[Federal Register Volume 69, Number 250 (Thursday, December 30, 2004)]
[Proposed Rules]
[Pages 78355-78359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-28630]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 1131
[Docket No. AO-271-837; DA-03-04-A]
Milk in the Arizona-Las Vegas Marketing Area; Tentative Partial
Decision on Proposed Amendment and Opportunity To File Written
Exceptions to Tentative Marketing Agreement and to Order
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This tentative partial decision adopts on an interim final and
emergency basis, a proposal that would eliminate the ability to
simultaneously pool the same milk on the Arizona-Las Vegas milk order
and any State-operated milk order that has marketwide pooling. This
decision requires determining if producers approve the issuance of the
amended order on an interim basis. Other proposals considered at the
public hearing regarding producer-handlers will be addressed in a
separate decision.
DATES: Comments should be submitted on or before February 28, 2005.
ADDRESSES: Comments (6 copies) should be filed with the Hearing Clerk,
Room 1083-STOP 9200, United States Department of Agriculture, 1400
Independence Avenue, SW., Washington, DC 20250-9200, and you may also
send your comments by the electronic process available at Federal
eRulemaking portal at http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Jack Rower, Marketing Specialist,
Order Formulation and Enforcement Branch, USDA/AMS/Dairy Programs, Room
2971-STOP 0231, 1400 Independence Avenue, SW., Washington, DC 20250-
0231, (202) 720-2357, e-mail address: [email protected].
SUPPLEMENTARY INFORMATION: This administrative action is governed by
the provisions of sections 556 and 557 of Title 5 of the United States
Code and, therefore, is excluded from the requirements of Executive
Order 12866.
The amendment to the rules proposed herein has been reviewed under
Executive Order 12988, Civil Justice Reform. It is not intended to have
a retroactive effect. If adopted, the proposed rule 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), provides that administrative proceedings must be
exhausted before parties may file suit in court. Under Section
608c(15)(A) of the Act, any handler subject to an order may request
modification or exemption from such order by filing with the Department
of Agriculture (Department) a petition stating that the order, any
provision of the order, or any obligation imposed in connection with
the order is not in accordance with the law. A handler is afforded the
opportunity for a hearing on the petition. After a hearing, the
Department would rule on the petition. The Act provides that the
district court of the United States in any district in which the
handler is an inhabitant, or has its principal place of business, has
jurisdiction in equity to review the Department'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 (5 U.S.C. 601 et
seq.), the Agricultural Marketing Service has considered the economic
impact of this
[[Page 78356]]
action on small entities and has certified that this proposed rule will
not have a significant economic impact on a substantial number of small
entities. For the purpose of the Regulatory Flexibility Act, a dairy
farm is considered a ``small business'' if it has an annual gross
revenue of less than $750,000, and a dairy products manufacturer is a
``small business'' if it has fewer than 500 employees. For the purposes
of determining which dairy farms are ``small businesses,'' the $750,000
per year criterion was used to establish a milk marketing guideline of
500,000 pounds per month. Although this guideline does not factor in
additional monies that may be received by dairy producers, it should be
an inclusive standard for most ``small'' dairy farmers. For purposes of
determining a handler's size, if the plant is part of a larger company
operating multiple plants that collectively exceed the 500-employee
limit, the plant will be considered a large business even if the local
plant has fewer than 500 employees.
During September 2003, the month during which the hearing began,
there were 106 dairy producers pooled on, and 22 handlers regulated by,
the Arizona-Las Vegas order. Approximately 18 producers, or 17 percent,
were small businesses based on the above criteria. On the handler side,
7, or 32 percent were ``small businesses''.
The adoption of the proposed producer milk provision, a part of the
order's pooling standards, serves to revise established criteria that
determine the producer milk that has a reasonable association with the
Arizona-Las Vegas milk marketing area and is not associated with other
marketwide pools concerning the same milk. Criteria for pooling milk
are also established on the basis of performance standards that are
considered adequate to meet the Class I fluid needs of the market and
determine those that are eligible to share in the revenue arising from
the classified pricing of milk. Criteria for pooling are established
without regard to the size of any dairy industry organization or
entity. The criteria established are applied in an equal fashion to
both large and small businesses and do not have any different economic
impact on small entities as opposed to large entities. Therefore, the
proposed amendment will 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 the proposed amendment would have no impact on
reporting, record keeping, or other compliance requirements because
they would remain identical to the current requirements. No new forms
are proposed and no additional reporting requirements would be
necessary.
