[Federal Register Volume 59, Number 151 (Monday, August 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19231]


[[Page Unknown]]

[Federal Register: August 8, 1994]


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Part II





Department of Agriculture





_______________________________________________________________________



Agricultural Marketing Service



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7 CFR Part 1001, et al.




Milk in the New England and Other Marketing Areas; Recommended Decision 
and Opportunity to File Written Exceptions on Proposed Amendments to 
Tentative Marketing Agreements and Orders; Proposed Rule
DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1001, 1002, 1004, 1005, 1006, 1007, 1011, 1012, 1013, 
1030, 1032, 1033, 1036, 1040, 1044, 1046, 1049, 1050, 1064, 1065, 
1068, 1075, 1076, 1079, 1093, 1094, 1096, 1099, 1106, 1108, 1124, 
1126, 1131, 1134, 1135, 1137, 1138, 1139

[Docket No. AO-14-A66, etc.; DA-92-11]
RIN 0581-AA57

 
Milk in the New England and Other Marketing Areas; Recommended 
Decision and Opportunity to File Written Exceptions on Proposed 
Amendments to Tentative Marketing Agreements and Orders 

------------------------------------------------------------------------
  7 CFR                                                                 
  part                   Marketing area                     AO Nos.     
------------------------------------------------------------------------
1001....  New England.................................  AO-14-A66       
1002....  New York-New Jersey.........................  AO-71-A81       
1004....  Middle Atlantic.............................  AO-160-A69      
1005....  Carolina....................................  AO-388-A6       
1006....  Upper Florida...............................  AO-356-A30      
1007....  Georgia.....................................  AO-366-A35      
1011....  Tennessee Valley............................  AO-251-A37      
1012....  Tampa Bay...................................  AO-347-A33      
1013....  Southeastern Florida........................  AO-286-A40      
1030....  Chicago Regional............................  AO-361-A30      
1032....  Southern Illinois-Eastern Missouri..........  AO-313-A40      
1033....  Ohio Valley.................................  AO-166-A63      
1036....  Eastern Ohio-Western Pennsylvania...........  AO-179-A58      
1040....  Southern Michigan...........................  AO-225-A44      
1044....  Michigan Upper Peninsula....................  AO-299-A28      
1046....  Louisville-Lexington-Evansville.............  AO-123-A64      
1049....  Indiana.....................................  AO-319-A41      
1050....  Central Illinois............................  AO-355-A28      
1064....  Greater Kansas City.........................  AO-23-A61       
1065....  Nebraska-Western Iowa.......................  AO-86-A49       
1068....  Upper Midwest...............................  AO-178-A47      
1075....  Black Hills, South Dakota...................  AO-248-A22      
1076....  Eastern South Dakota........................  AO-260-A31      
1079....  Iowa........................................  AO-295-A43      
1093....  Alabama-West Florida........................  AO-386-A13      
1094....  New Orleans-Mississippi.....................  AO-103-A55      
1096....  Greater Louisiana...........................  AO-257-A42      
1097\1\.  Memphis, Tennessee..........................  AO-219-A48      
1098\1\.  Nashville, Tennessee........................  AO-184-A57      
1099....  Paducah, Kentucky...........................  AO-183-A47      
1106....  Southwest Plains............................  AO-210-A54      
1108....  Central Arkansas............................  AO-243-A45      
1124....  Pacific Northwest...........................  AO-368-A22      
1126....  Texas.......................................  AO-231-A62      
1131....  Central Arizona.............................  AO-271-A31      
1134....  Western Colorado............................  AO-301-A23      
1135....  Southwestern Idaho-Eastern Oregon...........  AO-380-A12      
1137....  Eastern Colorado............................  AO-326-A27      
1138....  New Mexico-West Texas.......................  AO-335-A38      
1139....  Great Basin.................................  AO-309-A32      
------------------------------------------------------------------------
\1\The Memphis, Tennessee, and Nashville, Tennessee, orders were        
  terminated, effective July 31, 1993.                                  

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This recommended decision adopts the base month Minnesota-
Wisconsin (M-W) price updated with a butter/powder/cheese formula as 
the replacement for the Minnesota-Wisconsin price series, which 
establishes minimum prices for milk under all Federal milk orders. The 
recommendations in this decision are based on industry proposals 
considered at a public hearing held June 15-19, 1992.

DATES: Comments are due on or before October 7, 1994.

ADDRESSES: Comments (four copies) should be filed with the Hearing 
Clerk, room 1083, South Building, United States Department of 
Agriculture, Washington, DC 20250.

FOR FURTHER INFORMATION CONTACT: John F. Borovies, Branch Chief, USDA/
AMS/Dairy Division, Order Formulation Branch, room 2968, South 
Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 690-1366.

SUPPLEMENTARY INFORMATION: This administrative rule is governed by the 
provisions of Sections 556 and 557 of Title 5 of the United States Code 
and therefore is excluded from the requirements of Executive Order 
12866.
    The Regulatory Flexibility Act (5 U.S.C. 601-612) requires the 
Agency to examine the impact of a proposed rule on small entities. 
Pursuant to 5 U.S.C. 605(b), the Administrator of the Agricultural 
Marketing Service has certified that this action will not have a 
significant economic impact on a substantial number of small entities. 
The amendments would promote orderly marketing of milk by producers and 
regulated handlers.
    This proposed rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. It is not intended to have retroactive effect. If 
adopted, this proposed rule will 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 (the 
Act), provides that administrative proceedings must be exhausted before 
parties may file suit in court. Under Section 608c(15)(A) of the Act, 
any handler subject to an order may file with the Secretary a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with the law 
and requesting a modification of an order or to be exempted from the 
order. A handler is afforded the opportunity for a hearing on the 
petition. After a hearing, the Secretary would rule on the petition. 
The Act provides that the District Court of the United States in any 
district in which the handler is an inhabitant, or has his or her 
principal place of business, has jurisdiction in equity to review the 
Secretary's ruling on the petition, provided a bill in equity is filed 
not later than 20 days after date of the entry of the ruling.
    Prior documents in this proceeding:
    Notice of Hearing: Issued May 12, 1992; published May 15, 1992 (57 
FR 20790).

Preliminary Statement

    Notice is hereby given of the filing with the Hearing Clerk of this 
recommended decision with respect to proposed amendments to the 
tentative marketing agreements and the orders regulating the handling 
of milk in the New England and other marketing areas. This notice is 
issued pursuant to the provisions of the Act and the applicable rules 
of practice and procedure governing the formulation of marketing 
agreements and marketing orders (7 CFR Part 900).
    Interested parties may file written exceptions to this recommended 
decision with the Hearing Clerk, U.S. Department of Agriculture, 
Washington, DC 20250, on or before October 7, 1994. Four copies of the 
exceptions should be filed. All written submissions made pursuant to 
this notice will be made available for public inspection at the Office 
of the Hearing Clerk during regular business hours (7 CFR 1.27(b)).
    The proposed amendments and findings and conclusions are based on 
the record of a public hearing held at Alexandria, Virginia, on June 
15-19, 1992, pursuant to a notice of hearing issued May 15, 1992 (57 FR 
20790). The material issue on the record of the hearing relates to:
    Replacement of the Minnesota-Wisconsin price series used to 
establish minimum prices under the Federal orders.

Findings and Conclusions

    The following findings and conclusions on the material issues are 
based on evidence presented at the hearing and the record thereof:

Background Statement

    This proceeding was initiated in response to concerns expressed 
regarding the reliability of the Minnesota-Wisconsin price series (M-W 
price) as an accurate indicator of the average price of milk used in 
manufactured products because of a continuing decline in manufacturing 
grade (Grade B) milk production and the number of plants that compete 
for the Grade B milk supply. Prior to the announcement of this hearing, 
a study of possible alternative pricing mechanisms was undertaken by 
the Department and was released in November 1991. A study was also 
mandated by Congress in the 1990 Farm Bill, which further required that 
a public hearing be held on the issue and that the statistical 
information developed in the study be made available to the public.
    A Notice of Hearing issued on May 15, 1992, listed ten proposals to 
be considered during the M-W price replacement hearing. The proposals 
fell into four main categories: (1) competitive pay prices, (2) product 
price formulas, (3) cost-of-production formulas, and (4) the price 
support level. Several of the competitive pay prices were also proposed 
in conjunction with product price formulas for price-updating purposes. 
The hearing was specifically limited to a replacement for the M-W 
price. The hearing notice also specified that any proposals that would 
change the price level would have to be justified under the supply and 
demand pricing standards of the Act (7 U.S.C. 608c(18)).

