the market administrator, who will recalculate any
necessary proration of distributing plant delivery credit payments for
the preceding month pursuant to the process provided in paragraph
(d)(1) of this section. Handlers will be promptly notified of an
overpayment of credits based upon this final computation and remedial
payments to or from the distributing plant delivery credit fund will be
made on or before the next payment date for the following month.
(3) Distributing plant delivery credits paid pursuant to paragraphs
(d)(1) and (2) of this section shall be subject to final verification
by the market administrator pursuant to Sec. 1000.77 of this chapter.
Adjusted payments to or from the distributing plant delivery credit
fund will remain subject to the final proration established pursuant to
paragraph (d)(2) of this section.
(4) In the event that a qualified cooperative association is the
responsible party for whose account such milk is received and written
documentation of this fact is provided to the market administrator
pursuant to Sec. 1006.30(c)(3) prior to the date payment is due, the
distributing plant delivery credits for such milk computed pursuant to
this section shall be made to such cooperative association rather than
to the operator of the pool plant at which the milk was received.
(5) The market administrator shall provide monthly, to producers
who are not members of a qualified cooperative association, a statement
of the amount per hundredweight of distributing plant delivery credit
which the distributing plant handler receiving their milk is entitled
to claim.
(e) Eligible milk. Distributing plant delivery credits shall apply
to the following milk:
(1) Bulk unconcentrated fluid milk received at a pool distributing
plant as producer milk directly from dairy farms located within the
marketing area; or located within the Georgia counties of Appling,
Atkinson, Bacon, Baker, Ben Hill, Berrien, Brooks, Calhoun, Charlton,
Chattahoochee, Clay, Clinch, Coffee, Cook, Colquitt, Crisp, Decatur,
Dodge, Dooley, Dougherty, Early, Echols, Grady, Irwin, Lanier, Lee,
Lowndes, Jeff Davis, Macon, Marion, Miller, Mitchell, Pierce, Pulaski,
Quitman, Randolph, Schley, Seminole, Stewart, Sumter, Telfair, Terrel,
Thomas, Tift, Turner, Ware, Webster, Wilcox, and Worth, and received at
pool distributing plants. The quantity of milk described herein shall
be reduced by the quantity of any bulk unconcentrated fluid milk
products transferred from a pool distributing plant to a nonpool plant
or transferred to a pool supply plant on the same calendar day as
producer milk was received at such plant for which a distributing plant
delivery credit is requested.
(2) Bulk unconcentrated fluid milk transferred from a pool plant
regulated pursuant to Sec. 1006.7(c) or (d) to a pool distributing
plant regulated pursuant to Sec. 1006.7(a) or (b). The quantity of
milk described herein shall be reduced by the quantity of any bulk
unconcentrated fluid milk products transferred from a pool distributing
plant to a nonpool plant or transferred to a pool supply plant on the
same calendar day as milk was received by transfer from a pool supply
plant at such pool distributing plant for which a distributing plant
delivery credit is requested.
(f) Credit computation. Distributing plant delivery credits shall
be computed as follows:
(1) With respect to milk delivered directly from the farm to a
distributing plant:
(i) Determine the shortest hard-surface highway distance between
the shipping farm's county seat and the receiving plant and multiply
the miles by an adjustment rate of not greater than ninety-five percent
(95%) and not less than seventy-five percent (75%);
(ii) Subtract the Class I price specified in Sec. 1000.50(a) of
this chapter for the county in which the shipping farm is located from
the Class I price applicable for the county in which the receiving pool
distributing plant is located;
(iii) Multiply the adjusted miles so computed in (f)(1)(i) of this
section by the monthly mileage rate factor for the month computed
pursuant to paragraph (h) of this section;
(iv) Subtract any positive difference in Class I prices computed in
paragraph (f)(1)(ii) of this section from the rate determined in
paragraph (f)(1)(iii) of this section;
(v) Multiply the remainder computed in paragraph (f)(1(iv) of this
section by the hundredweight of milk described in paragraph (e)(1) of
this section;
(2) With respect to milk delivered from a pool supply plant to a
distributing plant:
(i) Determine the shortest hard-surface highway distance between
the transferring pool plant and the receiving plant, and multiply the
miles by an adjustment rate of not greater than ninety-five percent
(95%) and not less than seventy-five percent (75%);
(ii) Subtract the Class I price specified in Sec. 1000.50(a) of
this chapter for the transferring pool plant from the Class I price
applicable for the county in which the receiving pool distributing
plant is located;
(iii) Multiply the adjusted miles so computed in paragraph
(f)(2)(i) of this section by the mileage rate factor for the month
computed pursuant to paragraph (h) of this section;
(iv) Subtract any positive difference in Class I prices computed in
paragraph (f)(2)(ii) from the rate determined in paragraph (f)(2)(iii)
of this section;
(v) Multiply the remainder computed in paragraph (f)(2)(iv) of this
section by the hundredweight of milk described in paragraph (e)(2) of
this section.
