Milk in the Northeast and Other Marketing Areas; Proposed Amendments to Marketing Agreements and Orders
| Published date | 15 July 2024 |
| Record Number | 2024-14769 |
| Citation | 89 FR 57580 |
| Court | Agricultural Marketing Service |
| Section | Proposed rules |
Federal Register, Volume 89 Issue 135 (Monday, July 15, 2024)
[Federal Register Volume 89, Number 135 (Monday, July 15, 2024)]
[Proposed Rules]
[Pages 57580-57687]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14769]
[[Page 57579]]
Vol. 89
Monday,
No. 135
July 15, 2024
Part III Department of Agriculture-----------------------------------------------------------------------Agricultural Marketing Service-----------------------------------------------------------------------7 CFR Parts 1000, 1001, et al.Milk in the Northeast and Other Marketing Areas; Proposed Amendments to
Marketing Agreements and Orders; Proposed Rule
Federal Register / Vol. 89, No. 135 / Monday, July 15, 2024 /
Proposed Rules
[[Page 57580]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 1000, 1001, 1005, 1006, 1007, 1030, 1032, 1033, 1051,
1124, 1126, and 1131
[Doc. No. AMS-DA-23-0031]
Milk in the Northeast and Other Marketing Areas; Proposed
Amendments to Marketing Agreements and Orders
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This decision proposes to amend the pricing provisions in the
11 Federal Milk Marketing Orders (FMMOs).
DATES: Written exceptions and comments to this proposed rule must be
submitted on or before September 13, 2024.
ADDRESSES: Written exceptions should be filed with the Office of the
Hearing Clerk, U.S. Department of Agriculture, 1400 Independence Ave.
SW, Stop 9203, Room 1031, Washington, DC 20250-9203; Fax: (844) 325-
6940 or via the internet at https://www.regulations.gov. All comments
should reference the docket number and the date and page number of this
issue of the Federal Register. Comments will be made available for
public inspection in the Office of the Hearing Clerk during regular
business hours or can be viewed at https://www.regulations.gov. A
plain-language summary of this proposed rule is available at https://www.regulations.gov in the docket for this rulemaking.
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, Telephone: (202)
720-7183, Email address: [email protected].
SUPPLEMENTARY INFORMATION: This recommended decision proposes
amendments to five categories of milk pricing:
1. Milk Composition Factors. Update the factors to 3.3 percent true
protein, 6 percent other solids, and 9.3 percent nonfat solids.
2. Surveyed Commodity Products. Remove 500-pound barrel cheddar
cheese prices from the Dairy Products Mandatory Reporting Program
(DPMRP) survey and rely solely on the 40-pound block cheddar cheese
price to determine the monthly average cheese price used in the
formulas.
3. Class III and Class IV Formula Factors. Update the manufacturing
allowances to: Cheese: $0.2504; Butter: $0.2257; Nonfat Dry Milk
(NFDM): $0.2268; and Dry Whey: $0.2653. This decision also proposes
updating the butterfat recovery factor to 91 percent.
4. Base Class I Skim Milk Price. Update the formula as follows: the
base Class I skim milk price would be the higher-of the advanced Class
III or Class IV skim milk prices for the month. In addition, adopt a
Class I extended shelf life (ESL) adjustment equating to a Class I
price for all ESL products equal to the average-of mover, plus a 24-
month rolling average adjuster with a 12-month lag.
5. Class I and Class II differentials. Keep the $1.60 base
differential and adopt modified location specific Class I differential
values.
In conjunction with this Recommended Decision, the Agricultural
Marketing Service (AMS) conducted a Regulatory Economic Impact Analysis
to determine the potential impact of amending FMMO pricing formulas on
producer revenue and marketwide pool values. AMS used a static analysis
incorporating actual data reported from January 2019 to December 2023
to determine the estimated price impacts of the package of amendments
included in this Recommended Decision. The full text of the Regulatory
Economic Impact Analysis may be accessed at https://www.regulations.gov
or https://www.ams.usda.gov/rules-regulations/moa/dairy/hearings/national-fmmo-pricing-hearing.
Prior Documents in This Proceeding
Notice of Hearing: Published July 24, 2023 (88 FR 47396).
Notice of Reconvened Hearing: Published November 6, 2023 (88 FR
76143).
Notice of Reconvened Hearing: Published December 29, 2023 (88 FR
90134).
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, and 13175.
The amendments to the rules proposed herein have been reviewed
under Executive Order 12988, Civil Justice Reform. They are not
intended to have a retroactive effect. If adopted, the proposed
amendments would not preempt any state or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule.
The Agricultural Marketing Agreement Act 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
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.
Civil Rights Impact Analysis
AMS has reviewed this rulemaking in accordance with USDA
Departmental Regulation 4300-004, Civil Rights Impact Analysis, to
identify any major civil rights impacts the rule might have on FMMO
participants on the basis of race, color, national origin, disability,
sex, gender identity, political beliefs, age, marital, family/parental
status, religion, sexual orientation, reprisal, or because of an
individuals' income is derived from any public assistance program.
Based on the review and analysis of the rule and all available data,
issuance of this proposed rule is not likely to negatively impact low
and moderate-income populations, minority populations, women, Tribes or
persons with disabilities, by virtue of their age, race, color,
national origin, sex, disability, or marital or familial status. No
major civil rights impact is likely to result from this proposed rule.
Regulatory Flexibility Act and Paperwork Reduction Act
In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C.
601 et seq.), the AMS has considered the economic impact of this action
on small entities. Accordingly, AMS has prepared this initial
regulatory flexibility analysis. 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
[[Page 57581]]
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:
------------------------------------------------------------------------
NAICS U.S. industry Size standards in
NAICS code title number of employees
------------------------------------------------------------------------
311511.................... Fluid Milk 1,150
Manufacturing.
311512.................... Creamery Butter 750
Manufacturing.
311513.................... Cheese Manufacturing. 1,250
311514.................... Dry, Condensed, and 1,000
Evaporated Dairy
Product
Manufacturing.
------------------------------------------------------------------------
To determine which dairy farms are ``small businesses,'' the $3.75
million per year income limit was used to establish an annual milk
marketing threshold of 18.3 million pounds. 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. Based on the U.S. 2023 average yield per cow and 2023 NASS
average All-Milk price, a dairy farm with approximately 780 cows or
fewer would meet the definition of small business. In 2022, the most
recent year with statistics available, there were 24,470 dairy farms
with milk sales, of which approximately 19,576 had milk regulated on an
FMMO for at least one month of the year. Based on the 2022 Census of
Agriculture, Milk Cow Herd Size by Inventory and Sales, an estimated 89
percent of operations with milk sales are likely to be small
businesses.
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 manufacturing; 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 limit, respectively.
In 2022, the following number of plants were regulated for at least
one month of the year in each FMMO: 66 plants on the Northeast, 19
plants on the Appalachian, 9 plants on the Florida, 20 plants on the
Southeast, 58 plants on the Upper Midwest, 32 plants on the Central, 43
plants on the Mideast, 24 plants on California, 17 plants on the
Pacific Northwest, 26 plants on the Southwest, and 8 plants on Arizona.
According to the 2022 Census of Agriculture, approximately 86 percent
of fluid milk manufacturing plants, approximately 96 percent of cheese
plants, approximately 82 percent of dry products plants, and
approximately 78 percent of butter plants met the SBA definition of
small businesses.
How FMMO Pricing Provisions Currently Operate
The amendments recommended for adoption in this decision cover five
milk pricing subject areas: Milk Composition Factors, Surveyed
Commodity Products, Class III and Class IV Formula Factors, base Class
I skim milk price (Class I mover), and Class I and II Differentials.
This decision proposes to amend provisions in all five pricing subject
areas. The amendments are intended to update formulas and factors in
response to industry changes over time, many of which have not been
updated since the provisions were adopted on January 1, 2000, to ensure
USDA is carrying out the purposes of the AMAA.
Milk Composition Factors. FMMO milk prices are based on three
primary components--protein, other solids, and nonfat solids. Skim milk
composition factors in the current price formulas codified in the FMMO
regulations were adopted in 2000: 3.1 percent protein, 5.9 percent
other solids, and 9 percent nonfat solids. The proposed amendments
would increase milk composition factors to 3.3 percent protein, 6.0
percent other solids, and 9.3 percent nonfat solids. Actual component
tests of skim milk have increased since 2000, with more significant
increases beginning in 2016. The amendments are intended to more
accurately represent component levels in milk produced.
Surveyed Commodity Products. Milk prices under FMMOs are related to
wholesale prices for butter, cheese, nonfat dry milk, and dry whey. The
formulas use USDA-surveyed average wholesale prices to calculate milk
component prices (butterfat, protein, nonfat solids, and other solids)
that are converted to Class III and IV milk prices. The protein value
in cheese is a component of the Class III price. Currently, the prices
of commodity cheddar cheese packaged in 40-lb blocks (``blocks'') and
500-lb barrels (``barrels'') are collected weekly by AMS through the
DPMRP survey. A monthly average of those prices is used to represent
commodity cheese in the Class III price formula. The butterfat value in
commodity salted butter is the driver of the butterfat price used in
all classified prices. The proposed amendments would eliminate 500-lb
barrels from the DPMRP survey and rely solely on the monthly average
survey price for 40-lb cheddar blocks. The amendment is intended to
provide for more orderly marketing through a survey of only one
product.
Class III and IV Formulas Factors. Make allowances are a factor in
the FMMO pricing formulas representing the cost of converting raw milk
into the four manufactured dairy products surveyed by USDA (butter,
cheese, nonfat dry milk, and dry whey). Make allowances were last
updated in 2008 following a rulemaking proceeding in 2007. The proposed
amendments would update the make allowances in the FMMO Class III and
IV formulas to the following: $0.2504 for cheese; $0.2257 for butter;
$0.2268 for NFDM; and $0.2653 for dry whey. The proposed amendments
would also update the butterfat recovery factor in the Class III
formula to 91 percent. The amendments are intended to update the
formula factors to be more representative of current costs and
butterfat recovery observed in dairy product manufacturing.
Class I mover. The Class I mover is the base price for the skim
milk portion of raw milk used in the production of Class I products.
The Agriculture Improvement Act of 2018 (2018 Farm Bill) amended the
Class I skim milk price mover from the ``higher of'' Class III or Class
IV skim prices to a simple average of the two classes plus $0.74,
referred to as the ``average of'' mover. The proposed amendments would
return the base Class I skim milk price calculation to the higher-of
Class III or Class IV skim prices. The proposed amendments would also
adopt a rolling monthly Class I ESL adjustment equating to a Class I
price for all ESL products equal to the average-of the Class III and
Class IV advance prices,
[[Page 57582]]
plus a 24-month rolling average adjuster, with a 12-month lag. The
monthly Class I ESL adjustment would be calculated as the average of
the differences between the higher-of and the average-of calculations
for the prior 13 to 36 months. The amendments are intended to provide
for more orderly marketing by returning to the higher-of mover; while
the Class I ESL adjustment would provide better price equity for ESL
products whose marketing characteristics are distinct from other Class
I products.
Class I and II Differentials. FMMO Class I prices are calculated as
the average of the advanced Class III and Class IV prices, plus $0.74,
plus a location-specific differential referred to as a Class I
differential. As the value of milk varies by location, Class I
differentials have been determined for every county in the continental
U.S. Current Class I differential levels were implemented January 1,
2000, with updates to the differentials in the three southeastern
orders taking effect May 1, 2008. The proposed amendments would retain
the $1.60 base differential and adopt modified location-specific Class
I differential values. The amendments are intended to recognize the
evolution of the dairy industry since 2000 and the increased cost of
servicing the Class I market given current transportation costs and
plant and producer locations.
This decision finds these amendments are necessary. The evidentiary
record reflected testimony from a broad range of stakeholder views that
updates are necessary in all five pricing subject areas to reflect
current market conditions.
Impact on Small Businesses
An economic analysis has been performed on impacts the proposed
amendments will have on industry participants, including producers and
handlers. It can be found on the AMS website at https://www.ams.usda.gov/rules-regulations/moa/dairy/hearings/national-fmmo-pricing-hearing. The proposed amendments would be applied identically
to all proprietary and cooperative handlers regulated by FMMOs,
regardless of their size. The proposed amendments would implement
prices that more accurately reflect current market conditions,
providing for more orderly marketing for both small and large producers
and handlers.
AMS considered alternatives to each of the recommended amendments.
Over 49 days of hearing, dozens of witnesses from 9 industry
stakeholder groups presented testimony and evidence on 21 proposals in
the 5 pricing subject areas. AMS considered all evidence and testimony,
including alternative proposals presented, in making its
recommendations.
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 they
would remain identical to the current requirements. No new forms are
proposed, and no additional reporting requirements would be necessary.
This proposed rule 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, 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.
AMS 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 this rulemaking. This rulemaking does not duplicate, overlap,
or conflict with any existing Federal rules.
Preliminary Statement
A public hearing was held upon proposed amendments to the marketing
agreement and the orders regulating the handling of milk in all 11
Federal milk 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 Carmel, IN, from August 23-October 11, 2023,
November 27-December 8, 2023, January 16-19, 2024, and January 29-31,
2024, pursuant to a notice of hearing published July 24, 2023 (88 FR
47396), a notice of reconvened hearing published November 6, 2023 (88
FR 76143), and a second notice of reconvened hearing, published
December 29, 2023 (88 FR 90134).
The hearing was held to receive evidence on 21 proposals submitted
by dairy farmers, handlers, and other interested parties. A total of
165 witnesses testified over the course of the 49-day hearing.
Witnesses provided an overview of the complexity of the U.S. dairy
industry and submitted 511 exhibits containing supporting data,
analyses, and historical information.
The material issues, related to FMMO pricing formulas, presented on
the record of hearing are as follows:
1. Milk Composition Factors
2. Surveyed Commodity Products
3. Class III and Class IV Formula Factors
4. Base Class I Skim Milk Price
5. Class I and Class II differentials
Summary of Testimony
Milk Composition
Two proposals seeking to amend the milk composition standards are
being considered in this rulemaking. Proposal 1, submitted by the
National Milk Producers Federation (NMPF) seeks to increase the skim
component factors, with a 12-month implementation lag. The proposed
standards are as follows: increase the nonfat solids assumption from
9.0 to 9.41 per hundredweight (cwt) of Class IV skim milk; increase the
protein assumption from 3.1 to 3.39 per cwt of Class III skim milk; and
increase the other solids assumption from 5.9 to 6.02 per cwt of Class
III skim milk. Proposal 1 also contains an updating methodology that
would automatically update the standards no more than once every three
years once the nonfat solids component for the prior three years
changes by at least .07 percentage points.
Proposal 2, submitted on behalf of National All-Jersey (NAJ), is
identical to Proposal 1, except for the automatic update methodology.
The proposal would update the standards annually using the previous
year's weighted averages, with a 12-month implementation lag.
A witness from NMPF, a trade association representing dairy farmer-
owned cooperative marketing associations throughout the United States,
testified in support of updating the skim milk price milk component
factors, as contained in Proposal 1. The witness explained how the U.S.
dairy industry has undergone dynamic structural change since 2000,
while FMMO product price formulas have
[[Page 57583]]
generally remained static. The witness stated dairy farmers have
responded to component pricing by significantly increasing the
butterfat, protein, and other solid levels in their milking herds.
According to the USDA's National Agricultural Statistics Service
(NASS), said the witness, average butterfat tests have increased 10.9
percent from 2000 to 2022, and USDA's Economic Research Service (ERS)
reported average skim milk solids content of U.S. milk production
increased 0.31 percent during the same period. The witness said 2022
FMMO average protein, other solids, and nonfat solids (NFS) in pooled
milk were 3.39 percent, 6.02 percent, and 9.41 percent, respectively.
The NMPF witness asserted the static component levels contained in
the formulas result in underpayments to producers in all FMMO's for the
value of their Class I skim milk. Therefore, NMPF proposes to increase
the milk composition factors in skim milk to 2022 levels. The NMPF
witness analyzed 2013-2022 FMMO product prices and concluded adoption
of Proposal 1 would have increased the Class III skim price by $0.80
per cwt and the Class IV skim milk price by $0.41 per cwt. An increase
from the 2022-based skim milk component factors by the proposed 0.07
percentage point threshold level, the witness added, would have
increased the Class III and Class IV prices by $0.14 and $0.07 per cwt,
respectively.
Another NMPF witness testified the announced FMMO Class III and
Class IV skim milk values do not reflect the current component levels
of producer milk, resulting in announced prices being lower than actual
market values. The witness said this leads to a misalignment of fluid
and manufacturing milk, possibly leading to disorderly marketing
conditions. This occurs because the Class I Mover skim milk price is
calculated based on skim milk component levels based on 2000 levels,
narrowing the difference between Class I prices and manufacturing milk
prices (Classes III and IV) and resulting in more instances of price
inversions and depooling.
Several NMPF dairy farmer witnesses testified in support of
Proposal 1. The witnesses stated improved genetics and feed quality
have caused component levels in the milk they market to increase. The
witnesses stated component levels in the pricing formulas should be
updated to reflect the additional protein produced.
An NMPF witness testified regarding their work as a business
consultant with dairy farmers. The witness said dairy farming costs
have been consistently increasing due to higher feed prices, overall
inflation, interest rate increases, and rising costs associated with
labor and environmental regulations. The witness estimated the average
margin per cwt of milk produced over the past decade was less than $1,
or approximately 4 to 7 percent of the average milk price. It was the
witness's opinion that financially sustainable margins are necessary to
avoid further consolidation in the industry.
An NMPF dairy farmer witness testified that monthly pay price
volatility has increased since 2000. According to the witness, in 2000
their pay price varied $0.52, from a high of $12.95 to a low of $12.43.
In the 12 months prior to August 2023, the witness said the variance
was $7.46, ranging from $22.50 to $15.04, while costs continued to
rise, including the price of corn and soybean meal more than doubling.
The witness said that during the same 12-month period their milk output
rose over 10,000 pounds. The witness attributed improvements in cow
comfort, genetics, and feed quality to the increases in milk output and
component levels but opined low component standards were depressing
producer price differentials (PPDs) and discouraging milk from
supplying the Class I market.
NMPF, in their post-hearing brief, offered additional support for
Proposal 1. The brief credited significant advances related to animal
genetics, farm management, and cow nutrition as contributing to rising
skim milk component levels. NMPF reiterated hearing testimony regarding
the static component levels in the formulas leading to a narrowing of
the difference between Class I and manufacturing milk prices resulting
in more price inversions, larger volumes of depooled milk, and
resulting in disorderly marketing. NMPF stated higher skim milk
component levels have value in the competitive manufacturing dairy
market, which is the basis for determining Class I values. NMPF stated
that increasing the skim milk components in the formulas to reflect
current levels would recognize the current average value of producer
milk used for manufacturing dairy products and result in a Class I
price that properly reflects base milk values. Additionally, NMPF
argued delayed implementation of updated component level factors is
necessary because of dairy farmers' use of risk management programs.
Such a delay would allow for the completion of most transactions placed
prior to announcement of the change.
A Dairy Farmers of America, Inc. (DFA) witness, appearing on behalf
of NMPF, testified the failure to delay an update in skim component
standards would cause financial harm to dairy farmers, milk plants, end
users, and others who entered into risk-management transactions. DFA is
a dairy farmer cooperative and owns and operates 14 manufacturing
plants which produce liquid whey, Italian cheese, skim milk powder,
whole milk powder, American-style cheese, condensed milk, cream, nonfat
dry milk, milk protein concentrate (MPC), sweetened condensed milk, and
dry whey. The witness testified that failure to delay implementation
would affect the basis, or the profit margin for milk being hedged. The
witness testified that 35 to 45 percent of the U.S. milk supply was
hedged by dairy farmers and there is a growing demand for risk
management services among larger-sized dairies.
A witness representing the American Farm Bureau Federation (AFBF),
a farmer advocacy organization with approximately 6 million members
throughout the U.S., testified in support of Proposal 1. The witness
estimated that raising the skim component standards would increase the
Class I price by an average of $0.70 per cwt, based on 2022 data.
Consequently, raising the skim component standards would help bring the
Class I, III, and IV prices in alignment, reduce the frequency of
negative PPDs, and reduce the incentives for depooling, which the
witness said undermines orderly marketing. The witness stated that
raising the value of the skim milk in the manufacturing classes for the
skim and butterfat markets would reduce the incentive of manufacturing
plants in the multiple component pricing (MCP) orders to pool milk,
which would lower the producer's price and discourage milk from
entering a milk deficit region. The witness testified that updating
component standards would address some price misalignment issues and is
preferred to prevent handlers from depooling.
AFBF offered support in their post-hearing brief stating Proposal 1
would more accurately define the market value of skim milk pooled on
FMMOs. The brief asserted the resulting increase in Class I prices
would reduce the incidences of price misalignment with Class III and IV
prices, reduce the size and frequency of negative PPDs, and reduce
depooling incentives. AFBF supported periodic adjustments to component
levels, as contained in Proposal 1, to account for the continuing
increases in the component levels, but specified these levels should
[[Page 57584]]
only be changed in the positive direction. In AFBF's opinion, more
frequent updates, as contained in Proposal 2, would be disruptive.
A witness representing NAJ, an organization representing the
interests of Jersey cattle breeders, testified in support of Proposal
2, which proposes the same milk composition levels as Proposal 1, with
automatic annual updates. The witness said many factors have
contributed to increased component levels, including improved genomics,
increased use of gender-selected semen, and volume-based programs such
as base/excess programs. The witness testified an annual update would
provide improved accuracy because of the recently accelerated pace of
component increases and would have better alignment with pricing
between butterfat/skim and multiple component pricing FMMOs.
Additionally, the witness stated a 1-year lag on implementing these
updates would allow for greater risk management which is becoming
increasingly more important to producers and processors.
NAJ's post-hearing brief reiterated their support for Proposal 2,
arguing record evidence shows protein and other solids levels in
producer milk have progressively and significantly increased since FMMO
reform in the late 1990s. NAJ stated the trend of higher solids
components in skim milk was expected to continue due to economic
signals to producers from component values and improved production
techniques. NAJ argued amendments of standard skim milk composition
factors is necessary to help avoid periods of price inversions,
depooling, undervaluing Class I milk, milk supply inefficiency, and
disincentives to supply milk for Class I use. NAJ stated a change to
the skim milk component levels should be announced at least 11 months
in advance of implementation due to risk management practices used by
producers and processors. NAJ argued annual updates better serve risk
management practices because it would lead to smaller incremental
changes and less adverse impact on risk management contracts with more
than 12-months open interest at the time component changes are
announced.
A witness representing Edge Dairy Farmer Cooperative (Edge), a
Wisconsin-based dairy milk test verification cooperative, testified in
support of Proposals 1 and 2. The witness recommended increasing the
implementation lag to 15.5 months to support longer contract hedging.
The witness was of the opinion the standard butterfat test also should
be updated from 3.5 percent to 4.06 percent, the 2022 average butterfat
for all markets combined as published by the USDA's AMS. According to
the witness, this would more accurately reflect current butterfat
levels and better align the butterfat to protein ratio used in the
formula, ensuring more effective risk management tools, as farmers'
ability to manage their gross pay price risk would improve.
Edge, in their post-hearing brief, reiterated hearing testimony
that failure to adjust the butterfat level when updating skim component
levels would cause disorderly milk marketing, as it undermines
effective risk-management tools for dairy farmers. Edge argued that
without the corresponding change, producers hedging milk revenue using
risk management products based on Class III milk or Class IV milk
prices, will tend to be under protected against the decline in
butterfat prices. Edge added that changing the butterfat level would
not affect handler obligations to the producer settlement fund, PPDs,
or uniform producer prices.
A witness representing the International Dairy Foods Association
(IDFA) testified in opposition to Proposals 1 and 2, stating that
updating the component standards would increase the Class I skim price
by $0.60 per cwt, a value that cannot be recovered in the marketplace.
IDFA is a trade organization representing dairy manufacturers of milk,
cheese, ice cream, yogurt, cultured products, and dairy ingredients.
The IDFA witness testified consumers choose finished Class I products
based on desired fat level, freshness, and price, not higher nonfat
solids levels. The witness estimated that updating component levels in
the formulas would result in manufacturing handlers in butterfat/skim
FMMOs paying an additional $0.40 to $0.80 per cwt, even though the
component levels of milk delivered to those plants was less than those
proposed. The witness cited National Dairy Herd Information Association
(DHI) data showing 2020 to 2022 average skim protein levels in
butterfat/skim FMMOs below the levels contained in Proposals 1 and 2.
The witness attributed the lower observed component levels to the fact
that producer payments in these orders are made on the basis of the fat
and skim content of their milk, leaving no financial incentive to
produce higher component milk.
A witness from Saputo Cheese USA (Saputo), appearing on behalf of
IDFA, also testified in opposition of Proposals 1 and 2. Saputo is a
dairy processor and manufacturer operating 29 plants throughout the
U.S. The witness said Saputo operates three plants located in the skim/
fat orders, and in 2022 the average NFS level of milk received at those
plants was 9.1070 percent, which is less than what is proposed in
Proposals 1 and 2. The witness explained Saputo purchases skim solids
to add to its skim milk in order to ensure the Class II products it
manufactures contain the skim solids necessary to meet standard of
identity requirements for those products. Updating the component levels
in the formula would only result in Saputo paying for skim solids not
received, but it would not lower the amount of skim solids Saputo must
purchase, explained the witness.
A post-hearing brief submitted by IDFA reiterated its opposition to
Proposals 1 and 2, arguing that increased component levels have no
financial benefit or economic value to Class I handlers who would be
the primary entities impacted by adoption of these proposals. IDFA
stated the current FMMO system of pricing Class I milk on a skim/fat
basis versus Classes II, III, and IV milk on a component basis does not
create disorderly marketing.
The Milk Innovation Group (MIG) is a group of fluid milk processors
and producers that market value added dairy based products. MIG's
members include Anderson Erickson Dairy (AE), Aurora Organic Dairy
(Aurora), Crystal Creamery, Danone North America (Danone), fairlife, HP
Hood LLC (HP Hood), Organic Valley/CROPP Cooperative (Organic Valley),
Shamrock Foods Company (Shamrock), Shehadey Family Foods LLC
(Shehadey), and Turner Dairy Farms (Turner Dairy). Crystal Creamery is
a California fluid milk processor producing Class I, II, and IV
conventional and organic milk products. Danone is a food and beverage
company operating seven plants in the U.S. Fairlife is a fluid milk
processor of ultra-filtered lactose free milk, and other high protein
products. Organic Valley is a dairy farmer-owned organic cooperative
producing more than 30 percent of the organic milk sold in the U.S.
Seven witnesses representing MIG, including witnesses from HP Hood,
Shehadey, Saputo, Shamrock, AE, Turner Dairy, and Aurora, testified in
opposition to Proposals 1 and 2. HP Hood is a fluid milk processor
operating five ESL plants and four high-temperature, short-time (HTST)
plants in the Northeast and California. Shehadey operates four
manufacturing plants in California, Nevada, and Oregon, producing Class
I and Class II products. Shamrock is a fluid milk
[[Page 57585]]
processor of HTST and ESL products with processing facilities in
Arizona and Virginia, and a 20,000-head dairy farm located in Arizona.
AE is an Iowa fluid milk processor producing both Class I and II
products. Aurora is a vertically integrated organic milk supplier with
four organic dairy farms located in Colorado and Texas. Turner Dairy is
a small fluid milk processor with full or partial ownership of two
fluid milk plants, as well as a standalone Class II plant, all located
in western Pennsylvania.
Six witnesses testified their plants regularly receive milk with
components below the proposed levels. One witness offered that
component levels received ranged from 3.09 to 3.63 percent protein,
5.83 to 6.10 percent other solids, and 8.92 to 9.65 percent NFS. MIG
members testified that increasing the component levels in the formulas
would increase their raw milk costs, requiring them to pay for milk
components not received. One witness stated that adoption of Proposals
1 and 2 would increase costs between $0.60 and $0.75 per cwt. All MIG
witnesses claimed that fluid milk processors, even if they did receive
higher component milk, are unable to convert those higher components
into additional market revenue as Class I products are sold on a
volume, not component basis.
Another MIG witness testified on a survey conducted of MIG members
plus two additional large grocery retailers who own their own fluid
milk processing plants. According to the witness, using component data
from 32 out of the 36 plants surveyed, these plants frequently received
milk with components below the proposed levels. As data was
confidential, no specific data was provided. The witness also noted the
data showed component levels changed due to seasonality and
geographics, demonstrating inconsistent levels received by plants. The
witness testified the adoption of Proposals 1 or 2 would raise Class I
prices and make it more challenging for these plants to recover costs.
Should USDA decide to change the standard component levels in the
pricing formulas, the witness testified component minimums should be
used instead of averages because FMMOs are meant to provide minimum
prices.
A post-hearing brief filed on behalf of MIG argued it would be
disorderly for Class I fluid milk processors, the only mandatory
participant of FMMOs, to be forced to pay for component levels
regardless of what is actually received. MIG opined consumers do not
value additional skim component levels in fluid milk products,
therefore Class I processors are unable to recoup additional revenue
out of the market. MIG was of the opinion no record evidence was
provided at the hearing that the current skim component formula factors
are causing disorderly marketing and added that although they oppose
Proposals 1 and 2, if any part of these proposals are adopted there
should be a 12-month implementation delay.
A witness representing the CME Group (CME) testified to explain
various dairy risk management tools offered through the exchange,
including futures and options contracts. The witness explained the CME
is a derivatives marketplace offering a range of futures exchanges to
meet private risk management needs. The witness explained a futures
contract is a legally binding agreement to buy or sell a standardized
asset on a specific date or during a specific month. An option on a
futures contract is the right, but not the obligation, to buy or sell
the underlying futures contract at a predetermined price on or before a
given date in the future. The witness stated 97.43 percent of contracts
in the futures and options market are for 12-month periods, and in a
previous change to futures contracts there was an 18-month lag on
implementation to be beyond open interest. The witness testified that
Dairy Revenue Protection (DRP) is one of many programs that rely on CME
markets and advocated USDA to consider futures and options markets when
establishing implementation plans.
In its post-hearing brief, CME reiterated its neutrality on all
proposals under consideration. They stated any change modifying the
current Class III and Class IV formulas would be considered a material
change affecting current contracts. CME stressed the importance of
sufficient and transparent notice of any changes.
A post-hearing brief was submitted on behalf of Select Milk
Producers (Select), a dairy-farmer owned cooperative which owns and
operates eight processing plants in Texas, New Mexico, and Michigan,
manufacturing ESL fluid milk products and a variety of cheese, butter,
and NFDM products. Select offered support for Proposal 1 and took
exception to the assertion there is no value in higher protein levels
in Class I products, as it is belied by the success of specialty fluid
milk products such as fairlife, and the higher milk solids required for
California fluid milk. Although Select supported adoption of Proposal
1, they do not support a delay in implementation, nor the annual update
as contained in Proposal 2.
Lamers Dairy Inc. (Lamers), a Wisconsin based HTST fluid milk
processor, submitted a post-hearing brief in opposition to Proposals 1
and 2. Lamers stated component levels can vary both regionally and from
farm to farm. Lamers opined that USDA is statutorily required to
conduct a study of component levels before any change could be made and
argued adoption of Proposals 1 and 2 should not be considered.
New Dairy OPCO LLC (New Dairy), a fluid milk processor operating
four fully regulated distributing plants (three of which are located in
the southeastern U.S.), submitted a post-hearing brief in opposition to
Proposals 1 and 2. New Dairy offered support for arguments made by IDFA
and MIG that fluid milk processors would be unable to recoup the
additional cost of components should Proposals 1 or 2 be adopted. They
purport that charging fluid milk processors for components not actually
received would be disorderly. New Dairy said raising component levels
in the formulas would harm its southeastern plants as they pay on a
skim/fat basis which provides no incentive to producer to increase
components to match the national average.
In its post-hearing brief, NMPF opposed the annual updating feature
contained in Proposal 2. NMPF stated that by limiting changes to the
standard component levels to a periodic basis and relying on 3-year
weighted average, Proposal 1 is more likely to produce accurate
component values and avoid disruption from more frequent changes.
Surveyed Commodity Products
This rulemaking proceeding considers four proposals, and a modified
proposal submitted during the hearing, that would add or remove a
variety of products in the DPMRP survey, which are then reported in the
National Dairy Product Sales Report (NDPSR) and used to establish FMMO
classified prices. The proposals are as follows:
Proposal 3, submitted by NMPF, seeks to eliminate the Cheddar
cheese barrel price from the cheese price formula.
Proposal 4, submitted by AFBF, seeks to add Cheddar cheese 640-
pound block price series to the cheese price formula.
Proposal 5, submitted by AFBF, seeks to add unsalted butter to the
butterfat and cheese price formulas.
Proposal 6, submitted by the California Dairy Campaign (CDC), seeks
to add a price series for mozzarella to the cheese price formula.
Edge offered a proposal modification during the hearing to adopt
different weighting methodology which would
[[Page 57586]]
reweigh 40-pound blocks and 500-pound barrels in the DPMRP survey by
all U.S. cheddar block and barrel production volumes.
NMPF witnesses from Foremost Farms USA (Foremost), Ellsworth
Cooperative Creamery (Ellsworth), Land O'Lakes (LOL), and DFA testified
in support of Proposal 3. Foremost is a cooperative with 850 members
located in Wisconsin, Michigan, Iowa, Minnesota, Indiana, Ohio, and
Illinois, and operating eight manufacturing plants producing cheese and
butter.
Ellsworth is a Wisconsin-based cheese manufacturer producing a
significant volume of barrel cheese and a variety of specialized
cheeses and cheese curds from 250 dairy-farmer members. LOL is a dairy
farmer-owned cooperative with more than 1,000 dairy farmer members,
primarily producing butter and cheese.
The witnesses explained the current cheese price formula includes
both block and barrel cheese in the computation. They asserted the
cheese price formula provides for orderly marketing if the difference,
known as the ``spread,'' in the respective market prices of blocks and
barrels remains close to the assumed $0.03 per pound cost difference,
which occurred from 2000 to 2016. However, since 2017 the spread
between the block and barrel prices has been volatile. One witness
stated the weighted average spread published in the weekly NDPSR during
January 2017 through July 2023 was $0.120 per pound, with a much wider
and more volatile range per pound. The LOL witness opined that the
DPMRP survey could continue to include and publish prices of 500-pound
barrel cheese without necessitating its inclusion in the Class III
protein price calculation.
An NMPF witness testified the CME block cheddar price is used as a
pricing index for most cheese produced in the U.S., including cheddar,
40-pound block, 640-pound block, mozzarella, other American-type
cheese, and other cheese including cream cheese, and Hispanic cheese.
They estimated 90 percent of natural cheese produced in the U.S. is
sold using the CME 40-pound block cheddar price as a pricing index. The
witness estimated the CME barrel cheese price is used to price only
about 9 percent of total domestically produced natural cheeses,
including barrels themselves. They said DPMRP survey volumes of barrel
cheese between 2013 and 2022 ranged from 44 to 52 percent, resulting in
an overrepresentation of 500-pound barrels compared to the actual
volume of cheese that is priced off of barrels. The witness testified
that since 2017, the significantly wider and increasingly volatile
block-barrel spread has caused instability in the cheese market.
Consequently, the witness said, dairy farmer revenue has been reduced
as the over representation of 500-pound barrels lowered the Class III
price. The Foremost witness estimated the undervaluation represented $2
billion since 2017, opining the value would have been greater if not
for the large volume of Class III milk not pooled in 2020 and 2021.
The NMPF witness testified eliminating 500-pound barrel prices from
the Class III price would create more orderly marketing in FMMOs by
reducing the financial uncertainty for dairy producers and
manufacturers and ensuring the cheese price in the protein component
formula represents the single commodity cheddar cheese product. The
witness described how barrel cheese manufacturers are harmed when they
must account to the pool at an FMMO cheese price higher than the
revenue generated from barrel cheese product. The witness said
eliminating the 500-pound barrels would have increased the Class III
price by $0.41 per cwt, using average product prices for 2017 to 2022.
An NMPF witness testified that removing 500-pound barrels had been
addressed in prior rulemakings, but denied by USDA in the rulemaking.
However, current market conditions have significantly changed,
necessitating a re-evaluation. The witness attributed the increased
volatility in the block-barrel price spread since 2017 to a variety of
factors, including increased 500-pound barrel production capacity that
may be due to increasing values of its white whey by-product.
NMPF witnesses testified eliminating 500-pound barrel cheese from
the protein component price (PCP) formula would still provide adequate
volume of cheddar cheese for price discovery purposes as 40-pound block
cheese surveyed represents approximately 16 percent of total U.S.
natural cheddar cheese production. The witness also said this
methodology change would bring the cheese price into conformity with
the price for butter, NFDM, and dry whey, which utilize only one
surveyed product for price discovery purposes.
The witness testifying on behalf of Ellsworth stated 40-pound
blocks and 500-pound barrels are not interchangeable products. The
witness said while 40-pound block cheddar has many markets and uses,
500-pound barrel cheddar is used for processed cheese, a market driven
by few processors and purchasers. As a result, the witness said,
surveying barrel cheese prices skews the FMMO cheese price towards a
smaller market which is not representative of the rest of the cheese
market. The witness estimated the volatility in the block-barrel spread
since 2017 cost Ellsworth producers $0.84 per cwt. The witness said
barrel cheese manufacturers would adjust to the elimination of barrel
prices from the survey and eventually transition to prices based on the
40-pound block cheese price.
Witnesses representing IDFA, Leprino Foods Company (Leprino), and
Associated Milk Producers, Inc. (AMPI) testified in opposition to
Proposal 3. Leprino operates nine plants in the U.S., manufacturing
mozzarella cheese, whey products, and NFDM. AMPI owns and operates
eight manufacturing plants processing cheese, butter and powdered dairy
products from member farms in Wisconsin, Minnesota, Iowa, Nebraska,
South Dakota, and North Dakota.
The witnesses said sales of both block and barrel cheddar cheese
are robust and each play a significant role in setting the market value
of cheddar cheese. They argued eliminating 500-pound barrels would
reduce by more than half the cheese market price contained in the
survey and would result in a distorted picture of the total commodity
cheddar market. The witness said opposition to removing barrels was not
related to the presumed effect on the Class III price as the NDPSR
weighted average cheese price (reflecting block and barrel cheese) was
higher than the 40-pound block price in 9 of 14 years from 2009 to
2022. One witness opined additional cheddar block plant capacity is
coming on-line in the next couple of years, increasing 40-pound block
volumes, and would reduce the block-barrel spread to historical levels
under normal supply-demand behavior.
The IDFA witness speculated cheddar barrel manufacturers may opt
not to pool milk if the barrel price is no longer surveyed because they
would be unable to garner sufficient market revenue in order to account
to the pool and the Class III price.
Two Leprino witnesses testified eliminating 500-pound barrels from
the Class III price formula removes the product most closely reflecting
the supply and demand balance. They were of the opinion that removing
500-pound barrels would both shrink the survey volume and likely result
in greater production of cheddar blocks as a way to clear the market.
The witnesses testified this would add volatility to the block market,
cause unnecessary stress to the U.S. marketplace, and make U.S.
[[Page 57587]]
cheese a less attractive option for global buyers.
The Leprino witnesses said dropping 500-pound barrels from the
survey would create a presumption within the Class III formula that all
cheese, including barrels, would then be priced off blocks. The
witnesses asserted barrels and blocks have different supply and demand
functions, and eliminating barrels from the Class III formulas would
force barrels to be priced off blocks, adding dysfunction to the barrel
market. The witnesses were of the opinion barrels are the market-
clearing cheese, and instead 40-pound blocks should be eliminated from
the price formula to be more consistent with the minimum pricing
provisions.
In its post-hearing brief, NMPF reiterated testimony regarding
price differences between 40-pound blocks and 500-pound barrels
becoming more volatile since 2017. Historically, NMPF wrote, using both
block and barrel prices in the Class III pricing formula increased the
volume of cheddar cheese reported in the NDPSR. However, the increased
price spread has caused instability in the cheese market and reduced
revenue for dairy farmers as the barrel price is a disproportionately
large share when compared to its volume in the cheese market. NMPF
estimated 90 percent of the natural cheese produced in the U.S. is
priced using the CME 40-pound block price, while the remaining is
priced off of the CME barrel cheese price. As a result, NMPF wrote, the
Class III milk price has been undervalued and lowered producer revenue.
Leprino submitted a post-hearing brief reiterating the important
balancing function barrels provide and opined removing them would push
40-pound blocks into the balancing role and would increase price
volatility for cheddar blocks.
Select submitted a post-hearing brief in support of Proposal 3,
arguing 500-pound barrels no longer represent the commodity cheddar
market and 40-pound blocks are an appropriate commodity to establish
the protein price. According to Select's brief, current formulas
dramatically over weights the price of barrels relative to the markets
actual use barrels and the cheese priced off of them.
The AFBF submitted a post-hearing brief in support of Proposal 3
reiterating hearing testimony that barrels represent roughly 50 percent
of the NDPSR volume but is used to set prices for only 10 percent of
the cheese in the U.S. market. The AFBF stressed use of barrels in the
cheddar cheese price formula creates a price not representative of the
value of 90 percent of cheddar cheese produced.
IDFA, in their post-hearing brief, opposed Proposal 3 as they
argued its adoption would make 500-pound barrel production
uneconomical, resulting in barrel makers going out of business or
switching to block production which would destabilize the block market.
IDFA wrote that 40-pound blocks and 500-pound barrels serve materially
different functions in the market and the failure to include both in
the survey would distort the commodity cheddar cheese market.
NAJ submitted a post-hearing brief in opposition to Proposal 3. NAJ
cited hearing evidence showing the market price of block and barrel
cheese has diverged significantly since 2017, with barrel cheese priced
about $0.11 per pound less than block cheese from 2017-2022. NAJ stated
blocks and barrels have different uses, different buyer markets, and
limited substitutability. With an expected increase in block production
in the coming years, NAJ wrote, there may be many months in which
barrels are more per pound and should remain part of the cheese price
formula.
A witness representing the AFBF testified in support of adding 640-
pound cheddar blocks to the Class III formula, as contained in Proposal
4. The witness said adding 640-pound blocks would expand the volume of
cheese surveyed and better reflect U.S. block and barrel production
volumes. The witness was of the opinion there has been a pronounced
production shift from 40-pound blocks to 640-pound blocks and adding
640-pound blocks would provide more survey volume to avoid future
rulemaking to address the dwindling 40-pound block survey volume. The
witness testified that 40-pound and 640-pound blocks are largely
interchangeable in price, use, and storage, and therefore it is
appropriate those prices be reflected in the Class III price.
A witness representing IDFA testified in opposition to Proposal 4.
The witness said the DPMRP cheese survey encompassed more than 1.34
billion pounds of sales in 2022, divided almost evenly between 40-pound
blocks and 500-pound barrels. The witness testified the data set is
sufficient to determine prices in the market and, since 640-pound
blocks typically trade off the 40-pound block price, its addition would
provide little additional price discovery information. The witness
opined that only a small percentage of the 640-pound block market would
meet survey specifications because of the nature of how the product is
manufactured and sold.
The two Leprino witnesses argued it would be inappropriate to add
640-pound blocks as the market is largely make-to-order and the lack of
equipment to handle 640-pound blocks limits sales to a narrow group of
buyers. The witnesses noted the 640-pound block market is balanced
through the cutting down of 640-pound blocks into 40-pound blocks, so
the 40-pound block cheddar market is already reflected in its pricing.
A witness representing Glanbia PLC (Glanbia), testified in
opposition to Proposal 4. Glanbia owns four dairy plants in Idaho and
partially owns two joint venture plants in New Mexico and Michigan,
processing 34 million pounds of milk daily into barrel cheese, block
cheese, whey protein concentrates, proprietary protein blends, and
lactose. The witness testified Glanbia plants manufacture 40-pound and
640-pound-blocks, both priced off the CME 40-pound block price and
opined that adding 640-pound blocks would not add new information to
the survey.
A witness representing the Wisconsin Cheese Makers Association
(WCMA), whose 81 members include cheese manufacturers making 40-pound
blocks, 640-pound blocks, and 500-pound barrels, testified in
opposition to Proposal 4. The witness testified the industry uses the
40-pound block price to price 640-pound blocks, and since 40-pounds
blocks are already used in the protein formula, adding 640-pound blocks
would add no new price information.
A DFA witness representing NMPF, testifying in opposition to
Proposal 4, said the 40-pound block volume provides an adequate dataset
and the sole inclusion of 40-pound blocks is sufficient for cheese
price discovery, making adoption of Proposal 4 unnecessary. The witness
stated the daily CME cash block cheese market is widely recognized by
market participants as heavily influencing the price of cheese. The
witness concluded that because annual CME block cheese traded volumes
are not as large as NDPSR block survey volumes, the volume of 40-pound
blocks reported in the NDPSR is more than adequate to determine the
FMMO cheese price. The witness testified that incorporating 640-pound
blocks into the NDPSR data set could promote the same disorderly market
conditions currently observed with the inclusion of 500-pound barrels.
The AFBF reiterated their support of Proposal 4 in their post-
hearing brief. The AFBF indicated 640-pound blocks are priced
identically, or nearly
[[Page 57588]]
identically, to 40-pound blocks, and are a standardized commodity
cheddar cheese product. Including the 640-pound blocks in the NDPSR
survey, they argued, would help make the survey more robust.
Select, in their post-hearing brief, expressed support for Proposal
4 agreeing with proponents that its inclusion would increase DPMRP
survey volume. Select mentioned that with new cheese processing
capacity starting in upcoming years in Minnesota, New Mexico, Michigan,
and Texas, 640-pound blocks would become a larger proportion of the
commodity cheddar market and it would be prudent to incorporate their
prices and volume in the survey.
IDFA reiterated opposition to Proposal 4 in its post-hearing brief.
IDFA highlighted evidence describing how 640-pound blocks are typically
made to customer order as there is only a small number of cheese buyers
who are able to purchase and process them. Since manufacturers of 640-
pound blocks often balance the 640-pound block market by cutting them
down to 40-pound blocks, IDFA said no new price information would be
gained from including 640-pound blocks in the survey.
WCMA also expressed opposition to Proposal 4 in their post-hearing
brief and wrote that because 640-pound blocks do not have a unique
price discovery mechanism, they would add no new price information to
the formulas.
A witness representing the AFBF testified in support of Proposal 5,
seeking to add unsalted butter to the DPMRP butter survey. The witness
said because of the growing volume of unsalted butter production and
use in the U.S., the DPMRP salted-only butter price collection
increasingly underrepresents the value of U.S. butter. According to the
witness, the amount of butter captured by the NDPSR as a percentage of
total butter production has been declining, from 16 percent in 1999 to
9.4 percent in 2022. The witness expected this trend to continue
without the addition of unsalted butter.
Citing USDA voluntarily graded salted and unsalted butter volumes,
the AFBF witness said one reason for declining butter survey volumes is
the increase in U.S. unsalted butter production. The AFBF witness
testified the exclusion of unsalted butter is unnecessarily restrictive
for the purposes of the DPMRP survey. The witness cited U.S. butter
export data showing 2,000 metric tons exported in 2000, to over 65,000
metric tons in 2022, estimating almost all the exports were unsalted.
The witness said incorporating unsalted butter prices into the FMMO
butterfat formula would make the survey more representative of the
evolving butter market, allow for better market transparency, and
provide for more orderly marketing of butter and milk. The witness
claimed salted and unsalted butter are production substitutes, as the
same production line can be used for both without substantial
interruption. The witness clarified Proposal 5 is not intended to
change the current 80 percent butterfat reporting standard for butter,
and therefore exported unsalted butter at 82 percent butterfat would
continue to be excluded.
A witness representing CDC expressed support for Proposal 5,
without additional testimony. The CDC represents dairy farmers
throughout California and is a state chapter of the National Farmers
Union.
A witness representing IDFA testified in opposition to Proposal 5.
The witness testified there is no uniform specification for unsalted
butter, so it is impossible to derive a uniform price for purposes of
an FMMO pricing formula. The witness explained unsalted butter does not
store as well compared to salted butter, rendering unsalted butter less
capable of providing useful uniform price information. The witness also
testified unsalted butter tends to be priced off the CME Grade AA
salted butter price, and therefore does not bring any new pricing
information. As substantial quantities of unsalted butter are exported
through premium-assisted sales, which would not be included in the
DPMRP survey, emphasizing unsalted butter should not be relied on for
determining the market price of butter. Moreover, the witness
considered the current volume of salted butter reported in the DPMRP to
be a robust quantity of butter sales.
A witness representing the Dairy Institute of California (DIC)
testified in opposition to Proposal 5. The DIC is a trade association,
representing fluid milk and dairy product processing plants in
California. The witness asserted most unsalted butter is 82 percent
butterfat and exported and should be considered substantively different
from domestically consumed butter which contains 80 percent butterfat.
The witness referenced a lack of clarity on how subsidies on exported
butter would be handled in the product price reporting as another
reason for their opposition.
A California Dairies, Inc. (CDI) witness, representing NMPF,
testified in opposition to Proposal 5. CDI is a California dairy
farmer-owned cooperative with 258 members producing and marketing 41
percent of California's total milk production and operating six butter
and milk powder manufacturing facilities in the state. The witness
disagreed with the assertion that salted butter at 80 percent butterfat
no longer represents an adequate survey volume. The witness testified
CDI manufactures both types of butter, and unlike salted butter,
unsalted butter is manufactured exclusively for customer order. The
witness argued sales of the two types of butter are not
interchangeable. The witness stressed the addition of salt allows
salted butter to be stored for long periods, making it a market
clearing product, whereas the nature of unsalted butter requires it to
be sold and consumed in a significantly shorter period of time. The
witness was of the opinion introducing unsalted butter into the survey
may result in volatility in the relationship between salted and
unsalted butter similar to the current volatile relationship between
40-pound block and 500-pound cheddar barrels. The witness said it was
preferable to have one product generate the singular commodity
reference price for purposes of calculating the minimum FMMO prices.
In post-hearing briefs, the AFBF offered additional support for
Proposal 5, stating the growing volume of unsalted butter production
and use in the U.S. markets results in a salted-only butter price
collection in the NDPSR survey which increasingly underrepresents the
value of U.S. butter. The AFBF argued the declining trend in butter
survey volume as a percent of actual production would continue, as
butter survey volume has fallen from 16 percent of total production in
the 1999 to 9.4 percent in 2022.
Select expressed opposition to Proposal 5 in its post-hearing
brief. Select argued that despite the growth of unsalted butter
products, it should not be included in the survey because it lacks a
uniform specification, is typically produced for special orders, has no
active commodity market, is often made with 82 percent butterfat versus
80 percent, and is viewed as a higher-value product.
IDFA's post-hearing brief reiterated their opposition to Proposal 5
stating the Grade AA salted butter survey volume is robust and the
product is traded on the CME. IDFA wrote that a majority of unsalted
butter is exported through government or private assisted sales, such
as Dairy Export Incentive Program or Cooperatives Working Together,
which would disqualify such sales from being reported. IDFA also stated
unsalted butter does not store as
[[Page 57589]]
well as salted butter, making it more likely to be made to order to a
particular buyer's specifications.
A witness representing the CDC testified in support of adding
mozzarella prices to the FMMO cheese price, as contained in Proposal 6.
The witness was of the opinion adding mozzarella would make the FMMO
Class III price more reflective of all U.S. cheese production. The
witness asserted that because the volume of mozzarella production
significantly exceeds cheddar production it should be reflected in the
FMMO cheese price to improve price transparency and increase dairy
farmer revenue. The CDC witness also stated mozzarella production is
the largest category of cheese produced today and deserves a standard
specification determined by the volume of mozzarella produced today.
The CDC witness proposed adding mozzarella to the FMMO protein
price based on the Van Slyke cheese yield formula, a formula for
predicting cheddar cheese yields from milk on the basis of its fat and
casein content. The witness submitted numerous USDA Specifications of
Mozzarella Cheese for the Department to consider when determining an
acceptable moisture and fat content of mozzarella cheese to be
surveyed. The specification detailed requirements for six variations of
mozzarella types in four forms (loaf, sliced, shredded, or diced). The
witness testified that 5 to 6-pound loaves of mozzarella would be
representative of a wholesale commodity mozzarella product and
reasonable for inclusion in the survey.
A California dairy farmer testified in support of Proposal 6. The
witness said including mozzarella in the survey would create a Class
III price that more accurately reflects the value of the current cheese
market. The witness attributed the ongoing decline in the number of
California dairy farms to negative margins and price volatility and
stressed the urgency in capturing the additional value of mozzarella. A
Wisconsin dairy farmer also supported inclusion of mozzarella for
similar reasons.
A witness representing IDFA testified in opposition to Proposal 6.
The witness described the difficulty in selecting appropriate
mozzarella product specifications, yield assumptions, and manufacturing
costs to include in the formulas whose factors currently reflect only
cheddar production. The witness also testified the commercial
mozzarella cheese market contains wide product variability, including
varying fat and moisture parameters demanded by mozzarella customers.
The witness testified that unlike bulk cheddar products, mozzarella is
not a market-clearing product, is often sold to meet the customer
specifications, is not traded on the CME, and is not storable for
extended periods.
Witnesses from Leprino and Glanbia testified in opposition to
Proposal 6, asserting the proposal lacked critical details making it
difficult to interpret and evaluate. The witnesses explained the
equipment, production, and yield difference between mozzarella and
commodity cheddar. The witnesses said Proposal 6 does not define the
type of mozzarella to be surveyed or how USDA should address the
diversity of mozzarella cheese types and packages. The witnesses stated
significant volumes of mozzarella are manufactured into value-added
forms, whether as shred, string, or smaller retail or foodservice
loaves by the primary manufacturer. The witnesses also noted most
mozzarella is not market-clearing and is stored in refrigerated form
with limited shelf life reducing its role as a market clearing product.
The witnesses added that the volume of mozzarella production sold by
the primary manufacturer in bulk format is comparatively small, in
contrast to cheddar, in which most shredding, processing into consumer
packaging, and conversion to other forms is performed by different
companies rather than the original manufacturer. The witnesses opined
cheddar remains the most appropriate Class III cheese product.
Leprino reiterated their opposition to Proposal 6 in their post-
hearing brief. Leprino argued mozzarella cheese is a grouping or
collection of similar products with diverse specifications, and that
the assumption mozzarella production volume represents a single defined
bulk product is incorrect. Leprino further stated mozzarella has
different manufacturing processes, costs, and product yields.
Therefore, if mozzarella was added to the Class III pricing formula,
the formula would become substantially more complicated with little
incremental benefit.
A Foremost witness, testifying on behalf of NMPF, testified in
opposition to Proposal 6, urging USDA to only utilize one commodity
price series to represent each of the four dairy prices: cheese,
butter, NFDM, and dry whey, to ensure orderly marketing. The witness
noted the many mozzarella composition types, and purported deriving a
40-pound block cheddar equivalent price would be difficult. The witness
added mozzarella manufacturing costs are different and no data exists
to determine how those costs should be reflected in the cheese make
allowance. The witness said including mozzarella pricing into the
protein price calculation would not enhance price discovery as
mozzarella prices already move with the 40-pound cheddar market. Other
NMPF witnesses testified to the appropriateness of limiting the cheese
price to one survey product, cheddar. Witnesses representing the AFBF
and WCMA opposed the inclusion of mozzarella due to the lack of
standard format that could be surveyed.
Select's post-hearing brief opposed Proposal 6 because no workable
framework for incorporating mozzarella into the price formula was
provided on the record.
IDFA's post-hearing brief reiterated their opposition of Proposal 6
as mozzarella lacks uniformity in compositional specifications and
yields and is not traded on the CME. IDFA wrote the U.S. Food and Drug
Administration (FDA) Standards of Identity provide four different
variants of mozzarella cheese, with a wide variety of fat and moisture
levels. IDFA also stated that while proponents advocated use of the Van
Slyke formula to determine yields, the record lacked evidence as to how
the formula should be revised to incorporate mozzarella cheese.
WCMA opposed Proposal 6 in their post-hearing brief. WCMA members
argued that there is no FDA Standard of Identity for mozzarella and are
concerned over the vast variety of forms and functionality of each
mozzarella manufacturer.
A witness testifying on behalf of the CME offered information
regarding its dairy futures and options markets which utilize FMMO
prices. The witness did not appear in support or in opposition to any
proposal under consideration. The witness testified that the CME dairy
product portfolio, which began in 1996, includes Class III and Class IV
milk futures and options, cash-settled cheese, 40-pound block cheese,
cash-settled butter, NFDM, and dry whey. The witness said the
relationship between Class III and Class IV milk futures can serve as a
mechanism to manage both input and output costs and provide the dairy
trading community with an opportunity to provide liquidity to the
market while managing risk. The witness testified any changes to FMMO
formulas, or underlying DPMRP survey methodology could result in a
material change to the valuation of the contracts. A post-hearing brief
filed by CME reiterated its hearing testimony and stressed that the
Department consider the impact to futures and options
[[Page 57590]]
markets when determining the implementation timeframe for any FMMO
price formula changes.
A witness representing Edge offered the modified proposal that
would reweight 40-pound blocks and 500-pound barrels by U.S. production
volumes, not DPMRP survey volumes. The witness said this alternative
weighting methodology would reduce the weight of barrel cheese as most
cheddar cheese is manufactured into blocks. The witness explained that
since a significant volume of block cheddar cheese does not qualify for
inclusion in the NDPSR, barrels have a weight disproportionate to their
true market share of the cheddar market. The witness was of the opinion
the protein price should primarily reflect the block cheddar cheese
market as it is estimated 70 to 75 percent of all cheddar cheese is
produced into 40-pound or 640-pound blocks.
The Edge witness predicted that the block-barrel spread could
invert in 2025 due to the growth of block cheese production. The
witness expects cheese manufacturers who can make either blocks or
barrels will react to profitable opportunities, thus reducing the
spread between block and barrel prices by altering their production
schedules. The witness argued that, given the anticipated trends over
the next 3 to 5 years, it would be more prudent to reduce the weight of
barrels today and revisit the topic of removing barrels in 5 years.
Edge reiterated their support for the weighting methodology in its
post-hearing brief, as an alternative to eliminating barrel cheese or
adding 640-pound blocks to the survey. Edge explained that, in
practice, the Department would survey all barrel cheese production
volume on an annual basis, including forward contracted cheese volumes,
to determine the percentage of barrel cheese produced in relation to
the NASS total U.S. cheddar cheese production estimates. Edge proposed
the percentage be rounded to the nearest 5 percent, and the inverse
would be assumed to represent block production. This calculated weight
would be announced by September 15 and be applicable for the following
calendar year. Survey prices would then be weighted by these
percentages to determine weighted average cheese prices.
IDFA, in their post-hearing brief, opposed Edge's modified
proposal, arguing that it ignores market clearing, minimum pricing
principles. IDFA opposed the idea of Class III prices being
predominantly determined through a 40-pound block cheddar price.
A post-hearing brief submitted by NMPF opposed Proposals 4, 5, 6,
and Edge's modified proposal on the grounds the proposals perpetuate
the problem Proposal 3 seeks to fix, which is to have only one product
surveyed to determine a wholesale commodity price.
Class III and Class IV Formula Factors
a. Make Allowances
Proponents submitted three proposals to amend the make allowances
in the Class III and IV formulas. Proposal 7, submitted by NMPF, seeks
to update make allowances to the following: cheese, $0.2400; dry whey,
$0.2300; NFDM, $0.2100; butter, $0.0210. WCMA and IDFA submitted
Proposal 8 and identical Proposal 9, respectively, to update make
allowances as described in the below table. The proposals contain a
four-year implementation schedule with 50 percent of the increase
implemented in year 1 and the remaining 50 percent implemented evenly
across the remaining 3 years.
IDFA/WCMA Proposed Make Allowances
----------------------------------------------------------------------------------------------------------------
Product Year 1 Year 2 Year 3 Year 4
----------------------------------------------------------------------------------------------------------------
Cheese.......................................... $0.2422 $0.2561 $0.2701 $0.2840
Dry Whey........................................ 0.2582 0.2778 0.2976 0.3172
NFDM............................................ 0.2198 0.2370 0.2544 0.2716
Butter.......................................... 0.2251 0.2428 0.2607 0.2785
----------------------------------------------------------------------------------------------------------------
A former University of Wisconsin economics professor testified
regarding separate manufacturing cost surveys they conducted on behalf
of USDA and IDFA in 2021 and 2023, respectively. Each survey collected
data submitted voluntarily from plants producing commodity cheddar
cheese, dry whey, butter, and NFDM. The witness previously conducted
similar surveys used by the Department in determining make allowance
levels. The witness did not testify in support or opposition to any
manufacturing allowance proposals under consideration.
The witness explained that only plants manufacturing commodity
products meeting DPMRP product specifications were eligible to
participate. As plant participation was voluntary, the sample of plants
and respective volumes varied by product and between surveys, with
increasing cost variation between plants over time. The witness noted
more observed cost variation across plants can occur due to newer
automation technology employed in some plants, varying utility costs
over time, and economies of scale achieved by some plants who negotiate
input costs. The witness explained that dairy-based raw product costs,
such as raw milk or purchased cream, are excluded, while costs of non-
dairy ingredients needed to transform the raw milk into a manufactured
product, such as salt and enzymes, are collected and included in the
survey results. The witness said costs, such as labor and utility,
through the product-packaging stage are incorporated, but post-
packaging costs, such as long-term storage or distribution and sales
costs, are not. The witness explained an economic depreciation factor,
not consistent with taxable depreciation, is incorporated to cover
consumed capital, and the asset's return on investment is included to
capture opportunity costs.
The witness explained two different methodologies used for
allocating costs in multi-product plants that could not be associated
with a specific product (unallocated costs). The witness said the 2021
survey utilized a degree-of-transformation factor to allocate costs
based on degree of transformation raw milk must undergo in order to be
manufactured into the wholesale product. Transformation factors were
assigned subjectively, based on knowledge of manufacturing processes.
As a result, the witness said, unallocated costs were weighted towards
heavily transformed products, such as NFDM, while products undergoing
less transformation, for example, butter, were assigned a lower portion
of the unallocated costs. Due to questions from the industry regarding
this methodology, the witness said the 2023 survey reverted to
allocating costs on a solids basis, a methodology more familiar to
industry stakeholders. The
[[Page 57591]]
witness said the 2021 survey showed more variation of costs when
compared to current make allowance levels, ranging from an 18 percent
decrease in butter costs to a 75 percent increase in NFDM costs. The
2023 survey results revealed a more consistent cost change when
compared to current FMMO levels, ranging from a 65 percent increase in
NFDM costs to a 72 percent increase in butter costs.
The witness attributed much of the survey result differences to the
plant samples. For NFDM, the 2021 survey had 27 participating plants,
whereas the 2023 survey had 15, with larger average volume per plant,
according to the witness. For cheese, the 2023 survey included 18
cheddar cheese plants compared to 10 in the 2021 survey, and the
witness elaborated that the cheese plants surveyed were much larger on
average and represented a significant proportion of the NDPSR volume
when compared to the 2021 survey.
The witness testified the data on butter highlighted the importance
of sample composition. Both surveys sampled a similar numbers of butter
plants, 13 in 2023 and 12 in 2021, and represented roughly the same
total volume. However, the witness stated the 2023 survey had more
variation in production volumes whereas in the 2021 survey, butter
plants were more similarly sized. Finally, the witness testified the
dry whey surveys had similar numbers of participating plants, 9 in 2023
and 8 in 2021, but the surveyed volume in the 2023 survey was nearly 50
percent more than that contained in the 2021 survey.
