[Federal Register Volume 63, Number 196 (Friday, October 9, 1998)]
[Proposed Rules]
[Pages 54383-54385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-27179]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1065

[DA-98-10]


Milk in the Nebraska-Western Iowa Marketing Area; Proposed 
Suspension of Certain Provisions of the Order

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed suspension of rule.

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SUMMARY: This document invites written comments on a proposal to 
suspend 11 counties from the marketing area definition of the Nebraska-
Western Iowa Federal milk marketing order (Order 65) for the period of 
November 1, 1998, through December 31, 1999. The action was requested 
by Gillette Dairy (Gillette) of Rapid City, South Dakota, which 
contends the suspension is necessary to maintain its milk supply and to 
remain competitive in selling fluid milk products in the marketing 
area.

DATES: Comments must be submitted on or before November 9, 1998.

ADDRESSES: Comments (two copies) should be filed with the USDA/AMS/
Dairy Programs, Order Formulation Branch, Room 2971, South Building, 
P.O. Box 96456, Washington, DC 20090-6456. Comments may be faxed to 
(202) 690-0552 or e-mailed to OFB__FMMO__C[email protected]. Reference 
should be given to the title of action and docket number.

FOR FURTHER INFORMATION CONTACT: Clifford M. Carman, Marketing 
Specialist, USDA/AMS/Dairy Programs, Order Formulation Branch, Room 
2971, South Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 
720-9368, e-mail address [email protected].

SUPPLEMENTARY INFORMATION: The Department is issuing this proposed rule 
in conformance with Executive Order 12866.
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended to have a 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 the rule.
    The Agricultural Marketing Agreement Act of 1937, as amended (7 
U.S.C. 601-674), provides that administrative proceedings must be 
exhausted before parties may file suit in court. Under section 
608c(15)(A) of the Act, any handler subject to an order may request 
modification or exemption from such order by filing with the 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 law. 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 its principal 
place of business, has jurisdiction in equity to review the

[[Page 54384]]

Secretary's ruling on the petition, provided a bill in equity is filed 
not later than 20 days after the date of the entry of the ruling.

