[Federal Register: November 22, 2006 (Volume 71, Number 225)]
[Proposed Rules]
[Page 67489-67495]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22no06-19]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 1000, 1001, 1005, 1006, 1007, 1030, 1032, 1033, 1124,
1126, and 1131
[Docket No. AO-14-A76, et al.; DA-07-01]
Milk in the Northeast and Other Marketing Areas; Notice of
Hearing on Proposed Amendments to Tentative Marketing Agreements and
Orders
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7 CFR part Marketing area AO Nos.
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1001......... Northeast........................ AO-14-A76
1005......... Appalachian...................... AO-388-A20
1006......... Florida.......................... AO-356-A41
1007......... Southeast........................ AO-366-A49
1030......... Upper Midwest.................... AO-361-A42
1032......... Central.......................... AO-313-A51
1033......... Mideast.......................... AO-166-A75
1124......... Pacific Northwest................ AO-368-A37
1126......... Southwest........................ AO-231-A70
1131......... Arizona.......................... AO-271-A42
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AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule; Notice of public hearing on proposed rulemaking.
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SUMMARY: A national public hearing is being held to consider and take
evidence on a proposal seeking to amend the Class I and Class II milk
price formulas applicable to all Federal milk marketing orders.
Evidence also will be taken at the hearing to determine whether
emergency marketing conditions exist that would warrant omission of a
recommended decision under the rules of practice and procedure (7 CFR
900.12(d)).
DATES: The hearing will convene at 1 p.m., Monday, December 11, 2006.
ADDRESSES: The hearing will be held at the Sheraton Station Square
Hotel, 300 West Station Square Drive, Pittsburgh, Pa. 15219. Telephone
number: (412) 261-2000.
FOR FURTHER INFORMATION CONTACT: Gino Tosi, Associate Deputy
Administrator for Order Formulation and Enforcement, USDA/AMS/Dairy
Programs, Stop 0231-Room 2971, 1400 Independence Avenue, SW.,
Washington, DC 20250-0231, (202) 720-2357, e-mail address:
gino.tosi@usda.gov.
Persons requiring a sign language interpreter or other special
accommodations should contact David Walker, Market Administrator, at
(330) 225-4758; e-mail: dwalker@fmmaclev.com before the hearing begins.
[[Page 67490]]
SUPPLEMENTARY INFORMATION: This administrative action is governed by
the provisions of Sections 556 and 557 of Title 5 of the United States
Code and, therefore, is excluded from the requirements of Executive
Order 12866.
Notice is hereby given of a public hearing to be held at the
Sheraton Station Square Hotel, Pittsburgh, PA, beginning at 1 p.m. on
Monday, December 11, 2006, with respect to proposed amendments to the
tentative marketing agreements and to the orders regulating the
handling of milk in the Northeast and other marketing areas.
The hearing is called pursuant to the provisions of the
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), and the applicable rules of practice and procedure governing the
formulation of marketing agreements and marketing orders (7 CFR Part
900).
The purpose of the hearing is to receive evidence with respect to
the economic and marketing conditions which relate to the proposed
amendments, hereinafter set forth, and any appropriate modifications
thereof, to the tentative marketing agreements and to the orders.
Evidence will be taken at the hearing to determine whether
emergency marketing conditions exist that would warrant omission of a
recommended decision under the rules of practice and procedure (7 CFR
900.12(d)) with respect to any proposed amendments.
Also, since the proponent of the proposed amendment has requested
that the hearing be held on an expedited basis, under the rules of
practice and procedure (7 CFR 900.4(a)), it is determined that less
than 15 days notice is reasonable under the circumstances.
Initial Regulatory Flexibility Analysis
Actions under the Federal milk order program are subject to the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). This Act seeks to
ensure that, within the statutory authority of a program, the
regulatory and information collection requirements are tailored to the
size and nature of small businesses. For the purpose of the Act, a
dairy farm is a ``small business'' if it has an annual gross revenue of
less than $750,000, and a dairy products manufacturer is a ``small
business'' if it has fewer than 500 employees (13 CFR 121.201). Most
parties subject to a milk order are considered as a small business.
