Milk in the Upper Midwest Marketing Area; Tentative Partial Decision on Proposed Amendments and Opportunity To File Written Exceptions to Tentative Marketing Agreement and Order, 19709-19718 [05-7462]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 70, Number 71 (Thursday, April 14, 2005)]
[Proposed Rules]
[Pages 19709-19718]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-7462]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 70, No. 71 / Thursday, April 14, 2005 / 
Proposed Rules

[[Page 19709]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1030

[Docket No. AO-361-A39; DA-04-03A]


Milk in the Upper Midwest Marketing Area; Tentative Partial 
Decision on Proposed Amendments and Opportunity To File Written 
Exceptions to Tentative Marketing Agreement and Order

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This tentative partial decision adopts, on an interim final 
and emergency basis, proposals that would amend certain features of the 
pooling standards and transportation credit provisions of the Upper 
Midwest (UMW) milk marketing order. A separate decision will be issued 
at a later time that will address proposals concerning the depooling 
and repooling of milk, temporary loss of Grade A status, and increasing 
the maximum administrative assessment. This decision requires 
determining if producers approve the issuance of the amended order on 
an interim basis.

DATES: Comments should be submitted on or before June 13, 2005.

ADDRESSES: Comments (6 copies) should be filed with the Hearing Clerk, 
STOP 9200-Room 1083, United States Department of Agriculture, 1400 
Independence Avenue, SW., Washington, DC 20250-9200. You may send your 
comments by the electronic process available at the Federal eRulemaking 
portal: https://www.regulations.gov or by submitting comments to 
amsdairycomments@usda.gov. Reference should be made to the title of 
action and docket number.

FOR FURTHER INFORMATION CONTACT: Gino Tosi, Marketing Specialist, Order 
Formulation and Enforcement Branch, USDA/AMS/Dairy Programs, STOP 
0231--Room 2971, 1400 Independence Avenue, SW., Washington, DC 20250-
0231, (202) 690-3465, e-mail address: gino.tosi@usda.gov.

SUPPLEMENTARY INFORMATION: Specifically, this tentative partial 
decision proposes to adopt amendments which would ensure that producer 
milk originating outside the states that comprise the UMW order 
(Illinois, Iowa, Minnesota, North Dakota, South Dakota, Wisconsin, and 
the Upper Peninsula of Michigan) is providing consistent service to the 
order's Class I market, and would eliminate the ability to pool as 
producer milk diversions to nonpool plants outside of the states that 
comprise the UMW marketing area. Additionally, this decision proposes 
to adopt a limit to the transportation credit received by handlers that 
would only apply to the first 400 miles of applicable milk movements.
    This administrative action is governed by the provisions of 
sections 556 and 557 of Title 5 of the United States Code and, 
therefore, is excluded from the requirements of Executive Order 12866.
    The amendments to the rules proposed herein have been reviewed 
under Executive Order 12988, Civil Justice Reform. It is not intended 
to have a retroactive effect. If adopted, the proposed rule would not 
preempt any state or local laws, regulations, or policies, unless they 
present an irreconcilable conflict with this rule.
    The Agricultural Marketing Agreement Act of 1937 (the Act), 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 Department 
of Agriculture (Department) a petition stating that the order, any 
provision of the order, or any obligation imposed in connection with 
the order is not in accordance with the law. A handler is afforded the 
opportunity for a hearing on the petition. After a hearing, the 
Department would rule on the petition. The Act provides that the 
district court of the United States in any district in which the 
handler is an inhabitant, or has its principal place of business, has 
jurisdiction in equity to review the Department's ruling on the 
petition, provided a bill in equity is filed not later than 20 days 
after the date of the entry of the ruling.

Regulatory Flexibility Act and Paperwork Reduction Act

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.), the Agricultural Marketing Service has considered the economic 
impact of this action on small entities and has certified that this 
proposed rule will not have a significant economic impact on a 
substantial number of 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 $750,000, 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 $750,000 per year criterion was used to establish a 
production guideline of 500,000 pounds per month. Although this 
guideline does not factor in additional monies that may be received by 
dairy producers, it should be an inclusive standard for most ``small'' 
dairy farmers. For purposes of determining a handler's size, if the 
plant is part of a larger company operating multiple plants that 
collectively exceed the 500-employee limit, the plant will be 
considered a large business even if the local plant has fewer than 500 
employees.
    During August 2004, the month during which the hearing occurred, 
there were 15,608 dairy producers pooled on, and 60 handlers regulated 
by, the UMW order. Approximately 15,082 producers, or 97 percent, were 
considered small businesses based on the above criteria. On the 
processing side, approximately 49 handlers, or 82 percent, were 
considered ``small businesses.''
    The adoption of the proposed pooling standards serves to revise 
established criteria that determine those producers, producer milk, and 
plants that have a reasonable association with, and are consistently 
serving the fluid needs of, the UMW milk marketing area. Criteria for 
pooling are established on the basis of performance levels that are 
considered adequate to meet the Class I fluid needs and, by doing so, 
determine those producers who are eligible to share in the revenue that 
arises from the classified pricing of milk. Criteria for pooling are 
established without regard

[[Page 19710]]

to the size of any dairy industry organization or entity. The criteria 
established are applied in an identical fashion to both large and small 
businesses and do not have any different economic impact on small 
entities as opposed to large entities. The criteria established for 
transportation credits is also identically applied to both large and 
small businesses and do not have any different economic impact on small 
entities. Therefore, the proposed amendments will not have a 
significant economic impact on a substantial number of small entities.
    A review of reporting requirements was completed under the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). It was 
determined that these proposed amendments would have no impact on 
reporting, record keeping, or other compliance requirements because 
they would remain identical to the current requirements. No new forms 
are proposed and no additional reporting requirements would be 
necessary.
    This tentative partial decision does not require additional 
information collection that requires clearance by the Office of 
Management and Budget (OMB) beyond currently approved information 
collection. The primary sources of data used to complete the forms are 
routinely used in most business transactions. Forms require only a 
minimal amount of information which can be supplied without data 
processing equipment or a trained statistical staff. Thus, the 
information collection and reporting burden is relatively small. 
Requiring the same reports from all handlers does not significantly 
disadvantage any handler that is smaller than the industry average.
    No other burdens are expected to fall on the dairy industry as a 
result of overlapping Federal rules. This rulemaking proceeding 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. Also, parties may suggest modifications of this proposal for 
the purpose of tailoring their applicability to small businesses.

