order price regulations: Supply management program; hearings,
[Federal Register: March 8, 2000 (Volume 65, Number 46)]
[Proposed Rules]
[Page 12146-12151]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08mr00-30]
NORTHEAST DAIRY COMPACT COMMISSION
7 CFR Parts 1306, 1307 and 1309
Over-Order Price Regulation
AGENCY: Northeast Dairy Compact Commission.
ACTION: Proposed rule; notice of hearing.
SUMMARY: The Northeast Dairy Compact Commission proposes to amend the over-order price regulation to establish a supply management program. The proposed program is an assessment/refund plan under which the Commission would withhold $.05 cents from the producer price from each Compact monthly pool. At the end of the Commission's fiscal (calendar) year, the Commission would refund the withheld funds to compact eligible producers who had increased production at a rate of one percent or less, as compared to the prior calendar year's production. One-half of the assessed funds would be distributed to all eligible producers at a flat rate refund amount and one-half would be distributed based on the total volume of milk produced for the year, up to a maximum per hundredweight refund of $12,000.
DATES: A public hearing will be held on April 5, 2000 to commence at 1:00p.m. Sworn and notarized written testimony, comments and exhibits may be submitted until 5:00p.m. on April 19, 2000.
ADDRESSES: The public hearing will be held at the Wayfarer Inn, 121 S. River Road, U.S. Route 3, Bedford, New Hampshire. Mail, or deliver, sworn and notarized testimony, comments and exhibits to: Northeast Dairy Compact Commission, 34 Barre Street, Suite 2, Montpelier, Vermont 05602.
FOR FURTHER INFORMATION CONTACT: Kenneth M. Becker, Executive Director, Northeast Dairy Compact Commission at the above address or by telephone at (802) 229-1941, or by facsimile at (802) 229-2028.
SUPPLEMENTARY INFORMATION:
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Background
The Northeast Dairy Compact Commission (``Commission'') was established under authority of the Northeast Interstate Dairy Compact (``Compact''). The Compact was enacted into law by each of the six participating New England states as follows: Connecticut--Pub. L. 93- 320; Maine--Pub. L. 89-437, as amended, Pub. L. 93-274; Massachusetts-- Pub. L. 93-370; New Hampshire--Pub. L. 93-336; Rhode Island--Pub. L. 93-106; Vermont--Pub. L. 93-57. In accordance with Article I, Section 10 of the United States Constitution, Congress consented to the Compact in Pub. L. 104-127 (FAIR Act), Section 147, codified at 7 U.S.C. 7256. Subsequently, the United States Secretary of Agriculture, pursuant to 7 U.S.C. 7256(1), authorized implementation of the Compact. Congressional consent to the Compact was extended in Pub. L. 106-113, 115 Stat. 1501, November 29, 1999.
Pursuant to its rulemaking authority under Article V, Section 11 of the
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Compact, the Commission concluded an informal rulemaking process and voted to adopt a compact over-order price regulation on May 30, 1997.\1\ The Commission subsequently amended and extended the compact over-order price regulation.\2\ In 1998, the Commission further amended specific provisions of the over-order price regulation.\3\ The current compact over-order price regulation is codified at 7 CFR Chapter XIII.
\1\ 62 FR 29626 (May 30, 1997).
\2\ 62 FR 62810 (Nov. 25, 1997).
\3\ 63 FR 10104 (Feb. 27, 1998); 63 FR 46385 (Sept. 1, 1998); and 63 FR 65517 (Nov. 27, 1998).