For the purposes of determining which dairy farms are ``small
businesses,'' the $750,000 per year criterion was used to establish a
production 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.
USDA has identified that during 2005 approximately 51,060 of the
54,652 dairy producers whose milk is pooled on Federal orders are small
businesses. Small businesses represent about 93 percent of the dairy
farmers who participate in the Federal milk order program.
On the processing side, during June 2005 there were approximately
350 fully regulated plants (of which 149 or 43 percent were small
businesses) and 110 partially regulated plants (of which 50 or 45
percent were small businesses). In addition, there were 48 producer-
handlers, of which 29 were considered small businesses for the purposes
of this initial regulatory flexibility analysis, who submitted reports
under the Federal milk order program during this period.
The fluid use of milk represented more than 45.0 percent of total
Federal milk marketing order producer deliveries during January 2006.
Almost 237 million Americans, approximately 80 percent of the total
U.S. population reside within the geographical boundaries of the 10
Federal milk marketing areas.
In order to accomplish the goal of imposing no additional
regulatory burdens on the industry, a review of the current reporting
requirements was completed pursuant to the Paperwork Reduction Act of
1995 (44 U.S.C. 3501 et seq.) In light of that review, it was
determined that these proposed amendments would have little or no
impact on reporting, record keeping, or other compliance requirements
because these requirements would remain identical to those currently in
effect under the Federal order program. No new or additional reporting
would be necessary.
This notice does not require additional information collection that
requires clearance by the OMB beyond the currently approved information
collection. Information currently collected through the use of OMB-
approved forms and the primary sources of data used to complete the
forms are routinely used in business transactions. The forms require
only a minimal amount of information that can be provided without data
processing equipment or trained statistical staff. Thus, the
information collection burden is relatively small. Requiring the same
reports from all handlers does not disadvantage any handler that is
smaller than the industry average.
No other burdens are expected to fall upon the dairy industry as a
result of overlapping Federal rules. This proposed rulemaking does not
duplicate, overlap, or conflict with any existing Federal rules.
To ensure that small businesses are not unduly or
disproportionately burdened based on these proposed amendments,
consideration was given to mitigating any negative impacts. Minimum
pricing should not raise barriers regarding the ability of small
handlers, including milk manufacturers and processors, to compete in
the marketplace. It is similarly expected that small producers would
not experience any particular disadvantage compared to larger producers
as a result of the proposed amendments.
The following economic analysis discusses impacts of the proposed
amendments on market participants, including producers and milk
manufacturers and processors. Interested parties are invited to present
evidence on the probable regulatory and information collection impact
of the hearing proposals on small businesses. Also, such parties may
suggest modifications of the proposal for tailoring its applicability
to small businesses.
Preliminary Economic Analysis
In order to assess the impact of National Milk Producers Federation
(NMPF) proposed changes to Federal order Class I and II pricing
formulas, the Department has conducted an economic analysis. While the
proposed changes have effects on Class I and II prices, they also have
effects on the milk supply, product demand, and milk allocation. These
dynamic effects impact all Federal order class prices.
Scope of Analysis
Impacts of increasing Class I and II price movers were measured as
changes from the USDA Agricultural Baseline Projections to 2015 (OCE-
2006-1, http://www.usda.gov/oce/commodity/ag_baseline.htm). The
baseline projections are ``a Departmental consensus on a long-run
scenario for the agricultural sector.'' Included is a national, annual
projection of the supply-demand-price situation for milk. The USDA
baseline and the model baseline assume: (1) The Milk Price Support
Program (MPSP) will continue unchanged; (2) The Dairy Export
[[Page 67491]]
Incentive Program will be utilized to the maximum extent allowed
beginning in the 2006/07 fiscal year; (3) The Milk Income Loss Contract
(MILC) program will continue through September 2007; \1\ and (4) The
Federal Milk Marketing Order Program will continue unchanged. This
analysis maintains the first three assumptions as unchanged. The only
changes to the Federal Milk Marketing Order Program are those that are
proposed by NMPF. Since the model is an annual model, a simplifying
assumption is made that the proposed changes become effective January
1, 2007.
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\1\ Dairy producers are not eligible to choose September 2007 as
a month for which MILC payments are to be applied. This provision
was included so that it would not be necessary to include MILC
payments in the Federal budget for fiscal year 2007-08.