NMPF offered Proposal 7 as one option for amending FMMO make
allowance levels. Eleven NMPF witnesses, representing the manufacturing
interests of cooperatives, testified in support of Proposal 7. The
witnesses testified the current FMMO make allowances do not resemble
manufacturing costs currently experienced in their plants. The
witnesses provided detailed testimony on the impact of inadequate make
allowances, which consisted of similar themes. First, they were of the
opinion inadequate make allowances cause the FMMOs to overvalue raw
milk. Consequently, the witnesses said many cooperatives have reblended
cooperative revenues to members as a way of recouping manufacturing
costs not covered by current FMMO make allowances. Second, the
witnesses said insufficient make allowances disincentivize plant
investment, whether it be in current or potential new plants.
The NMPF witnesses testified the industry lacks consensus on
reliable data to determine make allowances due to inconsistencies in
cost allocation and reporting across operations. The witnesses were of
the opinion the available manufacturing cost surveys are not
comprehensive or reliable enough to justify large make allowance
increases. The witnesses all stressed increasing make allowances to
levels above actual costs could cause untenable financial harm to
producers, putting many out of business and jeopardizing the milk
supply. One NMPF witness described how an informal manufacturing cost
survey of some NMPF members was used in the development of Proposal 7.
A CDI witness testified regarding the impact insufficient make
allowances have had on their member farms and six butter and milk
powder manufacturing facilities. The CDI witness testified the NFDM and
butter make allowances in Proposal 7 are transformations of the 2021
survey results, using the combined costs and yields of the two
products. An LOL witness testified inadequate make allowances have led
to disorderly market conditions, including lack of investment in
manufacturing plants to process and balance milk supplies and
inequitable producer pay prices between producers of different
cooperatives and between cooperative and nonmember producers.
An Agri-Mark witness said current make allowances overvalue
producer milk and make it difficult for cooperatives with manufacturing
facilities to remain profitable and pay the FMMO blend price.
Consequently, the witness said, cooperatives must re-blend proceeds in
order to recoup manufacturing costs, resulting in producer pay prices
often less than FMMO blend prices. Agri-Mark is a dairy farmer-owned
cooperative located in the Northeastern U.S. with over 550 members, 3
cheese manufacturing plants and 1 butter-powder plant in the region.
A Foremost witness attributed higher operating costs seen in their
plants to inflation since 2008, adding that in the last 2 years, they
have experienced particularly acute price increases in all categories.
A witness representing FarmFirst Dairy Cooperative (FarmFirst), a
cooperative operating in the Upper Midwest with 2,600 dairy farmer
members, testified negotiated over-order premiums have diminished by 24
percent since 2020 due to their processor's compressed margins, partly
a result of inadequate make allowance levels. In addition to reducing
premiums, the FarmFirst witness attested the current make allowances
overvalue producer milk and have contributed to an oversupply of milk
in the Upper Midwest, resulting in milk dumping, negative PPDs,
depooling, and milk selling at below Class III prices.
A Northwest Dairy Association (NDA) witness testified in support of
Proposal 7. NDA is a dairy farmer-owned cooperative located in the
Pacific Northwest with approximately 295 members, whose subsidiary
(Darigold) operates 5 fluid milk bottling plants and 7 manufacturing
plants making butter, cheese, dry whey, and dry milk products. The
witness testified Darigold's manufacturing costs increased 80 percent
between 2008 and 2022. The witness said inadequate or delayed
investment in manufacturing plant capacity increases transportation
costs, which are borne by producers, since milk must be shipped farther
distances to find an available manufacturing market. A witness
representing Maryland and Virginia Milk Producers Cooperative, Inc.
(MDVA), a dairy farmer-owned cooperative located in the Mid-Atlantic
that operates three pool distributing plants and two pool supply plants
manufacturing bulk butter and NFDM, testified costs had increased
compared to 2008 levels, with NFDM conversion costs increasing 64
percent over the period. According to the MDVA witness, Proposal 7
would reduce, but not eliminate, the manufacturing losses incurred in
balancing their milk supply. A witness representing Lone Star Milk
Producers (Lone Star), a dairy-farmer owned cooperative marketing milk
on the Appalachian, Southeast, Central, and Southwest FMMOs, testified
that manufacturing costs at their butter and NFDM plant have risen
since commencing operation in 2017. A witness representing Ellsworth
testified to the increasing costs of production at their cheese and dry
whey operation. Lastly, a DFA witness testified in support of Proposal
7 and provided dairy farm cost of production data, arguing this data
should be considered when determining make allowances.
A dairy economist from the University of Missouri, appearing on
behalf of NMPF, testified on the estimated economic impact of Proposal
7. Using an econometric model, the witness estimated the proposed make
allowances would lead to a $0.30 decline in the All-Milk Price and a
200-million-pound milk production decline in the first year of
implementation, with a further milk production decline of 400 million
pounds in the second year. In the long run, the witness forecasted the
decline in the All-Milk Price would
[[Page 57592]]
moderate to $0.04 as markets adjusted to lowered milk production.
A dairy farm accountant, testifying on behalf of NMPF, presented
various statistics related to their dairy farmer clientele. The witness
testified average total income from their clients' operations was $5.50
per cwt in 2022, with a break-even milk price of $19.78 per cwt. The
witness said the average net income from 2006 to 2023 was $1.23 per
cwt, on an average milk production of 995,115 cwt, yielding an average
net income of approximately $1.2 million. The witness later stated that
a 3,300-milking cow herd would require an investment of approximately
$40 million.
An economist from Cornell University, testifying on behalf of NMPF,
testified on the topics of dairy farm profitability, cost of production
measures, and farm data from the Cornell Dairy Farm Business Summary,
Michigan State University, and the University of Wisconsin. The witness
warned that setting make allowances ``too high'' would lead to
unwarranted investments in processing facilities while setting make
allowances ``too low'' would lead to insufficient plant investments and
cooperative deductions on member milk checks.
Numerous dairy farmers testified in support of Proposal 7,
recognizing the need for increased make allowances despite what they
acknowledge would be a decrease in FMMO producer prices. These
witnesses testified to recent decreased farm margins due to a declining
All-Milk Price, falling net pay prices, higher feed costs, and
increased production costs, leading to near negative operating incomes.
The witnesses said that while make allowance increases would hasten
this trend, Proposal 7 accounts for these factors, balancing producer
and processor needs. Multiple witnesses expressed doubt in the
available manufacturing cost survey data due to its voluntary and
unaudited nature, as well as observations of cheese manufacturing
profitability and continued investment.
Dairy farmer witnesses testified that inadequate make allowances
have disadvantaged dairy farmer-members of cooperatives who own
manufacturing plants compared to dairy farmer-members of cooperatives
who own no plants. Several dairy farmer witnesses said that the
prevalence of market adjustment deductions from their member milk check
signifies negative returns on the cooperatives manufacturing assets due
to inadequate make allowances. Another dairy farmer testified
processing costs for Agri-Mark's four manufacturing plants producing
cheese, butter, NFDM, and whey have increased by an average of 20
percent since 2008, and insufficient make allowances have resulted in
deductions to member milk checks to cover processing costs. According
to the Agri-Mark witness, this has led to disorderly market conditions,
which impair plant investment and disadvantage cooperative members. A
CDI dairy farmer witness testified to the financial difficulties of
operating CDI's balancing plants given current make allowance levels.
A witness representing the Milk Producers Council (MPC), an
organization representing California dairy farms, testified Proposal
7's proposed make allowances balance producer and processor needs. The
witness said the cost survey information entered into evidence is of
limited value due to its voluntary, unaudited nature and the lack of
transparency in cost allocation for multi-product plants. The witness
argued differences between the All-Milk Price and the Mailbox Price
indicates a need for increased make allowances and a guideline to the
resulting impact on producer pay prices, currently estimated at $0.75
per cwt.
In its post-hearing brief, NMPF reiterated its arguments for
adopting the make allowance levels contained in Proposal 7, writing it
is the only option accounting for an increased cost in manufacturing
while protecting producer pay prices. NMPF stated there has never been
a make allowance adjustment greater than $0.35 per cwt, and the changes
contained in Proposal 7 would decrease farmer milk prices by
approximately $0.50 per cwt.
NMPF presented in its brief the aggregated costs cooperatives with
manufacturing capacity shared on the record, to emphasize the increases
across cost categories since make allowances were last updated. While
the need to update make allowances to reflect higher costs is
necessary, NMPF stated the data on the record is not sufficiently
comprehensive, verifiable, or unambiguous to determine make allowances
above those offered in Proposal 7. In its post-hearing brief, Agri-Mark
reiterated support for Proposal 7 as the most balanced approach to
updating make allowances, despite acknowledging the proposed levels are
not sufficient to cover all manufacturing costs.
Opponents to Proposal 7, primarily representatives for IDFA or
WCMA, echoed similar concerns from cooperative manufacturers regarding
inadequate make allowances, claiming the inability to recover
manufacturing costs on wholesale commodity products has led to a lack
of investment in manufacturing capacity. These witnesses testified on
the importance of make allowances fully covering manufacturing costs,
rather than a portion of costs as proposed in Proposal 7. Witnesses
testified that continued capital investment in plant yield and
efficiency gains have not fully countered the effects of insufficient
make allowances as costs have continued to increase. Without make
allowances accurately reflecting costs, the witness said, manufacturers
receive inaccurate financial signals, which impact investments, capital
distribution, and FMMO pooling decisions. Additionally, they said the
competitive advantage gained by manufacturing plants not regulated by
an FMMO lead to more investments into operations unaffiliated with the
FMMO system. Only an increase in make allowances reasonably covering
commodity product manufacturing costs, according to these witnesses,
can counteract these effects.
In its post-hearing brief, IDFA reiterated opposition for Proposal
7, writing that the proposed make allowance levels are inadequate and
not grounded in observed data. IDFA stressed that make allowances are
defined as covering the entire cost of converting raw milk to a given
dairy product, not a portion. In its brief, IDFA pointed to NMPF's
recognition that Proposal 7's make allowances do not fully cover actual
costs but instead represent a balance dairy farmers can withstand. IDFA
objected to the consideration of farm production costs when determining
make allowance levels. IDFA reiterated FMMOs are not a price support or
income support program, and the prices must reflect the market price of
end-dairy products. IDFA explained manufacturers cannot raise the
prices of commodity dairy products to offset higher manufacturing costs
because the wholesale prices are captured in the NDPSR and would raise
the reference price by the same amount. AMPI reiterated in its post-
hearing brief opposition for Proposal 7 as failing to reflect 2022
manufacturing costs. AMPI argued that USDA should not delay increasing
make allowances on the possibility that legislation will give USDA the
authority to conduct a mandatory audited survey.
A witness from DIC testified in support of Proposals 8 and 9. The
witness testified that setting minimum prices too high incentivizes
excess milk production, while a low minimum price through higher make
allowances allows for over-order premiums to set a competitive market
price. The witness
[[Page 57593]]
argued Class III and IV prices should allow manufacturing plants to
clear the market and operate profitably.
The DIC witness entered data concerning its 2022 California dairy
manufacturing cost forecast (2022 CA Forecast). The witness testified
the 2022 CA Forecast used a combination of 2003-2016 California
Department of Food and Agriculture (CDFA) data, state and national
indices, and market developments to measure how changes in labor,
utility, and other costs historically moved the actual CDFA cost data.
The model then used that information to forecast California-specific
2017-2022 manufacturing costs, according to the witness. The witness
said while the model forecasts costs, the range of actual costs around
those forecasts could be relatively wide given the relatively few
observations (14 years) used to estimate the model. For example, the
expert witness elaborated that CDFA only collected dry whey costs until
2006, when they surveyed fewer than three dry whey plants, which is why
the CA analysis did not forecast dry whey costs. The DIC witness opined
the best approach to determine manufacturing allowance levels is using
observed cost data but offered the 2022 CA Forecast as another
methodology for use with the other cost surveys and testimony
presented.
An IDFA witness testified in support of Proposals 8 and 9, stating
make allowances should be updated to reflect increased costs in
manufacturing dairy products. The witness said that while end-product-
prices change monthly to reflect the current market, make allowances
are fixed at 2006 cost levels, forcing dairy manufacturers to lose
money or stop production. The witness stressed the need for relief from
the current inadequate make allowances that do not reflect rising
industry costs, adding losses are not sustainable for plants or dairy
farmers who depend on these manufacturing outlets for their milk. The
witness explained IDFA's proposed make allowances are simple averages
of the 2023 survey and 2022 CA Forecast plus a $0.0015 marketing cost.
The IDFA and WCMA witnesses asserted accurate make allowances need
to be adopted quickly as current make allowances are based on 2005/2006
cost data. The IDFA witness clarified their staggered implementation
proposal, which would implement proposed year 1 levels shortly after
the final decision is published. Both IDFA and WCMA witnesses said the
staggered implementation is designed to recognize the impact
significant make allowance increases would have on producer prices.
However, if there is any delay in implementing changes, both witnesses
stressed the staggered implementation approach should be abandoned and
the proposed year 4 levels should be implemented.
The WCMA witness stated the use of audited California manufacturing
cost data in the 2022 CA Forecast should alleviate any data validity
concerns and the 2023 survey methodology follows precedent used to
determine the current make allowance levels. The witness noted the risk
of using a simple average of the 2022 CA Forecast and the 2023 survey
to determine proposed make allowances is the potential of the result
being skewed towards California costs, since California plants are
represented in both surveys.
A dairy farmer witness, who is a member of AMPI, testified on
behalf of IDFA and expressed support of Proposals 8 and 9. The witness
testified that AMPI, who participated in the 2023 survey, experienced
cheese manufacturing costs close to the study average despite plant
sizes that were smaller than the survey average plant size. The witness
said their manufacturing costs of bulk cheese products are 47 percent
higher and general plant expenses are up 62 percent in 2022, compared
to 2008.
Several dairy manufacturer witnesses representing Hilmar Cheese
Company (Hilmar), Glanbia, Saputo, and Leprino testified in support of
Proposals 8 and 9. Hilmar is a cheese and whey manufacturer with
processing locations in California and Texas. These witnesses testified
dairy processing costs have increased, particularly of late because of
inflation, noting Hilmar's natural gas costs were 45.1 percent above
the 20-year average. The Saputo witness echoed testimony on increasing
costs, citing the St. Louis Federal Reserve data series for labor,
energy, packaging, and maintenance costs. The witness said these costs,
comprising 20 percent of the total cost to manufacture a finished
cheese product, rose 60 percent, on average since 2006. According to
the witness, Saputo's manufacturing costs align with the 2021 and 2023
survey results. The Hilmar witness testified their manufacturing cost
increases correlate with the results of the 2022 CA Forecast. The
Leprino witness stated the 2021 survey and 2023 survey had robust
participation, and the 2022 CA Forecast, which used CDFA audited
mandatory data, leveraged a widely accepted statistical modeling
approach. All four witnesses stressed the urgency of updating make
allowances. The manufacturer witnesses generally agreed that inaccurate
make allowances distort pricing signals for farmers, processors, and
ultimately consumers.
Witnesses representing Nasonville Dairy and Cedar Grove Cheese, two
proprietary specialty and commodity cheese manufacturer members of
WCMA, testified to rising manufacturing costs by outlining costs in a
similar manner to the 2021 and 2023 surveys. According to the
witnesses, their costs have risen $0.3226 and $0.77 per pound,
respectively, far beyond the fully implemented Proposal 8 levels. The
witnesses testified that insufficient make allowances negatively impact
cheese processing investments and increase the production of higher-
cost specialty products unable to play the same balancing or
foodservice roles as commodity products. They added current make
allowance levels impair the ability of proprietary manufacturers to
participate in the FMMO pool and deprives producers the benefits of
having their milk pooled.
In their post-hearing briefs, WCMA and IDFA reiterated their
support for Proposals 8 and 9. IDFA wrote that USDA has consistently
set make allowances to reflect the most recent and reliable actual cost
data, using multiple surveys, as in Proposals 8 and 9. Further, IDFA
stressed in its brief the 2023 survey is the most robust of all of the
author's previous surveys used to set make allowances. IDFA refuted the
notion the 2022 CA Forecast is inappropriate to use for determining
make allowances, explaining the underlying data is robust audited
California manufacturing data and the econometric techniques are widely
accepted. IDFA contended that the 2022 CA Forecast and 2023 survey
averages are lower than the cooperative manufacturing costs shared on
the record. Even if inflation has subsided since 2022, IDFA added in
its brief, there would have to be deflation to arrive below pre-2022
levels.
IDFA clarified in its brief the proposed schedule for phasing in
make allowance changes, which is designed to accommodate farmers. When
addressing implementation timing, IDFA refuted the CME's points about
incorporating risk management in the timing of implementation, arguing
that CME's interests do not necessarily align with those of the broader
dairy industry because of the fee revenue they generate.
In its brief, IDFA emphasized the destabilizing effect of current
make allowances on processors and farmers. IDFA shared charts from the
hearing, showing how the Mailbox Price is in close proximity to FMMO
blend price,
[[Page 57594]]
which it says indicates FMMO prices are too high. IDFA refuted NMPF's
argument that Proposals 8 and 9 will result in a $1.42 per cwt decrease
in the All-Milk Price because FMMO prices are minimum prices and don't
reflect premiums received. Further, IDFA wrote in its brief that dairy
farmers whose cooperatives own processing facilities are receiving
depressed prices when make allowances are too low.
IDFA said the best method to update make allowances is through a
mandatory and audited USDA survey; however, USDA does not currently
have the authority and IDFA estimates it would take approximately five
years before new make allowances could be adopted once the authority
was granted. IDFA reiterated arguments that make allowances under-
representing actual costs harm both dairy farmers and manufacturers.
In its post-hearing brief, AMPI reiterated support for the make
allowance levels in Proposals 8 and 9, contending they accurately
reflect the changes in costs. AMPI added it supports immediate
implementation, rather than the phased 4-year approach. AMPI wrote the
2023 survey had the largest product volumes of any previous surveys and
highlighted other manufacturing cooperative testimony describing
increased manufacturing costs. AMPI opined continued high manufacturing
costs and farm bill delays have made make allowance updates more
urgent.
Leprino's post-hearing brief reiterated its support of Proposals 8
and 9, emphasizing the importance of implementing make allowance
changes immediately. Leprino stressed 2023 cost levels have continued
to climb and offered its own updated cost increases, compared to 2022:
11 percent for labor, 17 percent for property insurance, and 9 percent
for liability insurance.
A witness representing the AFBF testified in opposition to
Proposals 8 and 9, opining the 2021 and 2023 survey data may be biased
due to its unaudited nature and the known potential to be used for
rulemaking, stating the incentive to overestimate reported costs for
commodity goods disqualifies this voluntary data. The witness testified
only the 2016 CDFA survey results can be verified as accurate enough to
be used for determining make allowances. According to the witness, the
relatively complicated 2022 CA Forecast model using a small number of
observations (14 years) to forecast 2022 costs (6 years out from the
actual data) could be overfitted to the 2000-2016 data and unreliable
to predict future costs.
Numerous dairy farmer witnesses testified in opposition to
Proposals 8 and 9, focusing on the negative effect significant make
allowance increases would have on producer pay prices. A DFA farmer
witness from New Mexico testified the make allowance increases
contained in Proposals 8 and 9 would result in negative operating
income over the next 10 years, making continued operation of their farm
unsustainable. The witness said any make allowance increases would
severely and disproportionally impact producers in the southwest due to
the share of milk going into manufacturing products. A LOL dairy farmer
testified significant increases in make allowances would be difficult
for farms in California to absorb, where water scarcity has led to high
forage costs. According to the witness, large make allowance increases
would put adequate milk supply at risk, all the while guaranteeing
profit for commodity manufacturers and leading to over production of
manufactured dairy products.
Two dairy farmer witnesses, a member of the CDC and a small
Maryland dairy farmer, testified against increases in make allowances
due to the impact on producer pay prices and lack of accounting for
dairy farm production costs. According to the witnesses, while
processors can pass on costs to customers up the supply chain, producer
margins are too thin to sustain substantial price decreases from
increased make allowances. The witnesses testified that further
declines to producer margins will cause more producer exits and
disruption to the milk supply. A dairy farmer representing Edge
testified any change in make allowances should require a 15.5-month
delay, be restrained by the impact on producer pay prices, and cover
only the most efficient plants.
In its post-hearing brief, NMPF reiterated its arguments in
opposition to Proposals 8 and 9. NMPF argued that these proposed
changes would decrease dairy farmer milk prices by approximately $1.45
per cwt, further narrowing producer margins and causing disorderly
marketing.
NMPF cited ongoing plant investment as an indication current make
allowances are not too low as portrayed by proprietary manufacturers.
NMPF emphasized proprietary manufacturers are not required to be
regulated and, thus, can choose not to participate in the FMMO and
avoid paying minimum prices they contend are too high because of
inadequate make allowance levels. NMPF opined about the lack of
evidence to merit raising make allowances to levels contained in
Proposals 8 and 9.
In its brief, NMPF refuted the studies used as a basis for
Proposals 8 and 9. NMPF cited hearing testimony regarding the
insufficiency of some plant sample sizes in the 2023 survey. Further,
NMPF argued the 2023 survey does not capture how manufacturing costs
are skewed by plants that serve a balancing role. NMPF stated if make
allowances are set too high, balancing plants would be incentivized to
run at maximum capacity, rather than running at less than full capacity
to provide critical balancing services to the market. NMPF voiced
concerns with the 2022 CA Forecast, noting the proposed make allowances
in Proposals 8 and 9 are duplicative since the 2023 survey included
California data. Further, NMPF opined that the 2022 CA Forecast is of
little utility as it did not account for basic changes to the
California dairy manufacturing sector since 2016, such as plant
openings and closings and productivity improvements.
In its post-hearing brief, Select also opposed Proposals 8 and 9,
on the basis of the 2022 CA Forecast being inappropriate to use in
determining make allowances. Select echoed NMPF's argument that use of
the forecast would be duplicative of California data. Further, Select
argued indexing does not account for improvements to plant efficiencies
and the Department has not previously used indexing to determine make
allowances.
In its brief, the AFBF opposed any increase to make allowances,
instead advocating they only be increased once a mandatory, audited
cost survey was administered by the Department. The AFBF opined that
both the 2021 and 2023 surveys were biased because there was a clear
intention the surveys would be used in a rulemaking proceeding. The
AFBF opposed the use of indexing to set make allowances, as was done in
the 2022 CA Forecast, because it fails to recognize productivity
improvements over time. The AFBF echoed other brief arguments that
continued processor investment is evidence that make allowances are not
too low.
The Midwest Dairy Coalition (MDC), an alliance of six dairy farmer-
owned cooperatives operating in the Midwest, filed a post-hearing brief
stating make allowance updates are long overdue, but took the position
the Department should be granted legislative authority to conduct a
mandatory and audited cost survey. MDC did not offer support or
opposition to any make allowance related proposals. In its post-hearing
brief, Edge also did not support or oppose any make allowance related
[[Page 57595]]
proposals but cautioned against setting make allowances too high. Until
there is a mandatory and audited USDA-administered survey, Edge stated,
the Department should err on the side of caution to not subsidize
commodity manufacturing.
In its post-hearing brief, Select offered an alternative
methodology for determining the make allowance levels using what Select
argued was the most reliable record data. Select suggested taking the
average of the 2021 survey and 2023 survey, subtracting the current
make allowance level, and taking half that difference to add to current
make allowance levels. As a result, Select proposed the following:
cheddar cheese, $0.2281; butter, $0.2004; NFDM, $02260; and dry whey,
$0.2498.
In its post-hearing brief, CME noted any make allowance changes
would be considered material changes, and USDA should consider an
implementation timeframe that mitigates risks to those involved in
futures and options trading.
b. Yield Factors
Submitted by Select, Proposal 10 seeks to amend the cheese price
formula by increasing the butterfat recovery rate in the cheese yield,
from 90 to 93 percent. A Select witness testified in support of
Proposal 10 and clarified a butterfat recovery rate of 93 percent would
also necessitate an increase in the butterfat yield factor in the
protein price formula from 1.572 to 1.624. According to the witness,
these changes would result in a modest increase in the Class III price,
estimated at $0.04 per cwt. The witness stressed USDA should not be
guided by price impacts but rather by achieving formulas to better
reflect manufacturing realities and the actual value of raw milk.
Select reiterated support for this proposal in its post-hearing brief.
An independent expert witness, retained by Select, testified
advancements in vat technology, coagulants, and curd handling have
enabled manufacturers to achieve recovery rates higher than the
currently assumed 90 percent. The witness described how modern,
horizontal vats attain butterfat recoveries far exceeding both open and
enclosed horizontal vats, and how most commodity cheddar manufacturers
use advancements in coagulants and curd handling to attain greater than
93 percent butterfat recovery. Additionally, the witness said, whey
cream can be reintroduced into the cheesemaking vat to increase cheese
yield and revenue, ultimately increasing butterfat recovery.
The AFBF wrote in its brief that it also supports Proposal 10 to
increase the butterfat recovery factor. The AFBF pointed to evidence on
the record of increasing plant efficiencies, justifying updating the
butterfat recovery factor to the level in Proposal 10.
Six witnesses, representing Glanbia, Leprino, IDFA, CDI, DIC, and
MPC, testified in opposition to Proposal 10. The Glanbia witness
described a broad range of industry fat recovery based on plant age and
processing techniques, and acknowledged many modern plants, including
Glanbia plants, can achieve 93 percent cheddar fat recovery. The
witness testified Proposal 10 is being offered to enhance prices while
ignoring other parts of the formula that overvalue milk. The witness
contended lost solids within the manufacturing plant and the discounted
price of whey cream, should they be considered, outweigh the effects of
Proposal 10 on milk prices. The Leprino witness testified any changes
to the yield factor should only occur after a comprehensive review of
all yield assumptions. The witness agreed 93 percent butterfat
retention is achievable in some plants but does not believe it is
possible across the entire industry.
The IDFA witness contended Proposal 10 takes a piecemeal approach
to changes in the yield formula and selectively focuses on dairy farmer
revenue enhancements only. The witness opined whey cream is overvalued
in the current formula, as butterfat not going into cheese is currently
valued as Grade AA butter despite regulation that whey cream cannot be
used in Grade AA butter. The witness claimed whey cream is discounted
20 percent or more compared to fresh cream. In addition, the witness
said in-plant milkfat losses are not recognized in the current formula,
something that should be considered when evaluating yield factor
changes. The witness testified any decreases in the Class III prices
that result from accurately accounting for both processing losses and
whey cream values would more than offset the increases in Class III
prices proposed by Select.
A witness from the Center for Dairy Research (CDR), appearing on
behalf of IDFA, testified to observing improvements in butterfat
retentions over the past 40 years, mostly due to improved vat design
and technology. The CDR, with a dairy plant on the University of
Wisconsin-Madison campus, supports the U.S. dairy industry with
expertise in cheese, dairy ingredients, cultured products, dairy
beverages, quality/safety, and dairy processing. The witness noted a
range of butterfat losses at the cutting stage including 9 to 10
percent fat loss in open vats, 7 percent fat loss in Double O vats, 6
percent fat loss in horizontal vats, and 5 percent fat loss in modern
vats. The witness testified that while large modern plants are
installing newer, more efficient vats, old, less efficient vats are not
leaving production, and are being repurposed and installed in medium
and small plants throughout the country. The witness noted there is
still a large variety of vats being using in the industry, and stressed
the latest vat design does not ensure optimal butterfat retention, as
the experience of the cheesemaker and product handling practices could
also lower butterfat recovery.
Based on current observations and work within the industry, the CDR
witness provided best estimates for fat recoveries in cheddar
cheesemaking as 91 to 93 percent retention in well-run factories with
modern vats, 90 to 92 percent retention in well-run factories with
vertical Double O vats, and 88 to 91 percent retention in factories
with open vats. The witness said, based on their experience, 91 percent
could be considered the industry average butterfat recovery for cheddar
cheese plants.
A CDI witness, appearing on behalf of NMPF, testified to the lack
of yield data available to support the proposed recovery rate contained
in Proposal 10. The witness supported a tempered update to the cheese
make allowance that does not include an update to the yield factor. A
witness representing DIC testified the current 90 percent butterfat
recovery rate is reasonable because, despite some newer, more efficient
plants achieving higher fat recovery, older plants may not be able to
achieve the higher rates. The DIC witness stated fat recovery data is
lacking across the industry and further asserted the current 90 percent
butterfat recovery should be retained. The witness representing MPC
testified the current formula should remain in place until the industry
tackles the mechanics of the Class III formula, and the big issue is
how butterfat not being retained in the cheesemaking process is valued.
A witness representing AMPI provided testimony supporting the
improvement seen in butterfat recovery due to new vat technology. The
witness said AMPI installed cheesemaking equipment that facilitates the
recovery of fat; however, they did not provide specific data.
Submitted by Select, Proposal 11 seeks to eliminate farm-to-plant
shrinkage from the yield factors in the FMMO Class III and IV price
formulas. A witness appearing on behalf of Select testified USDA's
decision to include
[[Page 57596]]
shrinkage in the formula was premised on the concept that such losses
were not in the handler's control and are unavoidable and common. The
Select witness was of the opinion producers, cooperatives, and handlers
do have the ability to address and stem losses in the transportation of
milk from the farm to the plant. The witness said historically, as the
number of farms on a milk route increased, the probability for
discrepancies between farm weights and plant weights also increased, as
each stop offered potential for spillage, loss within piping, and
errors in measurement. The witness shared statistics on the increasing
size of U.S. dairy farms, stating that in 2016, three-quarters of all
U.S. milk production came from farms that could fill a full tanker,
whereas in 2000, less than half of U.S. production came from farms
filling a full tanker. The witness estimated 80 percent of the current
milk volume in the U.S. comes from farms able to fill full tankers on
every-other-day pickup schedules. Consequently, said the witness, the
occurrence of shrinkage is decreasing. As an example, explained the
witness, Select's members are large enough to ship full tanker loads of
milk, meaning Select does not experience the same risks of milk loss
which occur on multi-stop routes.
Other than milk losses occurring with hoses, the Select witness was
unaware of any inherent, unavoidable, farm-to-plant losses that could
occur within the pick-up process. The witness said even farms without
the ability to fill a tanker can adopt farm scales, flow measurement,
and other technologies to minimize imprecision and inaccuracy. The
witness testified the cost of implementing these improvements would be
offset by the anticipated price impacts of adopting Proposal 11, which
the witness estimated to be $0.07 per cwt.
A second Select witness presented an analysis of Select plant data
from August 2022 to July 2023, representing 171,240 milk shipments and
a total of 9.8 billion pounds. The witness stated approximately half of
their customers do not report plant weights back to Select. For those
plants who do report, the witness said reported plant weights exceeded
farm weights about half of the time. The witness stated non-shrink
factors, such as scale calibration or weather, typically cause the
large discrepancy between farm and plant weights. The witness concluded
that for the subset of loads where differences occurred between farm
and plant weights, the net variance across all loads was less than 0.1
percent.
A witness testifying on behalf of Continental Dairy Facilities
(CDF) and Continental Dairy Facilities Southwest (CDF SW), two wholly
owned subsidiary plants of Select in Michigan and Texas, manufacturing
NFDM, butter, and buttermilk powder, presented farm-to-plant loss data
to support Proposal 11. The witness analyzed farm-to-plant losses in
milk deliveries to the two CDF facilities from August 2022 through July
2023, comprised of both single and multi-farm pickups. The witness
stated in total, plant weights averaged 0.15 percent lower than farm
weights for CDF and 0.10 percent lower for CDF SW. The discrepancies
ranged from a negative 0.32 percent (plant weights were 0.32 percent
lower than farm weights) to 0.67 percent (plants weights were 0.67
percent lower than farm weights). Since many of the non-Select
shipments to CDF are multi-farm pickups, the witness said management
for farm-to-plant shrink is not unique to Select or larger farms,
generally. The witness described improperly calibrated scales, input or
transposition errors by milk haulers, changes in equipment or personnel
when weighing loads, or snow settled on scales or tanks when weighing,
as reasons for weight discrepancies. The witness testified these
variances are not inherent and that they can be addressed. Select
reiterated its arguments supporting Proposal 11 in its post-hearing
brief.
The AFBF expressed support for Proposal 11 in its post-hearing
brief. The AFBF contended that data on farm-to-plant shrinkage
contained in evidence is similar to what was used to determine the
original farm-to-plant shrinkage factor. The AFBF argued that this
issue does not merit a formal data collection, but a one-time
adjustment to reflect that farm-to-plant shrinkage is much less
significant than it used to be.
Five witnesses representing IDFA, Leprino, CDI, DIC, and MPC
testified in opposition to Proposal 11. The witnesses asserted Select's
minimal farm-to-plant shrinkage is not the reality for much of the
dairy industry, noting the lack of industry-wide data on farm-to-plant
shrinkage and the differing nature of measuring components at the farm,
rather than at the plant, are reasons Proposal 11 should not be
adopted. The witnesses further testified FMMO yield factors should not
be based on one company's experience, especially one, they argued, that
was an industry leader in this area.
The Leprino witness testified that while Select has been able to
limit their own farm-to-plant loss through increasing herd sizes and
improvements in milk weighing and sampling, this is not a
representation of the nationwide dairy industry. Additionally, the
witness argued the scientific characteristic of milk fat clinging to
the walls of stainless steel has not changed; as such, volume and fat
loss still occur, even at the most innovative plants. The IDFA witness
claimed less than 10 percent of all farms produce enough milk to fill
entire tanker loads, so it is reasonable to conclude the losses
experienced when the formulas were adopted are still happening today.
According to the witness, failure to account for the diversity of farm
size may further incentivize manufacturers to prefer larger farms over
smaller farms.
Submitted by Select, Proposal 12 recommends amending the nonfat
solids price formula by increasing the NFDM yield factor from 0.99 to
1.03. A Select witness testifying in support of Proposal 12 said it
would correct the NFS yield factor by including the value of milk
solids utilized in buttermilk powder, as producers are not currently
paid accurately from a price calculated on NFDM prices alone. According
to the witness, a proper yield factor for NFDM should account for all
milk solids, including the milk solids remaining in cream after
separation and used in butter or buttermilk. The witness stressed the
initial NFS formula, correctly adopted in 2000, included buttermilk
powder.
A witness representing CDF and CDF SW testified on price alignment
and processing differences between NFDM and buttermilk powder. The
witness stated sales and regional prices observed at the two plants for
buttermilk powder and low-heat NFDM are closely aligned, as well as
consistent with prices reported by AMS' Dairy Market News (DMN) from
January 2023 through June 2023. The witness further testified that the
process of drying buttermilk utilizes the same equipment as that of
drying skim milk but requires a thorough cleaning of equipment when
changing product lines, higher temperature, and additional drying time
due to buttermilk's higher butterfat content. The witness said this
leads to increased utility costs of approximately $0.02. The witness
testified the NFS yield factor should consider all powder products,
including buttermilk powder whose yield is lower than NFDM. Select
reiterated its arguments in support of Proposal 12 in its post-hearing
brief.
In its post-hearing brief, the AFBF expressed support for Proposal
12 as it believes it reflects the long-term market shift toward valuing
buttermilk near the NFDM price. The AFBF stated that a formal extensive
data collection is not
[[Page 57597]]
necessary for this proposal to be adopted because there is a clear
record of buttermilk values.
Two witnesses, representing Leprino and IDFA, testified in
opposition to Proposal 12. The witnesses testified Proposal 12 is based
upon a theoretical yield approach which assumes a perfect system with
no in-plant component losses in the conversion of NFS to NFDM. The
witness said in-plant losses exist even in the most modern and
efficient manufacturing facilities and should be recognized in the
price formulas. The witnesses gave an example of the portion of NFS
remaining in cream after separation, which cannot be processed into
NFDM. The Leprino witness argued the FMMO system is predicated on the
notion processors should pay for milk based on the revenue they can
derive from selling products manufactured from that milk. The witness
said milk routinely lost in processing does not end up in finished
products, which should continue to be accounted for in the formulas.
The IDFA witness testified product yields should incorporate
manufacturing losses, and overestimating the quantity of NFDM
manufactured from NFS by accounting for buttermilk powder would
overvalue the market-clearing of NFDM and contribute to disorderly
marketing.
A witness from CDI testified on behalf of NMPF in opposition to
Proposal 12. The witness testified CDI supports evaluating all factors
in the Class III and IV formulas, and yield factors should only be
updated once industry-wide data on product yields are available. The
witness stated the NFS price formula is based on NFDM and the yield
factor correctly reflects the yield of NFDM only, without an adjustment
for buttermilk powder. The witness said Proposal 12 would adjust the
NFDM yield factor to represent a composite yield for multiple products
which differ in terms of component composition, uses, cost of
manufacture, and market prices. While acknowledging buttermilk powder's
processing costs are likely higher than NFDM's, the CDI witness
testified there was not enough data to quantify the difference in
processing costs; further, data presented from DMN and by Select
witnesses are not sufficient to determine the alignment of prices
between buttermilk powder and NFDM. The witness clarified that buyers
of butterfat and NFS must account for all solids utilized at the
minimum component prices, regardless of whether the solids are used in
the surveyed products of butter and NFDM or in other Class IV products
such as buttermilk powder.
A witness from the DIC testified in opposition to Proposal 12.
According to the witness, while NFDM yields are likely higher than the
current yield factor of 0.99, not all NFS in producer milk end up in
NFDM, with some NFS from cream remaining in buttermilk. The DIC witness
claimed the lower yield factor is to compensate for generally lower
buttermilk powder prices compared to NFDM but acknowledged DMN data
suggested a buttermilk powder price discount relative to NFDM narrowing
in recent years. A witness from MPC testified in opposition to Proposal
12, stating they were opposed largely due to a lack of adequate data.
In their post-hearing briefs, IDFA and NMPF opposed Proposals 10,
11, and 12. IDFA argued the three proposals are not representative of
industry-wide experience, but rather on what is possible given modern
technology and equipment. NMPF echoed IDFA's opposition in its brief,
citing insufficient data to justify the proposed changes. IDFA
specifically objected to Proposal 11, stating it would place an unfair
burden on small farms that cannot fill a tanker and, thus, continue to
experience shrinkage. Proposal 11 was also opposed by WCMA in its post-
hearing brief. Lastly, IDFA contended Proposal 12 should be rejected
because it overvalues buttermilk powder.
Base Class I Skim Milk Price
Six proposals to amend the base Class I skim milk price were
considered in this proceeding. Proposal 13, submitted by NMPF, seeks to
return the base Class I skim milk price to the higher-of the Class III
or Class IV advanced skim milk price, referred to as the ``higher-of''
mover. Proposal 14, submitted by IDFA, would use an average of the
advanced Class III and Class IV skim milk prices, plus an adjuster that
resets every January. The adjuster would be the higher of either: (1)
$0.74; or (2) the 24-month average difference between the higher-of and
the average-of the advanced Class III and Class IV skim milk pricing
factors. The 24-month calculation would run from August of the three
years prior to July of the previous year. Proposal 15, submitted by
MIG, would amend the current average-of mover from a $0.74 adjuster to
a monthly rolling average adjuster calculated as the difference between
the higher-of and the average-of, for 24 months, with a 12-month lag.
Proposal 16, referred to as ``Class III plus,'' submitted by Edge,
would start with the announced Class III price and incorporate a 36-
month rolling adjuster averaging the monthly differences between the
higher-of the advanced Class III or advanced Class IV skim milk prices,
and the Class III skim milk price. The proposal would eliminate
advanced prices. Proposal 17, also submitted by Edge, would return to
the higher-of mover but would use announced rather than advanced
prices. Proposal 18, submitted by the AFBF, would return to the higher-
of mover and would eliminate the advanced pricing of Class I skim milk,
Class I butterfat and Class II skim milk.
An NMPF witness testified in support of Proposal 13. The witness
reviewed the 2000 Federal Order Reform (Order Reform) rulemaking and
summarized the higher-of methodology as accurately reflecting the value
of the different milk use categories and ensuring shifts in demand for
any one manufactured product does not lower Class I prices. The witness
said the Department determined during Order Reform that the higher-of
mover addresses disorderly marketing by reducing volatility in milk
prices, reducing class price inversions and depooling, and assisting
Class I handlers in competing for a milk supply.
The NMPF witness testified the 2019 change to the average-of was
designed to facilitate price risk management strategies for fluid milk
processors, which, the witness stated, is not an objective of FMMOs.
The witness said the intent of the change was to be roughly revenue
neutral, while allowing handlers to better manage volatility in monthly
Class I skim milk prices using Class III and Class IV milk futures and
options contracts. The witness claimed the 2019 change has not
functioned as intended or anticipated by NMPF, has exacerbated
disorderly marketing conditions, has not been revenue neutral, and will
continue to have deleterious effects on the dairy industry. The witness
described the asymmetrical risk to producers which was not anticipated
when the mover change occurred. The witness explained the higher-of
exceeds the average-of calculation whenever the Class III and IV
advanced skim milk pricing factors differ by more than $1.48 per cwt,
regardless of which factor is higher. The witness noted the reverse is
true when the advanced skim pricing factors differ by less than $1.48
per cwt.
A witness from Southeast Milk, Inc. (SMI), a NMPF cooperative
member with 114 dairy farmer members, testified that when the two
advanced skim milk pricing factors are equal, the maximum amount by
which the average-of can exceed the higher-of Class I mover is $0.74
per cwt, but there is no limit by which the average-of can
[[Page 57598]]
fall below the higher-of Class I mover. The NMPF witness testified that
in 2020 and 2022, there were instances when the average-of mover fell
below what the higher-of mover would have been, in which the difference
was at times significant. The witnesses testified the maximum
divergence recorded between the current average-of mover and the
higher-of mover was a $5.19 lower average-of mover in December 2020,
when Classes II, III, and IV skim prices differed by approximately $11
per cwt. In comparison, the witness said, the maximum gain during that
time was capped at $0.74. The SMI witness said because the upside is
capped, but the downside is not, it is difficult to ever return to
revenue neutrality under the average-of mover.
The SMI witness testified the average-of mover has lowered dairy
farmer revenue compared to what they would have received under the
higher-of mover, with estimated cumulative market losses totaling
$998.3 million from May 2019 through August 2023. The witness said that
for the same period, the average-of mover decreased revenue to the
southeastern FMMO producers by more than $192 million. The NMPF witness
reviewed data during periods of relative price stability, revealing the
average-of mover generated modest gains over the higher-of mover.
However, in periods of price volatility, there were substantial revenue
losses in months when the average-of mover was less than the calculated
higher-of mover, which resulted in significant cumulative losses to
producers over time.
The NMPF witness claimed the change to the average-of mover
increased disorderly marketing by reducing Class I prices relative to
the other classes and creating greater incentives for handlers to
depool milk. The witness said that in 2020, the enhanced demand for
cheese relative to the demand for butter and NFDM widened the spread
between Classes III and IV well beyond $1.48, substantially lowering
Class I prices compared to what they would have been under the higher-
of mover. The SMI witness testified that between May 2019 and June
2023, the Class III skim value exceeded the Class IV skim value by over
$1.48 per cwt in 16 months, and the Class IV skim value exceed Class
III skim value by $1.48 or more per cwt in 11 months. In 2023,
according to the SMI witness, the average-of continued to be lower than
the higher-of in some months, which had a more significant impact to
dairy farmers because it occurred during a time of extremely low dairy
farm margins. The witness said they expect to see more volatility and
larger spreads between Class III and Class IV prices in the future
because of anticipated higher butterfat prices which will lower the
Class III skim value.
The NMPF witness testified that adoption of the average-of mover
created class price inversions and resulted in significant volumes of
depooled Class III milk during the second half of 2020. Class price
inversions occurred again in 2022 and 2023, said the witness, resulting
in price volatility and substantial depooling of Class IV milk. The
witness opined a wide variety of market conditions have proven capable
of generating market volatility, driving a wedge between Class III and
IV skim milk prices, and resulting in an average-of mover of more than
$1 per cwt below what the higher-of mover calculation would have been.
The NMPF witness said the average-of mover has not resulted in
increased risk management activity at a value to handlers anywhere near
the losses experienced by dairy farmers. Numerous witnesses testified
their fluid milk customers have shown very little interest in hedging
milk since the average-of mover was implemented.
NMPF witnesses testified other Class I mover proposals under
consideration in this proceeding use the higher-of mover calculation as
the benchmark for determining adequate Class I skim milk price revenue.
They testified those proposals provide producers revenue in an after-
the-fact-manner that fails to maintain the maximum monthly separation
between advanced Class I prices and the manufacturing class prices, a
goal expressed by the Department when it recommended the higher-of
mover during Order Reform.
The SMI witness testified that because of the change to the
average-of mover, the southeastern FMMOs experienced disproportionately
large reductions in blend prices due to the higher Class I utilization
in the region, making it harder to attract supplemental milk the region
requires to meet fluid demand. The witness noted that using an average-
of mover to establish a Class I skim price makes it more difficult for
Class I handlers to procure milk from plants with higher-value
manufactured products because the price difference is not large enough
to draw milk away from manufacturing. The witness opined a Class I skim
mover should provide for orderly marketing by ensuring an adequate
supply of raw milk for fluid plants, producer price equity including
prompt and uniform payments to farmers and cooperatives, and stability
for dairy farms. The witness argued the current average-of mover makes
it more difficult for FMMOs to achieve those purposes.
An NMPF consultant witness testified the higher-of mover is
necessary to transmit market signals in real time. The witness said a
higher Class I milk price relative to other class prices sends market
signals to move milk from surplus to deficit regions to ensure adequate
fluid milk supplies. Additionally, the witness continued, disorderly
marketing caused by prolonged depooling occurs when the Class I price
is lower than Class II, III, or IV prices. The witness asserted
prolonged periods of depooling create market disorder. Since the change
in 2019, claimed the witness, the Class I mover has facilitated
persistent long-term periods of depooling because there is no guarantee
Class I prices will exceed the other class prices over time. In
contrast, the witness asserted that under the higher-of mover, if Class
III and IV advance skim prices increased, the Class I price would
remain higher and depooling would moderate.
The NMPF witness presented data to demonstrate the objective of
adopting the average-of mover, to allow for greater risk management,
has not been accomplished, and prolonged periods of depooling have made
it difficult for producers to hedge their farm margins. The witness
stated that when milk is not pooled, producer hedging losses cannot be
offset by gains on milk checks because revenue from the higher valued
manufacturing milk is not shared with the marketwide pool. The witness
asserted risk-management performance is relatively similar under the
higher-of and average-of movers, entering data they believed showed how
Class III futures contracts would similarly mitigate risk. The witness
contended other proposals do not adequately replicate the higher-of
price in future periods; nor do they share equally among dairy
producers and others, necessitating periodic recalibration. Rather than
recognize the average-of limitations, the witness said, other proposals
seek to align the average-of and higher-of performance. The witness
testified an average-of mover with an adjuster causes past market
conditions to influence current prices, sending pricing misinformation
to the market and causing disorderly marketing. The witness concluded
that without immediate market signals from the advanced Class III and
IV milk prices, any of the average-of or Class III plus movers would
struggle to replicate the higher-of mover performance.
An NMPF witness representing Prairie Farms testified producer
revenue
[[Page 57599]]
has been significantly reduced, without recovery, since the change to
the average-of mover. Prairie Farms is an Illinois based farmer-owned
milk cooperative with over 600 dairy farmer members operating fluid
milk processing and manufacturing facilities that produce a variety of
fluid and manufactured dairy products. Increased depooling in the last
few years because of the average-of mover has resulted in increased
price volatility, the witness said. The witness testified that with the
average-of mover either Class III or Class IV milk is not pooled,
depending on which class is higher, because the manufacturer is able to
keep the additional market revenue instead of sharing it among pooled
producers.
The Prairie Farms witness testified dairy producers want a pricing
system that gives real-time market signals, which is accomplished with
the higher-of mover. The witness testified Prairie Farms supported the
change to the average-of mover believing it would facilitate their
customers' ability to hedge Class I milk. However, Class I processors
have generally not increased their use of hedging, said the witness,
while dairy producers have taken on additional risk by giving up a
higher Class I price. The witness stated one reason they believe their
customers do not utilize hedging is because of fear of incurring a
price disadvantage compared to their competitor. The witness added that
of the Prairie Farms dairy farmer members engaged in risk management,
there has been a decrease in the use of forward contracting since the
implementation of the average-of mover because of negative PPDs, as
they create a negative basis dairy producers are unable to account for
in their risk management decisions. The witness presented data showing
negative PPDs have become larger and more frequent under the average-of
mover, which has increased the volume of depooled milk and
significantly reduced revenue to farmers.
Another NMPF witness representing Upstate Niagara Cooperative
(Upstate Niagara) testified the average-of mover has not operated as
intended, has negatively impacted producer revenue, and has exacerbated
disorderly conditions. Upstate Niagara is a dairy farmer-owned
cooperative marketing the milk of approximately 250 members and
operating eight fluid processing and manufacturing plants in New York
and Pennsylvania. According to the witness, under the average-of mover,
producers pooled on FMMOs with higher Class I utilization were most
severely impacted due to the depressed Class I milk prices and no
ability to benefit from the higher priced manufacturing milk. Similar
to other witnesses, the Upstate Niagara witness described the
asymmetric price risk of the average-of mover.
From interactions with fluid milk customers, the Upstate Niagara
witness said there is widespread acceptance of prices based on FMMO
monthly price announcements by their conventional customers. The
witness said conventional customers have been less interested in
pursuing a fixed price if there was any chance it could result in a
competitive disadvantage in any given month. The witness recognized
there may be some processors or end users in specialized Class I
product channels that may utilize hedging but contended it is a
relatively small portion of total Class I sales.
A University of Missouri professor testifying on behalf of NMPF
presented results of an analysis conducted to evaluate the impact of
adopting Proposal 13. The witness testified, under the higher-of mover,
Class I prices would increase every year between $0.32 and $0.50 per
cwt; the Class II price would be between $0.08 and $0.12 per cwt less
annually; the Class III price would be between $0.06 and $0.13 per cwt
less annually; the Class IV price would be between $0.08 and $0.12 per
cwt less annually; and the all-milk price would be between $0.01 or
$0.02 per cwt higher annually, except for a more significant increase
of $0.06 per cwt in the first year. The witness said the model
forecasted the effect on the all-milk price to moderate over time as
production expands.
Twenty dairy farmers testified in support of Proposal 13. Many
dairy farmers testified blend prices have been lower and their milk
prices have been reduced since the average-of mover was implemented.
They said only when Class III and Class IV prices are within a narrow
range of each other is the average-of mover equal to or outperforming
the higher-of mover. The witnesses said their experience supports
NMPF's assertion that farmers' milk prices have been reduced by $950
million, and the reduction is not just a COVID-era anomaly. Dairy
farmer witnesses said the losses demonstrate the goal of revenue
neutrality with the change to the average-of has not been achieved. One
witness asserted that in 29 of the 52 months since the average-of was
adopted, Class I prices averaged $1.30 per cwt less than what the price
would have been under the higher-of mover. In comparison, said the
witness, in the remaining 23 of the 52 months the average-of returned a
price only $0.42 higher per cwt. The witnesses testified to near-
universal support by dairy farmers for a return to either the higher-of
or, under the average-of, a mechanism to be equal to the higher-of over
a period of time, such as 24 months.
Several dairy farmers urged a return to the higher-of mover,
claiming a need for financial relief as dramatic shifts in milk markets
since implementation of the average-of mover have caused significant
financial losses to dairy farmers. Dairy farmers reiterated the
average-of mover change affects 100 percent of pooled producer milk
while it is unlikely fluid milk processors are covering 100 percent of
their products with risk management tools. A dairy farmer testified
they were assured the change to the average-of would be net neutral or
net positive, but it has not been. Many dairy farmer witnesses
described losses to dairy farmers under the average-of compared to what
the Class I mover would have been under the higher-of and testified to
receiving lower blend prices. The dairy farmers were concerned about
receiving a delayed value of milk from a Class I mover with a rolling
average methodology because they believe they cannot afford to wait
months or years for the added revenue. They testified restoring the
higher-of mover through adoption of Proposal 13 would help to reduce
the volatility in monthly milk prices, bringing more stability and
predictability to farmer income.
Dairy farmers of all sizes testified to relying on risk-management
tools, such as Dairy Margin Coverage (DMC), Dairy Revenue Protection
(DRP), and CME futures and options markets because it is difficult to
manage their farms through periods of significant price volatility.
Dairy farmers' testimonies described a range of contract periods,
anywhere from 3-18 months, depending on the individual farmers' risk-
management strategy and risk tolerance. In its post-hearing brief, NMPF
reiterated hearing testimony arguing the average-of mover does not meet
the standards set forth in Order Reform, and the change has not been
revenue neutral as originally assumed. NMPF restated that under the
average-of mover, price inversions, volatility, and depooling have
increased, and Class I prices have been less effective at incenting
milk to fluid processors relative to manufacturing. NMPF reiterated the
asymmetrical risk borne by dairy farmers with the average-of mover and
the frequency of which the difference between Class III and IV prices
exceeded $1.48 per cwt, effectuating that risk.
NMPF reiterated the average-of mover failed to send appropriate
market
[[Page 57600]]
signals to participants because the fixed adjuster could not maintain
the maximum monthly separation between the advanced Class I and the
manufacturing class prices. NMPF wrote this increased the likelihood
manufacturing classes would have a higher value than milk used in Class
I and resulted in increased volumes of depooled milk. Under the higher-
of mover on the other hand, NMPF argued, when a particular
manufacturing class price is rising, the Class I price also rises and
tends to maintain Class I as the highest priced class. To dampen the
effect volatility in the manufacturing classes has on Class I, the
highest priced manufacturing class should provide the foundation for
ensuring the Class I price remains above the manufacturing classes
almost every month, reducing the incentive to depool, which is
disorderly.
The demand for Class I hedging is not clear, NMPF asserted in its
brief, and no evidence was presented to suggest more than a small
minority of the overall fluid market utilizes hedging, especially
beyond ESL handlers. NMPF argued in its brief that while facilitating
risk management for fluid processors may have merit, it is not an
objective of FMMOs. In regulating processors, the AMAA only considers
price uniformity to processors, NMPF asserted. Finally, NMPF restated
in its brief the widespread support of producers for a return to the
higher-of mover.
The Dairy Cooperative Marketing Association, Inc. (DCMA), a Capper-
Volstead Marketing Agency in Common with nine cooperative members in
the southeastern U.S., submitted a post-hearing brief in support of
Proposal 13. In its brief, DCMA argued the change to the average-of
mover has not been revenue neutral to dairy farmers, nor provided
benefits to the industry as originally intended. According to DCMA, the
hearing record demonstrates that little Class I hedging occurs,
especially on HTST milk, and includes no evidence that the use of
hedging is more prevalent now than prior to the change. DCMA stated
most testimony demonstrated HTST milk is sold based on FMMO announced
prices each month plus a fixed margin. Because revenue on packaged milk
sales flows back to the processor in step with the monthly changes in
the FMMO announced prices, there is no price risk to the Class I
processor under this system, according to DCMA. In its brief, DCMA
described the pronounced losses in the southeastern region as a result
of the change to the average-of mover.
The MDC submitted a post-hearing brief in support of Proposal 13,
expressing the importance of making the changes as part of the FMMO
reform process underway. MDC conveyed in its brief the importance of
ensuring all reforms are considered in concert since all changes have
ripple effects throughout the entire system and across all classes of
milk.
In its post-hearing brief in support of Proposal 13, Select
reiterated the proposal would support the priorities expressed by the
Department in Order Reform, the rationales of which remain true today.
Select cited billions of dollars lost to producers, an increase in
depooling, and a lack of Class I handlers hedging their milk costs as
reasons the average-of has failed.
In both witness testimony and briefs, IDFA and MIG strongly opposed
a return to a higher-of mover. A majority of their opposition was
contained in supporting testimony and evidence for Proposals 14 and 15,
as detailed below.
A witness representing IDFA testified in support of Proposal 14.
The witness said the goal of Proposal 14 is to keep producer Class I
revenue consistent with what would be experienced under the previous
higher-of mover, while allowing for effective and affordable Class I
risk-management strategies.
The IDFA witness claimed that in the long-run, the proposed Class I
mover would never fall below what the Class I skim milk price would
have been under the higher-of mover. According to the witness, Proposal
14 would have paid more than the higher-of mover in 13 of the past 21
years. The witness asserted dairy farmers are ``made whole'' as
compared to the higher-of mover over time through the annual adjuster
calculation. The witness presented data from 2003 through 2019 showing
Proposal 14 would have yielded a Class I price $0.08 greater than the
higher-of mover. For 2004 through 2023, the witness said Proposal 14
would have yielded a Class I price $0.05 higher, due to the $0.74
floor.
The IDFA witness entered data and analysis to show the volume of
milk not pooled would be slightly less under Proposal 14 than Proposal
13, and the Class I price would be lower than Class III or Class IV
prices in nearly the same number of months under both proposals. The
IDFA witness presented an analysis showing Proposal 14 would have
reduced price volatility with the only exception of very high cheese
prices in 2020. According to the witness, volatility equates to greater
price risk, which increases hedging costs, and ultimately higher
consumer prices.
The IDFA witness countered claims the higher-of mover sends
important price signals to dairy farmers through the Class I price,
instead claiming the blend price sends more important price signals
because it is the price farmers receive. The witness alleged there is
little difference between signals sent by the blend price under
Proposals 13 and 14, arguing that from 2012 to 2022, Proposal 13 would
average 31.9 percent of the Class I value in the blend price while
Proposal 14 would average 31.8 percent. As the impact on the blend
prices is very similar, over time there is little difference in price
signals between the proposals, the witness said.
Regarding the delay incorporated by the rolling adjuster and
farmers possibly not receiving the make-up payments, the IDFA witness
noted farmers go out of business for many reasons, and some may go into
the business or expand and benefit from higher payments. The witness
said this issue is no different than handlers going out of business
before the make allowances are raised.
The IDFA witness testified hedging is a critical tool for the
subset of innovation and value-added milk manufacturers to remain
competitive with alternative beverages. In the few growing segments of
the milk market, especially ESL and higher value-added products,
retailers are demanding processors provide long-term fixed price
contracts, rather than contracts with fluctuating monthly prices, the
witness said. Since processors cannot enter into a fixed purchase price
for raw milk with their milk suppliers, hedging allows processors to
take on the risk of entering into a fixed sales price for its finished
products and cover the risk of raw milk prices rising during the
contract period, the witness testified.
The IDFA witness noted several ESL processors formed and quickly
implemented risk management plans in anticipation of the change to the
average-of mover. The witness noted ESL processors are interested in
hedging because of the longer product shelf-life. According to the
witness, a risk management plan allows a processor to level out what
could otherwise be very different costs of milk products that could
have been produced at significantly different times but are being sold
to the customer at the same point in time. The witness noted more
hedging of HTST products is done by end users, such as foodservice
customers, not processors. The witness testified that while risk
management is not a stated objective of the AMAA, a stable price,
promotion, and growth of the sale of milk are, and the ability to use
risk management tools results in stable prices and increased sales.
[[Page 57601]]
The witness testified IDFA would support a rolling average longer
or shorter than 24 months, but the 12-month implementation lag is
essential to allow for hedging. The witness testified Proposal 14
calculates the adjuster from August through July because long term
Class I sales contracts between processors and retailers are often
negotiated and entered into during the final months of the calendar
year. To allow for effective hedging for those contracts, Class I
processors would need to know at the time of the contract negotiations
what the adjuster would be for the next calendar year. The witness
supported Proposal 15 as an acceptable alternative to Proposal 14.
A dairy processor witness representing Schreiber Foods (Schreiber)
testified in support of Proposal 14 or 15. Schreiber is a fluid milk
processor primarily manufacturing Class II and Class III products, with
approximately 5 percent of their products sold as ESL Class I products.
The witness testified that over the past 20 years risk management has
become a necessary tool for companies with exposure to dairy market
volatility. The witness said that only since the change to the average-
of mover in 2019 have milk processors had a viable way to manage risk.
The witness testified that, in response to requests from foodservice
and retail customers to manage Class I costs, Schreiber has offered
Class I forward contracts since 2019. Prior to 2019, the witness said
creating an effective hedge for Class I milk was challenging as it was
unknown whether Class III or Class IV would be the mover. The witness
stressed the change to the average-of allows purchasers to use a
combination of Class III and Class IV hedge positions, which gives
everyone in the supply chain the ability to control their market risk
in a way that was not previously possible under the higher-of.
According to the witness, Schreiber hedges price risk for its ESL
production through a combination of Class III and IV futures and swaps,
and Class I swaps, which typically go out 12 to 18 months. Under
Proposal 14, the witness explained, market participants will know the
fixed adjuster in advance of the calendar year in order to conduct
their hedging analyses for the coming year. If the Class I mover were
to revert to the higher-of, the witness testified they would have to
either find a different way to hedge or cease offering forward
contracts on their ESL products.
A witness representing Nestl[eacute] USA (Nestl[eacute]) testified
in support of Proposal 14. Nestl[eacute] is a fluid milk processor
operating one plant regulated by the FMMO system. Nestl[eacute]
procures milk from cooperatives using contract agreements, the witness
testified, and offers its customers an annual fixed price contract for
their primary Class I product, an ESL product. The witness stressed the
importance of hedging to manage risk and compete in the market against
nondairy beverages. The witness stated Nestl[eacute] did not use
hedging for Class I under the higher-of mover because not knowing which
class price would be higher caused uncertainty. The witness testified
Nestl[eacute] currently hedges all its Class I milk purchases using
Classes III and IV futures contracts, and while they have an 18-month
outlook they typically hedge Class I milk 6 months out. If USDA returns
to the higher-of mover, the witness testified, Nestl[eacute] would not
be able to continue hedging its Class I milk. The witness testified
price volatility has specific impacts on ESL products, as it is
challenging for retailers to set different prices due to monthly milk
price fluctuations for two identical products sold at the same time but
produced in different months.
A witness representing Lamers testified in support of Proposals 14
and 15 stating those proposals would help smooth out the volatility in
the pricing of Class III and Class IV.
In its post-hearing brief, IDFA reiterated the importance of
hedging to processors for managing price risk and volatility and
claimed effective hedging could only be achieved with an average-of
mover. IDFA noted that when price uncertainty does not allow fluid milk
processors to manage risk 6 to 12 months out, they risk losing shelf
space to plant-based and other alternative beverage products that can
offer fixed prices. IDFA argued that the choice for a fluid milk
processor, especially with respect to ESL products, higher value-added
products, and foodservice, is increasingly between offering stable
pricing and long-term contracts demanded by customers or losing shelf
space to competing beverages. Pricing stability and long-term
contracting are facilitated by hedging, according to IDFA. IDFA
stressed the growing need for Class I hedging because of increased
volatility between the manufacturing classes.
In response to criticism of Proposal 14, IDFA wrote the average-of
mover does not create price inversions or lead to milk not being
pooled, arguing depooling occurs because of the price relationships
between classes, and is caused by negative PPDs and pooling
requirements. IDFA also wrote that the average-of mover does not
increase price volatility, unlike a higher-of mover which routinely and
unpredictably switches between Class III and Class IV. Finally, IDFA
asserted the value of Class I products is not necessarily related to
the value of Class III or IV products, thus, the higher-of does not
better reflect the value of milk than the average-of mover.