Small Business Consideration

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.), the Agricultural Marketing Service is considering the economic 
impact of this action on small entities. For the purpose of the 
Regulatory Flexibility Act, a dairy farm is considered a ``small 
business'' if it has an annual gross revenue of less than $500,000, and 
a dairy products manufacturer is a ``small business'' if it has fewer 
than 500 employees. For the purposes of determining which dairy farms 
are ``small businesses,'' the $500,000 per year criterion was used to 
establish a production guideline of 326,000 pounds per month. Although 
this guideline does not factor in additional monies that may be 
received by dairy producers, it should be an inclusive standard for 
most ``small'' dairy farmers. For purposes of determining a handler's 
size, if the plant is part of a larger company operating multiple 
plants that collectively exceed the 500-employee limit, the plant will 
be considered a large business even if the local plant has fewer than 
500 employees.
    For the month of April 1998, which is the most recent 
representative month, 1,649 dairy farmers were producers under Order 
65. Of these producers, 1,573 producers (i.e., 95%) were considered 
small businesses having monthly milk production under 326,000 pounds. A 
further breakdown of the monthly milk production of the producers on 
the order during April 1998 was as follows: 1,001 produced less than 
100,000 pounds of milk; 445 produced between 100,000 and 200,000; 127 
produced between 200,000 and 326,000; and 76 produced over 326,000 
pounds. During the same month, eight handlers were pooled under the 
order. One was considered a small business.
    Pursuant to authority contained in the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), this proposal 
would suspend 11 counties in the western panhandle of Nebraska from the 
marketing area definition of Order 65. The Nebraska counties are 
Banner, Box Butte, Cheyenne, Dawes, Deuel, Garden, Kimball, Morrill, 
Scotts Bluff, Sheridan, and Sioux.
    Gillette, the proponent of the proposed action, estimates that its 
sales in the counties represent 65% to 70% of total fluid milk sales in 
the 11 counties. Gillette explains that a loss of sales in an 
unregulated marketing area has resulted in its regulation under Order 
65 without any appreciable increase in sales in the Order's marketing 
area. The handler contends the proposed action is necessary to maintain 
its milk supply and to remain competitive in selling fluid milk 
products in the marketing area.
    Gillette was pooled under Order 65 during the months of January 
through May 1998. For the period of February through May 1998, Order 65 
price data shows that the average uniform price to producers was $13.34 
per hundredweight. If Gillette would not have been a regulated handler 
under Order 65 during this period, the average uniform price to 
producers would have been about $13.31 per hundredweight. Thus, the 
regulation of Gillette for the February through May 1998 period 
resulted in an increase in the average uniform price of 3 to 4 cents 
per hundredweight.
    There are three handlers other than Gillette that possibly have 
sales into the 11 Nebraska counties. The handlers are Meadow Gold of 
Lincoln, Nebraska; Roberts Dairy in Omaha, Nebraska; and Meadow Gold in 
Greeley, Colorado. Roberts Dairy hauls milk for Nebraska Dairy, Inc., 
which is a distribution facility that is owned by the same principal 
company that owns Gillette. However, the dairy appears to be a separate 
entity from Gillette. Market information indicates that if these three 
handlers have sales into the 11 counties the volume is relatively 
small. Because these handlers have relatively small sales, if any, into 
the 11 counties, the proposed rule is projected to not have a 
significant economic impact. The exact impact of the proposed rule on 
these handlers would be dependent upon the specific sales the handlers 
chose to pursue.
    The July 1996 population estimate and the December 1992 fluid milk 
per capita consumption data show that the 11 Nebraska counties 
represent a small amount of the population and fluid milk consumption 
in the State of Nebraska and in the entire Order 65 marketing area. The 
11 counties represent about 6% of the population and fluid milk 
consumption in the State of Nebraska and about 5% of the population and 
fluid milk consumption in the Order 65 marketing area.
    Gillette was a fully regulated handler under the Black Hills, South 
Dakota, Federal milk marketing order prior to its termination at the 
request of the Black Hills Milk Producers. After termination of the 
Black Hills order, Gillette for some time was a partially regulated 
handler under three Federal milk marketing orders: Eastern South Dakota 
(Order 76), Eastern Colorado (Order 137), and Order 65. From January 
1998 through May 1998, Gillette was a fully regulated handler under 
Order 65 because its fluid milk sales in the marketing area represented 
more than 15 percent of its receipts.
    When Gillette was a partially regulated handler, it paid to the 
producers supplying its plant at least the full Class use value of its 
milk each month. Thus, Gillette had no further obligation to the 
producer settlement funds of the orders under which it was a partially 
regulated handler. However, as a fully regulated handler, Gillette is 
required to pay the difference between its Class use value and the 
marketwide Class use value to the Order 65 producer settlement fund. 
This payment, Gillette contends, increases its cost for milk and 
reduces the amount it can pay its producers.
    A review of the current reporting requirements was completed 
pursuant to the paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), 
and it was determined that this proposed suspension would have little 
impact on reporting, recordkeeping, or other compliance requirements 
because these would remain almost identical to the current system. No 
new forms would need to be proposed.
    No other burdens are expected to fall upon the dairy industry as a 
result of overlapping Federal rules. This proposed regulation does not 
duplicate, overlap or conflict with any existing Federal rules.
    Interested parties are invited to submit comments on the probable 
regulatory and informational impact of this proposed rule on small 
entities. Specifically, interested parties should address the potential 
impact of the proposed action on both Order 65 producers and producers 
who supply Gillette as well as the competition that exists for fluid 
milk sales in the 11 counties between regulated and unregulated 
handlers. Also, parties may suggest modifications of this proposal for 
the purpose of tailoring their applicability to small businesses.
    Notice is hereby given that, pursuant to the provisions of the 
Agricultural Marketing Agreement Act, the suspension of the following 
provisions of the order regulating the handling of milk in the 
Nebraska-Western Iowa Federal milk marketing area is being considered 
for the period of November 1, 1998, through December 31, 1999:
    In Sec. 1065.2, the words ``Banner, Box Butte, Cheyenne, Dawes, 
Deuel, Garden, Kimball, Morrill, Scotts Bluff, Sheridan, Sioux''.

[[Page 54385]]

    All persons who want to submit written data, views or arguments 
about the proposed suspension should send two copies of their views to 
the USDA/AMS/Dairy Programs, Order Formulation Branch, Room 2971, South 
Building, P.O. Box 96456, Washington, DC 20090-6456, by the 30th day 
after publication of this notice in the Federal Register. The comment 
period is limited to 30 days due to the request for immediate action by 
the proponent of this proposed action.
    All written submissions made pursuant to this notice will be made 
available for public inspection in the Dairy Programs during regular 
business hours (7 CFR 1.27(b)).