(g) Mileage percentage rate adjustment. The monthly percentage rate
adjustment within the range of permissible percentage adjustments
provided in paragraphs (f)(1)(i) and (f)(2)(i) of this section shall be
determined by the market administrator, and publicly announced prior to
the month for which effective. In determining the percentage adjustment
to the actual mileages of milk delivered from farms and milk
transferred from pool plants the market administrator shall evaluate
the general supply and demand for milk in the marketing area, any
previous occurrences of sustained uneconomic movements of milk, and the
balances in the distributing plant
[[Page 84062]]
delivery credit fund. The adjustment percentage pursuant to paragraphs
(f)(1)(i) and (f)(2)(i) to of this section the actual miles used for
computing distributing plant credits and announced by the market
administrator shall always be the same percentage.
(h) Mileage rate for the distributing plant delivery credit fund.
The market administrator shall compute a mileage rate factor each month
as follows:
(1) Compute the simple average rounded down to three decimal places
for the most recent four (4) weeks of the Diesel Price per Gallon as
reported by the Energy Information Administration of the United States
Department of Energy for the Lower Atlantic and Gulf Coast Districts
combined;
(2) From the result in paragraph (h)(1) of this section subtract
$2.26 per gallon;
(3) Divide the result in paragraph (h)(2) of this section by 6.2,
and round down to three decimal places to compute the fuel cost
adjustment factor;
(4) Add the result in paragraph (h)(3) of this section to $3.67;
(5) Divide the result in paragraph (h)(4) of this section by 497;
(6) Round the result in paragraph (h)(5) of this section down to
five decimal places to compute the mileage rate.
(i) Oversight of milk movements. The market administrator shall
regularly monitor and evaluate the requests for distributing plant
delivery credits to determine that such credits are not encouraging
uneconomic movements of milk, and the credits continue to assure
orderly marketing and efficient handling of milk in the marketing area.
In making such determinations the market administrator will include in
the evaluation the general supply and demands for milk. If the market
administrator finds that uneconomic movements are occurring, and such
movements are persistent and pervasive, or are not being made in a way
that assures orderly marketing and efficient handling of milk in the
marketing area, after good cause shown, the market administrator may
disallow the payments of distributing plant delivery credit on such
milk. Before making such a finding, the market administrator shall give
the handler on such milk sufficient notice that an investigation is
being considered and shall provide notice that the handler has the
opportunity to explain why such movements were necessary, or the
opportunity to correct such movements prior to the disallowance of any
distributing plant delivery credits. Any disallowance of distributing
plant delivery credit pursuant to this provision shall remain
confidential between the market administrator and the handler.
PART 1007--MILK IN THE SOUTHEAST MARKETING AREA
0
13. The authority citation for part 1007 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
14. Amend Sec. 1007.30 by:
0
a. Redesignating paragraphs (a)(5) through (9) as paragraphs (a)(7)
through (11);
0
b. Adding new paragraphs (a)(5) and (6);
0
c. Redesignating paragraph (c)(3) as (c)(4) and revising it; and
0
d. Adding new paragraph (c)(3).
The revisions and additions read as follows.
Sec. 1007.30 Reports of receipts and utilization.
(a) * * *
(5) Receipts of producer milk described in Sec. 1007.84(e),
including the identity of the individual producers whose milk is
eligible for the distributing plant delivery credit pursuant to that
paragraph and the date that such milk was received;
(6) For handlers submitting distributing plant delivery credit
requests, transfers of bulk unconcentrated milk to nonpool plants,
including the dates that such milk was transferred;
* * * * *
(c) * * *
(3) With respect to milk for which a cooperative association is
requesting a distributing plant delivery credit pursuant to Sec.
1007.84, all of the information required in paragraphs (a)(5) and (6)
of this section.