This tentative partial decision does not require additional
information collection that requires clearance by the Office of
Management and Budget (OMB) 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, the
information collection and reporting burden is relatively small.
Requiring the same reports from all handlers does not significantly
disadvantage any handler that is smaller than the industry average.
No other burdens are expected to fall on the dairy industry as a
result of overlapping Federal rules. The rulemaking proceeding does not
duplicate, overlap, or conflict with any existing Federal rules.
Interested parties are invited to submit comments on the probable
regulatory and informational impact of this proposed rule on small
entities. Also, parties may suggest modifications of this proposal for
the purpose of tailoring their applicability to small businesses.
Prior Document in This Proceeding
Notice of Hearing: Issued July 31, 2003; published August 6, 2003
(68 FR 46505).
Correction to Notice of Hearing: August 20, 2003; published August
26, 2003 (68 FR 51202).
Notice of Reconvened Hearing: Issued October 27, 2003; published
October 31, 2003 (68 FR 62027).
Notice of Reconvened Hearing: Issued December 18, 2003; published
December 29, 2003 (68 FR 74874).
Preliminary Statement
Notice is hereby given of the filing with the Hearing Clerk of this
tentative partial decision with respect to the proposed amendment to
the tentative marketing agreement and the order regulating the handling
of milk in the Arizona-Las Vegas marketing area. This notice 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).
Interested parties may file written exceptions to this decision
with the Hearing Clerk, U.S. Department of Agriculture, Room 1083-STOP
9200, 1400 Independence Avenue, SW., Washington, DC 20250-9200, by
February 28, 2005. Six (6) copies of the exceptions should be filed.
All written submissions made pursuant to this notice will be made
available for public inspection at the office of the Hearing Clerk
during regular business hours (7 CFR 1.27(b)).
The hearing notice specifically invited interested persons to
present evidence concerning the probable regulatory and informational
impact of proposals on small businesses. While no evidence was received
that specifically addressed this issue, some of the evidence
encompassed entities of various size.
The proposed amendment set forth below is based on the record of a
public hearing held at Tempe, Arizona, on September 23-25, 2003,
pursuant to a notice of hearing issued July 31, 2003, and published
August 6, 2003 (68 FR 46505); reconvened at Seattle, Washington, on
November 17-21, 2003, pursuant to a notice of reconvened hearing issued
October 27, 2003, and published October 31, 2003 (68 FR 62027); and
reconvened at Alexandria, Virginia, on January 20-22, 2004, pursuant to
a notice of reconvened hearing issued December 18, 2003, and published
December 29, 2003 (68 FR 74874).
The material issues on the record of the hearing relate to:
1. Simultaneous pooling of milk on the order and on a State-
operated milk order providing for marketwide pooling.
2. Determination as to whether emergency marketing conditions exist
that would warrant the omission of a recommended decision and the
opportunity to file written exceptions.
Finding and Conclusions
The following findings and conclusions on the material issues are
based on evidence presented at the hearing and the record thereof:
1. Simultaneous Pooling on a Federal and State-Operated Milk Order
A proposal, published in the hearing notice as Proposal 4, seeking
to exclude the same milk from being simultaneously pooled on the
Arizona-Las Vegas order and any State-operated order which provides for
marketwide pooling, should be adopted immediately. The practice of
pooling milk on a Federal order and simultaneously pooling the same
milk on a State-operated order has come to be
[[Page 78357]]
referred to as double-dipping. The Arizona-Las Vegas order does not
currently prohibit milk from being simultaneously pooled on the order
and a State-operated order that provides for marketwide pooling.
Proposal 4 was offered by United Dairymen of Arizona, a cooperative
association that markets the milk of their members in the Arizona-Las
Vegas marketing area.
A witness appearing on behalf of the Alliance of Western Milk
Producers, testified in support of Proposal 4. The witness testified
that double-dipping creates a competitive advantage in both procuring
milk and competing for markets for milk.
A witness appearing on behalf of Northwest Dairy Association (NDA),
testified in support of Proposal 4, saying that double-dipping not only
creates disorderly conditions in California, it also results in
competitive inequities in Federal milk order areas. The NDA witness
explained that once minimal pool qualification standards are met, milk
pooled in this manner rarely is delivered to a Federal order marketing
area. The witness noted that the implementation of similar provisions
in Orders 30, 32, and 124, which effectively prevents the simultaneous
pooling of milk in the California State-wide pool and in the Federal
order, should also be adopted for the Arizona-Las Vegas order.