Replacement for the Minnesota-Wisconsin Price Series

    All Federal milk orders should be amended to provide for a new 
price series that will establish minimum prices under Federal milk 
orders utilizing the base month M-W competitive pay price updated with 
a butter/powder/cheese product price formula. Adoption of the updated 
base month M-W price will result in a basic formula price that 
adequately reflects the value of milk used in manufactured products and 
will allow for the continued use of an unregulated, competitive market 
price. Hence, supply and demand conditions will continue to be directly 
reflected in the basic formula price that serves as a basis for minimum 
pricing of regulated milk.
    Since the M-W price was first adopted in 1961 in the Chicago 
Regional marketing area, it has been used as a basis for setting 
minimum prices paid by regulated handlers. The M-W price is the mover 
of all Class I and Class II prices and is essentially the Class III 
price under all orders. Using the M-W price as the Class III price 
maintains price coordination between Grade B and Grade A milk supplies 
used for manufacturing purposes.
    The M-W price is a competitive price that represents an estimate of 
the average of prices paid for Grade B milk in Minnesota and Wisconsin 
by plants that manufacture butter, nonfat dry milk, and cheese. These 
products are sold in a national market in competition with such 
products made from Grade A milk that is in excess of fluid milk needs. 
Month-to-month changes in the M-W price reflect changes in overall 
supply and demand conditions for milk and its products nationally.
    The M-W price is currently computed by the National Agricultural 
Statistics Service (NASS). It is announced on or before the 5th day of 
every month and applies to Grade B milk delivered during the previous 
month. For example, the M-W price for February is announced on March 5 
(in 1994 it was announced on March 4). The M-W price determination is a 
two-step process. It involves (1) determining the average of actual pay 
prices at a large number of plants purchasing Grade B milk for the base 
month (in the above example, January), and (2) based on a sample of 
these plants, determining what the expected change in pay prices will 
be from the base month (January) to the following month (February), the 
month for which the M-W price is being determined. The reason for the 
updating procedure is that actual pay prices for a month are not 
available until late in the following month. Thus, updating the base 
month M-W price results in an M-W price that better reflects current 
marketing conditions.
    To calculate the base month M-W price, NASS collects actual data 
for the entire previous month from approximately 160-170 plants located 
in Minnesota and Wisconsin. The plants report the total pounds of Grade 
B milk received from producers and the total dollars paid to producers 
for the entire month. These plants represent approximately two-thirds 
of all Grade B milk sold in the two States.
    NASS derives the estimated portion of the M-W price series based on 
reports of a sample of approximately 67 of the base-month plants. These 
plants account for about 35 percent of the total manufacturing grade 
milk sold in the two States. These plants provide actual pay price data 
for the first half of the month and estimate prices for the second half 
of the month to which the M-W price relates. NASS then calculates the 
estimated change in price between the base month and the current month 
and applies this estimated change to the base month M-W price to 
determine the M-W price. According to the NASS witness who testified at 
the hearing, some plants in the estimate survey are unable to provide 
actual price data and can only estimate purchases for the first half of 
the month. Thus, the plants in the estimate survey that report actual 
price information account for about 25 percent of the Grade B milk in 
the two States.
    When the price series was first adopted in 1961, Grade B milk 
production accounted for 68 percent, or 18 billion pounds, of the total 
milk production in the two States. This production was purchased by 
about 1,200 plants. By 1992, Grade B production had declined to five 
billion pounds or 14 percent of the total milk production in the two 
States, with 272 plants purchasing the milk. Due to the decline in 
Grade B production and the number of plants purchasing the milk, along 
with the number of plants which can provide actual pay price data for 
the first half of the month, the statistical reliability of the M-W 
price has been questioned.
    Several proposals considered during this proceeding were based on 
competitive pay prices. There was support by a large majority of the 
witnesses who testified during the hearing and in post-hearing briefs 
for the adoption of a competitive pay price series. Most witnesses 
testified in opposition to the use of product price formulas, the 
support price, and cost-of-production formulas as replacements for the 
M-W price. Three main competitive pay price series were considered 
during the hearing: the A/B price series, the base month M-W (which is 
currently used to calculate the M-W price), and the Agricultural Prices 
M-W. These competitive pay price series were proposed in combination 
with a product price formula to be used to update the previous month's 
price to the current month with one exception which will be addressed 
later.
    An A/B manufacturing price series (A/B price) was developed based 
on industry proposals and comments submitted in connection with the 
Department's study. NASS developed this new competitive pay price 
series that represents prices paid for milk used in the manufacturing 
of dairy products, regardless of grade. NASS collects data from 150 
plants in Minnesota and Wisconsin that receive Grade B and/or Grade A 
milk used primarily to manufacture cheese, butter, and nonfat dry milk. 
The sample represents 78 percent of Minnesota's total milk production, 
of which approximately 75 percent is Grade A, and 65 percent of 
Wisconsin's total milk production, of which about 84 percent is Grade 
A.
    The calculation of the A/B price requires the deduction of the 
``pool draw,'' which is money that the Grade A plants receive from the 
Federal order pool as part of their share of the Class I market. This 
information is obtained by NASS from the Chicago Regional and Upper 
Midwest market administrators. The A/B prices are reported routinely in 
``Dairy Market News.'' As currently calculated, the A/B price that is 
available on or before the 5th day of the month is the price for the 
second preceding month.
    Proponents of proposals one and two, as listed in the hearing 
notice, were the main supporters of the adoption of an A/B price to 
replace the current M-W price. The National Farmers Organization (NFO), 
a cooperative association that proposed proposal one, advocated the 
usage of an A/B price updated by 50 percent of a product price formula. 
In connection with the
A/B price, NFO recommended the adoption of a floor price for the basic 
formula price equal to the cost of production.
    Two witnesses testified on behalf of NFO. The first witness 
primarily focused on the cost-of-production floor price. He stated that 
a fundamental purpose of NFO is to seek the cost of production plus a 
reasonable profit for dairy farmers. To meet this organizational 
purpose, NFO proposed using the national average economic (full 
ownership) costs, as calculated by the Economic Research Service for 
the most recently reported calendar year, as the floor price. The floor 
price would be utilized as the basic formula price whenever the 
competitive A/B price fell below the cost of production. The witness 
contended that establishing a floor price for the basic formula price 
would provide dairy farmers with stability in their milk price. The 
witness further stated that NFO did not believe that establishing a 
floor price at the cost-of-production level would have any impact on 
stimulating production.
    The second witness for NFO testified regarding the need to adopt an 
A/B price with a product price updater as a replacement for the M-W 
price. This witness asserted that a competitive pay price based solely 
on Grade B milk does not represent the true farm value of milk because 
of the decline in competition among plants purchasing Grade B milk. He 
contended that this lack of competition allows plants to shift money 
from Grade B milk producers and use this extra money to attract Grade A 
producers. Accordingly the witness stated that the A/B price series 
needed to be adopted to better reflect the true value of milk used in 
manufacturing.
    The witness addressed the concern of regulated prices being 
reported within the A/B price calculation that may create an upward 
price bias. NFO recognizes that this is a major factor; however, they 
do not propose to deregulate any plants in the A/B survey since a 
majority of the reporting plants are cooperative plants. The witness 
stated that the ``blend down'' of the Grade A price by the Grade B 
price and the non-inclusion of hauling subsidies would provide room 
above federal order minimum prices for flexibility in both upward and 
downward price movements. The witness asserted that this would negate 
any concern about an upward price bias in the A/B price series.
    Because the A/B price announced on or before the 5th of each month 
would apply to milk marketed in the second preceding month, NFO 
proposed the use of a product price updating formula in conjunction 
with the A/B price. NFO advanced the use of 50 percent of a product 
price formula which included all primary products and by-products of 
milk. NFO maintains that all products should be used in a product price 
formula to reflect the full value of producer milk. The witness stated 
that NFO chose to use only 50 percent of the updater because producer 
prices are not as volatile as prices in the product markets and because 
NFO believes this would lend a further degree of stability to producer 
prices.
    The Trade Association of Proprietary Plants (TAPP) and Farmers 
Union Milk Marketing Cooperative (FUMMC) also supported the adoption of 
the A/B price series to replace the M-W price. The TAPP and FUMMC's 
proposal (number two) would utilize an A/B price series updated by a 
weekly butter/powder/cheese product price formula. To this value a 
competitive premium would be added and 20 cents deducted yielding a 
tentative weekly M-W price. The final M-W price would be announced on 
or before the 5th of the following month and would be the weighted 
average of the tentative weekly M-W prices for the current month.
    The witness representing these two groups testified that the 
current M-W price, which is based solely on Grade B milk, 
underrepresents the true competitive value of milk for manufacturing 
purposes by 45 to 60 cents per hundredweight. According to the witness, 
this difference is paid to producers in the form of premiums and 
hauling subsidies. The witness said that because these are not 
consistent between plants, this situation is creating chaotic marketing 
conditions. The witness stated that incorporating Grade A milk into the 
Minnesota and Wisconsin price survey would result in a price series 
which would reflect the true competitive value of milk and promote 
orderly marketing conditions.
    The witness further testified that the industry is in need of 
current, or weekly, pricing to assist in marketing decisions. Using the 
A/B price in conjunction with a weekly updater to establish a tentative 
weekly M-W price would provide the industry with current information to 
be used as a pricing guide for the following week. The witness claimed 
that the dairy industry needs this information for buying, selling, and 
determining the value of milk in manufactured products.
    Two additional proposals noticed were based on the A/B price 
series. One proponent of proposal three, the Northeast Ad Hoc Federal 
Order Committee, withdrew its support for this proposal. This proposal 
would have expanded the amount of milk surveyed and/or expanded the 
states included in the survey. No other proponents of an expanded 
survey testified in support of this proposal. Thus, it is considered 
abandoned.
    Land O'Lakes (LOL) was the proponent of proposal four, the A/B 
price updated with a product price formula. At the hearing the witness 
for LOL offered a modification to the proposal as noticed. This 
modification was ruled to be beyond the limited scope of the hearing. 
As a result, LOL removed their support for this proposal. Thus, it is 
considered abandoned.
    One additional proposal, proposal number seven, utilizes the A/B 
price series in conjunction with a product price formula as a 
replacement alternative for the M-W price. This proposal will be 
addressed later in this decision.
    Opposition to the adoption of the A/B price series was expressed 
specifically by two witnesses during the hearing and subsequently in 
several briefs. A witness for the Milk Industry Foundation and the 
International Ice Cream Association (MIF/IICA), trade associations 
representing a substantial number of dairy processors, stated that the 
adoption of an A/B price survey provides a broader sample of milk, but 
would enhance the basic formula price. This, according to MIF/IICA, 
does not meet the criteria set forth in the hearing notice that the M-W 
replacement alternative be revenue-neutral. The witness cited 
statistics which indicated that during the period of September 1990 
through March 1992, the A/B price averaged 65 cents higher than the M-W 
price. The witness further expressed concern regarding an upward bias 
that is built into the A/B price because some of the milk included in 
the survey is regulated.
    A second witness representing Kraft General Foods (Kraft), opposed 
the adoption of the A/B price and further addressed the question of the 
upward bias in the A/B price. The witness stated that the A/B price 
uses regulated Grade A prices in the survey which are not competitively 
determined and therefore cannot truly reflect the value of milk used in 
manufacturing. The witness further explained that the A/B price also 
incorporates the highly competitive premium price structures that exist 
in the Midwest. Together these two factors, according to the Kraft 
witness, result in the upward price bias. The witness stated that this 
higher price level cannot be justified based on current supply and 
demand conditions as a replacement for the M-W price.
    Briefs filed on behalf of Anderson-Erickson and Southern Foods 
Group (AE/SFG), Kraft, Southern Coalition of Dairy Farmers (SCDF), 
United Dairymen of Arizona (UDA), Wisconsin Farm Bureau Federation and 
Minnesota Milk Producers Association (WFBF/MMPA), and the United States 
Department of Justice reiterated that the nature of the A/B price 
survey results in an upward bias in the reported price because of the 
inclusion of the regulated Grade A milk and the lack of adjustment for 
some price premiums. The briefs also maintained that adopting the A/B 
price as a replacement for the M-W price would result in higher prices 
under the Federal order program, an outcome which has no economic 
justification based on current supply and demand conditions.
    Substantial opposition to the adoption of a cost-of-production 
floor price was expressed by numerous witnesses at the hearing and 
subsequently in post-hearing briefs. The brief filed by AE/SFG 
specifically addressed the concept of establishing floor prices. The 
brief stated that ``establishing floor prices would disassociate prices 
from the market needs.'' Official Notice is taken of the Final Decision 
(58 FR 12634, published March 5, 1993) from the 1990 National Hearing. 
The brief also pointed out that in the 1990 National Hearing final 
decision floor prices for Class I and Class II milk were rejected. The 
AE/SFG brief alleged that the proponents failed to provide supply and 
demand evidence which demonstrates that marketing conditions have 
changed substantially within the last two years to warrant a change 
from the Department's earlier decision. Additional opposition to 
proposals replacing the M-W price with cost-of-production formulas is 
addressed later in this decision.
    The second competitive pay price series considered as a replacement 
for the M-W price is the base month M-W price. As explained previously, 
the base month M-W price is one component currently used by NASS to 
compute the M-W price. Adoption of the base month M-W price was 
advanced by five proponents in the notice of hearing. The MIF/IICA and 
AE/SFG proposed the use of the base month M-W price in conjunction with 
a product price formula updater. This price would be available on or 
before the 5th day of the month and would be based on the price for the 
second preceding month updated by the change in a product price formula 
for the preceding month.
    The witness representing the MIF/IICA testified that a basic 
formula price, based on an expanded, unregulated competitive pay price 
for Grade B milk in Minnesota and Wisconsin, would best reflect the 
supply and demand conditions for all major uses of manufactured dairy 
products and would provide the industry with a reliable price series. 
The witness stated that the base month M-W price survey represents 
about 60 percent of all Grade B milk in Minnesota and Wisconsin and 
incorporates a representative sample of both twice-a-month pay plants, 
as in the current M-W price, and once-a-month pay plants. Because the 
base month M-W price available on or before the 5th day of the month is 
for the second preceding month, the witness stated the need for a 
product price formula to update the base month M-W price. The MIF/IICA 
proposed adopting a butter/powder/cheese formula using annual product 
yields and Minnesota and Wisconsin product weights to update the base 
month M-W price. This formula was utilized in the Department's study to 
update the Agricultural Prices M-W. For example, the use of an updating 
formula would result in the price announced on March 5th being based on 
January pay prices updated by changes in product prices between January 
and February.
    The witness testified that this proposal would be essentially 
revenue-neutral when compared to the current M-W price. Their 
comparison of these two price series from January 1988 through April 
1992 resulted in an updated base month M-W price that averaged only 
five cents per hundredweight higher than the current M-W price.
    A witness representing Country Fresh, Inc., the Morningstar Group, 
Inc., and Oak Farms Dairy (Country Fresh, et al.) also testified in 
support of the adoption of the updated base month M-W price as a 
replacement for the current M-W price. The witness supported this 
proposal for four main reasons: (1) it uses actual Grade B milk prices 
in Minnesota and Wisconsin, thus linking Federal order prices to the 
competitive markets; (2) it expands the Grade B survey to alleviate 
NASS' statistical concerns; (3) prices remain relatively equal to 
current M-W prices; and (4) the proposal provides the same amount of 
advance pricing currently available under the Federal order program.
    Kraft also supported the adoption of the base month M-W price as 
the replacement for the current M-W price. However, Kraft's proposal 
does not include an updater. Thus, the price announced on the 5th of 
each month would be the price for the second preceding month. For 
example, the price announced on March 5th would represent January pay 
prices. The witness representing Kraft testified that the adoption of 
the base month M-W without an updating adjuster would accomplish the 
following objectives: (1) Eliminate the use of estimated prices; (2) 
Keep the M-W price determined in a non-regulated market; (3) Reflect 
competitive conditions for milk rather than products; (4) Result in a 
more competitively determined price; and (5) Remain free from fine 
tuning.
    The Kraft witness testified in opposition to the use of an updater 
in conjunction with the base month M-W price for two reasons. First, 
although he agreed that product prices and milk prices are related, he 
stated that changes in competitive milk prices do not correspond 
exactly with changes in product prices. Secondly, the witness asserted 
that product price formulas are subject to controversy based on which 
product prices, product yields, and weight factors are used.
    The Kraft witness acknowledged that the additional lag created by 
Kraft's proposal may affect the way the industry conducts business, as 
the lag may create month-to-month differences in processor margins. 
However, the witness contended that over time this proposal does not 
change the competitive value of milk to either producers or processors.
    Opposition to the adoption of the base month M-W price was 
presented by witnesses representing NFO, TAPP/FUMMC, and the United 
States Cheese Makers Association, the American Producers of Italian 
Type Cheese Association, the Ohio Swiss Cheese Association, and the 
Wisconsin Cheese Makers Association (Cheese Makers) and in briefs filed 
on behalf of these organizations and WFBF/MMPA. The witnesses for these 
organizations objected to the adoption of the base month M-W price for 
two primary reasons. First, the decline in the amount of Grade B milk 
production raises uncertainty about the statistical reliability of any 
survey based only on Grade B milk. Secondly, a Grade B only survey does 
not reflect the true value of milk used for manufacturing purposes.
    The opposition recited statistics regarding the decline in Grade B 
milk producers and processors that they claim has resulted in a lack of 
competition for the Grade B milk supply and an increased competition 
for the Grade A milk supply. The opposition further contended that as 
manufacturers shift money away from the Grade B supply, they can use 
this money to attract the Grade A milk supply. This results in Grade B 
prices which do not truly reflect the value of milk used for 
manufacturing purposes. The opponents argued that merely enlarging the 
sample size would neither affect the amount of competition nor the 
value of the milk.
    The Cheese Makers also argued that the continued use of a Grade B 
survey results in the extended use of an untimely price announcement, 
announcing the price for the milk after it has been manufactured into 
products. The witness stated that the dairy industry is one of the last 
industries to engage in the receipt of a raw commodity, manufacture it 
into finished products, and price and sell these products before 