On November 27, 1998, the Commission issued a notice of proposed rulemaking proceedings on several subjects and issues, including whether additional supply management policies and provisions should be incorporated into the over-order price regulation.\4\ The Commission held a public hearing to receive testimony on December 11, 1998 in Boxborough, Massachusetts and comments were received until 5:00p.m. on December 31, 1998. The Commission issued a notice of proposed rulemaking on April 19, 1999 \5\, in which a specific assessment and refund program was proposed. The Commission held a public hearing on May 5, 1999 in Concord, New Hampshire and received comments until May 19, 1999. The Commission subsequently reopened the rulemaking and proposed a base/excess plan, in addition to an assessment/refund plan. Notice of the supplemental proposed rulemaking proceedings was issued on June 21, 1999.\6\ The Commission held public hearings on July 7, 1999 in West Springfield, Massachusetts and August 4, 1999 in White River Junction, Vermont. The Commission received written comments through August 18, 1999.
\4\ 63 FR 65563 (Nov. 27, 1998).
\5\ 64 FR 19084 (Apr. 19, 1999).
\6\ 64 FR 33027 (June 21, 1999).
At its deliberative meeting on February 2, 2000, the Commission decided to conclude those proceedings. At that meeting, the Commission referred the supply management issue to its Committee on Regulations and Rulemaking for further study. The Committee was asked to report back to the full Commission no later than the March 1, 2000 meeting with recommendations for addressing supply management and the requirement in Article IV, Section 9(f) of the Compact. That provision requires the Commission, when establishing a compact over-order price, to ``take such action as necessary and feasible to ensure that the over-order price does not create an incentive for producers to generate additional supplies of milk.''
Since promulgation of the Compact Over-order Price Regulation in 1997, the Commission has closely monitored milk production levels in New England. One of the main goals in initially promulgating the Over- order Price Regulation was to at least stabilize the dairy industry supplying the New England consumer milk markets and to increase the local supply of milk.\7\
\7\ 62 FR 23039-40 (April 28, 1997); 62 FR 29635 (May 30, 1997); 62 FR 62814 (Nov. 25, 1997).
Based on the oral testimony and written comments and exhibits received in the December 1998 subjects and issues rulemaking proceeding, and the May, July and August 1999 public hearings and proposed rulemaking proceedings, the Commission proposes to implement a supply management program through an assessment and refund payment to producers who maintain their milk production within one percent of the prior year's production level. The proposed program is described in detail below.
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Proposed Supply Management Program
The proposed supply management program is designed to meet the Commission's responsibilities under Article IV, Section 9(f) of the Compact. That provision provides that ``[w]hen establishing a compact over-order price, the commission shall take such action as necessary and feasible to ensure that the over-order price does not create an incentive for producers to generate additional supplies of milk.'' The proposed supply management program is relatively straightforward to administer and implement and therefore would be a feasible method of addressing supply management. The proposed supply management program is necessary to ensure that the compact over-order price does not create an incentive for producers to increase milk production, as required by section 9(f) of the Compact.
Table 1 shows the total volume of milk in the Compact pool between July 1997 and December 1999. The volume of milk includes milk produced outside of New England, and distributed within New England, and does not include milk excluded pursuant to the Compact limitations on qualification of diverted and transferred milk.
Table 1.--Volume of Milk in the Compact Pool July 1997 Through December 1999 [In millions of pounds]
Month
1997 1998 1999
Jan............................................. ...... 544.2 568.3 Feb............................................. ...... 508.1 528.3 Mar............................................. ...... 561.2 563.0 Apr............................................. ...... 541.8 568.5 May............................................. ...... 580.8 599.0 June............................................ ...... 552.1 569.2 July............................................ 531.0 567.9 564.3 Aug............................................. 532.2 551.3 559.8 Sept............................................ 503.9 529.5 530.4 Oct............................................. 517.3 544.3 545.9 Nov............................................. 498.0 527.3 525.3 Dec............................................. 535.1 566.0 560.7
Average....................................... 519.6 547.9 556.9
Table 2 shows the volume of milk that has been depooled, or excluded from qualification for Compact payments, pursuant to the Compact limitations on diverted and transferred milk.\8\ The limitations on diverted and transferred milk became effective in January 1999 and applied to the first Compact pool in April 1999. The applicable regulations are codified at 7 CFR 1301.23(d) and 1304.2(c).