Prior Documents in This Proceeding

    Notice of Hearing: Issued June 16, 2004; published June 23, 2004 
(69 FR 34963).
    Notice of Hearing Delay: Issued July 14, 2004; published July 21, 
2004 (69 FR 43538).

Preliminary Statement

    Notice is hereby given of the filing with the Hearing Clerk of this 
tentative partial decision with respect to the proposed amendments to 
the tentative marketing agreement and the order regulating the handling 
of milk in the Upper Midwest marketing area. This notice is issued 
pursuant to the provisions of the Agricultural Marketing Agreement 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 decision 
with the Hearing Clerk, United States Department of Agriculture, Room 
1083-Stop 9200, 1400 Independence Avenue, SW, Washington, DC 20250-
9200, by June 13, 2005. Six (6) 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 hearing notice specifically invited interested persons to 
present evidence concerning the probable regulatory and informational 
impact of the proposals on small businesses. While no evidence was 
received that specifically addressed these issues, some of the evidence 
encompassed entities of various sizes.
    The proposed amendments set forth below are based on the record of 
a public hearing held in Bloomington, Minnesota, on August 16-19, 2004, 
pursuant to a notice of hearing issued June 16, 2004, published June 
23, 2004 (69 FR 34963), and a notice of a hearing delay issued July 14, 
2004, published July 21, 2004 (69 FR 43538).
    A public hearing was held upon proposed amendments to the marketing 
agreement and the order regulating the handling of milk in the UMW 
marketing area. The hearing was held, pursuant to the provisions of the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), and the applicable rules of practice and procedure governing the 
formulation of marketing agreements and marketing orders (7 CFR part 
900).
    The material issues on the record of the hearing relate to:
    1. Pooling Standards--Changing performance standards and diversion 
limits.
    2. Transportation credits.
    3. Determination as to whether emergency marketing conditions exist 
that would warrant the omission of a recommended decision and the 
opportunity to file written exceptions.

Findings and Conclusions

    This tentative partial decision specifically addresses Proposals 1, 
6, and features of Proposal 2 that are intended to better identify the 
milk of those producers who provide a reasonable and consistent 
servicing of the Class I needs of the UMW marketing area and thereby 
become eligible to pool on the UMW order. This decision also limits the 
transportation credits received by handlers that would only apply to 
the first 400 miles of applicable milk movements. The portion of 
Proposal 2 that addresses depooling, the portion of Proposal 6 that 
addresses temporary loss of Grade A approval, and Proposals 3, 4, 5, 
and 7 will be addressed in a separate decision. For the purpose of this 
tentative partial decision, references to Proposal 2 will only pertain 
to the second and third portions of the proposal (limiting the pooling 
of distant milk and transportation credits), and references to Proposal 
6 will only pertain to the touch-base standard of the proposal, as 
published in the hearing notice.
    The following findings and conclusions on the material issues are 
based on evidence presented at the hearing and the record thereof:

1. Pooling standards

    Several proposed changes to the pooling standards of the UMW order 
should be adopted immediately. Certain inadequacies of the current 
pooling provisions are resulting in large volumes of milk pooled on the 
UMW order which do not demonstrate a reasonable and consistent 
servicing of the UMW Class I market.
    Specifically, the following amendments should be adopted 
immediately: (1) Establish that only supply plants located in Illinois, 
Iowa, Minnesota, North Dakota, South Dakota, Wisconsin, and the Upper 
Peninsula of Michigan (hereinafter referred to as the ``7-state 
milkshed'') may use milk delivered directly from producers'' farms for 
qualification purposes; and (2) Establish that diversions to nonpool 
plants must be to plants located in the 7-state milkshed in order to be 
eligible as producer milk under the order. These amendments to the 
pooling standards were contained in two proposals, published in the 
hearing notice as Proposal 1 and Proposal 2, and as modified at the 
hearing.
    Three proposals (Proposals 1, 2, and 6) seeking to limit the 
ability of ``distant'' milk to become pooled were considered in this 
proceeding. The hearing record makes clear that the proponents of these 
proposals are of the

[[Page 19711]]