knowing the cost of the raw ingredient. This, according to the witness, 
is resulting in an unstable market.
    To follow through on the argument presented by the Cheese Makers 
regarding the untimeliness of a Grade B survey, several witnesses 
opposed the additional lag in pricing created by Kraft's proposal. In 
fact, most witnesses who supported the adoption of a competitive pay 
price series advocated the use of a product formula for updating 
purposes. One witness for the Central Milk Producers Cooperative (CMPC) 
stated that the industry has long recognized one problem with the 
current M-W price being the time lag between changes in product markets 
and milk prices both on the upside and downside of the market. The 
combination of the M-W price lag and the forward pricing used in the 
Federal order program further complicates the timing problem and any 
additional lag would be unacceptable. In its brief, CMPC further 
asserted that an additional lag could create an opportunity for 
exploitation of the market by manufacturers.
    The witness for Country Fresh, et al., stated that these 
organizations strongly oppose any reduction in the amount of forward 
notice the industry currently receives on its raw milk costs. This 
point of view was further addressed by the National Milk Producers 
Federation witness who stated that Federal order prices should, to the 
maximum extent possible, reflect current market conditions. The brief 
filed on behalf of AE/SFG stated that although we ``understand Kraft's 
proposal * * * less current pricing does not benefit anyone in the 
industry.''
    The third competitive pay price series advanced as an alternative 
to the current M-W price is the Agricultural Prices M-W (Ag Prices M-
W), which was developed for the study in response to an industry 
request to make the least amount of change necessary to replace the 
current M-W price. The Ag Prices M-W is an approximation of the base 
month M-W price and is calculated from NASS' ``Prices Received'' 
series, which includes estimates of manufacturing grade milk prices for 
Minnesota and Wisconsin. The ``Prices Received'' estimates are computed 
approximately two weeks prior to the tabulation of the base month M-W 
price. These estimates are published around the end of each month in 
``Agricultural Prices'', a NASS publication.
    The ``Prices Received'' estimates are derived from reports of 
plants that are part of the base month sample. These prices for 
Minnesota and Wisconsin are weighted together using the same weights as 
in the M-W price to determine the Ag Prices M-W. Thus, the Ag Prices M-
W available on the 5th day of the month would be the price for the 
second preceding month. The price announced March 5th would represent 
January pay prices. The volume of Grade B milk represented in the 
``Prices Received'' sample represents about 30 percent of all Grade B 
milk sold in Minnesota and Wisconsin.
    The adoption of the Ag Prices M-W updated with a product price 
formula was supported by numerous producer organizations during the 
hearing. One proponent of this replacement option, proposal number six, 
was the National Milk Producers Federation (NMPF), a federation that 
represents a substantial number of dairy cooperative marketing 
associations. A witness speaking on behalf of NMPF testified that there 
are currently sufficient quantities of Grade B milk being marketed in 
Minnesota and Wisconsin to allow NASS to collect reliable price 
information received by dairy producers for Grade B milk in those 
States.
    The NMPF witness further stated that the Ag Prices M-W ``will 
reflect a price level determined by competitive conditions which are 
affected by supply and demand in all the major uses of manufactured 
dairy products. It is a free market pay price resulting from 
competitive bidding among unregulated processors for milk for various 
manufacturing uses and is a good measure of changes in the value of 
milk for manufacturing.'' The witness also testified to the need for 
updating the Ag Prices M-W because Federal order prices should reflect 
current market conditions as much as possible and the one-month lag 
created by this formula would be unacceptable. The proponents of the Ag 
Prices M-W recommended the use of the same product price updating 
formula that is currently used to update Class II prices. Use of the Ag 
Prices M-W was also supported by Darigold, Farmers Cooperative 
Creamery, Northwest Independent Milk Producers Association, and 
Tillamook Cooperative Creamery Association (Darigold, et al.), all of 
whom are additional proponents of the Ag Prices M-W. A witness 
representing Darigold, et al., concluded that an important element of 
this price series is its relative price stability compared with the 
current M-W price.
    Opposition to the use of the Ag Prices M-W was advanced by the same 
organizations who opposed the adoption of the base month M-W price. The 
opposition cited the identical arguments for opposing the Ag Prices M-W 
as for the base month M-W price.
    In post-hearing briefs, all of the proponents of the base month M-W 
price and the Ag Prices M-W reiterated the need for the adoption of a 
competitive pay price series as a replacement for the current M-W 
price. Most of the proponents of these two proposals, with the 
exception of Kraft, stated that the primary difference between the 
updated base month M-W price and the updated Ag Prices M-W was the 
sample size. Most of these proponents expressed a willingness to 
support either competitive pay price series based on the amount of milk 
the Department determined would be necessary to obtain an accurate 
estimate of the price paid for Grade B milk in Minnesota and Wisconsin.
    Three other types of proposals were considered at the hearing: 
product price formulas, the support price, and cost-of-production 
formulas. All three types of proposals received substantial opposition. 
One other proposal listed in the hearing notice, proposal number eight, 
would have established the basic formula price on wholesale prices of 
manufactured products. Two proponents, Lamers Dairy, Inc., and Empire 
Cheese, Inc., withdrew their support for this proposal. There was no 
other support for proposal eight during the hearing. Thus, it is 
considered abandoned.
    The Cheese Makers proposed the adoption of a product price formula 
updated by a competitive pay price factor as a replacement for the M-W 
price, listed as proposal number seven in the hearing notice. This 
proposal is based on a current competitive pricing mechanism designed 
to reflect the current true value for milk. This proposal would require 
the announcement of weekly prices based on a butter/powder/cheese 
formula using the most recent weekly product prices. This weekly basic 
formula price would be announced on Friday and would apply to the 
following Monday through Sunday. The weekly prices would then be used 
to compute a monthly average product price formula value. A competitive 
differential, the difference between the monthly A/B price and the 
average product price value, would be multiplied by 50 percent to yield 
a preliminary adjustor. The preliminary adjustor would be added to the 
monthly product price formula value to determine the calculated basic 
formula price. The final industry price would then be computed based on 
75 percent of the difference between the competitive A/B price and the 
calculated basic formula price plus the blend price for the second 
preceding month. The intended result is a price to producers which 
would be more representative of the value of manufacturing grade milk.
    The witness testifying on behalf of the Cheese Makers stated that 
their proposal would determine the true manufacturing value of milk by 
using a product price formula updated with a competitive pay price. The 
witness also testified to the need within the industry for current 
pricing or announcing a price on Friday of each week that could be used 
as a guideline for pricing milk the following week. According to the 
witness, current pricing is crucial to the dairy industry because the 
price of the raw milk used in manufacturing is unpriced when the 
finished product is sold.
    Opposition to the Cheese Makers use of a product price formula as 
the basis for the basic formula price was presented by several 
organizations during the hearing and in post-hearing briefs. The 
witness representing Country Fresh, et al., stated that although 
product prices reflect supply and demand conditions in the marketplace, 
translating these into raw milk prices presents problems. According to 
the Country Fresh, et al., witness a product formula price has three 
key components: product prices, yield factors, and manufacturing 
allowances. Selecting the appropriate product prices, yield factors and 
manufacturing allowance to be used in the formula is difficult. The 
witness explained that there are several products and by-products of 
milk which can be used in a product price formula. Determining which 
products, and to a lesser extent which by-products, are included 
directly influences the value represented by the formula. Selecting 
appropriate yield factors is also difficult because these vary both 
seasonally and annually. Finally, establishing appropriate 
manufacturing allowances that vary with each plant based on the 
modernness of the facility, management practices, milk supplies, and 
product yields further complicates a product price formula. Factors 
that may be appropriate at one time can quickly become unacceptable, 
said the Country Fresh, et al., witness. Kraft's witness reiterated the 
points set forth by the Country Fresh, et al., witness, stating that 
changes in competitive milk prices do not correspond exactly with 
changes in product prices.
    In the post-hearing brief filed by AE/SFG, three supplementary 
reasons for opposing the Cheese Makers proposal were presented. 
According to the brief, product price formulas are unable to properly 
fulfill market-clearing functions. In addition to the assumptions 
concerning which products, yield factors, and manufacturing allowances 
are included in the formula, the AE/SFG brief contended that product 
price formulas will not send producers the needed production signals to 
increase or decrease production as quickly as would competitive pay 
prices. A second issue raised by AE/SFG related to the effect of the 
final price adjustor. According to the AE/SFG brief, the final price 
adjustor provides for more current pricing for cheese manufacturers at 
the expense of less current pricing for fluid processors. The final 
issue addressed in this brief concerned the price enhancement that AE/
SFG projected would occur for which they believe there is no supporting 
economic analysis under current supply and demand conditions. The brief 
filed by Country Fresh, et al., also addressed the concern that this 
proposal would eliminate advance pricing, a result the brief considered 
unacceptable.
    A brief filed by Alto Dairy Cooperative (Alto) stated that the 
Cheese Makers proposal attempts to set the stage for a long-run 
solution because it moves the industry toward a pricing system that 
reflects the value of milk products and their milk components. Alto 
felt that with some simplification and revisions, this proposal could 
form the basis for a long-term solution. However, Alto further stated 
that in this proceeding the revisions needed are not possible because 
the proceeding does not allow for consideration of the relationship 
between the Class I and Class III prices.
    The Minnesota Milk Producers Association and the Wisconsin Farm 
Bureau Federation (MMPA/WFBF) proposed replacing the M-W price with the 
support price (proposal number nine in the hearing notice). Four 
witnesses testified in support of this proposal. In addition, Lamers 
Dairy, Inc., and Hansen's Dairy, Inc., stated support for this proposal 
during the hearing.
    The first witness for MMPA/WFBF testified that the adoption of the 
support price as the basic formula price would establish consistency 
between the price support program and the Federal milk order program. 
The witness stated that this proposal would establish easily determined 
minimum prices for all classes of milk and would not set an effective, 
or market, price. According to the witness, this proposal would allow 
local market over-order pricing and over-order premiums to set the 
price for milk, resulting in a more market-driven system.
    The second witness for MMPA/WFBF elaborated on the benefit created 
by this proposal, as perceived by the witness, because it would 
decouple classified pricing from the Upper Midwest. He contended that 
the supply and demand situation in this area is unique because 
competition for manufacturing milk is driving producer pay prices year 
round. He described the effect of adopting the support price as a 
decrease in class prices where the order prices are the effective 
prices, and little change in markets where competition is determining 
the effective prices. A third witness for MMPA/WFBF reiterated these 
points and testified that the adoption of this proposal would guarantee 
that minimum order prices were not leading to disparate regional 
profitability levels.
    The final witness for MMPA/WFBF testifying in favor of adopting the 
support price as the basic formula price expounded on the points 
advanced by the previous witnesses. The witness also reiterated that 
this proposal would make the Federal milk order program consistent with 
the price support program in pursuing the objective of minimum prices. 
He observed that the minimum prices in all Federal orders are linked to 
the M-W price, not local supply and demand conditions. Thus, he stated, 
these prices are impacted by supply and demand conditions in Minnesota 
and Wisconsin regardless of what local marketing conditions may 
warrant. According to the witness, minimum prices established without 
regard to local supply and demand conditions result in disparate 
regional profitability. This witness testified that the adoption of the 
support price may or may not have an impact on the producer prices. If 
the competitive conditions of the market warrant the current price then 
this price would remain. If not, it would decline to the support level. 
He argued that adoption of the support price as the basic formula price 
would succeed in establishing minimum prices and thus would allow the 
Federal order program to establish true minimum prices.
    The witness stated that Federal order prices are intended to be 
minimum prices. However, he stated that the extent to which the Federal 
order prices represent minimum prices instead of effective prices 
varies among the orders as is evident by the cooperative pay prices. He 
asserted that if the cooperative pay price is above the order minimum 
blend price, then local marketing conditions are establishing the 
effective price. However, the witness concluded, if the cooperative pay 
price is below the order minimum blend price, the minimum prices are 
too high.
    Besides the brief filed by the proponents, two additional briefs 
were filed in support of this proposal, one by the U.S. Department of 
Justice (DOJ) and the second on behalf of Lamers Dairy, Inc., and 
Hansen's Dairy, Inc. The DOJ brief stated that the adoption of the 
support price as the basic formula price would establish a low minimum 
price which would allow market forces to play the greatest possible 
role in determining milk production and price. The DOJ contended that a 
low minimum price would not result in inadequate milk supplies or harm 
efficient producers, but would facilitate the transition towards a free 
market; would provide for more efficient industry performance; and 
would result in lower prices to consumers.
    Substantial opposition to the adoption of the support price as the 
basic formula price was presented during the hearing and in post-
hearing briefs. A witness representing Pennmarva Dairymen's Federation 
and its member cooperatives and Milk Marketing, Inc. (Pennmarva, et 
al.), offered extensive testimony in opposition to adopting the support 
price. First, the witness stated that the milk value established under 
the Federal order program should be based on the competitive value of 
milk used to produce manufactured dairy products. Since 1990, he 
observed, the support price of $10.10, adjusted to 3.5 percent 
butterfat, has yielded a price between $9.88 and $9.97 per 
hundredweight, depending on the support price calculation. He stated 
that during the same period, the M-W price at 3.5 percent butterfat has 
ranged from $10.02 to $13.94 per hundredweight. The witness contended 
that these price fluctuations have provided the necessary signals to 
Federal order producers to make adjustments in supply according to 
demand.
    The next point of objection by the Pennmarva, et al., witness 
focused on the disruption of orderly marketing conditions which he 
feared would be created by the adoption of the support price. According 
to the witness, this disruption would result because the Federal order 
price would be below the competitive value of milk. During the period 
between April 1988 through April 1992, the M-W price has exceeded the 
support price by amounts ranging from $.12 to $4.58.
    The Pennmarva, et al., witness then explained that the Federal 
order program and the price support program have different objectives. 
He described the order program objective as maintaining an adequate 
supply of milk to meet the fluid needs of the market, while the support 
program provides a price floor for milk used to manufacture dairy 
products. Another point of opposition addressed by the witness was the 
fact that Federal order class prices would no longer be influenced by 
seasonal and other supply and demand factors.
    Further objection by the Pennmarva, et al., witness addressed the 
fact that milk not regulated under the Federal order program would 
still be priced on a competitive basis, creating differences in price 
levels and further resulting in disorderly marketing. A substantial 
increase in over-order prices would become the means of improving the 
competitiveness of regulated handlers, resulting in greater inequities 
between producers and handlers. The witness projected that this would 
lead to increased instability between producers and handlers because of 
the increase in risks by both parties.
    Several other witnesses, including but not limited to MIF/IICA, 
NMPF, CMPC, AE/SFG, Darigold, et al., SCDF, Dairylea and its affiliated 
cooperatives, and Country Fresh, et al., expounded on the points of 
opposition addressed by the Pennmarva, et al., witness during the 
hearing and in post-hearing briefs. The consensus of those opposing the 
adoption of the support price was that it would result in disorderly 
marketing conditions with the price received by dairy farmers being 
lowered. They contended that Federal order prices would no longer 
reflect supply and demand conditions but would be based on a 
politically determined price.
    The final M-W price replacement alternative considered at the 
hearing, proposal number ten, was the use of a cost-of-production 
formula to determine the basic formula price. Several independent dairy 
farmers and dairy farmer organizations proposed this alternative. 
Proposal number ten in the hearing notice listed a formula that might 
be utilized to determine the cost of production although none of the 
witnesses testifying in support of this proposal discussed the listed 
formula. The witness testifying on behalf of the Progressive 
Agriculture Organization and several other groups (PAO) and the witness 
representing the National Farmers Union (NFU) proposed using the 
national average cost of production published by USDA, adjusted 
annually, as the basic formula price.
    The PAO witness stated that all dairy farmers should be treated 
equally and that the current basic formula price results in an 
inadequate pay price for producer milk. The witness contended that due 
to the inadequacy of this price, several dairy farmers have been either 
forced out of business or forced to increase production to maintain a 
constant cash flow. According to the witness, the PAO proposal would 
benefit producers, processors, and consumers because it would result in 
long-term price stability by eliminating the volatile price swings the 
industry currently experiences. Although the witness stated that this 
proposal would increase prices, he maintained that it would not 
stimulate production. Basically, these viewpoints were expressed by 
other witnesses representing the American Dairy Farmer Campaign and 
several other groups, Empire State Family Farm Alliance and several 
other groups, and the NFU. As mentioned previously, NFO also supported 
the adoption of the cost of production as a floor price for the basic 
formula price.
    A witness from the University of Wisconsin--River Falls, testified 
exclusively in opposition to the cost of production as a replacement 
for the M-W price. The witness based his opposition on the theory that 
the price received for milk determines the cost of production. He cited 
historical data which he maintained proved that dairy farmers do adjust 
their inputs in response to milk prices. He further reiterated the 
point that the adoption of a cost-of-production formula would not 
monitor changes in national supply and demand conditions.
    In addition to this witness, an overwhelming amount of opposition 
to the adoption of a cost-of-production formula was presented during 
the hearing and in post-hearing briefs. The general consensus of the 
opposition is that a cost-of-production formula accounts for only 
factors affecting supply conditions; it does not factor demand 
conditions into the calculation. Also, the opposition argued that 
basing the cost of production on the national average would not account 
for the regional variations in production costs and would tend to 
advantage the larger, more efficient producers. It was further agreed 
by the opponents that the ultimate result of adopting a cost-of-
production formula as the basic formula price would be an increase in 
production. Another problem cited with this proposal is the 
availability of data; USDA cost-of-production numbers tend to lag 
current production costs by two years.
    The Agricultural Marketing Agreement Act of 1937, as amended (the 
Act), authorizes the Federal milk order program. 7 U.S.C. section 602 
sets forth the declaration of policy and 7 U.S.C. section 608c(18) sets 
forth certain milk pricing requirements. Part of the policy of the 
Federal milk order program is to