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Demands for fluid milk and manufactured dairy products are
functions of per capita consumption and population. Per capita
consumption for the major milk and dairy products are estimated as
functions of own prices, substitute prices, and income. Retail margins
are assumed unchanged from the baseline. The demands for fluid milk and
soft manufactured products are satisfied first by the eligible supply
of milk. The milk supply for manufactured hard products is the volume
of milk marketings remaining after satisfying the volumes demanded for
fluid and soft manufactured products. Milk is manufactured into cheese,
butter or nonfat dry milk (NFDM) according to returns to manufacturing
in each class. Wholesale prices for cheese, butter, NFDM and dry whey
reflect supply and demand for these products. These manufactured dairy
product prices underlie the Federal order pricing system.
Discussion of Effects of NMPF Proposal on Federal Order Formulas
The NMPF proposal effectively would increase current Class I and II
price movers by constant amounts in Federal order formulas. The Class I
skim milk pricing factor would increase by $0.73 per hundredweight
(cwt.). The Class I butterfat pricing factor would increase by an
equivalent $0.0073 per pound. While the Class I skim milk and butterfat
pricing factors would be increased by the same amount, the Class II
skim milk and butterfat pricing factors would increase by different
amounts. The Class II skim pricing factor would increase by $0.0074 per
cwt., much smaller than the proposed Class I skim milk pricing factor.
The Class II butterfat pricing factor would increase by $0.0163 per
pound, an amount larger than the proposed Class I butterfat pricing
factor increase.
The proposed increases to Class I and II movers have the same
effect as increasing Class I and II differentials at all locations by
the effective proposed changes. Although NMPF proposes butterfat and
skim milk prices for Class I and II that differ from Class III and IV,
the differences are by constant amounts. Class II prices at 3.5 percent
butterfat would still change over time in lock step with Class IV
advanced pricing factors as currently used in Federal order formulas.
Class I prices at 3.5 percent butterfat would still change over time in
lock step with the higher of Class III or IV advanced pricing factors
as currently used in Federal order formulas.
Summary of Results for Proposed Changes to Class I and II Movers
Combined
The impacts of the changes to the Class I and Class II formulas
that are set forth in NMPF's proposal are summarized using annual and
nine-year, 2007-2015, average changes from the model baseline (Table
1). This section discusses the model results of increasing both the
Class I and Class II price movers together. The following section
discusses the model results of proposed changes to Class I and II
movers analyzed separately. The results presented for the Federal order
system are in the context of the larger U.S. market. In particular, the
Federal order price formulas use national manufactured dairy product
prices.
Producers. Over the nine-year period, the average Federal order
minimum blend price for milk at test increases $0.11 from a baseline
level of $14.71 per cwt. The average U.S. all-milk price increases by
about $0.06 from a baseline level of $14.79 per cwt. Federal order
marketings increase by an average 144 million pounds annually due to
the production increase in response to higher producer milk prices.
Federal order milk cash receipts increase by an average $167 million
annually from baseline receipts of $19,165 million. U.S. milk
marketings increase by an average of 227 million pounds annually,
yielding an average annual producer revenue increase of $146 million
from an average baseline value of $28,396 million.
