Milk in the Northeast and Other Marketing Areas; Proposed Amendments to Marketing Agreements and Orders

DEPARTMENT OF AGRICULTURE <SUBAGY>Agricultural Marketing Service</SUBAGY> <CFR>7 CFR Parts 1000, 1001, 1005, 1006, 1007, 1030, 1032, 1033, 1051, 1124, 1126, and 1131</CFR> <DEPDOC>[Doc. No. AMS-DA-23-0031]</DEPDOC> <SUBJECT>Milk in the Northeast and Other Marketing Areas; Proposed Amendments to Marketing Agreements and Orders</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Agricultural Marketing Service, USDA. <HD SOURCE="HED">ACTION:</HD> Proposed rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This decision proposes to amend the pricing provisions in the 11 Federal Milk Marketing Orders (FMMOs). </SUM> <DATES> <HD SOURCE="HED">DATES:</HD> Written exceptions and comments to this proposed rule must be submitted on or before September 13, 2024. </DATES> <HD SOURCE="HED">ADDRESSES:</HD> Written exceptions should be filed with the Office of the Hearing Clerk, U.S. Department of Agriculture, 1400 Independence Ave. SW, Stop 9203, Room 1031, Washington, DC 20250-9203; Fax: (844) 325-6940 or via the internet at <E T="03">https://www.regulations.gov.</E> All comments should reference the docket number and the date and page number of this issue of the <E T="04">Federal Register</E> . Comments will be made available for public inspection in the Office of the Hearing Clerk during regular business hours or can be viewed at <E T="03">https://www.regulations.gov.</E> A plain-language summary of this proposed rule is available at <E T="03">https://www.regulations.gov</E> in the docket for this rulemaking. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Erin Taylor, USDA/AMS/Dairy Programs, Order Formulation and Enforcement Branch, STOP 0231-Room 2530, 1400 Independence Avenue SW, Washington, DC 20250-0231, Telephone: (202) 720-7183, Email address: <E T="03">Erin.Taylor@usda.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> This recommended decision proposes amendments to five categories of milk pricing: 1. <E T="03">Milk Composition Factors.</E> Update the factors to 3.3 percent true protein, 6 percent other solids, and 9.3 percent nonfat solids. 2. <E T="03">Surveyed Commodity Products.</E> Remove 500-pound barrel cheddar cheese prices from the Dairy Products Mandatory Reporting Program (DPMRP) survey and rely solely on the 40-pound block cheddar cheese price to determine the monthly average cheese price used in the formulas. 3. C <E T="03">lass III and Class IV Formula Factors</E> . Update the manufacturing allowances to: Cheese: $0.2504; Butter: $0.2257; Nonfat Dry Milk (NFDM): $0.2268; and Dry Whey: $0.2653. This decision also proposes updating the butterfat recovery factor to 91 percent. 4. <E T="03">Base Class I Skim Milk Price.</E> Update the formula as follows: the base Class I skim milk price would be the higher-of the advanced Class III or Class IV skim milk prices for the month. In addition, adopt a Class I extended shelf life (ESL) adjustment equating to a Class I price for all ESL products equal to the average-of mover, plus a 24-month rolling average adjuster with a 12-month lag. 5. <E T="03">Class I and Class II differentials.</E> Keep the $1.60 base differential and adopt modified location specific Class I differential values. In conjunction with this Recommended Decision, the Agricultural Marketing Service (AMS) conducted a Regulatory Economic Impact Analysis to determine the potential impact of amending FMMO pricing formulas on producer revenue and marketwide pool values. AMS used a static analysis incorporating actual data reported from January 2019 to December 2023 to determine the estimated price impacts of the package of amendments included in this Recommended Decision. The full text of the Regulatory Economic Impact Analysis may be accessed at <E T="03">https://www.regulations.gov</E> or <E T="03">https://www.ams.usda.gov/rules-regulations/moa/dairy/hearings/national-fmmo-pricing-hearing.</E> <HD SOURCE="HD1">Prior Documents in This Proceeding</HD> <E T="03">Notice of Hearing:</E> Published July 24, 2023 (88 FR 47396). <E T="03">Notice of Reconvened Hearing:</E> Published November 6, 2023 (88 FR 76143). <E T="03">Notice of Reconvened Hearing:</E> Published December 29, 2023 (88 FR 90134). This administrative action is governed by sections 556 and 557 of title 5 of the United States Code and, therefore, is excluded from the requirements of Executive Orders 12866, 13563, and 13175. The amendments to the rules proposed herein have been reviewed under Executive Order 12988, Civil Justice Reform. They are not intended to have a retroactive effect. If adopted, the proposed amendments would not preempt any state