opinion that the current pooling provisions of the order enable milk 
which has no reasonable ability to service the Class I needs of the UMW 
market to become pooled on the order. According to the proponents, such 
milk currently need only make an initial qualifying delivery to a pool 
plant to become pooled on the order. The witnesses assert that this is 
causing the unwarranted lowering of the order's blend price.
    Proposal 1 was offered by Associated Milk Producers, Inc. (AMPI), 
Bongards' Creameries, Ellsworth Cooperative Creameries, and First 
District Association. Hereinafter, this decision will refer to these 
proponents as ``AMPI, et al.'' All are cooperative associations whose 
members'' milk is pooled on the UMW order.
    Proposal 2 was offered by Mid-West Dairymen's Company on behalf of 
Cass-Clay Creamery, Inc. (Cass-Clay), Dairy Farmers of America, Inc. 
(DFA), Foremost Farms USA Cooperative (Foremost Farms), Land O'Lakes, 
Inc. (LOL), Manitowoc Milk Producers Cooperative (MMPC), Mid-West 
Dairymen's Company, Milwaukee Cooperative Milk Producers (MCMP), Swiss 
Valley Farms Company (Swiss Valley), and Woodstock Progressive Milk 
Producers Association. Hereinafter, this decision will refer to these 
proponents as ``Mid-West, et al.'' Although Foremost Farms was a 
proponent of Proposal 2, no testimony was offered on their behalf. At 
the hearing, Plainview Milk Products Cooperative and Westby Cooperative 
Creamery also supported the testimony of Mid-West, et al. The 
proponents of Proposal 2 are qualified cooperatives representing 
producers whose milk supplies the milk needs of the marketing area and 
is pooled on the UMW order.
    Proposal 6, offered by Dean Foods Company (Dean), which also 
addresses the pooling of distant milk, should not be adopted. Proposal 
6 sought to increase the number of days that a dairy farmer's milk 
production would need to be delivered to a UMW pool plant from the 
current 1 day to 2 days before the milk of the dairy farmer would be 
eligible for diversion to a nonpool plant and have such diverted milk 
pooled on the order. This is commonly referred to by the industry as a 
``touch-base'' standard. If this standard was not met for each of the 
months of July through November, Proposal 6 would have required that 
the touch-base standard be increased to 2 days for each of the months 
of December though June. If the July through November touch-base 
standard of Proposal 6 was met, there would be no touch-base standard 
applicable for the months of December through June. Additionally, 
Proposal 6 would also specify that if a producer lost association with 
the UMW order, except as caused by a loss in Grade A status, the 
producer would need to meet the 2-day touch-base standard in the 
intended month for qualifying as a producer on the order and for 
pooling eligibility.
    During the hearing, Dean's witnesses made many modifications to 
their proposals which were further clarified in a post-hearing brief. 
In their brief, Dean explained that Proposal 6, as modified, intended 
that a dairy farmer's qualifying shipment could be made anytime during 
the month.
    Currently, the UMW order provides that a supply plant can qualify 
as a pool plant of the order by delivering 10 percent of its total 
monthly milk receipts to a pool distributing plant, a producer-handler, 
a partially regulated distributing plant, or a distributing plant 
regulated by another Federal order. Additionally, producer milk can be 
diverted to any nonpool plant, without regard to location, as long as 
the producer met the touch-base standard during the first qualifying 
month.
    A witness appearing on behalf of AMPI, et al., testified in support 
of Proposal 1. The witness stated that since Federal order reform, and 
as a result of other Federal order hearings over the last several 
years, the UMW pooling provisions have allowed milk to be pooled on the 
order from as far as California, Idaho, Utah, Oregon, Colorado, 
Montana, Nebraska, Ohio, Indiana, and Georgia. The witness explained 
that a previous UMW decision, which became effective May 1, 2002, only 
resulted in prohibiting the ability to simultaneously pool the same 
milk on the UMW order and on a State-operated milk order that had 
marketwide pooling. The witness noted that during the same time period, 
however, amendments to the pooling standards of the Central and Mideast 
milk marketing orders resulted in a tightening of their pooling 
standards, moving milk formerly pooled on those two orders onto the UMW 
marketwide pool which reduced the blend price and producer price 
differential (PPD) received by UMW dairy farmers.
    The AMPI, et al., witness testified that in December 2003, 263 
million pounds, or 12.3 percent of producer milk, pooled on the UMW 
order was located in Idaho. The witness also noted that for the same 
month, Jerome County, Idaho, had the most producer milk of any county 
pooled on the UMW order. The witness was of the opinion that milk seeks 
to be pooled on the UMW order when it cannot qualify for pooling in its 
own geographic area. The witness explained that milk located far from 
the UMW area seeks to be pooled on the UMW order because the pooling 
provisions of the UMW order are so liberal and because it is 
economically advantageous to do so.
    The AMPI, et al., witness stated that current order provisions 
allow any handler whose producers have touched base at a UMW pool 
plant, to pool 10 times the amount of milk shipped to a distributing 
plant and divert up to 90 percent of its milk supply to any nonpool 
plant. The witness stressed that this has resulted in Idaho producers 
pooling their milk on the UMW order by simply meeting the one-day 
touch-base standard and then diverting future milk production to a 
nonpool plant nearer to their farms in Idaho.
    The AMPI, et al., witness compared the actual PPD versus a scenario 
in which a PPD was computed without Idaho milk. The witness noted that 
in 2003 the actual PPD was a negative 5 cents while under their 
scenario the estimated PPD without Idaho milk would have been a 
positive $0.19, a $0.24 total difference. Under this scenario, it was 
demonstrated that UMW dairy farmers lost $36.5 million due to the $0.24 
average difference in the actual versus estimated PPD, contended the 
witness. The witness asserted that Idaho milk was not physically 
supplying the market and was never intended to supply the market. The 
witness also added that additional Idaho milk could be pooled on the 
UMW order because of the termination of the Western milk marketing 
order on April 1, 2004.
    The AMPI, et al., witness stressed that Proposal 1 is not intended 
to prohibit the pooling of milk based on its distance from the UMW 
marketing area. The witness explained that any supply plant, regardless 
of its location, that delivers 10 percent of its producer receipts to a 
UMW distributing plant in the order would qualify their total receipts 
for pooling. The witness also explained that Proposal 1 would lessen 
the incentive to pool milk that does not demonstrate a consistent 
servicing of the UMW market's Class I needs.
    A post-hearing brief submitted by AMPI asserted that $3 million per 
month is being siphoned off of the UMW marketwide pool by producers 
located long distances from the UMW and whose milk demonstrates no 
service to the UMW's fluid market. Their brief also reiterated that the 
termination of the Western order has resulted in a further lowering of 
blend prices

[[Page 19712]]