Table 1.--Model Results for National Milk Producers Federation Proposed Class I and Class II Changes
[Nine-year averages, 2007 through 2015]
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Class I and
Class I Class II II movers
Units Baseline movers movers increase
increase increase \1\
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Changes to Pricing Factors:
Class I skim.................. $/cwt................... ........... 0.7300 -- 0.7300
Class I skim.................. $/cwt................... ........... -- 0.0074 0.0074
Class I butterfat............. $/pound................. ........... 0.0073 -- 0.0073
Class II butterfat............ $/pound................. ........... -- 0.0163 0.0163
F.O. Minimum Prices, 3.5% BF:
Class I....................... $/cwt................... 16.46 0.60 -0.02 0.58
Class II...................... $/cwt................... 12.71 -0.13 0.04 -0.09
Class III..................... $/cwt................... 13.75 -0.13 -0.02 -0.15
Class IV...................... $/cwt................... 12.01 -0.13 -0.02 -0.15
Blend......................... $/cwt................... 14.37 0.12 0.00 0.12
Average Class Butterfat Test:
Class I....................... % of milk............... 2.04 0.00 0.00 0.00
Class II...................... % of milk............... 8.16 0.00 0.00 0.00
Class III..................... % of milk............... 3.49 0.00 0.00 0.00
Class IV...................... % of milk............... 4.37 -0.03 0.00 -0.03
F.O. Minimum Prices at Test:
Class I....................... $/cwt................... 14.10 0.65 -0.01 0.64
Class II...................... $/cwt................... 20.34 -0.28 0.09 -0.19
[[Page 67492]]
Class III..................... $/cwt................... 13.73 -0.13 -0.02 -0.15
Class IV...................... $/cwt................... 13.42 -0.21 -0.02 -0.23
Blend......................... $/cwt................... 14.71 0.12 0.00 0.11
Product Prices:
Cheddar....................... $/pound................. 1.4594 -0.0112 -0.0019 -0.0131
Butter........................ $/pound................. 1.5325 -0.0275 -0.0051 -0.0327
Nonfat dry milk (NFDM)........ $/pound................. 0.8444 -0.0018 0.0001 -0.0017
Whey.......................... $/pound................. 0.2750 -0.0015 -0.0002 -0.0017
Mozzarella.................... $/pound................. 1.7915 -0.0071 -0.0012 -0.0083
Retail ice cream.............. $/half gal.............. 3.8555 -0.0230 0.0075 -0.0156
CPI, other dairy products..... index value............. 121.4 -0.5 0.1 -0.3
Retail fluid milk \2\......... $/gal................... ........... 0.0560 -0.0011 0.0549
Federal Order Component Prices:
Protein....................... $/pound................. 2.3797 -0.0013 0.0004 -0.0009
Class III and IV butterfat.... $/pound................. 1.7010 -0.0330 -0.0062 -0.0392
Class I butterfat............. $/pound................. 1.7010 -0.0257 -0.0062 -0.0319
Class II butterfat............ $/pound................. 1.7010 -0.0330 0.0101 -0.0229
Other solids.................. $/pound................. 0.1195 -0.0015 -0.0002 -0.0018
Nonfat solids................. $/pound................. 0.6973 -0.0018 0.0001 -0.0017
Class I skim price............ $/cwt................... 10.7921 0.7169 0.0000 0.7169
Class II skim price........... $/cwt................... 6.9758 -0.0159 0.0083 -0.0076
Class III skim price.......... $/cwt................... 8.0821 -0.0131 0.0000 -0.0131
Class IV skim price........... $/cwt................... 6.2758 -0.0159 0.0009 -0.0150
Federal Order Class Uses:
Class I....................... mil. pounds............. 45,875 -70 1 -68
Class II...................... mil. pounds............. 17,489 63 -20 43
Class III..................... mil. pounds............. 51,152 30 4 34
Class IV...................... mil. pounds............. 15,694 144 -9 135
Total F.O. Marketings......... mil. pounds............. 130,211 167 -24 144
Federal Order Cash Receipts:
Class I....................... mil. $.................. 6,470 288 -6 282
Class II...................... mil. $.................. 3,561 -37 12 -25
Class III..................... mil. $.................. 7,026 -61 -10 -71
Class IV...................... mil. $.................. 2,108 -14 -4 -18
Total......................... mil. $.................. 19,165 176 -8 167
All Milk Price.................... $/cwt................... 14.79 0.07 -0.01 0.06
U.S. class use: \3\
Class I....................... mil. pounds............. 55,674 -85 2 -83
Class II...................... mil. pounds............. 20,455 74 -24 50
Class III..................... mil. pounds............. 93,173 55 7 63
Class IV...................... mil. pounds............. 22,911 210 -13 197
Milk Cows......................... 1000s................... 8,890 8 -1 7
Yield per Cow..................... pounds.................. 21,668 9 -1 8
U.S. Marketings \4\............... mil. pounds............. 191,855 254 -27 227
Government removals of NFDM:
Quantities.................... mil. pounds............. 290 13 -1 12
Outlays \5\................... mil. $.................. ........... 10 -1 10
U.S. Producer Revenue \6\......... mil. $.................. 28,396 158 -21 146
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\1\ Separate effects of increasing Class I and II movers do not necessarily add up to the combined effects due
to differences in the dynamics over time.