NAJ submitted a post-hearing brief in support of Proposal 14,
arguing it better protects long-term producer milk revenue, provides
less Class I price volatility, and preserves equitable risk-management
opportunities for Class I handlers who are required to participate in
the FMMO system. NAJ noted the perception a return to the higher-of
mover would produce higher producer Class I revenues is based on highly
divergent Class III and IV price movers and an expectation this will
continue in the future. However, NAJ argued in its brief this price
divergence analysis does not account for composition factor amendments
nor potential Class I differential amendments. With revised composition
factors, NAJ asserted, a restored manufacturing to Class I price spread
would mitigate price inversion and depooling.
A MIG witness testified in support of Proposal 15 seeking to amend
the average-of mover from a $0.74 adjuster to a rolling 24-month
adjuster with a 12-month lag. The witness claimed the movers contained
in Proposals 14 and 15 provide similar base Class I skim milk prices
and have similar effects on producer prices. The witness explained in
certain years Proposal 15 would return more money to farmers than the
higher-of, and even if farmers do not experience the benefits of a high
manufacturing price immediately, they will over time through the lagged
adjuster. The witness presented data comparing the monthly average base
Class I skim milk price calculated under the current mover, the higher-
of mover, and Proposal 15 from 2003 to 2022 to show Proposal 15 would
be revenue neutral in the long run.
The MIG witness testified Proposal 15 preserves risk-management
opportunities for both producers and Class I processors, which is part
of orderly marketing. The ability to hedge Class I milk became
effective in 2019, followed by the pandemic and regulatory uncertainty
as to whether the average-of would remain, and time, resources, and
lack of knowledge slowed the adoption of Class I risk-management
strategies, the witness testified.
Five MIG member witnesses representing fairlife, HP Hood, Turner
Dairy, Shehadey, and Crystal Creamery testified on the importance of
hedging Class I milk. The fairlife and HP Hood
[[Page 57602]]
witnesses said they primarily process ESL products, which they hedge
using CME Class III and IV component and commodity futures. The HP Hood
witness stated they do not hedge HTST milk because it is primarily sold
through direct store delivery where the standard business practice is
monthly pricing. However, ESL products are distributed primarily
through grocery warehouses and buyers expect 60 to 90 days' notice for
any price changes, the witness said. The HP Hood witness stated the
ability to hedge has not changed their ESL pricing strategy but has
allowed for fewer price increases. In earlier testimony a witness
representing Shamrock, also a MIG member, said they manufacture both
HTST and ESL products and hedge milk used in their ESL products.
A processor witness representing Shehadey testified contracts with
retailers such as grocery stores use a fixed formula that changes
monthly, quarterly, or semi-annually, and are based on FMMO prices. The
witness testified Shehadey has only HTST Class I milk products and they
do not use any form of risk-management tools to hedge their risk. The
Turner Dairy and Crystal Creamery witnesses said their companies
primarily process HTST Class I milk products which they currently do
not hedge. Both witnesses expressed value in hedging HTST milk sold to
foodservice, as foodservice customers prefer to know prices months to
years in advance. The fairlife and HP Hood witnesses testified hedging
under the higher-of mover was difficult due to price volatility and
uncertainty, but the average-of mover allows them to offset the risk.
The witnesses also testified it takes time to develop a robust hedging
program. The HP Hood witness stated Class I hedging is primarily used
by more sophisticated operators, but as Class I hedging becomes more
accepted, the market should become more liquid, and more processors
will likely use this risk-management tool. The fairlife witness said
fairlife typically hedges its ESL Class I products, mainly 0 to 6
months out, but contracts could extend up to 12 months.
A MIG witness explained that the adoption of Proposal 15 would
allow for less price volatility throughout the market and support
industry growth by stabilizing the cost of milk for retailers and
consumers. Hedging, the witness said, is important to offering
customers and consumers a more stable price, which could stem the
declines in fluid milk as fluid milk competes with many beverages in
the market. The fairlife witness testified that price certainty
translates to price stability for both the retailer and the consumer.
The HP Hood witness testified the goal of hedging is not to make a
higher return, but instead to act as price risk insurance by removing
some input price volatility and increasing margin certainty for end-
product sales. The Turner Dairy witness testified the average-of mover
results in more price stability which is beneficial to the Class I
market. The witness said under the higher-of formula, the Class I price
went up with every spike in butter, cheese, or powder markets, even
though short-term changes in those product prices have no direct effect
on the actual Class I market. The witness argued the price spikes
necessitated raising prices to cover cost, without a market-based
explanation to provide to customers.
The MIG and fairlife witnesses testified in support of the 12-month
lagged adjuster contained in Proposal 15, stating it is critical to
allow Class I processors to mitigate risk and hedge successfully.
Knowing the adjuster 12 months in advance allows companies who hedge to
reduce or eliminate basis risk, the witness said, while the 24-month
rolling adjuster updates and provides dynamic market signals. The
witnesses said Proposal 15 would stabilize prices by moving gradually
and make fluid milk products a more reliable and steady purchase for
customers. Proposal 15 has no floor or ceiling, as the witness
testified MIG members believe floors and ceilings can create price
distortions. The witnesses testified a lookback of less than 24 months
would create more volatility, while a longer lookback does not transfer
market signals well over time. The fairlife witness testified the 12-
month lag is necessary to be able to buy futures 12 months out. The 24-
month rolling average adjuster allows the system to recognize the
difference between Class III and Class IV prices and what the higher-of
mover would have been, the witness said, allowing the industry to know
definitively what the premium structure is going to look like
associated with the adjuster 12 months into the future.
In its post-hearing brief in support of Proposal 15, MIG argued
USDA should first assess whether the current average-of formula has
resulted in disorderly marketing. MIG wrote the current average-of
mover ensures the market has sufficient milk for both fluid and
manufacturing uses and there is not disorderly competition for fluid
market access. MIG argued a return to the higher-of under Proposal 13
would not provide higher returns to farmers, estimating a minimal
impact of a $0.01 to $0.02 per cwt increase in the long term. However,
MIG argued in its brief, the return to the higher-of mover would have
significant negative impacts on the Class I market and the entire dairy
industry. There is no asymmetrical risk inherent in Proposal 15, MIG
argued in its brief, unlike the present average-of mover formula.
According to MIG, the use of risk management developed primarily
after the average-of formula was adopted and is likely to grow in the
future. MIG stated Class I processors do currently use risk-management
tools to hedge ESL products, as this sector has historically utilized
more fixed pricing, meaning hedging can be more easily adopted. MIG
stated many HTST customers, such as grocery stores, have become
accustomed to the monthly fluctuations of pass-through pricing, but
HTST customers, such as school lunch programs or USDA feeding programs,
would benefit from the increased price certainty that comes with an
average-of calculated mover. The industry has not yet had time to
widely adopt risk management, MIG reiterated in its brief, and
regulatory uncertainty due to this proceeding has caused processors to
hesitate further use of risk-management tools.
MIG noted in its brief that even though the AMAA does not
specifically provide for hedging, a Class I formula that supports
hedging helps serve the enumerated purpose of the AMAA of avoiding
unreasonable price fluctuations and reducing milk price volatility.
When Class I processors can better manage risk, they can offer more
stable prices to customers and consumers, MIG argued in its brief.
In its brief, MIG reiterated hearing testimony that use of an
average-of mover best ensures an orderly market, and sufficient supply
of milk for fluid use, including the most accurate pricing signals for
dairy farmers in a longer, and more appropriate, time. MIG took
exception to arguments that the Class I price be used to address price
inversions and depooling. Using a California pool example, MIG argued
that record evidence shows the Department would have to increase the
Class I price an impractical amount to incentivize both manufacturing
classes to remain pooled. MIG reiterated many factors cause depooling
and negative PPDs, and neither the Class I price nor use of an average-
of mover drive those results. Rather, according to MIG, the main
drivers of depooling in the months reviewed in testimony were the Class
III/IV spread and advanced pricing.
In its brief, MIG argued a return to the higher-of mover will not
help Class I handlers in competing for milk supply
[[Page 57603]]
as a higher pool obligation detracts from the incentive to service
Class I plants. MIG reiterated hearing testimony that the current
marketplace is sufficiently served using an average-of formula.
Lamers submitted a post-hearing brief in support of retaining an
average-of mover. Lamers argued that because of the small percentage of
Class IV use in the market, Class IV prices should not be a main driver
for setting the Class I price, as an average-of mover is more
representative of the entire manufacturing market. Lamers preferred the
lower of the Class III and IV prices should be used when setting the
mover as they believe the higher-of artificially raises Class I prices
to consumers.
NMPF presented numerous witnesses who testified in opposition to
the continuation of the average-of mover, embedded in the summary of
their testimony and post-hearing brief presented above. An SMI witness
opposed a modified average-of mover, testifying it would result in
revenue losses to dairy farmers because the Class I price is paid back
to dairy farmers over time and would not compensate dairy farmers that
have exited the business.
Select expressed opposition to Proposals 14, 15, and 16 in its
post-hearing brief. Select wrote that the higher-of more accurately
reflects the value of milk in manufacturing classes, better manages
shifts in demand for any one manufactured product, helps reduce milk
price volatility, better addresses class price inversions and
depooling, and makes it more difficult to draw milk away from Class I
uses for manufacturing. Select noted most Class I handlers have not
engaged in milk hedging under the average-of mover, and the average-of
mover creates and exacerbates opportunistic depooling when Class III
and IV prices diverge significantly. Select opined the average-of mover
results in market disorder which they believe would continue until the
higher-of mover is restored.
In its post-hearing brief, the AFBF opposed Proposals 14 and 15,
arguing they do not address the key issue of class price misalignment.
The AFBF believes handlers of all sizes can find alternative methods of
managing risk under a higher-of mover.
A witness representing Edge testified in support of Proposals 16
and 17. The witness advocated for the adoption of Proposal 16, referred
to as a Class III plus proposal, because the Class III price is
typically higher than the Class IV milk price. In times of rapidly
declining dairy prices brought on by a decrease in demand, the witness
said, government recovery efforts typically prioritize more perishable
products, usually Class III. The witness said this would result in
higher Class III prices in relation to Class IV, and consequently a
base Class I skim price under Proposal 16 approximately equal to the
higher-of mover. According to the witness, in situations where the
Class IV skim milk price is higher than the Class III skim milk price,
any lost revenue would be redistributed to producers over the next
three years through the adjuster and would better support dairy farmers
during years of lower profitability. The witness testified risk
management under Proposal 16 is easy to implement and less expensive
due to high liquidity of Class III milk futures, creating more
predictable prices and making fluid milk products competitive with
plant-based beverages. The witness testified Edge would support a
monthly rolling adjuster in place of an annual adjuster.
The Edge witness testified that as Class I utilization rates
continue to fall, advanced pricing would continue to cause disorderly
marketing conditions such as opportunistic depooling. The witness said
advanced prices are antiquated and anti-competitive and their
elimination would encourage fluid plants to use risk management. The
Edge witness entered data showing the contribution of various factors
to negative PPDs. The witness testified that while the change to the
average-of mover tended to make PPDs more negative, advanced prices and
the spread between Class III and IV influenced pooling decisions, not
the adoption of the average-of mover. The witness testified that if the
Class I price was announced at the same time as the Class III and Class
IV prices, it would prevent a for-profit Class I trading relationship
between Class III and Class IV, and the CME group would be more likely
to create a Class I futures contract. The witness expressed a strong
preference for Proposal 16, which they argue balances producer,
processor, and consumer needs and supports risk management which they
said was critical for the success of the nation's dairy farmers,
particularly fluid sector innovators.
The Edge witness also testified in support of Proposal 17,
returning to the higher-of mover without advanced pricing. The witness
said the proposal would allow the Class I futures price to be equal to
the greater of the Class III futures price and the Class IV futures
price. Risk management players would have minimal risk in providing
liquidity to Class I hedgers by spreading their position between Class
I and the higher-of Class III or IV futures. The witness testified
dairy producers may prefer the higher-of mover without advanced
pricing, such as Proposal 17, as it provides real-time maximum income
for Class I milk, whereas Proposal 16 is more of a compromise.
The Edge witness stated that since 2010, total fluid milk sales
have been steadily declining, adding more instability and difficulties
hedging under the higher-of mover. The witness entered data showing how
much more risk and costs were involved to hedge under the higher-of
mover than the average-of mover. The witness concluded a person hedging
with futures contracts under the higher-of mover would have significant
difficulties, but hedging under the average-of mover meets
effectiveness standards required for hedge accounting.
Nine dairy farmer witnesses, located in Wisconsin, Minnesota, Iowa,
and South Dakota, testified in support of Proposals 16 and 17. The
dairy farmers opined Proposals 16 and 17 would decrease the frequency
of negative PPDs and depooling, and enhance their ability to manage
price risk through hedging and other risk-management programs. One
witness said using only the Class III skim price to set the Class I
skim price is the best option because Class III milk futures carry more
liquidity than Class IV and better represent Class I prices. The
witnesses testified Proposal 16 would help keep prices steady,
benefitting both plants and customers.
In its post-hearing brief, Edge objected to what it believes are
goals of some proponents to maximize FMMO Class I handler obligations
in order for the additional revenue to be used to offset the negative
producer impact of increasing make allowances. Edge argued the
Department should consider the following factors in its decision: there
have not been any significant shortages in the supply of beverage milk
to retail stores; Congress' reason for changing to the average-of mover
to facilitate risk management by fluid milk processors which fluid milk
processors testified is still relevant; advanced pricing is outdated
and no longer necessary to facilitate supply chain coordination but
instead facilitates opportunistic depooling; a mover resulting in the
highest fluid milk price when the Class IV price substantially exceeds
Class III is not in the best interest of consumers; and a mover
resulting in the highest fluid milk price when the Class IV price
substantially exceeds Class III is not in the best interest of all
dairy farmers. Edge argued dairy farmers located where Class I
utilization is low may be worse off under a higher-of mover than an
[[Page 57604]]
average-of or Class III-based pricing as proposed by Edge.
Edge reiterated Proposal 16 would facilitate risk management by
fluid milk manufacturers and large commercial buyers, eliminate
outdated advanced pricing and reduce the incidence and magnitude of
opportunistic depooling, and best serve both producer and consumer
interests.
A witness representing the AFBF testified in support of Proposal
18. The witness said the AFBF believes orderly pooling is the key to
orderly marketing, and this is best accomplished by the proper
alignment of the four class prices. The witness claimed advanced Class
I pricing leads to increased Class III component values, a common
factor contributing to negative PPDs. The witness said advanced prices
reflect market conditions that are 25 to 40 days older than final
prices, which are announced after the close of the month. When a market
rally occurs between the announcement of advanced and final prices, the
witness said it leads to low or negative PPDs and creates incentives
for handlers to depool milk. The witness stated depooling results in
elevated component prices not being shared with the pool, further
depressing the PPD and undermining the FMMO principle of uniform
producer prices. The witness testified advanced pricing may also cause
price inversions when manufacturing prices are rising rapidly, making
it difficult for Class I handlers to attract adequate milk supplies.
The witness entered data showing the effects of advanced pricing on
class price alignment from May 2019 to May 2023 under the current
average-of, and under Proposals 13, 17, and 18. The witness said this
data showed many months under the current average-of mover and Proposal
13 in which the manufacturing class prices exceeded the Class I price,
testifying this created disorderly marketing conditions. On the other
hand, according to the witness, the data showed elimination of advanced
pricing under Proposals 17 and 18 resulted in more consistent alignment
of class prices.
The AFBF witness testified the frequency of published commodity
data allows handlers to estimate price changes regardless of when
prices are announced, and as more products are available on the CME or
other exchanges, processors and manufacturers will have information
needed to hedge and manage risk. The witness opined that the
elimination of advanced pricing would allow for the introduction of
Class III and IV spread options, providing an additional way to hedge
Class I milk when both are used in combination. Three dairy farmers
testified in support of Proposal 18, stating the proposal would reduce
the incentive to depool brought on by low and negative PPDs.
The AFBF witness also testified that while they support the
elimination of advanced pricing, they oppose Proposal 16 because it
would delink Class I prices from Class IV prices, which they anticipate
being higher than Class III in the future due to better export markets.
The witness said tying the Class I price to only the Class III price
could operate more like a ``lower-of'' formula. The witness stated the
AFBF supports Proposal 17 because it is identical to Proposal 18 if
combined with Proposal 13.
In its post-hearing brief, the AFBF reiterated its support for a
return to the higher-of mover, which it argued would support class
price alignment and substantially decrease negative PPDs and depooling.
The AFBF reiterated its hearing testimony that volatility has and
continues to increase, contributing to price inversions and rapidly
changing markets, resulting in competitive inequalities among dairy
farmers. The AFBF said the CME has indicated a willingness to provide
contracts catering to industry demand, and the fact that the industry
is used to advanced pricing should not be a driving reason for its
retention. The AFBF argued disorderly marketing conditions are present
when producers do not receive uniform prices because of frequent
depooling, and its proposals lead to the realignment of class prices,
which encourage consistent pooling and uniform pricing.
An SMI witness, appearing on behalf of NMPF, testified in
opposition to elimination of advanced pricing as contained in Proposals
16, 17, and 18. The witness said 90 percent of packaged fluid milk is
highly perishable HTST milk which is processed, packaged, distributed,
and sold in a relatively short period. The witness said these marketing
characteristics require the price of the product to be known at the
time of purchase, which advanced pricing of Class I milk provides.
According to the witness, most HTST packaged fluid milk is priced
monthly by fluid processors to their customers based on monthly FMMO
Class I prices. This is materially different from cheese and butter
products, the witness said, the prices of which are typically based on
CME daily cash prices. According to the witness, advanced pricing
enables retailers to set store milk prices at the beginning of a month,
allowing the fluid processor to know the price the plant would receive
for the packaged fluid milk prior to the raw milk being processed,
packaged, and sold.
The SMI witness also testified that if advanced pricing was
eliminated, retailers would not know their fluid milk costs until the
end of the month when FMMO Class I prices are announced. This would
mean most fluid milk purchased by retailers would be sold during the
month without knowing its minimum regulated price which, the witness
said, from a retailer's perspective is not orderly marketing. The
witness claimed that if there were significant month-to-month increases
in the Class I price, retailers could seek price relief from the
processor, and ultimately, cooperative suppliers, opening the potential
for fluid milk processors in the same marketing area to have
inequitable raw milk costs and non-uniform payments to producers. In
its post-hearing brief, NMPF reiterated its opposition to the
elimination of advanced pricing.
A witness representing IDFA opposed Proposals 16, 17 and 18. The
witness objected to the elimination of advanced pricing as it would
result in Class I handlers pricing milk products to their customer
before knowing the minimum regulated milk price and impact a handler's
ability to hedge. In its post-hearing brief, IDFA supported the feature
of Proposal 16 that would create a predictable Class I price that could
be hedged based off a hedged Class III price plus a known adjuster.
However, IDFA maintained its opposition to the elimination of advanced
pricing, arguing it is essential for non-hedging Class I handlers to
know their milk cost before the start of the month. It is also an
important part of planning for fluid milk retail customers to market
milk, IDFA stated. IDFA noted in its brief that traditional fluid milk
retail customers are not yet using hedging sufficiently to permit a
regulatory change eliminating advanced pricing. IDFA reiterated their
total opposition to Proposals 17 and 18 in that they would return to a
higher-of mover and, according to the brief, eliminate any practical
ability to hedge.
A MIG witness testified in opposition to eliminating advanced
pricing. The witness said the industry is not yet using hedging
sufficiently to permit this regulatory change, as advanced pricing
remains critical for the dominant share of the fluid market as
retailers expect to know the price in advance. The witness also opposed
Proposal 16, which would price Class I milk solely off the Class III
price. The witness said the proposal would delink the fluid milk supply
and demand from Class IV which MIG believes is critical for balancing.
The witness opposed Proposals 17 and 18 as
[[Page 57605]]
they limit risk-management opportunities for Class I processors. In its
post-hearing brief, MIG reiterated its opposition to any proposal
(Proposals 16, 17, and 18) seeking to eliminate advanced pricing, which
MIG claimed is critical to Class I processors. MIG further argued that
eliminating advanced pricing would negatively impact those market
segments. With respect to Proposal 16, MIG expressed concern with
pricing Class I milk solely off Class III prices as it would be a
significant departure from the current practice and completely divorce
fluid milk supply and demand from the Class IV market. According to
MIG, the record contains testimony from cooperatives that Class IV
remains the ultimate balancing utilization.
In testimony and in its post-hearing brief, MIG opposed a return to
the higher-of mover under Proposals 13, 17, and 18 as it would severely
limit risk-management opportunities. MIG argued in its brief that a
return to the higher-of is unnecessary and not supported by the facts
as the industry has acknowledged the higher-of does not work. Dairy
farmers' concerns are not about the average-of, MIG asserted, but
rather the fixed $0.74 addition. USDA should support moving the
industry forward, not revert to an outdated policy because it is
familiar, MIG stated.
MIG argued NMPF introduced no evidence the average-of mover hinders
a sufficient supply of milk for fluid uses. Rather, MIG wrote, a return
to the higher-of mover would result in disorderly marketing as larger
spreads between Classes III and IV would lead to higher prices under
the higher-of mover and raise the uniform price, incentivizing the
lower-priced manufacturing milk to remain pooled. In that situation,
MIG argued, FMMOs should not be raising the uniform price paid out to
the lower-priced manufacturing class, thus, encouraging it to remain
pooled. This compensation, argued MIG, overvalues the lower-priced
manufacturing milk in the marketplace and incentivizes milk to move to
the lower manufacturing class instead of to a higher performing class.
According to MIG, the average-of mover would better move milk between
the manufacturing classes as the market needs. MIG argued the FMMOs are
designed to ensure processors have sufficient milk supplies for fluid
use, but FMMOs should not be drawing milk away from Class III or IV
when a manufacturing use would be the highest and best value for the
milk. According to MIG, Class I does not need more milk, and FMMOs
should not be disrupting the market to pull milk for fluid utilization.
MIG argued in its brief that revenue neutrality is not a valid policy
consideration without evidence to establish revenue neutrality is
necessary to ensure a sufficient supply of fluid milk.
A witness representing Lamers testified in opposition to the
elimination of advanced pricing in Proposals 16, 17, and 18. The
witness stated Class I handlers need to know prices in advance so they
can set wholesale pricing with their retail customers.
In its post-hearing brief, Select opposed the elimination of
advanced pricing set forth in Proposals 17 and 18, arguing that
testimony at the hearing made clear that the majority of producers
prefer using the higher-of, and the majority of handlers prefer to
maintain advanced pricing which Select believes is in the best interest
of stability in the Class I market.
Class I and Class II Differentials
Numerous witnesses appeared on behalf of NMPF testifying in support
of increasing the Class I differentials as provided for in Proposal 19.
Witness testimony centered around the themes of increased hauling
costs, changes in milk supply and demand locations, changes in supply
patterns resulting in longer hauls, and insufficient over-order
premiums to cover the full cost of servicing the Class I market. The
witnesses said the outdated assumptions embedded in the current Class I
differentials threaten the willingness of milk suppliers to serve the
Class I market.
An NMPF witness argued current differentials are antiquated, since,
other than the three southeast FMMOs, they have not been updated in
almost 25 years. In that time, they said, fuel costs and hauling
distances have increased due to changes in supply and demand locations.
The witness stressed over-order premiums should not be considered an
effective substitute for FMMO prices because they are very difficult to
obtain and maintain at levels adequate to cover the cost of servicing
the Class I market. The witness argued inadequate Class I differentials
contribute to price inversions and incentives to depool, which further
jeopardize the availability of milk to meet Class I demand.
The NMPF witness described the methodology used to arrive at the
proposed differential levels. According to the witness, NMPF requested
an update of the U.S. Dairy Sector Simulator Model (USDSS) which was
used during Order Reform as a basis for the differential levels adopted
January 1, 2000.
The USDSS model owners testified on the USDSS methodology, the
updated data and parameters, and explained the results. They explained
the USDSS model evaluates the geographic value of milk at fluid milk
processing plants across the U.S by finding the lowest cost solution of
assembling milk at farms and delivering it to plants. They said the
model accounts for approximately 90 percent of the U.S. dairy
processing and manufacturing plant capacity, and considers such factors
as milk supply locations, transportation costs (both variable and
fixed) associated with raw milk assembly, final and intermediate
product distribution, per capita demand by county population, and road
weight limits. In the model, plant capacity, products produced, and
milk components demanded at each plant are constrained by a variety of
government and private sources. The resulting values, said the
witnesses, represent the value of an additional load of milk at a
specific plant location (otherwise known as the ``marginal value'').
The witnesses said two sets of USDSS results were provided to NMPF,
May and October 2021, to provide marginal values for both flush and
deficit months. According to the witnesses, the results suggest
considerable differences between the values of milk at fluid plants
derived from spatial economic modeling and current Class I differential
values, with differences as large as $3.00 per cwt in some locations.
The witnesses attributed these differences to changes in the location
of milk production, the composition of dairy product demand, changes in
the location of dairy product demand from regional population shifts,
and the cost of transportation. Both witnesses discussed how modeling,
even though complex, is a simplification of reality and that there may
be unaccounted factors in some areas that would justify deviations from
the model results, including local traffic congestion, geography,
infrastructure restrictions, and price alignment across orders. The
witnesses said the model does not account for other factors, such as
existing business relationships and FMMO regulations, because they
could cause a departure from a market efficient solution. Lastly, the
witnesses noted the USDSS does not produce a base differential value;
it merely provides the additional value needed to move milk to a
particular location.
While NMPF cooperative member witnesses testified on how they used
the USDSS results to arrive at the proposed differentials, NMPF
witnesses stated they followed the same iterative process applied
during Order Reform, starting
[[Page 57606]]
with USDSS results and adjusting for milk movements, plant locations
and historic price relationships.
One witness said NMPF started with a base differential assumption
of $1.60 per cwt, as currently contained in the Class I differentials.
The witness said the costs embedded in the base differential (Grade A
maintenance, balancing, and a competitive factor) are still applicable
and those costs have not decreased over the past 25 years. The witness
said the base differential should also serve to limit class price
inversions, incentivize Class I milk deliveries, and ensure class price
alignment. To accomplish these goals, the witness said that in some
parts of the country the base differential is recommended to increase
to $2.20 per cwt.
One NMPF witness testified regarding the dairy farmer cost of
maintaining Grade A status. The witness said that in order to
participate in the FMMO program, dairy farmers incur costs associated
with obtaining and maintaining Grade A licenses. The witness was of the
opinion partial cost reimbursement for maintaining a Grade A license,
which currently represent $0.40 per cwt in the base differential,
should continue to be provided. The witness detailed standards for
maintaining Grade A status, which include various infrastructure
maintenance and sanitation requirements, and estimated a total current
cost of $1.30 per cwt to meet those requirements.
A series of NMPF witnesses testified on the regional considerations
factored into the proposed Class I differentials contained in Proposal
19. During their testimony they also touched on balancing costs faced
by NMPF cooperative members and the continued need to include a
competitive factor in the base differential. One witness described how
the average of the May and October 2021 results was used as a starting
point. From there, NMPF formed regional committees to evaluate the
USDSS average results and use their local market knowledge to derive
the final proposed differential values. According to the witness, a
series of 19 anchor cities were selected for their proximity near the
border of where two regions abutted. The regional committees used these
anchor cities as common starting points to design a final Class I
differential surface that ensured price alignment between orders. Each
committee looked at current price relationships between plant locations
and consumer demand areas, compared those to the USDSS averages, and
designed a Class I differential structure that accounted for factors
NMPF members thought were not adequately addressed in the USDSS
results.
Northeast
A DFA witness testifying on behalf of NMPF discussed the changes in
the Northeast marketing area, including increased hauling costs,
changes in the milk production and location of farm and fluid
processing plants, and an overall increase in production costs. The
witness said milk production in 11 of the 12 northeast states declined
from 2000 to 2022, except for New York which saw a 31.4 percent
increase, resulting in a small overall increase in the region's milk
production of 2.2 percent. During this time, the witness said the
resident population increased by 9.1 percent. The witness noted the
geographic shift in where milk is processed due to the closure of fluid
plants in urban areas since 2000. The witness surmised local milk
supplies in the northeast are used to meet increasing Class II and
Class III needs, necessitating milk to travel farther distances to meet
fluid demand. The witness estimated transportation costs paid by
producers in the region have increased $0.70 per cwt.
An Agri-Mark witness also testified regarding the changing
marketing conditions in the northeast region and described some of the
proposed differential differences from the USDSS model. The witness
opined that if the USDSS averages were adopted for Maine, it would
incent producers in Maine to service Massachusetts, instead of
remaining available to meet local demand. Therefore, the witness said
NMPF is proposing to flatten the differentials in Maine to maintain
current competitive relationships. NMPF is also proposing lower
differentials in northern Vermont and New York in order to incent milk
movements south and east. The witness said these changes from the USDSS
average results are needed to preserve current milk movements and to
maintain competitive relationships.
Mid-Atlantic
An MDVA witness representing NMPF testified regarding the proposed
differentials in the Mid-Atlantic region. The witness said MDVA
operates two balancing plants in the region that help balance the
market's reserves in both the Northeast and Appalachian FMMOs.
According to the witness, there are large seasonal swings in milk
delivered to those balancing plants, which result in significant cost
to the cooperative and its members. The witness was of the opinion the
base Class I differential should provide some balancing cost
reimbursement to its members through its distribution through the
marketwide pool. Transportation costs have also increased
significantly, the witness said, to a point where Class I differentials
are less effective in attracting milk from reserve supply areas to
Class I plants. In order to meet fluid demand, the witness said
cooperative members must pay for the additional cost through milk check
deductions without any additional compensation through the Class I
differential.
The MDVA witness compared current and USDSS average values for
multiple plant locations in the region. According to the witness, the
regional committee focused on the need to cover additional
transportation costs of servicing the fluid market and maintaining
current price relationships as principles when determining deviations
from the USDSS average results. One example cited two plants in
Landover, Maryland and Frederick, Maryland, located approximately 55
miles apart with a current difference in differential values of $0.10.
The witness said the USDSS average would have resulted in a $0.35
difference and created an artificial regulated cost advantage for the
lower zoned plant in Frederick, Maryland. Another example was in the
southeastern region where two Virginia plants located 15 miles apart
and currently in the same differential zone would have seen a $0.10
differential difference under the USDSS model average scenario. In this
case, said the witness, the committee decided to propose the same
differential value for the two plants in order to preserve their
competitive relationship.
Southeast
A DFA witness representing NMPF testified on the proposed
differentials in the southeast region. Similar to other witnesses,
their testimony centered on the decline in dairy farmers and the
closure of fluid processing plants which necessitate longer milk hauls
at a greater expense to dairy farmers, particularly cooperative
members. The witness spoke to the unique marketing conditions in the
southeast region, with a growing population, local fluid demand, and a
significant milk supply deficit requiring supplemental milk supplies to
be acquired from outside the region. The witness said the supplemental
milk supplies are obtained at great expense to DFA cooperative members.
The witness stated it is typical for supplemental loads to travel
between 500-650 miles or more, and while the transportation credits in
the Southeast FMMO provide partial reimbursement, the fund is
[[Page 57607]]
inadequate to cover the full cost. The witness said the proposed
differentials contained in Proposal 19 would assist in covering
transportation costs and support dairy farmers who supply the region.
Florida
An SMI witness representing NMPF testified on the proposed
differential for the Florida FMMO. The witness said there is an
inadequate milk supply available in Florida to meet its Class I needs,
necessitating significant volumes of milk deliveries from outside the
marketing area, notably Georgia. According to the witness, Florida milk
production is quickly shrinking, declining more than 10.9 percent in
2022, and necessitating more than 24 percent of its milk needs to come
from other states.
The witness discussed Florida's significant population increase and
high Class I utilization, which has averaged greater than 82 percent
since 2000. The witness described significant seasonal swings in fluid
milk needs and SMI's efforts to balance those needs through purchasing
additional milk tankers, marketing milk to non-pool plants at below
FMMO values when needed and buying supplemental loads at above FMMO
values during other times of the year. The witness said weather and the
seasonal population influx also complicate the region's milk balancing
efforts. These dynamics make supplying the Florida region particularly
expensive, estimating that SMI balancing costs for the first half of
2023 were $1.33 per cwt.
The SMI witness testified the proposed Florida differentials
maintain the historical differential slope while more adequately
reimbursing for transportation costs, which the witness estimated has
more than doubled in the past 20 years, from $2.31 in 2002 to $5.98 in
May 2023. The witness said the Florida differentials contained in
Proposal 19 are similar to the averages of the May and October 2021
USDSS results but were adjusted to preserve current competitive
relationships. As a result, the witness concluded the region would be
assured an adequate supply of milk for fluid use and fluid milk buyers
would be better assured of equal raw product costs.
The SMI witness was of the opinion the differentials should not be
adjusted to reflect recently enacted Distributing Plant Delivery
Credits in the Florida FMMO, as both are needed to ensure adequate
supplies of fluid milk for the region.
Southeast/Southwest
A Lone Star witness representing NMPF testified regarding the
differentials between the southwest and southeast regions. The witness
said the eastern portion of the Southwest FMMO and the three
southeastern FMMOs are milk deficit regions. The witness emphasized the
differential recommendations are designed to provide proper financial
incentives through a steeper differential slope to move milk into and
within those regions. The witness said other factors considered
included keeping current city to city price relationships as well as
competitive relationships between plants often clustered around
metropolitan areas. While differentials in some areas were increased
relative to the USDSS average to reflect NMPF member knowledge of milk
movements and related transportation costs in the region, other
differentials were lowered. The witness noted NMPF members believe the
USDSS overestimated balancing costs for parts of Virginia and the
Carolinas, and subsequently is proposing muted differential increases
for those regions.
Regarding Florida, the witness said the NMPF members accepted the
USDSS model average output of $7.90 as the differential for Miami,
Florida. They then worked up through the state with a priority of
maintaining competitive relationships between plants. The only
deviation the witness noted was Myakka City, Florida, whose current
differential is $0.40 higher than plants in the Tampa-Orlando corridor.
The witness was of the opinion the spread was too large, and
consequently Proposal 19 recommends the spread be reduced to $0.20.
In the southwest region, the Lone Star witness said, milk must move
significant distances from the supply region in the Texas panhandle and
eastern New Mexico to the demand centers in east Texas. The witness
said milk routinely travels anywhere from 400-650 miles to service the
fluid needs of the state and stressed the current differentials in the
region are inadequate in covering transportation costs for these
routine milk movements. Consequently, Proposal 19 generally contains
higher proposed differentials than the USDSS model average, with
greater increases moving northwest to southeast to incent milk to move
where needed. The witness added there is a single differential level
proposed for New Mexico, reflecting what the witness said was primarily
a captive in-state market for milk.
Mideast
A DFA witness representing NMPF testified in detail on hauling
assembly costs associated with the Mideast marketing area. The witness
described the region's principal supply areas as central and northeast
Michigan, northern Indiana and northwestern Ohio, and fluid demand
areas centering around the region's large cities of Detroit, Grand
Rapids, Indianapolis, Columbus, and Pittsburgh. The fluid plants
compete for a milk supply with the numerous small to medium-sized
cheese plants in northeast Ohio, two large cheese plants in central and
western Michigan and one large cheese plant in western Pennsylvania,
explained the witness.
The DFA witness testified the Mideast region has increased milk
production 20 percent over the last 23 years, while simultaneously
seeing a 66 percent reduction in dairy farms. The region's Class I
utilization was 37 percent in 2022, supplied by approximately 33
distributing plants, down from 57 in 2000. The consolidation in both
the supply and demand sectors, increased hauling distances to fluid
plants, along with a robust manufacturing sector, has created
challenges in encouraging milk to meet fluid demand.
The DFA witness estimated that Ohio assembly and delivery costs
have increased approximately 69 percent from 2006 to 2023, attributing
most of the increase to fuel, labor and equipment costs. The witness
said current differentials do not provide enough financial incentive to
move milk from supply regions to Class I plants. As a result, said the
witness, the cost of supplying fluid milk needs is largely borne by
cooperatives and their members.
For the Mideast area, the DFA witness said the committee
concentrated on a selected group of larger cities in the region to
analyze the relative value differences. The overall objective was to
determine the value needed to encourage milk to move from milk supply
areas in the north and west to areas of demand. The committee started
with Chicago, Illinois, and determined that even though no fluid plants
operated in the Chicago region, its differential should align with
prices of locations that supply packaged milk, which are Grand Rapids,
Michigan, Cedarburg Wisconsin, Rockford, Illinois, and Dubuque, Iowa.
The committee ultimately determined a $3.10 differential appropriate
for Chicago (Cook County). From there, the witness reviewed a series of
city pairs and provided justification for why the
[[Page 57608]]
proposed differentials were adjusted from the USDSS model average.
Reasons given for the changes centered on distance from larger
population centers and/or milk supply areas and providing enough
financial incentive, in the committee's opinion, to encourage milk to
move where needed. The witness mentioned another consideration was the
willingness of milk haulers to deliver, referring to resistance of milk
haulers to make the long hauls needed to deliver milk to central Ohio,
for example.
The DFA witness also detailed considerations for proposed
differentials in western Pennsylvania, centering around plants in the
Pittsburgh area, and plants in southwest Ohio and eastern Indiana. They
said differentials were adjusted in those areas to account for what the
committee believed were current competitive relationships. The witness
said that, ultimately, the committee recommended more slope than the
USDSS model by reducing the differential increases in the milk surplus
areas of Michigan and increasing the slope when moving to the south and
east.
Another DFA witness spoke to increased hauling costs in the Mideast
area. The witness said that as the number of dairy farms in the area
has declined, so has the number of available milk haulers. Compounding
the issue is competition with other industries who also rely on
commercial haulers. As a result, milk hauling rates have increased as
the fewer number of milk haulers must travel farther distances to
assemble and deliver milk loads. The witness presented data on various
factors that contribute to overall transportation costs, such as wages,
diesel fuel prices, and equipment purchase costs.
A witness from the Michigan Milk Producers Association (MMPA)
testified on the unique Michigan marketing conditions that resulted in
deviations from the USDSS model output. The witness said Michigan has
experienced significant milk production growth, accounting for 68
percent of the region's growth. Michigan milk production serves as a
reserve supply for states south and east, which are considerably longer
routes than when the differentials were adopted in 2000, said the
witness. They testified current differentials are no longer adequate to
cover current transportation costs and highlighted how the large flat
differential zone in Michigan, covering 525 miles, makes it difficult
to encourage milk to travel farther distances to supply fluid demand
instead of satisfying local manufacturing plant demand. Therefore, NMPF
proposed more, smaller pricing zones within the state to better reflect
the cost to move milk. The witness estimated MMPA's hauling cost for
transporting milk from mid-Michigan to eastern Ohio, approximately 287
miles, was $1.06 per cwt per 100 miles.
The MMPA witness testified that is has been more difficult to
obtain over order premiums to cover increased costs because national
retailers with more bargaining power have replaced local independent
stores. Consequently, the witness said, national retailers with a wider
geographic footprint and higher milk volume needs have put downward
pressure on premiums. The witness concluded that increasing Class I
differentials to better reflect the cost of supplying the fluid market
would be more equitable than an increasing reliance on a dairy farmer's
ability to negotiate over-order premiums in a magnitude large enough to
fully cover costs.
Upper Midwest
A Prairie Farms witness representing NMPF explained the proposed
Minnesota and Wisconsin differentials. The witness said the USDSS
results had too much slope between the states that would have created
too much financial incentive to move milk out of Minnesota, creating
difficulties for Minnesota plants to compete for a milk supply.
Consequently, the witness said NMPF is proposing fewer differential
zones in the Upper Midwest region to ensure a local supply could be
maintained. Further, in that region, NMPF was cognizant to propose
differential levels that would minimize negative impacts on producer
blend prices. This witness opined the differentials contained in
Proposal 19 would not fully cover the cost of moving milk the long
distances required to service the fluid market in regions where they
operate. However, they said, the proposed differentials would encourage
the availability of adequate milk supplies to support milk demand in
distant markets.
Central
The Prairie Farms witness also testified on the proposed Class I
differentials in the Illinois, Iowa, Missouri, and Nebraska areas. The
witness said that in the last 20 years the cooperative has become more
dependent on supplemental milk supplies to serve markets in Illinois
and Missouri, while Iowa has lost milk processing capacity in the
eastern half of the state due to plant closures. In addition, the
decline of milk production in southeast Iowa has made it more difficult
for Prairie Farms to stair step milk into the Appalachian and Southeast
FMMOs to meets its supplemental milk needs. All these factors have
contributed to changes in the region's milk movements and increased
producer hauling costs, stressed the witness. The witness reviewed
several equidistant Prairie Farms hauling routes and highlighted the
disparity in differential gains. For example, some routes traveling
approximately 300 miles may see a differential gain of $0.90, while
other routes traveling a similar distance may only see a gain of $0.25.
The witness stated the region's differentials need to be adjusted to
remove some of the disparity and provide adequate financial incentive
to supply fluid plants located in the south and east. The Prairie Farms
witness said their cost to move milk to its four southern and
southeastern fluid plants was approximately $5.25 to $5.50 per loaded
mile, and costs to supply plants in central Illinois is similar.
A DFA witness also testified to differentials proposed for the
Central FMMO region. The witness echoed other testimony regarding
decreased farm numbers, longer distances traveled, and increased
hauling expenses. The witness estimated DFA hauling costs in the region
have increased 151 percent from 2005 to 2022. The witness spoke to the
proposed differential increases in the region. Proposal 19 would
increase the current differential values by $1.35 in Kansas City, $1.15
in Omaha and $1.65 in Wichita. The witness elaborated that the higher
increase in Wichita reflects the area's lack of an adequate local milk
supply. More specifically, the witness stated that only 27 percent of
Wichita's demand is delivered from within a 150-mile radius, while in
Kansas City and Omaha, 47 percent and 55 percent, respectively, comes
from within 150 miles.
Numerous NMPF witnesses testified about the proposed Colorado
differentials. One DFA witness testified the USDSS model overestimated
the amount of milk in Colorado available to meet the State's fluid
needs because of private contractual relationships with manufacturing
plants. Consequently, NMPF recommends deviations from the model to
recognize current competitive relationships, said the witness. The
witness also discussed population, milk production, and fluid demand
similarities between Denver and other regional cities to justify
increasing the Denver area differentials to more closely align with
differentials in those cities. The witness said adoption of the USDSS
model output for Colorado, without adjustments, when combined with
other
[[Page 57609]]
changes that could result from this rulemaking would result in
significant, unsustainable decreases in producer pay prices and, thus,
blend price equity must be considered when making differential
adjustments.
Other DFA witnesses spoke in more detail on the potential producer
price impact on Colorado dairy farmers. The witnesses testified hauling
and feed costs in Colorado are higher than other parts of the region,
which they believe were not properly reflected in the USDSS model. One
witness said producer prices in Colorado currently exceed those of the
FMMO's base zone, however, if the USDSS model average were adopted, it
would result in producer blend prices lower than prices announced at
the base zone, causing significant financial harm to Colorado dairy
farmers.
Arizona
A United Dairymen of Arizona (UDA) witness representing NMPF
testified in support of Proposal 19. UDA is a dairy farmer-owned
cooperative association, with 36 cooperative members and a
manufacturing plant located in Arizona. The witness cited many factors,
such as weather, climate, transportation, fuel, and increased costs of
producing Grade A milk as challenges for Arizona dairy farmers. The
witness stressed the costs of maintaining Grade A status in the State
exceeded $2.35 per cwt. According to the UDA witness, the proposed
Arizona Class I differentials: generally follow the USDSS model, with
deviations made to reflect local market conditions; maintain current
price relationships between handlers within Arizona and the surrounding
states; and establish a smooth differential transition from surrounding
areas.
The witness noted UDA operates a plant in Tempe, Arizona, that
serves as a balancing plant for the market. The witness said the cost
of operating the plant does increase in the summer months as less milk
volume is run through the plant when milk supplies are lower.
California
A CDI witness testified on the process for determining the proposed
California differentials. The witness said the goal of the California
differentials was to recognize regional cost drivers and local market
conditions unique to servicing California urban areas, and to maintain
price relationships with surrounding states. In the witness' opinion,
the USDSS model did not account for the impact on producer prices,
which could alter pool stability and incentives to supply the Class I
market, and region-specific cost drivers such as geography or traffic.
Those considerations form the basis for the deviations from the USDSS
model output NMPF proposed.
The CDI witness provided an overview of the similarities between
the California Central Valley and Upper Midwest milksheds to justify
the position that the lowest differential in both regions should remain
similar. For that reason, said the witness, NMPF proposes a minimum
differential zone of $2.50 in California, which is similar to the
lowest Upper Midwest differential zone of $2.55. The witness also
discussed dwindling milk supplies, increased population, pervasive
traffic congestion, and the closure of manufacturing plants in southern
California as reasons for making adjustments. The witness described
changes made in three California regions (Central Valley, Bay Area, and
Southern California) to provide incentives for dairy farmers to serve
the Class I market in the urban areas.
A DFA witness also testified on California and Northern Nevada
proposed Class I differentials. The witness advocated the maintenance
of competitive equity between Class I and manufacturing plants in
northern Nevada and California counties. The witness was of the opinion
the USDSS model fell short in adequately capturing the cost of
producing milk in California. The witness said the current 10-cent
difference in zones is not sufficient as it does not reflect the actual
movements of milk or unique California State regulations, taxes,
geography, and high milk production costs. The witness stated the
current differentials do not cover the hauling costs in a state with
high gas prices, heavy traffic, and road weight limits. The witness
supported testimony from the CDI witness justifying the proposed
California differentials. The DFA witness also expressed northern
Nevada counties have a historic competitive relationship with northern
California, which should be preserved. The witness noted that Proposal
19 recognizes this dynamic by proposing a $2.90 differential for the
region.
Pacific Northwest
A witness representing Northwest Dairy Association (NDA) testified
on behalf of NMPF regarding the proposed differentials in the Pacific
Northwest (PNW) region, which includes the States of Washington,
Oregon, Idaho and Montana. NDA is a dairy farmer-owned cooperative that
markets the milk of approximately 295 dairy farmers in Washington,
Oregon, Idaho, and Montana, and conducts all processing and marketing
operations through the wholly owned subsidiary Darigold. The witness
described regional competitiveness at the farm level, ensuring
incentives to service Class I markets, and geographic and population-
influenced cost factors were the primary reasons the proposed
differentials deviate from the USDSS averages. The witness was of the
opinion proposed differentials in the PNW FMMO urban areas should
mirror those of the Central FMMO, as the urban areas of the two regions
operate similarly. To ensure competitive equity and the balancing needs
of distinct areas within the region, the witness said Proposal 19
recommends fewer pricing zones than produced by the USDSS model.
The NDA witness also described market changes similar to those of
other witnesses: declining milk production, increased population,
longer haul distances, and increased transportation costs. The witness
estimated NDA transportation costs for servicing PNW Class I plants has
increased $1.10 per cwt in the last 15 years.
In regard to the unregulated areas of the Northwest, the witness
used King County, Washington, as the base at $3.00 per cwt, and kept
the zones the same as they currently exist. In counties with little to
no milk production, the differential was reduced to as low as $2.20 in
Idaho. For areas with higher milk production, the differentials are
proposed at $2.55, reflecting the same level of differentials in South
Dakota.
In its post-hearing brief, NMPF emphasized adoption of Proposal 19
was necessary to ensure Class I differentials would be more reflective
of the current costs of supplying the Class I market. NMPF maintained
that the proposal would result in Class I differentials below actual
costs, keeping with the FMMO principle of minimum pricing. NMPF
reiterated testimony given at the hearing regarding the continued
relevancy of the costs associated with the base differential, and
stressed the costs have increased since it was first adopted in 2000.
NMPF reviewed its own testimony at the hearing on what it believes were
the appropriate regional considerations used to propose deviations from
the USDSS results. According to NMPF, adoption of Proposal 19 would
only raise the regulated cost of Class I milk under FMMOs by slightly
less than 8 percent.
NMPF reiterated the importance of Class I prices remaining the
highest priced class to ensure producers move surplus milk to deficit
regions to meet Class I demand. Without such pricing
[[Page 57610]]
hierarchy, NMPF stated, milk in the higher-valued use class would not
be pooled and it would result in non-uniform prices to producers.
A witness representing the AFBF testified in support of Proposal
19. The witness concurred with NMPF testimony on the increased costs of
servicing the market since the differentials were adopted in 2000. In
offering support for the differential adjustments, the witness said the
purpose of the USDSS model was to mimic an ideal market solution, so it
would be expected that actual market costs are higher. The witness
mentioned that given the seasonality of milk demand, it could be
considered more appropriate to start with the USDSS October 2021
results, rather than the average. In its post-hearing brief, the AFBF
stressed that regulated Class I differentials provide for long-term
stability; something that cannot be assured if a larger portion of milk
prices is negotiated through over-order premiums.
A witness representing IDFA testified in opposition to Proposal 19.
The witness was of the opinion NMPF did not use a consistent
methodology when determining differential level adjustments from the
USDSS model results. Additionally, stressed the witness, some of the
factors NMPF considered are not relevant and/or are unevenly applied
(dairy farm production costs, private business relationships, blend
price impacts, and regional dairy farm competitiveness), or were
already factored into the USDSS model (transportation costs and
maintaining handler equity). The witness was of the opinion that if
milk suppliers and cooperatives experienced transportation costs higher
than those provided for in the differentials, the additional cost
reimbursement should be negotiated through over-order premiums with
milk buyers. The witness also took issue with what they deemed an
undefined base differential, which was proposed at $1.60 in some areas
and $2.20 in other areas, with what they saw as no cost justification
for the difference.
The IDFA witness argued the purpose of Class I differentials is to
bring forth an adequate supply of milk for fluid use. According to the
witness, with an FMMO Class I utilization of 27 percent, the current
milk supply is more than adequate to serve Class I needs and there is
no justification for increasing Class I differentials. The IDFA witness
cited a recent retail milk demand study that found milk demand is
elastic and, thus, the quantity demanded is sensitive to price changes.
The witness argued any increase in price would not only hurt Class I
sales, but also increase government purchase costs for milk used in
nutrition and feeding programs. The witness stressed retail fluid milk
sales have been declining and USDA should not hasten the decline by
increasing Class I prices. The witness also added that eliminating or
reducing the depooling of milk should not be a consideration when
evaluating Class I differential levels. The witness said depooling is a
necessary tool for manufacturing handlers when the Class III or Class
IV price exceeds the blend price. They estimated that in some FMMO
areas the Class I differential would have to increase to $41.32 per cwt
in order to disincentivize depooling.
The IDFA witness was of the opinion that if USDA recommends
differential increases, they should not be increased in the three
southeastern FMMOs as those provisions already require fluid milk
handlers to pay transportation credits and distributing plant delivery
credit assessments to encourage producers to service Class I demand in
those deficit markets. The witness estimated those assessments already
account for approximately 42 to 46 percent of the differential
increases contained in Proposal 19.
The IDFA witness also argued the $0.40 portion of the base
differential attributed to maintaining Grade A status is no longer
relevant given over 99 percent of all milk currently produced is Grade
A. Consequently, said the witness, there is no longer a need to
incentivize farms to become Grade A in order to service the Class I
market and the base differential should be lowered to $1.20 per cwt.
Two witnesses representing IDFA, Saputo and Plains Dairy, testified
in opposition to Proposal 19 and offered support for the arguments put
forth by the IDFA witness. The Saputo witness said increasing fluid
milk prices may reduce the retail price spread between fluid milk and
plant-based products, further depress fluid milk sales, and ultimately
force fluid plants to switch from HTST to ESL processing. The witness
speculated a further decline in HTST facilities will force cultured
products to be made elsewhere and increase costs to consumers. In
regard to obtaining milk supplies, the witness said Saputo pays over-
order premiums when necessary. The witness also opposed any increases
in minimum regulated prices on the grounds that nonuniform increases
would put some of its plants at a cost disadvantage. The Plains Dairy
witness stated the increase from the model average results would impact
consumer prices by $0.07 per gallon. Plains Dairy is a fluid milk
processing facility in Texas.
A witness representing MIG also testified in opposition to Proposal
19 for many of the same reasons articulated by the IDFA witness. The
MIG witness said NMPF failed to cost-justify any elements of the base
differential, either at the $1.60 or $2.20 level, to support why it
should be maintained. In echoing IDFA's arguments, the MIG witness also
objected to NMPF's use of the USDSS averages as a starting point. As
the FMMO system provides for minimum prices, the witness was of the
opinion any evaluation of differential changes should start with the
USDSS May model results, which represent the flush season for milk
production. The witness said Proposal 19's problems are compounded
because NMPF failed to use a consistent set of principles to justify
its deviations from the USDSS results. In addition, many of the factors
used to justify deviations, the witness said, were already factors
considered by the model and, thus, are being double counted.
The MIG witness characterized the NMPF deviations as substantial
and presented a series of maps to visualize the magnitude of the
disparate changes. The witness also pointed to areas where price
changes are more dramatic between neighboring counties, and suggested
such price disparities could create incentives for disorderly
marketing. The witness deemed the Proposal 19 differentials to be
significantly different from current differentials, and argued the
increases are being proposed despite a lack of evidence from NMPF that
there is a shortage of milk available to meet Class I demand. Class I
differentials should reflect the minimum cost of serving Class I milk,
stressed the witness. If there are additional transportation costs not
provided for under the current differential as alleged by NMPF, the
witness testified, those would be reflected in negotiated over-order
premiums in the market. Instead, many areas of the country have no
over-order premiums, which the MIG witness interpreted as an indication
that FMMO prices are not minimums, but price enhancing. Similar to the
IDFA witness, the MIG witness was of the opinion no changes should be
made to the differentials in the three southeastern FMMOs until the
full impact of the recent amendments to the transportation credits and
establishment of the distributing plant delivery credits are known.
Three witnesses representing Organic Valley testified in opposition
to
[[Page 57611]]
Proposal 19. Organic Valley consists of 1,600 farmer-owners who produce
certified organic milk, three dairy manufacturing facilities which make
Class III and IV products and utilizes a network of co-packers to
process and distribute Class I products. The witnesses opposed the NMPF
proposed differentials as they would increase Organic Valley's
obligation to FMMO marketwide pools.
The Organic Valley witnesses described the differences between the
organic and conventional milk markets (both at the producer and
processors level). They were of the opinion Proposal 19 fails to
account for these differences and would result in inefficient milk
movements if adopted. The witnesses countered arguments that the
conventional market balances the organic market, claiming only around 2
percent of organic milk finds its way into conventional products.
A witness from Aurora testified in opposition to Proposal 19.
Aurora is a vertically integrated organic milk supplier with four
organic dairy farms located in Colorado and Texas. The witness was of
the opinion no justification exists to increase Class I differentials
as the areas surrounding the Aurora plants have adequate organic milk
supplies, something that was not accounted for in the USDSS model. The
witness explained the organic milk market and argued its structural
differences from the conventional milk market make any change to the
Class I differentials as applied to organic milk unwarranted. Similar
arguments were made by a MIG witness on behalf of Danone and Crystal
Creamery.
A witness for Maple Hill Creamery (Maple Hill) testified in
opposition to Proposal 19. Maple Hill purchases grass-fed organic milk
for processing and national distribution but does not own a fluid milk
plant. The witness opposed the proposed Class I differentials and
estimated their Class I marketwide pool obligation could increase up to
80 percent as a result. The witness made arguments similar to other
organic processors and concluded that increasing Class I differentials
would result in a choice between paying a lower organic fixed price to
its dairy farm suppliers and jeopardizing supply, or raising retail
prices and jeopardizing sales.
A witness representing Shamrock, a member of MIG, testified in
opposition to Proposal 19. The witness said adoption of Proposal 19
would increase their raw milk costs anywhere from 29 to 62 percent. The
witness testified Shamrock pays over-order premiums which they believe
cover any additional costs associated with servicing their plants in
excess of the Class I differential value. The witness noted an
inconsistency in NMPF methodology, as the differential for their
Virginia plant is proposed at the USDSS model average, while the
differential at their Arizona plant is $0.65 greater than the average.
A witness for AE, a MIG member, also testified in opposition to
Proposal 19. The witness was of the opinion NMPF had not provided
justification for the Class I differential increases. They specifically
objected to the Class I differential changes that would, in the
witness' opinion, give its nearest competitor a $0.15 greater advantage
than currently exists.
A MIG member witness for HP Hood testified in opposition to
Proposal 19. HP Hood also operates four standalone Class II plants in
the northeast. Similar to the AE witness, the HP Hood witness testified
the proposed Class I differentials would create competitive
disadvantages for their plants in relation to nearby cooperative owned
plants. The witness criticized what they believe was the lack of
uniformity used by NMPF in developing differentials that deviated from
USDSS results. The witness said there are ample milk supplies to meet
Class I needs and any increase in the Class I price would only serve to
decrease fluid milk sales.
A witness from Turner Dairy, a MIG member, testified in opposition
of Proposal 19. The witness objected to the continued relevance of the
three base differential components. The witness said Turner Dairy has
not had difficulty finding adequate milk supplies through its
independent dairy farm supply. The witness said any Class I
differential increases would be paid into the FMMO marketwide pool, not
to its direct suppliers. The witness said this would make it harder to
compete for dairy farm suppliers, particularly with competitors in the
unregulated area to their east. Similar to other witnesses, the Turner
Dairy witness detailed how the proposed Class I differentials would
create competitive disadvantages for their plants relative to nearby
cooperative plants, as well as decrease fluid milk consumption.
A MIG witness testifying on behalf of fairlife opposed Proposal 19.
The witness argued that if more money is needed to attract fluid milk
supplies, it should be negotiated in the marketplace, not mandated in
FMMO pricing provisions. The witness said fairlife regularly pays over
order premiums for even day receiving, transportation costs, and
quality attributes. In the witness' opinion, there are ample fluid milk
supplies and any increase in differential would only serve to create
market winners and losers.
A witness from Shehadey, testified in opposition to Proposal 19.
Shehadey operates four manufacturing plants in California, Nevada, and
Oregon, producing Class I and Class II products. The witness argued the
Class I differentials proposed for their plant locations should not be
increased as the local milk supply is adequate to meet their fluid
needs. The witness took particular objection with the disproportionate
increase by the Fresno, California, plant in relation to their
competitors located farther from the state's primary milk supply in the
Central Valley. The witness added that their Oregon plant has a more
distant milk supply relative to their other plants, and over-order
premiums are used to compensate dairy farmers for the additional costs
of servicing the plant.
A witness representing United Dairy, Inc. (United) testified in
opposition to Proposal 19. United is a fluid milk processor operating
three plants in West Virgina, Ohio, and Pennsylvania, which are
primarily supplied by independent dairy farms. The witness testified
their plants receive adequate milk supplies and pay over-order premiums
when needed to ensure their milk needs are met. The witness opined the
market should depend on over-order premiums, not unduly high regulated
prices, to direct milk where needed. Similar to other witnesses, the
United witness argued FMMO prices should not be increased because it
would negatively impact Class I sales. The witness objected to the
uneven application of differential increases, highlighting the
differential increases for the United plants are higher than every
other plant in the region, even when United has had no milk supply
shortages. A West Virginia independent dairy farm supplier of United
also testified in opposition to Proposal 19. The witness expressed
concern the proposed differential increases would ultimately lead to
the closure of the independent fluid milk processors in the State,
leaving local dairy farmers with few, if any, local market outlets, and
would widen the nutritional gap that already exists in the Appalachian
area as higher prices would reduce fluid milk consumption.
A witness representing Lamer's testified in opposition to Proposal
19. The witness said increasing Class I differentials would not benefit
consumers or processors as higher prices would lead to a decline in
fluid milk consumption and the closure of more fluid milk plants. The
witness was
[[Page 57612]]
of the opinion that limiting or disallowing the depooling of
manufacturing milk would be a more beneficial change for all dairy
stakeholders. A post-hearing brief filed by Lamers contended the
hearing record contains no evidence of Class I demand not being
fulfilled, thus any increase in Class I prices is not justified. The
brief argued that if additional transportation costs of moving milk to
Class I plants exist, they should be negotiated through over-order
premiums.
A series of academic researchers testified regarding milk price
elasticity. One researcher testified on behalf of NMPF regarding the
potential impact to fluid milk demand as a result of regulated price
changes. The witness referred to this as price elasticity, which
estimates the percentage change in demand (quantity) due to a 1 percent
change in price. The witness said any price elasticity less than the
absolute value of 1 is considered price inelastic--a 1 percent change
in price would result in less than a 1 percent change in demand--
implying increased revenue due to the price change would more than
offset the decreased revenue from fewer sales.
The NMPF witness reviewed 38 empirical studies, conducted between
1964 and 2022, measuring milk price elasticity at the retail level. The
witness found the study average elasticity of 0.35 percent, and a
median of 0.2 percent, concluding milk demand is inelastic. The witness
said consumers remain price insensitive because milk continues to be
considered a staple food. To illustrate its price inelasticity, the
witness elaborated the real price of milk relative to all goods and
services has declined 7 percent since 2013, during which time milk
demand has decreased 18.3 percent. If milk was elastic, said the
witness, a decline in price should have resulted in an increase in
demand. The witness reviewed other factors which they believe are
driving decreased milk consumption, including increased competition in
the beverage market from new products and alternative beverages, an
increase in the amount of food consumed away from home, and the lower
proportion of young kids in the population.
The NMPF witness evaluated the average increase in differentials
contained in Proposal 19, $1.49 or an 8.6 percent Class I price
increase, to estimate the impact on demand. Assuming a 55 percent
retail price transmission rate (1 percent change in the Class I price
would cause a 0.55 percent change in the retail price), the witness
estimated Proposal 19 would lead to a 1.6 percent decrease in demand.
The witness concluded the decrease in demand would be lower than the
increase in Class I revenue, resulting in a net increase of dairy
farmer revenue.
Another researcher testified on behalf of IDFA. The witness
presented the results of a study evaluating the impact milk price
changes have on the consumption of milk (in five disaggregated
varieties) and various alternatives, including soft drinks, bottled,
water, juices, and for the first time considered plant-based
alternatives. The witness utilized weekly scanner data from 2017
through August 2023 to evaluate three distinct time periods (pre-COVID,
COVID and post-COVID). The witness estimated the data represented
approximately 84 percent of the milk volume sold at retail outlets, or
64 percent of overall milk volume. The witness attributed the remaining
36 percent to milk sales through untracked retail, foodservice,
schools, and shrinkage. The witness noted it is likely the elasticity
for the unaccounted milk volume was highly inelastic.
The IDFA witness said the study found the own-price elasticities
for traditional white, flavored, and lactose-free milk to be elastic,
and when all five categories of milk were combined, it had an
elasticity of -1.26 in the post-COVID time period. Utilizing some of
the NMPF researcher's assumptions (8.6 percent increase in Class I
prices and a retail price transmission rate of .55 percent), the
witness estimated adoption of Proposal 19 would result in an overall
5.98 percent decrease in fluid milk sales and a 2.1 percent increase in
gross dairy farmer revenue. The witness concluded this study revealed
retail fluid milk sales are more sensitive to price changes than
previously thought. The witness also noted other demand studies that
utilize AMS estimated fluid milk sales, not weekly scanner data, do not
reflect the current retail marketplace because they incorporate highly
inelastic sales to schools, colleges and universities, long-term care
and senior living facilities, hospitals, and correctional institutions.