or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. The Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674) (AMAA), provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the AMAA, any handler subject to an order may request modification or exemption from such order by filing a petition with the USDA stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with the law. A handler is afforded the opportunity for a hearing on the petition. After a hearing, USDA would rule on the petition. The AMAA provides that the district court of the United States in any district in which the handler is an inhabitant, or has its principal place of business, has jurisdiction in equity to review USDA's ruling on the petition, provided a bill in equity is filed not later than 20 days after the date of the entry of the ruling. <HD SOURCE="HD1">Civil Rights Impact Analysis</HD> AMS has reviewed this rulemaking in accordance with USDA Departmental Regulation 4300-004, Civil Rights Impact Analysis, to identify any major civil rights impacts the rule might have on FMMO participants on the basis of race, color, national origin, disability, sex, gender identity, political beliefs, age, marital, family/parental status, religion, sexual orientation, reprisal, or because of an individuals' income is derived from any public assistance program. Based on the review and analysis of the rule and all available data, issuance of this proposed rule is not likely to negatively impact low and moderate-income populations, minority populations, women, Tribes or persons with disabilities, by virtue of their age, race, color, national origin, sex, disability, or marital or familial status. No major civil rights impact is likely to result from this proposed rule. <HD SOURCE="HD1">Regulatory Flexibility Act and Paperwork Reduction Act</HD> In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 <E T="03">et seq.</E> ), the AMS has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this initial regulatory flexibility analysis. The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions so that small businesses will not be unduly or disproportionately burdened. Marketing orders and amendments thereto are unique in that they are normally brought about through group action of essentially small entities for their own benefit. A small dairy farm as defined by the Small Business Administration (SBA) (13 CFR 121.201) is one that has an annual gross revenue of $3.75 million or less, and a small dairy products manufacturer is one that has no more than the number of employees listed in the chart below: <GPOTABLE COLS="3" OPTS="L2,nj,tp0,i1" CDEF="xs60,r50,19"> <TTITLE> </TTITLE> <CHED H="1">NAICS code</CHED> <CHED H="1">NAICS U.S. industry title</CHED> <CHED H="1"> Size standards in number of employees </CHED> <ROW> <ENT I="01">311511</ENT> <ENT>Fluid Milk Manufacturing</ENT> <ENT>1,150</ENT> <ENT>Dry, Condensed, and Evaporated Dairy Product Manufacturing</ENT> <ENT>1,000</ENT> </ROW> </GPOTABLE> To determine which dairy farms are “small businesses,” the $3.75 million per year income limit was used to establish an annual milk marketing threshold of 18.3 million pounds. Although this threshold does not factor in additional monies that may be received by dairy producers, it should be an accurate standard for most “small” dairy farmers. Based on the U.S. 2023 average yield per cow and 2023 NASS average All-Milk price, a dairy farm with approximately 780 cows or fewer would meet the definition of small business. In 2022, the most recent year with statistics available, there were 24,470 dairy farms with milk sales, of which approximately 19,576 had milk regulated on an FMMO for at least one month of the year. Based on the 2022 Census of Agriculture, Milk Cow Herd Size by Inventory and Sales, an estimated 89 percent of operations with milk sales are likely to be small businesses. To determine a handler's size, if the plant is part of a larger company operating multiple plants that collectively exceed the 750-employee limit for creamery butter manufacturing; the 1,000-employee limit for dry, condensed, and evaporated dairy product manufacturing; the 1,150-employee limit for fluid milk manufacturing; or the 1,250-employee limit for cheese manufacturing; the plant was considered a large business even if the local plant does not exceed the 750, 1,000, 1,150, or 1,250-employee limit, respectively. In 2022, the following number of plants were regulated for at least one month of the year in each FMMO: 66 plants on the Northeast, 19 plants on the Appalachian, 9 plants on the Florida, 20 plants on the Southeast, 58 plants on the Upper Midwest, 32 plants on the Central, 43 plants on the Mideast, 24 plants on California, 17 plants on the Pacific Northwest, 26 plants on the Southwest, and 8 plants on Arizona. 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