\8\ 63 FR 65517 (Nov. 27, 1998).
Table 2.--Volume of Depooled Milk January 1999 Through December 1999 [In millions of pounds]
Depooled Month
milk
Jan..........................................................
Feb..........................................................
Mar..........................................................
Apr..........................................................
4.3 May..........................................................
1.2 June.........................................................
.9 July.........................................................
1.5 Aug..........................................................
4.8 Sept.........................................................
4.7 Oct..........................................................
2.0 Nov..........................................................
2.2 Dec..........................................................
1.4
Total...................................................... 23.0
[[Page 12148]]
Table 3 shows the total volume of milk qualified for Compact payments, after exclusions pursuant to the diverted and transferred milk limitations, by quarter. Table 3 also shows the percent increase in milk volume over the same quarter in the prior year.
Table 3.--Compact Producer Milk by Quarter, July 1997 Through December 1999
1997 (million 1998 (million 1999 (million 1997/1998 1998/1999 Quarter
pounds)
pounds)
pounds) (percent) (percent)
Jan-Mar......................... ................
1,613.5
1,659.6 ...........
2.9 Apr-June........................ ................
1,674.7
1,736.7 ...........
3.7 Jul-Sep.........................
1,567.1
1,648.7
1,654.5
5.2
0.4 Oct-Dec.........................
1,550.4
1,637.6
1,631.9
5.6
-0.4 Average.........................
1,558.75
1,643.6
1,670.7
5.4
1.6
Table 4 shows the federal blend price, the Compact producer price and the percent of total producer price attributed to Compact payments.
Table 4.--Total Producer Price and Percent Attributed to Compact Payments
Federal Compact Total Percent of Month
blend price producer producer total due (zone 21) price
price to compact
July 1997................................................... $11.97
$1.28 $13.25
9.66 August......................................................
12.26
1.31
13.57
9.65 September...................................................
12.54
1.36
13.90
9.78 October.....................................................
13.60
0.81
14.41
5.62 November....................................................
14.10
0.44
14.54
3.03 December....................................................
14.06
0.40
14.46
2.77 January 1998................................................
14.02
0.34
14.36
2.37 February....................................................
14.30
0.04
14.34
0.28 March.......................................................
14.10
0.16
14.26
1.12 April.......................................................
13.96
0.14
14.10
1.00 May.........................................................
13.38
0.33
13.71
2.41 June........................................................
13.68
0.71
14.39
2.41 July........................................................
13.14
1.02
14.16
7.20 August......................................................
15.000.24
15.24
1.57 September...................................................
16.47
0.0016.47
0 October.....................................................
16.76
0.0016.76
0 November....................................................
16.67
0.0016.67
0 December....................................................
17.18
0.0017.18
0 January 1999................................................
17.29
0.0017.29
0 February....................................................
15.82
0.0015.82
0 March.......................................................
15.69
0.0015.69
0 April.......................................................
11.76
1.43
13.19
10.8 May.........................................................
12.42
0.82
13.24
6.2 June........................................................
12.79
0.73
13.52
5.4 July........................................................
12.97
1.01
13.98
7.22 August......................................................
13.64
0.70
14.34
4.88 September...................................................
15.34
0.21
15.55
1.35 October.....................................................
15.47
0.0015.47
0 November....................................................
15.41
0.0015.41
0 December....................................................
12.15
1.0013.15
7.60
Average.................................................
14.26
0.49
14.75
3.32
The Commission has considered the data shown in Tables 1 through 4 above to design a feasible supply management program that ensures that the over-order price does not create an incentive for producers to generate additional supplies of milk, and that is also consistent with its primary responsibility of assuring the viability of dairy farming in the northeast, and to assure consumers of an adequate, local supply of pure and wholesome milk. Compact Sections 1 and 9(f)
The proposed program would assess $0.5 per hundredweight from the producer price in each monthly Compact pool. By taking an equal rate from each producer pool, the impact on the monthly producer pay price would be minimized, and predictable, thereby continuing to ensure a sufficient and stable pay price to producers to cover their costs of production. These funds would be accumulated in a separate account throughout the calendar year in a supply management-settlement fund.