received by UMW dairy farmers as more unpooled milk seeks easy and 
profitable pooling opportunities. The brief explained that the loss of 
income to UMW dairy farmers merits the need for an emergency action.
    A witness appearing on behalf of Mid-West, et al., testified in 
support of Proposal 2. The witness stated that milk located within the 
7-state milkshed is already more than adequate to serve the fluid needs 
of the market. The witness asserted that Idaho milk is located too far 
from the market, in excess of 1,000 miles, to serve as a reliable 
reserve supply. The witness concluded that such milk should not be 
considered a consistent supply for the UMW marketing area. The Mid-
West, et al., witness explained that often when Idaho milk makes a pool 
qualifying one-day touch-base delivery to a distributing plant, milk 
produced and located within the marketing area has to be diverted from 
the distributing plant to accommodate the one-time physical receipt. 
The witness was of the opinion that this is tantamount to the local 
milk supply balancing the Idaho milk supply, rather than Idaho milk 
balancing the local milk supplies of the UMW market. Furthermore, the 
witness was of the opinion that if not for inadequate pooling 
provisions, milk located far from the market would not seek to be 
pooled because the cost of servicing the market would be prohibitive.
    The Mid-West, et al., witness said that typically the milk in Idaho 
pays a fee to a UMW handler for pooling and that these fees have become 
a significant revenue stream for some UMW handlers who seek to offset 
lower PPD's and increase their financial returns to producer members. 
The witness stated that in this way, milk located in the UMW marketing 
area is essentially used to qualify plants located in Idaho as UMW pool 
plants. Because Idaho milk is reported as a receipt by UMW handlers, it 
receives the benefit of the UMW PPD although it is never actually 
delivered to the UMW market except for the initial association. The 
witness said that in December 2003, more milk was pooled on the UMW 
order from Jerome County, Idaho, than from any other county in the 
country. The witness was of the opinion that the Idaho milk would not 
seek to be pooled if it had to meet the order's performance standards 
on its own merit because the cost of transporting it to a UMW 
distributing plant would exceed the monetary benefit of being pooled on 
the order. The witness insisted that the only way that milk located far 
from the market could be considered a reliable supplier to the UMW 
market is if it consistently provided service to the UMW fluid market 
on its own merit.
    The Mid-West, et al., witness stated that the impact on the PPD 
from the growing amount of Idaho milk pooled on the order has become 
significant. For example, the witness estimated that in September 2003, 
the PPD was reduced by $0.73. The witness stressed that while some 
entities were benefitting from the pooling of such milk by collecting 
pooling fees, all of the market's participants were being negatively 
affected because of the reduction in the PPD. The witness also noted 
that the termination of the Western order has only compounded the 
problem because milk once pooled and priced on the former Western order 
is seeking the price protection offered by another Federal milk order.
    The Mid-West, et al., witness maintained that it is the UMW's 
lenient performance standards that have enabled milk to participate and 
benefit from the UMW marketwide pool without demonstrating consistent 
and reliable service to the market. The witness also stressed that 
Proposal 2 does not treat in-area and out-of-area milk of a supply 
plant differently. The witness explained that both must ship 10 percent 
of its total milk receipts to a distributing plant to qualify as a pool 
plant for the order. Requiring this as a pooling standard for all 
supply plants, the witness said, will end the practice of using local 
milk supplies to qualify milk for pooling that has no physical tie to 
the marketing area.
    A brief submitted by Mid-West, et al., noted that less than one 
tenth of one percent of Idaho milk pooled on the UMW order was 
delivered to a pool distributing plant from April 2001 through May 2004 
as evidence of such milk's lack of reasonable and consistent service to 
the UMW market. Furthermore, the brief noted that only 0.21 percent of 
the pooled Idaho milk pooled was delivered to a UMW pool plant of any 
type during the same time period. The brief contended that statistics 
prepared by the Market Administrator's office indicated that the UMW 
order's blend price had been reduced approximately 25 cents per 
hundredweight continuously since 2003 by pooling Idaho milk. The Mid-
West, et al., brief reiterated that Proposal 2 does not prevent milk 
located far from the marketing area from being pooled. Rather, 
explained the brief, it would establish an appropriate performance 
standard so that milk which does not consistently service the Class I 
needs of the UMW market could not be pooled on the order.
    A witness appearing on behalf of LOL testified in support of 
Proposal 2. The witness asserted that milk located in Idaho and pooled 
on the UMW market is lowering the UMW PPD, thereby negatively impacting 
LOL's local producers. However, as a supporter of performance-based 
pooling, the witness was of the opinion that Proposal 2 places 
additional standards on milk produced outside the 7-state milkshed. 
While the LOL witness was of the opinion that such pooling issues 
should be addressed at a national hearing, the witness nevertheless 
supported Proposal 2 because it addresses the low PPD's being received 
by UMW producers.
    A witness appearing on behalf of MMPC testified in support of 
Proposal 2. The witness stated that MMPC has a small group of members 
located in Idaho that represent a significant amount of pooled milk on 
the UMW order. The witness explained that all members of MMPC pay a 2-
cent per hundredweight checkoff on their milk for services provided by 
MMPC, and their Idaho members checkoff payment provides significant 
additional revenue to the cooperative. However, the witness said that 
all of the producer members of MMPC who pool their milk on the UMW 
order would be better off without pooling the milk from Idaho. 
According to the witness, the reduction in the PPD is greater than the 
2-cent per hundredweight checkoff payment they receive for pooling 
Idaho milk.
    A witness appearing on behalf of DFA testified in support of 
Proposal 2. The DFA witness stated that the performance standards of 
the UMW order should limit the amount of milk pooled on the order to 
only that milk which can be reasonably considered a regular and 
consistent supply of the market.
    The DFA witness offered various pooling scenarios to illustrate 
that milk located in Idaho would not seek to be pooled on the UMW order 
if such milk were expected to make regular and consistent deliveries to 
pool plants. For all the scenarios, the witness assumed a hauling rate 
of $2.10 per loaded mile, a $1.60 Class I differential, and a 
transportation credit of 400 miles. The witness said that under these 
assumptions, milk would likely not seek to be pooled on the UMW order 
because the costs incurred would exceed the revenue received by being 
pooled on the UMW order. Additionally, the witness said that if the 
pooling standards are not amended to establish an appropriate level of 
consistent service, more milk will seek to be pooled on the order and

[[Page 19713]]