\2\ Retail fluid milk porices are not projected in the model. Projected impacts are calculated by multiplying
the Class I price per pound at test by 8.62 pounds of milk per gallon.
\3\ Total U.S. class use does not add to U.S. Marketings due to the presence of imported ingredients.
\4\ U.S. Marketings differs from U.S. milk production due to farm use of milk.
\5\ MPSP outlays are not projected in the model. For this table, outlays are computed by multiplying NDM net
removal quantities by the NDM support price of $0.80. No attempt is made to estimate changes in storage,
handling, transportation, processing, and
\6\ U.S. Producer Revenue includes MILC payments for 2007.
Milk Manufacturers and Processors. Increasing Federal order Class I
and II movers as proposed has the combined effect of increasing Class I
prices and decreasing prices for the manufacturing milk classes. The
retail price of fluid milk increases by $0.0549 per gallon. Since milk
is less scarce due to increases in milk production, and reductions in
Class I use, more milk moves into manufactured uses. As a result dairy
product prices decrease to clear markets of production increases. Over
the nine-year projection period, wholesale dairy product prices
decrease as follows: $0.0131 per pound for cheddar cheese, $0.0327 for
butter, $0.0017 for NFDM, $0.0017 for dry whey, and $0.0083 for
mozzarella. The retail price for ice cream decreases by $0.0156 per
half-gallon. The CPI for
[[Page 67493]]
other dairy products decreases by a value of 0.3. Most Federal order
component prices decrease on average over the nine-year projection
period: $0.0009 per pound for protein, $0.0017 for nonfat solids, and
$0.0018 for other solids.
The average Class III and IV butterfat price decreases by an
average $0.0392 per pound over the nine-year projection period. The
average Class I butterfat price decreases by an average $0.0319. The
difference between the Class III and IV and Class I butterfat prices is
$0.0073, the effective proposed formula change. The Class I butterfat
price decreases because the proposed increase in the Class I butterfat
pricing factor is not enough to offset the butter price decrease. The
average Class II butterfat price decreases by $0.0229 per pound over
the nine-year projection period. The difference between the Class IV
butterfat price and the Class II butterfat price is $0.0163, the
effective proposed formula change. The Class II butterfat price
decreases because the proposed increase in the Class II butterfat
pricing factor is not enough to offset the butter price decrease.
The average Class III and IV skim milk prices decrease by an
average $0.0131 and $0.0150 per cwt. respectively over the nine-year
projection period. The average Class I skim milk price increases by an
average $0.7169. The difference between the Class III and Class I
average skim milk prices is $0.7300, the effective proposed formula
change. The Class I skim milk price increases because the proposed
formula change for the Class I skim milk pricing factor more than
offsets the price decreases in the component prices used in pricing
Class I and III. The average Class II skim milk price decreases by
$0.0076 per cwt. over the nine-year projection period. The difference
between the Class IV skim price and the Class II skim price is $0.0074,
the effective proposed formula change. The Class II skim milk price
decreases because the proposed formula change for the Class II skim
milk pricing factor is not enough to offset the price decreases in the
component prices used in pricing Class II and IV.
There are notable differences between changes in Federal order
class prices at 3.5 percent butterfat and changes in Federal order
class prices at class butterfat percentages. Butterfat tests for the
four Federal order milk classes differ from one class to another due to
the mix of products within each class. Butterfat proportions are higher
for Class II and IV milk than for Class I and III milk. Differences
between prices at test and prices at 3.5 percent butterfat are greatest
for Class II. The lower butterfat price plays a greater role in the
Class II price at test because of the higher average fat content of the
products in the class. While the Class II price at 3.5 percent
butterfat decreases by an average $0.09 per cwt., the Class II price at
test decreases by an average $0.19 per cwt.