A witness testifying on behalf of Dairy Farmers of America (DFA), a
dairy farmer cooperative that markets the milk of their members in
Arizona-Las Vegas and in most of the other Federal milk orders,
supported adoption of Proposal 4. The witness indicated that the
regulatory language for this proposal is identical to what has been
adopted for Orders 30, 32, 33, and 124. A witness representing Sarah
Farms, a producer-handler located in Arizona, testified in opposition
to adopting Proposal 4. The witness was of the opinion that the
adoption of Proposal 4 would be a trade restriction and that Sarah
Farms preferred freer trade rather than more restricted trade. The
witness concluded by hypothesizing that Proposal 4 was proposed to hurt
Sarah Farms.
A witness representing Edaleen Dairy, a producer-handler located in
Lynden, Washington, also testified in opposition to adopting Proposal
4. The witness indicated that since Sarah Farms was opposed to Proposal
4, they would also be opposed to it.
The witness explained that California operates a quota and overbase
payment system. Under this system, all producers receive a uniform
blend price in the form of the overbase. Other producers are entitled
to an additional payment of $1.70 per hundredweight for their ``quota''
milk. The witness noted that producers who have moved California milk
into the Arizona market have lost their quota and if they were to
participate in California again they would only be entitled to the
overbase price. The witness indicated that the California Department of
Food and Agriculture had issued a decision that required a producer
participating in the state order to do so for a period of twelve months
at a time, preventing participation in the Federal order program
because California does not permit dual participation. As a result, the
witness noted that benefits can not be obtained by double-dipping.
In post hearing briefs, Edaleen Dairy, Mallorie's Dairy, Smith
Brothers Farm, and Sarah Farms concurred that a producer located in
California, pooling milk in Arizona, would not be considered double-
dipping.
For nearly 70 years, the Federal government has operated the milk
marketing order program. The law authorizing the use of milk marketing
orders, the Agricultural Marketing Agreement Act of 1937 (AMAA), as
amended, provides authority for milk marketing orders as an instrument
which dairy farmers may voluntarily use to achieve objectives
consistent with the AMAA and that are in the public interest. An
objective of the AMAA, as it relates to milk, was the stabilization of
market conditions in the dairy industry. The declaration of the AMAA is
specific: ``the disruption of the orderly exchange of commodities in
interstate commerce impairs the purchasing power of farmers and
destroys the value of agricultural assets which support the national
credit structure and that these conditions affect transactions in
agricultural commodities with a national public interest, and burden
and obstruct the normal channels of interstate commerce.''
The AMAA provides authority for employing several methods to
achieve more stable marketing conditions. Among these is classified
pricing, which entails pricing milk according to its use by charging
processors differing prices on the basis of form and use. In addition,
the AMAA provides for specifying when and how processors are to account
for and make payments to dairy farmers. Plus, the AMAA requires that
milk prices established by an order be uniform to all processors and
that the price charged can be adjusted by, among other things, the
location at which milk is delivered by producers (section 608c(5)).
As these features and constraints provided for in the AMAA were
employed in establishing prices under Federal milk orders, some
important market stabilization goals were achieved. The most often
recognized goal was the near elimination of ruinous pricing practices
of handlers competing with each other on the basis of the price they
paid dairy farmers for milk and in price concessions made by dairy
farmers. The need for processors to compete with each other on the
price they paid for milk was significantly reduced because all
processors are charged the same minimum amount for milk, and processors
had assurance that their competitors were paying the same value-
adjusted minimum price.
The AMAA also authorizes the establishment of uniform prices to
producers as a method to achieve stable marketing conditions.
Marketwide pooling has been adopted in all Federal orders because it
provides equity to both processors and producers, thereby helping to
prevent disorderly marketing conditions. A marketwide pool, using the
mechanism of a producer settlement fund to equalize the use-value of
milk pooled on an order, meets that objective of the AMAA, ensuring
uniform prices to producers supplying a market.
Since the 1960's the Federal milk order program has recognized the
harm and disorder that resulted to both producers and handlers when the
same milk of a producer was simultaneously pooled on more than one
Federal order. When this occurs, producers do not receive uniform
minimum prices, and handlers receive unfair competitive advantages. The
need to prevent ``double pooling'' became critically important as
distribution areas expanded and orders merged. Milk already pooled
under a State-operated program and able to simultaneously be pooled
under a Federal order has essentially the same undesirable outcomes
that Federal orders once experienced and subsequently corrected.