would result in a continued lowering of the order's blend price.
    The DFA witness stressed that the order's performance standards 
must more clearly define what milk can reasonably be considered a 
consistent supply to the market. According to the witness, the 
underpinning logic of Federal order pricing is that milk supplies 
located closer to the market have a higher value than those further 
away. Predecessor orders had location adjustments that were a mechanism 
for assigning differing values to milk depending on its distance to the 
market, explained the witness. Milk located further from the marketing 
area was less valuable to the market, thus recognizing that more local 
milk supplies had a higher value because it cost much less to transport 
local milk supplies to the market, the witness said. The witness stated 
that location adjustments were once an important method of achieving 
pooling discipline. While there were no proposals regarding location 
adjustments under consideration, the witness explained, adoption of 
Proposal 2 would achieve a similar economic result--establishing a 
relationship between the value of milk and its distance from the 
market. The witness stressed that Proposal 2 would provide the 
framework to more accurately identify the milk of those producers which 
can reasonably be considered as reliable suppliers to the UMW fluid 
market.
    A witness appearing on behalf of Cass-Clay testified in support of 
Proposal 2. Cass-Clay is a dairy farmer-owned cooperative located in 
the UMW marketing order that processes 45 percent of its total milk 
receipts into Class I products. The witness explained that Cass-Clay 
does pool distant milk for a fee which generates revenue to offset some 
of the negative PPD's received by UMW dairy farmers. According to the 
witness, the revenue generated from pooling fees has enabled Cass-Clay 
to support their members' mailbox price and retain membership in a 
highly competitive market. The witness also stated that Cass-Clay does 
not favor pooling Idaho milk and supports Proposal 2 because it would 
limit the ability to pool milk that is located far from the UMW 
marketing area.
    A witness appearing on behalf of MCMP testified in support of 
Proposal 2. The witness was of the opinion that if distant producers 
want to collect money from the UMW marketwide pool, they should be 
regularly and consistently serving the UMW market. It was MCMP's 
position that Proposal 2 is fair and right for the market as a whole.
    A witness appearing on behalf of the Galloway Company testified in 
support of Proposal 2. Galloway Company owns and operates a Class II 
manufacturing plant regulated by the UMW order. The witness was of the 
opinion that Proposal 2 would reduce the amount of milk pooled on the 
UMW order that is not actually serving the fluid market.
    A witness appearing on behalf of the Wisconsin, North Dakota, and 
Minnesota Farmers Unions (Farmers Unions) testified in support of 
limiting the ability of milk to pool on the UMW order that is located 
far from the marketing area. However, the witness did not express 
support for any particular proposal. The witness said that pooling milk 
from far outside the UMW marketing area has had an adverse economic 
effect on producers who do regularly supply the UMW market. The witness 
was of the opinion that pooling such milk was placing an undue hardship 
on UMW dairy producers who regularly and consistently serve the Class I 
needs of the UMW market by reducing their revenue.
    A dairy farmer, who is a Director on the DFA Central Area Council, 
testified in support of Proposal 2. The witness was of the opinion that 
milk produced far from the marketing area, such as Idaho, cannot 
regularly service the UMW market while still returning a profit to 
those dairy farmers. The witness was of the opinion that the UMW order 
should be modified to ensure that producer milk receiving the UMW blend 
price is actually serving the UMW market.
    A witness appearing on behalf of Dean testified in opposition to 
Proposals 1 and 2. Dean owns and operates distributing plants regulated 
by the UMW order as well as UMW nonpool plants. The witness explained 
that Dean opposed the proposals because of the limitation on the 
transportation credit to 400 miles. Dean's post-hearing brief 
maintained its opposition to Proposal 1 stating that the proponents 
only want to address the problem of distant milk, not the issue of 
depooling. Furthermore, Dean's brief stressed its opposition to 
Proposal 2, insisting that it is a compromise position among the 
proponents and does not go far enough to ensure that all milk pooled on 
the order is consistently servicing the order's Class I market.
    A Dean witness also testified in support of Proposal 6. The witness 
said the proposal would increase the current one time 1-day touch-base 
provision to 2 days in each of the months of July through November and 
if that standard was not met, the producer must deliver 2 days milk 
production in each of the months of December through June. Furthermore, 
the witness said that Proposal 6 also would establish a 2-day touch-
base provision for a dairy farmer who lost producer status with the UMW 
order, except as a result of loss of Grade A status for less than 21 
days, or became a dairy farmer for other markets. The Dean witness 
asserted that increasing the touch-base standard to 2 days would ensure 
that more milk would be consistently available at pool plants to serve 
the fluid market. A second Dean witness also testified in support of 
Proposal 6. The witness asserted that the intent of the Federal order 
system is to ensure a sufficient supply of milk for fluid use and 
provide for uniform payments to producers who stand ready, willing, and 
able to serve the fluid market, regardless of how the milk of any 
individual is utilized. While some entities are of the opinion that the 
order system should ensure a sufficient milk supply to all plants, the 
Dean witness was of the opinion that the order system addresses only 
the need for ensuring a milk supply to distributing plants. The witness 
elaborated on this opinion by citing examples of order language that 
stress providing for a regular supply of milk to distributing plants as 
a priority of the Federal milk order program.
    The Dean witness was of the opinion that for the Federal milk order 
system to ensure orderly marketing, orders need to provide adequate 
economic incentives that will attract milk to fluid plants and need to 
properly define regulations to determine the milk of those producers 
who can participate in the marketwide pool. In Dean's opinion both 
features are missing from the terms of the UMW order. In this regard, 
the witness said, current pooling standards have allowed milk to become 
pooled on the order without demonstrating regular service to the Class 
I needs of the market.
    Dean explained further in their post-hearing brief that when 
distant milk attaches to the UMW pool and dilutes the blend price, 
Class I handlers have to increase their premiums in an effort to offset 
the negative PPD so that they can retain their producers. This, argued 
Dean, results in inconsistent product costs between handlers. In 
conclusion, the Dean brief stressed that Proposal 6 does not establish 
different standards for in-area and out-of-area milk. Rather, the brief 
explained, it ensures that all milk will demonstrate regular and 
consistent service to the fluid market as a criterion for being pooled 
on the UMW order.
    Dean's brief also emphasized the need for the Department to act on 
an emergency basis. The brief stressed that

[[Page 19714]]

the financial impact on UMW entities is substantial and a recommended 
decision should be omitted.
    A witness appearing on behalf of AMPI, et al., testified in 
opposition to Proposal 6. According to the witness, the 2-day touch 
base provision contained in Proposal 6 would only result in additional 
and unwarranted expense to UMW producers and promote the uneconomic 
movement of milk for the sole purpose of meeting an unneeded standard. 
Furthermore, the witness asserted, in a low Class I utilization order 
like the UMW, a 2-day touch-base standard is unreasonable.
    The AMPI, et al., witness also testified that much of AMPI's Grade 
A milk is commingled with Grade B milk when it is picked up from the 
farm. Proposal 6 would require AMPI to pick up their Grade A and Grade 
B milk separately, explained the witness, and thus would be extremely 
costly and inefficient. The witness was of the opinion that the current 
order's one-time touch-base provision is sufficient for ensuring an 
adequate supply of milk for fluid use. Additionally, the witness said 
that the Market Administrator already has the authority to adjust 
supply plant shipping standards in the event that distributing plants 
have difficulty in obtaining adequate milk supplies to meet the 
market's Class I demands.
    A post-hearing brief submitted by AMPI, et al., reiterated their 
opposition to Proposal 6. The brief contended that if Proposal 6 were 
adopted, select handlers would face increased handling and 
transportation costs to meet the new performance standard. The brief 
further argued that Proposal 6 would necessitate that supply plants 
invest more capital to build additional silo capacity used only to 
accommodate the increased volumes of producer milk needing to touch 
base.
    A witness appearing on behalf of Wisconsin Cheesemakers Association 
(WCMA), also testified in opposition to Proposal 6. WCMA represents a 
group of dairy manufacturers and marketers in Wisconsin. According to 
the witness, 32 of WCMA's members operate 42 dairy facilities pooled on 
the UMW order. The witness was of the opinion that the implementation 
of Proposal 6 would not result in orderly marketing within the UMW 
order because the 2-day touch-base standard would cause uneconomic and 
inefficient shipments of milk solely for the purpose of meeting the new 
higher standard. Furthermore, the witness said the additional milk 
needed to be shipped to a pool supply plant would necessitate that 
additional silo capacity be built at plants to receive the additional 
milk volumes arising from establishing a higher touch-base standard.
    A witness appearing on behalf of the National Family Farm 
Coalition, an organization which represents family farms located in 32 
states, including those states comprising the UMW marketing area, 
testified in opposition to all proposals at the hearing. The witness 
was of the opinion that the entire Federal order system was in need of 
complete reform. The witness asserted that proponents of the proposals 
being heard were entities whose actions have lowered prices received by 
family farmers.
    A post-hearing brief submitted by Alto Dairy (Alto), a cooperative 
with 580 members in Wisconsin and Michigan, expressed their opposition 
to Proposals 1, 2, and 6. The brief argued that the pooling of milk 
located far from the marketing area serves to equalize the blend prices 
between Federal orders and contended that a ban on such pooling in the 
UWM order would lead to similar bans in other Federal orders. The brief 
concluded that this would widen blend price differences among all 
Federal orders.
    A brief submitted on behalf of Family Dairies USA (Family Dairies), 
expressed their opposition to Proposals 1, 2, and 6. Family Dairies is 
a cooperative handler regulated by the UMW order that operates a pool 
supply plant located in the marketing area. The brief expressed the 
opinion that these proposals essentially establish performance 
standards for out-of-area milk that are different from performance 
standards for in-area milk. The brief contended that establishing 
different standards based on location is discriminatory, is designed to 
erect trade barriers to distant milk, and is illegal. In their brief 
they argued that producers who bear large transportation costs to 
supply the fluid market, in effect, are not receiving uniform prices. 
In this regard, the brief asserted that Proposals 1, 2, and 6 violated 
uniform producer prices because of the transportation cost burden on 
distant producers.