Consumers. The expected $0.64 per cwt increase in the minimum nine-
year average Class I price at test results in an average $0.0549 per
gallon increase in the price of fluid milk for consumers. Consumers
decrease consumption of fluid milk products, resulting in a decrease of
68 million pounds in Federal order Class I marketings. Consumers
increase consumption of manufactured dairy products in response to
lower dairy product prices. The manufacturing Federal order class
marketings increase as follows: 43 million pounds for Class II, 34
million pounds for Class III, and 135 million pounds for Class IV. U.S.
class marketing increase as follows: 50 million pounds for Class II, 63
million pounds for Class III, and 193 million pounds for Class IV.
Government Outlays. In 2007, with higher Class I prices, MILC
payments decrease by $82 million below the baseline level of $190
million. This impact rounds to approximately $0.04 per cwt. averaged
over all of the milk production.
With the proposed increases to Federal order Class I and II pricing
factors, milk production increases, dairy product prices decrease, and
government removals increase relative to baseline levels. Over the
projection period, government removals of NFDM increase by an annual
average of 12 million pounds per year. Government outlays related to
government removals increase by an average of $10 million over the
projection period.
Contrasting Effects of Increasing Class I and II Movers
Effects of increasing Class I price movers differ significantly
from effects of increasing Class II price movers. The differences are
mainly due to the differences in price elasticity of demand \2\ of
fluid milk versus Class II products. Model parameters indicate that
fluid milk has a very inelastic demand price elasticity of -0.05. Class
II products are much more price elastic with respect to demand. Model
parameters indicate that frozen Class II products and other Class II
products have demand price elasticities of -0.50 and -1.18
respectively. To examine these effects, model scenarios were run to
examine the effects of proposed changes to Class I and Class II movers
separately.
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\2\ Price elasticity of demand is the percentage change in
consumption corresponding to a 1 percent change in price.
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Effects of Changes to Class I Movers: Increasing Class I movers as
proposed by NMPF results in higher Federal order Class I pool receipts
of $288 million. Federal order Class I producer revenue increases
because the increase in the Class I price at test ($0.65 per cwt.) more
than offsets the decrease in Class I use (70 million pounds) that
results from the higher price. With the proposed increases in Class I
movers, the average Federal order blend price at test increases by
$0.12 per cwt., the average all-milk price increases by $0.07 per cwt.,
and producer revenues increase by $158 million.
Effects of Changes to Class II Movers: With the proposed increases
in Class II movers, Federal order Class II use decreases by 20 million
pounds. As Class II use decreases, relatively more milk is allocated to
other products, lowering their prices. Product prices decrease for
cheddar cheese ($0.0019 per pound), butter ($0.0051 per pound), and
fluid milk (0.0011 per gallon). Since these demands have relatively low
price elasticities, consumption does not increase very much for these
products. Although Federal order Class II receipts increase by $12
million, the increase is not enough to offset decreases in cash
receipts for the other classes, and total Federal order class receipts
fall by $8 million. The average reduction in the Federal order blend
price at test rounds to zero. The all-milk price decreases by $0.01,
and average U.S. producer revenue decreases by $21 million.
Detailed Analysis Information
A complete Preliminary Economic Analysis, NMPF Proposed Changes to
Class I and II Mover, is available at http://www.ams.usda.gov/[fxsp0
]dairy/hearings.htm. For further information contact Howard
McDowell, Senior Economist, USDA/AMS/Dairy Programs, Office of the
Chief Economist, Room 2753, South Building, U.S. Department of
Agriculture, Washington, DC 20250, (202) 720-7091, e-mail address
howard.mcdowell@usda.gov.
Executive Order 12988, Civil Justice Reform
The amendments to the rules proposed herein have been reviewed
under Executive Order 12988, Civil Justice Reform. They are not
intended to have a retroactive effect. If adopted, the proposed
amendments would not preempt any state or local laws,
[[Page 67494]]
regulations, or policies, unless they present an irreconcilable
conflict with this rule.
The Agricultural Marketing Agreement Act provides that
administrative proceedings must be exhausted before parties may file
suit in court. Under Section 8c(15)(A) of the Act (7 U.S.C. 608c
(15)(A)), 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.
Interested parties who wish to introduce exhibits should provide
the Presiding Officer at the hearing with (6) copies of such exhibits
for the Official Record. Also, it would be helpful if additional copies
are available for the use of other participants at the hearing.