(4) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1007.82, all of
the information required in paragraphs (a)(7) through (9) of this
section.
* * * * *
0
15. Amend Sec. 1007.32 by revising paragraph (a) to read as follows:
Sec. 1007.32 Other reports.
(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1000.9(a) and (c) of this chapter shall
report to the market administrator any adjustments to distributing
plant delivery credit requests as reported pursuant to Sec.
1007.30(a)(5) and (6) and any adjustments to transportation credit
requests as reported pursuant to Sec. 1007.30(a)(7) through (9) of
this section.
* * * * *
0
16. Amend Sec. 1007.81 by revising the first sentence of paragraph (a)
to read as follows:
Sec. 1007.81 Payments to the transportation credit balancing fund.
(a) On or before the 12th day after the end of the month (except as
provided in Sec. 1000.90 of this chapter), each handler operating a
pool plant and each handler specified in Sec. 1000.9(c) of this
chapter shall pay to the market administrator a transportation credit
balancing fund assessment determined by multiplying the pounds of Class
I producer milk assigned pursuant to Sec. 1007.44 by $0.60 per
hundredweight or such lesser amount as the market administrator deems
necessary to maintain a balance in the fund equal to the total
transportation credits disbursed during the prior June through February
period to reflect any changes in the current mileage rate versus the
mileage rate(s) in effect during the prior June through February
period. * * *
* * * * *
0
17. Amend Sec. 1007.82 by:
0
a. Revising the first sentence of paragraph (a)(1), the first sentence
of paragraph (b), and paragraph (d)(3)(iii); and
0
b. Adding paragraph (d)(3)(viii).
The revisions and addition read as follows:
Sec. 1007.82 Payments from the transportation credit balancing fund.
(a) * * *
(1) On or before the 13th day (except as provided in Sec. 1000.90)
after the end of each of the months of January, and July through
December and any other month in which transportation credits are in
effect pursuant to paragraph (b) of this section, the market
administrator shall pay to each handler that received, and reported
pursuant to Sec. 1007.30(a)(7), bulk milk transferred from a plant
fully regulated under another Federal order as described in paragraph
(c)(1) of this section or that received, and reported pursuant to Sec.
1007.30(a)(8), milk directly from producers' farms as specified in
paragraph (c)(2) of this section, a preliminary amount determined
pursuant to paragraph (d) of this section to the extent that funds are
available in the transportation credit balancing fund. * * *
(b) The market administrator may extend the period during which
transportation credits are in effect (i.e., the transportation credit
period) to the month of February or June if a written request to do so
is received fifteen (15) days prior to the beginning of the month for
which the request is made and, after
[[Page 84063]]
conducting an independent investigation, finds that such extension is
necessary to assure the market of an adequate supply of milk for fluid
use. * * *
* * * * *
(d) * * *
(3) * * *
(iii) Subtract 15 percent (15%) of the miles from the mileage so
determined;
* * * * *
(viii) The market administrator may revise the factor described in
(3)(iii) of this section (the mileage adjustment factor) if a written
request to do so is received fifteen (15) days prior to the beginning
of the month for which the request is made and, (15) days prior to the
beginning of the month for which the request is made and, after
conducting an independent investigation, finds that such revision is
necessary to assure orderly marketing, efficient handling of milk in
the marketing area, and an adequate supply of milk for fluid use. The
market administrator may increase the mileage adjustment factor by as
much as ten percentage points (10%) up to twenty-five percent (25%) or
decrease it by as much as ten percentage points (10%), to a minimum of
five percent (5%). Before making such a finding, the market
administrator shall notify all handlers in the market that a revision
is being considered and invite written data, comments, and arguments.
Any decision to revise the mileage rate factor must be issued in
writing prior to the first day of the month for which the revision is
to be effective.
0
18. Amend Sec. 1007.83 by revising paragraphs (a)(2) through (5) to
read as follows:
Sec. 1007.83 Mileage rate for the transportation credit balancing
fund.
(a) * * *
(2) From the result in paragraph (a)(1) of this section subtract
$2.26 per gallon;
(3) Divide the result in paragraph (a)(2) of this section by 6.2,
and round down to three decimal places to compute the fuel cost
adjustment factor;
(4) Add the result in paragraph (a)(3) of this section to $3.67;
(5) Divide the result in paragraph (a)(4) of this section by 497;
* * * * *
0
19. Add Sec. 1007.84 before the undesignated center heading
``Administrative Assessment and Marketing Service Deduction'' to read
as follows:
Sec. 1007.84 Distributing plant delivery credits.