At the conclusion of the calendar year, producers would have 45 days to submit an application to the Commission for a refund from the supply management-settlement fund. Producers would be eligible for the refund if they maintained their milk production volume at a rate of increase of 1%, or less, compared to the prior year's production. All eligible producers would receive a refund based on a flat rate per producer. One-half of the supply management-settlement fund would be distributed to eligible producers on a per producer basis. The amount of the flat rate refund would be determined by dividing the total number of eligible producers into one-half the value of the supply management-settlement fund.
In addition, eligible producers would receive a refund amount based on a price per hundredweight of their total volume of milk produced in the calendar year, up to a maximum of $12,000. The other half of the supply management-settlement fund would be distributed on the per hundredweight
[[Page 12149]]
basis. The amount of this half of the refund would be determined by dividing the total volume of milk produced by eligible producers into one-half the value of the supply management-settlement fund to determine the rate per hundredweight each eligible producer would receive.
The assessment/refund program would provide a reward to those producers who stabilize their milk production and would create an incentive for all producers to maintain a stable, local supply of milk for the New England milk market.
All producers would share equally in the burden of funding this program through a reduction in the producer pay price. Only those producers who reduce or maintain their production level at 1% or less would be eligible for a refund. However, the program would not otherwise restrict the milk production of those producers who, for business reasons unrelated to the compact payments, choose to increase their milk production at a rate greater than 1% per year.
It is the intention and judgment of the Commission that the combination of the proposed supply management assessment/refund program and the rules limiting compact payments on diverted and transferred milk will operate in coordination to regulate the supply of milk in New England relative to the consumer demand and to ensure that the compact payments do not create an incentive to generate supplies of milk in excess of the tolerance levels prescribed for diverted and transferred milk.
The Commission offers the following examples to assist interested persons in evaluating the proposed supply management program. Tables 5 and 6 show the estimated impact of the assessment/refund program on different size farms. The tables are based on the following assumptions. The monthly average production in the Compact pool in 1999 was approximately 556,900,000 pounds, with a yearly production of 6,682,800,000. Using an assessment figure of $.05 per hundredweight, the total assessment/refund pool would be $3,341,400 annually. Assuming there are 4,000 Compact eligible producers, the average cost of the assessment per producer would be $835. The per hundredweight refund amount would be paid on the producers total annual production. The Commission estimates that 60-70% of producers could be eligible for the refund under the proposed program. Table 5 assumes that 60% (2,400) producers would be eligible for a refund and the per producer payment would be $696 for all eligible producers and the per hundredweight refund rate would be $.041. Table 6 assumes that 70% (2,800) of producers would be eligible for the refund and the per producer payment would be $595 and the per hundredweight refund rate would be $.035. Refund payments on a per hundredweight basis would not exceed $12,000.
Table 5.--60% Eligible Producers
No. of cows
Pounds
Cost
$/farm $/cwt $ Total Net refund
40................................ 700,000
$350
$696
$287
$983
$633 57................................ 1,000,000
500
696
410
1,106
606 86................................ 1,500,000
750
696
615
1,311
561 286............................... 5,000,000
2,500
696
2,050
2,746
246 1,144............................. 20,000,000 10,000
696
8,200
8,896 -1,104
Table 6.--70% Eligible Producers
No. of cows
Pounds
Cost
$/farm $/cwt $ Total Net refund
40................................ 700,000
$350
$596
$245
$841
$491 57................................ 1,000,000
500
596
350
946
446 86................................ 1,500,000
750
596
525
1,121
371 286............................... 5,000,000
2,500
596
1,750
2,346
-154 1,144............................. 20,000,000 10,000
596
7,000
7,596 -2,404
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Proposed Technical Amendments to the Over-Order Price Regulation
The Commission proposes to amend section 1306.3 and to add a new Part 1309 to provide the necessary regulations to implement the proposed supply management assessment/refund program. The Commission also proposes to make corresponding technical changes required by the specific amendments and additions to the current regulations.