A third academic researcher, also testifying on behalf of IDFA,
provided results of a study evaluating the market effects of Proposal
19. Looking at milk production, fluid milk consumption, and producer
price statistics since 2000, the witness concluded there are sufficient
milk supplies nationally to meet Class I demands. The witness was also
of the opinion sufficient milk supplies, at reasonable prices, exist
for the high Class I utilization FMMOs (the Appalachian, Southeast, and
Florida), because retail prices in the three markets were below those
of a 30-city average retail milk price when compared to other regions
of the country. The witness commented that elasticity studies not
accounting for non-dairy alternatives are not representative of the
current retail market. The witness reviewed recent fluid demand studies
and concluded adoption of Proposal 19 would increase fluid milk prices,
decrease consumption, and result in more milk use in manufactured
products.
A post-hearing brief submitted on behalf of Select supported
increasing Class I differentials, but not to the levels contained in
Proposal 19. Select contended deviations from the USDSS results made by
NMPF may be appropriate but disagreed with the type and extent of those
included in Proposal 19. Select took exception to the proposed
adjustments in the mideast and southwest regions where they have member
farms. Select noted reasons for making deviations were not applied
uniformly, especially in areas that have similar supply and demand
environments. Select stated increased transportation costs and shifts
in milk production and processing locations justify increasing Class I
differentials and offered support for using the average of the May and
October 2021 USDSS results, with minor adjustments and smoothing of the
surface as the USDA would find appropriate.
A post-hearing brief submitted on behalf of MIG opposed adoption of
Proposal 19, arguing hearing evidence supports lowering, not raising,
Class I differentials. MIG cites the abundance of milk available to
serve the Class I market and FMMO adjustments to shipping percentages
as evidence to deny Proposal 19. MIG reiterated its objection to the
methodology used and deviations made by NMPF in developing the proposed
differentials. The brief contended raising Class I differentials would
be disorderly because it would lower Class I demand and aggravate
challenges already faced by fluid milk processors. MIG also noted Class
I differential changes should not be considered until the impact of
recent changes to transportation cost-related provisions in the
Appalachian, Florida, and Southeast FMMOs were known.
A post-hearing brief submitted on behalf of IDFA opposed Proposal
19 on the grounds its adoption would cause market disorder by raising
fluid milk prices, decreasing fluid milk consumption, harm consumers,
and divert milk into manufacturing uses. IDFA reiterated hearing
testimony in its
[[Page 57613]]
brief regarding the price elasticity of fluid milk and concluded
adopting Proposal 19 would reduce fluid milk consumption by 5.98
percent, resulting in over 2.2 billion pounds of milk being diverted to
manufacturing uses.
Similarly, IDFA objected to NMPF's methodology in determining the
differential levels offered in Proposal 19. IDFA objected to NMPF's use
of dairy farm production costs to justify increases to the Class I
differentials and referenced existing milk production as more than
adequate to meet fluid milk demand. IDFA maintained Class I
differentials should instead be lowered by $0.40 per cwt because the
Grade A maintenance cost consideration is obsolete and inaccurate.
A MIG witness testified in support of Proposal 20, seeking to
reduce the base differential to $0.00. The witness' testimony centered
around the continued relevance of the cost components currently
provided for in the base differential: Grade A maintenance, balancing,
and Class I incentive costs. The witness was of the opinion the base
differential results in market enhancing prices that induce
overproduction and reduce fluid milk consumption. The witness said that
since almost all U.S. produced milk meets Grade A standards, it is no
longer necessary to provide compensation through Class I differentials
for those costs as they are not unique to producers supplying the Class
I market. They argued these costs are already provided for in market-
clearing Class III and IV prices where most of the U.S. milk supply is
utilized.
The MIG witness said the balancing cost factor is no longer
justified as fluid milk processors have either invested in
infrastructure to balance their own milk supply or pay over-order
premiums to their suppliers for balancing services. The witness was of
the opinion incorporating balancing costs within the Class I price
results in processors paying for balancing services they do not receive
or paying twice for such services--once through the Class I price and
again in an over-order premium. Lastly, the MIG witness argued the
$0.60 Class I incentive cost factor is no longer necessary to attract
adequate supplies of fluid milk given the low, and continually
declining Class I utilization.
Witnesses from MIG member companies testified in support of
Proposal 20. MIG's members echoed the previous MIG testimony on the
relevance of the base differential cost factors in the current market
environment. In particular, the MIG witnesses argued that through plant
investments, particularly ESL processing or additional milk silos,
combined with over-order premiums paid to their milk suppliers, they
are directly paying for their individual milk balancing needs. The
witnesses all opined that through the base differential they are being
double charged for such services. All MIG members testified that if
additional monies are needed for balancing services or to obtain
adequate milk supplies, it is more appropriate for those costs to be
negotiated in the marketplace and paid directly to their milk
suppliers, rather than as part of a regulated minimum price shared with
all pooled producers.
Another MIG witness testified regarding the relevancy of the base
differential in the current marketplace. The witness was of the opinion
the base differential should be reduced to $0.00, and if cost recovery
is needed by producers, it can be negotiated with milk buyers. The
witness utilized the USDSS model to compare the value of Class I and
Class III milk at the county level. The witness presented the results
and explained in some parts of the country, where Class III milk is
more valuable, it would take additional incentives to service a Class I
plant rather than remain at the higher valued manufacturing plant. In
other areas of the country, namely the southeast, northeast, and
California, the value of Class I is higher, representing the cost to
balance the region's Class I demand. The witness said the national
average value of the differences was negative $0.38, indicating
nationally, it is more valuable for milk to service Class III plants.
The witness drew the conclusion this analysis supports the argument for
lowering the base differential to $0.00 and allowing fluid plants to
negotiate and pay premiums directly to their milk suppliers.
A post-hearing brief submitted on behalf of MIG reiterated its
witnesses' testimony that the base differential is no longer
economically justified. MIG stated the current oversupply of Class I
milk is caused, in part, from high FMMO blend prices. According to MIG,
adoption of Proposal 20 would correct this disorder by allowing a
greater proportion of fluid milk costs to be negotiated and paid
directly to suppliers. The brief reviewed MIG witness testimony on the
relevancy of the costs associated with the base differential and the
steps taken by its fluid milk processor members to balance and obtain a
milk supply.
A Lone Star witness, appearing on behalf of NMPF, testified in
opposition to Proposal 20. The witness argued a base differential of
$0.00 would result in the elimination of any Class I differential for
large portions of the U.S., amounting to approximately $650 million
annually, with no guarantee the money could be recovered through over-
order premiums. Additionally, said the witness, the lower differentials
would lead to disorderly marketing conditions through increased
occurrences of negative PPDs, higher volumes of depooled milk, and
reduced or eliminated incentives to supply the Class I market. The
witness stressed that costs to maintain Grade A status and balance the
market's milk supply are real and significant. The witness said
adoption of Proposal 20 would be akin to adopting individual handler
pools in much of the country, an idea which they said has been found to
cause disorderly marketing conditions.
The NMPF witness maintained milk has an inelastic demand, so any
reduction in Class I prices will not have a significant impact on Class
I sales. The witness also said that despite opposition testimony
regarding the perils of setting regulated prices too high, there are
also negative consequences for setting the regulated price too low. In
the witness's opinion, dairy farmers still face a market power
imbalance when negotiating prices above FMMO minimums, reiterating
previous testimony on the difficulty cooperatives have faced when
negotiating and maintaining over-order premiums.
The NMPF witness concluded by emphasizing the objective of the FMMO
system is to set prices to ensure a sufficient quantity of milk for
fluid use. The witness stressed providing for prices that reflect the
current costs of supplying the market as demonstrated through NMPF
testimony should be a priority of this proceeding.
In their post-hearing brief, NMPF argued Proposal 20 incorrectly
assumes the cost of servicing Class I demand has not increased and
reiterated witness testimony on the continued relevancy and need for
the base differential. NMPF stressed that costs recognized in the base
differential continued to be incurred by dairy farmers in servicing the
Class I market and took exception with the position such costs could be
adequately recovered through over-order premiums. NMPF maintained Class
I demand is inelastic and reiterated the need for Class I prices to
continue to be the highest priced class in order to ensure an adequate
supply.
The AFBF witness also expressed opposition to Proposal 20. The
witness testified the cost factors provided for in the base
differential are still relevant and in fact higher than when the
differential was adopted. The witness
[[Page 57614]]
suggested the Department consider raising the base differential and
provided current cost estimates for each of the three factors, which
would result in a base differential increase of approximately $0.60 per
cwt. The witness stressed the importance of the base differential in
contributing to the proper alignment of classified prices which they
considered a critical element of orderly marketing. The AFBF's post-
hearing brief reiterated its witnesses' hearing testimony and concluded
adoption of Proposal 20 would lead to disorderly marketing conditions.
A post-hearing brief filed by Lamers offered support for Proposal
20. Lamers stated its adoption would better reflect the real value of
milk and all four classes would have a closer price relationship.
Lamers asserted high Class I differentials are no longer needed to
supply the fluid market given that 98 percent of milk produced is Grade
A. A post-hearing brief submitted by New Dairy also offered support for
Proposal 20.
Select's post-hearing brief expressed opposition to Proposal 20 and
asserted a base differential of $1.60 should be maintained. Select
opined the cost of maintaining Grade A status still exists and has
increased, as have the costs associated with balancing and competing
for a milk supply.
A post-hearing brief submitted by Edge, while not offering support
or opposition to Proposals 19 or 20, did contend Class I milk prices
should not be raised beyond necessary levels and not be raised merely
to offset the negative producer impact of increasing make allowances.
The AFBF witness also testified in support of Proposal 21, seeking
to increase the Class II differential from $0.70 to $1.56 per cwt. The
witness explained the proposed differential reflects updated drying
costs based on the current NFDM make allowance. The witness did not
believe the proposed increase would lead to the substitution of Class
IV powders in lieu of Class II fresh milk. The witness estimated that
adoption of Proposal 21 would increase annual FMMO marketwide pool
values by $122 million and reduce the likelihood of negative PPDs and
depooling. These views were reiterated in AFBF's post-hearing brief.
Several witnesses representing MIG including Turner Dairy; HP Hood;
AE; Shamrock; CROPP; Aurora; Shehadey; Crystal Creamery; and fairlife
testified in opposition to Proposal 21. The MIG witnesses indicated
adoption of Proposal 21 would result in Class II standalone plants
choosing not to participate in the FMMO system, putting fully regulated
Class I plants with Class II production at a competitive disadvantage.
This sentiment was emphasized by witnesses from Turner Dairy and
Shehadey, whose fully regulated Class I plants also produce notable
volumes of Class II products. The witness from Crystal Creamery
provided an analysis of CME NFDM and Class II nonfat solids prices,
projecting an increase of 20 to 50 percent in the use of Class IV
nonfat solids if Proposal 21 was adopted. Lastly, a witness from
fairlife predicted adoption of Proposal 21 would cause some
manufacturers to reformulate products in order to avoid paying the
higher Class II price.
In its post-hearing brief, MIG reiterated hearing testimony and
added that cream, a Class II product, must be made with fluid milk in
accordance with the standards of identity established by the U.S. Food
and Drug Administration. As such, according to MIG, a pooled Class II
manufacturer of cream could not reformulate and, further, would
experience an estimated 3.5 percent increase in its FMMO marketwide
pool obligations.
Several witnesses representing IDFA, including Saputo, Galloway,
and Lakeview Farms, also testified in opposition to Proposal 21. The
witness for Saputo indicated the demand for Class II skim solids is
likely to decrease if Proposal 21 is adopted, as alternative milk
solids would have a greater substitution value. Further, according to
the witness, costs to consumers for cream would likely increase.
The witness for Galloway testified that adoption of Proposal 21
would not increase blend prices or limit depooling and negative PPDs,
as alleged, because Class II manufacturers would instead utilize more
Class IV powder ingredients in lieu of fresh milk. In the witness'
opinion, increasing the Class II differential would only serve to
promote disorderly marketing through the displacement of the local milk
supply and permanent investment of equipment to enable the use of Class
IV ingredients. The witness said once a manufacturer makes the costly
capital investment decision, they do not switch back to use fresh milk
in the future. The witness estimated adoption of Proposal 21 would
result in a $99.4 million loss to producers through the use of lower
valued Class IV ingredients. A witness from Lakeview Farms supported
the statements of other witnesses, emphasizing the likely increase in
costs to the customer. This witness added that innovation of more oil-
based formulations to offset the price volatility of dairy fat would
lead to a disruption in the dairy supply chain.
In its post-hearing brief, IDFA reiterated testimony from the
hearing which stressed that there is already an adequate supply of milk
for Class I and Class II needs, and opined the current Class II price
formula is working well as is. As such, according to IDFA, there is no
evidence that suggests a need to increase the Class II differential.
IDFA argued further that farmers are likely to receive lower net prices
as a result of Proposal 21 due to the anticipated substitution of lower
cost Class IV NFDM for Class II nonfat solids. Lastly, IDFA focused on
the likely disproportionate impact of Proposal 21 on Class I handlers
that also manufacture Class II products. Without the ability to depool,
these handlers could not take advantage of lower NFDM prices, IDFA
wrote.
An MMPA witness appearing on behalf of NMPF also testified in
opposition to Proposal 21. The witness' testimony mirrored other
witnesses cautioning that adoption could cause substitution with Class
IV powder ingredients. The witness said not only does the Class II and
Class IV price difference need to be considered, but so does the
significantly lower transportation cost of powder versus fresh milk.
Under the current Class II differential, Class II milk already has an
incentive not to be pooled, said the witness. Increasing the
differential would only heighten the incentive and create competitive
disadvantages for Class I plants making Class II products, while
simultaneously lowering marketwide pool values. In its post-hearing
brief, NMPF added that adoption of Proposal 21 may incent the practice
of substituting less expensive milk powder for fresh milk to make Class
II products. NMPF also elaborated on its members' concerns regarding
the likely increase in depooling of Class II milk if Proposal 21 was
adopted.
USDA received post-hearing briefs related to Proposal 21 from three
additional stakeholders: New Dairy; Select; and Lamers. New Dairy
expressed its opposition to the AFBF's Proposal 21, emphasizing that
the current milk supply is sufficient, and it shared the concerns of
other hearing participants regarding the potential competitive
disadvantages for Class I handlers manufacturing Class II products.
Select explained that the AFBF's proposal deviates from the rationale
and methodology USDA utilized to establish the Class II differential
during Order Reform and, thus, according to Select, Proposal 21 likely
overstates an appropriate Class II
[[Page 57615]]
differential. Further, Select was of the opinion increasing the Class
II differential would discourage the use of fresh milk and cream in
lieu of Class IV ingredients. Lastly, Lamers expressed its concern that
the adoption of Proposal 21 would lead to disorderly marketing and
stated no evidence was presented to suggest a need to increase the
Class II differential.
Discussion and Findings
An FMMO (or ``order'') is a regulation issued by the Secretary of
Agriculture (Secretary) that places certain requirements on the
handling of milk in a defined geographic marketing area. FMMOs are
authorized by the AMAA. The declared policy of the AMAA is to ``. . .
establish and maintain such orderly marketing conditions for
agricultural commodities in interstate commerce. . . .'' 7 U.S.C.
602(1). As specified by the AMAA, the principal means of meeting the
objectives of the FMMO program are through classified milk pricing and
the marketwide pooling of returns. This rulemaking concerns and is
limited to classified milk pricing.
FMMOs announce prices each month for milk received by plants during
that month, according to its use classification. Since 2000, the FMMO
program has used product price formulas that rely on the wholesale
price of bulk products to determine the minimum classified prices
handlers pay for raw milk in the four classes of utilization. Class III
and Class IV prices are announced on or before the 5th day of the
following month to which they apply. The Class III and Class IV price
formulas form the base, also known as the mover, from which Class I and
Class II prices are determined.
The Class I price is announced in advance of the applicable month.
It is determined by adding the Class I differential assigned to the
plant's location, plus the average of advanced Class III and Class IV
prices (computed by using the most recent two weeks' DPMRP data
released on or before the 23rd of the preceding month), plus $0.74. The
Class II skim milk price, announced at the same time as the Class I
price, is determined by adding $0.70 per cwt to the advanced Class IV
skim milk price. Thus, the advanced prices pertaining to milk marketed
in a particular month use the same formulae as the calculation of Class
III and IV prices for milk marketed in that same month, but the
specific data are from different time periods. The Class II butterfat
price is announced at the end of the month, at the same time as the
Class III and Class IV prices, by adding $0.007 per pound to the Class
IV butterfat price.
Component prices are based on prices for the selected bulk products
collected through the AMS-administered DPMRP, which collects weekly
wholesale prices for four manufactured dairy products in various bulk
package sizes (cheese, butter, NFDM, and dry whey powder). Weekly
average prices for cheddar cheese (the weighted average of block and
barrel prices), butter, NFDM, and dry whey are reported in the
NDPSR.\1\ Butterfat prices for milk used in products in each of the
four classes is determined through surveyed butter prices. Protein and
other solids prices for milk used in Class III products are derived
from surveyed cheese and dry whey prices, respectively. The nonfat
solids price for milk used in Class II and Class IV products is
calculated from surveyed NFDM product prices.
---------------------------------------------------------------------------
\1\ Official Notice is taken of the Notice of Equivalent Price
Series: 77 FR 22282 (April 18, 2012). The National Dairy Product
Sales Report was deemed as equivalent to the price series previously
released by the National Agricultural Statistics Service.
---------------------------------------------------------------------------
The butterfat, protein, other solids, and nonfat solids prices are
derived through the weighted average monthly NDPSR survey prices of
each corresponding commodity, minus a manufacturing (make) allowance,
multiplied by a yield factor. The make allowance factor represents the
fixed and variable processing costs manufacturers incur in making raw
milk into one pound of product. The yield factor represents the
approximate quantity of product that can be made from a cwt of milk
received at the plant, assuming a certain component composition of the
milk and the final products. Among other factors used to determine
yield, the milk received at a plant is adjusted to reflect farm-to-
plant shrinkage compared to farm weights. This relates to the basic
question of how much milk is required to make a pound of product.
This product pricing system was implemented as a part of Order
Reform on January 1, 2000. 64 FR 70868 (Dec. 17, 1999). While
individual pieces of the price formulas have been updated occasionally
since that time, this proceeding is the first time since their adoption
that the Department is considering a comprehensive update to all four
classified price formulas 68 FR 7063 (Feb. 12, 2003); 71 FR 78333 (Dec.
29, 2006); 78 FR 24334 (Apr. 25, 2013).
The objective of this proceeding is to evaluate whether market or
other economic conditions have changed and if the price formulas need
to be updated to reflect current conditions, including economic and
technological factors related to processing, transportation, and other
relevant market functions or services. Twenty-one proposals, divided
into five main topic areas, were considered: milk composition factors--
two proposals; surveyed commodity products--four proposals; Class III
and Class IV formula factors--six proposals; base Class I skim milk
price (often referred to as the ``higher of'')--six proposals; and
Class I and Class II differentials--three proposals.
The record supports the findings that some price formula factors
should be amended to reflect current market conditions that were
evidenced in this proceeding. The recommended changes, which are
discussed in detail below, include:
1. Milk Composition Factors: Update the factors to 3.3 percent true
protein, 6 percent other solids, and 9.3 percent nonfat solids.
2. Surveyed Commodity Products: Remove 500-pound barrel cheddar
cheese prices from the DPMRP survey and rely solely on the 40-pound
block cheddar cheese price to determine the monthly average cheese
price used in the formulas.
3. Class III and Class IV Formula Factors:
a. Update the manufacturing allowances as follows:
i. Cheese: $0.2504;
ii. Butter: $0.2257;
iii. NFDM: $0.2268; and
iv. Dry Whey: $0.2653.
b. Update the butterfat recovery factor to 91 percent.
4. Base Class I Skim Milk Price: updating the formula as follows:
a. Class I milk used in ESL products: The average of the advanced
Class III and Class IV skim milk prices, plus a rolling monthly
adjuster. The rolling monthly adjuster would be equal to the average of
the difference between the higher-of and the average-of, for 24 months,
with a 12-month implementation lag period.
b. Milk used in all other Class I products: the higher-of the
advanced Class III or Class IV skim milk prices for the month.
5. Class I and Class II differentials: Update the Class I
differentials to generally reflect the United States Dairy Sector
Simulator May results contained in evidence.
Milk Composition Factors
Milk composition factors contained in the product price formulas
represent assumed component levels of skim milk on a cwt basis. These
factors were adopted on January 1, 2000. Currently, the formulas assume
3.1 pounds of true
[[Page 57616]]
protein, 5.9 pounds of other solids, and 9 pounds of nonfat solids in
100 pounds of skim milk.
The level of assumed components in milk ultimately impacts minimum
regulated prices paid by handlers, although the impact varies since
there are variations in how components are used to value milk between
FMMOs. All handlers regulated by the Arizona, Southeast, Florida, and
Appalachian FMMOs pay for milk used in all four classes on a volume
(cwt) basis, regardless of the components contained in the skim milk
(referred to as skim/fat pricing). Simply put, handlers pay for the
pounds of skim and pounds of butterfat in milk they purchase from dairy
farmers. In the remaining seven FMMOs, handlers pay for manufacturing
milk based on the actual pounds of components in milk they purchase
(referred to as multiple component pricing). Milk used in fluid milk
products (Class I) is paid based on the skim and butterfat pounds
delivered, regardless of the components contained in the milk. Changing
the milk component factors primarily impacts Class I minimum prices
paid by fluid milk processors in all 11 FMMOs, and to a lesser extent
manufacturing handlers purchasing milk for Class II, III, and IV uses
on skim/fat FMMOs.
Proponents of changing the milk component factors argue actual
average milk component levels in farm milk have increased since January
1, 2000, and milk should be priced to buyers to reflect the value of
those components. NMPF proposes (Proposal 1) component levels at
observed 2022 levels (3.39 true protein, 6.02 other solids, and 9.41
pounds of nonfat solids). NMPF also proposes an updated methodology
whereby components could be updated once every three years, without a
rulemaking proceeding, if the nonfat solids levels in FMMO producer
skim milk changed by 0.07 percentage points or more from the level
stated in regulation. In its proposal, NAJ seeks an automatic annual
update, with no change threshold to be met (Proposal 2).
Both NMPF and NAJ argue that because component levels in producer
milk have risen but are still accounted for in the price formulas at
2000 levels, the difference between Class I prices and manufacturing
milk prices (Class III and IV) has narrowed. Put another way, milk used
in manufacturing in the multiple component FMMOs is paid based on
actual component levels, so producers are paid for all component pounds
delivered to manufacturing plants (approximately 85 percent of FMMO
manufacturing milk is pooled on the 7 multiple component orders).
Consequently, payments for milk delivered to manufacturing plants
increase as component levels delivered to those plants increase.
However, milk delivered to Class I plants is paid on a fat/skim basis
whose formulas contain the assumed component levels at issue in this
proceeding. Thus, as milk component levels have risen, Class I plants
have continued to pay for milk based on the static component levels
contained in the formulas. Proponents argue the result has been a
narrowing between fluid and manufacturing prices causing marketing
challenges, especially in the milk deficit markets in the southeastern
region that must compete to procure a supplemental Class I milk supply
with manufacturing milk demands in multiple component orders.
Proponents also stressed the narrowing of the difference between Class
I and manufacturing milk prices increases the occurrence of price
inversions and depooling.
The record of this proceeding reveals FMMO component levels in raw
milk have increased since January 1, 2000, most notably since the mid-
2010s. Milk component data is not available before 2000 because the
prior methodology for pricing milk did not require milk composition-
level assumptions. The Order Reform decision did not address
specifically why these assumptions were adopted. However, since
component levels observed in FMMO skim milk in 2000 were 3.1 percent
true protein, 5.9 percent other solids, and 9.0 percent nonfat solids,
it is reasonable to assume they were set at those levels because at the
time they were representative of all pooled milk in the FMMO system.
Evidence reveals that from 2000, component levels were relatively flat
with only a slight increase through the mid-2010s. Beginning in 2016,
observed data show a marked increase in component levels. The data also
clearly show component levels throughout the country vary by season,
with levels lower in the spring and summer, and higher in the fall and
winter. Hearing testimony revealed numerous reasons for the recently
observed milk component increases, including genomics in dairy cattle
selection and breeding, higher cull rates of less productive cattle,
and improvements in cattle nutrition and animal husbandry.
Opponents of increasing component levels, primarily fluid milk
handlers, argued three general reasons an increase is not justified.
First, fluid milk handlers, who would be primarily impacted by these
proposals, do not receive producer milk at the proposed component
levels. They contend higher component milk is delivered to
manufacturing plants, leaving the lower component milk for fluid milk
handlers. Second, fluid milk handlers testified they receive no
additional market revenue for higher components in milk because their
sales are on a volume basis (i.e., gallons) not on the skim component
levels in their fluid milk products. Therefore, they argued, they
should not be charged for additional skim components that have no
additional market value in their products. Third, opponents argued
updating component levels also would unduly harm manufacturing handlers
in the skim/fat orders who pay for milk based on a skim/fat basis, as
explained earlier. They argue the proposed component levels are higher
than those delivered to plants, both fluid and manufacturing, in the
four skim/fat orders. An evaluation of the record evidence for each of
these claims follows.
First, opponents of increasing component levels argued fluid milk
handlers do not receive milk containing the levels of components
proposed. Testimony from fluid milk handlers during the hearing was
mixed. Some fluid milk handlers would not reveal component levels for
the Department to consider, citing confidentiality concerns. Other
fluid handlers, who did offer data, showed a range of average component
levels in skim milk received: true protein ranged from 3.03 to 3.63 and
other solids ranged from 5.83 to 6.10. Many producers who testified
also discussed the rise in their farm component levels because of the
decisions and investments made at the farm. While some producers could
cite data, for example true protein tests ranged from 3.12 to 3.83,
many who could not cite specifics did discuss a general increase in
their component levels.
Second, opponents argued that because component levels have no
bearing on the volume of milk sold, they should not be required to pay
higher Class I prices for higher components that provide no additional
market revenue. The record clearly shows fluid milk handlers sell fluid
milk products based on volume, which is why prices are based on skim
and butterfat pounds purchased. Proponents of changing the composition
levels provided anecdotal evidence, such as marketing claims and
product description, to assert fluid milk products can garner
additional market revenue for higher component levels. However, no data
were provided to prove there is a general industry-accepted norm or
practice that allows handlers to recover a value for nonfat
[[Page 57617]]
milk solids in excess of the nutrition label claim.
Finally, opponents claimed that increasing component levels in
minimum price calculations would unduly harm manufacturing handlers in
the skim/fat orders. The record contains actual component tests of
producer milk in the multiple component pricing orders because
producers in those orders are paid based on the pounds of components
sold. However, component data for the four skim/fat orders could only
be estimated as producers in those orders are paid based on the volume
of skim milk and butterfat produced, not component levels. Record
evidence contains USDA estimated data showing component levels in milk
have consistently been above the current assumptions in all four fat/
skim orders. Estimated protein and other solids levels of skim milk
pooled in the three southeastern orders have been above the assumed
levels in most months since January 2018, and below the levels
contained in Proposal 1 in all months. Estimated protein and other
solids levels of skim milk pooled in the Arizona Order have been above
the assumed levels in all months since January 2018, and above the
levels contained in Proposal 1 some months. Dairy Herd Improvement
Association component data offered at the hearing, although by no means
all encompassing, is consistent with estimated data provided by USDA.
In the four skim/fat orders, average protein levels from 2020-2022 were
above the current formula assumptions but below those contained in
Proposal 1.
This decision considers how the price formulas should be updated to
reflect current market conditions. Milk composition levels are only one
piece of the formulas being addressed. However, as with all the factors
adopted at the time of Order Reform and updated through subsequent
rulemakings, the question before the Department is what level is
representative of current supply and demand conditions as required by
the AMAA. Some parties argued milk composition factors should not be
changed because not all milk would meet the levels proposed by NMPF.
Price formulas in the FMMO system have never had factors that assumed
all milk was identical. Since FMMOs utilize a national pricing system,
price formulas have always relied on averages to set levels
representative of market conditions. The nature of an average means
some milk will fall above or below the specified level. This was true
with the milk composition levels that were adopted in 2000, and similar
to other factors, such as make allowances, survey commodity prices, and
butterfat recovery percentages.
With sufficient data showing increasing milk composition levels,
the record supports updating the formulas to reflect current market
conditions. The question becomes what levels best represent the entire
U.S. market. The review of record evidence described earlier reveals
many factors should be considered: the average component levels of
pooled producer milk, the variability in milk components regionally and
seasonally, the discrepancy in milk component levels received by fluid
milk handlers compared to manufacturing handlers, and the variability
of component levels from farm to farm. These factors were not
specifically mentioned as being considered in the Order Reform decision
when the current levels were set. However, given the evolution of the
dairy industry in the past 24 years, they are relevant for
consideration in this proceeding.
Fluid milk handlers argued the component levels should not be
increased because Class I plants do not receive component levels as
high as proposed. While the record does not contain a comprehensive
data set of milk component levels received at fluid milk plants, it
does contain data on milk component levels of all milk pooled on the
FMMOs, as well as evidence submitted by producers on the component
levels in their milk, and information from fluid milk handlers on the
component levels they receive. Importantly, many fluid plant operators
testified the milk components received at their respective plants are
higher than currently assumed in the formulas, but less than what has
been proposed.
While this decision finds milk composition levels should be
increased, the levels in Proposal 1 are not appropriate, assumed
component levels applicable to the raw milk whose price is impacted by
these assumptions. Given the variability and seasonality of component
level information contained in the record, this decision finds an
average of component levels in skim milk over a recent time period
appropriate. Based on evidence that component levels have been
increasing at a more rapid rate since the mid-2010s, this decision
finds the average component levels from 2016-2022 the most appropriate
time period to represent producer milk currently priced on a skim/fat
basis. Accordingly, this decision recommends the following: 3.3 percent
true protein, 6.0 percent other solids, and 9.3 percent nonfat solids.
Estimated data for the three southeastern orders show component levels
exceeding these proposed levels in recent months, thus addressing
opponents' claims that manufacturing handlers in the southeastern
orders receive lower component milk than other FMMOs. The
recommendation balances the cumulative body of evidence and testimony
presented at the hearing.
During the hearing and in their post-hearing brief, Edge proposed,
in addition to updating skim component levels, that the assumed
butterfat level of 3.5 percent should also be updated to facilitate
risk management. Updating butterfat levels is outside the scope of this
proceeding as no proposal contained in the hearing notice offered such
a change. As risk management programs utilizing FMMO prices are
maintained in the private sector, such programs can adapt as necessary
to facilitate the use of updated price formulas.
NMPF and NAJ also proposed alternative updating and implementation
schedules for the milk composition levels. NMPF proposed the
composition levels be updated once every three years, but only if there
was a 0.07 percent or greater change in nonfat solids levels, compared
to what was in regulation. For example, if Proposal 1 was adopted, milk
composition factors could only be updated three years later if the
average nonfat solids levels in pooled FMMO milk was 9.48 percent (9.41
x 1.007). NAJ proposed the levels be updated annually, regardless of
the magnitude of increase. Both proponents requested a 12-month
implementation lag because of the implications such a change could have
on producer risk management positions. Edge proposed a longer
implementation lag of 15\1/2\ months because of risk management
positions tied to the DRP.
The development and use of dairy risk management tools is
relatively new, and the Department has never before been asked to delay
implementation of FMMO changes in consideration of risk management.
However, testimony made clear producers' concern regarding the negative
financial impact that could occur if regulatory changes did not account
for the growing use of risk management tools.
Producers testified to the use of numerous market-based risk
management tools, including the CME futures and options, and the two
USDA-Risk Management Agency approved insurance products, DRP and
Livestock Gross Margin--Dairy (LGM-Dairy). Use of risk management tools
by producers testifying at the hearing varied sharply, with some not
using any tools, some
[[Page 57618]]
only enrolling in the DMC program, and fewer using DRP insurance or the
CME hedging tools. The record reflects 32 percent of U.S. milk
production was covered in 2022 under DRP, and with a much smaller use
of LGM-Dairy. Producers testifying were particularly concerned with the
implementation schedule for the initial change, as risk management
positions could be as far out as 18 to 24 months. Evidence shows that
from 2018 through 2022, almost all CME contracts, 97.34 percent,
expired within 12 months. According to producers, any change to the
milk composition level assumptions during the contract period could
result in basis risk to producers not covered by the hedge. A CME
witness testified they saw a 54 percent drop in contracts with
expiration dates over 360 days in 2022 as compared to 2018, which the
CME attributed to the industry already anticipating a regulatory change
based on the outcome of this hearing.
Record evidence depicted the concern regulatory changes could have
on risk management tools, particularly the impact on the usability of
these tools during a transition period. Risk management usage must be
considered against the interest of other producers who do not use risk
management tools, since it would delay recognition of the higher
components in producer milk. While risk management use is not a factor
in determining what the milk component levels should be, it is
appropriate when determining an implementation timeframe to attempt to
mitigate potential financial harm to producers who utilize risk
management tools. Accordingly, this decision finds a 12-month
implementation lag appropriate, beginning when other changes from this
proceeding become effective. This delayed implementation should cover
hedge positions for the vast majority of producers utilizing these
tools. In addition, as this recommended decision indicates the
Department's initial position, producers making risk management
decisions are aware of the potential changes, should they be approved
by producers.
Lastly, this decision does not support an automatic update of the
milk composition levels, as contained in Proposal 1 or Proposal 2. It
is clear from the record that many factors, as described earlier,
should be considered when making a change. Those factors can only be
considered through the course of a rulemaking.
Surveyed Commodity Products
USDA administers the DPMRP to gather weekly wholesale prices of
four manufactured dairy products. Average survey prices are released
weekly in the NDPSR, and monthly average commodity prices are released
by AMS on or before the 5th of the following month. The monthly product
prices are then used in the FMMO price formulas to determine component
values in raw milk. The same four commodities have been surveyed since
2000. NASS administered the survey from 2000 to 2012; submitting data
was voluntary until 2008, and then mandatory and verified from 2008 to
2012. AMS has administered the survey since 2012 with the data being
mandatory and audited 73 FR 34175 (June 17, 2008).
This proceeding is considering four proposals that would add or
remove a variety of products in the DPMRP survey. Because FMMOs enforce
minimum raw milk pricing, the overarching question for the Department
in this decision is whether the current surveyed commodities are an
appropriate representation of market clearing, wholesale commodity
products whose prices provide an accurate reflection of the minimum
value of raw milk. DPMRP currently surveys cheddar cheese, butter,
nonfat dry milk, and dry whey. Proposals submitted in this proceeding
offer changes to the cheese survey (Proposals 3, 4, and 6) and changes
to the butter survey (Proposal 5). No proposals seek changes to the
NFDM or dry whey surveys.
Cheese Survey
Currently, FMMOs utilize a weighted average DPMRP survey price of
40-lb cheddar cheese blocks and 500-lb cheddar cheese barrels to
determine the protein price used in the Class III price formula.
Although both products meet the definition of cheddar cheese, the
different package styles reflect that their intended uses are
different. Cheddar cheese barrels are intended to be further processed
into processed cheeses. Cheddar cheese blocks can also be used for that
purpose, but they are produced with the intention of use in a natural
cheese with minimal further processing (for example cutting into
consumer packages or shredding.) DPMRP weights the cheese price by the
volume of surveyed blocks and barrels, which according to record
evidence, is typically around 50 percent blocks and 50 percent barrels.
Proposal 3 seeks to drop barrels from the survey and solely rely on
a survey of 40-lb blocks. Proponents offered a few reasons for dropping
barrels. First, they believe barrels are overrepresented in the survey
because the weighting methodology is based on the production
percentages included in the survey and not actual production across the
entire cheddar cheese market. Proponents believe the percentage of
cheddar cheese manufactured and priced off 40- pound block prices is
significantly higher than 50 percent of the U.S. natural cheese market.
Second, proponents argue that having what amounts to two products in
the survey results in an average price that is not representative of
either blocks or barrels. They say this has been particularly evident
since 2017, when market prices between blocks and barrels began to
significantly diverge, both in magnitude and direction, from the
historical average difference of $0.03. Barrel prices were even
occasionally higher than blocks (historically, block prices have been
higher than barrel prices). Proponents argued that when barrel prices
have been well below the assumed $0.03 difference, the current
weighting methodology results in a lower average cheddar price than
would have been if the two prices were weighted in accordance with
actual, total production of each product. Members of NMPF testified a
block-only survey would contain adequate survey volume to be
representative of the cheese market.
Opponents of dropping barrels asserted: (1) it is not appropriate
to eliminate approximately half of the current cheese survey volume;
(2) barrels are a market-clearing product and should continue to be
included in the survey; and (3) blocks and barrels together represent
the national cheese market as they are both commodity products with
different commercial uses. Opponents also disputed the claim that most
cheese is priced off the block market.
During the hearing, Edge offered an alternative that would reweight
the survey average price based on the U.S. production volume of blocks
and barrels as determined by NASS, instead of volume from respondents
to the AMS survey. They opined barrels should not be removed from the
survey because in months where the barrel price exceeded blocks, the
Class III price would have been lower than it otherwise was, and
consequently producer revenue would be less. Instead, Edge argued a
better solution to the issue of overweighting barrels was to use a
weighting methodology reflective of actual U.S. cheddar cheese
production.
Proposal 4, submitted by AFBF, seeks to add 640-lb blocks of
cheddar cheese to the survey. This type of cheddar cheese is made using
the same process as 40-lb blocks and differs only in the final
container for the cheese curd. Both sizes represent an intermediate
product requiring further processing before it
[[Page 57619]]
can be consumed. The proponent's primary justification is the
additional survey volume that would be added. The AFBF agreed with NMPF
that barrels are overrepresented in the survey, and their proposed
solution is to add survey volume through the addition of 640-lb blocks.
This argument implicitly assumes the accuracy of milk valuation is
improved when a larger volume of cheese is surveyed.
Opponents to adding 640-lb blocks argued: (1) most 640-lb blocks
are already priced off 40-lb blocks, so their inclusion would not
enhance price discovery; and (2) 640-lb blocks are typically customer-
specific which would exclude those blocks from the survey. The
opposition is premised on the additional survey volume not adding new
price information either because the prices are already reflected in
the 40-pound block price, or because the customized products are value-
added and should not be included for minimum pricing.
Proposal 6, offered by CDC, seeks to add mozzarella cheese to the
survey. Proponents argue mozzarella is the largest volume of cheese
produced in the U.S., and revenue from mozzarella products should be
captured in the survey and ultimately reflected in prices paid by Class
III handlers. Further, proponents argued a higher Class III price
should be reflected in producer prices to offset increasing farm
production costs.
Opponents argued there is no one standard of identity for
mozzarella cheese, making it difficult to delineate what mozzarella
product would have a substantial volume of reportable sales to
represent the market value of mozzarella cheese. In addition, opponents
stated no manufacturing cost data is available to be evaluated for
inclusion in the manufacturing allowance calculation for cheese.
Lastly, opponents asserted mozzarella is not a market-clearing product
and therefore should not be considered when determining minimum prices.
While there were three proposals offering changes to the cheese
survey, two of them lack data and evidence to support adoption. First,
the addition of mozzarella is not supported by the record. The record
reveals multiple standards for different mozzarella cheese products,
but no evidence was presented to show which of those would be
appropriate to survey as an improvement in finding a minimum value for
milk. Furthermore, no evidence was presented on what would define a
commodity mozzarella product, rather than a value-added product, which
is a general rule for inclusion in the DPMRP. Proponents offered
information on mozzarella in consumer sized packages (e.g., mozzarella
sticks), but little to no evidence on what should be considered a
commodity mozzarella product. Evidence shows that a majority of what is
considered mozzarella production is driven by customer specification
and would not meet any of the standards of identities offered,
indicating it would be considered a value-added product and excluded
from the survey. Lastly, the record indicates mozzarella products are
already typically priced based on the 40-pound cheddar cheese block
price. Therefore, adoption of Proposal 6 would only result in
significant costs associated with determining a commodity mozzarella
product to be surveyed and the ongoing cost of surveying said product,
without adding measurable new price information to the DPMRP cheese
survey. Accordingly, Proposal 6 is denied.
The record lacks evidence to support adoption of Proposal 4, adding
640-lb blocks. The record reflects widespread industry consensus that
640-lb blocks are typically priced off 40-lb blocks. Because of this
price relationship, numerous industry witnesses testified that no new
price information would be captured by including 640-lb blocks. In
addition, several witnesses testified 640-lb blocks are largely made-
to-order on long-term price contracts which would exclude the sales
from the survey because of these marketing characteristics. No data was
presented to evaluate whether any additional price information gained
through inclusion of 640-lb blocks would offset the burden (lack of
efficiency) to both the industry and USDA for their inclusion.
Accordingly, Proposal 4 is denied.
The Department considered the idea presented by Edge to reweight
blocks and barrels in the survey to reflect total U.S. cheddar cheese
production volumes by packaging type, instead of survey volumes.
However, the record lacks evidence regarding the market dynamics of
barrel production to analyze how this idea would be implemented, or the
impact it may have on prices, to evaluate whether it would result in a
more appropriate cheese price. In addition, as is made clear below,
this decision finds that surveying two cheese products is no longer an
appropriate method for providing orderly marketing in today's
marketplace, rendering further discussion of a more proper weighting
methodology unnecessary.
What is left to consider is whether 500-lb barrels should remain in
the survey. When determining which products are appropriate to be
included in surveys, the Order Reform Final Decision is instructive. As
described in the decision, ``The importance of using minimum prices
that are market-clearing for milk used to make cheese and butter/nonfat
dry milk cannot be overstated. The prices for milk used in these
products must reflect supply and demand and must not exceed a level
that would require handlers to pay more for milk than needed to clear
the market and make a profit.'' 64 FR 16026, 16094 (April 2, 1999). To
effectuate that objective, FMMOs use survey prices of market-clearing
commodity products.
In the Order Reform decision, both block and barrel cheese were
included in the survey to increase the sample size and give a better
representation of the cheese market. Since Order Reform was
implemented, an evaluation of which products should be included in the
cheese survey has occurred twice. In 2000, shortly after implementation
of Order Reform, the Department considered both the addition and
subtraction of cheese products into the survey, which at that time was
administered by the NASS. 65 FR 20094 (April 14, 2000) In 2007, the
Department again considered changing the products in the cheese survey,
including the removal of 500-lb cheddar cheese barrels. 72 FR 6179
(Feb. 9, 2007) In both proceedings, the Department maintained that
inclusion of both 40-lb blocks and 500-lb barrels was representative of
the cheese market at the time.
While not contained in the hearing notice of the 2000 proceeding,
there was testimony at the hearing for incorporation of other cheeses
in addition to cheddar. The idea was denied because ``If the survey
included other descriptions of cheddar and other types of cheese, such
as mozzarella, it would not be possible to consider the reported price
as representative of the value of any particular product.'' 67 FR
67906, 67926 (Nov. 7, 2002) This reasoning illustrates an important
consideration of which products should be contained in the survey;
products whose resulting prices are representative of a distinct
product.
For all other product pricing formulas (butter, nonfat dry milk,
and dry whey), DPMRP only surveys one product. The butter survey
collects prices of 80 percent salted Grade AA butter, the NFDM survey
collects prices of USDA Extra Grade NFDM, and the dry whey survey
collects prices for USDA Extra Grade dry whey. While all three of these
products can be in varying bulk packaging sizes as specified in
regulation, the product itself is
[[Page 57620]]
essentially the same. 7 CFR 1170.8 Consequently, the resulting survey
prices represent single, distinct products.
The same cannot be said of the two cheddar cheese products
surveyed. Forty-pound block cheddar cheese is typically colored, and
primarily sent for further processing into consumer type packages such
as ``cut and wrap'' and shredded products. Barrel cheese, on the other
hand, is typically white (uncolored) and used primarily for processed
cheese and cheese-flavored products. The hearing record demonstrates
the two products are not interchangeable but rather are produced for
two distinctly different uses which have their own supply and demand
factors. These fundamental qualities have not significantly changed
since Order Reform. At the time of Order Reform, and during the
subsequent two rulemakings considering changes to the cheese survey,
the prices of blocks and barrels were relatively close, and it was
determined the additional volume added with the inclusion of barrels
was a benefit to orderly marketing as it ensured a robust survey
sample.
Testimony and evidence presented showed the historical price
alignment of the two products, estimated at $0.03 per pound, until
2017. Proponents argued the market changed significantly in 2017 when
there was a dramatic increase in price volatility both within each
product and in the relationship between the two products. To determine
statistical validity of that claim, the differences in the monthly
average block and barrel prices from 2001-2023 were analyzed to
identify breaks in the structure of the block-barrel spread. The
analysis found December 2016 to be a statistically significant month,
indicating the period between 2001 to 2016 and 2017 to 2023 were
statistically different in terms of the block-barrel spread volatility.
Historically, prices for blocks and barrels were similarly priced. From
2001-2016, the block-barrel spread averaged $0.01 per pound, while from
2017-2023 the spread significantly increased to $0.115 per pound.
When surveying prices of two products that recently are so
divergent, the resulting average cheese price does not represent either
of the products surveyed. For example, in October 2020, cheddar block
prices averaged $2.5692 per pound and cheddar barrel prices averaged
$0.6052 per pound lower at $1.9640 per pound. The weighted average
cheese price for October used to compute FMMO component prices was
$2.2921, a price reflecting neither of the two survey products.
Accordingly, after careful analysis of the record, this decision finds
the DPMRP cheese survey should only include 40-lb cheddar cheese
blocks. Evidence reveals a clear and statistically significant shift in
the cheddar markets occurred in 2017, which witness testimony
attributed to a number of market factors including plant investments
and increased production of white whey. As a result, inclusion of both
blocks and barrels in the cheese survey has resulted in average cheese
prices used in FMMO formulas that are not representative of any one
cheese product. Therefore, this decision recommends adoption of
Proposal 3.
There was significant testimony regarding how cheddar barrel makers
would be impacted if 500-lb barrels were no longer surveyed. It was
clear there was no industry consensus, not even between barrel makers,
on the impact. What is paramount to any rulemaking is to ensure FMMO
provisions provide for orderly marketing conditions, as required by the
AMAA. The ultimate consideration is which set of bulk, market-clearing,
commodity type dairy products provide the most accurate and efficient
means of determining the minimum value of milk components. One facet of
this is to ensure prices used in the formula best represent the
fundamental products selected for their purpose. As described above,
that goal is not being met by using both blocks and barrels in the
survey.
One concern expressed by some barrel cheese manufacturers is that
the Class III price resulting from a block-only calculation would often
be too high to ensure a profitable return to barrel cheese makers.
Multiple considerations are worth noting. One, there are numerous
styles of cheese represented in Class III. Manufacturers of each have
no guarantees on their net returns, and, hence, manage their business
by taking minimum pricing into account. To that end, there are many
steps remaining in this rulemaking process, including publication of a
final decision, producer referendum, and if passed, an implementation
period. These steps should allow barrel manufacturers ample time to
determine if changes are needed in their business practices to adjust
to the prices that would result from this recommended price survey. As
FMMOs only enforce minimum regulated prices on pooled milk, it should
not be overlooked that barrel manufacturers choose whether to pool milk
subject to minimum prices.
Butter Survey
Currently, FMMOs utilize the monthly average DPMRP survey price of
80 percent salted Grade AA butter in 25-kilogram and 68-pound boxes to
determine the butterfat price used in all 4 classified pricing
formulas. Proposal 5 seeks to add unsalted butter to the survey.
Proponents argue the volume of U.S. butter production captured by the
survey has been decreasing, and adding unsalted butter would increase
the sample size and yield more robust survey results.
Testimony in opposition to Proposal 5 asserted the production of
unsalted butter is mostly manufactured to a particular customer order.
Because the lack of salt results in a shorter shelf life, unsalted
butter is generally not manufactured unless its sale is imminent. On
the other hand, because salted butter can be stored, when milk needs to
clear the market and butter manufacturers lack a buyer, they will make
salted butter to store and sell later. Opponents also noted unsalted
butter is typically exported, often facilitated through premium-
assisted sales, rendering those sales unreportable.
The record lacks evidence to support adoption of Proposal 5.
Although data was entered showing the amount of unsalted butter graded
by the USDA Dairy Grading Program tripled between 2005 and 2022, the
USDA butter grading program is voluntary; hence, the data does not give
a complete picture of the U.S. butter market. Furthermore, there was no
indication regarding what percentage of the graded butter volume would
be reportable given testimony noting the structure of the unsalted
butter market would likely make a large share of it nonreportable. No
data was presented to evaluate whether any additional price information
gained through inclusion of unsalted butter would outweigh the burden
to both the industry and USDA for its inclusion. In fact, the record
demonstrates that unsalted butter is not a market clearing product
given its shorter shelf-life and on-demand production.
The record evidence supports salted butter as the market clearing
butter product and continuation as the only butter product in the
survey. In addition, as discussed in evaluating the cheese survey,
having two commodity products surveyed (such as blocks and barrels) can
have the unintended consequence of resulting in a component price that
does not represent either product produced. As no price information was
entered into evidence to evaluate how salted and unsalted butter prices
compare, the Department
[[Page 57621]]
could not determine if a similar situation might occur by adding
unsalted butter to the survey. Accordingly, Proposal 5 is denied.
Class III and Class IV Formula Factors
The Class III and IV formula factors include four distinct
elements--manufacturing (make) allowance, butterfat recovery, farm-to-
plant shrinkage, and nonfat solids yield.
a. Make Allowances
Make allowances represent the costs of converting raw milk into the
four manufactured dairy products surveyed by USDA. The current make
allowance levels were determined through a 2007 rulemaking that became
effective October 1, 2008, and are as follows ($/per pound): cheese--
0.2003; butter--0.1715; NFDM--0.1678; and dry whey--0.1991. The 2007
rulemaking used an average of two surveys: a voluntary, unaudited 2006
nationwide cost survey conducted by the Cornell Program on Dairy
Markets and Policy (CPDMP), and a mandatory, audited 2006 cost survey
of plants located in California conducted by the CDFA. This proceeding
must determine whether manufacturing costs have increased such that a
change from the current levels is warranted, and if so, what are
appropriate levels.
Four manufacturing cost data sets were entered into the record for
consideration in this proceeding. The first was conducted by the
University of Wisconsin, on behalf of USDA, and was a voluntary survey
of manufacturing plants throughout the U.S. (2021 survey). This survey
was similar to the 2006 CPDMP survey used to determine current make
allowances, as the primary researcher authored both. The 2021 survey
collected cost information provided from manufacturing plants of cheese
(10 plants), butter (12 plants), NFDM (27 plants) and dry whey (8
plants). Annual data submitted by plants primarily represented calendar
year 2019, and included labor, utilities, non-labor processing,
packaging, general and administrative, and return on investment cost
categories. The 2021 survey results were presented as total averages,
and high and low-cost plant averages.
The 2021 survey methodology was similar to the 2006 study, except
for the allocation of non-allocated costs. Some fixed or overhead costs
could not be allocated directly. Some costs were inherently direct
costs but were not collected in a manner that allowed them to be
assigned to a particular processing activity or product. When that
occurred in previous studies, unallocated costs were allocated on a
solids basis, which testimony revealed to be a common practice,
according to some manufacturers. In some facilities making multiple
products, such as butter and powder plants, not all plant operators had
the infrastructure to allocate costs to the different products. A
common example was plant utilities wherein the plant only had a single
electric meter. If an operator utilized 70 percent of the solids
received at the plant in butter, then 70 percent of the unallocated
costs (e.g., electricity) were allocated to butter production, and the
remaining 30 percent were allocated to NFDM production. This allocation
method was referred to by the study author as the ``non-
transformation'' method.
In the 2021 survey, the author used what they believed to be a
better method for addressing costs the manufacturer could not directly
allocate. Unallocated costs were allocated based on an estimation of
the degree of processing transformation the raw milk underwent to
transform into a manufactured product. On a scale from 1 to 10,
products with minimum processing (liquid whey) were assigned a 1, while
products with a high degree of transformation (whey protein
concentrate) were assigned a 10. The survey author argued this somewhat
subjective and ordinal measure of costs could provide a more logical
allocation of certain costs that were inarguably not properly
attributed through the non-transformation cost allocation method. The
most obvious example was the highly energy consuming process of drying
for NFDM powders. For example, operating a milk dryer requires
significant energy, resulting in an assumption that it was more
appropriate for a higher percentage of the plant's energy costs to be
attributed to its powder production.
A second data set was a survey conducted by the same author,
administered on behalf of IDFA, seeking to capture more current costs
and increase the number of respondents. This survey, referred to as the
2023 survey, was similar to the 2021 survey except for two elements.
First, the plants that voluntarily submitted data were different in
number and type: 18 cheese, 13 butter, 15 NFDM, and 9 dry whey plants
participated. The survey author explained that while the number of
participating plants were similar for butter and whey across both
surveys, the structure of the plants was noticeably different.
Consequently, most of the variability in average costs between the 2021
and 2023 surveys is attributed to the plant sample, rather than actual
cost increases over time. For example, the 2021 butter plants surveyed
tended to be larger than the 2023 butter plants surveyed, accounting
for a significant portion of the cost difference between the two
surveys. Some witnesses at hearing also noted the 2023 survey captured
2022 costs, a time of historically high inflation which has since
moderated.
The second notable difference was the 2023 survey used the non-
transformation methodology of allocating unallocated costs on a solids
basis. The survey author indicated mixed industry feedback on the
transformation allocation methodology used in the 2021 survey, as many
participants stated allocating costs on a solids basis is standard
practice. To facilitate comparison of the two surveys the author also
presented updated 2021 survey results using the non-transformation
allocation methodology.
In support of a separate data set, mandatory and audited 2004-2016
California manufacturing cost survey results, conducted by the CDFA,
were entered. These surveys formed the historical data used to forecast
current costs in the CA Forecast described below. The 2006 CDFA study
was used by USDA when determining the current FMMO make allowances.
The fourth data set, entered on behalf of IDFA, was a result of a
statistical model that used data from the 2004-2016 California
manufacturing cost surveys and other known input prices and
productivity data (for example, the producer price index) to project
future California manufacturing costs, referred to hereinafter as the
CA Forecast. The study author testified the model predictions were a
better estimate of costs than a simple trend analysis since they
accounted for the impacts of other factors, such as accelerating
inflation, that are known to describe changes in manufacturing costs in
California. Unlike the 2021 and 2023 surveys which evaluated six cost
categories (processing labor, utilities, packaging, non-labor or
utilities processing, general and administrative, and return on
investment), the CA Forecast only estimated three cost categories
(labor, utility, and other). Other costs were defined as the remaining
costs after labor and utility costs were deducted. Inasmuch as the CDFA
results were used by USDA when previously amending make allowances,
proponents argued this statistical estimation of what CA manufacturing
costs might have been for 2022 would be a helpful indicator to validate
other manufacturing cost data entered into the record.
[[Page 57622]]
These data sets were the basis of the manufacturing allowance
levels proposed by stakeholders at the hearing. Two sets of make
allowance levels were offered ($/pound):
----------------------------------------------------------------------------------------------------------------
Proposal 7 Proposals 8 and 9
----------------------------------------------------------------
Product IDFA/WCMA IDFA/WCMA IDFA/WCMA IDFA/WCMA
NMPF year 1 year 2 year 3 year 4
----------------------------------------------------------------------------------------------------------------
Cheese......................................... 0.2400 0.2422 0.2561 0.2701 0.2840
Dry Whey....................................... 0.2300 0.2582 0.2778 0.2976 0.3172
NFDM........................................... 0.2100 0.2198 0.2370 0.2544 0.2716
Butter......................................... 0.0210 0.2251 0.2428 0.2607 0.2785
----------------------------------------------------------------------------------------------------------------
NMPF asserted that their proposed levels take a balanced approach
between recognizing increased manufacturing costs and the impact to
producers if there is a significant increase from current levels. They
testified that while they evaluated the 2021 survey when developing
their proposal, the levels they ultimately proposed were a consensus
judgment of all NMPF members. By their own description, the proposal is
not intended to reflect the entirety of current manufacturing costs.
NMPF witnesses argued that their proposal would update make allowances
to be a closer reflection of manufacturing costs, but further increases
could not be justified because of the potential impact to producers.
They argued that until a mandatory cost survey can be conducted to
provide assurances of accuracy in the calculation of manufacturing
costs, any increases larger than they proposed would reduce producer
revenue, lower already slim (if any) margins, and negatively impact the
availability of adequate supplies of milk for fluid use. They
considered such consequences disorderly.
NMPF stressed current make allowances are too low and have resulted
in cooperative reblending as a method of sharing losses among
cooperative members who own manufacturing plants. NMPF witnesses also
testified to receiving reduced premiums from manufacturing plant
customers as they attempt to recoup costs not covered by the current
make allowance levels. Reduced and/or deferred plant investment caused
by inadequate make allowances was also a theme discussed by many
witnesses. Cooperative witnesses spoke of the disproportionate burden
on cooperatives with balancing plants, which inherently have higher
manufacturing costs as they do not operate continuously at full
capacity because of the market-wide balancing role they necessarily
assume.
NMPF cooperative witnesses and dairy farmer members presented
evidence on increasing farm production costs and slim farm margins.
They opined that the impact to producers should be considered when
determining appropriate make allowance levels.
WCMA and IDFA offered separate, but identical proposals. Their
proposed make allowance levels were derived from the average of the
2023 study and the CA Forecast, plus a $0.0015 marketing cost factor.
The proposals contained a 4-year implementation schedule with 50
percent of the increase implemented in year 1 and the remaining 50
percent implemented evenly across the next 3 years. Proponents offered
a phased implementation schedule in recognition of the impact that
sudden, large increases in make allowances would have on producer
revenue.
WCMA and IDFA witnesses asserted there are limits to a
manufacturing handler's ability to lower costs through efficiencies. As
make allowances have not been increased in over 15 years, the witnesses
stated plants have reached the limit on capturing cost efficiencies,
and inadequate make allowances are now impacting innovation and capital
investments. Manufacturing handlers testified their costs of
manufacturing have increased and are in line with the 2021 and 2023
survey results. As a consequence of inadequate make allowances, the
witnesses said classified prices are overvaluing raw milk. To
substantiate the claim, witnesses compared producer mailbox prices with
FMMO blend prices. In regions where mailbox prices (which contain
premiums and deductions reflecting reblending) are below blend prices,
the witnesses asserted regulated prices are too high, as manufacturers
have lowered market premiums to make up for high manufacturing costs.
The record clearly demonstrates that make allowance levels are not
reflective of the costs manufacturers incur in processing raw milk into
the finished bulk products of cheese, butter, NFDM, and dry whey. This
was one of the only facts to which all participating parties agreed and
offered evidence in support, as discussed above. However, there were
divergent views on what should constitute adequate make allowance
values going forward.
Since 2000, when product pricing was adopted, FMMO decisions have
consistently relied on surveys of observed manufacturing costs to
determine proper make allowance levels. Previous make allowances have
been derived in whole, or in combination with, surveys conducted by
CPDMP, CDFA, and the USDA Rural Business Cooperative Service. The
importance of relying on actual, observed costs cannot be overstated.
FMMO price formulas determine the classified prices handlers pay to
dairy farmers. It is important that all variables reflect actual market
conditions.
While the use of modeling is helpful for policy analysis, the
evidentiary record of this proceeding contains adequate observed market
data to determine make allowance levels without the need to rely on
model assumptions. Modeling involves a host of assumptions made by the
modeler, as was described by the CA Forecast author, which result in
estimates with a wide confidence interval. In other words, cost
estimates could have a wide range of possible values consistent with
the model. The confidence interval for the cost estimates widens when
some indexes used to forecast are not specific to dairy manufacturing.
Economic modeling was considered and rejected during Order Reform as a
replacement for the Basic Formula Price. This decision affirms the
Department's long-held position that this type of modeling, requiring
extensive assumptions, is not an appropriate methodology for
determining make allowances when superior information is available. As
it is common for participants to not reveal confidential information
such as manufacturing costs, the cost surveys contained in evidence
provide the best available information on observed costs for this
proceeding. Accordingly, this decision does not find justification for
[[Page 57623]]
using the CA Forecast in determining appropriate make allowances
levels.
In opposition to Proposals 8 and 9, cooperatives and dairy farmer
members offered substantial testimony regarding the potential impact to
dairy farmers should make allowances be significantly increased.
Accordingly, they recommend adoption of the NMPF proposal as it
attempts to temper the impact to producers.
FMMOs are designed to provide for orderly marketing through
classified prices paid by handlers and marketwide pooling to determine
average minimum blend prices paid to producers. As FMMO formulas are
market-oriented, the product prices that drive classified prices are
chosen to reflect current supply and demand conditions. This was last
reiterated by the Department in 2013, writing ``when the supply of milk
is insufficient to meet the demand for Class III and Class IV products,
the prices for these products increase as do regulated minimum milk
prices paid to dairy farmers; because the milk is more valuable and the
greater value is captured in the pricing formulas.'' 78 FR 9248 (Feb.
7, 2013). Further, the Secretary is expressly authorized in the AMAA to
set prices to reflect ``. . . the price of feeds, the available
supplies of feeds, and other economic conditions which affect market
supply and demand for milk or its products. . . .'' 7 U.S.C. 608c(18).
This concept was discussed and validated by a Federal court and is
relevant to this proceeding. Bridgewater Dairy, LLC et al. v. USDA, No.
3:07-cv-104, 2007 WL 634059 (N.D. Ohio, 2007). Therefore, the potential
impact to producers remains an inappropriate factor in determining make
allowance levels. While many stakeholders look to the FMMO program to
provide stability, it is not within FMMO authority to support dairy
farmer income.
Accordingly, record evidence does not support adoption of Proposal
7, whose make allowances levels are not reflective of observed costs
provided in evidence and is designed to dampen the impact to producers.
A vast majority of hearing participants supported a USDA-
administered, mandatory, and audited survey as the most appropriate
method for obtaining observed cost data to determine make allowance
levels. Some witnesses asserted make allowances should not be changed
until such a survey is administered and results published. Conducting
such a survey is not currently authorized by law. The lack of a
mandatory survey has not been reason to delay two previous updates to
make allowance levels, and its continued lack of existence now is not a
reason for delaying such an update in this proceeding. As discussed,
the record of this proceeding clearly demonstrates manufacturing costs
have increased since make allowance levels were last changed. Given the
body of evidence, this decision finds it appropriate to increase make
allowances to ensure the price formulas better reflect manufacturing
costs and provide for more orderly marketing conditions.
The record reveals the voluntary, unaudited nature of the 2021 and
2023 surveys are met with reluctance by some stakeholders, particularly
the producer community. Questions regarding plant sampling, cost
allocation methodology, and capturing of a high-cost time period
expressed on the record are legitimate considerations. Issues with the
results of voluntary, unaudited surveys are not new to the process of
determining make allowances. Similar situations occurred in both the
2006 and 2007 rulemakings. In both instances, make allowances were
determined by using parts of different survey results. The record of
this proceeding supports the same considerations.
What remains for this recommended decision to determine are proper
make allowance levels given the survey data contained in evidence: the
2021 survey; the 2023 survey; and the 2016 CA survey. The record does
not support consideration of the 2021 survey results that relied on the
transformation cost allocation method for allocating unallocated costs.