establish and maintain such orderly marketing conditions * * * as 
will provide, in the interests of producers and consumers, an 
orderly flow of the supply, thereof * * * to avoid unreasonable 
fluctuations in supplies and prices. * * *

    The pricing provisions state in part, that

    Whenever the Secretary finds, upon the basis of evidence adduced 
at the hearing * * * , that the parity prices of such commodities 
are not reasonable in view of the price of feeds, the available 
supplies of feeds, and other economic conditions which affect market 
supply and demand for milk and its products in the marketing area * 
* * he shall fix such prices as he finds will reflect such factors, 
insure a sufficient quantity of pure and wholesome milk to meet 
current needs and further to assure a level of farm income adequate 
to maintain productive capacity sufficient to meet anticipated 
future needs, and be in the public interest.

    The hearing notice stated that any change in price levels must be 
justified under the supply and demand pricing standards mentioned 
above. The hearing record indicates that current price levels are 
achieving a reasonable balance between supply and demand for milk. 
Present price levels are ensuring consumers of an adequate supply of 
milk while maintaining sufficient reserve supplies. The record 
conclusively demonstrates that three types of the proposals 
considered--product price formulas (except for updating purposes), the 
support price, and cost-of-production formulas--would change current 
price levels and do not have sufficient justification in the 
evidentiary record for such changes. In addition, the latter two 
proposals do not comply with the criteria specified in the Act. 
Consequently, such proposals are denied.
    A host of economic conditions affect both supply and demand. The 
interaction of supply and demand results in a ``market'' price. Thus, 
the M-W price, as a competitive pay price, reflects all of the economic 
conditions that affect both supply and demand and is automatically 
responsive to any changes that affect economic conditions.
    The cost-of-production formulas and the price support level, as 
replacements for the M-W price, would ignore these economic factors and 
would establish price levels on a limited and different basis. While 
the cost of milk production is an economic factor that affects supply, 
it is not a price indicator that reflects all economic supply and 
demand factors. Likewise, the price support level is a price floor that 
is designed to prevent further price reductions that might otherwise be 
warranted by supply and demand conditions. As a result of not 
encompassing all economic supply and demand factors, these two types of 
proposals would establish prices on factors that are not in conformance 
with the requirements of the Act.
    The use of cost-of-production formulas also would substantially 
enhance price levels, a result which was not justified on the basis of 
the evidentiary record of this proceeding. During the five-year period 
1988-1992, the economic (full ownership) costs of producing a 
hundredweight of milk, as published by the Economic Research Service 
(ERS), annually averaged $1.77 greater than the current M-W price, 
ranging from $0.27 to $3.04 more. The cost of production exceeded the 
M-W price during these five years in all but seven months, September 
1989 through January 1990, and May and June 1990. This was an atypical 
period within the dairy industry that resulted in record level prices 
as milk production declined and demand in both the domestic and foreign 
markets increased. Official Notice is taken of ``Economic Indicators of 
the Farm Sector, Costs of Production--Major Field Crops & Livestock and 
Dairy, 1991,'' February 1994, Economic Research Service.
    The same five-year comparison of NFO's proposal, which is based on 
an A/B updated price with a cost-of-production floor price as the basic 
formula price, disclosed that the cost-of-production value would have 
been in effect for all but 14 months during this 60-month period. NFO's 
proposal results in a basic formula price that would have exceeded the 
current M-W price by an annual average of $2.01, ranging from $0.93 to 
$3.04.
    The opposite of the price enhancement generated by the cost-of-
production formula as the basic formula price could occur if the 
support price were adopted as a replacement. The support price as the 
basic formula price would result in a significant decrease in Federal 
order minimum prices, an outcome which was not justified on the basis 
of the evidentiary record of this proceeding. The same five-year 
comparison (1988-1992) of the support price to the current M-W price 
shows that the M-W price on a yearly basis averaged $1.60 greater than 
the support price, ranging from a low in 1988 of $0.70 to a high in 
1990 of $2.32. On a monthly basis, the M-W price equalled the support 
price only once during this period and exceeded the support price by as 
much as $4.58. Official notice is taken of ``Dairy Market News'', 
Volume 60, Report 31, Agricultural Marketing Service. As a result, 
Federal order minimum prices would be static and would be virtually 
meaningless as indicators of supply and demand conditions and changes 
in such conditions. Minimum prices established on such a basis would 
not be consistent with the requirements of the Act.
    As was indicated in the brief filed by Alto, the Cheese Makers 
formula needs to be further developed to be considered as a viable 
alternative for replacing the M-W price. The formula as presented 
during the hearing would still require the use of a competitive pay 
price series to be utilized in computing the final adjustor. The Cheese 
Makers proposed the use of the A/B price but stated that any 
competitive pay price could be utilized in their proposal. However, 
they provided no analysis as to what impact other competitive pay 
prices may have on the formula.
    The Cheese Makers proposal, as presented, is also likely to be 
revenue-enhancing and such enhancement is not justified on the basis of 
the evidentiary record of this proceeding. The proponents contend that 
the proposal does not change current price levels. However, the 
proponents are comparing their proposal to the A/B price series, which 
increases price levels from the current M-W price, as previously 
discussed. The calculated basic formula price advanced by the Cheese 
Makers results in a moderate price increase over the M-W price. In 1989 
the calculated basic formula price averaged $0.29 above the M-W price 
and in 1990 averaged $0.33 greater than the M-W price. A substantial 
increase in the M-W price is evident when the final adjustor is 
included in the comparison. This computation resulted in a 1989 price 
$0.54 greater than the M-W price and $0.62 greater in 1990. The use of 
the final adjustor, which adjusts the price after wholesale prices for 
fluid milk products have been determined, would effectively eliminate 
the advance Class I pricing feature that currently exists under the 
orders. The proposal also does not specify a clear procedure for the 
computation of minimum Class II prices. As a result of all the changes 
that would need to be adopted to make this a workable replacement, the 
Cheese Makers proposal goes beyond the scope of the hearing to consider 
a replacement for the M-W price as the basic formula price under all 
Federal milk orders.
    As demonstrated throughout the hearing record, the obvious problem 
with the current M-W price survey is the declining amount of Grade B 
milk and the declining number of plants that purchase such milk. These 
trends have resulted in concern about the validity of the M-W price as 
a measure of the competitive value of milk for manufacturing purposes. 
However, this was not an immediate concern of a large number of the 
parties that participated in this proceeding. The immediate concern 
expressed was the reliability of the procedure to update the base month 
M-W price to compute the current month's M-W price. The NASS witness 
testified that the number of plants available for updating the base 
month has been declining as fewer plants pay twice a month. However, 
the NASS witness did not express any reservations about the reliability 
of the base month M-W price.
    When the M-W price was first adopted in 1961 as the basic formula 
price in the Chicago order, the Secretary determined that a competitive 
pay price was superior to product formulas or the support price in 
establishing the basic formula price. That decision states:

    The use of the competitive pay price method of pricing milk is 
based upon the premise that in a highly competitive economy dairy 
concerns will tend to purchase milk at prices commensurate with the 
more efficient concerns' ability to pay for the product. As shifts 
occur in the relationship between finished products prices, one 
group of processors may be able to pay higher prices. The other 
processors must meet or approximate these prices or lose their 
supplies. If a dairy concern fails to make the necessary 
adjustments, it will in time be forced out of business. Increasing 
labor and other costs will tend to reduce prices paid for milk. On 
the other hand, the use of new assembling, processing, packaging and 
marketing techniques which reduce costs or increase product returns 
will tend to increase prices paid for milk. These upward or downward 
adjustments in costs would be automatically reflected in reserve 
prices by using the competitive pay prices method of pricing.

    The economic rationale stated when the M-W price was first adopted 
remains sound today. Consequently, the basic formula price replacement 
should continue to be based on a competitive pay price series.
    Of the three competitive pay price series considered at the 
hearing, the evidence on the record supports the adoption of either the 
base month M-W price or the Ag Prices M-W, both updated by a product 
price formula. Each price series has tracked the M-W price in the past, 
thus reflecting the same supply and demand conditions. The majority of 
participants in this proceeding indicated that either price series 
would be acceptable, leaving the determination of the amount of milk 
and number of plants included in the sample size to the discretion of 
the Secretary. In cross examination, the NASS witness stated that the 
base month M-W price is expected to outlive the Ag Prices M-W in terms 
of statistical reliability because it relies on a larger sample size of 
actual pay prices compared to the Ag Prices M-W. Thus, this decision 
recommends adopting the base month M-W price updated with a butter/
powder/cheese formula, because this price is based on actual pay prices 
from a larger Grade B sample size and is projected to have greater 
statistical longevity than the Ag Prices M-W.
    The price levels that would have resulted under the three 
alternative competitive pay price series, as compared to the M-W price, 
support the above recommendation. The degree of coordination between 
the current M-W price and the alternative replacements is a substantial 
indicator of the ability of the pricing alternatives to echo the supply 
and demand conditions reflected by the current M-W price. An accurate 
comparison of these prices without updaters could not be made on a 
monthly basis because each of these prices lags the M-W price by a 
month. However, a three-year comparison essentially eliminates this 
problem.
    During both 1990 and 1991, the average A/B price per hundredweight 
exceeded the M-W price per hundredweight by 63 cents, and by 85 cents 
in 1992. The average Ag Prices M-W per hundredweight exceeded the M-W 
price per hundredweight by nine cents in 1990, equalled the M-W price 
per hundredweight in 1991, and was two cents greater in 1992. The base 
month M-W price per hundredweight yielded an average of six cents more 
in 1990 and resulted in the same price differences as the Ag Prices M-W 
per hundredweight in 1991 and 1992. Over the three-year period, the 
base month M-W price per hundredweight and Ag Prices M-W per 
hundredweight averaged nearly the same as the current M-W price per 
hundredweight while the A/B price per hundredweight averaged about 70 
cents higher. The most recently published information indicates that 
this trend is continuing. Official notice is taken of ``Dairy Market 
News'', Jan. 3-7, 1994, Volume 61, Report 1, Agricultural Marketing 
Service; ``Agricultural Prices, 1992 Summary'', July 1993, National 
Agricultural Statistics Service; ``Minnesota-Wisconsin Manufacturing 
Grade Milk Price'', monthly release, June 1992-February 1994, Wisconsin 
Agricultural Statistics Service; ``Prices Received--Minnesota-Wisconsin 
Manufacturing Grade Milk, 1992 Summary'', June 1993, National 
Agricultural Statistics Service.
    The evidence on the record indicates that a large amount of Grade A 
milk is being manufactured into dairy products. However, the record 
does not validate the argument that this Grade A milk should be 
factored into the basic formula price. Additionally, there was no 
substantial evidence submitted regarding current supply and demand 
conditions that warrants price increases of the magnitude generated by 
the A/B price.
    The A/B proponents may be correct to state that this option 
represents an average value for a large proportion of milk used for 
manufacturing purposes in the Midwest. However, it does not represent a 
market-clearing price for supplies of milk in excess of fluid demand. 
This is evident by the amount of milk that is currently sold at prices 
below the A/B price, that is, at the current M-W price. The hearing 
record indicates that adopting this price series would tend to be 
revenue-enhancing.
    To be considered in the future as a viable alternative, the A/B 
price series needs to address two inherent problems. First the A/B 
price is based in part on a regulated price. Regulated plants included 
in the survey that use Grade A milk for manufacturing are subject to 
minimum order pricing. This factor results in an upward bias in the A/B 
price. The price for this milk cannot be directly reduced to pay price 
levels warranted by supply and demand conditions for such milk. After 
the first month of implementation, survey plants would be reporting a 
pay price which could not be less than the minimum price required to be 
paid for Grade A milk under the Federal order program. Consequently, 
after the first month of implementation, supply and demand conditions 
would have a limited influence on the price.
    The proponents of this series maintained that the ``blend down'' of 
the Grade A price with the Grade B price will eliminate this problem. 
However, a review of the amount of milk included in this survey, 
approximately 70 percent of the total milk production in the States of 
Minnesota and Wisconsin, of which almost 80 percent is Grade A, 
indicates that it is unlikely the Grade B price would have a ``blending 
down'' impact or effect on the Grade A price.
    Secondly, Grade A premiums are built into the A/B price unless 
specifically deducted. This too results in an upward bias as premiums 
are added one month into the reported price and the same premium is 
then added in the second month to the already existing premium.
    As a result of lack of justification for price enhancement in the 
evidentiary record, as well as the problems associated with the upward 
price bias, the proposals to replace the M-W price with an A/B price 
are denied. Potential solutions addressing the upward bias were not 
considered during this proceeding.
    A comparison of the survey size for May 1991 data demonstrates that 
the Ag Prices M-W survey included 131.6 million pounds of milk reported 
by 71 plants. The base month M-W price survey included 316.5 million 
pounds of milk reported by 168 plants. Simply waiting a few additional 
days results in a sample size of milk which is 140 percent greater than 
the Ag Prices M-W. The base month M-W price sample size of milk is over 
four and one-half times greater than the current M-W price estimate 
survey, which included actual pay price reports on only 56.8 million 
pounds of milk reported by 69 plants. Thus, the base month M-W price 
best reflects the competitive pay prices of a much larger volume of 
milk and sample of plants and should be the primary component in the 
basic formula price.
    The hearing record also supports the use of a product price formula 
to update the base month M-W price to the current month. The base month 
M-W price available on the 5th day of a month would represent milk 
prices for the second preceding month. For example the price announced 
March 5th would be based on January prices. A product price formula 
updater would enable the base month M-W price to reflect more 
accurately current supply and demand conditions taking into account 
price changes for wholesale manufactured products during the preceding 
month, in this example February. Although product prices do not 
translate directly into milk prices, the record indicates that the 
industry views these as a good indicator of changes in milk prices for 
updating purposes.
    The price delay that would be created by adopting this proposal 
without an updating method would result in the minimum price required 
to be paid by regulated plants varying significantly from what 
unregulated plants were actually paying for milk for manufacturing uses 
in the same month. Because of this inequity, adoption of the base month 
M-W price without a product price updater cannot be justified as a 
replacement for the M-W price.
    An analysis of the effects of various updating formulas on the 
competitive pay prices resulted in minor differences. Most hearing 
participants advocated the use of the change in gross values yielded by 
a product price formula between the preceding month and the current 
month. Only NFO advocated using 50 percent of this change, stating that 
producer prices and product markets do not change at the same rate. NFO 
claimed that using 50 percent would not reflect the volatility of 
product markets on a penny-for-penny basis and further lends a degree 
of stability to producer prices.
    All hearing participants promoted the use of a butter/powder/cheese 
formula with minor differences expressed regarding the inclusion of 
specific by-products. After reviewing the various formulas, it is 
concluded the best updater would include the following products and 
representative price series: Grade AA butter, Chicago Mercantile 
Exchange (AAB); Nonfat dry milk, Central States production area (NFDM); 
Dry buttermilk, Central States production area (DBM); Cheddar cheese, 
40-pound block, National Cheese Exchange (NCE); and Grade A butter, 
Chicago Mercantile Exchange (AB). Dry whey is not included in the 
formula because not all cheese manufacturers process whey, and the 
disposal of it is a cost to many manufacturers. Furthermore, dry whey 
is no longer included in calculating the cheese purchase price under 
the dairy price support program.
    Most hearing participants advocated the use of either support price 
yield factors or annual yield factors in the formula. The study 
released by the Department developed and used annual yield factors for 
each month. These annual yield factors will be used in the updating 
formula. Basically these yields are those used under the price support 
program adjusted to milk containing 3.5 percent butterfat. The yields 
used in the formula are: Butter--4.27 pounds per hundredweight of milk; 
Nonfat dry milk--8.07 pounds per hundredweight of milk; Dry 
buttermilk--.42 pounds per hundredweight of milk; Cheddar cheese--9.87 
pounds per hundredweight of milk; and Whey cream butter--.238 pounds 
per hundredweight of milk.
    Hearing participants also advocated the use of factors to weight 
the butter-nonfat dry milk and cheese components of the formula. These 
weights are based on the proportion of milk used in the production of 
butter-nonfat dry milk and in the production of American cheese in the 
Minnesota and Wisconsin area and in the United States. Nonfat dry milk 
is used to compute the butter-nonfat dry milk weighting factor because 
significant proportions of butter are manufactured in Minnesota and 
Wisconsin from the butterfat that is in excess of fluid milk 
operations. Cheese accounts for about 95 percent of the milk used in 
these products in the two States and about 75 percent in the United 
States. The Minnesota and Wisconsin weights are being used in the 
product price formula because the competitive pay price adopted is a 
Minnesota and Wisconsin pay price series. The milk equivalent used will 
be for the second preceding month.
    The butter/powder/cheese formula recommended in this decision was 
developed and tested in the Department's study. The gross value change 
in the product price formula from the preceding month to the current 
month will be used to update the base month M-W price. The gross value 
change for each month will be computed as follows:
    (1) Determine the gross value of milk used to manufacture Cheddar 
cheese and butter/nonfat dry milk:
    (a) The gross value of milk used to manufacture Cheddar cheese 
equals (9.87  x  NCE) + (.238  x  AB); and
    (b) The gross value of milk used to manufacture butter-nonfat dry 
milk equals (4.27  x  AAB) + (8.07  x  NFDM) + (.42  x  DBM).
    (2) Determine the amount by which these gross values exceed or are 
less than the respective gross values for the preceding month.
    (3) Compute weighting factors to be applied to the gross value 
changes. The weighting factors will be calculated as follows:
    (a) Determine the milk equivalent for both American cheese and 
butter-nonfat dry milk by using the American cheese production in 
Minnesota and Wisconsin divided by 9.87 to determine the cheese milk 
equivalent and the nonfat dry milk production in Minnesota and 
Wisconsin divided by 8.07 to determine the butter-nonfat dry milk 
equivalent;
    (b) Add the cheese milk equivalent and the butter-nonfat dry milk 
equivalent together to calculate the total milk equivalent; and
    (c) Divide the milk equivalent for cheese by the total milk 
equivalent to yield the cheese weighting factor and divide the butter-
nonfat dry milk equivalent by the total milk equivalent to yield the 
butter-nonfat dry milk weighting factor.
    (4) Use these weighting factors to compute a weighted average of 
changes in the gross values described above.
    An analysis of the base month M-W price updated by the full gross 
value change in the butter/powder/cheese formula, and by 50 percent of 
the gross value change, revealed that using the full gross value change 
results in an updated base month M-W price which better reflects 
current price levels. During 1990 the full gross value change in the 
butter/powder/cheese updating formula resulted in an average updated 
base month M-W price eight cents greater than the current M-W price, 
and in 1991 the updated price averaged one cent less. During 1992 and 
1993, the average updated base month M-W price was greater than the 
current M-W price by three cents and one cent, respectively. The base 
month M-W price updated by 50 percent of the same formula resulted in a 
1990 average price which exceeded the M-W price by 26 cents, in 1991 
the average price was eight cents less, in 1992 the average price was 
six cents greater, and in 1993 the average price was three cents less. 
Official Notice is taken of ``Dairy Market Statistics'', 1992 and 1993 
Annual Summaries, Agricultural Marketing Service; and ``Dairy 
Products'', 1992 and 1993 Annual Summaries, National Agricultural 
Statistic Service. From evidence in the record, and the results of this 
analysis, it is concluded that the full value of gross change between 
the preceding month and the current month using the butter/powder/
cheese formula described above results in an updated price that best 
reflects the current value of manufacturing milk.
    Although the updated base month M-W price will result in annual 
price levels that nearly maintain the current annual price levels, the 
updated base month M-W price will not track the current M-W price 
precisely from month-to-month. This is because the month-to-month price 
variability will increase as a result of the use of a product price 
formula that will allow the updated base month price to react quicker 
to marketing conditions both on the upside and downside of the market. 
The table below compares the monthly updated base month M-W price as 
proposed to the current monthly M-W price for 1993. During this period, 
the greatest monthly differences occurred in April when the updated 
base month M-W price exceeded the current M-W price by 46 cents, and in 
October when the updated base month M-W price was 27 cents lower than 
the current M-W price. However, for the entire 12 month period the 
updated base month M-W price exceeded the M-W price by only one cent.