The proposed amendments, as set forth below, have not received the
approval of the Department.
Proposed by National Milk Producers Federation (NMPF):
Proposal 1
Proposal 1 would change how the Class I skim milk price is
determined for setting and moving Class I prices. Proposal 1 continues
to essentially use the higher of the current advance Class III or
advance Class IV skim milk price per hundredweight (cwt) in setting and
moving Class I prices, but adds an adjustment factor of $0.73. The
$0.73 per cwt factor is intended to reflect the increases in costs
associated with supplying the Class I market. The proposal seeks to
accomplish this objective by replacing the current Class I price mover
(where all prices are U.S. average prices as reported by the National
Agricultural Statistical Service (NASS)) with the higher of:
a. Nonfat dry milk price x 8.9 - $0.52; or
b. Cheese price x 10.0 + Dry whey price x 6.1 - Butter Price x 3.9
- 1.44.
Proposal 1 would eliminate direct reference to the advanced Class
III and Class IV skim milk prices in the formula for determining the
Class I skim milk price. While the make allowance factors used in
determining Class III and Class IV formulas are under consideration for
change in a separate rulemaking proceeding, the formulas above would be
changed to reflect any future amendments made to product make
allowances or product yield factors for cheese, nonfat dry milk, butter
and dry whey as the result of formal rulemaking. The proposed formulas
are based on current make allowances used in determining Class III and
Class IV prices. The $0.52 and $1.44 factors presented in the above
formulas are not revised make allowance factors. They represent the
mathematical simplification of adjusting current advanced Class III and
Class IV prices by a factor of $0.73.
Proposals 2 and 3
In order to use the simplified formulas in Proposal 1, the proposed
use of an advanced cheese skim milk price per cwt, an advanced butter-
powder skim milk price per cwt and an advanced butterfat price per
pound would be used to replace the current advance Class III and Class
IV skim milk prices per cwt. Additionally, the proposed advanced
butterfat price per pound would be determined differently than it is
currently.
Proposal 2 would change the current advanced Class III skim milk
pricing factor per cwt to an advanced cheese skim milk price per cwt
factor. The cheese skim price per cwt would be determined by:
a. Multiplying the weighted average of the 2 most recent NASS
average weekly prices for block and barrel cheese by 10; multiplying
the weighted average of the 2 most recent NASS average weekly survey
prices for dry whey announced before the 24th day of the month times
6.1;
b. Multiplying the weighted average of the 2 most recent NASS
weekly survey prices for butter announced before the 24th day of the
month times 3.9;
c. Adding the amounts computed in a. above; and subtracting the
butter price per pound in b. above; and
d. Subtracting $1.44.
e. The advanced butterfat price per pound would be determined by
multiplying the weighted average of the 2 most recent NASS survey
prices for butter by 1.20; and from this product subtracting $0.1307.
Proposal 3 would change referring to the current advanced Class IV
skim milk pricing factor per cwt to a butter-powder skim milk price per
cwt. The advanced butter powder skim milk price (nonfat dry milk) per
cwt would be determined by:
a. Multiplying the weighted average of the 2 most recent NASS
weekly survey prices for nonfat dry milk announced before the 24th day
of the month by 8.9; and
b. From the product subtracting $0.52.
Proposal 4
This proposal would change the way the Class II milk price is
computed without noticeably changing the level of pricing. While the
skim portion of milk used in Class II would continue to be announced in
advance, it is proposed to be computed by:
a. Multiplying the weighted average of the 2 most recent NASS
survey prices for nonfat dry milk per pound announced before the 24th
day of the month by 8.9; and
b. From the product subtracting $0.54.
Proposal 5
This proposal would change how the current Class II butterfat price
is determined. As proposed the Class II butterfat price per pound would
be the NASS AA Butter survey price reported by the Department for the
month multiplied by 1.2; and from the product subtracting $0.1147.
(Instead of adding $0.70 to the butterfat price (the current Class II
differential), this proposal would add $1.53 per cwt).