2. Transportation Credits

    Two proposals seeking an identical mileage limit applicable for a 
handler receiving a transportation credit for moving milk for Class I 
uses should be adopted immediately. While no handler is currently 
receiving a transportation credit on milk from distances of greater 
than 400 miles, the proposed 400-mile limit is reasonable to ensure 
that milk used in fluid products will be acquired from sources nearest 
to the distributing plants. Specifically, receipt of the transportation 
credit for milk delivered to distributing plants on the first 400 miles 
between the transferring and receiving plant should be adopted 
immediately. These identical changes were included in Proposals 1 and 
2.
    Currently, the UMW order provides for a transportation credit on 
bulk milk transferred from a pool plant to a pool distributing plant. 
The transportation credit is calculated by multiplying $0.0028 times 
the number of miles between the transferring plant and the receiving 
plant and is applied on a per hundredweight basis. An adjustment is 
made for the different Class I prices between the transferring and 
receiving plants. The transportation credit is paid to the receiving 
distributing plant to partially offset the cost of transporting milk.
    A witness appearing on behalf of AMPI, et al., testified in support 
of the transportation credit limit contained in Proposal 1. The witness 
said that in 2003 no pooled milk received a transportation credit that 
was transported over 400 miles. The AMPI, et al., witness also 
testified that very little milk which did receive a transportation 
credit was shipped between 300 and 399 miles to the receiving 
distributing plant. The witness stressed that limiting the 
transportation credit to 400 miles would not disadvantage any handler 
currently delivering milk to a distributing plant.
    A witness appearing on behalf of Mid-West, et al., testified in 
support of the transportation credit limit contained in Proposal 2. The 
witness was of the opinion that milk located within the marketing area 
is more than adequate to supply the order's distributing plants. The 
witness said that adopting the proposed limit of 400 miles would not 
affect any current pool handlers receiving the credit. However, noted 
the witness, a mileage limit on the transportation credit would prevent 
any new supply plants that were located great distances from 
distributing plants from draining money from the producer settlement 
fund (PSF) in the future.
    A brief submitted on behalf of Mid-West, et al., maintained their 
position that placing a mileage limitation on receiving a 
transportation credit would avoid the potential of the UMW pool 
subsidizing the delivery of milk to UMW distributing plants from 
unneeded areas.
    The witness appearing on behalf of LOL also expressed their support 
for establishing a transportation credit limit.
    A witness appearing on behalf of Dean testified in opposition to 
limiting receipt of the transportation credit. The

[[Page 19715]]