Hearing participants expressed skepticism of this method as it is
standard industry practice to allocate costs on a solids basis.
Although the study author explained how the transformation numbers were
assigned to products, the record does not contain sufficient evidence
to validate the new methodology. Whether or not the transformation
methodology is theoretically more accurate is not relevant. What is
germane is that manufacturers allocate costs, manage their plants, and
make marketing and pricing decisions in accordance with the traditional
method of allocating fixed and unallocated costs on a pro-rata basis of
milk solids in the final products. Accordingly, the 2021 survey results
utilizing this methodology were not considered when determining the
levels recommended in this decision. The revised 2021 and 2023 surveys,
using non-transformed survey results, and the 2016 CA survey results
were used in determining the make allowances recommended in this
decision. Relying on a combination of these survey results provides a
consensus set of data to determine appropriate make allowance levels
and is superior to relying only on one survey.
Cheese
--------------------------------------------------------------------------------------------------------------------------------------------------------
2021 Non- 2023 Non-
transformed transformed 2016 CA survey Current USDA proposed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost................................................. ................. $0.2201 ................. ................. .................
High Cost................................................ ................. $0.3181 ................. ................. .................
Average.................................................. $0.2365 $0.2643 $0.2454 $0.2003 $0.2504
# Plants................................................. 10 18 4 ................. .................
--------------------------------------------------------------------------------------------------------------------------------------------------------
This decision recommends a $0.2504 per pound cheese make allowance,
derived from the average of the 2021 and 2023 non-transformed survey
results. The 2023 survey incorporates a representative sample size,
accounting for 55.6 percent of NASS cheddar cheese production. The
record indicates the 2023 survey, which collected cost data primarily
from 2022, covered a period of relatively high inflation and rising
input costs. An example is packaging costs--lumber and corrugated
materials--which testimony indicates have receded since peaking in
2022. Absent any other data on the record, this decision finds it
appropriate to utilize an average of the 2023 and 2021 non-transformed
survey results to ensure the recommended cheese make allowance is not
disproportionately affected by higher 2022 costs that have since
moderated. The decision finds use of the 2021 and 2023 surveys provides
a manufacturing allowance reflective of the national cheddar cheese
market. In 2022, California cheddar cheese production represented
approximately 6.9 percent of reported NASS cheddar cheese production.
As incorporation of the 2016 CA survey would result in an over
representation of California cheese
[[Page 57624]]
manufacturing costs, this decision does not support its consideration.
Butter
--------------------------------------------------------------------------------------------------------------------------------------------------------
2021 Non- 2023 Non-
transformed transformed 2016 CA survey Current USDA proposed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost................................................. ................. $0.2616 $0.1838 ................. .................
High Cost................................................ ................. $0.4210 $0.2149 ................. .................
Average.................................................. $0.1338 $0.3176 $0.1938 $0.1715 $0.2257
# Plants................................................. 12 13 7 ................. .................
--------------------------------------------------------------------------------------------------------------------------------------------------------
This decision recommends a $0.2257 per pound butter make allowance,
derived from the average of the 2021 and 2023 non-transformed survey
results. While the 2021 and 2023 surveys had roughly the same number of
reporting plants and represented roughly the same volume of NASS U.S.
butter production (approximately 80-82 percent), the plant samples
differed significantly. The study author claimed sampling was the main
driver for the notably different survey results. The 2023 survey
captured data from both smaller and larger plants while the 2021 survey
consisted of a more homogenous sample of larger and more efficient
plants. The record indicates the 2023 survey, which collected cost data
primarily from 2022, covered a period of relatively high inflation and
rising input costs. According to the Producer Price Index for All
Commodities (PPI), published by the Bureau of Labor Statistics, prices
have moderated since their June 2022 peak. Thus, this decision finds it
appropriate to average the 2023 and 2021 non-transformed surveys to
ensure the recommended butter make allowance is not disproportionately
affected by higher 2022 input costs that have since moderated and
account for the differences in plant sampling. The decision finds use
of the 2021 and 2023 surveys provides a manufacturing allowance
reflective of the national butter market, as both surveys represent
over 80 percent of 2022 NASS butter production volumes. This decision
does not support incorporating the 2016 CA survey in the calculation as
it would overrepresent California butter manufacturing costs.
NFDM
--------------------------------------------------------------------------------------------------------------------------------------------------------
2021 Non- 2023 Non-
transformed transformed 2016 CA survey Current USDA proposed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost................................................. ................. $0.2302 $0.1854 ................. .................
High Cost................................................ ................. $0.3247 $0.2786 ................. .................
Average.................................................. $0.2454 $0.2750 $0.2082 $0.1678 $0.2268
# Plants................................................. 27 15 8 ................. .................
--------------------------------------------------------------------------------------------------------------------------------------------------------
This decision recommends a $0.2268 per pound NFDM make allowance,
derived from the average of the 2021 non-transformed survey and 2016
CDFA cost of processing survey results. In 2022, California represented
43.7 percent of U.S. NFDM production. This supports hearing testimony
describing the importance of California manufacturing facilities in the
total U.S. production of NFDM powder. Therefore, this decision finds it
appropriate to place more emphasis on California NFDM plant costs
considering the dominant share of NFDM production by California plants.
As 2016 was the last CDFA study published, and it contains audited
data, unlike the 2021 and 2023 surveys, it is appropriate to use as one
of the surveys to determine the recommended average make allowance. As
stated previously, given all the cost surveys contained in the
evidentiary record have shortcomings, this decision finds it
appropriate to use an average of two surveys when recommending make
allowances. Regarding a NFDM make allowance, what remains is
consideration of either the 2021 or 2023 survey. In the 2023 survey,
significantly fewer plants participated and record evidence suggests at
least one large NFDM manufacturer did not participate. The record
reveals the 2021 survey to be a better representation of plants
producing NFDM in the U.S. than the 2023 survey. Additionally, as NFDM
production is heavily energy dependent, the 2023 survey captured the
historically high energy costs, particularly natural gas, that have
since moderated. Utilizing the 2021 survey figures moderates the
influence of the high inflationary period experienced in 2022,
particularly for energy and utilities.
Dry Whey
--------------------------------------------------------------------------------------------------------------------------------------------------------
2021 Non- 2023 Non-
transformed transformed 2016 CA survey Current USDA proposed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost................................................. ................. $0.2848 ................. ................. .................
High Cost................................................ ................. $0.3952 ................. ................. .................
Average.................................................. $0.2457 $0.3361 ................. $0.1991 $0.2653
# Plants................................................. 8 9 ................. ................. .................
--------------------------------------------------------------------------------------------------------------------------------------------------------
This decision recommends a $0.2653 per pound dry whey make
allowance, derived from the 2021 non-transformed survey and 2023 non-
transformed low-cost survey result. Similar to NFDM, dry whey
production is heavily energy dependent, and the same concerns regarding
the 2023 survey results exist for dry whey. The record reflects
incrementally higher drying costs are incurred when drying whey
compared to NFDM due to the higher moisture content in whey. Natural
gas prices increased substantially between 2019 and 2022. The Henry Hub
Natural Gas Spot Price increased 153 percent between 2019 and 2022.
However, prices declined in 2023, with the spot
[[Page 57625]]
price falling by 61 percent. Natural gas prices in 2023 were comparable
to prices in 2019, with the spot price one percent lower than in 2019.
Compared to 2016, natural gas prices were slightly lower in 2023, with
spot prices about 4 percent below 2016 levels. These data suggest
natural gas prices are similar to price levels observed during the
Stephenson 2021 survey. Absent any other data on the record, this
decision finds it appropriate to utilize the 2023 non-transformed low-
cost average ($0.2848) with the 2021 non-transformed survey to ensure
the recommended dry whey make allowance is not disproportionately
affected by higher 2022 energy and utilities costs that have since
moderated.
The record does not support inclusion of a $0.0015 per pound
marketing cost for any of the four make allowances. While supported by
a few participants in both testimony and post-hearing briefs, no data
was provided to validate $0.0015 as an appropriate estimation of
marketing costs.
The make allowances recommended in this decision are more
representative of manufacturing costs than current make allowances,
which were last changed in 2008. Record evidence clearly supports
updates; however, as previously mentioned, each of the surveys of
observed costs has weaknesses. The recommended make allowance levels
are the best approximation of manufacturing costs given publicly
available data and evidence contained in this proceeding's record. In
accordance with long-standing practice, this decision does not
recommend delaying the implementation of make allowances determined to
best reflect current conditions. Should these make allowances be
approved by producers, they would be implemented through the
publication of a final rule.
b. Butterfat Recovery
Currently, the Class III formulas contain a 90-percent butterfat
recovery assumption. This represents the percentage of butterfat in raw
milk that can be recovered during the cheesemaking process, recognizing
that for both theoretical and practical reasons, 100% of utilization of
butterfat (or any other raw milk component) in the production of a
dairy product is impossible. Proposal 10 seeks to increase the
butterfat recovery assumption to 93 percent. Proponents claimed modern
cheesemaking equipment and better cheese handling techniques make a
higher butterfat recovery not only attainable, but common in practice.
Opponents mainly consisted of manufacturers asserting that while
some cheese plants attain butterfat recovery percentages in excess of
90 percent, yield assumptions that increase producer revenue, such as
butterfat recovery, should not be amended outside a comprehensive
review of all assumptions that determine yield factors. Multiple
opponents mentioned the overvaluation of whey cream as an example of a
potential issue.
This rulemaking proceeding sought to consider changes to the FMMO
pricing formulas. Industry participants were invited to submit
proposals concerning the current pricing provisions of the FMMOs. Those
opposing changes to the butterfat recovery percentage had an
opportunity to submit proposals on any of the yield factors, as they
fall within the provisions of the pricing formulas. None, other than
those submitted by Select, were received. This decision does not find
it appropriate to deny consideration of any yield related proposal
presented in this proceeding on the basis of a potential future
evaluation of all yield factors.
The record contains testimony from several expert witnesses
explaining the cheesemaking process and use of more modern cheese
equipment and technology, including improvements in coagulants and curd
handling, allowing handlers the ability to capture a larger percentage
of butterfat in cheese. As butterfat recovery numbers are considered
confidential information, the record does not contain a well-developed
picture of recovery levels in U.S. cheese plants. The record indicates
the age of equipment and technology used in cheese plants varies
widely. While evidence was submitted describing high butterfat
retention rates that are achievable using new equipment, it does not
demonstrate those rates are reflective of the general industry
conditions. Other than a few new, very modern plants, the record does
not support a 93 percent butterfat recovery factor as attainable by
most cheese plants.
The record contains considerable testimony estimating current
butterfat recovery rates in the universe of cheese plants with varying
ages of equipment and technology. Expert witnesses estimated butterfat
recovery in cheddar plants ranged from 88 to 93 percent, attributing
much of the difference to cheddar vat equipment. It is important that
the product price formulas reflect current, not theoretical, conditions
for the general population of plants. Experts generally offered that
most commodity cheddar cheese plants can obtain greater than 90 percent
recovery, but few obtain 93 percent, with a 91 percent butterfat
recovery rate considered the industry average. Accordingly, this
decision recommends a 91 percent butterfat recovery rate. Such an
increase necessitates a change to the butterfat yield factor in cheese
from 1.572 to 1.589.
c. Farm-to-Plant Shrinkage
Currently, the FMMO formulas assume a farm-to-plant shrinkage
factor of 0.25 percent. This represents normal milk losses that occur
when milk is delivered from the farm to a plant. Under the FMMO system,
most handlers purchase milk from producers based on farm weights and
tests. The shrinkage factor recognizes that when milk is pumped from a
farm bulk tank to a milk tanker, and then from milk tanker to the plant
silo, milk sticks to the sides of the pipes and tanks. Milk can also be
lost in the milk hauling process when milk haulers must make multiple
farm stops to fill a load. As a result, plants often physically receive
less milk than was measured at the farm. In recognition of this
reality, the yields are slightly reduced to reflect the amount of milk
actually available to make a product, as compared to the amount of milk
picked up on farms.
The proponents asserted that producers shipping full tanker loads
is common in the Southwest where they operate. They testified to and
provided cooperative data regarding the steps they have taken to reduce
shrinkage. Proponents said increased average farm size results in fewer
stops by the milk hauler to fill up a load, thus lowering overall
shrinkage. They opined shrinkage should no longer be a reality for
farms as losses can be managed on any size farm through adoption of
farm scales, flow measurements, and other technologies to improve
accuracy.
Opponents argued only a small percentage of dairy farms are able to
produce enough milk to fill an entire tanker load. While the number of
large farms has grown, opponents testified removing the shrinkage
factor could further incentivize manufacturers to prefer large over
small farms. Consequently, they opined the farm-to-plant shrinkage
factor should remain.
Record evidence reveals most dairy farms are unable to fill a
tanker load per day. According to the NASS, daily milk production per
cow averaged 66.5 pounds in 2022. Assuming an average tanker load of
milk is approximately 48,000 pounds, it would require a milking herd of
722 cows to fill a tanker. In 2022, of the 24,470 U.S. dairy farms
[[Page 57626]]
with milk sales, only 3,451 farms (approximately 14 percent) had 500 or
more milk cows, and 2,013 (approximately 8 percent) had 1,000 or more
milk cows.
For the approximately 90 percent of farms that are not able to ship
full tanker loads of milk, the record indicates farm-to-plant losses
remain a reality for most producers and cooperatives operating within
the FMMO system. As most handlers pay producers based on farm weights
and tests, it remains appropriate to provide recognition in the
formulas for milk solids paid for but not physically received at the
handler's facility. Accordingly, Proposal 10 is not recommended for
adoption.
d. Nonfat Solids Yield
Currently, the FMMO Class IV price formula contains a NFDM yield
factor of 0.99, representing the pounds of NFDM that can be made from
one pound of nonfat solids of raw milk delivered from the farm. This
factor is less than 1.0, as it recognizes both farm-to-plant shrinkage
and the portion of nonfat solids utilized in NFDM.
Select offered Proposal 12 to adjust the NFDM yield factor to
account for both the NFDM and buttermilk powder that can be
manufactured from the same pound of nonfat solids, and proposed an NFDM
yield factor of 1.02. Proponents claim producers are not compensated
for nonfat solids that end up in buttermilk powder since such
production is not accounted for in the yield factor.
A review of previous rulemakings reveals numerous changes to the
NFDM yield factor both during and since Order Reform. The Order Reform
recommended decision contained a nonfat solids yield factor of 0.96 as
a divisor (equivalent to a 1.04 multiplier) in the nonfat solids price
equation. It represented the percent of nonfat solids in a pound of
NFDM. In other words, if a NFDM plant had 1 pound of nonfat solids, it
could make 1.04 pounds of NFDM due to the moisture content in the final
product. The factor was changed in the Order Reform final decision to
1.02 (equivalent to a 0.98 multiplier) as stakeholders commented it
should represent both the NFDM and buttermilk powder that could be
produced from one pound of nonfat solids.
The nonfat solids yield factor was again considered in a 2000
rulemaking. Initially, the factor was amended to 1.00. 65 FR 82832
(Dec. 28, 2000). During that proceeding, stakeholders argued the yield
factor should reflect that more than one pound of NFDM can be
manufactured from one pound of nonfat solids, resulting in a divisor
less than one, or a multiplier greater than one. Evidence from that
proceeding was used to demonstrate a calculation using only the NFDM
price, NFDM make allowance, and a multiplier of 1.00 would be
equivalent to a more complex formula attempting to combine the NFDM and
buttermilk net prices using corresponding yield factors.
The final decision in the 2000 rulemaking changed all yield
factors, including the nonfat solids yield, from divisors to
multipliers. 67 FR 67906 (Nov. 7, 2002). Keeping in line with only
reflecting the nonfat solids used in NFDM, the nonfat solids yield
multiplier changed from 1.0 to 0.99, with the incorporation of a farm-
to-plant shrinkage factor of 0.25 percent. As calculated, for 1 pound
of nonfat solids leaving the farm, 0.9975 pounds entered the plant
(1.00-0.0025 = 0.9975). Subtracting an estimated 0.0479 pounds of
nonfat solids ending up in buttermilk powder left 0.9496 pounds of
nonfat solids in NFDM (0.9975-0.0479 = 0.9496). It was assumed NFDM is
96.2 percent nonfat solids, resulting in a NFDM yield factor
calculation of 0.9496/0.962 = 0.9871, which was rounded to 0.99. The
final decision made clear the 0.99 should be considered a NFDM yield
factor, no longer a nonfat solids yield factor as was the case when
Order Reform was implemented.
Proposal 12 requests buttermilk powder again be incorporated into
the NFDM yield. Proponents testified that without accounting for
buttermilk powder, producers are not compensated for all the nonfat
solids they sell to a Class IV manufacturer. Record evidence does not
support such a claim. Class IV manufacturers are required to pay the
nonfat solids price for pooled milk purchased, regardless of whether
those nonfat solids end up in NFDM, butter, buttermilk powder, or any
other Class IV product. The same can be said for other classified
products whose component prices are computed similarly, even if there
are numerous products in the category. For example, the other solids
price is determined through a survey of dry whey prices and a dry whey
make allowance. Manufacturers pay the other solids price even if they
are making other products in the category, such as whey protein
concentrate or whey protein isolate.
Additionally, while the rulemaking history of the NFDM and nonfat
solids yield factors is complex, evidence does not support that
attempting to reflect two products (buttermilk powder and NFDM) in the
NFDM yield would provide for more orderly marketing conditions.
Recommendations are made throughout this recommended decision
attempting to simplify, where possible, an already complex set of
pricing formulas. As such, this decision finds it appropriate to
maintain the current NFDM yield factor that only reflects one product.
Accordingly, Proposal 12 is not recommended for adoption.
Base Class I Skim Milk Price
Currently, the base Class I skim milk price, also referred to as
the ``Class I mover'' or ``mover,'' is the simple average of the
monthly advanced Class III and Class IV skim milk pricing factors, plus
an adjuster of $0.74 per cwt. This formula was implemented under the
2018 Farm Bill, which amended the AMAA to revise the provisions related
to determining the monthly Class I skim milk price. Public Law 115-334,
132 Stat. 4490 Sec. 1403. Congress exempted this amendment from the
formal rulemaking process, and USDA implemented the change through a
final rule. The formula has been in effect for milk marketed on and
after May 1, 2019. 84 FR 8590 (March 11, 2019). Prior to the change,
the base Class I skim milk price was the higher of the advanced Class
III or Class IV skim milk prices (the ``higher-of''), announced on or
before the 23rd of the prior month. The higher-of formula had been in
effect since January 1, 2000.
Industry stakeholders offered six proposals to amend the Class I
mover. Proposal 13 would return to the previous higher-of Class I
mover. NMPF explained the change to the average-of was supported at the
time by both NMPF and IDFA, as it was intended to be revenue neutral
for producers and provide Class I processors the ability to utilize
hedging for risk management.
IDFA and MIG proposed maintaining the average-of mover but
recommended different calculations for the adjuster. Proposal 14,
offered by IDFA, incorporates an adjuster that resets every January and
would be the higher of either: (1) $0.74; or (2) the 24-month average
difference between the higher-of and the average-of the advanced Class
III and Class IV skim milk pricing factors. The 24-month calculation
would run from August of three years prior to July of the previous
year. For example: the 2024 adjuster would have been calculated by
subtracting the average of the advanced Class III and IV skim pricing
factors from the higher of the advanced Class III or Class IV skim
pricing factor for each month of August 2021 through July 2023, then
averaging the differences of the 24 months. The result for the August
2021 to July 2023
[[Page 57627]]
time period is $0.95, which is higher than $0.74, and thus would have
been the adjuster effective January 1, 2024, for the calendar year. For
the month of January 2024, the advanced Class III and IV skim pricing
factors were $5.74 per cwt and $9.25 per cwt, respectively, averaging
to $7.50 per cwt. With the addition of the adjuster, the January 2024
base Class I skim milk price would have been $8.45 per cwt ($7.50 +
$0.95) under Proposal 14.
Proposal 15, offered by MIG, incorporates a monthly rolling average
adjuster calculated as the difference between the higher-of and the
average-of, for 24 months, with a 12-month lag. For example, the
adjuster for January 2024 would have been $1.01 per cwt, calculated
from the 24-month average difference of the higher of the advanced
Class III or Class IV skim pricing factor less the average of the
advanced Class III and IV skim pricing factors from January 2021 to
December 2022. The January 2024 advanced Class III skim pricing factor
was $5.74 per cwt and advanced Class IV skim pricing factor was $9.25
per cwt, resulting in an average of $7.50 per cwt. The average-of, with
the addition of the adjuster, would result in a January 2024 base Class
I skim milk price of $8.51 per cwt ($7.50 + $1.01) under Proposal 15.
Edge offered Proposals 16 and 17. The Class I mover in Proposal 16
would be the announced Class III skim milk price, plus an adjuster
reflecting the 36-month average of the difference between the higher-of
the advanced \2\ Class III or Class IV skim milk prices and the
announced \3\ Class III skim milk price from August of four years prior
to July of the previous year. The adjuster would be calculated annually
and be effective January of each year. For example: The adjuster for
2024 would be $1.64 per cwt, calculated from the 36-month average
difference of the higher of the advanced Class III or Class IV skim
pricing factor and the announced Class III skim milk price from August
2020 to July 2023. The announced Class III skim milk price for January
2024 was $4.92 per cwt, and with the addition of the adjuster would
result in a January 2024 base Class I skim milk price of $6.56 per cwt
under Proposal 16. Proposal 17 would return to the previous higher-of
calculation. Both Proposals 16 and 17 would eliminate advanced pricing
for Class I and Class II milk. Edge preferred Proposal 16, stating it
would facilitate Class I hedging.
---------------------------------------------------------------------------
\2\ Advanced refers to prices announced on or before the 23rd of
the prior month.
\3\ Announced refers to prices announced on or before the 5th of
the following month.
---------------------------------------------------------------------------
The AFBF offered Proposal 18, which is nearly identical to Proposal
17. Both Edge and the AFBF stressed the importance of eliminating
advanced pricing as a means for limiting price inversions that result
in significant volumes of milk not pooled.
NMPF presented testimony describing how the 2019 mover change was
not revenue neutral, which is why they seek a return to the higher-of.
NMPF and dairy farmers described volatile markets in response to the
COVID-19 pandemic. Even as the COVID-19 pandemic has ended, prices have
remained volatile, and stakeholders opined they expect volatility to
continue. NMPF witnesses asserted that because of the current formula
and volatile markets, there is no way for the impact to dairy farmers
to be revenue neutral in the long term.
According to NMPF, an unanticipated consequence of the average-of
mover is the asymmetric risk borne by dairy farmers. NMPF explained the
static nature of the $0.74 adjuster means that dairy farmers only
benefit from the average-of when the difference between the advanced
Class III and Class IV skim milk prices is less than $1.48. When the
difference is greater, producers are paid less, sometimes significantly
less, than they would have been under the higher-of mover. During the
50-month period from May 2019-June 2023, the average-of mover was lower
than the higher-of in 27 months. NMPF asserted when the average-of
exceeded the higher-of, it did so by no more than $0.74, regardless of
the magnitude of the difference between Class III and Class IV skim
milk prices. However, when the average-of was lower than the higher-of,
the reduction could be significantly more than $0.74. NMPF cited
October 2022 as an example. At that time, the average-of was lower than
the higher-of by $2.08. According to NMPF, from May 2019 to August
2023, producers were paid $998.3 million less than they would have if
the higher-of mover had been in place.
Both IDFA and MIG asserted their adjusters would result in revenue
neutrality to producers over time because of regular updates to better
reflect current market conditions, whereas the current static $0.74
adjuster reflects market conditions from 2000-2018. IDFA further
claimed the $0.74 floor contained in Proposal 14 ensures producers
would receive Class I skim milk prices at least equating to what they
receive under the current formula. MIG opined a rolling average
adjuster would provide better dynamic market signals while also
stabilizing prices through more gradual monthly changes.
In justifying these methods to continue an average-of mover, IDFA
and MIG witnesses stressed the importance of maintaining the ability
for Class I processors to hedge their future prices. The use of an
average-of mover would allow them to continue to spread risk by taking
equal positions in the Class III and Class IV futures and options
markets. IDFA and MIG maintained hedging is a critical tool for certain
processors, particularly ESL, to remain competitive with alternative
beverages, such as bottled water, juice, and milk alternatives that do
not face the same regulatory pricing framework as fluid milk. The
ability to lock in a future price makes their cost known and allows a
longer price horizon. They further asserted promoting and growing the
sale of milk is a goal of the AMAA, which can be achieved using
hedging. Both proponents explained a processor's ability to hedge is
not negatively impacted by the adjuster calculation (whether monthly or
annually), so long as it is announced well in advance. IDFA was
amenable to either adjuster calculation, so long as the average-of
mover is maintained.
Proponents of maintaining an average-of mover argued Congress
amended the AMAA to facilitate risk management for Class I, and as it
directed the Department to adopt the average-of mover, the Department
must now continue that policy and refrain from taking action that would
inhibit risk management. However, in the 2018 Farm Bill, Congress
stipulated the average-of mover must be maintained for a period of not
less than two years, at which time the formula could be modified
through the standard FMMO amendment process. Congress did not direct
that risk management consideration must be maintained beyond the two
years following implementation of the 2018 Farm Bill.
To evaluate the NMPF claim regarding asymmetric risk, AMS analyzed
May 2019-December 2023 prices (56 months). The analysis found the
current average-of mover to be greater than the higher-of mover in 23
months, resulting in $334 million in additional revenue paid to
producers in those months. The two movers were equal in 2 months, and
in the remaining 31 months, the average-of mover was less than the
higher-of mover, resulting in $1.4 billion less in revenue paid to
producers in those months than would have been without the mover
change. The net result to dairy farmers during those 56 months was
negative $1.066 billion. Further, in months when the
[[Page 57628]]
average-of was more than the higher-of mover, the difference was never
greater than $0.74 and, mathematically, could never be greater than
that amount under the current average-of system. However, in months
when the average-of was less than the higher-of mover, the difference
was as great as $5.19. This analysis supports NMPF's assertion of the
asymmetric risk borne by producers under the current mover calculation.
The record reveals the $0.74 static adjuster was adopted because,
at the time, it represented the additional value paid to producers
through the higher-of versus what would have been the average-of mover
from 2000-2017. Evidence shows $0.74 is no longer representative of the
additional higher-of value to producers as Class III and IV prices have
become significantly more divergent in recent years. A comparison of
advanced Class III skim and Class IV skim milk prices from January
2000-April 2019 and from May 2019-December 2023 illustrates the
increased volatility. From January 2000-April 2019, when the Class I
skim milk price was determined by the higher-of mover, the monthly
difference in advanced prices ranged from $0 to $6.77. From May 2019
through December 2023, the range was $0 to $11.86, equating to an
increase of slightly more than 75 percent.
Testimony described rapidly changing Class III and IV prices
resulting not only in months when the Class I mover was significantly
lower than it would have been under the higher-of formula, but times
when the Class I price (announced before the month) was less than the
Class III and/or Class IV price (announced after the month). As
handlers have the option to pool Class III and Class IV milk, this
price inversion led to many months when the higher-valued manufacturing
milk was not pooled. Testimony on the record described several
consequences: (1) manufacturing handlers opted out of pool
participation, keeping the higher market revenue instead of sharing it
with all pooled producers; (2) instances when a manufacturing handler
opted out of pool participation, and the historically high market
revenue was not shared with their own producer suppliers; and (3)
significant disparity in payments to pooled and nonpooled producers in
some months.
Testimony detailed the conditions in 2020 when the demand for
cheese relative to butter rapidly widened the spread between Class III
and Class IV Prices. For example, the base Class I skim milk price for
June 2020 (announced May 20, 2020) was $7.08 (based on an $6.68
advanced Class III skim milk price and an $5.99 advanced Class IV skim
milk price). Cheese prices rose rapidly during the month, resulting in
a $15.06 Class III skim milk price and $6.62 Class IV skim milk price.
According to record evidence, high volumes of Class III milk were not
pooled in order to avoid paying the higher valued Class III price into
the marketwide pool.
Record data reveals a significant increase in the estimated volume
of milk not pooled in 2020 and 2021, which NMPF attributed to price
volatility. Data shows milk volumes not pooled in 2020 and 2021 were
approximately 60 percent greater than in 2019. Testimony and evidence
pointed to pronounced price volatility being considered the norm, not
the exception, going forward.
Record evidence also shows how the lower average-of mover value
resulted in muted blend prices in some regions of the county, making it
difficult to attract milk supplies for fluid use. This was particularly
a concern in the southeastern FMMOs which experienced a
disproportionate reduction in blend prices relative to other FMMOs
because of their high Class I utilization. Testimony described how
blend prices between the Southeast FMMO and nearby orders narrowed,
making it difficult to attract supplemental milk to meet the fluid
demand in the milk deficit region.
During Order Reform, the Department considered numerous options for
determining Class I prices as it evaluated an appropriate Class I
pricing system. In the Order Reform recommended decision, several
variations of an average mover were considered, including a moving
average and a declining average weighted most heavily by the current
month's price, along with a higher-of option based on the second
preceding month's prices. When considering its recommendation, the
Department evaluated each option's ability to improve price stability
while maintaining appropriate producer price signals to ensure an
adequate supply of milk for fluid use.
The Department initially recommended a 6-month declining average of
the higher-of the Class III and Class IV skim milk prices. The goal was
to ``decrease monthly Class I price volatility while minimally
affecting the long-run price.'' 63 FR 4802, 4886 (Jan. 30, 1998).
Analysis of that option compared to the higher-of option showed only a
two-cent difference based on data from 1992-1997, thus supporting the
notion an average-of price would not impact prices in the long run.
Public comments in response to the recommended decision cautioned the
Class I price should be closely and directly linked to manufacturing
prices. Commenters opposed a six-month declining average because it
would delay the linkage with the Class I price, resulting in counter-
cyclical pricing--something noted in the final decision, which stated
that, for example, if Class I prices are undervalued, ``it reduces
producers' pay prices at a time when the producers should be receiving
a positive price signal.'' 64 FR 16026, 16102 (Apr. 2, 1999). Analysis
conducted for the Order Reform final decision evaluated prices post-
1998 and found using a 6-month average mover during times of increased
price volatility would have led to price inversions. The decision
explained how price inversions could lead to depooling under which
disorderly marketing conditions may arise. As a result, the final
decision also articulated, on the same page as the most recently noted
quotation, ``because handlers compete for the same milk for different
uses, Class I prices should exceed Class III and Class IV prices to
assure an adequate supply of milk for fluid use.'' Accordingly, the
final decision recommended the higher-of mover which remained in place
until May 2019.
Record evidence clearly shows that the price inversions and
depooling predicted in the Order Reform final decision occurred after
the average-of mover was implemented in 2019. The principle of
maintaining a proper link between Class I and manufacturing prices to
avoid price inversions and depooling remains an important consideration
in evaluating change to the Class I mover in this rulemaking.
Proponents offering modifications to the average-of mover
acknowledge price inversions and depooling have occurred with greater
frequency and duration. However, they maintain hedging is a critical
risk management tool that should be preserved and cannot be achieved
using the higher-of mover. Record evidence highlights that although
both HTST and ESL are fluid milk products, there are notable
differences between HTST and ESL processing and sales. ESL products
require unique processing techniques and packaging that significantly
increase product shelf-life. The record indicates ESL products have a
shelf-life of at least 65 days; some ESL processors stated their
products have a shelf-life of 120 days or more.
ESL processors described marketing differences between the two
types of products. ESL products: (1) have a longer shelf-life which
facilitates a wider distribution; (2) are typically
[[Page 57629]]
shipped to centralized retail warehouses (distribution centers) and
from there are distributed to individual stores by the store owners;
and (3) are sold to retail customers who prefer long-term contracts and
a long lead time for any price changes, often 60-90 days or more. This
is significantly different than HTST products that: (1) have a
significantly shorter self-life (common range is 14-21 days)
necessitating more local distribution; (2) are typically distributed
through direct-store-delivery (DSD); and (3) whose retail customers are
accepting of FMMO Class I prices that vary monthly.
ESL processors explained the average-of mover has enabled them to
meet customer demand for long-term price-fixed contracts by using the
futures and options market to hedge the risk associated with changes in
monthly FMMO Class I prices. They credit the ability to manage risk as
a factor in the growth of ESL products. Before adoption of the average-
of mover, processors of ESL products took on a significant amount of
price risk to meet the long-term, fixed price contracts required by
customers because they had no way of knowing when they negotiated
contracts whether the advanced Class III or Class IV price would become
the base Class I skim milk price. The record contains no similar
evidence that HTST processors face the same constraints. In fact,
record evidence shows advanced Class I pricing with monthly sales
negotiations was, and remains, standard practice for these products.
Given all the record evidence, this decision must determine the
best method for determining Class I skim milk prices that ensure
adequate fluid milk supplies and orderly marketing conditions. The
earlier discussion of record evidence clearly highlights the disorderly
marketing conditions that occurred as a result of the average-of mover.
However, when considering how to provide for more orderly marketing
conditions, this decision cannot ignore how the Class I market has
evolved since 2000.
Prior to FMMO Reform, fluid milk products were almost exclusively
HTST, which have a shorter shelf-life and move from farm to retail in a
relatively short time. Advanced pricing ensures equity among fluid milk
handlers, allowing them to know their regulated minimum raw milk cost
at the time they negotiate prices with their buyers and ensure equal
raw milk cost between similarly situated handlers.
The record reflects significant development and growth of ESL
products since Order Reform. The record also highlights marketing ESL
products is significantly different than HTST products. Evidence shows
the different distribution pattern (warehouse v. DSD) and longer shelf-
life (65-120 days) facilitates wider geographic, rather than local,
marketing and distribution. In addition, it is common for competing ESL
products being sold in the same month to have been processed during a
range of previous months. As a result, processors of ESL products do
not necessarily have the same regulated minimum raw milk prices for
products sold during the same month. This undermines handler equity
between processors of ESL products as they do not have equal raw milk
costs for products competing for sales in the same month. This decision
supports a hybrid solution that will ensure adequate supplies of milk
for fluid use, while also accounting for the inequities between
processors of ESL products.
FMMOs are tasked with ensuring minimum prices reflect supply and
demand conditions, which is accomplished, in part, through weekly
surveys of wholesale bulk commodity products. Weekly survey prices
provide signals to market participants on the changing value
relationships between dairy product markets. FMMOs do not control those
market-based relationships. As monthly average prices are determinants
of Class III and IV prices, it is expected there will be periods when
Class III values will be higher, and other times when Class IV values
will be higher. Under a monthly pricing system that allows for
voluntary pooling of manufactured milk and advanced Class I pricing,
there will be occasions when these value differences are large enough
to have price inversions and/or incentivize handlers to not pool milk
during a particular month. The record clearly shows such situations
occurred prior to May 2019. However, record data highlights the shift
in duration and magnitude of these occurrences since the average-of
mover was adopted. The record reveals large and prolonged value
differences can cause significant differences in pay prices between
producers and reduced willingness to supply the Class I market. The
record of this proceeding supports returning to the higher-of Class I
mover for HTST products. The higher-of would provide a better link
between Class I and manufacturing prices and better ensure Class I
prices remain the highest to bring forth an adequate supply of fluid
milk. Therefore, this decision recommends adoption of Proposal 13 for
HTST fluid milk products.
Returning to the higher-of mover for ESL products would deepen the
pricing inequity that naturally exists for those products, as described
earlier. For example, under the higher-of mover, a handler processing
and selling an ESL product in January 2023 would have faced a base
Class I skim milk price of $11.62 per cwt. However, handlers who
processed ESL products two or four months before, which are also being
sold in January 2023, would have faced a base Class I skim milk price
of $12.61 and $13.82 per cwt, respectively. This results in a
difference of base raw milk costs of up to $2.20 per cwt for ESL
products competing for sales during January 2023.
Given the marketing characteristics of ESL products, short of
providing for fixed minimum prices, price differences between these
competing products will always exist. However, this decision strives to
recognize the evolution of the ESL market since Order Reform with a
pricing structure for ESL products that would narrow differences, make
them more predictable, and provide for more orderly marketing
conditions. This decision finds pricing differences would be reduced
through adoption of a Class I ESL adjustment that would equate to a
Class I price for all ESL products equal to the average-of mover
contained in Proposal 15. The Class I ESL adjustment will provide more
long-run pricing equity for ESL product by better ensuring handlers
whose ESL products compete for sales during the same month, but whose
raw milk may have been purchased and processed during different time
periods, have more similar costs.
In practice, the higher-of Class I mover would be announced on or
before the 23rd of the prior month. A Class I ESL adjustment would be
announced at the same time, and equal the difference between the
higher-of mover and the average-of the advanced Class III and Class IV
skim pricing factors plus a rolling monthly adjuster. The rolling
monthly adjuster would be calculated as the average of the differences
between the higher-of and the average-of calculations for the prior 13
to 36 months. All milk used in ESL products with a shelf-life no less
than 60 days, regardless of the type of Class I plant \4\ in which they
are made, would be subject to the adjustment. The adjustment would be
added to or subtracted from the handler's pool obligation applicable to
the amount of milk used in ESL products. The rolling adjuster would be
computed in advance and announced on or before the 23rd of the month 12
months in advance of its application (i.e. January 2023 rolling
[[Page 57630]]
adjuster would have been announced on or before December 23, 2021).
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\4\ 1xxx.7(a) or 1xxx.7(b).
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For example, the advanced Class III and IV skim pricing factors for
January 2023 were $9.54 per cwt and $11.62 per cwt, respectively.
The average-of the two factors (applicable to ESL milk)
would have been $10.58 plus the rolling adjuster reflecting the average
of the differences between the higher-of and the average-of from
January 2020 to December 2021 ($1.58 per cwt), for a total of $12.16
per cwt.
The higher-of mover (applicable to HTST milk) would have
been $11.62 per cwt.
The January 2023 Class I ESL adjustment would have been
$0.54 ($12.16-$11.62), calculated by subtracting the higher-of
announced price from the average plus rolling average calculation.
The effect of the adjustment would be a base Class I skim price for
HTST milk of $11.62, and an effective base Class I skim milk price for
ESL milk of $12.16. While this example computes a positive adjustment
resulting in a higher effective price for ESL milk, it is to be
expected in some months the adjustment will be negative, resulting in a
lower effective price. The objective of the ESL adjustment is not to
create a higher or lower effective Class I price, but rather to reduce
the range of base Class I skim prices paid for milk used in ESL
products being sold during a month. Evidence on the record indicates
the Class I ESL adjustment will tend to moderate the price highs and
lows, thus providing improved price equity between handlers of ESL
products. The record indicates ESL products represent approximately 8
to 10 percent of the Class I market and would be subject to the Class I
ESL adjustment.
This decision finds the Class I ESL adjustment, combined with the
higher-of mover price for HTST products will provide for more orderly
marketing and better ensure price equity for handlers of similar Class
I products.
This decision also recommends maintaining advanced Class I pricing.
Proponents of Proposals 16, 17, and 18 argued advanced pricing should
be eliminated to prevent short term inversions between the monthly
Class I price and Class III and/or IV prices, and subsequent incentives
for depooling. Opponents, both independent and cooperative Class I
processors along with a majority of producers, supported the continued
use of advanced pricing. As discussed previously, advanced Class I
pricing provides equity to regulated Class I processors by informing
them of their regulated minimum raw milk cost in advance of the sale of
their product. This ensures all dairy processors have an opportunity to
align their raw milk costs with the sale prices of their products,
which are generally negotiated before the start of the month. In the
case of Class I products and the nonfat solids portion of Class II
products, this alignment is facilitated by advanced pricing.
Accordingly, Proposals 16, 17, and 18 are denied.
Select argued USDA should omit a recommended decision on the Class
I mover following a finding by the Secretary ``on the basis of the
record that due and timely execution of his functions imperatively and
unavoidably requires such omission.'' (Select Post Hearing Brief, 2024,
pp. 46-47) (citing 7 CFR 900.12(d)). The Secretary finds no sufficient
information on the record to determine that skipping the recommended
decision is unavoidable and is therefore issuing a recommended decision
on the Class I mover.
Class I and Class II Differentials
a. Class I Differentials
The current Class I price structure was developed during the Order
Reform process when Congress directed the Department to review the
Class I price structure as part of larger FMMO consolidation efforts.
Federal Agriculture Improvement and Reform Act of 1996, Public Law 104-
127, 110 Stat. 888. The Department considered several objectives when
determining an appropriate Class I price surface, including: being
national in scope, while also accounting for local and regional
conditions; recognizing the location value of milk; recognizing all
uses of milk; and meeting AMAA requirements. The Department met AMAA
requirements governing classified pricing by ensuring the price surface
would ``reflect enough of the milk value to maintain sufficient revenue
for producers to maintain an adequate supply of milk and provide equity
to handlers with regards to raw product costs.'' 64 FR 16026, 16109
(Apr. 2, 1999) \5\ The Class I price surface adopted on January 1,
2000, met those objectives.
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\5\ Order Reform Final Decision.
---------------------------------------------------------------------------
Class I milk pricing consists of two pieces: the base Class I mover
applied uniformly to all Class I milk (as discussed previously) and a
location specific differential which represents the location value of
milk at a specific plant location. The differentials provide producers
a financial incentive to supply the Class I market, which tends to be
closer to the population centers, rather than delivering milk to a
manufacturing plant typically closer to the farm. The location specific
differential consists of two parts: a base value (also referred to as
the ``base differential'') applied uniformly to all Class I milk, and a
location value.
The base differential is currently $1.60 per cwt, representing
three costs whose values were determined to reflect market conditions
during the late 1990s. First, the cost of maintaining Grade A farm
status ($0.40) which includes costs associated with the labor,
resources and utility expenses for maintaining required equipment and
facilities, and adherence to certain management practices. Second,
marketing costs (also referred to as balancing costs) ($0.60) which
include, among other things, the costs associated with seasonal and
daily reserve balancing of milk supplies and transportation to more
distant processing plants. Lastly, a competitive factor ($0.60) is
included to represent a portion of the competitive costs incurred by
fluid plants to compete with manufacturing plants for a milk supply.
The location values were developed during the Order Reform process
through an analysis conducted with the USDSS, maintained at the time by
Cornell University. The USDSS was used to evaluate the geographic or
``spatial'' value of milk and milk components across the U.S. under the
assumption of efficient markets. The model used 240 supply locations,
334 consumption locations, 622 dairy processing plant locations, 5
product groups, 2 milk components, and transportation and distribution
costs among all locations to determine mathematically consistent
location values for milk and components. Model results provided county
specific information regarding the relationship of prices between
geographic locations based on May and October 1995 data.
Since adoption on January 1, 2000, only differentials in the
Appalachian, Florida, and Southeast FMMOs have been amended. The
amendments, effective May 1, 2008, were the result of a region-specific
rulemaking evaluating transportation costs in servicing those milk
deficit orders. 73 FR 14153 (Mar. 17, 2008).
The record reflects consensus among hearing participants that the
dairy marketplace has evolved significantly over the past 25 years.
However, there remains strong disagreement on how the market changes
should be interpreted and recognized in the Class I differentials. The
producer community argued Class I differentials no longer reflect the
cost of servicing fluid milk
[[Page 57631]]
demand and should be updated to reflect the current structure and
significantly higher transportation costs through adoption of Proposal
19. The processing and manufacturing community argued certain cost
factors contained in the differentials are no longer relevant and
should be eliminated through adoption of Proposal 20. They stressed
that if the costs of servicing the Class I market exceed those of the
proposed reduced Class I differential values, they can be negotiated
between buyers and sellers through over-order premiums.
Proposal 19 would increase the Class I differentials based in part
on updated USDSS results reflecting the current dairy market structure
and transportation costs. NMPF witnesses explained USDSS result
averages were the foundation of their deliberations, and deviations
were made to account for a variety of factors they believed were not
accounted for, including producer price impacts, competitive
relationships, blend price alignment, private supply arrangements, and
unique local market conditions such as traffic or geography. Although
NMPF began with results from a mathematical model, the process
thereafter was primarily subjective. They started by selecting a series
of cities, which they called ``anchor cities,'' to represent areas
which bordered multiple FMMO regions. Then, regional committees
adjusted model-derived location values to better align location values
and reflect local marketing and transportation conditions within their
region, respecting the anchor cities as starting points. NMPF combined
the independently derived regional results and made further refinements
to ensure smooth pricing transitions between the regions. Ultimately,
NMPF proposed that the lowest differential increase from $1.60 per cwt
to $2.20 per cwt. NMPF maintains the cost factors provided for in the
base differential value remain relevant and presented testimony from
member cooperatives that such costs have increased.
Opposition to Proposal 19 centered on several areas. First,
opponents argued there is more than an adequate supply of milk
nationally to meet Class I needs, therefore adoption of Proposal 19, or
any increase to Class I differentials, is not warranted. Second,
opponents contended raising Class I prices would be disorderly because
it would further decrease already declining Class I consumption and,
they argued, the FMMO objective of ensuring adequate milk supplies
implies FMMOs should adopt provisions that encourage Class I
consumption. One such opponent presented an econometric study which
found fluid milk demand is elastic, concluding that increasing Class I
prices would decrease consumption and violate FMMO objectives. Third,
opponents took exception to NMPF's proposal development process and
what they considered a lack of unifying principles used to adjust the
USDSS results, believing NMPF had failed to provide cost justification
for maintaining a base differential. Independent fluid milk processors
further argued the entire development process led to results with a
favorable bias towards NMPF member-owned plants. Lastly, organic milk
processors and some organic cooperatives argued organic milk should not
be treated similarly to conventional milk in the FMMO program because
it has different and unrelated market structures. In its post-hearing
brief, MIG reiterated its position on organic milk and further argued
that because NMPF did not demonstrate current Class I differentials
create disorderly marketing conditions the evidentiary threshold for
increasing differentials had not been met.
MIG offered Proposal 20, which would lower the base differential
value to $0.00, contending FMMO Class I prices are too high and have
resulted in an oversupply of milk that they believe is disorderly.
According to MIG, there is more than an adequate supply of milk to meet
fluid demand. Given 99 percent of U.S. milk production meets Grade A
standards, MIG argued compensation for Grade A maintenance is already
provided for in manufacturing milk prices and therefore the $0.40 Grade
A factor is no longer justified.
Additionally, MIG members' testimony detailed efforts they have
adopted to balance their own milk supply, including infrastructure
investments, creating more uniform receiving and processing schedules,
and paying over-order premiums. Organic and ESL MIG members testified
their fluid milk products function as wholly distinct markets with
their own balancing and supply challenges. Therefore, MIG concluded the
balancing cost and Class I competitive factors should no longer be
recognized in the Class I price. Lastly, MIG and its members argued
that if additional money is needed to compensate dairy farmers and
cooperatives for balancing costs or to incentivize milk to serve Class
I plants, those costs should be negotiated between the buyer and seller
and paid through over-order premiums, not as part of the regulated
price.
A vast majority of producers and their cooperatives opposed
Proposal 20. They maintained, both in witness testimony and post-
hearing briefs, there is relevancy of costs associated with the base
differential. NMPF stressed the costs, while difficult to precisely
quantify, are still relevant and have increased since adopted in 2000.
NMPF described the disorder that would arise if the base differential
was reduced to $0.00 and a greater portion of market-wide cost
reimbursement was forced to be negotiated in the market. While some
NMPF members testified to receiving over-order premiums, they stressed
establishing and maintaining premiums is difficult because there
remains a market imbalance of power between milk sellers and buyers.
Opponents of any change to Class I prices, either through a change
to Class I differentials or other FMMO amendments, raised several
overarching objections. First, they alleged disorderly marketing must
first be proven to justify any changes to FMMO provisions. They cited a
lack of instances of fluid demand not being met as an indication
disorder is not present in the fluid milk market.
The declared policy of the AMAA is to ``. . . establish and
maintain such orderly marketing conditions for agricultural commodities
in interstate commerce. . . .'' FMMOs accomplish this mandate through
the classified pricing of milk products and marketwide pooling of those
classified use values. Through these mechanisms, orderly marketing
conditions are provided so handlers are assured of uniform minimum raw
milk costs and producers receive minimum uniform payments for their raw
milk, regardless of its use. While previous FMMO amendatory proceedings
may have found market disorder to warrant changes to provisions, the
AMAA does not contain an express or implied declaration that a finding
of disorderly marketing conditions is required before an order can be
amended. Second, opponents argued Class I prices cannot be amended
until the FMMO system is modified to recognize the organic milk sector.
However, potential amendments that would adopt disparate treatment of
organic milk were not within the scope of this proceeding, as defined
in the hearing notice.
Third, Class I processors and manufacturers argued the Department
should consider the impact to Class I sales when evaluating changes as
they allege the AMAA objective of ensuring adequate milk supplies
implies the FMMO should encourage fluid consumption. They further argue
that demand for fluid milk is elastic and, therefore, raising Class I
differentials would be disorderly as it would result in a decline in
Class I sales. The AMAA
[[Page 57632]]
authorizes FMMOs to provide for orderly marketing conditions and ensure
an adequate supply of milk for fluid use. It does not explicitly state
nor imply FMMO provisions should encourage Class I sales. FMMOs are
charged with ensuring adequate supplies of fluid milk, regardless of
the quantity demanded.
As to whether or not fluid milk has an inelastic or elastic demand,
numerous studies were entered into the record, some drawing opposite
conclusions. An econometric study entered on behalf of MIG found the
retail level demand for fluid milk to be elastic. The study looked at
cross sectional data over relatively short periods of time. In
contrast, an NMPF witness reviewed numerous studies published within
the last 20 years that evaluated time series data, concluding the
studies support the assertion that fluid milk demand remains inelastic
with respect to prices for those products. An analysis of the MIG study
indicates that other than product prices and quantities, no other
variables were considered that could explain changes in demand. Such
variables which are generally recognized to be determinants of demand
outside of price include, but are not limited to, household income,
demographics, and measures of preferences. While the MIG study found
retail price affects retail milk demand, it did not demonstrate price
was the only factor that impacts demand. By design, the study estimated
that only prices for milk and competing products could account for
changes in quantities sold. Certainly, more study may be warranted
given the evolution of the dairy industry in the last 25 years.
However, a conclusion of the long-term demand elasticity of fluid milk
cannot be drawn from one study of cross-sectional data, given the
overwhelming body of studies contained in this hearing record which
found otherwise.
Finally, opponents opined that milk is typically more valuable when
used in Class III products, rather than Class I, and therefore the
record lacks justification to increase Class I differentials. Testimony
was given comparing USDSS model results (utilizing 2016 data) showing,
outside of the southeastern region, higher marginal location values for
milk used at Class III manufacturing locations than for milk used in
Class I processing in the same locations. No evidence was presented as
to how the Class III location values could or should be implemented to
achieve the purposes of the AMAA. Unlike estimated Class I location
values which have been historically relied upon to determine Class I
differentials, this was the first time the USDSS model results were
utilized to calculate location values for Class III milk, and the first
time testimony was offered to suggest how the correlation between Class
III and Class I location values should impact pricing decisions. The
record lacks evidence to validate the interpretation of Class III
location values, as further indicated by the differing views of the
study authors as to whether this would be an appropriate interpretation
of the various sets of USDSS results.
The record of this proceeding indicates the cost of servicing the
Class I market is no longer sufficiently reflected by existing Class I
differentials. This was evident in the USDSS results and validated
through firsthand testimony of cooperative milk suppliers who described
increased servicing costs. Current Class I differentials were
established based on 1995 data. In the nearly thirty years since, the
record reflects the market has substantially changed in size and
structure. While milk production has increased approximately 45 percent
from 1995 until 2022, during the same time period the number of dairy
farms has decreased by approximately 74 percent, and the average herd
size has increased from 68 to 261 cows.
Consolidation has also occurred on the processing and manufacturing
side. The record describes plant closures, particularly on the fluid
processing side, and plant investment, especially in large
manufacturing plants. Considerable testimony and evidence were given
describing increased distances milk must travel to find a market
outlet. Because of the greater distances between supply locations and
fluid processing plants, cooperative witnesses testified to increasing
costs to ensure fluid demand is met. The witnesses also described in
detail how the increasing costs are disproportionately borne by
cooperative members who often see deductions on their milk checks to
cover increased organizational and individual transportation costs,
which some witnesses attested more than doubled in the past 20 years.
There was little to no rebuttal to the claim the market has
consolidated on both the producer and processor side, resulting in
increased transportation costs. The USDSS study authors themselves
attributed the observed differences in the 2022 results, when compared
to the current differentials, to four primary factors: change in milk
production locations, change in compositions of dairy product demand,
change in demand locations, and increased transportation costs per
mile. What is at issue is the justification for increasing Class I
differentials. While only one witness described a situation in which
they were unable to procure enough milk to meet the demand of their
fluid milk processor, the record is full of testimony on the difficulty
cooperatives have faced to ensure fluid milk demand is met. Cooperative
witnesses discussed needing to reach out to more distant supply
locations to find available milk supplies willing to serve the Class I
market instead of remaining at a manufacturing plant, and the inability
to recoup a large portion of the additional transportation costs
through over-order premiums.
FMMOs were established in the 1930s when the market contained many
sellers and few buyers of milk. The highly perishable nature of raw
milk resulted in producers engaging in pricing behavior that lowered
farm prices as producers undercut one another in order to find a market
outlet, a condition generally described as destructive competition.
This unavoidable competitive behavior was among the reasons producers
petitioned Congress to authorize a marketing order program to provide
orderly marketing through known terms of trade and the pooling of
market returns, which in turn provided a more equitable balance of
power between buyers and sellers.
While the record of this proceeding reveals continued consolidation
on both the producer and processing sides of the market, it also
contains evidence the fundamental elements that were the genesis of the
FMMO program still exist. Raw milk remains a highly perishable product,
produced every day, that cannot be stored for any significant length of
time and incurs high costs when transported over long distances. No
substantive evidence was presented to indicate there is no longer an
imbalance of market power between buyers and sellers. Processors spoke
of the abundance of milk produced as a reason Class I prices should not
be increased. However, that reality also highlights how the dairy
marketplace continues to place processors in a price setting role. As a
price taker, the record reflects considerable testimony attesting to
the difficulty dairy farmers have had and continue to have in obtaining
and maintaining over-order premiums at levels sufficient to cover
actual and/or opportunity costs.
It is natural for buyers of milk to want to pay less and for
sellers of milk to want to be paid more. The role of FMMOs is to
determine minimum prices that provide for orderly marketing conditions
that balance these natural competitive desires. The AMAA
[[Page 57633]]
expressly authorizes marketwide pooling of classified prices as a tool
for accomplishing orderly marketing. In determining appropriate
classified prices, the Department cannot place an undue reliance on
over-order premiums which diminish the role of marketwide revenue
pooling and can lead to disorderly marketing conditions. Accordingly,
this decision recommends changes to the Class I differentials to better
reflect the various aspects of the current marketplace.
The first step in evaluating appropriate Class I differential
levels is the base differential. While the USDSS model is appropriate
to show the value differences of milk between two fluid plant
locations, as will be discussed later, it is not designed to inform the
level of the minimum value needed to service Class I plants. Proposal
20 seeks to reduce the base differential to $0.00 on the premise the
costs represented either are no longer relevant (Grade A maintenance)
or should be left up to negotiation with the fluid milk processor and
their supplier (balancing and Class I incentive cost). While the record
does not precisely describe how much the cost components of the base
differential have increased, it lacks evidence to demonstrate those
costs have decreased. In fact, discussion of various costs throughout
the proceeding indicates that costs have instead increased. Given the
lack of clear record evidence specific to costs accounted for in the
base differential, this decision recommends continuation of the $1.60
base differential.
Despite arguments Grade A maintenance costs should no longer be
covered because 99 percent of U.S. milk production is Grade A, this
decision continues to find it appropriate to recognize the additional
costs for maintaining Grade A status in a regulatory pricing system
requiring Grade A standards be met for participation. When the Grade A
factor was incorporated into the base differential, it was specifically
for Grade A maintenance costs, not costs associated with conversion to
Grade A status. Proponents argue that because almost all milk meets
Grade A standards, it is no longer necessary to provide a recognition
of that cost in the base differential. Whether 99 percent of milk
production today is Grade A, or 96 percent as it was at the time of
Order Reform, is irrelevant. The record demonstrates dairy producers
incur costs to maintain Grade A standards which are a requirement for
participating in the FMMO system. As only Class I milk is required to
participate and raw milk used in fluid milk products is required to
meet Grade A standards, it is appropriate for the Class I price to
continue to recognize those costs.
The record does not demonstrate the remaining two base differential
factors, balancing costs and additional monies needed to compete for a
milk supply, are no longer relevant. All parties testified to their
continued existence. Proposal 20 would require those costs to be
negotiated in the market.
Proponents of Proposal 20 argued they have made capital investments
to balance their supply and/or pay over-order premiums to their
suppliers to meet their milk needs, and/or provide balancing services.
While their testimony acknowledges these costs exist, proponents argued
the FMMO is making them pay twice for such services--once through the
regulated price and again through their negotiated over-order premium.
They further argued that if cost reimbursement is needed for such
services, they should be able to pay that value to their suppliers
directly through over-order premiums, not into the marketwide pool.
Cooperative witnesses testified at length on the costs associated
with ensuring daily, weekly, monthly, and seasonal fluctuating needs of
the fluid market are met. While their balancing costs were considered
confidential information, cooperative witnesses testified to the
overall increase in costs associated with providing those services. In
particular, cooperative witnesses spoke to the higher costs incurred to
operate regional balancing plants. These plants often do not run at
full capacity year-round in order to ensure capacity to balance excess
supply during flush periods or provide additional milk to fluid
processing plants during months of increased demand. The record
reflects these marketing costs are incurred for the benefit of
balancing the entire market's milk supplies, thus providing for the
orderly marketing of milk for fluid use. It has always been the case
that an individual processor may find it necessary and/or advantageous
to pay premiums above the minimum value to suit their individual and
fluctuating needs. FMMO pricing balances the value needed to be
reflected in the minimum regulated prices, without an over-reliance on
over-order premiums that can undermine marketwide revenue pooling and
lead to unequal raw product costs between similarly situated handlers
and non-uniform payments to producers.
An additional function of the base differential, as described in
the Order Reform Recommended Decision, is to generate the additional
monies necessary for the FMMO pools to balance the reliance on over-
order premiums. This was of particular concern in marketing orders with
low Class I differentials and low Class I utilization, for which the
decision noted ``there is a risk that handlers may not face equal raw
product costs for various reasons. Thus, having a larger proportion of
the actual value of Class I milk in the market order pool in these
areas, than is now the case, should promote pricing equity among market
participants.'' 63 FR 4802, 4909 (Jan. 30, 1998). As this decision
seeks to update Class I differentials, maintaining the balance of what
proportion of the value of Class I should be reflected in the
marketwide pool remains a consideration. Negotiations for over-order
premiums are not conducted in a vacuum, but are done with the benefit
of both parties knowing minimum FMMO values and the costs represented
in the minimum values the plant is responsible for paying. If Class I
processors believe they are being double charged, they can use that
information in their over-order premium negotiations.
Maintaining the $1.60 base differential would ensure Class I prices
typically remain the highest, which is of particular importance in
locations where the base differential is the effective differential.
Without a base differential value in these locations, there would be
little difference between the Class I price and the manufacturing
price, and thus no financial incentive to serve the fluid market would
exist to ensure the FMMO policy objective is met. Accordingly, this
decision finds a $1.60 base differential remains an appropriate minimum
value to ensure Class I demand is met.
While the Department appreciates the effort put forth to submit a
comprehensive option in Proposal 19, the record of this proceeding does
not support its adoption. Proposal 19 contains a base differential of
$2.20, which is an increase of $0.60 from the current level. However,
the record lacks data to quantify costs in excess of the $1.60 base
value.
Proponents described using the average of the USDSS May and October
results as a starting point for consideration but did not provide
evidence as to why, under a minimum pricing system, the average rather
than the minimum values observed in the May results was appropriate or
preferable. Furthermore, the record does not contain evidence to
support how the deviations made from the USDSS averages are
appropriate. Proponents
[[Page 57634]]
described their own marketing expertise but presented insufficient
evidence to determine if the proposed differentials would result in
Class I prices in excess of what is appropriate for a minimum pricing
system. Accordingly, this decision does not recommend adoption of
Proposal 19.
However, this decision finds evidence to support raising the Class
I differentials from the current levels. The record of this proceeding
reveals the cost of servicing the Class I market has increased since
the Class I differentials were adopted in 2000 and amended in the
southeastern FMMOs in 2008. Evidence reflects the market structure of
Class I plants and the milk supply have changed considerably in the
last 25 years. That was supported in witness testimony, as well as
USDSS model results, which clearly show the location value of milk has
changed. The Department continues to find the USDSS model the best
available tool for determining the location value of milk given the
vast array of factors that contribute to how milk is produced,
transported, processed, and distributed in the U.S.
When the differentials were adopted during Order Reform, testimony
reflects the Department used USDSS model results as a starting point
and made adjustments for various reasons. The Order Reform Recommended
Decision described several options the Department considered. Of the
differential surface ultimately adopted, AMS wrote, ``Nine differential
zones provide the basis for establishing the price structure. These
zones were established based on results of the USDSS model, knowledge
of current supply and demand conditions, and recognition of other
marketing conditions such as fluid versus manufacturing markets, urban
versus rural areas, and surplus versus deficit markets.'' 63 FR 4802,
4905 (Jan. 30, 1998). The decision went on to outline additional
reasons for adjustments including ensuring price alignment with
neighboring zones and adequate marketwide pool draws.
The USDSS model estimates results for an efficient milk supply and
distribution network, provided at its lowest cost. The USDSS study
authors acknowledged when using the model results to determine Class I
differentials, adjustments would be appropriate as there are factors
unaccounted for in the model, such as FMMO provisions, abnormal traffic
patterns, and competitive relationships.
Accordingly, this decision recommends Class I differentials be
changed to better reflect the current cost of serving the Class I
market. When determining appropriate levels, the Department began with
the USDSS May results, referred to hereinafter as ``May results.'' The
May results are the lower of the two months provided in evidence, which
is an appropriate starting point for determining minimum prices. The
Department then evaluated the results on a regional basis and made
adjustments based on three principles and two additional
considerations.
First, adjustments were made where necessary to better align Class
I handler equity. This means the proposed Class I differentials should
not give one handler an uneconomic cost advantage relative to an actual
or potential competing handler. Second, adjustments were made to
maintain producer equity and prevent uneconomic rewards or penalties to
producers who deliver or could deliver milk to the same plant or
market. Third, adjustments were made to ensure the marketwide pools
continue to provide orderly marketing conditions. The combination of
handler and producer equity goals is further achieved through the size
and shape of pricing zones. The USDSS values are determined at specific
locations, or ``nodes,'' in the model. Model results can be displayed
on a map or in a list of counties to convey the price surface, but the
methodology for doing so, as explained by the study authors, was a
mathematical tool which interpolated values between distances.
Additional information about markets can be added to the model results
through knowledge about the economic or geographic (roads, natural
barriers, etc.) conditions in specific locations. This may lead to a
decision to change the shape or contours of the pricing surface that is
estimated from the model results. Lastly, adjustments were made to
reflect unique challenges associated with servicing dense urban
environments. The changes by regions are described below.
The general process began with roughly $0.20 differential bands
generated from the May results. The May and October results formed a
soft boundary for differential adjustments. The current differentials
formed a hard lower boundary, which were rounded to the nearest dime to
eliminate $0.05 differences between zones, consistent with the USDSS
model results which were in $0.10 increments.