The five aforementioned proposals would modify the current
provisions of all Federal milk marketing orders as follows:
1. Amend Sec. 1000.50 by:
a. Revising paragraph (e)
b. Revising paragraph (g); and
c. Revising paragraph (q) (1) (2) (3)
The revisions and additions would read as follows:
Section 1000.50 Class Prices, Component Prices, and Advanced
Pricing Factors.
* * * * *
(e) Class II skim milk price. The Class II skim milk price per
hundredweight shall be the weighted average of the 2 most recent
U.S. average weekly survey NASS nonfat dry milk prices announced
before the 24th day of the month, times 8.9, then subtracting from
this product $0.54.
(g) Class II butterfat price. The Class II butterfat price per
pound, rounded to the nearest one hundredth cent, shall be the U.S.
average NASS AA butter survey price reported by the Department for
the month, multiplied by 1.20, then subtracting from this product
$0.1147. * * *
(q) * * *
(1) An advanced cheese skim milk price per hundredweight,
rounded to the nearest cent, shall be computed as follows:
(i) Following the procedure set forth in paragraph (n)(1) of
this section, but using the weighted average of the 2 most recent
NASS
[[Page 67495]]
U.S. average weekly survey prices announced before the 24th day of
the month, multiply the resulting cheese price by 10.
(ii) Multiply the weighted average of the 2 most recent NASS
U.S. average weekly survey dry whey prices announced before the 24th
day of the month by 6.1.
(iii) Multiply the weighted average of the 2 most recent NASS
U.S. average weekly survey butter prices announced before the 24th
day of the month by 3.9.
(iv) Add the amounts computed in paragraphs (q)(1)(i) and (ii),
subtract the amount in paragraph (q)(1)(iii), and subtract $1.44.
(2) An advanced butter-powder skim milk price per hundredweight,
rounded to the nearest cent, shall be computed as follows:
(i) Multiply the weighted average of the 2 most recent NASS U.S.
average weekly survey prices for nonfat dry milk announced before
the 24th day of the month by 8.9; and
(ii) From the amount computed in paragraph (q)(2)(i) subtract
$0.52.
(3) An advanced butterfat price per pound, rounded to the
nearest one-hundredth cent, shall be calculated by computing a
weighted average of the 2 most recent U.S. average NASS AA butter
survey prices announced before the 24th day of the month,
multiplying the result by 1.20, then subtracting $0.1307.
* * * * *
Proposed by Dairy Programs, Agricultural Marketing Service:
Proposal No. 6
For all Federal Milk Marketing Orders, make such changes as may be
necessary to make the entire marketing agreements and the orders
conform with any amendments thereto that may result from this hearing.
List of Subjects in 7 CFR Parts 1000, 1001, 1005, 1006, 1007, 1030,
1032, 1033, 1124, 1126, and 1131.
Milk marketing orders.
The authority citation for 7 CFR Parts 1000, 1001, 1005, 1006,
1007, 1030, 1032, 1033, 1124, 1126, and 1131 continues to read as
follows:
Authority: 7 U.S.C. 601-674, and 7253.
Copies of this notice of hearing and the orders may be procured
from the Market Administrator of each of the aforesaid marketing areas,
or from the Hearing Clerk, United States Department of Agriculture,
STOP 9200--Room 1083, 1400 Independence Avenue, SW., Washington, DC
20250-9200, or may be inspected there.
Copies of the transcript of testimony taken at the hearing will not
be available for distribution through the Hearing Clerk's Office. If
you wish to purchase a copy, arrangements may be made with the reporter
at the hearing.
From the time that a hearing notice is issued and until the
issuance of a final decision in a proceeding, Department employees
involved in the decision-making process are prohibited from discussing
the merits of the hearing issues on an ex parte basis with any person
having an interest in the proceeding. For this particular proceeding,
the prohibition applies to employees in the following organizational
units:
Office of the Secretary of Agriculture.
Office of the Administrator, Agricultural Marketing Service.
Office of the General Counsel.
Dairy Programs, Agricultural Marketing Service (Washington office)
and the Offices of all Market Administrators.
Procedural matters are not subject to the above prohibition and may
be discussed at any time.
Dated: November 17, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 06-9341 Filed 11-20-06; 3:01 pm]
BILLING CODE 3410-02-P