witness was of the opinion that the purpose of limiting receipt of the 
transportation credit was only to prevent distant milk from pooling on 
the UMW order. If milk is needed to supply distributing plants, the 
witness argued, then it should be pooled without regard to the distance 
it needs to be transported.
    The record of this proceeding finds that several amendments to the 
pooling standards of the UMW order should be adopted immediately to 
more properly identify the milk of those producers that should share in 
the order's marketwide pool proceeds. Currently, milk located far from 
the UMW marketing area that demonstrates no consistent service to the 
Class I needs of the market is able to qualify for pooling on the UMW 
order. The addition of this milk to the order at lower classified use-
values results in a lower blend price returned to those producers who 
consistently supply the Class I needs of the UMW market. Such milk does 
not demonstrate a reasonable level of performance in servicing the 
Class I milk needs of the UMW marketing area and therefore should not 
be pooled.
    The pooling standards of all Federal milk marketing orders, 
including the UMW order, are intended to ensure that an adequate supply 
of milk is available to meet the Class I needs of the market and to 
provide the criteria for identifying the milk of those producers who 
are reasonably associated with the market as a condition for receiving 
the order's blend price. The pooling standards of the UMW order are 
represented in the Pool Plant, Producer, and the Producer milk 
provisions of the order and are performance based. Taken as a whole, 
these provisions are intended to ensure that an adequate supply of milk 
is available to meet the Class I needs of the market and provide the 
criteria for determining the producer milk that has demonstrated 
service to the Class I market and thereby should share in the 
marketwide distribution of pool proceeds.
    Pooling standards that are performance based provide the only 
viable method for determining those eligible to share in the marketwide 
pool. It is primarily the additional revenue generated from the higher-
valued Class I use of milk that adds additional income, and it is 
reasonable to expect that only those producers who consistently bear 
the costs of supplying the market's fluid needs should be the ones to 
share in the returns arising from higher-valued Class I sales so that 
costs can be recovered.
    Pooling standards are needed to identify the milk of those 
producers who are providing service in meeting the Class I needs of the 
market. If a pooling provision does not reasonably accomplish this end, 
the proceeds that accrue to the marketwide pool from fluid milk sales 
are not properly shared with the appropriate producers. The result is 
the unwarranted lowering of returns to those producers who actually 
incur the costs of servicing and supplying the fluid needs of the 
market.
    Pool plant standards, specifically standards that provide for the 
pooling of milk through supply plants, need to reflect the supply and 
demand conditions of the marketing area. This is important because 
producers whose milk, regardless of utilization, is pooled receive the 
market's blend price. When a pooling feature's use deviates from its 
intended purpose, and its use results in pooling milk that cannot 
reasonably be considered as serving the fluid needs of the market, it 
is appropriate to re-examine the standard in light of current marketing 
conditions.
    Unlike other consolidated orders established as a part of Federal 
milk order reform on the basis of the area in which Class I handlers 
compete with each other for the majority of their sales, the current 
consolidated UMW marketing area also was based on a common procurement 
area. In this regard, it would be unreasonable to conclude that areas 
far from the UMW area, such as Idaho, share a common procurement area 
with those states that comprise the current UMW marketing area. While 
it is the Class I use of milk by regulated handlers in the marketing 
area that provides additional revenue to the pool and not the 
procurement area, the procurement area was nevertheless envisioned to 
be the primary area relied upon by the order's distributing plants for 
a supply of milk.
    The geographic boundaries of the UMW order were not intended to 
limit or define which producers, which milk of those producers, or 
which handlers could enjoy the benefits of being pooled on the order. 
What is important and fundamental to all Federal orders, including the 
UMW order, is the proper identification of those producers, the milk of 
those producers, and handlers that should share in the proceeds arising 
from Class I sales. The UMW order's current pooling standards do not 
reasonably accomplish this.
    The hearing record clearly indicates that the milk of producers 
located in areas distant from the marketing area is pooled on and 
receives the UMW order's blend price. Current inadequate supply plant 
performance standards enable milk which has deminimus physical 
association with the market and which demonstrates no consistent 
service to the Class I needs to be pooled on the UMW order. The 
inappropriate pooling of milk occurs because the order has inadequate 
diversion provisions that allow for milk to be diverted to a 
manufacturing plant located far from the marketing area. The avenue for 
such milk to pool on the UMW order is made possible by distant handlers 
working out an arrangement with pooled handlers located within the UMW 
to pool the milk of the distant handler, often for a fee. The milk is 
included as part of the total receipts of the pooled handler even 
though such milk is diverted to plants located far from the marketing 
area.
    Requiring milk originating outside of the 7-state milkshed to 
qualify for pooling separately by delivering milk to an UMW 
distributing plant or distributing plant unit is not needed to ensure 
that such milk is actually servicing the Class I needs of the market. 
The adopted changes of limiting diversions to plants physically located 
within the 7-state milkshed in conjunction with not permitting handlers 
to use in-area milk to qualify milk located outside the 7-state 
milkshed essentially accomplishes the intent of ensuring the proper 
identification of milk that services the Class I needs of the market.
    Some entities on brief argued that requiring out-of-area milk to 
perform separately is a form of location discrimination and is a means 
of erecting trade barriers. This argument is without merit. Separate 
pooling standards for plants located outside the 7-state milkshed will 
not prohibit milk from being pooled if it meets the UMW's order pooling 
standards. The amended pooling provisions provide identical pooling 
standards to both in-area and out-of-area supply plants as both must 
ship 10 percent to the Class I market. Nevertheless, for the reasons 
stated above, other changes to the pooling standards negate the need to 
provide for separate pooling standards for out-of-area milk.
    The Federal milk order system has consistently recognized that 
there is a cost incurred by producers in servicing an order's Class I 
market, and the primary reward to producers for performing such service 
is receiving the order's blend price. The amended pooling provisions 
will ensure that milk seeking to be pooled and receive the order's 
blend price is consistently servicing the order's Class I needs. 
Consequently, the adopted pooling provisions will ensure the more 
equitable sharing of revenue generated

[[Page 19716]]

from Class I sales among producers who bear the costs.
    Changes to the order's diversion provisions are needed to ensure 
that milk pooled on the order not used for Class I purposes is part of 
the legitimate reserve supply of Class I handlers. Providing for the 
diversion of milk is a desirable and needed feature of an order because 
it facilitates the orderly and efficient disposition of milk when not 
needed for fluid use. However, it is necessary to safeguard against 
excessive milk supplies becoming associated with the market through the 
diversion process. Associating more milk than is actually part of the 
legitimate reserve supply of the diverting plant unnecessarily reduces 
the potential blend price paid to dairy farmers who service the 
market's Class I needs. Without reasonable diversion provisions, the 
order's performance standards are weakened and give rise to disorderly 
marketing conditions.
    The hearing record clearly indicates that milk located far from the 
marketing area can be reported as diverted milk by a pooled handler and 
receive the order's blend price. Under the current pooling provisions, 
this can occur after a one-time delivery to an UMW pool plant. After 
the initial delivery, such milk need never again be delivered to an UMW 
pool plant. The record evidence confirms that usually this milk is 
delivered to a nonpool plant located as far from the marketing area as 
the diverted milk. This milk is never again physically associated with 
a plant in the marketing area nor does it serve the Class I needs of 
the market.
    It is appropriate to amend the order's diversion provisions so that 
diversions can be made only to plants physically located within the 7-
state milkshed. Milk diverted to such plants better ensures that this 
milk is a legitimate reserve supply of the diverting handler and is 
readily available to service the Class I market when needed.
    The Agricultural Marketing Agreement Act of 1937 (the Act) was 
amended by the Food Security Act of 1985 to provide authority for the 
establishment of marketwide service payments. Under the Act, as 
amended, marketwide service payments can be established to partially 
reimburse handlers for services provided of marketwide benefit by using 
money out of the PSF before a blend price is computed.
    Class I sales add additional revenue to the marketwide pool, so 
ensuring an adequate supply of milk to distributing plants benefits, in 
general, all market participants. Consequently, a transportation credit 
was established in the pre-reform Chicago Regional order to reimburse a 
portion of the cost of transporting milk to a distributing plant for 
use in Class I products. The transportation credit provision was 
carried into the consolidated UMW order as part of Federal order 
reform.
    Transportation credits in the current UMW order assist plants in 
obtaining a milk supply to fulfill Class I demand and promote the 
orderly marketing of milk. However, it is important that the 
transportation credit provision not be used as a method of 
circumventing the intent of other performance-based pooling standards. 
Establishing a mileage limit on the transportation credit will 
encourage distributing plants to use milk located in the nearby 
procurement area. The UMW has an abundance of milk within the marketing 
area beyond Class I demands and there should be no incentive given to 
attract milk for Class I use beyond that available within 400 miles of 
a distributing plant, a reasonable proxy for describing the common 
procurement area of the order's distributing plants. A handler may 
acquire a milk supply from far distances, however, the transportation 
credit would apply only to the first 400 miles of milk movement.
    Evidence presented at the hearing revealed that currently no 
distributing plant is receiving a transportation credit for milk 
located farther than 400 miles from their plant. Therefore, the 
proposed amendment should not alter any current UMW handler's business 
practices. The ability of distant milk to use the transportation credit 
as a means of meeting the performance standards of the order will be 
limited. This is consistent with other changes adopted in this decision 
that stress meeting performance-based standards as a condition for 
receiving the order's blend price.
    A proposal seeking to increase the order's touch-base standard as a 
means of ensuring that the Class I needs of the market are met should 
not be adopted. While the touch-base standard is an important feature 
of an order's pooling standards, increasing the standard is not 
appropriate given the marketing conditions of the UMW marketing area. 
The UMW marketing area has an abundance of milk located within the 
marketing area and as a result, its Class I utilization is relatively 
low. For example, during 2003, the order's Class I utilization averaged 
24.2 percent. Increasing the touch-base standard is unwarranted because 
it would likely cause the uneconomic movement of milk for the sole 
purpose of meeting a higher standard without adequately addressing 
pooling provisions in a manner that would ensure a consistent servicing 
of the market's Class I needs.