                     Monthly Price Comparisons--1993                    
------------------------------------------------------------------------
                                  Updated                               
                                 base month  Current M-W    Difference  
             Month               M-W (Col.     (Col. 2)    (Col. 1-Col. 
                                     1)                         2)      
------------------------------------------------------------------------
January.......................       $11.02       $10.89         $0.13  
February......................        10.72        10.74         (0.02) 
March.........................        11.19        11.02          0.17  
April.........................        12.61        12.15          0.46  
May...........................        12.37        12.52         (0.15) 
June..........................        11.82        12.03         (0.21) 
July..........................        11.30        11.42         (0.12) 
August........................        11.18        11.17         (0.01) 
September.....................        12.29        11.90          0.39  
October.......................        12.19        12.46         (0.27) 
November......................        12.62        12.75         (0.13) 
December......................        12.44        12.51         (0.07) 
                                                                        
                               -----------------------------------------
    1993 Ave..................        11.81        11.80          0.01  
------------------------------------------------------------------------

    This decision recognizes that the adoption of the base month M-W 
price, or any Grade B milk series, is only a short-term solution since 
the amount of Grade B milk production is expected to continue 
declining. This decision agrees with the MIF/IICA witness who stated 
that the adoption of a Grade B survey, although it would not be a long-
term solution, would provide the industry with a reliable basic formula 
price for a few more years allowing the industry additional time to 
carefully consider longer-term solutions. Adoption of the base month M-
W price will provide the Department and the industry with more time to 
jointly develop a viable, long-term solution.
    Several organizations made specific requests regarding the adoption 
of a M-W price replacement. National All-Jersey, Inc., a national dairy 
farmer organization, and the American Jersey Cattle Club, a breed 
registry association, requested that the Secretary continue adjusting 
the M-W replacement to a 3.5 percent butterfat standard, continue 
collecting and reporting the protein content of the milk in the survey, 
and adopt a price replacement which will not restrict the further 
implementation of multiple component pricing plans. The adoption of the 
base month M-W as the replacement for the current M-W price will not 
change any of the adjustments and announcements that are currently 
reported and will not hinder adoption of multiple component pricing 
plans. The NFO and Cheese Makers further requested the continued 
collection and possible publication of the hauling subsidies paid to 
producers by plants in Minnesota and Wisconsin. It is expected that 
this information will continue to be collected by NASS and published by 
NASS in their ``Prices Received'' publication.

Conforming Changes

    As proposed in the Notice of Hearing, conforming changes are 
provided in the butterfat differential section to allow for the use of 
the updated base month M-W price in the butterfat differential 
calculation. To calculate a butterfat differential that will reflect 
the most current marketing conditions, the preceding month's base month 
M-W price at test, updated by the current month's product formula 
updater, will be used in conjunction with the current month's butter 
price. A comparison between the above butterfat differential and the 
current butterfat differential results in slight differences. This 
method of calculating the butterfat differential was supported in the 
CMPC and NFO briefs.
    Additional changes have been made to the Black Hills, South Dakota, 
Pacific Northwest, Southwestern Idaho-Eastern Oregon, and Great Basin 
orders. One change has been made to the Black Hills order to provide 
for uniform implementation and use of the basic formula price in all 
Federal orders. This has been accomplished by removing the butter/
powder formula price. One conforming change each has been made to the 
Pacific Northwest, Southwestern Idaho-Eastern Oregon, and Great Basin 
orders to provide for more uniform location of the butterfat 
differential provision within these orders.

Rulings on Proposed Findings and Conclusions

    Briefs and proposed findings and conclusions were filed on behalf 
of certain interested parties. These briefs, proposed findings and 
conclusions, and the evidence in the record were considered in making 
the findings and conclusions set forth above. To the extent that the 
suggested findings and conclusions filed by interested parties are 
inconsistent with the findings and conclusions set forth herein, the 
requests to make such findings or reach such conclusions are denied for 
the reasons previously stated in this decision.

General Findings

    The findings and determinations hereinafter set forth supplement 
those that were made when the New England and Other Marketing Area 
orders were first issued and when they were amended. The previous 
findings and determinations are hereby ratified and confirmed, except 
where they may conflict with those set forth herein.
    (a) 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 in view of the price of feeds, available 
supplies of feeds, and other economic conditions which affect market 
supply and demand for milk in the marketing areas, and the minimum 
prices specified in the tentative marketing agreements and the orders, 
as hereby proposed to be amended, are such prices as will reflect the 
aforesaid factors, insure a sufficient quantity of pure and wholesome 
milk, and be in the public interest; and
    (c) The tentative marketing agreements and the orders, as hereby 
proposed to be amended, will regulate the handling of milk in the same 
manner as, and will be applicable only to persons in the respective 
classes of industrial and commercial activity specified in, marketing 
agreements upon which a hearing has been held.

Recommended Marketing Agreements and Orders Amending the 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 amending the orders, as amended, regulating the 
handling of milk in the New England and Other 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 1001, 1002, 1004, 1005, 1006, 1007, 
1011, 1012, 1013, 1030, 1032, 1033, 1036, 1040, 1044, 1046, 1049, 1050, 
1064, 1065, 1068, 1075, 1076, 1079, 1093, 1094, 1096, 1099, 1106, 1108, 
1124, 1126, 1131, 1134, 1135, 1137, 1138, 1139

    Milk marketing orders.
    1. The authority citation for 7 CFR Parts 1001, 1002, 1004, 1005, 
1006, 1007, 1011, 1012, 1013, 1030, 1032, 1033, 1036, 1040, 1044, 1046, 
1049, 1050, 1064, 1065, 1068, 1075, 1076, 1079, 1093, 1094, 1096, 1099, 
1106, 1108, 1124, 1126, 1131, 1134, 1135, 1137, 1138, 1139 is revised 
to read as follows:

    Authority: 7 U.S.C. 601-674.

PART 1001--MILK IN THE NEW ENGLAND MARKETING AREA

    1. Section 1001.51 is amended by revising paragraph (a) to read as 
follows:


Sec. 1001.51  Basic formula prices.

    (a) The basic formula price shall be the preceding month's average 
pay price for manufacturing grade milk in Minnesota and Wisconsin using 
the ``base month'' series, as reported by the Department, adjusted to a 
3.5 percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1001.76 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a)(1) through (a)(5) of this section.
    (1) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (a)(2) of 
this section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (i) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (A) Multiply the butter price by 4.27;
    (B) Multiply the nonfat dry milk price by 8.07; and
    (C) Multiply the dry buttermilk price by 0.42.
    (ii) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (A) Multiply the Cheddar cheese price by 9.87; and
    (B) Multiply the butter (from whey cream) price by 0.238.
    (2) The following product prices shall be used pursuant to 
paragraph (a)(1) of this section:
    (i) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (ii) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (iii) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (iv) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (v) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (3) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (4) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (a)(3) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (a)(4)(i) and (a)(4)(ii):
    (i) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent reporting period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (ii) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent reporting period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (5) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (a)(3) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (a)(4) of this section.
* * * * *
    2. Section 1001.76 is amended by revising paragraph (b) to read as 
follows:


Sec. 1001.76  Butterfat differential.

* * * * *
    (b) Round to the nearest one-tenth cent, which shall be 0.138 times 
the current month's butter price less 0.0028 times the preceding 
month's average pay price per hundredweight, at test, for manufacturing 
grade milk in Minnesota and Wisconsin, using the ``base month'' series, 
adjusted pursuant to Sec. 1001.51(a)(1) through (a)(5), as reported by 
the Department. The butter price means the simple average for the month 
of the Chicago Mercantile Exchange, Grade A butter price as reported by 
the Department.

PART 1002--MILK IN THE NEW YORK-NEW JERSEY MARKETING AREA

    1. Section 1002.51 is amended by revising paragraph (a) to read as 
follows:


Sec. 1002.51  Basic formula prices.

    (a) The basic formula price shall be the preceding month's average 
pay price for manufacturing grade milk in Minnesota and Wisconsin using 
the ``base month'' series, as reported by the Department, adjusted to a 
3.5 percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1002.81 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a)(1) through (a)(5) of this section.
    (1) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (a)(2) of 
this section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (i) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (A) Multiply the butter price by 4.27;
    (B) Multiply the nonfat dry milk price by 8.07; and
    (C) Multiply the dry buttermilk price by 0.42.
    (ii) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (A) Multiply the Cheddar cheese price by 9.87; and
    (B) Multiply the butter (from whey cream) price by 0.238.
    (2) The following product prices shall be used pursuant to 
paragraph (a)(1) of this section:
    (i) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (ii) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (iii) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (iv) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (v) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (3) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (4) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (a)(3) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (a)(4)(i) and (a)(4)(ii):
    (i) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (ii) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent reporting period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese. (5) Compute a weighted 
average of the changes in gross values per hundredweight of milk 
determined pursuant to paragraph (a)(3) of this section in accordance 
with the relative proportions of milk determined pursuant to paragraph 
(a)(4) of this section.
* * * * *
    2. Section 1002.56 is amended by revising paragraphs (a)(4), (a)(5) 
and (a)(6) and by adding a new paragraph (a)(7), to read as follows:


Sec. 1002.56  Announcement of class prices and butterfat differential.