Northeast
The recommended differentials in the Northeast region largely
follow the May results with minimal changes. The differential for
Portland, Maine, was raised to $4.50 to match the results in Concord,
New Hampshire, to ensure handler equity. Albany County, New York, and
Rensselaer County, New York, were moved to the same differential by
increasing the Albany differential $0.10 to meet the Rensselaer
differential, as plants in those counties are located just across a
bridge from one another but were assigned different prices by the
model. Differentials in most New Jersey counties are proposed to be
$0.10 to $0.20 above the May results, but within the May and October
range, to reflect testimony on the cost of servicing urban areas and
transportation concerns. The differential for Washington, DC, is also
proposed to be $0.10 above the May result to reflect testimony on
servicing an urban area.
Appalachian
The variation between the model results in May and October are more
significant in the three southeastern orders. As discussed by several
witnesses, this region experiences unique marketing conditions with
high Class I utilization and deficit local milk supply. Due to the
substantial seasonality of the local milk supply, it requires
significant but variable volumes of supplemental milk supplies from
outside the region as well as changes in milk movements of regular
suppliers to the market throughout the year. The Transportation Credit
Balancing Fund (TCBF) and the recently implemented Distributing Plant
Delivery Credit (DPDC) are programs to compensate handlers for some of
the additional and variable transportation costs associated with
supplying the Class I markets in these orders during different periods
of the year. The reimbursement rates for these programs include
adjustments for any gain in Class I differentials from supply point to
receiving plant. Therefore, any changes in difference in Class I
differentials would be reflected in the calculated rate for eligible
payments in both the TCBF and DPDC in all three southeastern orders.
The recommended differentials in the Appalachian region are largely
formed in $0.20 and $0.30 bands based on the May results starting with
$3.70 in Southern Indiana and, moving southeast, increasing to $6.00
along the Carolina coast. In most areas, the proposed differentials are
within $0.10 (+/-) of the May results. There are a few exceptions where
the proposed differentials are $0.20 less than the May results to
better align handler equity. For example, in Spartanburg County, South
Carolina, the proposed differential is $5.60, $0.20 less than the
[[Page 57635]]
May results. This maintains the current competitive relationship
between this area and the Atlanta, Georgia area, and with the competing
handlers in North Carolina.
Southeast
The proposed differentials in the Southeast FMMO start at $3.20 in
southwest Missouri and increase moving southeast to $6.00 in southeast
Georgia. The proposed differentials follow the May results closely,
within $0.10 (+/-), with a few modifications. The East Baton Rouge
Parish differential was reduced by $0.20 from the May results to be
consistent with the May result of $5.20 for competing areas such as
Lafayette Parish. Tangipahoa Parish was placed in the $5.40 zone, or
$0.30 below the May result. These decreases are meant to ensure handler
equity while still acknowledging the thinner and steeper surface
reflected in the May results in the southeastern U.S.
Rutherford County, Tennessee, is also proposed to be modified to be
consistent with neighboring Davidson County, Tennessee, at $4.60 ($0.20
below the May result) to provide for handler equity. In Missouri,
Webster County was placed in the $3.20 zone to match the Greene,
Hickory, and Polk County differentials. This addresses handler equity
concerns and results in a $0.10 proposed decrease for Webster County
from the May result.
Florida
The proposed differentials for Florida largely follow the May
results with modification to address handler equity concerns. The
differentials start at $6.00 in the Florida panhandle region and
increase going south with mostly $0.40 bands ending at $7.40 in south
Florida. Processing plants in central Florida were placed in the same
$6.80 band to match the May result in Volusia County due to handler
equity concerns. This necessitated decreases from the May results of
$0.10 in Orange County, $0.10 in Hillsborough County, and $0.20 in Polk
County. For similar handler equity concerns, Broward County is proposed
to match the May result in Dade County of $7.40 in the southernmost
part of Florida.
Upper Midwest
In the Upper Midwest region, deviations from the May results are
proposed to ensure producer equity and ensure the marketwide pool
provides for orderly marketing. The Upper Midwest FMMO is unique in its
low Class I utilization, which creates challenges in setting a
differential surface that sends the proper signals to producers
supplying the Class I market while also ensuring producer equity and
orderly marketing among producers supplying the region's plants.
Estimates indicate a large differential range in the region would not
result in equity between producers and could result in disorderly
marketing. Therefore, the differential surface was flattened from the
May results, in general, by raising the differentials in the western
part of the region--in the eastern Dakotas and much of Minnesota--and
lowering the differentials in the eastern part--in northern Illinois,
southeastern Minnesota, and Wisconsin.
Differentials in five counties, Dakota, Hennepin, Ramsey, Scott,
and Washington, in the Minneapolis/St. Paul metropolitan area of
Minnesota, are raised $0.10 higher than neighboring counties to reflect
higher costs of serving an urban area and incentivize Class I service
relative to surrounding manufacturing plants. In addition, they are set
at the same differential of $2.90 to promote handler equity among fluid
processing plants in the metropolitan area. The new differential for
these counties, except for Hennepin, are $0.10 to $0.20 above the May
results. The differential for Hennepin, $0.30 above the May results, is
set the same as its peer counties to ensure that handlers in this
county are able to compete for available milk supplies on an equitable
basis.
Differentials in the regions supplying the Chicago, Illinois, area
are adjusted to ensure handler equity. Generally, the differentials in
this area are set at $3.10 to $3.20. The record reflects bottling
plants in eastern Iowa, northern Illinois, southeastern Wisconsin,
northern Indiana, and southwest Michigan all compete for Class I sales
into the Chicago area. Thus, Class I differentials in northern Illinois
are lowered $0.20 and $0.10 in Kane and Winnebago counties,
respectively, from the May results. Similarly, comparisons and
adjustments were made to the May results to align with northern Indiana
and southwest Michigan counties supplying the Chicago area.
Central
The proposed differentials in the Central FMMO start at $2.30 in
western Colorado and increase moving east to $4.00 in southern
Illinois. The proposal aligns the production area of northern Colorado
with the large production areas of New Mexico, the Texas Panhandle, and
southwest Kansas at $2.50. This required increasing the differential in
Weld, Boulder, and Morgan counties of Colorado by $0.10 to $0.20 from
the May model results. In order to encourage milk to service Class I
demand, some counties in the greater Denver area, including Colorado
Springs, are proposed at the May results of $2.70, while others are
proposed to increase as much as $0.20 above the May results to provide
for handler equity.
In southern Illinois, testimony reflects plants compete for sales
within a similar distribution area. Therefore, counties were grouped
into a $3.60 zone. This represents an increase of $0.10 for some
plants, while others remained at the May result of $3.60. In Iowa, all
counties with distributing plants are set at the May result of $2.70.
Douglas County, Nebraska, and Minnehaha County, South Dakota,
proposed differentials are $2.70 and $2.60, an increase of $0.20 and
$0.10, respectively, from the May results. These increases recognize
handler equity both to the east with Polk County, Iowa, and to the
north with Cass County, North Dakota.
In Kansas, the two counties with distributing plants, Reno and
Sedgwick, are proposed to be $2.90, as they are neighboring counties,
and the same differential levels would provide for handler equity. This
increase also provides handler equity and price alignment with Oklahoma
plants to the south.
In Oklahoma, Lincoln, Cleveland, and Grady counties are proposed at
the same differential of $3.30. Lincoln and Cleveland counties are
proposed at the May results, while this represents a $0.20 increase for
Grady County. The $3.30 differential for these three counties provides
for handler equity and price alignment both to the north in Kansas and
the south in Texas.
Mideast
Differentials in the Mideast region were evaluated on a state-by-
state basis. Michigan differentials are set at the May results, $3.00
in the upper peninsula and $3.30 in the lower peninsula, because there
were no additional producer or handler equity issues to address.
Indiana is divided into three differential zones moving north to south
($3.30, $3.60, and $3.70) which align with the May results. The
differentials for Lake and Huntington counties are proposed to be
lowered by $0.40 and $0.10, respectively, from the May results to
provide handler equity in the northern Indiana zone. The differentials
in Madison and Wayne counties are proposed to increase $0.10 and $0.20,
respectively, from the May results to provide handler equity in the
central Indiana zone of $3.60. Southern Indiana
[[Page 57636]]
counties are proposed at the May result of $3.70.
Proposed differentials in Ohio generally follow the May results
within $0.10 (+/-) and zones were determined based on handler equity
concerns. Moving northwest to southeast, proposed differential zones
are $3.30, $3.60, $3.80, $4.00, and $4.30. The five differential zones
align within a $0.10 (+/-) range of the May results. The exception is
Cuyahoga County with a proposed $0.20 decrease from the May result to
provide for hander equity with Wayne and Stark counties.
Proposed differentials in western Pennsylvania are generally
consistent with the May results to provide for handler equity, either
in a $3.90 or $4.00 zone. Butler, Fayette, Lawrence, and Mercer
counties are proposed to be lowered by $0.10 from the May results to
the $4.00 zone. West Virgina differentials range from $4.00 to $4.80,
moving northwest to southeast, consistent with the May results as there
were no additional producer and handler equity to address.
Southwest
The proposed differentials in the Southwest FMMO start at $2.30 in
northwest New Mexico and increase moving southeast to $4.80 in
southeast Texas. Bernalillo County, New Mexico, is proposed to increase
$0.30 from the May result to provide for handler and producer equity
with nearby manufacturing plants. Testimony reflects the Texas
Panhandle and southeastern New Mexico regions contain mostly
manufacturing plants and draw milk from the same supply region in the
Panhandle. For producer equity concerns, these regions are proposed to
be in a $2.50 zone. This matches the May results for the eastern New
Mexico plant locations, necessitating a proposed increase of $0.10 to
$0.30 in counties within the Panhandle region to reach a uniform $2.50
zone. In Lubbock County, Texas, the differential is proposed at $2.60,
a decrease of $0.20 from the May result, recognizing handler equity in
the Panhandle region and producer equity considerations with
manufacturing plants competing for milk supplies. Dallas County, Texas,
is proposed at the May result of $3.70 and a $0.10 increase is proposed
for Tarrant County to maintain handler equity. Bexar County, Texas is
proposed at $4.30, a $0.10 increase from the May result, and Harris and
Montgomery counties are proposed at $4.80, a $0.20 increase from the
May result to reflect difficulties in servicing congested urban areas.
Arizona
In Arizona, the metropolitan area of Phoenix encompasses both
Maricopa and Pinal counties. The differentials for these counties are
proposed to increase $0.30 and $0.20, respectively, above the May
results to reflect the higher cost of servicing an urban area, in
addition to providing handler equity with Clark County, Nevada. The
differential for Yuma County is proposed at $2.50, an increase of $0.40
from the May result to maintain handler equity between Maricopa County,
Arizona, and Los Angeles, California.
California
For California, testimony was given regarding additional
transportation costs from excessive traffic congestion and geographic
obstacles in southern California that were not accounted for in the
model. Accordingly, the differential in San Diego is proposed to
increase $0.20 from the May result to $2.80. To maintain handler equity
within the southern California region, the differentials for Orange,
Riverside, and Los Angeles counties are proposed to be $2.80. This is
$0.40, $0.50 and $0.60 above the May results in Orange, Riverside, and
Los Angeles counties, respectively. Ventura County is proposed to
increase $0.40 from the May result, to $2.60, to address producer
equity concerns and ensure price alignment with the surrounding
counties. For Kern County, the primary milk supply area for much of
this region, the differential is proposed to be $2.50. This also serves
to encourage Kern County milk to move south to distributing plants,
rather than north to manufacturing plants where the proposed
differential is $2.20.
The differentials in the remaining San Joaquin Valley counties,
Tulare, Kings, Fresno, Madera, Merced, Stanislaus, and San Joaquin, are
proposed to be $2.20 based on testimony indicating these counties are
considered one supply area. Of these counties, Madera County has the
highest increase from the May result, $0.40, to maintain handler equity
as well as maintain producer equity for the producer milk in this area.
The proposed $2.20 differential zone is then carried into the
Sacramento Valley counties of Sacramento, Yolo, Colusa, and Glenn, an
increase of $0.20 to $0.30 from the May results. These counties, along
with those in the San Joaquin Valley, supply milk for distributing
plants in the San Francisco Bay area. The proposed differentials for
Alameda, Contra Costa, Solano, Napa, Marin, and Sonoma counties are set
at $2.40 to encourage milk to service the San Francisco Bay area. This
represents an increase of $0.40 to $0.50 from the May model results for
these supply counties to maintain handler equity.
San Francisco and counties south along the central California coast
are further from a milk supply. The differentials in that area are
proposed at $2.50 and include San Francisco, San Mateo, Santa Cruz,
Santa Clara, San Benito, Monterey, San Luis Obispo, and Santa Barbara
counties, representing increases from the May results of $0.20 to
$0.50.
Similar to the Sacramento Valley, the differentials for the
counties of Mendocino, Lake, and Humboldt, which are located along the
northeast California coast and supply the San Francisco Bay area, are
proposed to be $2.20 to provide for producer equity.
Western Unregulated States
Differentials in Nevada generally follow the May results, except
for a few modifications. In northern Nevada, to provide for handler
equity, Washoe County is proposed to increase $0.10 from the May result
to align with the neighboring $2.00 California zone. Eureka, Nye, and
Esmerelda counties are proposed at $2.20, resulting in changes from the
May results of plus or minus $0.10.
The proposed differentials in Utah start at $2.00 in the north and
increase moving south up to $2.50 in the southwest part of the State.
While most of the proposed differentials are aligned with the May
results, the counties of Davis, Morgan, Salt Lake, Tooele, Utah, and
Weber are recommended at $2.20, an increase of $0.10. This aligns those
counties with counties to the north and west, ensuring both producer
and handler equity.
The proposed differentials in the state of Montana start at $1.70
and increase to $2.40 in the southeast part of the state. Most of the
proposed differentials are aligned with the May results. The only
county with a proposed differential more than $0.10 different from the
May result is Golden Valley which is lowered $0.20 to ensure handler
equity with the counties to its north and south.
The proposed differentials in the unregulated portions of the state
of Idaho start at $1.70 and increase to $2.20. While most of the
proposed differentials are within $0.10 of the May results, the county
of Cassia is decreased $0.20 for handler equity with plants to the
south into Utah. This brings the unregulated Idaho counties in
alignment with counties to the north and south, ensuring both producer
and handler equity with those areas.
[[Page 57637]]
Lastly, the proposed differentials in Wyoming generally follow the
May results as there were no producer or handler equity concerns to
address. Except for Laramie, Wyoming, which is proposed at $2.50 to
align with neighboring Northeast Colorado. This represents a $0.20
increase compared to the May results.
Pacific Northwest
In the Pacific Northwest, the proposed differential in Seattle was
increased $0.30 above the May result to reflect unique geography and
the cost of serving an urban market. Likewise, the proposed
differential in Portland, Oregon, was increased from the May result to
align with Seattle to provide for producer and handler equity.
Testimony reflected both cities are equidistant to milk supplies in
south central Washington, and both have similar supply issues. The
remaining proposed differentials reflect a $0.20 banding around the May
results.
Summary
In total, the differentials proposed by this decision reflect a
simple average $0.01 higher than the USDSS model May results ($3.81
versus $3.80) for the 3,108 counties in the contiguous U.S.
The following is a general description of the changes from the
USDSS model May results:
------------------------------------------------------------------------
Range of Number of
Number of counties difference plants
------------------------------------------------------------------------
5....................................... -$0.40 to -$0.60 1
224..................................... -$0.20 to -$0.30 12
2,652................................... -$0.10 to +$0.10 172
190..................................... +$0.20 to +$0.30 35
37...................................... +$0.40 to $0.60 22
------------------------------------------------------------------------
An analysis shows the proposed differentials, on a weighted average
basis for FMMO Class I milk (2019-2023), increased $1.24/cwt. Based on
pooled Class I milk during 2019-2023, the current weighted Class I
differential was $2.63 per cwt. The proposed differentials would have
increased the weighted average to $3.87 per cwt.
Other Issues
In post-hearing briefs, some stakeholders objected to NMPF's use of
producer costs of production for proposing updated Class I differential
levels. As described above, such costs were not considered in the
development of the Class I differentials recommended in this decision.
Another argument made in post-hearing briefs centered on the
amended TCBF provisions in the Appalachian and Southeast FMMOs and
newly established DPDC provisions in the Appalachian, Florida, and
Southeast FMMOs. These provisions became effective March 1, 2024, and
were a result of a regional rulemaking proceeding to address the
chronic milk supply issues of those regions. 89 FR 6401 (Feb. 1, 2024).
As the proceeding resulted in increased transportation cost related
assessments on Class I handlers, some stakeholders argue no changes
should be made to the Class I differentials until the impact of these
regional changes can be observed.
The Appalachian, Florida, and Southeast FMMOs adopted marketwide
service payment provisions that authorize year-round assessments on
Class I milk, paid by handlers, for payment to handlers for Class I
deliveries made to their plants according to the TCBF and DPDC
provisions. Under the marketwide service provisions of the AMAA,
marketwide service programs are only authorized to pay monies to
handlers. 7 U.S.C. 608c(5)(J). Therefore, it would not be appropriate
to delay consideration of Class I differential levels, monies which are
paid to producers (both cooperative and independent), for TCBF and DPDC
payments which are made only to handlers. If Class I differential
levels are changed as a result of this proceeding, thus impacting the
market conditions which led to the creation of the marketwide service
programs, stakeholders could petition USDA to make changes to the TCBF
and DPDC provisions.
b. Class II Differential
The FMMO system currently prices milk used in Class II products
uniformly. The Class II skim milk price is computed as the advanced
Class IV skim price plus $0.70 per cwt. The Class II butterfat price is
the Class III butterfat price for the month, plus the same amount
expressed as $0.007 per pound. The $0.70 differential between the Class
IV and Class II skim milk prices, adopted in the Order Reform Final
Decision, was based on an estimate of the cost of drying condensed milk
and re-wetting the solids for use in Class II products, which was seen
as an economic, upper-bound constraint on the use of fresh milk in
Class II processing.
Proposal 21, submitted by AFBF, seeks to update the Class II
differential to $1.56 per cwt. AFBF derived the proposed level by
updating the factors originally used to determine drying cost. Those
include the NFDM make allowance and the nonfat solids yield factor used
in the FMMO formulas, and butterfat and nonfat solids levels in FMMO
pooled milk. As rewetting solids, the practice of first reconstituting
powdered milk with water, is no longer a common practice, AFBF argued
such cost no longer needs to be considered. AFBF opined a $1.56 Class
II differential would not be high enough to incentivize the
substitution of Class IV products for fresh milk. AFBF claimed the
additional Class II value added to the marketwide pool because of the
higher differential would reduce the occurrence of negative PPDs and
depooling.
Opponents of Proposal 21 argued such a large Class II differential
increase would incentivize the substitution of Class IV products in the
manufacture of Class II products. Class I processors, who also have
Class II production, argued such an increase would put them at a
competitive disadvantage with standalone Class II manufacturers. They
indicated processors who produce both products are required to pool all
milk received at the plant but processors who only produce Class II
products can opt to pool milk.
Record evidence does not support adoption of Proposal 21.
Mathematically, the formula used by AFBF to compute an updated Class II
differential mimics the calculation from Order Reform. However, it is
clear from record testimony that more than doubling the current Class
II differential, as proposed by AFBF,
[[Page 57638]]
would result in handler equity issues and increased substitution of
Class IV products in lieu of fresh fluid milk in Class II products.
Class II production is unusual, if not unique, among dairy processing
facilities as some products are produced at Class I plants, and others
at standalone Class II plants. Because all milk received at Class I
plants is required to be pooled, regardless of use, this can result in
the same products having different regulatory burdens depending on the
type of plant where it was produced. That phenomenon has existed since
2000. However, the record shows that instances of milk in Class II
products produced from Class II plants not being pooled could
dramatically increase with adoption of Proposal 21. The result would be
a competitive disadvantage for Class I plants by creating a pricing
inequity that would produce disorderly marketing conditions.
Accordingly, Proposal 21 is denied.
Conforming Changes
Proposal 22, authored by AMS, would authorize changes, where
necessary, in the respective marketing orders to conform with any
amendments resulting from this proceeding. The record contains no
opposition to the proposal. Accordingly, this decision recommends a
series of conforming changes to ensure the proposed amendments to the
uniform pricing formulas applicable to the respective marketing orders
can be effectuated. The proposed changes are as follows:
1. Amending 7 CFR 1000.43 to remove references to 1135.11, as the
order is no longer in effect. Also adding 7 CFR 1000.43(e) which would
define skim milk used in ultra-pasteurized or aseptically processed and
packaged fluid milk products eligible for the Class I ESL adjustment be
limited to available Class I producer milk classified pursuant to the
allocation process contained in Section1000.44(a);
2. Amending 7 CFR 1000.50 to remove all references to NASS and
replace them with AMS;
3. Amending the following counties (and FIPS code) in 7 CFR
1000.52, to be consistent with the Federal Information Procession
Series maintained by the Federal Communication Commission: Yellowstone,
MT (30113) has been merged into Gallatin and Park Counties, MT (30031)
(30067), Shannon, SD (46113) has been renamed Oglala Lakota, SD
(46102), Bedford City, VA (51515) has been merged into Bedford County,
VA (51019), and Clifton Forge City, VA (51560) has been merged into
Alleghany County, VA (51005). Additionally, amending the FIPS code for
Pierce, WA (53053) as it was original printed incorrectly.
4. Amending 7 CFR 1000.76, provisions governing partially regulated
distributing plants to add ``applicable'' to references to the Class I
price throughout the section to indicate application of a Class I ESL
adjustment, when applicable, and remove the reference in 7 CFR
1000.76(b)(1)(i) to 7 CFR 1135.11 as the latter is no longer in effect;
5. Amend the introductory paragraphs of 7 CFR 1001.60, 1005.60,
1006.60, 1007.60, 1030.60, 1032.60, 1033.60, 1051.60, 1124.60, 1126.60,
and 1131.60, sections which calculate the handler's value of milk in
each FMMO. Section .60 of each order would be revised with the addition
of an instruction to compute an adjustment to a handler's producer milk
obligation for Class I producer milk eligible for the Class I ESL
adjustment. The adjustment would be calculated by multiplying the
monthly Class I ESL adjustment by the monthly pounds of eligible Class
I skim milk. The instruction would be inserted prior to the instruction
regarding reconstituted milk for each order. Other paragraphs are
proposed to be redesignated to reflect the insertion;
6. Further amending 7 CFR 1005.60(g), 1006.60(g)-(i), and
1007.60(g) to remove language pertaining to transportation cost
reimbursement during the months of January 2005 through March 2005 and
September 2017, which is no longer in effect; and
7. Amending 7 CFR 1005.51, 1006.51, and 1007.51 to remove Class I
price adjustments in the Appalachian, Florida, and Southeast FMMOs. The
order language would no longer be necessary with the proposed
amendments to the Class I differentials.
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 Northeast, Southeast, Appalachian,
Florida, Upper Midwest, Central, Mideast, California, Southwest,
Pacific Northwest, and Arizona FMMOs 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
have 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 Northeast,
Appalachian, Florida, Southeast, Upper Midwest, Central, Mideast,
California, Pacific Northwest, Southwest, and Arizona marketing areas
are recommended as the detailed and appropriate means by which the
foregoing conclusions may be carried out.
List of Subjects in 7 CFR Parts 1000, 1001, 1005, 1006, 1007, 1030,
1032, 1033, 1051, 1124, 1126, and 1131
Milk marketing orders.
[[Page 57639]]
For the reasons set forth in the preamble, AMS proposes to amend 7
CFR parts 1000, 1001, 1005, 1006, 1007, 1030, 1032, 1033, 1051, 1124,
1126, and 1131 as follows:
PART 1000--GENERAL PROVISIONS OF FEDERAL MILK MARKETING ORDERS
0
1. The authority citation for 7 CFR part 1000 continues to read as
follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
2. Amend Sec. 1000.43 by removing the words ``and Sec. 1135.11 of
this chapter'' from paragraph (a) and paragraph (b) introductory text
and the words ``or Sec. 1135.11 of this chapter'' from paragraph
(b)(2) and by adding paragraph (e) to read as follows:
Sec. 1000.43 General classification rules.
* * * * *
(e) Any skim milk used in ultra-pasteurized or aseptically
processed and packaged fluid milk products shall be allocated in
combination with Class I milk and the quantity of producer milk
eligible to be priced shall be limited to available Class I producer
milk classified pursuant to Sec. 1000.44(a).
0
3. Revise and republish Sec. 1000.50 to read as follows:
Sec. 1000.50 Class prices, component prices, and advanced pricing
factors.
Class prices per hundredweight of milk containing 3.5 percent
butterfat, component prices, and advanced pricing factors shall be as
follows. The prices and pricing factors described in paragraphs (a),
(b), (c), (e), (f), and (q) of this section shall be based on a
weighted average of the most recent 2 weekly prices announced by the
Agriculture Marketing Service (AMS) before the 24th day of the month.
These prices shall be announced on or before the 23rd day of the month
and shall apply to milk received during the following month. The prices
described in paragraphs (g) through (p) of this section shall be based
on a weighted average for the preceding month of weekly prices
announced by AMS on or before the 5th day of the month and shall apply
to milk received during the preceding month. The price described in
paragraph (d) of this section shall be derived from the Class II skim
milk price announced on or before the 23rd day of the month preceding
the month to which it applies and the butterfat price announced on or
before the 5th day of the month following the month to which it
applies.
(a) Class I price. The Class I price per hundredweight, rounded to
the nearest cent, shall be 0.965 times the Class I skim milk price plus
3.5 times the Class I butterfat price.
(b) Class I skim milk price. The Class I skim milk price per
hundredweight shall be the adjusted Class I differential specified in
Sec. 1000.52, plus the higher of the advanced pricing factors computed
in paragraph (q)(1) or (2) of this section rounded to the nearest cent.
(c) Class I butterfat price. The Class I butterfat price per pound
shall be the adjusted Class I differential specified in Sec. 1000.52
divided by 100, plus the advanced butterfat price computed in paragraph
(q)(3) of this section.
(d) Class II price. The Class II price per hundredweight, rounded
to the nearest cent, shall be .965 times the Class II skim milk price
plus 3.5 times the Class II butterfat price.
(e) Class II skim milk price. The Class II skim milk price per
hundredweight shall be the advanced Class IV skim milk price computed
in paragraph (q)(2) of this section plus 70 cents.
(f) Class II nonfat solids price. The Class II nonfat solids price
per pound, rounded to the nearest one-hundredth cent, shall be the
Class II skim milk price divided by 9.3.
(g) Class II butterfat price. The Class II butterfat price per
pound shall be the butterfat price plus $0.007.
(h) Class III price. The Class III price per hundredweight, rounded
to the nearest cent, shall be 0.965 times the Class III skim milk price
plus 3.5 times the butterfat price.
(i) Class III skim milk price. The Class III skim milk price per
hundredweight, rounded to the nearest cent, shall be the protein price
per pound times 3.30 plus the other solids price per pound times 6.00.
(j) Class IV price. The Class IV price per hundredweight, rounded
to the nearest cent, shall be 0.965 times the Class IV skim milk price
plus 3.5 times the butterfat price.
(k) Class IV skim milk price. The Class IV skim milk price per
hundredweight, rounded to the nearest cent, shall be the nonfat solids
price per pound times 9.30.
(l) Butterfat price. The butterfat price per pound, rounded to the
nearest one-hundredth cent, shall be the U.S. average AMS AA Butter
survey price reported by the Department for the month, less 22.57
cents, with the result multiplied by 1.211.
(m) Nonfat solids price. The nonfat solids price per pound, rounded
to the nearest one-hundredth cent, shall be the U.S. average AMS nonfat
dry milk survey price reported by the Department for the month, less
22.68 cents and multiplying the result by 0.99.
(n) Protein price. The protein price per pound, rounded to the
nearest one-hundredth cent, shall be computed as follows:
(1) The U.S. average AMS survey price for 40-lb. block cheese
reported by the Department for the month;
(2) Subtract 25.04 cents from the price computed pursuant to
paragraph (n)(1) of this section and multiply the result by 1.383;
(3) Add to the amount computed pursuant to paragraph (n)(2) of this
section an amount computed as follows:
(i) Subtract 25.04 cents from the price computed pursuant to
paragraph (n)(1) of this section and multiply the result by 1.589; and
(ii) Subtract 0.91 times the butterfat price computed pursuant to
paragraph (l) of this section from the amount computed pursuant to
paragraph (n)(3)(i) of this section; and
(iii) Multiply the amount computed pursuant to paragraph (n)(3)(ii)
of this section by 1.17.
(o) Other solids price. The other solids price per pound, rounded
to the nearest one-hundredth cent, shall be the U.S. average AMS dry
whey survey price reported by the Department for the month minus 26.53
cents, with the result multiplied by 1.03.
(p) Somatic cell adjustment. The somatic cell adjustment per
hundredweight of milk shall be determined as follows:
(1) Multiply 0.0005 by the weighted average price computed pursuant
to paragraph (n)(1) of this section and round to the 5th decimal place;
(2) Subtract the somatic cell count of the milk (reported in
thousands) from 350; and
(3) Multiply the amount computed in paragraph (p)(1) of this
section by the amount computed in paragraph (p)(2) of this section and
round to the nearest full cent.
(q) Advanced pricing factors. For the purpose of computing the
Class I skim milk price, the Class II skim milk price, the Class II
nonfat solids price, and the Class I butterfat price for the following
month, the following pricing factors shall be computed using the
weighted average of the 2 most recent AMS U.S. average weekly survey
prices announced before the 24th day of the month:
(1) An advanced Class III skim milk price per hundredweight,
rounded to the nearest cent, shall be computed as follows:
(i) Following the procedure set forth in paragraphs (n) and (o) of
this section, but using the weighted average of the 2 most recent AMS
U.S. average weekly survey prices announced before the 24th
[[Page 57640]]
day of the month, compute a protein price and an other solids price;
(ii) Multiply the protein price computed in paragraph (q)(1)(i) of
this section by 3.30;
(iii) Multiply the other solids price per pound computed in
paragraph (q)(1)(i) of this section by 6.0; and
(iv) Add the amounts computed in paragraphs (q)(1)(ii) and (iii) of
this section.
(2) An advanced Class IV skim milk price per hundredweight, rounded
to the nearest cent, shall be computed as follows:
(i) Following the procedure set forth in paragraph (m) of this
section, but using the weighted average of the 2 most recent AMS U.S.
average weekly survey prices announced before the 24th day of the
month, compute a nonfat solids price; and
(ii) Multiply the nonfat solids price computed in paragraph
(q)(2)(i) of this section by 9.30.
(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 AMS AA Butter survey prices announced
before the 24th day of the month, subtracting 22.57 cents from this
average, and multiplying the result by 1.211.
(r) Class I Extended Shelf Life (ESL) adjustment. The Class I ESL
adjustment, rounded to the nearest cent, shall be computed as follows:
(1) Compute the simple average of the advanced pricing factors
computed in paragraphs (q)(1) and (2) of this section;
(2) Add the following:
(i) Determine the higher of the advanced pricing factors computed
in paragraphs (q)(1) and (2) of this section, for each of the preceding
13 to 36 months;
(ii) Calculate the average of the advanced pricing factors computed
in paragraphs (q)(1) and (2) of this section, for each of the preceding
13 to 36 months;
(iii) For each of the preceding 13 to 36 months, subtract the
amount computed in paragraph (r)(2)(ii) of this section from the amount
computed in paragraph (r)(2)(i) of this section; and
(iv) Compute the average of the differences computed in paragraph
(r)(2)(iii) of this section.
(3) Subtract the higher of the advanced pricing factors computed in
paragraphs (q)(1) and (2) of this section.
0
4. Revise and republish Sec. 1000.52 to read as follows:
Sec. 1000.52 Adjusted Class I differentials.
The Class I differential adjusted for location to be used in Sec.
1000.50(b) and (c) shall be as follows:
----------------------------------------------------------------------------------------------------------------
Class I
differential
County/parish/city State FIPS code adjusted for
location
----------------------------------------------------------------------------------------------------------------
Autauga........................................ AL 01001 5.80
Baldwin........................................ AL 01003 5.80
Barbour........................................ AL 01005 5.80
Bibb........................................... AL 01007 5.60
Blount......................................... AL 01009 5.40
Bullock........................................ AL 01011 5.80
Butler......................................... AL 01013 5.80
Calhoun........................................ AL 01015 5.60
Chambers....................................... AL 01017 5.60
Cherokee....................................... AL 01019 5.40
Chilton........................................ AL 01021 5.60
Choctaw........................................ AL 01023 5.80
Clarke......................................... AL 01025 5.80
Clay........................................... AL 01027 5.60
Cleburne....................................... AL 01029 5.60
Coffee......................................... AL 01031 5.80
Colbert........................................ AL 01033 4.90
Conecuh........................................ AL 01035 5.80
Coosa.......................................... AL 01037 5.60
Covington...................................... AL 01039 5.80
Crenshaw....................................... AL 01041 5.80
Cullman........................................ AL 01043 5.40
Dale........................................... AL 01045 5.80
Dallas......................................... AL 01047 5.80
DeKalb......................................... AL 01049 5.40
Elmore......................................... AL 01051 5.80
Escambia....................................... AL 01053 5.80
Etowah......................................... AL 01055 5.40
Fayette........................................ AL 01057 5.40
Franklin....................................... AL 01059 5.20
Geneva......................................... AL 01061 5.80
Greene......................................... AL 01063 5.60
Hale........................................... AL 01065 5.60
Henry.......................................... AL 01067 5.80
Houston........................................ AL 01069 5.80
Jackson........................................ AL 01071 5.20
Jefferson...................................... AL 01073 5.60
Lamar.......................................... AL 01075 5.40
Lauderdale..................................... AL 01077 4.90
Lawrence....................................... AL 01079 5.20
Lee............................................ AL 01081 5.80
Limestone...................................... AL 01083 5.20
Lowndes........................................ AL 01085 5.80
[[Page 57641]]
Macon.......................................... AL 01087 5.80
Madison........................................ AL 01089 5.20
Marengo........................................ AL 01091 5.80
Marion......................................... AL 01093 5.20
Marshall....................................... AL 01095 5.40
Mobile......................................... AL 01097 5.80
Monroe......................................... AL 01099 5.80
Montgomery..................................... AL 01101 5.80
Morgan......................................... AL 01103 5.40
Perry.......................................... AL 01105 5.60
Pickens........................................ AL 01107 5.40
Pike........................................... AL 01109 5.80
Randolph....................................... AL 01111 5.60
Russell........................................ AL 01113 5.80
Shelby......................................... AL 01117 5.60
St. Clair...................................... AL 01115 5.60
Sumter......................................... AL 01119 5.60
Talladega...................................... AL 01121 5.60
Tallapoosa..................................... AL 01123 5.60
Tuscaloosa..................................... AL 01125 5.60
Walker......................................... AL 01127 5.40
Washington..................................... AL 01129 5.80
Wilcox......................................... AL 01131 5.80
Winston........................................ AL 01133 5.40
Arkansas....................................... AR 05001 4.60
Ashley......................................... AR 05003 4.90
Baxter......................................... AR 05005 3.60
Benton......................................... AR 05007 3.20
Boone.......................................... AR 05009 3.30
Bradley........................................ AR 05011 4.60
Calhoun........................................ AR 05013 4.60
Carroll........................................ AR 05015 3.30
Chicot......................................... AR 05017 4.90
Clark.......................................... AR 05019 4.00
Clay........................................... AR 05021 4.30
Cleburne....................................... AR 05023 4.00
Cleveland...................................... AR 05025 4.60
Columbia....................................... AR 05027 4.30
Conway......................................... AR 05029 4.00
Craighead...................................... AR 05031 4.30
Crawford....................................... AR 05033 3.30
Crittenden..................................... AR 05035 4.60
Cross.......................................... AR 05037 4.30
Dallas......................................... AR 05039 4.30
Desha.......................................... AR 05041 4.90
Drew........................................... AR 05043 4.60
Faulkner....................................... AR 05045 4.00
Franklin....................................... AR 05047 3.60
Fulton......................................... AR 05049 4.00
Garland........................................ AR 05051 4.00
Grant.......................................... AR 05053 4.30
Greene......................................... AR 05055 4.30
Hempstead...................................... AR 05057 4.00
Hot Spring..................................... AR 05059 4.30
Howard......................................... AR 05061 4.00
Independence................................... AR 05063 4.00
Izard.......................................... AR 05065 4.00
Jackson........................................ AR 05067 4.30
Jefferson...................................... AR 05069 4.60
Johnson........................................ AR 05071 3.60
Lafayette...................................... AR 05073 4.30
Lawrence....................................... AR 05075 4.30
Lee............................................ AR 05077 4.60
Lincoln........................................ AR 05079 4.60
Little River................................... AR 05081 3.60
Logan.......................................... AR 05083 3.60
Lonoke......................................... AR 05085 4.30
Madison........................................ AR 05087 3.30
Marion......................................... AR 05089 3.60
Miller......................................... AR 05091 4.00
Mississippi.................................... AR 05093 4.30
[[Page 57642]]
Monroe......................................... AR 05095 4.60
Montgomery..................................... AR 05097 4.00
Nevada......................................... AR 05099 4.30
Newton......................................... AR 05101 3.60
Ouachita....................................... AR 05103 4.30
Perry.......................................... AR 05105 4.00
Phillips....................................... AR 05107 4.60
Pike........................................... AR 05109 4.00
Poinsett....................................... AR 05111 4.30
Polk........................................... AR 05113 3.60
Pope........................................... AR 05115 3.60
Prairie........................................ AR 05117 4.30
Pulaski........................................ AR 05119 4.30
Randolph....................................... AR 05121 4.00
Saline......................................... AR 05125 4.30
Scott.......................................... AR 05127 3.60
Searcy......................................... AR 05129 3.60
Sebastian...................................... AR 05131 3.60
Sevier......................................... AR 05133 3.60
Sharp.......................................... AR 05135 4.00
St. Francis.................................... AR 05123 4.60
Stone.......................................... AR 05137 4.00
Union.......................................... AR 05139 4.60
Van Buren...................................... AR 05141 4.00
Washington..................................... AR 05143 3.30
White.......................................... AR 05145 4.30
Woodruff....................................... AR 05147 4.30
Yell........................................... AR 05149 3.60
Apache......................................... AZ 04001 2.30
Cochise........................................ AZ 04003 2.40
Coconino....................................... AZ 04005 2.40
Gila........................................... AZ 04007 2.40
Graham......................................... AZ 04009 2.40
Greenlee....................................... AZ 04011 2.40
La Paz......................................... AZ 04012 2.50
Maricopa....................................... AZ 04013 2.60
Mohave......................................... AZ 04015 2.50
Navajo......................................... AZ 04017 2.30
Pima........................................... AZ 04019 2.40
Pinal.......................................... AZ 04021 2.60
Santa Cruz..................................... AZ 04023 2.40
Yavapai........................................ AZ 04025 2.40
Yuma........................................... AZ 04027 2.50
Alameda........................................ CA 06001 2.40
Alpine......................................... CA 06003 1.80
Amador......................................... CA 06005 1.80
Butte.......................................... CA 06007 2.00
Calaveras...................................... CA 06009 1.80
Colusa......................................... CA 06011 2.20
Contra Costa................................... CA 06013 2.40
Del Norte...................................... CA 06015 2.20
El Dorado...................................... CA 06017 1.80
Fresno......................................... CA 06019 2.20
Glenn.......................................... CA 06021 2.20
Humboldt....................................... CA 06023 2.20
Imperial....................................... CA 06025 2.50
Inyo........................................... CA 06027 2.20
Kern........................................... CA 06029 2.50
Kings.......................................... CA 06031 2.20
Lake........................................... CA 06033 2.20
Lassen......................................... CA 06035 2.00
Los Angeles.................................... CA 06037 2.80
Madera......................................... CA 06039 2.20
Marin.......................................... CA 06041 2.40
Mariposa....................................... CA 06043 1.80
Mendocino...................................... CA 06045 2.20
Merced......................................... CA 06047 2.20
Modoc.......................................... CA 06049 2.00
Mono........................................... CA 06051 2.00
Monterey....................................... CA 06053 2.50
Napa........................................... CA 06055 2.40
[[Page 57643]]
Nevada......................................... CA 06057 2.00
Orange......................................... CA 06059 2.80
Placer......................................... CA 06061 2.00
Plumas......................................... CA 06063 2.00
Riverside...................................... CA 06065 2.80
Sacramento..................................... CA 06067 2.20
San Benito..................................... CA 06069 2.50
San Bernardino................................. CA 06071 2.60
San Diego...................................... CA 06073 2.80
San Francisco.................................. CA 06075 2.50
San Joaquin.................................... CA 06077 2.20
San Luis Obispo................................ CA 06079 2.50
San Mateo...................................... CA 06081 2.50
Santa Barbara.................................. CA 06083 2.50
Santa Clara.................................... CA 06085 2.50
Santa Cruz..................................... CA 06087 2.50
Shasta......................................... CA 06089 2.00
Sierra......................................... CA 06091 2.00
Siskiyou....................................... CA 06093 2.00
Solano......................................... CA 06095 2.40
Sonoma......................................... CA 06097 2.40
Stanislaus..................................... CA 06099 2.20
Sutter......................................... CA 06101 2.20
Tehama......................................... CA 06103 2.20
Trinity........................................ CA 06105 2.00
Tulare......................................... CA 06107 2.20
Tuolumne....................................... CA 06109 1.80
Ventura........................................ CA 06111 2.60
Yolo........................................... CA 06113 2.20
Yuba........................................... CA 06115 2.00
Adams.......................................... CO 08001 2.70
Alamosa........................................ CO 08003 2.50
Arapahoe....................................... CO 08005 2.70
Archuleta...................................... CO 08007 2.30
Baca........................................... CO 08009 2.50
Bent........................................... CO 08011 2.50
Boulder........................................ CO 08013 2.50
Broomfield..................................... CO 08014 2.50
Chaffee........................................ CO 08015 2.50
Cheyenne....................................... CO 08017 2.50
Clear Creek.................................... CO 08019 2.50
Conejos........................................ CO 08021 2.50
Costilla....................................... CO 08023 2.50
Crowley........................................ CO 08025 2.70
Custer......................................... CO 08027 2.70
Delta.......................................... CO 08029 2.30
Denver......................................... CO 08031 2.70
Dolores........................................ CO 08033 2.30
Douglas........................................ CO 08035 2.70
Eagle.......................................... CO 08037 2.50
El Paso........................................ CO 08041 2.70
Elbert......................................... CO 08039 2.70
Fremont........................................ CO 08043 2.70
Garfield....................................... CO 08045 2.30
Gilpin......................................... CO 08047 2.50
Grand.......................................... CO 08049 2.50
Gunnison....................................... CO 08051 2.50
Hinsdale....................................... CO 08053 2.30
Huerfano....................................... CO 08055 2.70
Jackson........................................ CO 08057 2.50
Jefferson...................................... CO 08059 2.70
Kiowa.......................................... CO 08061 2.50
Kit Carson..................................... CO 08063 2.50
La Plata....................................... CO 08067 2.30
Lake........................................... CO 08065 2.50
Larimer........................................ CO 08069 2.50
Las Animas..................................... CO 08071 2.50
Lincoln........................................ CO 08073 2.70
Logan.......................................... CO 08075 2.50
Mesa........................................... CO 08077 2.30
Mineral........................................ CO 08079 2.50
[[Page 57644]]
Moffat......................................... CO 08081 2.30
Montezuma...................................... CO 08083 2.30
Montrose....................................... CO 08085 2.30
Morgan......................................... CO 08087 2.50
Otero.......................................... CO 08089 2.70
Ouray.......................................... CO 08091 2.30
Park........................................... CO 08093 2.70
Phillips....................................... CO 08095 2.50
Pitkin......................................... CO 08097 2.50
Prowers........................................ CO 08099 2.50
Pueblo......................................... CO 08101 2.70
Rio Blanco..................................... CO 08103 2.30
Rio Grande..................................... CO 08105 2.50
Routt.......................................... CO 08107 2.50
Saguache....................................... CO 08109 2.50
San Juan....................................... CO 08111 2.30
San Miguel..................................... CO 08113 2.30
Sedgwick....................................... CO 08115 2.50
Summit......................................... CO 08117 2.50
Teller......................................... CO 08119 2.70
Washington..................................... CO 08121 2.50
Weld........................................... CO 08123 2.50
Yuma........................................... CO 08125 2.50
Fairfield...................................... CT 09001 5.00
Hartford....................................... CT 09003 4.80
Litchfield..................................... CT 09005 4.80
Middlesex...................................... CT 09007 4.80
New Haven...................................... CT 09009 4.80
New London..................................... CT 09011 4.80
Tolland........................................ CT 09013 4.80
Windham........................................ CT 09015 4.80
District of Columbia........................... DC 11001 4.70
Kent........................................... DE 10001 4.60
New Castle..................................... DE 10003 4.40
Sussex......................................... DE 10005 4.80
Alachua........................................ FL 12001 6.40
Baker.......................................... FL 12003 6.40
Bay............................................ FL 12005 6.00
Bradford....................................... FL 12007 6.40
Brevard........................................ FL 12009 6.80
Broward........................................ FL 12011 7.40
Calhoun........................................ FL 12013 6.00
Charlotte...................................... FL 12015 7.00
Citrus......................................... FL 12017 6.80
Clay........................................... FL 12019 6.40
Collier........................................ FL 12021 7.40
Columbia....................................... FL 12023 6.40
DeSoto......................................... FL 12027 7.00
Dixie.......................................... FL 12029 6.40
Duval.......................................... FL 12031 6.40
Escambia....................................... FL 12033 5.80
Flagler........................................ FL 12035 6.80
Franklin....................................... FL 12037 6.00
Gadsden........................................ FL 12039 6.00
Gilchrist...................................... FL 12041 6.40
Glades......................................... FL 12043 7.00
Gulf........................................... FL 12045 6.00
Hamilton....................................... FL 12047 6.40
Hardee......................................... FL 12049 7.00
Hendry......................................... FL 12051 7.40
Hernando....................................... FL 12053 6.80
Highlands...................................... FL 12055 7.00
Hillsborough................................... FL 12057 6.80
Holmes......................................... FL 12059 6.00
Indian River................................... FL 12061 7.00
Jackson........................................ FL 12063 6.00
Jefferson...................................... FL 12065 6.00
Lafayette...................................... FL 12067 6.40
Lake........................................... FL 12069 6.80
Lee............................................ FL 12071 7.00
Leon........................................... FL 12073 6.00
[[Page 57645]]
Levy........................................... FL 12075 6.40
Liberty........................................ FL 12077 6.00
Madison........................................ FL 12079 6.00
Manatee........................................ FL 12081 7.00
Marion......................................... FL 12083 6.80
Martin......................................... FL 12085 7.00
Miami-Dade..................................... FL 12086 7.40
Monroe......................................... FL 12087 7.40
Nassau......................................... FL 12089 6.40
Okaloosa....................................... FL 12091 5.80
Okeechobee..................................... FL 12093 7.00
Orange......................................... FL 12095 6.80
Osceola........................................ FL 12097 6.80
Palm Beach..................................... FL 12099 7.40
Pasco.......................................... FL 12101 6.80
Pinellas....................................... FL 12103 6.80
Polk........................................... FL 12105 6.80
Putnam......................................... FL 12107 6.40
Santa Rosa..................................... FL 12113 5.80
Sarasota....................................... FL 12115 7.00
Seminole....................................... FL 12117 6.80
St. Johns...................................... FL 12109 6.40
St. Lucie...................................... FL 12111 7.00
Sumter......................................... FL 12119 6.80
Suwannee....................................... FL 12121 6.40
Taylor......................................... FL 12123 6.40
Union.......................................... FL 12125 6.40
Volusia........................................ FL 12127 6.80
Wakulla........................................ FL 12129 6.00
Walton......................................... FL 12131 6.00
Washington..................................... FL 12133 6.00
Appling........................................ GA 13001 6.00
Atkinson....................................... GA 13003 6.00
Bacon.......................................... GA 13005 6.00
Baker.......................................... GA 13007 5.80
Baldwin........................................ GA 13009 5.80
Banks.......................................... GA 13011 5.60
Barrow......................................... GA 13013 5.80
Bartow......................................... GA 13015 5.60
Ben Hill....................................... GA 13017 6.00
Berrien........................................ GA 13019 6.00
Bibb........................................... GA 13021 5.80
Bleckley....................................... GA 13023 5.80
Brantley....................................... GA 13025 6.00
Brooks......................................... GA 13027 6.00
Bryan.......................................... GA 13029 6.00
Bulloch........................................ GA 13031 6.00
Burke.......................................... GA 13033 6.00
Butts.......................................... GA 13035 5.80
Calhoun........................................ GA 13037 5.80
Camden......................................... GA 13039 6.00
Candler........................................ GA 13043 6.00
Carroll........................................ GA 13045 5.60
Catoosa........................................ GA 13047 5.40
Charlton....................................... GA 13049 6.00
Chatham........................................ GA 13051 6.00
Chattahoochee.................................. GA 13053 5.80
Chattooga...................................... GA 13055 5.40
Cherokee....................................... GA 13057 5.60
Clarke......................................... GA 13059 5.80
Clay........................................... GA 13061 5.80
Clayton........................................ GA 13063 5.80
Clinch......................................... GA 13065 6.00
Cobb........................................... GA 13067 5.60
Coffee......................................... GA 13069 6.00
Colquitt....................................... GA 13071 6.00
Columbia....................................... GA 13073 5.80
Cook........................................... GA 13075 6.00
Coweta......................................... GA 13077 5.80
Crawford....................................... GA 13079 5.80
Crisp.......................................... GA 13081 5.80
[[Page 57646]]
Dade........................................... GA 13083 5.40
Dawson......................................... GA 13085 5.60
Decatur........................................ GA 13087 6.00
DeKalb......................................... GA 13089 5.80
Dodge.......................................... GA 13091 5.80
Dooly.......................................... GA 13093 5.80
Dougherty...................................... GA 13095 5.80
Douglas........................................ GA 13097 5.60
Early.......................................... GA 13099 5.80
Echols......................................... GA 13101 6.00
Effingham...................................... GA 13103 6.00
Elbert......................................... GA 13105 5.80
Emanuel........................................ GA 13107 6.00
Evans.......................................... GA 13109 6.00
Fannin......................................... GA 13111 5.60
Fayette........................................ GA 13113 5.80
Floyd.......................................... GA 13115 5.60
Forsyth........................................ GA 13117 5.60
Franklin....................................... GA 13119 5.60
Fulton......................................... GA 13121 5.80
Gilmer......................................... GA 13123 5.60
Glascock....................................... GA 13125 5.80
Glynn.......................................... GA 13127 6.00
Gordon......................................... GA 13129 5.60
Grady.......................................... GA 13131 6.00
Greene......................................... GA 13133 5.80
Gwinnett....................................... GA 13135 5.80
Habersham...................................... GA 13137 5.60
Hall........................................... GA 13139 5.60
Hancock........................................ GA 13141 5.80
Haralson....................................... GA 13143 5.60
Harris......................................... GA 13145 5.80
Hart........................................... GA 13147 5.60
Heard.......................................... GA 13149 5.60
Henry.......................................... GA 13151 5.80
Houston........................................ GA 13153 5.80
Irwin.......................................... GA 13155 6.00
Jackson........................................ GA 13157 5.80
Jasper......................................... GA 13159 5.80
Jeff Davis..................................... GA 13161 6.00
Jefferson...................................... GA 13163 5.80
Jenkins........................................ GA 13165 6.00
Johnson........................................ GA 13167 5.80
Jones.......................................... GA 13169 5.80
Lamar.......................................... GA 13171 5.80
Lanier......................................... GA 13173 6.00
Laurens........................................ GA 13175 5.80
Lee............................................ GA 13177 5.80
Liberty........................................ GA 13179 6.00
Lincoln........................................ GA 13181 5.80
Long........................................... GA 13183 6.00
Lowndes........................................ GA 13185 6.00
Lumpkin........................................ GA 13187 5.60
Macon.......................................... GA 13193 5.80
Madison........................................ GA 13195 5.80
Marion......................................... GA 13197 5.80
McDuffie....................................... GA 13189 5.80
McIntosh....................................... GA 13191 6.00
Meriwether..................................... GA 13199 5.80
Miller......................................... GA 13201 5.80
Mitchell....................................... GA 13205 5.80
Monroe......................................... GA 13207 5.80
Montgomery..................................... GA 13209 6.00
Morgan......................................... GA 13211 5.80
Murray......................................... GA 13213 5.40
Muscogee....................................... GA 13215 5.80
Newton......................................... GA 13217 5.80
Oconee......................................... GA 13219 5.80
Oglethorpe..................................... GA 13221 5.80
Paulding....................................... GA 13223 5.60
Peach.......................................... GA 13225 5.80
[[Page 57647]]
Pickens........................................ GA 13227 5.60
Pierce......................................... GA 13229 6.00
Pike........................................... GA 13231 5.80
Polk........................................... GA 13233 5.60
Pulaski........................................ GA 13235 5.80
Putnam......................................... GA 13237 5.80
Quitman........................................ GA 13239 5.80
Rabun.......................................... GA 13241 5.60
Randolph....................................... GA 13243 5.80
Richmond....................................... GA 13245 6.00
Rockdale....................................... GA 13247 5.80
Schley......................................... GA 13249 5.80
Screven........................................ GA 13251 6.00
Seminole....................................... GA 13253 6.00
Spalding....................................... GA 13255 5.80
Stephens....................................... GA 13257 5.60
Stewart........................................ GA 13259 5.80
Sumter......................................... GA 13261 5.80
Talbot......................................... GA 13263 5.80
Taliaferro..................................... GA 13265 5.80
Tattnall....................................... GA 13267 6.00
Taylor......................................... GA 13269 5.80
Telfair........................................ GA 13271 6.00
Terrell........................................ GA 13273 5.80
Thomas......................................... GA 13275 6.00
Tift........................................... GA 13277 5.80
Toombs......................................... GA 13279 6.00
Towns.......................................... GA 13281 5.60
Treutlen....................................... GA 13283 6.00
Troup.......................................... GA 13285 5.60
Turner......................................... GA 13287 5.80
Twiggs......................................... GA 13289 5.80
Union.......................................... GA 13291 5.60
Upson.......................................... GA 13293 5.80
Walker......................................... GA 13295 5.40
Walton......................................... GA 13297 5.80
Ware........................................... GA 13299 6.00
Warren......................................... GA 13301 5.80
Washington..................................... GA 13303 5.80
Wayne.......................................... GA 13305 6.00
Webster........................................ GA 13307 5.80
Wheeler........................................ GA 13309 6.00
White.......................................... GA 13311 5.60
Whitfield...................................... GA 13313 5.40
Wilcox......................................... GA 13315 5.80
Wilkes......................................... GA 13317 5.80
Wilkinson...................................... GA 13319 5.80
Worth.......................................... GA 13321 5.80
Adair.......................................... IA 19001 2.70
Adams.......................................... IA 19003 2.90
Allamakee...................................... IA 19005 2.90
Appanoose...................................... IA 19007 2.90
Audubon........................................ IA 19009 2.70
Benton......................................... IA 19011 2.90
Black Hawk..................................... IA 19013 2.90
Boone.......................................... IA 19015 2.70
Bremer......................................... IA 19017 2.90
Buchanan....................................... IA 19019 2.90
Buena Vista.................................... IA 19021 2.60
Butler......................................... IA 19023 2.90
Calhoun........................................ IA 19025 2.70
Carroll........................................ IA 19027 2.70
Cass........................................... IA 19029 2.70
Cedar.......................................... IA 19031 3.10
Cerro Gordo.................................... IA 19033 2.90
Cherokee....................................... IA 19035 2.60
Chickasaw...................................... IA 19037 2.90
Clarke......................................... IA 19039 2.90
Clay........................................... IA 19041 2.60
Clayton........................................ IA 19043 2.90
Clinton........................................ IA 19045 3.10
[[Page 57648]]
Crawford....................................... IA 19047 2.60
Dallas......................................... IA 19049 2.70
Davis.......................................... IA 19051 2.90
Decatur........................................ IA 19053 2.90
Delaware....................................... IA 19055 2.90
Des Moines..................................... IA 19057 3.10
Dickinson...................................... IA 19059 2.70
Dubuque........................................ IA 19061 3.10
Emmet.......................................... IA 19063 2.70
Fayette........................................ IA 19065 2.90
Floyd.......................................... IA 19067 2.90
Franklin....................................... IA 19069 2.70
Fremont........................................ IA 19071 2.70
Greene......................................... IA 19073 2.70
Grundy......................................... IA 19075 2.90
Guthrie........................................ IA 19077 2.70
Hamilton....................................... IA 19079 2.70
Hancock........................................ IA 19081 2.70
Hardin......................................... IA 19083 2.70
Harrison....................................... IA 19085 2.60
Henry.......................................... IA 19087 2.90
Howard......................................... IA 19089 2.80
Humboldt....................................... IA 19091 2.70
Ida............................................ IA 19093 2.60
Iowa........................................... IA 19095 2.90
Jackson........................................ IA 19097 3.10
Jasper......................................... IA 19099 2.90
Jefferson...................................... IA 19101 2.90
Johnson........................................ IA 19103 2.90
Jones.......................................... IA 19105 3.10
Keokuk......................................... IA 19107 2.90
Kossuth........................................ IA 19109 2.70
Lee............................................ IA 19111 3.10
Linn........................................... IA 19113 2.90
Louisa......................................... IA 19115 3.10
Lucas.......................................... IA 19117 2.90
Lyon........................................... IA 19119 2.60
Madison........................................ IA 19121 2.70
Mahaska........................................ IA 19123 2.90
Marion......................................... IA 19125 2.90
Marshall....................................... IA 19127 2.90
Mills.......................................... IA 19129 2.70
Mitchell....................................... IA 19131 2.80
Monona......................................... IA 19133 2.60
Monroe......................................... IA 19135 2.90
Montgomery..................................... IA 19137 2.70
Muscatine...................................... IA 19139 3.10
O'Brien........................................ IA 19141 2.60
Osceola........................................ IA 19143 2.70
Page........................................... IA 19145 2.90
Palo Alto...................................... IA 19147 2.70
Plymouth....................................... IA 19149 2.60
Pocahontas..................................... IA 19151 2.70
Polk........................................... IA 19153 2.70
Pottawattamie.................................. IA 19155 2.70
Poweshiek...................................... IA 19157 2.90
Ringgold....................................... IA 19159 2.90
Sac............................................ IA 19161 2.60
Scott.......................................... IA 19163 3.10
Shelby......................................... IA 19165 2.60
Sioux.......................................... IA 19167 2.60
Story.......................................... IA 19169 2.70
Tama........................................... IA 19171 2.90
Taylor......................................... IA 19173 2.90
Union.......................................... IA 19175 2.90
Van Buren...................................... IA 19177 2.90
Wapello........................................ IA 19179 2.90
Warren......................................... IA 19181 2.70
Washington..................................... IA 19183 2.90
Wayne.......................................... IA 19185 2.90
Webster........................................ IA 19187 2.70
[[Page 57649]]
Winnebago...................................... IA 19189 2.70
Winneshiek..................................... IA 19191 2.80
Woodbury....................................... IA 19193 2.60
Worth.......................................... IA 19195 2.80
Wright......................................... IA 19197 2.70
Ada............................................ ID 16001 1.70
Adams.......................................... ID 16003 2.00
Bannock........................................ ID 16005 2.00
Bear Lake...................................... ID 16007 2.20
Benewah........................................ ID 16009 2.40
Bingham........................................ ID 16011 2.00
Blaine......................................... ID 16013 1.80
Boise.......................................... ID 16015 1.70
Bonner......................................... ID 16017 2.40
Bonneville..................................... ID 16019 2.00
Boundary....................................... ID 16021 2.40
Butte.......................................... ID 16023 2.00
Camas.......................................... ID 16025 1.80
Canyon......................................... ID 16027 1.70
Caribou........................................ ID 16029 2.00
Cassia......................................... ID 16031 1.70
Clark.......................................... ID 16033 2.00
Clearwater..................................... ID 16035 2.00
Custer......................................... ID 16037 1.80
Elmore......................................... ID 16039 1.70
Franklin....................................... ID 16041 2.00
Fremont........................................ ID 16043 2.00
Gem............................................ ID 16045 1.70
Gooding........................................ ID 16047 1.70
Idaho.......................................... ID 16049 2.00
Jefferson...................................... ID 16051 2.00
Jerome......................................... ID 16053 1.70
Kootenai....................................... ID 16055 2.40
Latah.......................................... ID 16057 2.20
Lemhi.......................................... ID 16059 1.80
Lewis.......................................... ID 16061 2.00
Lincoln........................................ ID 16063 1.70
Madison........................................ ID 16065 2.00
Minidoka....................................... ID 16067 1.70
Nez Perce...................................... ID 16069 2.00
Oneida......................................... ID 16071 2.00
Owyhee......................................... ID 16073 1.80
Payette........................................ ID 16075 1.70
Power.......................................... ID 16077 2.00
Shoshone....................................... ID 16079 2.20
Teton.......................................... ID 16081 2.00
Twin Falls..................................... ID 16083 1.70
Valley......................................... ID 16085 1.80
Washington..................................... ID 16087 1.70
Adams.......................................... IL 17001 3.20
Alexander...................................... IL 17003 4.00
Bond........................................... IL 17005 3.60
Boone.......................................... IL 17007 3.10
Brown.......................................... IL 17009 3.40
Bureau......................................... IL 17011 3.40
Calhoun........................................ IL 17013 3.60
Carroll........................................ IL 17015 3.20
Cass........................................... IL 17017 3.40
Champaign...................................... IL 17019 3.60
Christian...................................... IL 17021 3.60
Clark.......................................... IL 17023 3.60
Clay........................................... IL 17025 3.60
Clinton........................................ IL 17027 3.60
Coles.......................................... IL 17029 3.60
Cook........................................... IL 17031 3.20
Crawford....................................... IL 17033 3.60
Cumberland..................................... IL 17035 3.60
De Witt........................................ IL 17039 3.40
DeKalb......................................... IL 17037 3.20
Douglas........................................ IL 17041 3.60
DuPage......................................... IL 17043 3.20
[[Page 57650]]
Edgar.......................................... IL 17045 3.60
Edwards........................................ IL 17047 3.60
Effingham...................................... IL 17049 3.60
Fayette........................................ IL 17051 3.60
Ford........................................... IL 17053 3.60
Franklin....................................... IL 17055 3.60
Fulton......................................... IL 17057 3.40
Gallatin....................................... IL 17059 4.00
Greene......................................... IL 17061 3.60
Grundy......................................... IL 17063 3.40
Hamilton....................................... IL 17065 3.60
Hancock........................................ IL 17067 3.20
Hardin......................................... IL 17069 4.00
Henderson...................................... IL 17071 3.20
Henry.......................................... IL 17073 3.20
Iroquois....................................... IL 17075 3.60
Jackson........................................ IL 17077 3.60
Jasper......................................... IL 17079 3.60
Jefferson...................................... IL 17081 3.60
Jersey......................................... IL 17083 3.60
Jo Daviess..................................... IL 17085 3.10
Johnson........................................ IL 17087 4.00
Kane........................................... IL 17089 3.20
Kankakee....................................... IL 17091 3.40
Kendall........................................ IL 17093 3.20
Knox........................................... IL 17095 3.40
La Salle....................................... IL 17099 3.40
Lake........................................... IL 17097 3.10
Lawrence....................................... IL 17101 3.60
Lee............................................ IL 17103 3.20
Livingston..................................... IL 17105 3.40
Logan.......................................... IL 17107 3.40
Macon.......................................... IL 17115 3.40
Macoupin....................................... IL 17117 3.60
Madison........................................ IL 17119 3.60
Marion......................................... IL 17121 3.60
Marshall....................................... IL 17123 3.40
Mason.......................................... IL 17125 3.40
Massac......................................... IL 17127 4.00
McDonough...................................... IL 17109 3.40
McHenry........................................ IL 17111 3.10
McLean......................................... IL 17113 3.40
Menard......................................... IL 17129 3.40
Mercer......................................... IL 17131 3.20
Monroe......................................... IL 17133 3.60
Montgomery..................................... IL 17135 3.60
Morgan......................................... IL 17137 3.40
Moultrie....................................... IL 17139 3.60
Ogle........................................... IL 17141 3.20
Peoria......................................... IL 17143 3.40
Perry.......................................... IL 17145 3.60
Piatt.......................................... IL 17147 3.40
Pike........................................... IL 17149 3.40
Pope........................................... IL 17151 4.00
Pulaski........................................ IL 17153 4.00
Putnam......................................... IL 17155 3.40
Randolph....................................... IL 17157 3.60
Richland....................................... IL 17159 3.60
Rock Island.................................... IL 17161 3.20
Saline......................................... IL 17165 4.00
Sangamon....................................... IL 17167 3.40
Schuyler....................................... IL 17169 3.40
Scott.......................................... IL 17171 3.40
Shelby......................................... IL 17173 3.60
St. Clair...................................... IL 17163 3.60
Stark.......................................... IL 17175 3.40
Stephenson..................................... IL 17177 3.10
Tazewell....................................... IL 17179 3.40
Union.......................................... IL 17181 4.00
Vermilion...................................... IL 17183 3.60