The Commission proposes to amend section 1306.3, by first redesignating existing paragraphs (e) through (g) as paragraphs (f) through (h) and adding a new paragraph (e). The new paragraph will allow the Commission to withhold $.05 from each monthly producer pool to fund the supply management-settlement fund.
A new Part 1309 is proposed to provide the regulations to implement the supply management program. Section 1309.1 defines producer qualifications for the refund program. Section 1309.2 defines the procedure for computing the refund prices to be paid to qualified producers. Section 1309.3 would provide the authority for the establishment of a supply management-settlement fund. Finally, section 1309.4 would describe the procedure for issuing payments to producers eligible for a refund under the supply management program.
Official Notice of Technical, Scientific or Other Matters
Pursuant to the Commission regulations, 7 CFR 1361.5(g)(5), the Commission hereby gives public notice that it may take official notice, at the public hearing April 5, or afterward, of relevant facts, statistics, data, conclusions, and other information provided by or through the United States Department of Agriculture, including, but not limited to, matters reported by the National Agricultural Statistics Service, the Market Administrators, the Economic Research Service, the Agricultural Marketing Service and information, data and statistics developed and maintained by the Departments of Agriculture of the States or Commonwealth within the Compact regulated area and the November 1999 study conducted by the University of Vermont entitled ``Impacts of the Northeast Interstate Dairy Compact on the New England Milk Supply.''
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The Commission will also receive into the record of this rulemaking proceeding the entire record, including the public hearing transcript and written comments and submissions, of the December 1998 subjects and issues rulemaking proceeding regarding whether additional supply management policies and provisions should be incorporated into the Over-order Price Regulation and the proposed rulemaking noticed on April 19, 1999 at 64 FR 19084 and the supplemental proposed rulemaking proceeding noticed on June 21, 1999 at 64 FR 33027.
Public Participation in Rulemaking Proceedings
The Commission seeks and encourages oral and written testimony and comments from all interested persons regarding these proposed rules. The Commission continues to benefit from the valuable insights and active participation of all segments of the affected community including consumers, processors and producers in the development and administration of the Over-order Price Regulation.
Date, Time and Location of the Public Hearing
The Northeast Dairy Compact Commission will hold a public hearing to commence at 1:00p.m. on April 5, 2000 at the Wayfarer Inn, 121 S. River Road, U.S. Route 3, Bedford, New Hampshire.
Written Comments and Exhibits
Pursuant to the Commission rules, 7 CFR 1361.4, any person may participate in the rulemaking proceeding independent of the hearing process by submitting written comments or exhibits to the Commission. Comments and exhibits may be submitted at any time before 5:00p.m. on April 19, 2000.
Please note:
Comments and exhibits will be made part of the record of the rulemaking proceeding only if they identify the author's name, address and occupation, and if they include a sworn and notarized statement indicating that the comment and/or exhibit is presented based upon the author's personal knowledge and belief. Facsimile copies will be accepted up until the 5:00p.m. deadline, but the original must then be sent by ordinary mail.
List of Subjects in 7 CFR Parts 1306, 1307 and 1309
Milk.
Codification in Code of Federal Regulations
For reasons set forth in the preamble, the Northeast Dairy Compact Commission proposes to amend 7 CFR parts 1306 and 1307 and to add a new part 1309 as follows:
PART 1306--COMPACT OVER-ORDER PRODUCER PRICE
1. The authority citation for part 1306 continues to read as follows:
Authority: 7 U.S.C. 7256.