* * * * *
    (a) * * *
    (4) The basic formula price for the preceding month, pursuant to 
Sec. 1002.51(a), as reported by the United States Department of 
Agriculture.
    (5) The average price per hundredweight for manufacturing grade 
milk, f.o.b. plants in Wisconsin and Minnesota, using the base month 
series, for the second preceding month, as reported by the United 
States Department of Agriculture.
    (6) The average price per pound, of Grade A (92-score) butter, at 
the Chicago Mercantile Exchange, for the preceding month, as reported 
by the United States Department of Agriculture.
    (7) The average price per pound, of nonfat dry milk f.o.b. Central 
States Area, for the preceding month, as reported by the United States 
Department of Agriculture.
* * * * *
    3. Section 1002.81 is revised to read as follows:


Sec. 1002.81  Butterfat differential.

    The butterfat differential for the adjustment of prices as 
specified in this part shall be plus or minus for each one-tenth of one 
percent of butterfat above or below 3.5 percent by an amount computed 
as follows: Round to the nearest one-tenth cent, 0.138 times the 
current month's butter price less 0.0028 times the preceding month's 
average pay price per hundredweight, at test, for manufacturing grade 
milk in Minnesota and Wisconsin, using the ``base month'' series, 
adjusted pursuant to Sec. 1002.51(a)(1) through (a)(5), as reported by 
the Department. The butter price means the simple average for the month 
of the Chicago Mercantile Exchange, Grade A butter price as reported by 
the Department.

PART 1004--MILK IN THE MIDDLE ATLANTIC MARKETING AREA

    1. Section 1004.50 is amended by revising paragraph (d)(1) to read 
as follows:


Sec. 1004.50  Class and component prices.

* * * * *
    (d) * * *
    (1) Compute a butterfat differential per one percent butterfat, 
rounded to the nearest one-tenth cent, by multiplying the current 
month's butter price by 1.38, and subtract from the result an amount 
determined by multiplying 0.028 by the preceding month's average pay 
price per hundredweight, at test, for manufacturing grade milk in 
Minnesota and Wisconsin, using the ``base month'' series, adjusted 
pursuant to Sec. 1004.51(a)(1) through (a)(5), as reported by the 
Department. The butter price means the simple average for the month of 
the Chicago Mercantile Exchange, Grade A butter price as reported by 
the Department.
* * * * *
    2. Section 1004.51 is amended by revising paragraph (a) to read as 
follows:


Sec. 1004.51  Basic formula prices.

    (a) The basic formula price shall be the preceding month's average 
pay price for manufacturing grade milk in Minnesota and Wisconsin using 
the ``base month'' series, as reported by the Department, adjusted to a 
3.5 percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1004.50(d)(1) and rounded to 
the nearest cent, plus or minus the change in gross value yielded by 
the butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a)(1) through (a)(5) of this section.
    (1) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (a)(2) of 
this section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (i) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (A) Multiply the butter price by 4.27;
    (B) Multiply the nonfat dry milk price by 8.07; and
    (C) Multiply the dry buttermilk price by 0.42.
    (ii) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (A) Multiply the Cheddar cheese price by 9.87; and
    (B) Multiply the butter (from whey cream) price by 0.238.
    (2) The following product prices shall be used pursuant to 
paragraph (a)(1) of this section:
    (i) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (ii) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (iii) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (iv) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (v) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (3) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (4) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (a)(3) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (a)(4)(i) and (a)(4)(ii):
    (i) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (ii) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (5) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (a)(3) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (a)(4) of this section.
* * * * *

PART 1005--MILK IN THE CAROLINA MARKETING AREA

    1. Section 1005.51 is revised to read as follows:


Sec. 1005.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1005.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1005.74 is revised to read as follows:


Sec. 1005.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price(s) shall be increased or decreased, respectively, for 
each one-tenth percent butterfat variation from 3.5 percent by a 
butterfat differential, rounded to the nearest one-tenth cent, which 
shall be 0.138 times the current month's butter price less 0.0028 times 
the preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1005.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1006--MILK IN THE UPPER FLORIDA MARKETING AREA

    1. Section 1006.51 is revised to read as follows:


Sec. 1006.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1006.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1006.74 is revised to read as follows:


Sec. 1006.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1006.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1007--MILK IN THE GEORGIA MARKETING AREA

    1. Section 1007.51 is revised to read as follows:


Sec. 1007.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1007.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1007.74 is revised to read as follows:


Sec. 1007.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform prices for base and excess milk shall be increased or 
decreased, respectively, for each one-tenth percent butterfat variation 
from 3.5 percent by a butterfat differential, rounded to the nearest 
one-tenth cent, which shall be 0.138 times the current month's butter 
price less 0.0028 times the preceding month's average pay price per 
hundredweight, at test, for manufacturing grade milk in Minnesota and 
Wisconsin, using the ``base month'' series, adjusted pursuant to 
Sec. 1007.51(a) through (e), as reported by the Department. The butter 
price means the simple average for the month of the Chicago Mercantile 
Exchange, Grade A butter price as reported by the Department.

PART 1011--MILK IN THE TENNESSEE VALLEY MARKETING AREA

    1. Section 1011.51 is revised to read as follows:


Sec. 1011.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1011.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1011.74 is revised to read as follows:


Sec. 1011.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price(s) shall be increased or decreased, respectively, for 
each one-tenth percent butterfat variation from 3.5 percent by a 
butterfat differential, rounded to the nearest one-tenth cent, which 
shall be 0.138 times the current month's butter price less 0.0028 times 
the preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1011.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1012--MILK IN THE TAMPA BAY MARKETING AREA

    1. Section 1012.51 is revised to read as follows:


Sec. 1012.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1012.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1012.74 is revised to read as follows:


Sec. 1012.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1012.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1013--MILK IN THE SOUTHEASTERN FLORIDA MARKETING AREA

    1. Section 1013.51 is revised to read as follows:


Sec. 1013.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1013.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1013.74 is revised to read as follows:


Sec. 1013.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1013.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1030--MILK IN THE CHICAGO REGIONAL MARKETING AREA

    1. Section 1030.51 is revised to read as follows:


Sec. 1030.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1030.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1030.74 is revised to read as follows:


Sec. 1030.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1030.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1032--MILK IN THE SOUTHERN ILLINOIS-EASTERN MISSOURI MARKETING 
AREA

    1. Section 1032.51 is revised to read as follows:


Sec. 1032.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1032.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1032.74 is revised to read as follows:


Sec. 1032.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1032.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1033--MILK IN THE OHIO VALLEY MARKETING AREA

    1. Section 1033.51 is amended by revising paragraph (a) to read as 
follows:


Sec. 1033.51  Basic formula prices.

    (a) The basic formula price shall be the preceding month's average 
pay price for manufacturing grade milk in Minnesota and Wisconsin using 
the ``base month'' series, as reported by the Department, adjusted to a 
3.5 percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1033.73 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a)(1) through (a)(5) of this section.
    (1) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (a)(2) of 
this section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (i) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (A) Multiply the butter price by 4.27;
    (B) Multiply the nonfat dry milk price by 8.07; and
    (C) Multiply the dry buttermilk price by 0.42.
    (ii) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (A) Multiply the Cheddar cheese price by 9.87; and
    (B) Multiply the butter (from whey cream) price by 0.238.
    (2) The following product prices shall be used pursuant to 
paragraph (a)(1) of this section:
    (i) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (ii) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (iii) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (iv) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (v) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (3) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (4) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (a)(3) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (a)(4)(i) and (a)(4)(ii):
    (i) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (ii) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (5) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (a)(3) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (a)(4) of this section.
* * * * *
    2. Section 1033.73 is revised to read as follows:


Sec. 1033.73  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1033.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1036--MILK IN THE EASTERN OHIO-WESTERN PENNSYLVANIA MARKETING 
AREA

    1. Section 1036.51 is revised to read as follows:


Sec. 1036.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1036.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1036.74 is revised to read as follows:


Sec. 1036.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1036.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1040--MILK IN THE SOUTHERN MICHIGAN MARKETING AREA

    1. Section 1040.51 is revised to read as follows:


Sec. 1040.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1040.51 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1040.74 is revised to read as follows:


Sec. 1040.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform prices shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1040.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1044--MILK IN THE MICHIGAN UPPER PENINSULA MARKETING AREA

    1. Section 1044.51 is amended by revising paragraph (a) to read as 
follows:


Sec. 1044.51  Basic formula price.

    (a) The basic formula price shall be the preceding month's average 
pay price for manufacturing grade milk in Minnesota and Wisconsin using 
the ``base month'' series, as reported by the Department, adjusted to a 
3.5 percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1044.62 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a)(1) through (a)(5) of this section.
    (1) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (a)(2) of 
this section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (i) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (A) Multiply the butter price by 4.27;
    (B) Multiply the nonfat dry milk price by 8.07; and
    (C) Multiply the dry buttermilk price by 0.42.
    (ii) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (A) Multiply the Cheddar cheese price by 9.87; and
    (B) Multiply the butter (from whey cream) price by 0.238.
    (2) The following product prices shall be used pursuant to 
paragraph (a)(1) of this section:
    (i) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (ii) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (iii) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (iv) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (v) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (3) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (4) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (a)(3) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (a)(4)(i) and (a)(4)(ii):
    (i) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (ii) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (5) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (a)(3) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (a)(4) of this section.
    2. Section 1044.62 is revised to read as follows:


Sec. 1044.62  Butterfat differential.

    The applicable uniform prices to be paid pursuant to Sec. 1044.70 
shall be increased or decreased, for each one-tenth of one percent 
butterfat variation from 3.5 percent by a butterfat differential, 
rounded to the nearest one-tenth cent, which shall be 0.138 times the 
current month's butter price less 0.0028 times the preceding month's 
average pay price per hundredweight, at test, for manufacturing grade 
milk in Minnesota and Wisconsin, using the ``base month'' series, 
adjusted pursuant to Sec. 1044.51 (a)(1) through (a)(5), as reported by 
the Department. The butter price means the simple average for the month 
of the Chicago Mercantile Exchange, Grade A butter price as reported by 
the Department.

PART 1046--MILK IN THE LOUISVILLE-LEXINGTON-EVANSVILLE MARKETING 
AREA

    1. Section 1046.51 is revised to read as follows:


Sec. 1046.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1046.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1046.74 is revised to read as follows:


Sec. 1046.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price(s) shall be increased or decreased, respectively, for 
each one-tenth percent butterfat variation from 3.5 percent by a 
butterfat differential, rounded to the nearest one-tenth cent, which 
shall be 0.138 times the current month's butter price less 0.0028 times 
the preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1046.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1049--MILK IN THE INDIANA MARKETING AREA

    1. Section 1049.51 is revised to read as follows:


Sec. 1049.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1049.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1049.74 is revised to read as follows:


Sec. 1049.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1049.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1050--MILK IN THE CENTRAL ILLINOIS MARKETING AREA

    1. Section 1050.51 is revised to read as follows:


Sec. 1050.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1050.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1050.74 is revised to read as follows:


Sec. 1050.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1050.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1064--MILK IN THE GREATER KANSAS CITY MARKETING AREA

    1. Section 1064.51 is revised to read as follows:


Sec. 1064.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1064.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1064.74 is revised to read as follows:


Sec. 1064.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1064.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1065--MILK IN THE NEBRASKA-WESTERN IOWA MARKETING AREA

    1. Section 1065.51 is revised to read as follows:


Sec. 1065.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1065.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1065.74 is revised to read as follows:


Sec. 1065.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1065.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1068--MILK IN THE UPPER MIDWEST MARKETING AREA

    1. Section 1068.51 is revised to read as follows:


Sec. 1068.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1068.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1068.74 is revised to read as follows:


Sec. 1068.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1068.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1075--MILK IN THE BLACK HILLS, SOUTH DAKOTA MARKETING AREA

    1. Section 1075.50 is amended by revising paragraph (c) to read as 
follows:


Sec. 1075.50  Class prices.

* * * * *
    (c) Class III price. The Class III price shall be the basic formula 
price for the month.
    2. Section 1075.51 is amended by revising paragraph (a) to read as 
follows:


Sec. 1075.51  Basic formula prices.