(a) Distributing plant delivery credit fund. The market
administrator shall maintain a separate fund known as the Distributing
Plant Delivery Credit Fund into which shall be deposited the payments
made by handlers pursuant to paragraph (b) of this section and out of
which shall be made the payments due handlers pursuant to paragraph (d)
of this section. Payments due a handler shall be offset against
payments due from the handler.
(b) Payments to the distributing plant delivery credit fund. On or
before the 12th day after the end of the month (except as provided in
Sec. 1000.90 of this chapter), each handler operating a pool plant and
each handler specified in Sec. 1000.9(c) of this chapter shall pay to
the market administrator a distributing plant delivery credit fund
assessment determined by multiplying the pounds of Class I producer
milk assigned pursuant to Sec. 1007.44 by a per hundredweight
assessment rate of $0.50 or such lesser amount as the market
administrator deems necessary to maintain a balance in the fund equal
to the total distributing plant delivery credit disbursed during the
prior calendar year. If the distributing plant delivery credit fund is
in an overfunded position, the market administrator may completely
waive the distributing plant delivery credit assessment for one or more
months. In determining the distributing plant delivery credit
assessment rate, in the event that during any month of that previous
calendar year the fund balance was insufficient to cover the amount of
credits that were due, the assessment should be based upon the amount
of credits that would have been disbursed had the fund balance been
sufficient.
(c) Assessment rate announcement. The market administrator shall
announce publicly on or before the 23rd day of the month (except as
provided in Sec. 1000.90 of this chapter), the assessment rate per
hundredweight pursuant to paragraph (b) of this section for the
following month.
(d) Payments from the distributing plant delivery credit fund.
Payments from the distributing plant delivery credit fund to handlers
and cooperative associations requesting distributing plant delivery
credits shall be made as follows:
(1) On or before the 13th day (except as provided in Sec. 1000.90
of this chapter) after the end of each month, the market administrator
shall pay to each handler that received, and reported pursuant to Sec.
1007.30(a)(5), bulk unconcentrated milk directly from producers' farms,
or receipts of bulk unconcentrated milk by transfer from a pool supply
plant as defined in Sec. 1007.7(c) or (d), a preliminary amount
determined pursuant to paragraph (f) of this section to the extent that
funds are available in the distributing plant delivery credit fund. If
an insufficient balance exists to pay all of the credits computed
pursuant to this section, the market administrator shall distribute the
balance available in the distributing plant delivery credit fund by
reducing payments pro rata using the percentage derived by dividing the
balance in the fund by the total credits that are due for the month.
The credits resulting from this initial proration shall be subject to
audit adjustment pursuant to paragraph (d)(3) of this section.
(2) The market administrator shall accept adjusted requests for
distributing plant delivery credits on or before the 20th day of the
month following the month for which such credits were requested
pursuant to Sec. 1007.32(a). After such date, a preliminary audit will
be conducted by the market administrator, who will recalculate any
necessary proration of distributing plant delivery credit payments for
the preceding month pursuant to the process provided in paragraph
(d)(1) of this section. Handlers will be promptly notified of an
overpayment of credits based upon this final computation and remedial
payments to or from the distributing plant delivery credit fund will be
made on or before the next payment date for the following month.
(3) Distributing plant delivery credits paid pursuant to paragraphs
(d)(1) and (2) of this section shall be subject to final verification
by the market administrator pursuant to Sec. 1000.77 of this chapter.
Adjusted payments to or from the distributing plant delivery credit
fund will remain subject to the final proration established pursuant to
paragraph (d)(2) of this section.
(4) In the event that a qualified cooperative association is the
responsible party for whose account such milk is received and written
documentation of this fact is provided to the market administrator
pursuant to Sec. 1007.30(c)(3) prior to the date payment is due, the
distributing plant delivery credits for such milk computed pursuant to
this section shall be made to such cooperative association rather than
to the operator of the pool plant at which the milk was received.
(5) The market administrator shall provide monthly to producers who
are not members of a qualified cooperative association a statement of
the amount per hundredweight of distributing plant delivery credit
which the distributing plant handler receiving their milk is entitled
to claim.