2. In Sec. 1306.3 redesignate paragraphs (e) through (g) as paragraphs (f) through (h) and add a new paragraph (e) to read as follows:
Sec. 1306.3 Computation of basic over-order producer price.
* * * * *
(e) Subtract 5 cents per hundredweight from the basic over-order producer price computed pursuant to this section and deposit that amount in the supply management-settlement fund. * * * * *
PART 1307--PAYMENTS FOR MILK
3. The authority citation for part 1307 continues to read as follows:
Authority: 7 U.S.C. 7256.
4. Section 1307.1 is amended in paragraphs (a), (b) and (c) by removing ``1306.3(f)'' and adding ``1306.3(g)'' in its place.
5. A new part 1309 is added to read as follows:
PART 1309--SUPPLY MANAGEMENT REFUND PROGRAM
Sec. 1309.1 Producer qualification for supply management refund program. 1309.2 Computation of supply management refund prices. 1309.3 Supply management-settlement fund. 1309.4 Payment to producers of supply management refund.
Authority: 7 U.S.C. 7256.
Sec. 1309.1 Producer qualification for supply management refund program.
A dairy farmer who is a qualified producer pursuant to Sec. 1301.11 of this chapter for the entire refund year and the dairy farmer's milk production during the refund year is less than or the increase is not more than 1% of the milk production of the preceding calendar year.
Sec. 1309.2 Computation of supply management refund prices.
The compact commission shall compute the supply management refund prices applicable to all qualified milk as follows:
(a) Combine into one total the values, including all interest earned, deducted pursuant to Sec. 1306.3(e) of this chapter for the refund year;
(b) Subtract 50% from the total value computed pursuant to paragraph (a) of this section to be used for the per farm payments to producers who submitted documentation pursuant to Sec. 1309.4(a);
(c) Divide the resulting amount by the sum of all milk production reported by producers qualified pursuant to Sec. 1309.1 and who submitted documentation pursuant to Sec. 1309.4(a).
Sec. 1309.3 Supply management-settlement fund.
(a) The compact commission shall establish and maintain a separate fund known as the supply management-settlement fund. It shall deposit into the fund all amounts deducted pursuant to Sec. 1306.3(e) of this chapter. It shall pay from the fund all amounts due producers pursuant to Sec. 1309.4;
(b) All amounts subtracted under Sec. 1309.2(c), including interest earned thereon, shall remain in the supply management-settlement fund as an obligated balance until it is withdrawn for the purpose of effectuating Sec. 1309.4;
(c) The compact commission shall place all monies subtracted under Sec. 1306.3(e) of this chapter in an interest-bearing bank account or accounts in a bank or banks duly approved as a Federal depository for such monies, or invest them in short-term U.S. Government securities;
(d) If, after payments to producers of supply management refund pursuant to Sec. 1309.4 there is a surplus in the fund, it is to be returned to the producer-settlement fund.
Sec. 1309.4 Payment to producers of supply management refund.
(a) All producers who are qualified pursuant to Sec. 1309.1 shall become eligible to receive payment of the supply management refund computed pursuant to Sec. 1309.2 by submitting to the compact commission documentation that the producer milk production during the refund year is less than or the increase is not more than 1% of the milk production of the preceding calendar year. Such documentation shall be filedwith the commission not later than 45 days after the end of the calendar year.
(b) The commission will make payment to all producers qualified pursuant to Sec. 1309.1 and eligible pursuant to paragraph (a) of this section in the following manner:
(1) A per farm payment computed by dividing the amount subtracted pursuant to Sec. 1309.2(b) by the total eligible producers; and
(2) The value determined by multiplying the supply management
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refund price computed pursuant to Sec. 1309.2(e) by the producer's milk pounds, not to exceed $12,000.
Dated: March 2, 2000. Kenneth M. Becker, Executive Director.
[FR Doc. 00-5585Filed3-7-00; 8:45 am]
BILLING CODE 1650-01-P