Statement of Consideration

    The proposed rule would suspend 11 counties from the marketing area 
definition of the Nebraska-Western Iowa Federal milk marketing order. 
The counties, which are located in the western panhandle of Nebraska, 
include Banner, Box Butte, Cheyenne, Dawes, Deuel, Garden, Kimball, 
Morrill, Scotts Bluff, Sheridan, and Sioux.
    The July 1996 population estimate, which represents the most recent 
population statistics, shows that the total population for the Order 65 
marketing area is 2,000,529 (i.e., 412,167 for Iowa counties and 
1,588,362 for Nebraska counties). The population estimate for the 
entire State of Nebraska is 1,652,093, while the population for the 11 
Nebraska counties is 91,194. In addition, the December 1992 Federal 
Milk Order Statistics Report (Per Capita Sales of Fluid Milk Products 
in Federal Order Markets) indicates that the Nebraska fluid milk per 
capita consumption is about 20 pounds per person per month. It is 
estimated that the fluid milk consumption per month within the 11 
Nebraska counties is 1,823,880 (20 lbs. * 91,194).
    The July 1996 population estimate and the December 1992 fluid milk 
per capita consumption data show that the 11 Nebraska counties 
represent a small amount of the population and fluid milk consumption 
in the State of Nebraska and in the entire Order 65 marketing area. The 
11 counties represent about 6% of the population and fluid milk 
consumption in the State of Nebraska and about 5% of the population and 
fluid milk consumption in the Order 65 marketing area.
    Gillette was a fully regulated handler under the Black Hills, South 
Dakota, Federal milk marketing order prior to its termination at the 
request of the Black Hills Milk Producers. After termination of the 
Black Hills order, Gillette for some time was a partially regulated 
handler under three Federal milk marketing orders: Eastern South Dakota 
(Order 76), Eastern Colorado (Order 137), and Order 65. From January 
1998 through May 1998, Gillette was a fully regulated handler under 
Order 65 because its fluid milk sales in the marketing area represented 
more than 15 percent of its receipts.
    When Gillette was a partially regulated handler, it paid to the 
producers supplying its plant at least the full Class use value of its 
milk each month. Thus, Gillette had no further obligation to the 
producer settlement funds of the orders under which it was a partially 
regulated handler. However, as a fully regulated handler, Gillette is 
required to pay the difference between its Class use value and the 
marketwide Class use value to the Order 65 producer settlement fund. 
This payment, Gillette contends, increases its cost for milk and 
reduces the amount it can pay its producers.
    According to Gillette, marketing conditions in Order 65 have 
changed significantly since the order was promulgated. Gillette 
estimates that its sales in the 11 counties represent 65% to 70% of 
total fluid milk sales in the counties. Gillette explains that a loss 
of sales in an unregulated marketing area has resulted in its 
regulation under Order 65 because such sales represented at least 15 
percent of its receipts, but without any appreciable increase in sales 
in the Order's marketing area. Furthermore, the handler states that 
since its milk supply comes from the Black Hills Milk Producers there 
is no balancing of milk supply for the plant from Order 65 or any other 
Federal milk marketing order.
    Black Hills Milk Producers also requested that the counties be 
removed from the Order 65 marketing area definition. The cooperative 
representing the producers explained that it is dependent on Gillette's 
survival. It states that the regulation of Gillette under Order 65 has 
caused its producers hardship by costing them as much as $1.00 per 
hundredweight during some months. According to the cooperative, this 
cost results from an agreement that it has with Gillette in which it 
refunds to Gillette an amount equal to half of the handler's obligation 
to the producer settlement fund when Gillette is fully regulated. 
Although the producers pay this amount to Gillette, Order 65 price data 
for the February through May 1998 period indicates that their monthly 
pay prices were above the Order 65 uniform price.
    The Federal Order Reform Proposed Rule, which was issued on January 
21, 1998 (63 FR 4802), recommended excluding the 11 Nebraska counties 
from the consolidated Central order. The recommendation currently is 
under consideration. However, Gillette has requested that the proposed 
action be considered immediately.
    Accordingly, it may be appropriate to suspend the aforesaid 
provisions for the period of November 1, 1998, through December 31, 
1999.

List of Subjects in 7 CFR Part 1065

    Milk marketing orders.

    The authority citation for 7 CFR Part 1065 continues to read as 
follows:

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

    Dated: September 23, 1998.
Richard M. McKee,
Deputy Administrator, Dairy Programs.
[FR Doc. 98-27179 Filed 10-8-98; 8:45 am]
BILLING CODE 3410-02-P