There are other State-operated milk order programs that provide for
marketwide pooling. For example, New York operates a milk order program
for the western region of that State. A key feature explaining why this
State-operated program has operated for years alongside the Federal
milk order program is the exclusion of milk from the State pool when
the same milk is already pooled under a Federal order. Because of the
impossibility of the same milk being pooled simultaneously, the Federal
order program has had no reason to specifically address ``double
dipping'' or ``double pooling'' issues,
[[Page 78358]]
the disorderly marketing conditions that arise from such practice, or
the primacy of one regulatory program over another. The other States
with marketwide pooling similarly do not allow double-pooling of
Federal order milk.
The record supports that the Arizona-Las Vegas order should be
amended to preclude the ability to simultaneously pool the same milk on
the order if the same milk is already pooled on a State-operated order
that provides for marketwide pooling.
Proposal 4 offers a reasonable solution for prohibiting the same
milk to draw pool funds from Federal and State marketwide pools
simultaneously. It is consistent with the current prohibition against
allowing the same milk to participate simultaneously in more than one
Federal order pool. Adoption of Proposal 4 will not establish any
barrier to the pooling of milk from any source that actually
demonstrates performance in supplying the Arizona-Las Vegas market's
Class I needs.
2. Determination of Emergency Marketing Conditions
Evidence presented at the hearing establishes that California milk
that can be pooled simultaneously on a State-operated order and a
Federal order, a practice commonly referred to as double-dipping, would
render the Arizona-Las Vegas milk order unable to establish prices that
are uniform to producers and to handlers. This shortcoming of the
pooling provisions could allow milk not providing a reasonable or
consistent service to meeting the needs of the Class I market to be
pooled on the Arizona-Las Vegas order.
In view of these findings, an interim final rule amending the order
will be issued as soon as the procedures are completed to determine the
approval of producers whose milk is pooled in the Arizona-Las Vegas
order. Consequently, it is determined that emergency marketing
conditions exist and the issuance of a recommended decision is
therefore being omitted. The record clearly establishes a basis as
noted above for amending the order on an interim basis. Other proposals
considered at the public hearing regarding producer-handlers will be
issued in a separate decision.
Rulings on Proposed Findings and Conclusions
Briefs, proposed findings and conclusions were filed on behalf of
certain interested parties. These briefs, proposed findings and
conclusions, and the evidence in the record were considered in making
the findings and conclusions set forth above. To the extent that the
suggested findings and conclusions filed by interested parties are
inconsistent with the findings and conclusions set forth herein, the
requests to make such findings or reach such conclusions are denied for
the reasons previously stated in this decision.
General Findings
The findings and determinations hereinafter set forth supplement
those that were made when the Arizona-Las Vegas order was first issued
and when it was amended. The previous findings and determinations are
hereby ratified and confirmed, except where they may conflict with
those set forth herein.
The following findings are hereby made with respect to the
aforesaid marketing agreement and order:
(a) The interim marketing agreement and the order, as hereby
proposed to be amended, and all of the terms and conditions thereof,
will tend to effectuate the declared policy of the Act;
(b) The parity prices of milk as determined pursuant to section 2
of the Act are not reasonable with respect to the price of feeds,
available supplies of feeds, and other economic conditions which affect
market supply and demand for milk in the marketing area, and the
minimum prices specified in the interim marketing agreement and the
order, as hereby proposed to be amended, are such prices as will
reflect the aforesaid factors, insure a sufficient quantity of pure and
wholesome milk, and be in the public interest; and
(c) The interim marketing agreement and the order, as hereby
proposed to be amended, will regulate the handling of milk in the same
manner as, and will be applicable only to persons in the respective
classes of industrial and commercial activity specified in, the
marketing agreement upon which a hearing has been held.
Interim Marketing Agreement and Interim Order Amending the Order
Annexed hereto and made a part hereof are two documents: an Interim
Marketing Agreement regulating the handling of milk, and an Interim
Order amending the order regulating the handling of milk in the
Arizona-Las Vegas marketing area, which have been decided upon as the
detailed and appropriate means of effectuating the foregoing
conclusions.
It is hereby ordered, that this entire tentative partial decision
and the interim order and the interim marketing agreement annexed
hereto be published in the Federal Register.