3. Determination of Emergency Marketing Conditions

    Record evidence establishes that current pooling standards of the 
UMW order are inadequate and result in the erosion of the blend price 
received by producers who are serving the Class I needs of the market 
and should be changed on an emergency basis. The unwarranted erosion of 
such producer blend prices stem from improper supply plant standards 
and the lack of appropriate limits on diversions of milk to only plants 
located within the 7-state milkshed.
    It is also appropriate to establish a mileage limit on the 
transportation credit on an emergency basis to prevent the credit from 
being used to circumvent the amended pooling provisions contained in 
this decision regarding supply plant performance standards and diverted 
milk. Establishing a mileage limit will ensure that other changes made 
to ensure consistent performance to the Class I market before milk is 
eligible to be pooled and receive the order's blend price are not 
weakened.
    Consequently, it is determined that emergency marketing conditions 
exist and the issuance of a recommended decision is therefore being 
omitted. The record clearly establishes a basis as noted above for 
amending the order on an interim basis and the opportunity to file 
written exceptions to the proposed amended order remains.
    In view of these findings, an interim final rule amending the order 
will be issued as soon as the procedures are completed to determine the 
approval of producers.

Rulings on Proposed Findings and Conclusions

    Briefs, 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 Upper

[[Page 19717]]

Midwest order was first issued and when it was amended. The previous 
findings and determinations are hereby ratified and confirmed, except 
where they may conflict with those set forth herein.
    The following findings are hereby made with respect to the 
aforesaid marketing agreement and order:
    (a) The interim marketing agreement and the order, as hereby 
proposed to be amended, and all of the terms and conditions thereof, 
will tend to effectuate the declared policy of the Act;
    (b) The parity prices of milk as determined pursuant to section 2 
of the Act are not reasonable with respect to the price of feeds, 
available supplies of feeds, and other economic conditions which affect 
market supply and demand for milk in the marketing area, and the 
minimum prices specified in the interim marketing agreement and the 
order, 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 interim marketing agreement and the order, 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, the 
marketing agreement upon which a hearing has been held.

Interim Marketing Agreement and Interim Order Amending the Order

    Annexed hereto and made a part hereof are two documents--an Interim 
Marketing Agreement regulating the handling of milk and an Interim 
Order amending the order regulating the handling of milk in the Upper 
Midwest marketing area, which have been decided upon as the detailed 
and appropriate means of effectuating the foregoing conclusions.
    It is hereby ordered, that this entire tentative partial decision 
and the interim order and the interim marketing agreement annexed 
hereto be published in the Federal Register.

Determination of Producer Approval and Representative Period

    The month of July 2004 is hereby determined to be the 
representative period for the purpose of ascertaining whether the 
issuance of the order, as amended and as hereby proposed to be amended, 
regulating the handling of milk in the Upper Midwest marketing area is 
approved or favored by producers, as defined under the terms of the 
order as hereby proposed to be amended, who during such representative 
period were engaged in the production of milk for sale within the 
aforesaid marketing area.

List of Subjects in 7 CFR Part 1030

    Milk Marketing order.

    Dated: April 8, 2005.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.

Interim Order Amending the Order Regulating the Handling of Milk in the 
Upper Midwest Marketing Area

    This interim order shall not become effective unless and until the 
requirements of ``900.14 of the rules of practice and procedure 
governing proceedings to formulate marketing agreements and marketing 
orders have been met.

Findings and Determinations

    The findings and determinations hereinafter set forth supplement 
those that were made when the order was first issued and when it was 
amended. The previous findings and determinations are hereby ratified 
and confirmed, except where they may conflict with those set forth 
herein.
    (a) Findings. A public hearing was held upon certain proposed 
amendments to the tentative marketing agreement and to the order 
regulating the handling of milk in the Upper Midwest area. The hearing 
was held pursuant to the provisions of the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), and the 
applicable rules of practice and procedure (7 CFR part 900).
    Upon the basis of the evidence introduced at such hearing and the 
record thereof, it is found that:
    (1) The said order as hereby amended, and all of the terms and 
conditions thereof, will tend to effectuate the declared policy of the 
Act;
    (2) 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 aforesaid marketing area. The minimum 
prices specified in the order as hereby 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
    (3) The said order as hereby amended regulates the handling of milk 
in the same manner as, and is applicable only to persons in the 
respective classes of industrial or commercial activity specified in, a 
marketing agreement upon which a hearing has been held.

Order Relative to Handling

    It is therefore ordered, that on and after the effective date 
hereof, the handling of milk in the Upper Midwest marketing area shall 
be in conformity to and in compliance with the terms and conditions of 
the order, as amended, and as hereby amended, as follows: