PROPOSED RULEMAKING
MILK MARKETING BOARD
[7 PA. CODE CH. 148]
Over-Order Premium Pool
[31 Pa.B. 5367] The Milk Marketing Board (Board) proposes to add Chapter 148 (relating to establishment of an over-order premium pool) to read as set forth in Annex A.
Purpose of Proposed Rulemaking
This proposed rulemaking creates a partial pool of 45% of the over-order premium. This 45% will be distributed to all qualified producers, as defined in § 148.1 (relating to definitions), regardless of whether or not their milk is used as Class I fluid milk. The current over-order premium is only paid to those producers whose milk is produced, processed and sold as Class I fluid milk in this Commonwealth.
Summary of Proposed Rulemaking
Currently, the Board places a premium above the Federal order price of Class I fluid milk that is produced, processed and sold within this Commonwealth. This premium is designated as an over-order premium and is currently at a level of $1.40 per hundredweight of milk plus a $.25 diesel fuel add-on, resulting in a total of $1.65 per hundredweight of milk. This mandated over-order premium is now paid to Class I producers. The Board has determined that 45% of this over-order premium should be placed in a pool and shared with all qualified producers as defined in the proposed rulemaking. The remaining 45% of the over-order premium would continue to be paid to the Class I producers.
Statutory Authority
There is no specific language within the Milk Marketing Law (law) (31 P. S. §§ 700j-101--700j-1302) that discusses pooling of an over-order premium. The authority for the proposed rulemaking is implied throughout the law, as follows.
Section 301 of the law (31 P. S. § 700j-301) authorizes the Board to ''regulate the entire milk industry of this Commonwealth, including the production . . . of milk . . . including the establishment of reasonable trade practices.''
Section 801 of the law (31 P. S. § 700j-801) states that the Board shall ascertain and maintain prices paid to producers ''as will be most beneficial to the public interest, best protect the milk industry of this Commonwealth and insure a sufficient quantity of pure and wholesome milk to inhabitants of this Commonwealth.''
Section 803 of the law (31 P. S. § 700j-803) directs the Board to establish minimum producer pricing through either the establishment of a minimum price or a formula for the setting of minimum prices to be paid to producers by milk dealers.
Section 804 of the law (31 P. S. § 700j-804) prescribes the manner in which minimum producer pricing may be classified. The Board may classify milk in any reasonable manner that the Board deems advisable.
Section 806 of the law (31 P. S. § 700j-806) establishes the manner in which producers are to be paid by the milk dealer, including the terms and method of computing payment.
Public Involvement
Discussions were held with all segments of the dairy industry. Those participants included representatives from Pennsylvania Association of Milk Dealers; Land O'Lakes; Pennsylvania Grange; Pennsylvania Farm Bureau; Dairy Farmers of America; Dairylea Cooperative; Maryland/Virginia Cooperative; Pennsylvania Farmers Union; Pennsylvania Food Merchants Association; and Federal Market Administrator--Federal Order 1.
Fiscal Impact
The administration costs of maintaining the over-order premium pool by the Board is estimated to be $130,000 annually. This figure is based on the salaries, fringe benefits and paid leave for five current Board employees to operate the pool for 5 days per month.
Paperwork Requirements
Milk dealers and cooperatives already provide the information needed to perform the calculations described in the proposed rulemaking through the submission of monthly reports to the Board. The date of submission of the monthly reports will be changed to an earlier date to accommodate the timetable established in the proposed rulemaking. Additional paperwork will be required to be completed by the agency since it will have to provide each milk dealer with the information set forth in § 148.6 (relating to pool administrator's reporting requirements).
Effective Date; Sunset Date
The proposed rulemaking will become effective 60 days following publication in the Pennsylvania Bulletin as final rulemaking. There is no sunset date.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on September 12, 2001, a copy of this proposal was submitted to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House and Senate Committees on Agriculture and Rural Affairs. In addition to submitting the proposed rulemaking, the Board has provided IRRC and the Committees with a copy of a detailed regulatory analysis form. A copy of this material is available to the public upon request.
Public Comment
Interested persons are invited to submit written comments, suggestions or objections concerning the proposed rulemaking to Sharon L. Grottola, Chief Counsel, Milk Marketing Board, 2301 North Cameron Street, Harrisburg, PA 17110, within 30 days following publication in the Pennsylvania Bulletin.
BEVERLY R. MINOR,
ChairpersonFiscal Note: 47-9. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 7. AGRICULTURE
PART VI. MILK MARKETING BOARD
PENNSYLVANIA OVER-ORDER PREMIUM POOL Sec.
148.1. Definitions. 148.2. Pennsylvania over-order premium dealer's reporting requirements. 148.3. Calculation of the contributing pool plant over-order premium value. 148.4. Calculation of the pool. 148.5. Collection and distribution of the pool. 148.6. Pool administrator's reporting requirements. § 148.1. Definitions.
The following words and terms, when used in this part, have the following meanings, unless the context clearly indicates otherwise:
Contributing pool plant--Pennsylvania pool plant with Pennsylvania Class I utilization.
Distributing plant--A plant that is approved by a duly constituted regulatory agency for the handling of Grade A milk at which fluid milk products are processed or packaged and from which there is route disposition or transfers of packaged fluid milk products to other plants.
Diversion--Any transaction involving the purchase of milk or milk products from a producer in which the milk thus purchased does not enter the Pennsylvania pool plant and is delivered to another plant. Whether milk enters the Pennsylvania pool plant will be determined on the basis of the United States Department of Agriculture guidelines.
Over-order premium value--The over-order premium value is an amount, over and above the applicable Federal order or Board-established minimum class price, which the Board mandates be paid to producers for all milk produced in this Commonwealth and included in the Pennsylvania Class I utilization of Pennsylvania pool plants.
Over-order premium rate--Hundredweight rate of the over-order premium value paid on Class I milk produced, processed and utilized in this Commonwealth.
Pennsylvania Class I pounds--Pennsylvania milk disposed of in the form of fluid milk products and adjusted for purchases from other dealers, shrinkage and inventory variation.
Pennsylvania milk pool or pool--
(i) The sum of the obligation of over-order premium from Pennsylvania pool plants.
(ii) The amount to be redistributed to Pennsylvania producers.
Pennsylvania out-of-State diversion--Diversion of Pennsylvania production to out-of-State plants.
Pennsylvania pool plant--A Pennsylvania plant that purchases and physically receives Pennsylvania producer milk, excluding producer-dealers.
Pennsylvania producer--A person who operates a farm located in this Commonwealth that produces milk.
Pennsylvania production--Milk produced by Pennsylvania producers and sold to Pennsylvania pool plants regardless of the location of plant of physical receipt.
Pool administrator--The pool administrator is the Board.
Pool allotment--The amount allotted from the pool to a Pennsylvania pool plant for payment to individual producers entitled to receive an amount due from pool payments.
Pool payment--The amount of the over-order premium payable to the Pennsylvania milk pool by a Pennsylvania pool plant.
Producer-dealer--A person who does the following:
(i) Operates a dairy farm and a distributing or manufacturing plant in this Commonwealth.
(ii) Receives milk solely from its own farm production and may receive bulk milk from other dealers.
(iii) Receives at its plant or acquires for route disposition no more than 150,000 pounds of fluid milk products from milk dealers (this limitation does not apply if the producer-dealer's own farm production is less than 150,000 pounds during the month).
(iv) Provides proof satisfactory to the pool administrator that the care and management of the dairy animals and other resources necessary to produce all milk handled (excluding receipts from subparagraph (ii)) and the processing and packaging operations are the producer-dealer's own enterprise and at its own risk.
Qualified pounds--Grade A milk produced in this Commonwealth and physically received at a pool plant from a Pennsylvania producer, less Pennsylvania production transferred to nonpool plants, and excluding milk received from a producer-dealer. Transfers will be allocated to Pennsylvania or out-of-State production based upon the percentage of physical producer receipts at a pool plant. For example, if 50,000 pounds of milk is transferred to nonpool plants, and a pool plant physically receives 1 million pounds of producer milk, half of which is Pennsylvania production, then 25,000 pounds would be considered a Pennsylvania produced transfer. Any non-Class I milk depooled from a Federal milk marketing order at the dealer's or producer's election during any month is disqualified for that month and 1 additional month. For example, if non-Class I milk is depooled for 3 months, that amount of milk for the depooling producer or dealer is disqualified from the pool for 6 months.
Qualified producer--A Pennsylvania producer whose Grade A milk is purchased or processed as fluid or manufactured products by a Pennsylvania pool plant, excluding diversions to out-of-State distributing plant and receipts from producer-dealers.
Redistribution rate--The premium rate due to qualified producers, calculated by dividing the pool by the qualified pounds, and rounding to the fourth decimal place using the uniform method of increasing the fourth decimal place by one if the next decimal place is five or more or making no change if the next decimal place is less than five. Example: $1.05655 becomes $1.0566 and $1.05654 becomes $1.0565.
§ 148.2. Pennsylvania over-order premium dealer's reporting requirements.
By the 9th day after the end of each month, each Pennsylvania pool plant shall file with the Board information contained in forms prescribed and furnished by the Board.
§ 148.3. Calculation of the contributing pool plant over-order premium value.
The pool administrator shall calculate the over-order premium value for each contributing pool plant in the following manner:
(1) Divide the Pennsylvania production by the total producer purchases net of non-Class I Diversions to arrive at the percentage of Pennsylvania purchases. This percentage may not exceed 100%.
(2) Multiply the over-order premium rate times the Pennsylvania class I utilization times the percentage of Pennsylvania purchases to arrive at the contributing pool plant over-order premium value.
Example
Where
A = 300,000 pounds Pennsylvania production B = 700,000 pounds total producer purchases C = 100,000 pounds non-Class I diversions D = Percentage of Pennsylvania purchases E = $1.00/cwt over-order premium rate F = 400,000 pounds Pennsylvania Class I utilization G = Contributing pool plant over-order premium value
A = D 300,000 = 50% ______ ______ (B - C) (700,000 - 100,000) E × F × D = G $1.00/cwt × 400,000 × 50% = $2,000 § 148.4. Calculation of the pool.
The pool administrator shall calculate the plant pool obligation for each contributing pool plant, pool and the redistribution rate in the following manner.
(1) Multiply the contributing pool plant over-order premium value calculated in § 148.3 (relating to calculation of the contributing pool plant by over-order premium value) for each contributing pool plant by 45% to arrive at the plant pool obligation. The remaining 55% of the over-order premium value is the directly distributed over-order premium value.
(2) The sum of all plant pool obligations from all contributing pool plants is the pool.
(3) Divide the pool by the hundredweights of all qualified pounds for all Pennsylvania pool plants to arrive at the redistribution rate.
Example
Where
Ga = $2,000 Contributing pool plant over-order premium value (Dairy A) Gb = $3,000 Contributing pool plant over-order premium value (Dairy B) Gc = $0 Contributing pool plant over-order premium value (Dairy C) Ia = Plant pool obligation (Dairy A) Ib = Plant pool obligation (Dairy B) Ic = Plant pool obligation (Dairy C) Ja = Directly distributed over order premium value (Dairy A) Jb = Directly distributed over-order premium value (Dairy B) Jc = Directly distributed over-order premium value (Dairy C) Aa = 300,000 pounds Pennsylvania production (Dairy A) Ab = 500,000 pounds Pennsylvania production (Dairy B) Ac = 50,000 pounds Pennsylvania production (Dairy C) Ka = 50,000 pounds Pennsylvania out-of-State diversion (Dairy A) Kb = 200,000 pounds Pennsylvania out-of-State diversion (Dairy B) Kc = 0 pounds Pennsylvania out-of-State diversion (Dairy C) La = 100,000 pounds Federally depooled milk (Dairy A) Ma = Qualified pounds (Dairy A) Mb = Qualified pounds (Dairy B) Mc = 192,857 pounds Qualified pounds (Dairy C) N = Pennsylvania milk pool O = Redistribution rate (i) Dairy A Ga × 45% = Ia $2,000 × 45% = $900 Ga - Ia = Ja $2,000 - $900 = $1,100 Dairy B Gb × 45% = Ib $3,000 × 45% = $1,350 Gb - Ib = Jb $3,000 - $1,350 = $1,650 Dairy C Gc × 45% = Ic $0 × 45% = $0 Gc - Ic = Jc $0 - $0 = $0 (ii) N Pennsylvania milk pool $2,250 ______ ______ (iii) Dairy A Aa - (Ka + L) = Ma 300,000 - (50,000 + 100,000) = 150,000 Dairy B Ab - Kb = Mb 500,000 - 200,000 = 300,000 Dairy C Mc 192,857 192,857 _____ 642,857 ______ ______ N = O $2,250 = $0.3500/Hundredweight ______ ______ (Ma + Mb + Mc)/100 642,857/100
§ 148.5. Collection and distribution of the pool.
The pool administrator shall calculate the pool allotment and pool payment for each plant in the following manner:
(1) Multiply the redistribution rate times hundredweights of the qualified pounds at each Pennsylvania pool plant to arrive at the pool allotment for each plant.
Example
Where
Ma = 150,000 pounds Qualified pounds (Dairy A) Mb = 300,000 pounds Qualified pounds (Dairy B) Mc = 192,857 pounds Qualified pounds (Dairy C) O = $0.3500/cwt Redistribution Rate P = Pool allotment Dairy A Ma × O = Pa (150,000/100) × $0.3500 = $525 Dairy B
Mb × O = Pb (300,000/100) × $0.3500 = $1,050 Dairy C
Mc × O = Pc (192,857/100) × $0.3500 = $675 ____ $2,250 (2) For contributing pool plants:
(i) Add the pool allotment to the directly distributed over-order premium value to arrive at the amount to be distributed among qualified producers.
(ii) Subtract the amount to be distributed among qualified producers from the contributing plant over-order premium value calculated in § 148.3 (relating to calculation of the contributing pool plant over-order premium value) to arrive at the pool payment.
(iii) Pool payments shall be received by the pool administrator on or before the 18th day after the end of the month. If the 18th day falls on a weekend or State-recognized holiday, payment may be received on the next business day following the weekend or State-recognized holiday.
(iv) Contributing pool plant operators shall divide the amount to be distributed among qualified producers by the hundredweights of all Pennsylvania production less Federally depooled milk to arrive at the plant distribution rate.
(v) Multiply the plant distribution rate by the hundredweights of milk from each Pennsylvania producer or producer group to arrive at the net over-order premium value payable to each producer or producer group. No distribution of any over-order premium value shall be made to any producer or producer group for any portion of milk depooled under a Federal Milk Marketing Order.
(vi) Contributing pool plant operators shall make payment of the contributing pool plant over-order premium value with the final payment.
Example
Where
Ja = $1,100 Directly distributed over-order premium value (Dairy A) Pa = $525 Pool allotment (Dairy A) Ga = $2,000 Contributing pool plant over-order premium value (Dairy A) Qa = Amount to be distributed among qualified producers Ra = Pool payment Aa = 300,000 pounds Pennsylvania production La = 100,000 pounds Federally de-pooled milk (Dairy A) Sa = Plant distribution rate per hundredweight Dairy A
* To derive the amount to be distributed among qualified producers
Ja + Pa = Qa $1,100 + $525 = $1,625* To derive the pool payment
Ga - Qa = Ra $2,000 - $1,625 = $375* To derive the plant distribution rate per hundredweight
Qa = Sa $1,625 = ______ ______ (Aa - La)/100) (300,000 - 100,000/100)
$0.5417/Hundredweight
(3) For all Pennsylvania pool plants other than contributing pool plants:
(i) The pool allotment is the amount to be distributed among qualified producers.
(ii) Divide the amount to be distributed among qualified producers by the hundredweights of all Pennsylvania production to arrive at the plant distribution rate.
(iii) Multiply the plant distribution rate by the hundredweights of milk from each Pennsylvania producer or producer group to arrive at the net over-order premium value payable to each producer or producer group.
(4) On or before the 22nd day after the end of the month, the State Treasurer shall make payment of the pool allotment to each Pennsylvania pool plant receiving pool payments for redistribution to their qualified producers.
(5) Pennsylvania pool plants receiving pool allotments shall distribute those funds to their qualified producers by the date of the advance payment for the following month. Checks forwarding pool payments to qualified producers shall include a line item that identifies the pool portion of the check.
§ 148.6. Pool administrator's reporting requirements.
(a) By the 16th day after the end of each month, the pool administrator shall advise each Pennsylvania pool plant of the following information as it pertains to them. If the 16th falls on a weekend or State-recognized holiday, the pool administrator shall advise the Pennsylvania pool plant of the following information on the last business day prior to the weekend or State-recognized holiday:
(1) Pennsylvania production.
(2) Total pounds received.
(3) Class I pounds--utilization.
(4) Nonclass I diversions.
(5) Diversions to out-of-State plants.
(6) Over-order premium rate.
(7) Over-order premium obligation.
(8) Percentage to pool (currently 45%).
(9) Amount of premium pooled.
(10) Qualified pounds.
(11) Total pool amount.
(12) Total qualified pounds.
(13) Redistribution rate.
(14) Pool payment.
(15) Amount Pennsylvania pool plant will receive out of pool.
(16) Any adjustments from previous months.
(17) Pennsylvania pool plant distribution rate per hundredweight
(b) This information will be generated from the PMMB 62, Milk Dealers Monthly Report, submitted by the Pennsylvania pool plants.
[Pa.B. Doc. No. 01-1721. Filed for public inspection September 21, 2001, 9:00 a.m.]
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