Wabash......................................... IL 17185 3.60
[[Page 57651]]
Warren......................................... IL 17187 3.20
Washington..................................... IL 17189 3.60
Wayne.......................................... IL 17191 3.60
White.......................................... IL 17193 3.60
Whiteside...................................... IL 17195 3.20
Will........................................... IL 17197 3.20
Williamson..................................... IL 17199 4.00
Winnebago...................................... IL 17201 3.10
Woodford....................................... IL 17203 3.40
Adams.......................................... IN 18001 3.30
Allen.......................................... IN 18003 3.30
Bartholomew.................................... IN 18005 3.70
Benton......................................... IN 18007 3.60
Blackford...................................... IN 18009 3.30
Boone.......................................... IN 18011 3.60
Brown.......................................... IN 18013 3.70
Carroll........................................ IN 18015 3.60
Cass........................................... IN 18017 3.30
Clark.......................................... IN 18019 4.00
Clay........................................... IN 18021 3.60
Clinton........................................ IN 18023 3.60
Crawford....................................... IN 18025 4.00
Daviess........................................ IN 18027 3.70
Dearborn....................................... IN 18029 3.70
Decatur........................................ IN 18031 3.70
DeKalb......................................... IN 18033 3.30
Delaware....................................... IN 18035 3.60
Dubois......................................... IN 18037 3.70
Elkhart........................................ IN 18039 3.30
Fayette........................................ IN 18041 3.60
Floyd.......................................... IN 18043 4.00
Fountain....................................... IN 18045 3.60
Franklin....................................... IN 18047 3.70
Fulton......................................... IN 18049 3.30
Gibson......................................... IN 18051 3.70
Grant.......................................... IN 18053 3.30
Greene......................................... IN 18055 3.70
Hamilton....................................... IN 18057 3.60
Hancock........................................ IN 18059 3.60
Harrison....................................... IN 18061 4.00
Hendricks...................................... IN 18063 3.60
Henry.......................................... IN 18065 3.60
Howard......................................... IN 18067 3.60
Huntington..................................... IN 18069 3.30
Jackson........................................ IN 18071 3.70
Jasper......................................... IN 18073 3.60
Jay............................................ IN 18075 3.30
Jefferson...................................... IN 18077 4.00
Jennings....................................... IN 18079 3.70
Johnson........................................ IN 18081 3.60
Knox........................................... IN 18083 3.70
Kosciusko...................................... IN 18085 3.30
LaGrange....................................... IN 18087 3.30
Lake........................................... IN 18089 3.30
LaPorte........................................ IN 18091 3.30
Lawrence....................................... IN 18093 3.70
Madison........................................ IN 18095 3.60
Marion......................................... IN 18097 3.60
Marshall....................................... IN 18099 3.30
Martin......................................... IN 18101 3.70
Miami.......................................... IN 18103 3.30
Monroe......................................... IN 18105 3.70
Montgomery..................................... IN 18107 3.60
Morgan......................................... IN 18109 3.60
Newton......................................... IN 18111 3.60
Noble.......................................... IN 18113 3.30
Ohio........................................... IN 18115 3.70
Orange......................................... IN 18117 3.70
Owen........................................... IN 18119 3.60
Parke.......................................... IN 18121 3.60
Perry.......................................... IN 18123 4.00
[[Page 57652]]
Pike........................................... IN 18125 3.70
Porter......................................... IN 18127 3.30
Posey.......................................... IN 18129 3.70
Pulaski........................................ IN 18131 3.30
Putnam......................................... IN 18133 3.60
Randolph....................................... IN 18135 3.60
Ripley......................................... IN 18137 3.70
Rush........................................... IN 18139 3.60
Scott.......................................... IN 18143 4.00
Shelby......................................... IN 18145 3.60
Spencer........................................ IN 18147 4.00
St. Joseph..................................... IN 18141 3.30
Starke......................................... IN 18149 3.30
Steuben........................................ IN 18151 3.30
Sullivan....................................... IN 18153 3.70
Switzerland.................................... IN 18155 4.00
Tippecanoe..................................... IN 18157 3.60
Tipton......................................... IN 18159 3.60
Union.......................................... IN 18161 3.60
Vanderburgh.................................... IN 18163 3.70
Vermillion..................................... IN 18165 3.60
Vigo........................................... IN 18167 3.60
Wabash......................................... IN 18169 3.30
Warren......................................... IN 18171 3.60
Warrick........................................ IN 18173 3.70
Washington..................................... IN 18175 4.00
Wayne.......................................... IN 18177 3.60
Wells.......................................... IN 18179 3.30
White.......................................... IN 18181 3.60
Whitley........................................ IN 18183 3.30
Allen.......................................... KS 20001 2.90
Anderson....................................... KS 20003 2.90
Atchison....................................... KS 20005 2.90
Barber......................................... KS 20007 2.60
Barton......................................... KS 20009 2.60
Bourbon........................................ KS 20011 3.20
Brown.......................................... KS 20013 2.90
Butler......................................... KS 20015 2.90
Chase.......................................... KS 20017 2.70
Chautauqua..................................... KS 20019 2.90
Cherokee....................................... KS 20021 3.20
Cheyenne....................................... KS 20023 2.50
Clark.......................................... KS 20025 2.60
Clay........................................... KS 20027 2.70
Cloud.......................................... KS 20029 2.70
Coffey......................................... KS 20031 2.90
Comanche....................................... KS 20033 2.60
Cowley......................................... KS 20035 2.90
Crawford....................................... KS 20037 3.20
Decatur........................................ KS 20039 2.50
Dickinson...................................... KS 20041 2.70
Doniphan....................................... KS 20043 2.90
Douglas........................................ KS 20045 2.90
Edwards........................................ KS 20047 2.60
Elk............................................ KS 20049 2.90
Ellis.......................................... KS 20051 2.50
Ellsworth...................................... KS 20053 2.60
Finney......................................... KS 20055 2.50
Ford........................................... KS 20057 2.50
Franklin....................................... KS 20059 2.90
Geary.......................................... KS 20061 2.70
Gove........................................... KS 20063 2.50
Graham......................................... KS 20065 2.50
Grant.......................................... KS 20067 2.50
Gray........................................... KS 20069 2.50
Greeley........................................ KS 20071 2.50
Greenwood...................................... KS 20073 2.90
Hamilton....................................... KS 20075 2.50
Harper......................................... KS 20077 2.90
Harvey......................................... KS 20079 2.90
Haskell........................................ KS 20081 2.50
[[Page 57653]]
Hodgeman....................................... KS 20083 2.50
Jackson........................................ KS 20085 2.90
Jefferson...................................... KS 20087 2.90
Jewell......................................... KS 20089 2.60
Johnson........................................ KS 20091 3.20
Kearny......................................... KS 20093 2.50
Kingman........................................ KS 20095 2.90
Kiowa.......................................... KS 20097 2.60
Labette........................................ KS 20099 3.20
Lane........................................... KS 20101 2.50
Leavenworth.................................... KS 20103 2.90
Lincoln........................................ KS 20105 2.60
Linn........................................... KS 20107 3.20
Logan.......................................... KS 20109 2.50
Lyon........................................... KS 20111 2.90
Marion......................................... KS 20115 2.70
Marshall....................................... KS 20117 2.70
McPherson...................................... KS 20113 2.70
Meade.......................................... KS 20119 2.50
Miami.......................................... KS 20121 3.20
Mitchell....................................... KS 20123 2.60
Montgomery..................................... KS 20125 3.20
Morris......................................... KS 20127 2.70
Morton......................................... KS 20129 2.50
Nemaha......................................... KS 20131 2.70
Neosho......................................... KS 20133 2.90
Ness........................................... KS 20135 2.50
Norton......................................... KS 20137 2.50
Osage.......................................... KS 20139 2.90
Osborne........................................ KS 20141 2.50
Ottawa......................................... KS 20143 2.70
Pawnee......................................... KS 20145 2.50
Phillips....................................... KS 20147 2.50
Pottawatomie................................... KS 20149 2.70
Pratt.......................................... KS 20151 2.60
Rawlins........................................ KS 20153 2.50
Reno........................................... KS 20155 2.90
Republic....................................... KS 20157 2.60
Rice........................................... KS 20159 2.60
Riley.......................................... KS 20161 2.70
Rooks.......................................... KS 20163 2.50
Rush........................................... KS 20165 2.50
Russell........................................ KS 20167 2.50
Saline......................................... KS 20169 2.70
Scott.......................................... KS 20171 2.50
Sedgwick....................................... KS 20173 2.90
Seward......................................... KS 20175 2.50
Shawnee........................................ KS 20177 2.90
Sheridan....................................... KS 20179 2.50
Sherman........................................ KS 20181 2.50
Smith.......................................... KS 20183 2.50
Stafford....................................... KS 20185 2.60
Stanton........................................ KS 20187 2.50
Stevens........................................ KS 20189 2.50
Sumner......................................... KS 20191 2.90
Thomas......................................... KS 20193 2.50
Trego.......................................... KS 20195 2.50
Wabaunsee...................................... KS 20197 2.90
Wallace........................................ KS 20199 2.50
Washington..................................... KS 20201 2.70
Wichita........................................ KS 20203 2.50
Wilson......................................... KS 20205 2.90
Woodson........................................ KS 20207 2.90
Wyandotte...................................... KS 20209 3.20
Adair.......................................... KY 21001 4.20
Allen.......................................... KY 21003 4.20
Anderson....................................... KY 21005 4.20
Ballard........................................ KY 21007 4.00
Barren......................................... KY 21009 4.20
Bath........................................... KY 21011 4.20
Bell........................................... KY 21013 4.80
[[Page 57654]]
Boone.......................................... KY 21015 4.00
Bourbon........................................ KY 21017 4.20
Boyd........................................... KY 21019 4.20
Boyle.......................................... KY 21021 4.20
Bracken........................................ KY 21023 4.00
Breathitt...................................... KY 21025 4.50
Breckinridge................................... KY 21027 4.00
Bullitt........................................ KY 21029 4.00
Butler......................................... KY 21031 4.20
Caldwell....................................... KY 21033 4.00
Calloway....................................... KY 21035 4.20
Campbell....................................... KY 21037 4.00
Carlisle....................................... KY 21039 4.00
Carroll........................................ KY 21041 4.00
Carter......................................... KY 21043 4.20
Casey.......................................... KY 21045 4.20
Christian...................................... KY 21047 4.20
Clark.......................................... KY 21049 4.20
Clay........................................... KY 21051 4.50
Clinton........................................ KY 21053 4.50
Crittenden..................................... KY 21055 4.00
Cumberland..................................... KY 21057 4.50
Daviess........................................ KY 21059 4.00
Edmonson....................................... KY 21061 4.20
Elliott........................................ KY 21063 4.20
Estill......................................... KY 21065 4.20
Fayette........................................ KY 21067 4.20
Fleming........................................ KY 21069 4.20
Floyd.......................................... KY 21071 4.50
Franklin....................................... KY 21073 4.00
Fulton......................................... KY 21075 4.00
Gallatin....................................... KY 21077 4.00
Garrard........................................ KY 21079 4.20
Grant.......................................... KY 21081 4.00
Graves......................................... KY 21083 4.20
Grayson........................................ KY 21085 4.00
Green.......................................... KY 21087 4.20
Greenup........................................ KY 21089 4.20
Hancock........................................ KY 21091 4.00
Hardin......................................... KY 21093 4.20
Harlan......................................... KY 21095 4.80
Harrison....................................... KY 21097 4.20
Hart........................................... KY 21099 4.20
Henderson...................................... KY 21101 4.00
Henry.......................................... KY 21103 4.00
Hickman........................................ KY 21105 4.00
Hopkins........................................ KY 21107 4.00
Jackson........................................ KY 21109 4.20
Jefferson...................................... KY 21111 4.00
Jessamine...................................... KY 21113 4.20
Johnson........................................ KY 21115 4.50
Kenton......................................... KY 21117 4.00
Knott.......................................... KY 21119 4.50
Knox........................................... KY 21121 4.50
Larue.......................................... KY 21123 4.20
Laurel......................................... KY 21125 4.50
Lawrence....................................... KY 21127 4.20
Lee............................................ KY 21129 4.20
Leslie......................................... KY 21131 4.50
Letcher........................................ KY 21133 4.80
Lewis.......................................... KY 21135 4.20
Lincoln........................................ KY 21137 4.20
Livingston..................................... KY 21139 4.00
Logan.......................................... KY 21141 4.20
Lyon........................................... KY 21143 4.00
Madison........................................ KY 21151 4.20
Magoffin....................................... KY 21153 4.50
Marion......................................... KY 21155 4.20
Marshall....................................... KY 21157 4.00
Martin......................................... KY 21159 4.50
Mason.......................................... KY 21161 4.20
[[Page 57655]]
McCracken...................................... KY 21145 4.00
McCreary....................................... KY 21147 4.50
McLean......................................... KY 21149 4.00
Meade.......................................... KY 21163 4.00
Menifee........................................ KY 21165 4.20
Mercer......................................... KY 21167 4.20
Metcalfe....................................... KY 21169 4.20
Monroe......................................... KY 21171 4.50
Montgomery..................................... KY 21173 4.20
Morgan......................................... KY 21175 4.20
Muhlenberg..................................... KY 21177 4.00
Nelson......................................... KY 21179 4.20
Nicholas....................................... KY 21181 4.20
Ohio........................................... KY 21183 4.00
Oldham......................................... KY 21185 4.00
Owen........................................... KY 21187 4.00
Owsley......................................... KY 21189 4.50
Pendleton...................................... KY 21191 4.00
Perry.......................................... KY 21193 4.50
Pike........................................... KY 21195 4.50
Powell......................................... KY 21197 4.20
Pulaski........................................ KY 21199 4.50
Robertson...................................... KY 21201 4.20
Rockcastle..................................... KY 21203 4.20
Rowan.......................................... KY 21205 4.20
Russell........................................ KY 21207 4.50
Scott.......................................... KY 21209 4.00
Shelby......................................... KY 21211 4.00
Simpson........................................ KY 21213 4.20
Spencer........................................ KY 21215 4.00
Taylor......................................... KY 21217 4.20
Todd........................................... KY 21219 4.20
Trigg.......................................... KY 21221 4.20
Trimble........................................ KY 21223 4.00
Union.......................................... KY 21225 4.00
Warren......................................... KY 21227 4.20
Washington..................................... KY 21229 4.20
Wayne.......................................... KY 21231 4.50
Webster........................................ KY 21233 4.00
Whitley........................................ KY 21235 4.50
Wolfe.......................................... KY 21237 4.20
Woodford....................................... KY 21239 4.20
Acadia Parish.................................. LA 22001 5.20
Allen Parish................................... LA 22003 4.90
Ascension Parish............................... LA 22005 5.20
Assumption Parish.............................. LA 22007 5.20
Avoyelles Parish............................... LA 22009 5.20
Beauregard Parish.............................. LA 22011 4.90
Bienville Parish............................... LA 22013 4.60
Bossier Parish................................. LA 22015 4.30
Caddo Parish................................... LA 22017 4.30
Calcasieu Parish............................... LA 22019 4.90
Caldwell Parish................................ LA 22021 4.90
Cameron Parish................................. LA 22023 4.90
Catahoula Parish............................... LA 22025 5.20
Claiborne Parish............................... LA 22027 4.30
Concordia Parish............................... LA 22029 5.20
De Soto Parish................................. LA 22031 4.30
East Baton Rouge Parish........................ LA 22033 5.20
East Carroll Parish............................ LA 22035 5.20
East Feliciana Parish.......................... LA 22037 5.20
Evangeline Parish.............................. LA 22039 4.90
Franklin Parish................................ LA 22041 4.90
Grant Parish................................... LA 22043 4.90
Iberia Parish.................................. LA 22045 5.20
Iberville Parish............................... LA 22047 5.20
Jackson Parish................................. LA 22049 4.60
Jefferson Davis Parish......................... LA 22053 4.90
Jefferson Parish............................... LA 22051 5.60
La Salle Parish................................ LA 22059 4.90
Lafayette Parish............................... LA 22055 5.20
[[Page 57656]]
Lafourche Parish............................... LA 22057 5.60
Lincoln Parish................................. LA 22061 4.60
Livingston Parish.............................. LA 22063 5.40
Madison Parish................................. LA 22065 5.20
Morehouse Parish............................... LA 22067 4.90
Natchitoches Parish............................ LA 22069 4.60
Orleans Parish................................. LA 22071 5.60
Ouachita Parish................................ LA 22073 4.90
Plaquemines Parish............................. LA 22075 5.60
Pointe Coupee Parish........................... LA 22077 5.20
Rapides Parish................................. LA 22079 4.90
Red River Parish............................... LA 22081 4.60
Richland Parish................................ LA 22083 4.90
Sabine Parish.................................. LA 22085 4.60
St. Bernard Parish............................. LA 22087 5.60
St. Charles Parish............................. LA 22089 5.60
St. Helena Parish.............................. LA 22091 5.40
St. James Parish............................... LA 22093 5.20
St. John the Baptist Parish.................... LA 22095 5.60
St. Landry Parish.............................. LA 22097 5.20
St. Martin Parish.............................. LA 22099 5.20
St. Mary Parish................................ LA 22101 5.20
St. Tammany Parish............................. LA 22103 5.60
Tangipahoa Parish.............................. LA 22105 5.40
Tensas Parish.................................. LA 22107 5.20
Terrebonne Parish.............................. LA 22109 5.60
Union Parish................................... LA 22111 4.60
Vermilion Parish............................... LA 22113 5.20
Vernon Parish.................................. LA 22115 4.60
Washington Parish.............................. LA 22117 5.60
Webster Parish................................. LA 22119 4.30
West Baton Rouge Parish........................ LA 22121 5.20
West Carroll Parish............................ LA 22123 4.90
West Feliciana Parish.......................... LA 22125 5.20
Winn Parish.................................... LA 22127 4.60
Barnstable..................................... MA 25001 5.10
Berkshire...................................... MA 25003 4.50
Bristol........................................ MA 25005 5.10
Dukes.......................................... MA 25007 5.10
Essex.......................................... MA 25009 5.10
Franklin....................................... MA 25011 4.70
Hampden........................................ MA 25013 4.70
Hampshire...................................... MA 25015 4.70
Middlesex...................................... MA 25017 5.10
Nantucket...................................... MA 25019 5.10
Norfolk........................................ MA 25021 5.10
Plymouth....................................... MA 25023 5.10
Suffolk........................................ MA 25025 5.10
Worcester...................................... MA 25027 4.90
Allegany....................................... MD 24001 4.10
Anne Arundel................................... MD 24003 4.60
Baltimore...................................... MD 24005 4.40
Baltimore City................................. MD 24510 4.60
Calvert........................................ MD 24009 4.80
Caroline....................................... MD 24011 4.60
Carroll........................................ MD 24013 4.40
Cecil.......................................... MD 24015 4.40
Charles........................................ MD 24017 4.80
Dorchester..................................... MD 24019 4.80
Frederick...................................... MD 24021 4.40
Garrett........................................ MD 24023 4.10
Harford........................................ MD 24025 4.40
Howard......................................... MD 24027 4.60
Kent........................................... MD 24029 4.60
Montgomery..................................... MD 24031 4.60
Prince George's................................ MD 24033 4.60
Queen Anne's................................... MD 24035 4.60
Somerset....................................... MD 24039 4.80
St. Mary's..................................... MD 24037 4.80
Talbot......................................... MD 24041 4.60
Washington..................................... MD 24043 4.20
[[Page 57657]]
Wicomico....................................... MD 24045 4.80
Worcester...................................... MD 24047 4.80
Androscoggin................................... ME 23001 4.20
Aroostook...................................... ME 23003 3.90
Cumberland..................................... ME 23005 4.50
Franklin....................................... ME 23007 4.20
Hancock........................................ ME 23009 3.90
Kennebec....................................... ME 23011 4.20
Knox........................................... ME 23013 4.20
Lincoln........................................ ME 23015 4.20
Oxford......................................... ME 23017 4.20
Penobscot...................................... ME 23019 3.90
Piscataquis.................................... ME 23021 3.90
Sagadahoc...................................... ME 23023 4.20
Somerset....................................... ME 23025 3.90
Waldo.......................................... ME 23027 3.90
Washington..................................... ME 23029 3.90
York........................................... ME 23031 4.50
Alcona......................................... MI 26001 3.30
Alger.......................................... MI 26003 3.00
Allegan........................................ MI 26005 3.30
Alpena......................................... MI 26007 3.30
Antrim......................................... MI 26009 3.30
Arenac......................................... MI 26011 3.30
Baraga......................................... MI 26013 3.00
Barry.......................................... MI 26015 3.30
Bay............................................ MI 26017 3.30
Benzie......................................... MI 26019 3.30
Berrien........................................ MI 26021 3.30
Branch......................................... MI 26023 3.30
Calhoun........................................ MI 26025 3.30
Cass........................................... MI 26027 3.30
Charlevoix..................................... MI 26029 3.30
Cheboygan...................................... MI 26031 3.30
Chippewa....................................... MI 26033 3.00
Clare.......................................... MI 26035 3.30
Clinton........................................ MI 26037 3.30
Crawford....................................... MI 26039 3.30
Delta.......................................... MI 26041 2.80
Dickinson...................................... MI 26043 2.80
Eaton.......................................... MI 26045 3.30
Emmet.......................................... MI 26047 3.30
Genesee........................................ MI 26049 3.30
Gladwin........................................ MI 26051 3.30
Gogebic........................................ MI 26053 2.80
Grand Traverse................................. MI 26055 3.30
Gratiot........................................ MI 26057 3.30
Hillsdale...................................... MI 26059 3.30
Houghton....................................... MI 26061 3.00
Huron.......................................... MI 26063 3.30
Ingham......................................... MI 26065 3.30
Ionia.......................................... MI 26067 3.30
Iosco.......................................... MI 26069 3.30
Iron........................................... MI 26071 2.80
Isabella....................................... MI 26073 3.30
Jackson........................................ MI 26075 3.30
Kalamazoo...................................... MI 26077 3.30
Kalkaska....................................... MI 26079 3.30
Kent........................................... MI 26081 3.30
Keweenaw....................................... MI 26083 3.00
Lake........................................... MI 26085 3.30
Lapeer......................................... MI 26087 3.30
Leelanau....................................... MI 26089 3.30
Lenawee........................................ MI 26091 3.30
Livingston..................................... MI 26093 3.30
Luce........................................... MI 26095 3.00
Mackinac....................................... MI 26097 3.00
Macomb......................................... MI 26099 3.30
Manistee....................................... MI 26101 3.30
Marquette...................................... MI 26103 3.00
Mason.......................................... MI 26105 3.30
[[Page 57658]]
Mecosta........................................ MI 26107 3.30
Menominee...................................... MI 26109 2.80
Midland........................................ MI 26111 3.30
Missaukee...................................... MI 26113 3.30
Monroe......................................... MI 26115 3.30
Montcalm....................................... MI 26117 3.30
Montmorency.................................... MI 26119 3.30
Muskegon....................................... MI 26121 3.30
Newaygo........................................ MI 26123 3.30
Oakland........................................ MI 26125 3.30
Oceana......................................... MI 26127 3.30
Ogemaw......................................... MI 26129 3.30
Ontonagon...................................... MI 26131 2.80
Osceola........................................ MI 26133 3.30
Oscoda......................................... MI 26135 3.30
Otsego......................................... MI 26137 3.30
Ottawa......................................... MI 26139 3.30
Presque Isle................................... MI 26141 3.30
Roscommon...................................... MI 26143 3.30
Saginaw........................................ MI 26145 3.30
Sanilac........................................ MI 26151 3.30
Schoolcraft.................................... MI 26153 3.00
Shiawassee..................................... MI 26155 3.30
St. Clair...................................... MI 26147 3.30
St. Joseph..................................... MI 26149 3.30
Tuscola........................................ MI 26157 3.30
Van Buren...................................... MI 26159 3.30
Washtenaw...................................... MI 26161 3.30
Wayne.......................................... MI 26163 3.30
Wexford........................................ MI 26165 3.30
Aitkin......................................... MN 27001 2.80
Anoka.......................................... MN 27003 2.80
Becker......................................... MN 27005 2.70
Beltrami....................................... MN 27007 2.30
Benton......................................... MN 27009 2.80
Big Stone...................................... MN 27011 2.70
Blue Earth..................................... MN 27013 2.80
Brown.......................................... MN 27015 2.80
Carlton........................................ MN 27017 2.80
Carver......................................... MN 27019 2.80
Cass........................................... MN 27021 2.80
Chippewa....................................... MN 27023 2.80
Chisago........................................ MN 27025 2.80
Clay........................................... MN 27027 2.70
Clearwater..................................... MN 27029 2.30
Cook........................................... MN 27031 2.30
Cottonwood..................................... MN 27033 2.80
Crow Wing...................................... MN 27035 2.80
Dakota......................................... MN 27037 2.90
Dodge.......................................... MN 27039 2.80
Douglas........................................ MN 27041 2.80
Faribault...................................... MN 27043 2.80
Fillmore....................................... MN 27045 2.80
Freeborn....................................... MN 27047 2.80
Goodhue........................................ MN 27049 2.80
Grant.......................................... MN 27051 2.80
Hennepin....................................... MN 27053 2.90
Houston........................................ MN 27055 2.80
Hubbard........................................ MN 27057 2.70
Isanti......................................... MN 27059 2.80
Itasca......................................... MN 27061 2.30
Jackson........................................ MN 27063 2.80
Kanabec........................................ MN 27065 2.80
Kandiyohi...................................... MN 27067 2.80
Kittson........................................ MN 27069 2.30
Koochiching.................................... MN 27071 2.30
Lac qui Parle.................................. MN 27073 2.70
Lake........................................... MN 27075 2.30
Lake of the Woods.............................. MN 27077 2.30
Le Sueur....................................... MN 27079 2.80
Lincoln........................................ MN 27081 2.60
[[Page 57659]]
Lyon........................................... MN 27083 2.70
Mahnomen....................................... MN 27087 2.60
Marshall....................................... MN 27089 2.30
Martin......................................... MN 27091 2.80
McLeod......................................... MN 27085 2.80
Meeker......................................... MN 27093 2.80
Mille Lacs..................................... MN 27095 2.80
Morrison....................................... MN 27097 2.80
Mower.......................................... MN 27099 2.80
Murray......................................... MN 27101 2.70
Nicollet....................................... MN 27103 2.80
Nobles......................................... MN 27105 2.70
Norman......................................... MN 27107 2.60
Olmsted........................................ MN 27109 2.80
Otter Tail..................................... MN 27111 2.80
Pennington..................................... MN 27113 2.30
Pine........................................... MN 27115 2.80
Pipestone...................................... MN 27117 2.60
Polk........................................... MN 27119 2.30
Pope........................................... MN 27121 2.80
Ramsey......................................... MN 27123 2.90
Red Lake....................................... MN 27125 2.30
Redwood........................................ MN 27127 2.80
Renville....................................... MN 27129 2.80
Rice........................................... MN 27131 2.80
Rock........................................... MN 27133 2.60
Roseau......................................... MN 27135 2.30
Scott.......................................... MN 27139 2.90
Sherburne...................................... MN 27141 2.80
Sibley......................................... MN 27143 2.80
St. Louis...................................... MN 27137 2.30
Stearns........................................ MN 27145 2.80
Steele......................................... MN 27147 2.80
Stevens........................................ MN 27149 2.80
Swift.......................................... MN 27151 2.80
Todd........................................... MN 27153 2.80
Traverse....................................... MN 27155 2.70
Wabasha........................................ MN 27157 2.80
Wadena......................................... MN 27159 2.80
Waseca......................................... MN 27161 2.80
Washington..................................... MN 27163 2.90
Watonwan....................................... MN 27165 2.80
Wilkin......................................... MN 27167 2.70
Winona......................................... MN 27169 2.80
Wright......................................... MN 27171 2.80
Yellow Medicine................................ MN 27173 2.70
Adair.......................................... MO 29001 3.20
Andrew......................................... MO 29003 2.90
Atchison....................................... MO 29005 2.70
Audrain........................................ MO 29007 3.40
Barry.......................................... MO 29009 3.20
Barton......................................... MO 29011 3.20
Bates.......................................... MO 29013 3.20
Benton......................................... MO 29015 3.20
Bollinger...................................... MO 29017 3.60
Boone.......................................... MO 29019 3.40
Buchanan....................................... MO 29021 3.20
Butler......................................... MO 29023 4.00
Caldwell....................................... MO 29025 3.20
Callaway....................................... MO 29027 3.40
Camden......................................... MO 29029 3.40
Cape Girardeau................................. MO 29031 3.60
Carroll........................................ MO 29033 3.20
Carter......................................... MO 29035 4.00
Cass........................................... MO 29037 3.20
Cedar.......................................... MO 29039 3.20
Chariton....................................... MO 29041 3.20
Christian...................................... MO 29043 3.30
Clark.......................................... MO 29045 3.20
Clay........................................... MO 29047 3.20
Clinton........................................ MO 29049 3.20
[[Page 57660]]
Cole........................................... MO 29051 3.40
Cooper......................................... MO 29053 3.40
Crawford....................................... MO 29055 3.60
Dade........................................... MO 29057 3.20
Dallas......................................... MO 29059 3.30
Daviess........................................ MO 29061 3.20
DeKalb......................................... MO 29063 3.20
Dent........................................... MO 29065 3.60
Douglas........................................ MO 29067 3.30
Dunklin........................................ MO 29069 4.30
Franklin....................................... MO 29071 3.60
Gasconade...................................... MO 29073 3.60
Gentry......................................... MO 29075 2.90
Greene......................................... MO 29077 3.20
Grundy......................................... MO 29079 3.20
Harrison....................................... MO 29081 2.90
Henry.......................................... MO 29083 3.20
Hickory........................................ MO 29085 3.20
Holt........................................... MO 29087 2.90
Howard......................................... MO 29089 3.40
Howell......................................... MO 29091 3.60
Iron........................................... MO 29093 3.60
Jackson........................................ MO 29095 3.20
Jasper......................................... MO 29097 3.20
Jefferson...................................... MO 29099 3.60
Johnson........................................ MO 29101 3.20
Knox........................................... MO 29103 3.20
Laclede........................................ MO 29105 3.30
Lafayette...................................... MO 29107 3.20
Lawrence....................................... MO 29109 3.20
Lewis.......................................... MO 29111 3.20
Lincoln........................................ MO 29113 3.60
Linn........................................... MO 29115 3.20
Livingston..................................... MO 29117 3.20
Macon.......................................... MO 29121 3.20
Madison........................................ MO 29123 3.60
Maries......................................... MO 29125 3.60
Marion......................................... MO 29127 3.20
McDonald....................................... MO 29119 3.20
Mercer......................................... MO 29129 2.90
Miller......................................... MO 29131 3.40
Mississippi.................................... MO 29133 4.00
Moniteau....................................... MO 29135 3.40
Monroe......................................... MO 29137 3.40
Montgomery..................................... MO 29139 3.40
Morgan......................................... MO 29141 3.40
New Madrid..................................... MO 29143 4.00
Newton......................................... MO 29145 3.20
Nodaway........................................ MO 29147 2.90
Oregon......................................... MO 29149 4.00
Osage.......................................... MO 29151 3.60
Ozark.......................................... MO 29153 3.60
Pemiscot....................................... MO 29155 4.30
Perry.......................................... MO 29157 3.60
Pettis......................................... MO 29159 3.40
Phelps......................................... MO 29161 3.60
Pike........................................... MO 29163 3.40
Platte......................................... MO 29165 3.20
Polk........................................... MO 29167 3.20
Pulaski........................................ MO 29169 3.40
Putnam......................................... MO 29171 2.90
Ralls.......................................... MO 29173 3.40
Randolph....................................... MO 29175 3.40
Ray............................................ MO 29177 3.20
Reynolds....................................... MO 29179 3.60
Ripley......................................... MO 29181 4.00
Saline......................................... MO 29195 3.40
Schuyler....................................... MO 29197 3.20
Scotland....................................... MO 29199 3.20
Scott.......................................... MO 29201 4.00
Shannon........................................ MO 29203 3.60
[[Page 57661]]
Shelby......................................... MO 29205 3.20
St. Charles.................................... MO 29183 3.60
St. Clair...................................... MO 29185 3.20
St. Francois................................... MO 29187 3.60
St. Louis...................................... MO 29189 3.60
St. Louis City................................. MO 29510 3.60
Ste. Genevieve................................. MO 29186 3.60
Stoddard....................................... MO 29207 4.00
Stone.......................................... MO 29209 3.30
Sullivan....................................... MO 29211 3.20
Taney.......................................... MO 29213 3.30
Texas.......................................... MO 29215 3.60
Vernon......................................... MO 29217 3.20
Warren......................................... MO 29219 3.60
Washington..................................... MO 29221 3.60
Wayne.......................................... MO 29223 4.00
Webster........................................ MO 29225 3.20
Worth.......................................... MO 29227 2.90
Wright......................................... MO 29229 3.30
Adams.......................................... MS 28001 5.20
Alcorn......................................... MS 28003 4.90
Amite.......................................... MS 28005 5.40
Attala......................................... MS 28007 5.20
Benton......................................... MS 28009 4.90
Bolivar........................................ MS 28011 4.90
Calhoun........................................ MS 28013 5.20
Carroll........................................ MS 28015 5.20
Chickasaw...................................... MS 28017 5.20
Choctaw........................................ MS 28019 5.20
Claiborne...................................... MS 28021 5.20
Clarke......................................... MS 28023 5.60
Clay........................................... MS 28025 5.20
Coahoma........................................ MS 28027 4.90
Copiah......................................... MS 28029 5.40
Covington...................................... MS 28031 5.60
DeSoto......................................... MS 28033 4.60
Forrest........................................ MS 28035 5.80
Franklin....................................... MS 28037 5.20
George......................................... MS 28039 5.80
Greene......................................... MS 28041 5.80
Grenada........................................ MS 28043 5.20
Hancock........................................ MS 28045 5.80
Harrison....................................... MS 28047 5.80
Hinds.......................................... MS 28049 5.40
Holmes......................................... MS 28051 5.20
Humphreys...................................... MS 28053 5.20
Issaquena...................................... MS 28055 5.20
Itawamba....................................... MS 28057 5.20
Jackson........................................ MS 28059 5.80
Jasper......................................... MS 28061 5.60
Jefferson...................................... MS 28063 5.20
Jefferson Davis................................ MS 28065 5.60
Jones.......................................... MS 28067 5.60
Kemper......................................... MS 28069 5.40
Lafayette...................................... MS 28071 4.90
Lamar.......................................... MS 28073 5.80
Lauderdale..................................... MS 28075 5.60
Lawrence....................................... MS 28077 5.60
Leake.......................................... MS 28079 5.40
Lee............................................ MS 28081 5.20
Leflore........................................ MS 28083 5.20
Lincoln........................................ MS 28085 5.40
Lowndes........................................ MS 28087 5.20
Madison........................................ MS 28089 5.40
Marion......................................... MS 28091 5.60
Marshall....................................... MS 28093 4.90
Monroe......................................... MS 28095 5.20
Montgomery..................................... MS 28097 5.20
Neshoba........................................ MS 28099 5.40
Newton......................................... MS 28101 5.60
Noxubee........................................ MS 28103 5.40
[[Page 57662]]
Oktibbeha...................................... MS 28105 5.20
Panola......................................... MS 28107 4.90
Pearl River.................................... MS 28109 5.80
Perry.......................................... MS 28111 5.80
Pike........................................... MS 28113 5.40
Pontotoc....................................... MS 28115 4.90
Prentiss....................................... MS 28117 4.90
Quitman........................................ MS 28119 4.90
Rankin......................................... MS 28121 5.40
Scott.......................................... MS 28123 5.40
Sharkey........................................ MS 28125 5.20
Simpson........................................ MS 28127 5.60
Smith.......................................... MS 28129 5.60
Stone.......................................... MS 28131 5.80
Sunflower...................................... MS 28133 4.90
Tallahatchie................................... MS 28135 4.90
Tate........................................... MS 28137 4.90
Tippah......................................... MS 28139 4.90
Tishomingo..................................... MS 28141 4.90
Tunica......................................... MS 28143 4.60
Union.......................................... MS 28145 4.90
Walthall....................................... MS 28147 5.60
Warren......................................... MS 28149 5.20
Washington..................................... MS 28151 4.90
Wayne.......................................... MS 28153 5.80
Webster........................................ MS 28155 5.20
Wilkinson...................................... MS 28157 5.20
Winston........................................ MS 28159 5.40
Yalobusha...................................... MS 28161 4.90
Yazoo.......................................... MS 28163 5.20
Beaverhead..................................... MT 30001 1.80
Big Horn....................................... MT 30003 2.40
Blaine......................................... MT 30005 2.00
Broadwater..................................... MT 30007 1.80
Carbon......................................... MT 30009 2.40
Carter......................................... MT 30011 2.40
Cascade........................................ MT 30013 1.80
Chouteau....................................... MT 30015 1.80
Custer......................................... MT 30017 2.40
Daniels........................................ MT 30019 2.30
Dawson......................................... MT 30021 2.40
Deer Lodge..................................... MT 30023 1.80
Fallon......................................... MT 30025 2.40
Fergus......................................... MT 30027 2.00
Flathead....................................... MT 30029 2.00
Gallatin....................................... MT 30031 2.00
Garfield....................................... MT 30033 2.40
Glacier........................................ MT 30035 1.80
Golden Valley.................................. MT 30037 2.00
Granite........................................ MT 30039 1.80
Hill........................................... MT 30041 1.80
Jefferson...................................... MT 30043 1.80
Judith Basin................................... MT 30045 2.00
Lake........................................... MT 30047 2.00
Lewis and Clark................................ MT 30049 1.70
Liberty........................................ MT 30051 1.80
Lincoln........................................ MT 30053 2.00
Madison........................................ MT 30057 1.80
McCone......................................... MT 30055 2.40
Meagher........................................ MT 30059 1.80
Mineral........................................ MT 30061 2.00
Missoula....................................... MT 30063 1.80
Musselshell.................................... MT 30065 2.40
Park........................................... MT 30067 2.00
Petroleum...................................... MT 30069 2.40
Phillips....................................... MT 30071 2.30
Pondera........................................ MT 30073 1.70
Powder River................................... MT 30075 2.40
Powell......................................... MT 30077 1.80
Prairie........................................ MT 30079 2.40
Ravalli........................................ MT 30081 1.80
[[Page 57663]]
Richland....................................... MT 30083 2.40
Roosevelt...................................... MT 30085 2.30
Rosebud........................................ MT 30087 2.40
Sanders........................................ MT 30089 2.00
Sheridan....................................... MT 30091 2.30
Silver Bow..................................... MT 30093 1.80
Stillwater..................................... MT 30095 2.40
Sweet Grass.................................... MT 30097 2.00
Teton.......................................... MT 30099 1.70
Toole.......................................... MT 30101 1.80
Treasure....................................... MT 30103 2.40
Valley......................................... MT 30105 2.30
Wheatland...................................... MT 30107 2.00
Wibaux......................................... MT 30109 2.40
Yellowstone.................................... MT 30111 2.40
Alamance....................................... NC 37001 5.40
Alexander...................................... NC 37003 5.60
Alleghany...................................... NC 37005 5.40
Anson.......................................... NC 37007 5.80
Ashe........................................... NC 37009 5.40
Avery.......................................... NC 37011 5.40
Beaufort....................................... NC 37013 5.80
Bertie......................................... NC 37015 5.60
Bladen......................................... NC 37017 5.80
Brunswick...................................... NC 37019 6.00
Buncombe....................................... NC 37021 5.40
Burke.......................................... NC 37023 5.60
Cabarrus....................................... NC 37025 5.60
Caldwell....................................... NC 37027 5.60
Camden......................................... NC 37029 5.60
Carteret....................................... NC 37031 6.00
Caswell........................................ NC 37033 5.40
Catawba........................................ NC 37035 5.60
Chatham........................................ NC 37037 5.60
Cherokee....................................... NC 37039 5.40
Chowan......................................... NC 37041 5.60
Clay........................................... NC 37043 5.60
Cleveland...................................... NC 37045 5.60
Columbus....................................... NC 37047 6.00
Craven......................................... NC 37049 6.00
Cumberland..................................... NC 37051 5.80
Currituck...................................... NC 37053 5.60
Dare........................................... NC 37055 5.80
Davidson....................................... NC 37057 5.60
Davie.......................................... NC 37059 5.60
Duplin......................................... NC 37061 5.80
Durham......................................... NC 37063 5.40
Edgecombe...................................... NC 37065 5.60
Forsyth........................................ NC 37067 5.40
Franklin....................................... NC 37069 5.60
Gaston......................................... NC 37071 5.60
Gates.......................................... NC 37073 5.60
Graham......................................... NC 37075 5.40
Granville...................................... NC 37077 5.40
Greene......................................... NC 37079 5.80
Guilford....................................... NC 37081 5.40
Halifax........................................ NC 37083 5.60
Harnett........................................ NC 37085 5.80
Haywood........................................ NC 37087 5.40
Henderson...................................... NC 37089 5.60
Hertford....................................... NC 37091 5.60
Hoke........................................... NC 37093 5.80
Hyde........................................... NC 37095 5.80
Iredell........................................ NC 37097 5.60
Jackson........................................ NC 37099 5.60
Johnston....................................... NC 37101 5.80
Jones.......................................... NC 37103 6.00
Lee............................................ NC 37105 5.60
Lenoir......................................... NC 37107 5.80
Lincoln........................................ NC 37109 5.60
Macon.......................................... NC 37113 5.60
[[Page 57664]]
Madison........................................ NC 37115 5.40
Martin......................................... NC 37117 5.80
McDowell....................................... NC 37111 5.60
Mecklenburg.................................... NC 37119 5.60
Mitchell....................................... NC 37121 5.40
Montgomery..................................... NC 37123 5.60
Moore.......................................... NC 37125 5.60
Nash........................................... NC 37127 5.60
New Hanover.................................... NC 37129 6.00
Northampton.................................... NC 37131 5.60
Onslow......................................... NC 37133 6.00
Orange......................................... NC 37135 5.40
Pamlico........................................ NC 37137 6.00
Pasquotank..................................... NC 37139 5.60
Pender......................................... NC 37141 6.00
Perquimans..................................... NC 37143 5.60
Person......................................... NC 37145 5.40
Pitt........................................... NC 37147 5.80
Polk........................................... NC 37149 5.60
Randolph....................................... NC 37151 5.60
Richmond....................................... NC 37153 5.80
Robeson........................................ NC 37155 5.80
Rockingham..................................... NC 37157 5.40
Rowan.......................................... NC 37159 5.60
Rutherford..................................... NC 37161 5.60
Sampson........................................ NC 37163 5.80
Scotland....................................... NC 37165 5.80
Stanly......................................... NC 37167 5.60
Stokes......................................... NC 37169 5.40
Surry.......................................... NC 37171 5.40
Swain.......................................... NC 37173 5.40
Transylvania................................... NC 37175 5.60
Tyrrell........................................ NC 37177 5.80
Union.......................................... NC 37179 5.80
Vance.......................................... NC 37181 5.40
Wake........................................... NC 37183 5.60
Warren......................................... NC 37185 5.40
Washington..................................... NC 37187 5.80
Watauga........................................ NC 37189 5.40
Wayne.......................................... NC 37191 5.80
Wilkes......................................... NC 37193 5.40
Wilson......................................... NC 37195 5.80
Yadkin......................................... NC 37197 5.40
Yancey......................................... NC 37199 5.40
Adams.......................................... ND 38001 2.40
Barnes......................................... ND 38003 2.60
Benson......................................... ND 38005 2.30
Billings....................................... ND 38007 2.40
Bottineau...................................... ND 38009 2.30
Bowman......................................... ND 38011 2.40
Burke.......................................... ND 38013 2.30
Burleigh....................................... ND 38015 2.40
Cass........................................... ND 38017 2.70
Cavalier....................................... ND 38019 2.30
Dickey......................................... ND 38021 2.60
Divide......................................... ND 38023 2.30
Dunn........................................... ND 38025 2.40
Eddy........................................... ND 38027 2.40
Emmons......................................... ND 38029 2.40
Foster......................................... ND 38031 2.40
Golden Valley.................................. ND 38033 2.40
Grand Forks.................................... ND 38035 2.30
Grant.......................................... ND 38037 2.40
Griggs......................................... ND 38039 2.60
Hettinger...................................... ND 38041 2.40
Kidder......................................... ND 38043 2.40
LaMoure........................................ ND 38045 2.60
Logan.......................................... ND 38047 2.40
McHenry........................................ ND 38049 2.30
McIntosh....................................... ND 38051 2.40
McKenzie....................................... ND 38053 2.40
[[Page 57665]]
McLean......................................... ND 38055 2.40
Mercer......................................... ND 38057 2.40
Morton......................................... ND 38059 2.40
Mountrail...................................... ND 38061 2.30
Nelson......................................... ND 38063 2.30
Oliver......................................... ND 38065 2.40
Pembina........................................ ND 38067 2.30
Pierce......................................... ND 38069 2.30
Ramsey......................................... ND 38071 2.30
Ransom......................................... ND 38073 2.60
Renville....................................... ND 38075 2.30
Richland....................................... ND 38077 2.60
Rolette........................................ ND 38079 2.30
Sargent........................................ ND 38081 2.60
Sheridan....................................... ND 38083 2.40
Sioux.......................................... ND 38085 2.40
Slope.......................................... ND 38087 2.40
Stark.......................................... ND 38089 2.40
Steele......................................... ND 38091 2.60
Stutsman....................................... ND 38093 2.40
Towner......................................... ND 38095 2.30
Traill......................................... ND 38097 2.60
Walsh.......................................... ND 38099 2.30
Ward........................................... ND 38101 2.30
Wells.......................................... ND 38103 2.40
Williams....................................... ND 38105 2.30
Adams.......................................... NE 31001 2.60
Antelope....................................... NE 31003 2.60
Arthur......................................... NE 31005 2.40
Banner......................................... NE 31007 2.40
Blaine......................................... NE 31009 2.50
Boone.......................................... NE 31011 2.60
Box Butte...................................... NE 31013 2.40
Boyd........................................... NE 31015 2.50
Brown.......................................... NE 31017 2.50
Buffalo........................................ NE 31019 2.50
Burt........................................... NE 31021 2.60
Butler......................................... NE 31023 2.60
Cass........................................... NE 31025 2.70
Cedar.......................................... NE 31027 2.60
Chase.......................................... NE 31029 2.50
Cherry......................................... NE 31031 2.40
Cheyenne....................................... NE 31033 2.40
Clay........................................... NE 31035 2.60
Colfax......................................... NE 31037 2.60
Cuming......................................... NE 31039 2.60
Custer......................................... NE 31041 2.50
Dakota......................................... NE 31043 2.60
Dawes.......................................... NE 31045 2.40
Dawson......................................... NE 31047 2.50
Deuel.......................................... NE 31049 2.40
Dixon.......................................... NE 31051 2.60
Dodge.......................................... NE 31053 2.60
Douglas........................................ NE 31055 2.70
Dundy.......................................... NE 31057 2.50
Fillmore....................................... NE 31059 2.60
Franklin....................................... NE 31061 2.60
Frontier....................................... NE 31063 2.50
Furnas......................................... NE 31065 2.50
Gage........................................... NE 31067 2.70
Garden County.................................. NE 31069 2.40
Garfield....................................... NE 31071 2.50
Gosper......................................... NE 31073 2.50
Grant.......................................... NE 31075 2.40
Greeley........................................ NE 31077 2.60
Hall........................................... NE 31079 2.60
Hamilton....................................... NE 31081 2.60
Harlan......................................... NE 31083 2.50
Hayes.......................................... NE 31085 2.50
Hitchcock...................................... NE 31087 2.50
Holt........................................... NE 31089 2.50
[[Page 57666]]
Hooker......................................... NE 31091 2.40
Howard......................................... NE 31093 2.60
Jefferson...................................... NE 31095 2.60
Johnson........................................ NE 31097 2.70
Kearney........................................ NE 31099 2.60
Keith.......................................... NE 31101 2.50
Keya Paha...................................... NE 31103 2.50
Kimball........................................ NE 31105 2.40
Knox........................................... NE 31107 2.60
Lancaster...................................... NE 31109 2.60
Lincoln........................................ NE 31111 2.50
Logan.......................................... NE 31113 2.40
Loup........................................... NE 31115 2.50
Madison........................................ NE 31119 2.60
McPherson...................................... NE 31117 2.40
Merrick........................................ NE 31121 2.60
Morrill........................................ NE 31123 2.40
Nance.......................................... NE 31125 2.60
Nemaha......................................... NE 31127 2.70
Nuckolls....................................... NE 31129 2.60
Otoe........................................... NE 31131 2.70
Pawnee......................................... NE 31133 2.70
Perkins........................................ NE 31135 2.50
Phelps......................................... NE 31137 2.50
Pierce......................................... NE 31139 2.60
Platte......................................... NE 31141 2.60
Polk........................................... NE 31143 2.60
Red Willow..................................... NE 31145 2.50
Richardson..................................... NE 31147 2.70
Rock........................................... NE 31149 2.50
Saline......................................... NE 31151 2.60
Sarpy.......................................... NE 31153 2.70
Saunders....................................... NE 31155 2.60
Scotts Bluff................................... NE 31157 2.40
Seward......................................... NE 31159 2.60
Sheridan....................................... NE 31161 2.40
Sherman........................................ NE 31163 2.50
Sioux.......................................... NE 31165 2.40
Stanton........................................ NE 31167 2.60
Thayer......................................... NE 31169 2.60
Thomas......................................... NE 31171 2.40
Thurston....................................... NE 31173 2.60
Valley......................................... NE 31175 2.50
Washington..................................... NE 31177 2.60
Wayne.......................................... NE 31179 2.60
Webster........................................ NE 31181 2.60
Wheeler........................................ NE 31183 2.50
York........................................... NE 31185 2.60
Belknap........................................ NH 33001 4.50
Carroll........................................ NH 33003 4.50
Cheshire....................................... NH 33005 4.50
Coos........................................... NH 33007 4.20
Grafton........................................ NH 33009 4.40
Hillsborough................................... NH 33011 4.50
Merrimack...................................... NH 33013 4.50
Rockingham..................................... NH 33015 4.50
Strafford...................................... NH 33017 4.50
Sullivan....................................... NH 33019 4.50
Atlantic....................................... NJ 34001 4.80
Bergen......................................... NJ 34003 5.00
Burlington..................................... NJ 34005 4.80
Camden......................................... NJ 34007 4.70
Cape May....................................... NJ 34009 4.80
Cumberland..................................... NJ 34011 4.70
Essex.......................................... NJ 34013 5.00
Gloucester..................................... NJ 34015 4.70
Hudson......................................... NJ 34017 5.00
Hunterdon...................................... NJ 34019 4.70
Mercer......................................... NJ 34021 4.70
Middlesex...................................... NJ 34023 4.90
Monmouth....................................... NJ 34025 4.90
[[Page 57667]]
Morris......................................... NJ 34027 4.90
Ocean.......................................... NJ 34029 4.90
Passaic........................................ NJ 34031 5.00
Salem.......................................... NJ 34033 4.70
Somerset....................................... NJ 34035 4.90
Sussex......................................... NJ 34037 4.70
Union.......................................... NJ 34039 5.00
Warren......................................... NJ 34041 4.70
Bernalillo..................................... NM 35001 2.40
Catron......................................... NM 35003 2.30
Chaves......................................... NM 35005 2.50
Cibola......................................... NM 35006 2.30
Colfax......................................... NM 35007 2.50
Curry.......................................... NM 35009 2.50
DeBaca......................................... NM 35011 2.50
Dona Ana....................................... NM 35013 2.50
Eddy........................................... NM 35015 2.50
Grant.......................................... NM 35017 2.50
Guadalupe...................................... NM 35019 2.50
Harding........................................ NM 35021 2.50
Hidalgo........................................ NM 35023 2.50
Lea............................................ NM 35025 2.50
Lincoln........................................ NM 35027 2.50
Los Alamos..................................... NM 35028 2.40
Luna........................................... NM 35029 2.50
McKinley....................................... NM 35031 2.30
Mora........................................... NM 35033 2.50
Otero.......................................... NM 35035 2.50
Quay........................................... NM 35037 2.50
Rio Arriba..................................... NM 35039 2.30
Roosevelt...................................... NM 35041 2.50
San Juan....................................... NM 35045 2.30
San Miguel..................................... NM 35047 2.50
Sandoval....................................... NM 35043 2.40
Santa Fe....................................... NM 35049 2.40
Sierra......................................... NM 35051 2.50
Socorro........................................ NM 35053 2.40
Taos........................................... NM 35055 2.50
Torrance....................................... NM 35057 2.40
Union.......................................... NM 35059 2.50
Valencia....................................... NM 35061 2.40
Carson City.................................... NV 32510 1.90
Churchill...................................... NV 32001 1.90
Clark.......................................... NV 32003 2.60
Douglas........................................ NV 32005 1.80
Elko........................................... NV 32007 2.00
Esmeralda...................................... NV 32009 2.20
Eureka......................................... NV 32011 2.20
Humboldt....................................... NV 32013 1.90
Lander......................................... NV 32015 2.00
Lincoln........................................ NV 32017 2.50
Lyon........................................... NV 32019 1.90
Mineral........................................ NV 32021 2.00
Nye............................................ NV 32023 2.20
Pershing....................................... NV 32027 1.90
Storey......................................... NV 32029 1.90
Washoe......................................... NV 32031 2.00
White Pine..................................... NV 32033 2.20
Albany......................................... NY 36001 4.40
Allegany....................................... NY 36003 3.90
Bronx.......................................... NY 36005 5.10
Broome......................................... NY 36007 4.00
Cattaraugus.................................... NY 36009 3.90
Cayuga......................................... NY 36011 3.90
Chautauqua..................................... NY 36013 3.90
Chemung........................................ NY 36015 4.00
Chenango....................................... NY 36017 4.00
Clinton........................................ NY 36019 4.20
Columbia....................................... NY 36021 4.40
Cortland....................................... NY 36023 3.90
Delaware....................................... NY 36025 4.20
[[Page 57668]]
Dutchess....................................... NY 36027 4.70
Erie........................................... NY 36029 3.80
Essex.......................................... NY 36031 4.20
Franklin....................................... NY 36033 4.10
Fulton......................................... NY 36035 4.10
Genesee........................................ NY 36037 3.80
Greene......................................... NY 36039 4.40
Hamilton....................................... NY 36041 4.10
Herkimer....................................... NY 36043 4.00
Jefferson...................................... NY 36045 4.00
Kings.......................................... NY 36047 5.10
Lewis.......................................... NY 36049 4.00
Livingston..................................... NY 36051 3.80
Madison........................................ NY 36053 3.90
Monroe......................................... NY 36055 3.80
Montgomery..................................... NY 36057 4.10
Nassau......................................... NY 36059 5.10
New York County................................ NY 36061 5.10
Niagara........................................ NY 36063 3.80
Oneida......................................... NY 36065 3.90
Onondaga....................................... NY 36067 3.90
Ontario........................................ NY 36069 3.80
Orange......................................... NY 36071 4.70
Orleans........................................ NY 36073 3.80
Oswego......................................... NY 36075 3.90
Otsego......................................... NY 36077 4.10
Putnam......................................... NY 36079 4.70
Queens......................................... NY 36081 5.10
Rensselaer..................................... NY 36083 4.40
Richmond....................................... NY 36085 5.10
Rockland....................................... NY 36087 5.00
Saratoga....................................... NY 36091 4.20
Schenectady.................................... NY 36093 4.20
Schoharie...................................... NY 36095 4.20
Schuyler....................................... NY 36097 3.90
Seneca......................................... NY 36099 3.90
St. Lawrence................................... NY 36089 4.00
Steuben........................................ NY 36101 3.90
Suffolk........................................ NY 36103 5.10
Sullivan....................................... NY 36105 4.40
Tioga.......................................... NY 36107 4.00
Tompkins....................................... NY 36109 3.90
Ulster......................................... NY 36111 4.40
Warren......................................... NY 36113 4.20
Washington..................................... NY 36115 4.20
Wayne.......................................... NY 36117 3.80
Westchester.................................... NY 36119 5.00
Wyoming........................................ NY 36121 3.80
Yates.......................................... NY 36123 3.80
Adams.......................................... OH 39001 4.00
Allen.......................................... OH 39003 3.30
Ashland........................................ OH 39005 3.80
Ashtabula...................................... OH 39007 3.80
Athens......................................... OH 39009 4.00
Auglaize....................................... OH 39011 3.60
Belmont........................................ OH 39013 4.00
Brown.......................................... OH 39015 4.00
Butler......................................... OH 39017 3.80
Carroll........................................ OH 39019 3.80
Champaign...................................... OH 39021 3.60
Clark.......................................... OH 39023 3.60
Clermont....................................... OH 39025 4.00
Clinton........................................ OH 39027 3.80
Columbiana..................................... OH 39029 4.00
Coshocton...................................... OH 39031 3.80
Crawford....................................... OH 39033 3.60
Cuyahoga....................................... OH 39035 3.80
Darke.......................................... OH 39037 3.60
Defiance....................................... OH 39039 3.30
Delaware....................................... OH 39041 3.60
Erie........................................... OH 39043 3.60
[[Page 57669]]
Fairfield...................................... OH 39045 3.80
Fayette........................................ OH 39047 3.80
Franklin....................................... OH 39049 3.60
Fulton......................................... OH 39051 3.30
Gallia......................................... OH 39053 4.30
Geauga......................................... OH 39055 3.80
Greene......................................... OH 39057 3.60
Guernsey....................................... OH 39059 3.80
Hamilton....................................... OH 39061 3.80
Hancock........................................ OH 39063 3.60
Hardin......................................... OH 39065 3.60
Harrison....................................... OH 39067 3.80
Henry.......................................... OH 39069 3.30
Highland....................................... OH 39071 4.00
Hocking........................................ OH 39073 4.00
Holmes......................................... OH 39075 3.80
Huron.......................................... OH 39077 3.60
Jackson........................................ OH 39079 4.00
Jefferson...................................... OH 39081 4.00
Knox........................................... OH 39083 3.80
Lake........................................... OH 39085 3.80
Lawrence....................................... OH 39087 4.30
Licking........................................ OH 39089 3.80
Logan.......................................... OH 39091 3.60
Lorain......................................... OH 39093 3.80
Lucas.......................................... OH 39095 3.30
Madison........................................ OH 39097 3.60
Mahoning....................................... OH 39099 4.00
Marion......................................... OH 39101 3.60
Medina......................................... OH 39103 3.80
Meigs.......................................... OH 39105 4.30
Mercer......................................... OH 39107 3.30
Miami.......................................... OH 39109 3.60
Monroe......................................... OH 39111 4.00
Montgomery..................................... OH 39113 3.60
Morgan......................................... OH 39115 4.00
Morrow......................................... OH 39117 3.60
Muskingum...................................... OH 39119 3.80
Noble.......................................... OH 39121 4.00
Ottawa......................................... OH 39123 3.60
Paulding....................................... OH 39125 3.30
Perry.......................................... OH 39127 4.00
Pickaway....................................... OH 39129 3.80
Pike........................................... OH 39131 4.00
Portage........................................ OH 39133 3.80
Preble......................................... OH 39135 3.60
Putnam......................................... OH 39137 3.30
Richland....................................... OH 39139 3.60
Ross........................................... OH 39141 4.00
Sandusky....................................... OH 39143 3.60
Scioto......................................... OH 39145 4.00
Seneca......................................... OH 39147 3.60
Shelby......................................... OH 39149 3.60
Stark.......................................... OH 39151 3.80
Summit......................................... OH 39153 3.80
Trumbull....................................... OH 39155 4.00
Tuscarawas..................................... OH 39157 3.80
Union.......................................... OH 39159 3.60
Van Wert....................................... OH 39161 3.30
Vinton......................................... OH 39163 4.00
Warren......................................... OH 39165 3.80
Washington..................................... OH 39167 4.00
Wayne.......................................... OH 39169 3.80
Williams....................................... OH 39171 3.30
Wood........................................... OH 39173 3.60
Wyandot........................................ OH 39175 3.60
Adair.......................................... OK 40001 3.30
Alfalfa........................................ OK 40003 2.60
Atoka.......................................... OK 40005 3.60
Beaver......................................... OK 40007 2.50
Beckham........................................ OK 40009 2.60
[[Page 57670]]
Blaine......................................... OK 40011 2.90
Bryan.......................................... OK 40013 3.60
Caddo.......................................... OK 40015 2.90
Canadian....................................... OK 40017 2.90
Carter......................................... OK 40019 3.30
Cherokee....................................... OK 40021 3.30
Choctaw........................................ OK 40023 3.60
Cimarron....................................... OK 40025 2.50