[[Page 84064]]
(e) Eligible milk. Distributing plant delivery credits shall apply
to the following milk:
(1) Bulk unconcentrated fluid milk received directly from dairy
farms at a pool distributing plant as producer milk subject to the
following conditions:
(i) The farm on which the milk was produced is located within the
specified marketing areas of the order in this part or the marketing
area of Federal Order 1005 (7 CFR part 1005).
(ii) The farm on which the milk was produced is located in the
following counties in the State of:
(A) Illinois: Alexander, Bond, Clay, Clinton, Crawford, Edwards,
Effingham, Fayette, Franklin, Gallatin, Hamilton, Hardin, Jackson,
Jasper, Jefferson, Johnson, Lawrence, Marion, Massac, Monroe,
Montgomery, Perry, Pope, Pulaski, Randolph, Richland, St Clair, Saline,
Union, Washington, Wayne, White, Williamson, Calhoun, Greene, Jersey,
Macoupin, Madison, and Wabash.
(B) Kansas: Allen, Anderson, Bourbon, Chautauqua, Cherokee, Coffey,
Crawford, Douglas, Elk, Franklin, Greenwood, Jefferson, Johnson,
Labette, Leavenworth, Linn, Lyon, Miami, Montgomery, Neosho, Osage,
Shawnee, Wabaunsee, Wilson, Woodson, and Wyandotte.
(C) Missouri: Audrain, Bates, Benton, Boone, Callaway, Camden,
Cass, Clay, Cole, Cooper, Franklin, Gasconade, Henry, Hickory, Howard,
Jackson, Jefferson, Johnson, Lafayette, Lincoln, Maries, Miller,
Moniteau, Montgomery, Morgan, Osage, Pettis, Phelps, Pike, Platte,
Pulaski, Ray, St Charles, St Clair, Ste Genevieve, St Louis, St. Louis
City, Saline, and Warren.
(D) Oklahoma: Adair, Atoka, Bryan, Cherokee, Choctaw, Coal, Craig,
Creek, Delaware, Haskell, Hughes, Latimer, Le Flore, McCurtain,
Mcintosh, Mayes, Muskogee, Nowata, Okfuskee, Okmulgee, Osage, Ottawa,
Pawnee, Pittsburg, Pushmataha, Rogers, Sequoyah, Tulsa, Wagoner, and
Washington.
(E) Texas: Anderson, Angelina, Bowie, Camp, Cass, Chambers,
Cherokee, Delta, Fannin, Franklin, Galveston, Gregg, Hardin, Harris,
Harrison, Henderson, Hopkins, Houston, Hunt, Jasper, Jefferson,
Kaufman, Lamar, Liberty, Marion, Montgomery, Morris, Nacogdoches,
Newton, Orange, Panola, Polk, Rains, Red River, Rusk, Sabine, San
Augustine, San Jacinto, Shelby, Smith, Titus, Trinity, Tyler, Upshur,
Van Zandt, Walker, and Wood.
(iii) The Market Administrator may include additional counties from
the states listed in paragraph (e)(1)(ii) of this section upon the
request of a pool handler and provision of satisfactory proof that the
county is a source of regular supply of milk to order distributing
plants.
(iv) Producer milk eligible for a payment under this section cannot
be eligible for payment from the transportation credit balancing fund
as specified in Sec. 1007.82(c)(2).
(v) The quantity of milk described herein shall be reduced by the
quantity of any bulk unconcentrated fluid milk products transferred
from a pool distributing plant to a nonpool plant or transferred to a
pool supply plant on the same calendar day as producer milk was
received at such plant for which a distributing plant delivery credit
is requested.
(2) Bulk unconcentrated fluid milk transferred from a pool supply
plant regulated pursuant to Sec. 1007.7(c) or (d) to a pool
distributing plant regulated pursuant to Sec. 1007.7(a) or (b). The
quantity of milk described herein shall be reduced by the quantity of
any bulk unconcentrated fluid milk products transferred from a pool
distributing plant to a nonpool plant or transferred to a pool supply
plant on the same calendar day as milk was received by transfer from a
pool supply plant at such pool distributing plant for which a
distributing plant delivery credit is requested.
(f) Credit computation. Distributing plant delivery credits shall
be computed as follows:
(1) With respect to milk delivered directly from the farm to a
distributing plant:
(i) Determine the shortest hard-surface highway distance betwe
[…truncated; see source link]Indexed from Federal Register on December 1, 2023.
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