Determination of Producer Approval and Representative Period
The month of May 2004 is hereby determined to be the representative
period for the purpose of ascertaining whether the issuance of the
order, as amended and as hereby proposed to be amended, regulating the
handling of milk in the Arizona-Las Vegas marketing area is approved or
favored by producers, as defined under the terms of the order as hereby
proposed to be amended, who during such representative period were
engaged in the production of milk for sale within the aforesaid
marketing area.
List of Subjects in 7 CFR Part 1131
Milk marketing orders.
Dated: December 23, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
Interim Order Amending the Order Regulating the Handling of Milk in the
Arizona-Las Vegas Marketing Area
This interim 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 order was first issued and when it was
amended. The previous findings and determinations are hereby ratified
and confirmed, except where they may conflict with those set forth
herein.
(a) Findings. A public hearing was held upon certain proposed
amendments to the tentative marketing agreement and to the order
regulating the handling of milk in the Arizona-Las Vegas marketing
area. The hearing was held pursuant to the provisions of the
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), and the applicable rules of practice and procedure (7 CFR part
900).
Upon the basis of the evidence introduced at such hearing and the
record thereof, it is found that:
(1) The said order as hereby amended, and all of the terms and
conditions thereof, will tend to effectuate the declared policy of the
Act;
(2) The parity prices of milk, as determined pursuant to section 2
of the Act, are not reasonable in view of the price of feeds, available
supplies of feeds, and other economic conditions which affect market
supply and demand
[[Page 78359]]
for milk in the aforesaid marketing area. The minimum prices specified
in the order as hereby amended are such prices as will reflect the
aforesaid factors, insure a sufficient quantity of pure and wholesome
milk, and be in the public interest; and
(3) The said order as hereby amended regulates the handling of milk
in the same manner as, and is applicable only to persons in the
respective classes of industrial or commercial activity specified in, a
marketing agreement upon which a hearing has been held.
Order Relative to Handling
It is therefore ordered, that on and after the effective date
hereof, the handling of milk in the Arizona-Las Vegas marketing area
shall be in conformity to and in compliance with the terms and
conditions of the order, as amended, and as hereby amended, as follows:
The authority citation for 7 CFR part 1131 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
PART 1131--MILK IN THE ARIZONA--LAS VEGAS MARKETING AREA
1. Section 1131.13 is amended by adding a new paragraph (e) to read
as follows:
Sec. 1131.13 Producer milk.
* * * * *
(e) Producer milk shall not include milk of a producer that is
subject to a marketwide equalization pool under a milk classification
and pricing plan under the authority of a State government.
[This marketing agreement will not appear in the Code of Federal
Regulations.]
Marketing Agreement Regulating the Handling of Milk in Certain
Marketing Areas
The parties hereto, in order to effectuate the declared policy
of the Act, and in accordance with the rules of practice and
procedure effective thereunder (7 CFR Part 900), desire to enter
into this marketing agreement and do hereby agree that the
provisions referred to in paragraph I hereof as augmented by the
provisions specified in paragraph II hereof, shall be and are the
provisions of this marketing agreement as if set out in full herein.
I. The findings and determinations, order relative to handling,
and the provisions of Sec. Sec. 1131.1 to 1131.86 all inclusive, of
the order regulating the handling of milk in the Arizona-Las Vegas
marketing area (7 CFR Part 1131) which is annexed hereto; and
II. The following provisions: Record of milk handled and
authorization to correct typographical errors.
(a) Record of milk handled. The undersigned certifies that he/
she handled during the month of------------2004, ------hundredweight
of milk covered by this marketing agreement.
(b) Authorization to correct typographical errors. The
undersigned hereby authorizes the Deputy Administrator, or Acting
Deputy Administrator, Dairy Programs, Agricultural Marketing
Service, to correct any typographical errors which may have been
made in this marketing agreement.
Effective date. This marketing agreement shall become effective
upon the execution of a counterpart hereof by the Department in
accordance with Section 900.14(a) of the aforesaid rules of practice
and procedure.
In witness whereof, The contracting handlers, acting under the
provisions of the Act, for the purposes and subject to the
limitations herein contained and not otherwise, have hereunto set
their respective hands and seals.
Signature
By (Name)--------------------------------------------------------------
(Title)----------------------------------------------------------------
(Address)--------------------------------------------------------------
(Seal)
Attest
[FR Doc. 04-28630 Filed 12-29-04; 8:45 am]
BILLING CODE 3410-02-P