Cleveland...................................... OK 40027 3.30
Coal........................................... OK 40029 3.60
Comanche....................................... OK 40031 2.90
Cotton......................................... OK 40033 3.30
Craig.......................................... OK 40035 3.20
Creek.......................................... OK 40037 3.30
Custer......................................... OK 40039 2.60
Delaware....................................... OK 40041 3.20
Dewey.......................................... OK 40043 2.60
Ellis.......................................... OK 40045 2.60
Garfield....................................... OK 40047 2.90
Garvin......................................... OK 40049 3.30
Grady.......................................... OK 40051 3.30
Grant.......................................... OK 40053 2.90
Greer.......................................... OK 40055 2.60
Harmon......................................... OK 40057 2.60
Harper......................................... OK 40059 2.60
Haskell........................................ OK 40061 3.60
Hughes......................................... OK 40063 3.30
Jackson........................................ OK 40065 2.90
Jefferson...................................... OK 40067 3.30
Johnston....................................... OK 40069 3.60
Kay............................................ OK 40071 2.90
Kingfisher..................................... OK 40073 2.90
Kiowa.......................................... OK 40075 2.90
Latimer........................................ OK 40077 3.60
Le Flore....................................... OK 40079 3.60
Lincoln........................................ OK 40081 3.30
Logan.......................................... OK 40083 3.30
Love........................................... OK 40085 3.30
Major.......................................... OK 40093 2.60
Marshall....................................... OK 40095 3.60
Mayes.......................................... OK 40097 3.20
McClain........................................ OK 40087 3.30
McCurtain...................................... OK 40089 3.60
McIntosh....................................... OK 40091 3.30
Murray......................................... OK 40099 3.30
Muskogee....................................... OK 40101 3.30
Noble.......................................... OK 40103 3.20
Nowata......................................... OK 40105 3.20
Okfuskee....................................... OK 40107 3.30
Oklahoma....................................... OK 40109 3.30
Okmulgee....................................... OK 40111 3.30
Osage.......................................... OK 40113 3.20
Ottawa......................................... OK 40115 3.20
Pawnee......................................... OK 40117 3.20
Payne.......................................... OK 40119 3.30
Pittsburg...................................... OK 40121 3.60
Pontotoc....................................... OK 40123 3.30
Pottawatomie................................... OK 40125 3.30
Pushmataha..................................... OK 40127 3.60
Roger Mills.................................... OK 40129 2.60
Rogers......................................... OK 40131 3.20
Seminole....................................... OK 40133 3.30
Sequoyah....................................... OK 40135 3.30
Stephens....................................... OK 40137 3.30
Texas.......................................... OK 40139 2.50
Tillman........................................ OK 40141 2.90
Tulsa.......................................... OK 40143 3.30
Wagoner........................................ OK 40145 3.30
Washington..................................... OK 40147 3.20
Washita........................................ OK 40149 2.60
Woods.......................................... OK 40151 2.60
[[Page 57671]]
Woodward....................................... OK 40153 2.60
Baker.......................................... OR 41001 2.20
Benton......................................... OR 41003 2.20
Clackamas...................................... OR 41005 2.70
Clatsop........................................ OR 41007 2.20
Columbia....................................... OR 41009 2.20
Coos........................................... OR 41011 2.20
Crook.......................................... OR 41013 2.20
Curry.......................................... OR 41015 2.20
Deschutes...................................... OR 41017 2.20
Douglas........................................ OR 41019 2.20
Gilliam........................................ OR 41021 2.20
Grant.......................................... OR 41023 2.20
Harney......................................... OR 41025 2.20
Hood River..................................... OR 41027 2.20
Jackson........................................ OR 41029 2.20
Jefferson...................................... OR 41031 2.20
Josephine...................................... OR 41033 2.20
Klamath........................................ OR 41035 2.20
Lake........................................... OR 41037 2.20
Lane........................................... OR 41039 2.20
Lincoln........................................ OR 41041 2.20
Linn........................................... OR 41043 2.20
Malheur........................................ OR 41045 1.80
Marion......................................... OR 41047 2.20
Morrow......................................... OR 41049 2.20
Multnomah...................................... OR 41051 2.70
Polk........................................... OR 41053 2.20
Sherman........................................ OR 41055 2.20
Tillamook...................................... OR 41057 2.20
Umatilla....................................... OR 41059 2.20
Union.......................................... OR 41061 2.20
Wallowa........................................ OR 41063 2.20
Wasco.......................................... OR 41065 2.20
Washington..................................... OR 41067 2.20
Wheeler........................................ OR 41069 2.20
Yamhill........................................ OR 41071 2.20
Adams.......................................... PA 42001 4.30
Allegheny...................................... PA 42003 4.00
Armstrong...................................... PA 42005 4.00
Beaver......................................... PA 42007 4.00
Bedford........................................ PA 42009 4.10
Berks.......................................... PA 42011 4.30
Blair.......................................... PA 42013 4.00
Bradford....................................... PA 42015 4.00
Bucks.......................................... PA 42017 4.50
Butler......................................... PA 42019 4.00
Cambria........................................ PA 42021 4.00
Cameron........................................ PA 42023 4.00
Carbon......................................... PA 42025 4.30
Centre......................................... PA 42027 4.00
Chester........................................ PA 42029 4.30
Clarion........................................ PA 42031 4.00
Clearfield..................................... PA 42033 4.00
Clinton........................................ PA 42035 4.00
Columbia....................................... PA 42037 4.10
Crawford....................................... PA 42039 4.00
Cumberland..................................... PA 42041 4.20
Dauphin........................................ PA 42043 4.20
Delaware....................................... PA 42045 4.40
Elk............................................ PA 42047 4.00
Erie........................................... PA 42049 3.90
Fayette........................................ PA 42051 4.00
Forest......................................... PA 42053 4.00
Franklin....................................... PA 42055 4.20
Fulton......................................... PA 42057 4.10
Greene......................................... PA 42059 4.00
Huntingdon..................................... PA 42061 4.10
Indiana........................................ PA 42063 4.00
Jefferson...................................... PA 42065 4.00
Juniata........................................ PA 42067 4.10
[[Page 57672]]
Lackawanna..................................... PA 42069 4.30
Lancaster...................................... PA 42071 4.30
Lawrence....................................... PA 42073 4.00
Lebanon........................................ PA 42075 4.20
Lehigh......................................... PA 42077 4.30
Luzerne........................................ PA 42079 4.20
Lycoming....................................... PA 42081 4.10
McKean......................................... PA 42083 3.90
Mercer......................................... PA 42085 4.00
Mifflin........................................ PA 42087 4.10
Monroe......................................... PA 42089 4.40
Montgomery..................................... PA 42091 4.40
Montour........................................ PA 42093 4.10
Northampton.................................... PA 42095 4.40
Northumberland................................. PA 42097 4.10
Perry.......................................... PA 42099 4.20
Philadelphia................................... PA 42101 4.60
Pike........................................... PA 42103 4.40
Potter......................................... PA 42105 3.90
Schuylkill..................................... PA 42107 4.20
Snyder......................................... PA 42109 4.10
Somerset....................................... PA 42111 4.10
Sullivan....................................... PA 42113 4.10
Susquehanna.................................... PA 42115 4.20
Tioga.......................................... PA 42117 4.00
Union.......................................... PA 42119 4.10
Venango........................................ PA 42121 4.00
Warren......................................... PA 42123 3.90
Washington..................................... PA 42125 4.00
Wayne.......................................... PA 42127 4.30
Westmoreland................................... PA 42129 4.00
Wyoming........................................ PA 42131 4.20
York........................................... PA 42133 4.30
Bristol........................................ RI 44001 5.10
Kent........................................... RI 44003 5.10
Newport........................................ RI 44005 5.10
Providence..................................... RI 44007 5.10
Washington..................................... RI 44009 5.10
Abbeville...................................... SC 45001 5.80
Aiken.......................................... SC 45003 6.00
Allendale...................................... SC 45005 6.00
Anderson....................................... SC 45007 5.60
Bamberg........................................ SC 45009 6.00
Barnwell....................................... SC 45011 6.00
Beaufort....................................... SC 45013 6.00
Berkeley....................................... SC 45015 6.00
Calhoun........................................ SC 45017 6.00
Charleston..................................... SC 45019 6.00
Cherokee....................................... SC 45021 5.60
Chester........................................ SC 45023 5.80
Chesterfield................................... SC 45025 5.80
Clarendon...................................... SC 45027 6.00
Colleton....................................... SC 45029 6.00
Darlington..................................... SC 45031 6.00
Dillon......................................... SC 45033 6.00
Dorchester..................................... SC 45035 6.00
Edgefield...................................... SC 45037 5.80
Fairfield...................................... SC 45039 5.80
Florence....................................... SC 45041 6.00
Georgetown..................................... SC 45043 6.00
Greenville..................................... SC 45045 5.60
Greenwood...................................... SC 45047 5.80
Hampton........................................ SC 45049 6.00
Horry.......................................... SC 45051 6.00
Jasper......................................... SC 45053 6.00
Kershaw........................................ SC 45055 6.00
Lancaster...................................... SC 45057 5.80
Laurens........................................ SC 45059 5.80
Lee............................................ SC 45061 6.00
Lexington...................................... SC 45063 6.00
Marion......................................... SC 45067 6.00
[[Page 57673]]
Marlboro....................................... SC 45069 5.80
McCormick...................................... SC 45065 5.80
Newberry....................................... SC 45071 5.80
Oconee......................................... SC 45073 5.60
Orangeburg..................................... SC 45075 6.00
Pickens........................................ SC 45077 5.60
Richland....................................... SC 45079 6.00
Saluda......................................... SC 45081 5.80
Spartanburg.................................... SC 45083 5.60
Sumter......................................... SC 45085 6.00
Union.......................................... SC 45087 5.80
Williamsburg................................... SC 45089 6.00
York........................................... SC 45091 5.60
Aurora......................................... SD 46003 2.60
Beadle......................................... SD 46005 2.60
Bennett........................................ SD 46007 2.40
Bon Homme...................................... SD 46009 2.60
Brookings...................................... SD 46011 2.60
Brown.......................................... SD 46013 2.60
Brule.......................................... SD 46015 2.50
Buffalo........................................ SD 46017 2.50
Butte.......................................... SD 46019 2.40
Campbell....................................... SD 46021 2.50
Charles Mix.................................... SD 46023 2.50
Clark.......................................... SD 46025 2.60
Clay........................................... SD 46027 2.60
Codington...................................... SD 46029 2.60
Corson......................................... SD 46031 2.40
Custer......................................... SD 46033 2.40
Davison........................................ SD 46035 2.60
Day............................................ SD 46037 2.60
Deuel.......................................... SD 46039 2.60
Dewey.......................................... SD 46041 2.40
Douglas........................................ SD 46043 2.60
Edmunds........................................ SD 46045 2.50
Fall River..................................... SD 46047 2.40
Faulk.......................................... SD 46049 2.50
Grant.......................................... SD 46051 2.60
Gregory........................................ SD 46053 2.50
Haakon......................................... SD 46055 2.40
Hamlin......................................... SD 46057 2.60
Hand........................................... SD 46059 2.50
Hanson......................................... SD 46061 2.60
Harding........................................ SD 46063 2.40
Hughes......................................... SD 46065 2.50
Hutchinson..................................... SD 46067 2.60
Hyde........................................... SD 46069 2.50
Jackson........................................ SD 46071 2.40
Jerauld........................................ SD 46073 2.60
Jones.......................................... SD 46075 2.40
Kingsbury...................................... SD 46077 2.60
Lake........................................... SD 46079 2.60
Lawrence....................................... SD 46081 2.40
Lincoln........................................ SD 46083 2.60
Lyman.......................................... SD 46085 2.50
Marshall....................................... SD 46091 2.60
McCook......................................... SD 46087 2.60
McPherson...................................... SD 46089 2.50
Meade.......................................... SD 46093 2.40
Mellette....................................... SD 46095 2.40
Miner.......................................... SD 46097 2.60
Minnehaha...................................... SD 46099 2.60
Moody.......................................... SD 46101 2.60
Oglala Lakota.................................. SD 46102 2.40
Pennington..................................... SD 46103 2.40
Perkins........................................ SD 46105 2.40
Potter......................................... SD 46107 2.50
Roberts........................................ SD 46109 2.60
Sanborn........................................ SD 46111 2.60
Spink.......................................... SD 46115 2.60
Stanley........................................ SD 46117 2.40
[[Page 57674]]
Sully.......................................... SD 46119 2.50
Todd........................................... SD 46121 2.40
Tripp.......................................... SD 46123 2.50
Turner......................................... SD 46125 2.60
Union.......................................... SD 46127 2.60
Walworth....................................... SD 46129 2.50
Yankton........................................ SD 46135 2.60
Ziebach........................................ SD 46137 2.40
Anderson....................................... TN 47001 4.90
Bedford........................................ TN 47003 4.90
Benton......................................... TN 47005 4.60
Bledsoe........................................ TN 47007 4.90
Blount......................................... TN 47009 5.20
Bradley........................................ TN 47011 5.20
Campbell....................................... TN 47013 4.90
Cannon......................................... TN 47015 4.90
Carroll........................................ TN 47017 4.60
Carter......................................... TN 47019 5.20
Cheatham....................................... TN 47021 4.60
Chester........................................ TN 47023 4.60
Claiborne...................................... TN 47025 4.90
Clay........................................... TN 47027 4.60
Cocke.......................................... TN 47029 5.20
Coffee......................................... TN 47031 4.90
Crockett....................................... TN 47033 4.30
Cumberland..................................... TN 47035 4.90
Davidson....................................... TN 47037 4.60
Decatur........................................ TN 47039 4.60
DeKalb......................................... TN 47041 4.90
Dickson........................................ TN 47043 4.60
Dyer........................................... TN 47045 4.30
Fayette........................................ TN 47047 4.60
Fentress....................................... TN 47049 4.60
Franklin....................................... TN 47051 5.20
Gibson......................................... TN 47053 4.30
Giles.......................................... TN 47055 4.90
Grainger....................................... TN 47057 4.90
Greene......................................... TN 47059 5.20
Grundy......................................... TN 47061 4.90
Hamblen........................................ TN 47063 5.20
Hamilton....................................... TN 47065 5.20
Hancock........................................ TN 47067 4.90
Hardeman....................................... TN 47069 4.60
Hardin......................................... TN 47071 4.90
Hawkins........................................ TN 47073 5.20
Haywood........................................ TN 47075 4.60
Henderson...................................... TN 47077 4.60
Henry.......................................... TN 47079 4.30
Hickman........................................ TN 47081 4.60
Houston........................................ TN 47083 4.60
Humphreys...................................... TN 47085 4.60
Jackson........................................ TN 47087 4.60
Jefferson...................................... TN 47089 5.20
Johnson........................................ TN 47091 5.20
Knox........................................... TN 47093 4.90
Lake........................................... TN 47095 4.30
Lauderdale..................................... TN 47097 4.30
Lawrence....................................... TN 47099 4.90
Lewis.......................................... TN 47101 4.90
Lincoln........................................ TN 47103 5.20
Loudon......................................... TN 47105 5.20
Macon.......................................... TN 47111 4.60
Madison........................................ TN 47113 4.60
Marion......................................... TN 47115 5.20
Marshall....................................... TN 47117 4.90
Maury.......................................... TN 47119 4.90
McMinn......................................... TN 47107 5.20
McNairy........................................ TN 47109 4.90
Meigs.......................................... TN 47121 5.20
Monroe......................................... TN 47123 5.20
Montgomery..................................... TN 47125 4.30
[[Page 57675]]
Moore.......................................... TN 47127 4.90
Morgan......................................... TN 47129 4.90
Obion.......................................... TN 47131 4.30
Overton........................................ TN 47133 4.60
Perry.......................................... TN 47135 4.60
Pickett........................................ TN 47137 4.60
Polk........................................... TN 47139 5.40
Putnam......................................... TN 47141 4.60
Rhea........................................... TN 47143 4.90
Roane.......................................... TN 47145 4.90
Robertson...................................... TN 47147 4.60
Rutherford..................................... TN 47149 4.60
Scott.......................................... TN 47151 4.90
Sequatchie..................................... TN 47153 5.20
Sevier......................................... TN 47155 5.20
Shelby......................................... TN 47157 4.60
Smith.......................................... TN 47159 4.60
Stewart........................................ TN 47161 4.30
Sullivan....................................... TN 47163 5.20
Sumner......................................... TN 47165 4.60
Tipton......................................... TN 47167 4.60
Trousdale...................................... TN 47169 4.60
Unicoi......................................... TN 47171 5.40
Union.......................................... TN 47173 4.90
Van Buren...................................... TN 47175 4.90
Warren......................................... TN 47177 4.90
Washington..................................... TN 47179 5.20
Wayne.......................................... TN 47181 4.90
Weakley........................................ TN 47183 4.30
White.......................................... TN 47185 4.90
Williamson..................................... TN 47187 4.60
Wilson......................................... TN 47189 4.60
Anderson....................................... TX 48001 4.00
Andrews........................................ TX 48003 2.90
Angelina....................................... TX 48005 4.60
Aransas........................................ TX 48007 4.60
Archer......................................... TX 48009 3.30
Armstrong...................................... TX 48011 2.50
Atascosa....................................... TX 48013 4.30
Austin......................................... TX 48015 4.30
Bailey......................................... TX 48017 2.50
Bandera........................................ TX 48019 4.00
Bastrop........................................ TX 48021 4.30
Baylor......................................... TX 48023 2.90
Bee............................................ TX 48025 4.60
Bell........................................... TX 48027 4.00
Bexar.......................................... TX 48029 4.30
Blanco......................................... TX 48031 4.00
Borden......................................... TX 48033 2.90
Bosque......................................... TX 48035 3.60
Bowie.......................................... TX 48037 4.00
Brazoria....................................... TX 48039 4.80
Brazos......................................... TX 48041 4.30
Brewster....................................... TX 48043 3.30
Briscoe........................................ TX 48045 2.50
Brooks......................................... TX 48047 4.60
Brown.......................................... TX 48049 3.60
Burleson....................................... TX 48051 4.30
Burnet......................................... TX 48053 4.00
Caldwell....................................... TX 48055 4.30
Calhoun........................................ TX 48057 4.60
Callahan....................................... TX 48059 3.30
Cameron........................................ TX 48061 4.60
Camp........................................... TX 48063 3.70
Carson......................................... TX 48065 2.50
Cass........................................... TX 48067 4.00
Castro......................................... TX 48069 2.50
Chambers....................................... TX 48071 4.80
Cherokee....................................... TX 48073 4.00
Childress...................................... TX 48075 2.60
Clay........................................... TX 48077 3.30
[[Page 57676]]
Cochran........................................ TX 48079 2.50
Coke........................................... TX 48081 3.30
Coleman........................................ TX 48083 3.60
Collin......................................... TX 48085 3.70
Collingsworth.................................. TX 48087 2.60
Colorado....................................... TX 48089 4.30
Comal.......................................... TX 48091 4.00
Comanche....................................... TX 48093 3.60
Concho......................................... TX 48095 3.60
Cooke.......................................... TX 48097 3.30
Coryell........................................ TX 48099 4.00
Cottle......................................... TX 48101 2.60
Crane.......................................... TX 48103 2.90
Crockett....................................... TX 48105 3.30
Crosby......................................... TX 48107 2.60
Culberson...................................... TX 48109 2.90
Dallam......................................... TX 48111 2.50
Dallas......................................... TX 48113 3.70
Dawson......................................... TX 48115 2.90
Deaf Smith..................................... TX 48117 2.50
Delta.......................................... TX 48119 3.70
Denton......................................... TX 48121 3.70
DeWitt......................................... TX 48123 4.30
Dickens........................................ TX 48125 2.60
Dimmit......................................... TX 48127 4.00
Donley......................................... TX 48129 2.50
Duval.......................................... TX 48131 4.60
Eastland....................................... TX 48133 3.60
Ector.......................................... TX 48135 2.90
Edwards........................................ TX 48137 3.60
El Paso........................................ TX 48141 2.70
Ellis.......................................... TX 48139 3.70
Erath.......................................... TX 48143 3.60
Falls.......................................... TX 48145 4.00
Fannin......................................... TX 48147 3.70
Fayette........................................ TX 48149 4.30
Fisher......................................... TX 48151 2.90
Floyd.......................................... TX 48153 2.60
Foard.......................................... TX 48155 2.90
Fort Bend...................................... TX 48157 4.60
Franklin....................................... TX 48159 3.70
Freestone...................................... TX 48161 4.00
Frio........................................... TX 48163 4.30
Gaines......................................... TX 48165 2.60
Galveston...................................... TX 48167 4.80
Garza.......................................... TX 48169 2.90
Gillespie...................................... TX 48171 4.00
Glasscock...................................... TX 48173 3.30
Goliad......................................... TX 48175 4.60
Gonzales....................................... TX 48177 4.30
Gray........................................... TX 48179 2.50
Grayson........................................ TX 48181 3.70
Gregg.......................................... TX 48183 4.00
Grimes......................................... TX 48185 4.60
Guadalupe...................................... TX 48187 4.30
Hale........................................... TX 48189 2.50
Hall........................................... TX 48191 2.50
Hamilton....................................... TX 48193 3.60
Hansford....................................... TX 48195 2.50
Hardeman....................................... TX 48197 2.90
Hardin......................................... TX 48199 4.80
Harris......................................... TX 48201 4.80
Harrison....................................... TX 48203 4.00
Hartley........................................ TX 48205 2.50
Haskell........................................ TX 48207 2.90
Hays........................................... TX 48209 4.00
Hemphill....................................... TX 48211 2.60
Henderson...................................... TX 48213 3.70
Hidalgo........................................ TX 48215 4.60
Hill........................................... TX 48217 3.70
Hockley........................................ TX 48219 2.60
[[Page 57677]]
Hood........................................... TX 48221 3.70
Hopkins........................................ TX 48223 3.70
Houston........................................ TX 48225 4.00
Howard......................................... TX 48227 2.90
Hudspeth....................................... TX 48229 2.70
Hunt........................................... TX 48231 3.70
Hutchinson..................................... TX 48233 2.50
Irion.......................................... TX 48235 3.30
Jack........................................... TX 48237 3.30
Jackson........................................ TX 48239 4.60
Jasper......................................... TX 48241 4.80
Jeff Davis..................................... TX 48243 2.90
Jefferson...................................... TX 48245 4.80
Jim Hogg....................................... TX 48247 4.60
Jim Wells...................................... TX 48249 4.60
Johnson........................................ TX 48251 3.70
Jones.......................................... TX 48253 3.30
Karnes......................................... TX 48255 4.30
Kaufman........................................ TX 48257 3.70
Kendall........................................ TX 48259 4.00
Kenedy......................................... TX 48261 4.60
Kent........................................... TX 48263 2.90
Kerr........................................... TX 48265 4.00
Kimble......................................... TX 48267 3.60
King........................................... TX 48269 2.90
Kinney......................................... TX 48271 4.00
Kleberg........................................ TX 48273 4.60
Knox........................................... TX 48275 2.90
La Salle....................................... TX 48283 4.30
Lamar.......................................... TX 48277 3.70
Lamb........................................... TX 48279 2.50
Lampasas....................................... TX 48281 4.00
Lavaca......................................... TX 48285 4.30
Lee............................................ TX 48287 4.30
Leon........................................... TX 48289 4.00
Liberty........................................ TX 48291 4.80
Limestone...................................... TX 48293 4.00
Lipscomb....................................... TX 48295 2.60
Live Oak....................................... TX 48297 4.30
Llano.......................................... TX 48299 4.00
Loving......................................... TX 48301 2.90
Lubbock........................................ TX 48303 2.60
Lynn........................................... TX 48305 2.90
Madison........................................ TX 48313 4.00
Marion......................................... TX 48315 4.00
Martin......................................... TX 48317 2.90
Mason.......................................... TX 48319 3.60
Matagorda...................................... TX 48321 4.80
Maverick....................................... TX 48323 4.00
McCulloch...................................... TX 48307 3.60
McLennan....................................... TX 48309 4.00
McMullen....................................... TX 48311 4.30
Medina......................................... TX 48325 4.00
Menard......................................... TX 48327 3.60
Midland........................................ TX 48329 2.90
Milam.......................................... TX 48331 4.00
Mills.......................................... TX 48333 3.60
Mitchell....................................... TX 48335 3.30
Montague....................................... TX 48337 3.30
Montgomery..................................... TX 48339 4.80
Moore.......................................... TX 48341 2.50
Morris......................................... TX 48343 3.70
Motley......................................... TX 48345 2.60
Nacogdoches.................................... TX 48347 4.00
Navarro........................................ TX 48349 3.70
Newton......................................... TX 48351 4.80
Nolan.......................................... TX 48353 3.30
Nueces......................................... TX 48355 4.60
Ochiltree...................................... TX 48357 2.50
Oldham......................................... TX 48359 2.50
Orange......................................... TX 48361 4.80
[[Page 57678]]
Palo Pinto..................................... TX 48363 3.30
Panola......................................... TX 48365 4.00
Parker......................................... TX 48367 3.70
Parmer......................................... TX 48369 2.50
Pecos.......................................... TX 48371 3.30
Polk........................................... TX 48373 4.60
Potter......................................... TX 48375 2.50
Presidio....................................... TX 48377 2.90
Rains.......................................... TX 48379 3.70
Randall........................................ TX 48381 2.50
Reagan......................................... TX 48383 3.30
Real........................................... TX 48385 4.00
Red River...................................... TX 48387 3.70
Reeves......................................... TX 48389 2.90
Refugio........................................ TX 48391 4.60
Roberts........................................ TX 48393 2.50
Robertson...................................... TX 48395 4.00
Rockwall....................................... TX 48397 3.70
Runnels........................................ TX 48399 3.30
Rusk........................................... TX 48401 4.00
Sabine......................................... TX 48403 4.60
San Augustine.................................. TX 48405 4.60
San Jacinto.................................... TX 48407 4.60
San Patricio................................... TX 48409 4.60
San Saba....................................... TX 48411 3.60
Schleicher..................................... TX 48413 3.60
Scurry......................................... TX 48415 2.90
Shackelford.................................... TX 48417 3.30
Shelby......................................... TX 48419 4.60
Sherman........................................ TX 48421 2.50
Smith.......................................... TX 48423 3.70
Somervell...................................... TX 48425 3.70
Starr.......................................... TX 48427 4.60
Stephens....................................... TX 48429 3.30
Sterling....................................... TX 48431 3.30
Stonewall...................................... TX 48433 2.90
Sutton......................................... TX 48435 3.60
Swisher........................................ TX 48437 2.50
Tarrant........................................ TX 48439 3.70
Taylor......................................... TX 48441 3.30
Terrell........................................ TX 48443 3.30
Terry.......................................... TX 48445 2.60
Throckmorton................................... TX 48447 3.30
Titus.......................................... TX 48449 3.70
Tom Green...................................... TX 48451 3.30
Travis......................................... TX 48453 4.00
Trinity........................................ TX 48455 4.60
Tyler.......................................... TX 48457 4.80
Upshur......................................... TX 48459 3.70
Upton.......................................... TX 48461 3.30
Uvalde......................................... TX 48463 4.00
Val Verde...................................... TX 48465 3.60
Van Zandt...................................... TX 48467 3.70
Victoria....................................... TX 48469 4.60
Walker......................................... TX 48471 4.60
Waller......................................... TX 48473 4.60
Ward........................................... TX 48475 2.90
Washington..................................... TX 48477 4.30
Webb........................................... TX 48479 4.30
Wharton........................................ TX 48481 4.60
Wheeler........................................ TX 48483 2.60
Wichita........................................ TX 48485 2.90
Wilbarger...................................... TX 48487 2.90
Willacy........................................ TX 48489 4.60
Williamson..................................... TX 48491 4.00
Wilson......................................... TX 48493 4.30
Winkler........................................ TX 48495 2.90
Wise........................................... TX 48497 3.30
Wood........................................... TX 48499 3.70
Yoakum......................................... TX 48501 2.60
Young.......................................... TX 48503 3.30
[[Page 57679]]
Zapata......................................... TX 48505 4.30
Zavala......................................... TX 48507 4.00
Beaver......................................... UT 49001 2.40
Box Elder...................................... UT 49003 2.00
Cache.......................................... UT 49005 2.20
Carbon......................................... UT 49007 2.20
Daggett........................................ UT 49009 2.30
Davis.......................................... UT 49011 2.20
Duchesne....................................... UT 49013 2.20
Emery.......................................... UT 49015 2.30
Garfield....................................... UT 49017 2.30
Grand.......................................... UT 49019 2.30
Iron........................................... UT 49021 2.40
Juab........................................... UT 49023 2.20
Kane........................................... UT 49025 2.40
Millard........................................ UT 49027 2.30
Morgan......................................... UT 49029 2.20
Piute.......................................... UT 49031 2.30
Rich........................................... UT 49033 2.20
Salt Lake...................................... UT 49035 2.20
San Juan....................................... UT 49037 2.30
Sanpete........................................ UT 49039 2.20
Sevier......................................... UT 49041 2.30
Summit......................................... UT 49043 2.20
Tooele......................................... UT 49045 2.20
Uintah......................................... UT 49047 2.30
Utah........................................... UT 49049 2.20
Wasatch........................................ UT 49051 2.20
Washington..................................... UT 49053 2.50
Wayne.......................................... UT 49055 2.30
Weber.......................................... UT 49057 2.20
Accomack....................................... VA 51001 4.80
Albemarle...................................... VA 51003 4.50
Alexandria City................................ VA 51510 4.50
Alleghany...................................... VA 51005 4.50
Amelia......................................... VA 51007 4.80
Amherst........................................ VA 51009 4.50
Appomattox..................................... VA 51011 4.80
Arlington...................................... VA 51013 4.60
Augusta........................................ VA 51015 4.30
Bath........................................... VA 51017 4.50
Bedford........................................ VA 51019 4.80
Bland.......................................... VA 51021 4.80
Botetourt...................................... VA 51023 4.80
Bristol City................................... VA 51520 5.20
Brunswick...................................... VA 51025 5.20
Buchanan....................................... VA 51027 4.80
Buckingham..................................... VA 51029 4.80
Buena Vista City............................... VA 51530 4.50
Campbell....................................... VA 51031 4.80
Caroline....................................... VA 51033 4.80
Carroll........................................ VA 51035 5.20
Charles City................................... VA 51036 5.20
Charlotte...................................... VA 51037 4.80
Charlottesville................................ VA 51540 4.50
Chesapeake City................................ VA 51550 5.20
Chesterfield................................... VA 51041 4.80
Clarke......................................... VA 51043 4.30
Colonial Heights............................... VA 51570 4.80
Covington...................................... VA 51580 4.50
Craig.......................................... VA 51045 4.80
Culpeper....................................... VA 51047 4.50
Cumberland..................................... VA 51049 4.80
Danville City.................................. VA 51590 5.20
Dickenson...................................... VA 51051 4.80
Dinwiddie...................................... VA 51053 5.20
Emporia........................................ VA 51595 5.20
Essex.......................................... VA 51057 4.80
Fairfax........................................ VA 51059 4.60
Fairfax City................................... VA 51600 4.50
Falls Church City.............................. VA 51610 4.50
[[Page 57680]]
Fauquier....................................... VA 51061 4.50
Floyd.......................................... VA 51063 5.20
Fluvanna....................................... VA 51065 4.50
Franklin City.................................. VA 51620 5.20
Franklin County................................ VA 51067 4.80
Frederick...................................... VA 51069 4.30
Fredericksburg City............................ VA 51630 4.50
Galax City..................................... VA 51640 5.20
Giles.......................................... VA 51071 4.80
Gloucester..................................... VA 51073 5.20
Goochland...................................... VA 51075 4.80
Grayson........................................ VA 51077 5.20
Greene......................................... VA 51079 4.50
Greensville.................................... VA 51081 5.20
Halifax........................................ VA 51083 5.20
Hampton City................................... VA 51650 5.20
Hanover........................................ VA 51085 4.80
Harrisonburg................................... VA 51660 4.30
Henrico........................................ VA 51087 4.80
Henry.......................................... VA 51089 5.20
Highland....................................... VA 51091 4.30
Hopewell....................................... VA 51670 5.20
Isle of Wight.................................. VA 51093 5.20
James City..................................... VA 51095 5.20
King and Queen................................. VA 51097 4.80
King George.................................... VA 51099 4.80
King William................................... VA 51101 4.80
Lancaster...................................... VA 51103 5.20
Lee............................................ VA 51105 4.80
Lexington...................................... VA 51678 4.50
Loudoun........................................ VA 51107 4.40
Louisa......................................... VA 51109 4.50
Lunenburg...................................... VA 51111 5.20
Lynchburg City................................. VA 51680 4.80
Madison........................................ VA 51113 4.50
Manassas....................................... VA 51683 4.50
Manassas Park.................................. VA 51685 4.50
Martinsville City.............................. VA 51690 5.20
Mathews........................................ VA 51115 5.20
Mecklenburg.................................... VA 51117 5.20
Middlesex...................................... VA 51119 5.20
Montgomery..................................... VA 51121 4.80
Nelson......................................... VA 51125 4.50
New Kent....................................... VA 51127 5.20
Newport News City.............................. VA 51700 5.20
Norfolk City................................... VA 51710 5.20
Northampton.................................... VA 51131 4.80
Northumberland................................. VA 51133 4.80
Norton City.................................... VA 51720 4.80
Nottoway....................................... VA 51135 4.80
Orange......................................... VA 51137 4.50
Page........................................... VA 51139 4.30
Patrick........................................ VA 51141 5.20
Petersburg City................................ VA 51730 5.20
Pittsylvania................................... VA 51143 5.20
Poquoson City.................................. VA 51735 5.20
Portsmouth City................................ VA 51740 5.20
Powhatan....................................... VA 51145 4.80
Prince Edward.................................. VA 51147 4.80
Prince George.................................. VA 51149 5.20
Prince William................................. VA 51153 4.50
Pulaski........................................ VA 51155 4.80
Radford City................................... VA 51750 4.80
Rappahannock................................... VA 51157 4.50
Richmond City.................................. VA 51760 4.80
Richmond County................................ VA 51159 4.80
Roanoke........................................ VA 51161 4.80
Roanoke City................................... VA 51770 4.80
Rockbridge..................................... VA 51163 4.50
Rockingham..................................... VA 51165 4.30
Russell........................................ VA 51167 4.80
[[Page 57681]]
Salem City..................................... VA 51775 4.80
Scott.......................................... VA 51169 4.80
Shenandoah..................................... VA 51171 4.30
Smyth.......................................... VA 51173 5.20
Southampton.................................... VA 51175 5.20
Spotsylvania................................... VA 51177 4.50
Stafford....................................... VA 51179 4.50
Staunton....................................... VA 51790 4.30
Suffolk City................................... VA 51800 5.20
Surry.......................................... VA 51181 5.20
Sussex......................................... VA 51183 5.20
Tazewell....................................... VA 51185 4.80
Virginia Beach City............................ VA 51810 5.20
Warren......................................... VA 51187 4.30
Washington..................................... VA 51191 5.20
Waynesboro..................................... VA 51820 4.30
Westmoreland................................... VA 51193 4.80
Williamsburg................................... VA 51830 5.20
Winchester City................................ VA 51840 4.30
Wise........................................... VA 51195 4.80
Wythe.......................................... VA 51197 5.20
York........................................... VA 51199 5.20
Addison........................................ VT 50001 4.30
Bennington..................................... VT 50003 4.50
Caledonia...................................... VT 50005 4.30
Chittenden..................................... VT 50007 4.30
Essex.......................................... VT 50009 4.20
Franklin....................................... VT 50011 4.20
Grand Isle..................................... VT 50013 4.20
Lamoille....................................... VT 50015 4.30
Orange......................................... VT 50017 4.30
Orleans........................................ VT 50019 4.20
Rutland........................................ VT 50021 4.30
Washington..................................... VT 50023 4.30
Windham........................................ VT 50025 4.50
Windsor........................................ VT 50027 4.50
Adams.......................................... WA 53001 2.20
Asotin......................................... WA 53003 2.20
Benton......................................... WA 53005 2.20
Chelan......................................... WA 53007 2.40
Clallam........................................ WA 53009 2.40
Clark.......................................... WA 53011 2.70
Columbia....................................... WA 53013 2.20
Cowlitz........................................ WA 53015 2.40
Douglas........................................ WA 53017 2.40
Ferry.......................................... WA 53019 2.40
Franklin....................................... WA 53021 2.20
Garfield....................................... WA 53023 2.20
Grant.......................................... WA 53025 2.20
Grays Harbor................................... WA 53027 2.40
Island......................................... WA 53029 2.40
Jefferson...................................... WA 53031 2.40
King........................................... WA 53033 2.70
Kitsap......................................... WA 53035 2.40
Kittitas....................................... WA 53037 2.40
Klickitat...................................... WA 53039 2.20
Lewis.......................................... WA 53041 2.40
Lincoln........................................ WA 53043 2.40
Mason.......................................... WA 53045 2.40
Okanogan....................................... WA 53047 2.40
Pacific........................................ WA 53049 2.40
Pend Oreille................................... WA 53051 2.40
Pierce......................................... WA 53053 2.40
San Juan....................................... WA 53055 2.40
Skagit......................................... WA 53057 2.40
Skamania....................................... WA 53059 2.40
Snohomish...................................... WA 53061 2.40
Spokane........................................ WA 53063 2.40
Stevens........................................ WA 53065 2.40
Thurston....................................... WA 53067 2.40
Wahkiakum...................................... WA 53069 2.40
[[Page 57682]]
Walla Walla.................................... WA 53071 2.20
Whatcom........................................ WA 53073 2.40
Whitman........................................ WA 53075 2.20
Yakima......................................... WA 53077 2.20
Adams.......................................... WI 55001 2.90
Ashland........................................ WI 55003 2.80
Barron......................................... WI 55005 2.80
Bayfield....................................... WI 55007 2.80
Brown.......................................... WI 55009 2.90
Buffalo........................................ WI 55011 2.80
Burnett........................................ WI 55013 2.80
Calumet........................................ WI 55015 2.90
Chippewa....................................... WI 55017 2.80
Clark.......................................... WI 55019 2.80
Columbia....................................... WI 55021 2.90
Crawford....................................... WI 55023 2.90
Dane........................................... WI 55025 2.90
Dodge.......................................... WI 55027 2.90
Door........................................... WI 55029 2.90
Douglas........................................ WI 55031 2.80
Dunn........................................... WI 55033 2.80
Eau Claire..................................... WI 55035 2.80
Florence....................................... WI 55037 2.80
Fond du Lac.................................... WI 55039 2.90
Forest......................................... WI 55041 2.80
Grant.......................................... WI 55043 2.90
Green.......................................... WI 55045 2.90
Green Lake..................................... WI 55047 2.90
Iowa........................................... WI 55049 2.90
Iron........................................... WI 55051 2.80
Jackson........................................ WI 55053 2.80
Jefferson...................................... WI 55055 2.90
Juneau......................................... WI 55057 2.90
Kenosha........................................ WI 55059 3.10
Kewaunee....................................... WI 55061 2.90
La Crosse...................................... WI 55063 2.90
Lafayette...................................... WI 55065 2.90
Langlade....................................... WI 55067 2.90
Lincoln........................................ WI 55069 2.80
Manitowoc...................................... WI 55071 2.90
Marathon....................................... WI 55073 2.90
Marinette...................................... WI 55075 2.90
Marquette...................................... WI 55077 2.90
Menominee...................................... WI 55078 2.90
Milwaukee...................................... WI 55079 3.10
Monroe......................................... WI 55081 2.90
Oconto......................................... WI 55083 2.90
Oneida......................................... WI 55085 2.80
Outagamie...................................... WI 55087 2.90
Ozaukee........................................ WI 55089 3.10
Pepin.......................................... WI 55091 2.80
Pierce......................................... WI 55093 2.80
Polk........................................... WI 55095 2.80
Portage........................................ WI 55097 2.90
Price.......................................... WI 55099 2.80
Racine......................................... WI 55101 3.10
Richland....................................... WI 55103 2.90
Rock........................................... WI 55105 2.90
Rusk........................................... WI 55107 2.80
Sauk........................................... WI 55111 2.90
Sawyer......................................... WI 55113 2.80
Shawano........................................ WI 55115 2.90
Sheboygan...................................... WI 55117 2.90
St. Croix...................................... WI 55109 2.80
Taylor......................................... WI 55119 2.80
Trempealeau.................................... WI 55121 2.80
Vernon......................................... WI 55123 2.90
Vilas.......................................... WI 55125 2.80
Walworth....................................... WI 55127 3.10
Washburn....................................... WI 55129 2.80
Washington..................................... WI 55131 2.90
[[Page 57683]]
Waukesha....................................... WI 55133 2.90
Waupaca........................................ WI 55135 2.90
Waushara....................................... WI 55137 2.90
Winnebago...................................... WI 55139 2.90
Wood........................................... WI 55141 2.90
Barbour........................................ WV 54001 4.30
Berkeley....................................... WV 54003 4.30
Boone.......................................... WV 54005 4.50
Braxton........................................ WV 54007 4.30
Brooke......................................... WV 54009 4.00
Cabell......................................... WV 54011 4.50
Calhoun........................................ WV 54013 4.30
Clay........................................... WV 54015 4.50
Doddridge...................................... WV 54017 4.30
Fayette........................................ WV 54019 4.50
Gilmer......................................... WV 54021 4.30
Grant.......................................... WV 54023 4.30
Greenbrier..................................... WV 54025 4.50
Hampshire...................................... WV 54027 4.30
Hancock........................................ WV 54029 4.00
Hardy.......................................... WV 54031 4.30
Harrison....................................... WV 54033 4.30
Jackson........................................ WV 54035 4.30
Jefferson...................................... WV 54037 4.30
Kanawha........................................ WV 54039 4.50
Lewis.......................................... WV 54041 4.30
Lincoln........................................ WV 54043 4.50
Logan.......................................... WV 54045 4.50
Marion......................................... WV 54049 4.00
Marshall....................................... WV 54051 4.00
Mason.......................................... WV 54053 4.30
McDowell....................................... WV 54047 4.80
Mercer......................................... WV 54055 4.80
Mineral........................................ WV 54057 4.10
Mingo.......................................... WV 54059 4.50
Monongalia..................................... WV 54061 4.10
Monroe......................................... WV 54063 4.80
Morgan......................................... WV 54065 4.30
Nicholas....................................... WV 54067 4.50
Ohio........................................... WV 54069 4.00
Pendleton...................................... WV 54071 4.30
Pleasants...................................... WV 54073 4.00
Pocahontas..................................... WV 54075 4.50
Preston........................................ WV 54077 4.10
Putnam......................................... WV 54079 4.50
Raleigh........................................ WV 54081 4.50
Randolph....................................... WV 54083 4.30
Ritchie........................................ WV 54085 4.30
Roane.......................................... WV 54087 4.30
Summers........................................ WV 54089 4.80
Taylor......................................... WV 54091 4.30
Tucker......................................... WV 54093 4.30
Tyler.......................................... WV 54095 4.00
Upshur......................................... WV 54097 4.30
Wayne.......................................... WV 54099 4.50
Webster........................................ WV 54101 4.50
Wetzel......................................... WV 54103 4.00
Wirt........................................... WV 54105 4.30
Wood........................................... WV 54107 4.00
Wyoming........................................ WV 54109 4.80
Albany......................................... WY 56001 2.40
Big Horn....................................... WY 56003 2.40
Campbell....................................... WY 56005 2.40
Carbon......................................... WY 56007 2.40
Converse....................................... WY 56009 2.40
Crook.......................................... WY 56011 2.40
Fremont........................................ WY 56013 2.40
Goshen......................................... WY 56015 2.40
Hot Springs.................................... WY 56017 2.40
Johnson........................................ WY 56019 2.40
Laramie........................................ WY 56021 2.50
[[Page 57684]]
Lincoln........................................ WY 56023 2.20
Natrona........................................ WY 56025 2.40
Niobrara....................................... WY 56027 2.40
Park........................................... WY 56029 2.20
Platte......................................... WY 56031 2.40
Sheridan....................................... WY 56033 2.40
Sublette....................................... WY 56035 2.20
Sweetwater..................................... WY 56037 2.40
Teton.......................................... WY 56039 2.20
Uinta.......................................... WY 56041 2.20
Washakie....................................... WY 56043 2.40
Weston......................................... WY 56045 2.40
----------------------------------------------------------------------------------------------------------------
0
5. Amend Sec. 1000.76 by removing the words ``and Sec. 1135.11 of
this chapter'' wherever they appear and by revising and republishing
paragraphs (a)(2) through (4) and paragraph (c) to read as follows:
Sec. 1000.76 Payments by a handler operating a partially regulated
distributing plant.
* * * * *
(a) * * *
(2) For orders with multiple component pricing, compute a Class I
differential price by subtracting Class III price from the current
month's applicable Class I price. Multiply the pounds remaining after
the computation in paragraph (a)(1)(iii) of this section by the amount
by which the Class I differential price exceeds the producer price
differential, both prices to be applicable at the location of the
partially regulated distributing plant except that neither the adjusted
Class I differential price nor the adjusted producer price differential
shall be less than zero;
(3) For orders with skim milk and butterfat pricing, multiply the
remaining pounds by the amount by which the applicable Class I price
exceeds the uniform price, both prices to be applicable at the location
of the partially regulated distributing plant except that neither the
adjusted Class I price nor the adjusted uniform price differential
shall be less than the lowest announced class price; and
(4) Unless the payment option described in paragraph (d) of this
section is selected, add the amount obtained from multiplying the
pounds of labeled reconstituted milk included in paragraph (a)(1)(iii)
of this section by any positive difference between the applicable Class
I price at the location of the partially regulated distributing plant
(less $1.00 if the reconstituted milk is labeled as such) and the Class
IV price.
* * * * *
(c) The operator of a partially regulated distributing plant that
is subject to marketwide pooling of returns under a milk classification
and pricing program that is imposed under the authority of a State
government shall pay on or before the 25th day after the end of the
month (except as provided in Sec. 1000.90) to the market administrator
for the producer-settlement fund an amount computed as follows: after
completing the computations described in paragraphs (a)(1)(i) and (ii)
of this section, determine the value of the remaining pounds of fluid
milk products disposed of as route disposition in the marketing area by
multiplying the hundredweight of such pounds by the amount, if greater
than zero, that remains after subtracting the State program's class
prices applicable to such products at the plant's location from the
applicable Federal order Class I price at the location of the plant.
* * * * *
PART 1001--MILK IN THE NORTHEAST MARKETING AREA
0
6. The authority citation for part 1001 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
7. Amend Sec. 1001.60 by:
0
a. Revising the introductory paragraph;
0
b. Redesignating paragraph (i) as paragraph (j); and
0
c. Adding new paragraph (i).
The revision and addition read as follows:
Sec. 1001.60 Handler's value of milk.
For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of the handler's pool
plants and of each handler described in Sec. 1000.9(c) of this chapter
with respect to milk that was not received at a pool plant by adding
the amounts computed in paragraphs (a) through (i) of this section and
subtracting from that total amount the value computed in paragraph (j)
of this section. Unless otherwise specified, the skim milk, butterfat,
and the combined pounds of skim milk and butterfat referred to in this
section shall result from the steps set forth in Sec. 1000.44(a), (b),
and (c) of this chapter, respectively, and the nonfat components of
producer milk in each class shall be based upon the proportion of such
components in producer skim milk. Receipts of nonfluid milk products
that are distributed as labeled reconstituted milk for which payments
are made to the producer-settlement fund of another Federal order under
Sec. 1000.76(a)(4) or (d) of this chapter shall be excluded from
pricing under this section.
* * * * *
(i) Compute an adjustment for eligible Class I producer milk
pursuant to Sec. 1000.43(e) of this chapter by multiplying the Class I
skim milk price adjuster computed in Sec. 1000.50(r) of this chapter
by the pounds of skim milk eligible in Class I.
* * * * *
PART 1005--MILK IN THE APPLACHIAN MARKETING AREA
0
8. The authority citation for part 1005 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
9. Amend Sec. 1005.51 by revising paragraph (a) and removing and
reserving paragraph (b) to read as follows:
Sec. 1005.51 Class I differential, adjustments to Class I prices, and
Class I price.
(a) The Class I differential shall be the differential established
for Mecklenburg County, North Carolina, which is reported in Sec.
1000.52 of this chapter. The Class I price shall be the price computed
pursuant to Sec. 1000.50(a) of
[[Page 57685]]
this chapter for Mecklenburg County, North Carolina.
(b) [Reserved]
0
10. Amend Sec. 1005.60 by:
0
a. Revising the introductory paragraph and paragraph (a);
0
b. Removing paragraph (g);
0
c. Redesignating paragraph (f) as paragraph (g); and
0
d. Adding new paragraph (f).
The revisions and addition read as follows:
Sec. 1005.60 Handler's value of milk.
For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of the handler's pool
plants and of each handler described in Sec. 1000.9(c) of this chapter
with respect to milk that was not received at a pool plant by adding
the amounts computed in paragraphs (a) through (f) of this section and
subtracting from that total amount the value computed in paragraph (g)
of this section. Receipts of nonfluid milk products that are
distributed as labeled reconstituted milk for which payments are made
to the producer-settlement fund of another Federal order under Sec.
1000.76(a)(4) or (d) of this chapter shall be excluded from pricing
under this section.
(a) Multiply the pounds of skim milk and butterfat in producer milk
that were classified in each class pursuant to Sec. 1000.44(c) of this
chapter by the applicable skim milk and butterfat prices, and add the
resulting amounts;
* * * * *
(f) Compute an adjustment for eligible Class I producer milk
pursuant to Sec. 1000.43(e) of this chapter by multiplying the Class I
skim milk price adjuster computed in Sec. 1000.50(r) of this chapter
by the pounds of skim milk eligible in Class I.
* * * * *
PART 1006--MILK IN THE FLORIDA MARKETING AREA
0
11. The authority citation for part 1006 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
12. Amend Sec. 1006.51 by revising paragraph (a), removing and
reserving paragraph (b), and removing paragraph (c) to read as follows:
Sec. 1006.51 Class I differential, adjustments to Class I prices, and
Class I price.
(a) The Class I differential shall be the differential established
for Hillsborough County, Florida, which is reported in Sec. 1000.52 of
this chapter. The Class I price shall be the price computed pursuant to
Sec. 1000.50(a) of this chapter for Hillsborough County, Florida.
(b) [Reserved]
0
13. Amend Sec. 1006.60 by:
0
a. Revising the introductory paragraph and paragraph (a);
0
b. Removing paragraphs (g) through (i);
0
c. Redesignating paragraph (f) as paragraph (g); and
0
d. Adding new paragraph (f).
The revisions and addition read as follows:
Sec. 1006.60 Handler's value of milk.
For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of the handler's pool
plants and of each handler described in Sec. 1000.9(c) of this chapter
with respect to milk that was not received at a pool plant by adding
the amounts computed in paragraphs (a) through (f) of this section and
subtracting from that total amount the value computed in paragraph (g)
of this section. Receipts of nonfluid milk products that are
distributed as labeled reconstituted milk for which payments are made
to the producer-settlement fund of another Federal order under Sec.
1000.76(a)(4) or (d) of this chapter shall be excluded from pricing
under this section.
(a) Multiply the pounds of skim milk and butterfat in producer milk
that were classified in each class pursuant to Sec. 1000.44(c) of this
chapter by the applicable skim milk and butterfat prices, and add the
resulting amounts;
* * * * *
(f) Compute an adjustment for eligible Class I producer milk
pursuant to Sec. 1000.43(e) of this chapter by multiplying the Class I
skim milk price adjuster computed in Sec. 1000.50(r) of this chapter
by the pounds of skim milk eligible in Class I.
* * * * *
PART 1007--MILK IN THE SOUTHEAST MARKETING AREA
0
14. The authority citation for part 1007 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
15. Amend Sec. 1007.51 by revising paragraph (a) and removing and
reserving paragraph (b) to read as follows:
Sec. 1007.51 Class I differential, adjustments to Class I prices, and
Class I price.
(a) The Class I differential shall be the differential established
for Fulton County, Georgia, which is reported in Sec. 1000.52 of this
chapter. The Class I price shall be the price computed pursuant to
Sec. 1000.50(a) of this chapter for Fulton County, Georgia.
(b) [Reserved]
0
16. Amend Sec. 1007.60 by:
0
a. Revising the introductory paragraph and paragraph (a);
0
b. Removing paragraph (g);
0
c. Redesignating paragraph (f) as paragraph (g); and
0
d. Adding new paragraph (f).
The revisions and addition read as follows:
Sec. 1007.60 Handler's value of milk.
For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of the handler's pool
plants and of each handler described in Sec. 1000.9(c) of this chapter
with respect to milk that was not received at a pool plant by adding
the amounts computed in paragraphs (a) through (f) of this section and
subtracting from that total amount the value computed in paragraph (g)
of this section. Receipts of nonfluid milk products that are
distributed as labeled reconstituted milk for which payments are made
to the producer-settlement fund of another Federal order under Sec.
1000.76(a)(4) or (d) of this chapter shall be excluded from pricing
under this section.
(a) Multiply the pounds of skim milk and butterfat in producer milk
that were classified in each class pursuant to Sec. 1000.44(c) of this
chapter by the applicable skim milk and butterfat prices, and add the
resulting amounts;
* * * * *
(f) Compute an adjustment for eligible Class I producer milk
pursuant to Sec. 1000.43(e) of this chapter by multiplying the Class I
skim milk price adjuster computed in Sec. 1000.50(r) of this chapter
by the pounds of skim milk eligible in Class I.
* * * * *
PART 1030--MILK IN THE UPPER MIDWEST MARKETING AREA
0
17. The authority citation for part 1030 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
18. Amend Sec. 1030.60 by:
0
a. Revising the introductory paragraph;
0
b. Redesignating paragraphs (j) and (k) as paragraphs (k) and (l); and
0
c. Adding new paragraph (j).
The revision and addition read as follows:
Sec. 1030.60 Handler's value of milk.
For the purpose of computing a handler's obligation for producer
milk,
[[Page 57686]]
the market administrator shall determine for each month the value of
milk of each handler with respect to each of the handler's pool plants
and of each handler described in Sec. 1000.9(c) of this chapter with
respect to milk that was not received at a pool plant by adding the
amounts computed in paragraphs (a) through (j) of this section and
subtracting from that total amount the values computed in paragraphs
(k) and (l) of this section. Unless otherwise specified, the skim milk,
butterfat, and the combined pounds of skim milk and butterfat referred
to in this section shall result from the steps set forth in Sec.
1000.44(a), (b), and (c) of this chapter, respectively, and the nonfat
components of producer milk in each class shall be based upon the
proportion of such components in producer skim milk. Receipts of
nonfluid milk products that are distributed as labeled reconstituted
milk for which payments are made to the producer-settlement fund of
another Federal order under Sec. 1000.76(a)(4) or (d) of this chapter
shall be excluded from pricing under this section.
* * * * *
(j) Compute an adjustment for eligible Class I producer milk
pursuant to Sec. 1000.43(e) of this chapter by multiplying the Class I
skim milk price adjuster computed in Sec. 1000.50(r) of this chapter
by the pounds of skim milk eligible in Class I.
* * * * *
PART 1032--MILK IN THE CENTRAL MARKETING AREA
0
19. The authority citation for part 1032 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
20. Amend Sec. 1032.60 by:
0
a. Revising the introductory paragraph;
0
b. Redesignating paragraph (j) as paragraph (k); and
0
c. Adding new paragraph (j).
The revision and addition read as follows:
Sec. 1032.60 Handler's value of milk.
For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of the handler's pool
plants and of each handler described in Sec. 1000.9(c) of this chapter
with respect to milk that was not received at a pool plant by adding
the amounts computed in paragraphs (a) through (j) of this section and
subtracting from that total amount the value computed in paragraph (k)
of this section. Unless otherwise specified, the skim milk, butterfat,
and the combined pounds of skim milk and butterfat referred to in this
section shall result from the steps set forth in Sec. 1000.44(a), (b),
and (c) of this chapter, respectively, and the nonfat components of
producer milk in each class shall be based upon the proportion of such
components in producer skim milk. Receipts of nonfluid milk products
that are distributed as labeled reconstituted milk for which payments
are made to the producer-settlement fund of another Federal order under
Sec. 1000.76(a)(4) or (d) of this chapter shall be excluded from
pricing under this section.
* * * * *
(j) Compute an adjustment for eligible Class I producer milk
pursuant to Sec. 1000.43(e) of this chapter by multiplying the Class I
skim milk price adjuster computed in Sec. 1000.50(r) of this chapter
by the pounds of skim milk eligible in Class I.
* * * * *
PART 1033--MILK IN THE MIDEAST MARKETING AREA
0
21. The authority citation for part 1033 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
22. Amend Sec. 1033.60 by:
0
a. Revising the introductory paragraph;
0
b. Redesignating paragraph (j) as paragraph (k); and
0
c. Adding new paragraph (j).
The revision and addition read as follows:
Sec. 1033.60 Handler's value of milk.
For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of the handler's pool
plants and of each handler described in Sec. 1000.9(c) of this chapter
with respect to milk that was not received at a pool plant by adding
the amounts computed in paragraphs (a) through (j) of this section and
subtracting from that total amount the value computed in paragraph (k)
of this section. Unless otherwise specified, the skim milk, butterfat,
and the combined pounds of skim milk and butterfat referred to in this
section shall result from the steps set forth in Sec. 1000.44(a), (b),
and (c) of this chapter, respectively, and the nonfat components of
producer milk in each class shall be based upon the proportion of such
components in producer skim milk. Receipts of nonfluid milk products
that are distributed as labeled reconstituted milk for which payments
are made to the producer-settlement fund of another Federal order under
Sec. 1000.76(a)(4) or (d) of this chapter shall be excluded from
pricing under this section.
* * * * *
(j) Compute an adjustment for eligible Class I producer milk
pursuant to Sec. 1000.43(e) of this chapter by multiplying the Class I
skim milk price adjuster computed in Sec. 1000.50(r) of this chapter
by the pounds of skim milk eligible in Class I.
* * * * *
PART 1051--MILK IN THE CALIFORNIA MARKETING AREA
0
23. The authority citation for part 1051 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
24. Amend Sec. 1051.60 by:
0
a. Revising the introductory paragraph;
0
b. Redesignating paragraph (i) as paragraph (j); and
0
c. Adding new paragraph (i).
The revision and addition read as follows:
Sec. 1051.60 Handler's value of milk.
For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of the handler's pool
plants and of each handler described in Sec. 1000.9(c) of this chapter
with respect to milk that was not received at a pool plant by adding
the amounts computed in paragraphs (a) through (i) of this section and
subtracting from that total amount the value computed in paragraph (j)
of this section. Unless otherwise specified, the skim milk, butterfat,
and the combined pounds of skim milk and butterfat referred to in this
section shall result from the steps set forth in Sec. 1000.44(a), (b),
and (c) of this chapter, respectively, and the nonfat components of
producer milk in each class shall be based upon the proportion of such
components in producer skim milk. Receipts of nonfluid milk products
that are distributed as labeled reconstituted milk for which payments
are made to the producer-settlement fund of another Federal order under
Sec. 1000.76(a)(4) or (d) of this chapter shall be excluded from
pricing under this section.
* * * * *
(i) Compute an adjustment for eligible Class I producer milk
pursuant to Sec. 1000.43(e) of this chapter by multiplying the Class I
skim milk price adjuster computed in Sec. 1000.50(r) of this
[[Page 57687]]
chapter by the pounds of skim milk eligible in Class I.
* * * * *
PART 1124--MILK IN THE PACIFIC NORTHWEST MARKETING AREA
0
25. The authority citation for part 1124 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
26. Amend Sec. 1124.60 by:
0
a. Revising the introductory paragraph;
0
b. Redesignating paragraph (i) as paragraph (j); and
0
c. Adding new paragraph (i).
The revision and addition read as follows:
Sec. 1124.60 Handler's value of milk.
For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of the handler's pool
plants and of each handler described in Sec. 1000.9(c) of this chapter
with respect to milk that was not received at a pool plant by adding
the amounts computed in paragraphs (a) through (i) of this section and
subtracting from that total amount the value computed in paragraph (j)
of this section. Unless otherwise specified, the skim milk, butterfat,
and the combined pounds of skim milk and butterfat referred to in this
section shall result from the steps set forth in Sec. 1000.44(a), (b),
and (c) of this chapter, respectively, and the nonfat components of
producer milk in each class shall be based upon the proportion of such
components in producer skim milk. Receipts of nonfluid milk products
that are distributed as labeled reconstituted milk for which payments
are made to the producer-settlement fund of another Federal order under
Sec. 1000.76(a)(4) or (d) of this chapter shall be excluded from
pricing under this section.
* * * * *
(i) Compute an adjustment for eligible Class I producer milk
pursuant to Sec. 1000.43(e) of this chapter by multiplying the Class I
skim milk price adjuster computed in Sec. 1000.50(r) of this chapter
by the pounds of skim milk eligible in Class I.
* * * * *
PART 1126--MILK IN THE SOUTHWEST MARKETING AREA
0
27. The authority citation for part 1126 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
28. Amend Sec. 1126.60 by:
0
a. Revising the introductory paragraph;
0
b. Redesignating paragraph (j) as paragraph (k); and
0
c. Adding new paragraph (j).
The revision and addition read as follows:
Sec. 1126.60 Handler's value of milk.
For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of the handler's pool
plants and of each handler described in Sec. 1000.9(c) of this chapter
with respect to milk that was not received at a pool plant by adding
the amounts computed in paragraphs (a) through (j) of this section and
subtracting from that total amount the value computed in paragraph (k)
of this section. Unless otherwise specified, the skim milk, butterfat,
and the combined pounds of skim milk and butterfat referred to in this
section shall result from the steps set forth in Sec. 1000.44(a), (b),
and (c) of this chapter, respectively, and the nonfat components of
producer milk in each class shall be based upon the proportion of such
components in producer skim milk. Receipts of nonfluid milk products
that are distributed as labeled reconstituted milk for which payments
are made to the producer-settlement fund of another Federal order under
Sec. 1000.76(a)(4) or (d) of this chapter shall be excluded from
pricing under this section.
* * * * *
(j) Compute an adjustment for eligible Class I producer milk
pursuant to Sec. 1000.43(e) of this chapter by multiplying the Class I
skim milk price adjuster computed in Sec. 1000.50(r) of this chapter
by the pounds of skim milk eligible in Class I.
* * * * *
PART 1131--MILK IN THE ARIZONA MARKETING AREA
0
29. The authority citation for part 1131 continues to read as follows:
Authority: 7 U.S.C. 601-674, and 7253.
0
30. Amend Sec. 1131.60 by:
0
a. Revising the introductory paragraph;
0
b. Redesignating paragraph (f) as paragraph (g); and
0
c. Adding new paragraph (f).
The revision and addition read as follows:
Sec. 1131.60 Handler's value of milk.
For the purpose of computing a handler's obligation for producer
milk, the market administrator shall determine for each month the value
of milk of each handler with respect to each of the handler's pool
plants and of each handler described in Sec. 1000.9(c) of this chapter
with respect to milk that was not received at a pool plant by adding
the amounts computed in paragraphs (a) through (f) of this section and
subtracting from that total amount the value computed in paragraph (g)
of this section. Receipts of nonfluid milk products that are
distributed as labeled reconstituted milk for which payments are made
to the producer-settlement fund of another Federal order under Sec.
1000.76(a)(4) or (d) of this chapter shall be excluded from pricing
under this section.
* * * * *
(f) Compute an adjustment for eligible Class I producer milk
pursuant to Sec. 1000.43(e) of this chapter by multiplying the Class I
skim milk price adjuster computed in Sec. 1000.50(r) of this chapter
by the pounds of skim milk eligible in Class I.
* * * * *
Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2024-14769 Filed 7-12-24; 8:45 am]
BILLING CODE 3410-02-P