    (a) The basic formula price shall be the preceding month's average 
pay price for manufacturing grade milk in Minnesota and Wisconsin using 
the ``base month'' series, as reported by the Department, adjusted to a 
3.5 percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1075.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a)(1) through (a)(5) of this section.
    (1) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (a)(2) of 
this section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (i) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (A) Multiply the butter price by 4.27;
    (B) Multiply the nonfat dry milk price by 8.07; and
    (C) Multiply the dry buttermilk price by 0.42.
    (ii) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (A) Multiply the Cheddar cheese price by 9.87; and
    (B) Multiply the butter (from whey cream) price by 0.238.
    (2) The following product prices shall be used pursuant to 
paragraph (a)(1) of this section:
    (i) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (ii) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (iii) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (iv) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (v) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (3) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (4) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (a)(3) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (a)(4)(i) and (a)(4)(ii):
    (i) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (ii) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (5) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (a)(3) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (a)(4) of this section.
    3. Section 1075.74 is revised to read as follows:


Sec. 1075.74  Butterfat differential.

    The uniform price shall be increased or decreased, respectively, 
for each one-tenth percent butterfat variation from 3.5 percent by a 
butterfat differential, rounded to the nearest one-tenth cent, which 
shall be 0.138 times the current month's butter price less 0.0028 times 
the preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1075.51(a)(1) through (a)(5), 
as reported by the Department. The butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade A 
butter price as reported by the Department.

PART 1076--MILK IN THE EASTERN SOUTH DAKOTA MARKETING AREA

    1. Section 1076.51 is revised to read as follows:


Sec. 1076.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1076.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1076.74 is revised to read as follows:


Sec. 1076.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1076.51(a) through (e), as 
reported by the Department. The basic formula price for the month is 
computed pursuant to Sec. 1076.51, as reported by the Department. The 
butter price means the simple average for the month of the Chicago 
Mercantile Exchange, Grade A butter price as reported by the 
Department.

PART 1079--MILK IN THE IOWA MARKETING AREA

    1. Section 1079.51 is revised to read as follows:


Sec. 1079.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1079.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1079.74 is revised to read as follows:


Sec. 1079.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1079.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1093--MILK IN THE ALABAMA-WEST FLORIDA MARKETING AREA

    1. Section 1093.51 is revised to read as follows:


Sec. 1093.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1093.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1093.74 is revised to read as follows:


Sec. 1093.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1093.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1094--MILK IN THE NEW ORLEANS-MISSISSIPPI MARKETING AREA

    1. Section 1094.51 is revised to read as follows:


Sec. 1094.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1094.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1094.74 is revised to read as follows:


Sec. 1094.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1094.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1096--MILK IN THE GREATER LOUISIANA MARKETING AREA

    1. Section 1096.51 is revised to read as follows:


Sec. 1096.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1096.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1096.74 is revised to read as follows:


Sec. 1096.74   Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1096.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1099--MILK IN THE PADUCAH, KENTUCKY MARKETING AREA

    1. Section 1099.51 is revised to read as follows:


Sec. 1099.51   Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1099.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1099.74 is revised to read as follows:


Sec. 1099.74   Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1099.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1106--MILK IN THE SOUTHWEST PLAINS MARKETING AREA

    1. Section 1106.51 is revised to read as follows:


Sec. 1106.51   Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1106.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1106.74 is revised to read as follows:


Sec. 1106.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1106.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1108--MILK IN THE CENTRAL ARKANSAS MARKETING AREA

    1. Section 1108.51 is revised to read as follows:


Sec. 1108.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1108.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1108.74 is revised to read as follows:


Sec. 1108.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1108.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1124--MILK IN THE PACIFIC NORTHWEST MARKETING AREA

    1. Section 1124.19 is amended by removing paragraph (e) and 
revising the section heading to read as follows:


Sec. 1124.19  Product prices.

* * * * *
    2. Section 1124.50 is amended by revising the reference in 
paragraph (e) and paragraph (f)(2) from ``Sec. 1124.19(e)'' to 
``paragraph (f)(3) of this section'' and adding a new paragraph (f)(3) 
to read as follows:


Sec. 1124.50  Class and component prices.

* * * * *
    (f) * * *
    (3) Compute a butterfat differential rounded to the nearest one-
tenth cent, by multiplying the current month's butter price by 0.138, 
and subtract from the result an amount determined by multiplying 0.0028 
by the preceding month's average pay price per hundredweight, at test, 
for manufacturing grade milk in Minnesota and Wisconsin, using the 
``base month'' series, adjusted pursuant to Sec. 1124.51(a)(1) through 
(a)(5), as reported by the Department. The butter price means the 
simple average for the month of the Chicago Mercantile Exchange, Grade 
A butter price as reported by the Department.
* * * * *
    3. Section 1124.51 is amended by revising paragraph (a) to read as 
follows:


Sec. 1124.51  Basic formula prices.

    (a) The basic formula price shall be the preceding month's average 
pay price for manufacturing grade milk in Minnesota and Wisconsin using 
the ``base month'' series, as reported by the Department, adjusted to a 
3.5 percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1124.50(f)(3) and rounded to 
the nearest cent, plus or minus the change in gross value yielded by 
the butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a)(1) through (a)(5) of this section.
    (1) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (a)(2) of 
this section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (i) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (A) Multiply the butter price by 4.27;
    (B) Multiply the nonfat dry milk price by 8.07; and
    (C) Multiply the dry buttermilk price by 0.42.
    (ii) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (A) Multiply the Cheddar cheese price by 9.87; and
    (B) Multiply the butter (from whey cream) price by 0.238.
    (2) The following product prices shall be used pursuant to 
paragraph (a)(1) of this section:
    (i) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (ii) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (iii) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (iv) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (v) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (3) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (4) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (a)(3) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (a)(4)(i) and (a)(4)(ii):
    (i) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (ii) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (5) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (a)(3) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (a)(4) of this section.
* * * * *
    4. Section 1124.75 is amended by revising the reference in 
paragraph (a)(2)(i) from ``Sec. 1124.19(e)'' to ``Sec. 1124.50(f)(3)''.

PART 1126--MILK IN THE TEXAS MARKETING AREA

    1. Section 1126.51 is revised to read as follows:


Sec. 1126.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1126.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1126.74 is revised to read as follows:


Sec. 1126.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1126.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1131--MILK IN THE CENTRAL ARIZONA MARKETING AREA

    1. Section 1131.51 is revised to read as follows:


Sec. 1131.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1131.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1131.74 is revised to read as follows:


Sec. 1131.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1131.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1134--MILK IN THE WESTERN COLORADO MARKETING AREA

    1. Section 1134.51 is revised to read as follows:


Sec. 1134.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1134.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1134.74 is revised to read as follows:


Sec. 1134.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1134.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1135--MILK IN THE SOUTHWESTERN IDAHO-EASTERN OREGON MARKETING 
AREA

    1. Section Sec. 1135.19 is amended by removing paragraph (e) and 
revising the section heading to read as follows:


Sec. 1135.19  Product prices.

* * * * *
    2. Section 1135.50 is amended by revising the reference in 
paragraph (e) and paragraph (f)(2) from ``Sec. 1135.19(e)'' to 
``paragraph (f)(3) of this section'' and adding a new paragraph (f)(3) 
to read as follows:


Sec. 1135.50  Class and component prices.

* * * * *
    (f) * * *
    (3) Compute a butterfat differential rounded to the nearest one-
tenth cent, by multiplying the current month's butter price by 0.138, 
and subtract from the result an amount determined by multiplying 0.0028 
by the preceding month's average pay price per hundredweight, at test, 
for manufacturing grade milk in Minnesota and Wisconsin, using the 
``base month'' series, adjusted pursuant to Sec. 1135.51(a)(1) through 
(a)(5), as reported by the Department. The butter price means the 
simple average for the month of the Chicago Mercantile Exchange, Grade 
A butter price as reported by the Department.
* * * * *
    3. Section 1135.51 is amended by revising paragraph (a) to read as 
follows:


Sec. 1135.51  Basic formula prices.

    (a) The basic formula price shall be the preceding month's average 
pay price for manufacturing grade milk in Minnesota and Wisconsin using 
the ``base month'' series, as reported by the Department, adjusted to a 
3.5 percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1135.50(f)(3) and rounded to 
the nearest cent, plus or minus the change in gross value yielded by 
the butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a)(1) through (a)(5) of this section.
    (1) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (a)(2) of 
this section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (i) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (A) Multiply the butter price by 4.27;
    (B) Multiply the nonfat dry milk price by 8.07; and
    (C) Multiply the dry buttermilk price by 0.42.
    (ii) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (A) Multiply the Cheddar cheese price by 9.87; and
    (B) Multiply the butter (from whey cream) price by 0.238.
    (2) The following product prices shall be used pursuant to 
paragraph (a)(1) of this section:
    (i) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (ii) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (iii) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (iv) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (v) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (3) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (4) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (a)(3) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (a)(4)(i) and (a)(4)(ii):
    (i) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (ii) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (5) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (a)(3) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (a)(4) of this section.
* * * * *
    4. Section 1135.74 is amended by revising the reference in 
paragraphs (b)(2)(i) and (b)(2)(ii) from ``Sec. 1135.19(e)'' to 
``Sec. 1135.50(f)(3)''.

PART 1137--MILK IN THE EASTERN COLORADO MARKETING AREA

    1. Section 1137.51 is revised to read as follows:


Sec. 1137.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1137.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1137.74 is revised to read as follows:


Sec. 1137.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1137.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1138--MILK IN THE NEW MEXICO-WEST TEXAS MARKETING AREA

    1. Section 1138.51 is revised to read as follows:


Sec. 1138.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1138.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the butter (from whey cream) price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2):
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1138.74 is revised to read as follows:


Sec. 1138.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1138.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1139--MILK IN THE GREAT BASIN MARKETING AREA

    1. Section 1139.50 is amended by changing the reference in 
paragraph (d) from ``Sec. 1139.51(a)'' to ``paragraph (e)(1) of this 
section'' and by revising paragraph (e), to read as follows:


Sec. 1139.50  Class and component prices.

* * * * *
    (e) Butterfat price. The butterfat price per pound shall be the 
total of paragraphs (e)(2) and (e)(3) computed as follows:
    (1) Compute a butterfat differential rounded to the nearest one-
tenth cent, by multiplying the current month's butter price by 0.138, 
and subtract from the result an amount determined by multiplying 0.0028 
by the preceding month's average pay price per hundredweight, at test, 
for manufacturing grade milk in Minnesota and Wisconsin, using the 
``base month'' series, adjusted pursuant to Sec. 1139.51 (a)(1) through 
(a)(5), as reported by the Department. The butter price means the 
simple average for the month of the Chicago Mercantile Exchange, Grade 
A butter price as reported by the Department.
    (2) The skim milk value per hundredweight for the month, computed 
pursuant to paragraph (d) of this section, divided by 100; and
    (3) The butterfat differential for the month computed pursuant to 
paragraph (e)(1) of this section multiplied by 10.
* * * * *
    Section 1139.51 is amended by revising paragraph (a) to read as 
follows:


Sec. 1139.51  Basic formula prices.

    (a) The basic formula price shall be the preceding month's average 
pay price for manufacturing grade milk in Minnesota and Wisconsin using 
the ``base month'' series, as reported by the Department, adjusted to a 
3.5 percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1139.50(e)(1) and rounded to 
the nearest cent, plus or minus the change in gross value yielded by 
the butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a)(1) through (a)(5) of this section.
    (1) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (a)(2) of 
this section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (i) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (A) Multiply the butter price by 4.27;
    (B) Multiply the nonfat dry milk price by 8.07; and
    (C) Multiply the dry buttermilk price by 0.42.
    (ii) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (A) Multiply the Cheddar cheese price by 9.87; and
    (B) Multiply the butter (from whey cream) price by 0.238.
    (2) The following product prices shall be used pursuant to 
paragraph (a)(1) of this section:
    (i) Butter price. Butter price means the simple average for the 
month of the Chicago Mercantile Exchange, Grade AA butter price, as 
reported by the Department.
    (ii) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Central States nonfat dry milk price, as 
reported by the Department.
    (iii) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Central States dry buttermilk price, as 
reported by the Department.
    (iv) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (v) Butter (from whey cream) price. Butter (from whey cream) price 
means the simple average for the month of the Chicago Mercantile 
Exchange Grade A butter price, as reported by the Department.
    (3) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (4) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (a)(3) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (a)(4)(i) and (a)(4)(ii):
    (i) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (ii) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (5) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (a)(3) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (a)(4) of this section.
* * * * *
    Dated: August 3, 1994.
Lon Hatamiya,
Administrator.
[FR Doc. 94-19231 Filed 8-5-94; 8:45 am]
BILLING CODE 3410-02-P