238.00.22 Ark. Code R. 003

Current through Register Vol. 49, No. 9, September, 2024

Rule 238.00.22-003 - Milk Stabilization Rule

I.Purpose

1. The purpose of these rules is to:

a. Implement Act 521 of 2021, codified at Ark. Code Ann. § 2-10-104; and

b. Ensure that Arkansas milk producers receive Class 1 prices for milk utilized or sold as fluid milk in this state.

2. It is the understanding of the Arkansas Milk Stabilization Board that:

a. Prices for milk produced and sold in Arkansas are currently only regulated at the Federal level, pursuant to the state of Arkansas's inclusion in Federal Milk Marketing Order Number 7;

b. The Federal regulations set the minimum prices of milk paid to producers based on the average utilization of milk within the entire marketing order region, which includes several southeastern states;

c. Traditionally, the utilization of milk produced and sold in the state of Arkansas as fluid milk is much higher than the average utilization of milk as fluid milk in the Federal Milk Marketing Order Number 7;

d. As a result, Arkansas milk producers are often underpaid for the milk they produce, making it necessary for the state to require a premium to fairly compensate milk producers;

e. The overwhelming majority of milk producers in Arkansas are members of cooperative associations;

f. Due to various economic reasons, the cooperative associations often negotiate with milk dealers to reach agreements for price premiums that exceed the Federal Marketing Order's established monthly minimum milk price;

g. However, milk producers remain underpaid for the milk they produce as the premiums paid to cooperatives are not sufficiently passed on to producers;

h. It is therefore necessary to establish clear circumstances that cause Arkansas milk producers to be underpaid for milk, and to require that premium payments are fairly passed through to producers in those circumstances.

II.DEFINITIONS AND CONTEXT

The following terms shall be construed in this rule to have the following meanings, except in those instances where the context clearly indicates otherwise:

"BOARD" means the Arkansas Milk Stabilization Board.

"BOOKS AND RECORDS" or "BOOKS OR RECORDS" shall include all pertinent books, ledgers, journals, records, papers, memoranda, correspondence, vouchers, bills, receipts, cancelled checks, accounts, exhibits, photographs and other documents.

"CONSUMER" means any person other than a milk dealer who purchases milk for consumption or use by him or herself or others.

"COOPERATIVE" means a cooperative agricultural association or corporation of producers organized under the laws of this State or of any other state and engaged in making collective sales or in the marketing of milk for producers under contract with it.

"DEALER" means any person, who purchases or receives or handles on consignment or otherwise milk within the State, for processing or manufacture and further sale, within or without the State, whether on behalf of himself or others, or both. A producer who delivers milk to a milk dealer only shall not be deemed a milk dealer.

"DEPARTMENT" means the Arkansas Department of Agriculture.

"HANDLE" to handle means the doing of any one or several or all of the following acts, to buy, sell, barter, acquire, store, process, consign, receive, transport, control as owner, buyer, seller, consignee, consignor, bailee, bailor, broker, or factor.

"MARKET" includes any county, city, borough, incorporated town, or township in the State, or any two or more such counties, cities, boroughs, incorporated towns, or townships, or any portions thereof, or any other land within the territorial limits of the State designated by the Board as a marketing area.

"MILK" includes fluid milk and cream, fresh, sour or storage, skimmed milk, low-fat milk, flavored milk or milk drink, buttermilk, ice cream mix, and condensed or concentrated whole or skimmed milk except when contained in hermetically sealed cans.

"OVER-MARKET PREMIUM" means the payment required to be paid to producers pursuant to Act 521 of 2021, and further provided for in this rule.

"PERSON" includes an individual, corporation, association, partnership, limited partnership, or other unincorporated enterprise owned or conducted by or on behalf of two or more individuals or other persons.

"PRICE" includes the amount paid or to be paid and the proceeds returned or to be returned, whether the transaction be one of purchase, sale, consignment, sale or return, accounting, or otherwise.

"PRODUCER" means a person producing milk in Arkansas.

"SOLD" means a producer's sale of milk to a dealer, either directly or indirectly through a cooperative or other agent.

"STORE" includes a grocery store, hotel, restaurant, soda fountain, dairy products store, or any similar mercantile establishment which sells or distributes milk.

Any reference in this rule to quantity of milk shall be construed to include its whole milk equivalent.

III.PRICES OF MILK

A.Calculations of Milk Prices

Milk class prices shall be calculated using the regulations set in 7 C.F.R. Part 1000 . By the 17^th of every month, a dealer shall determine the utilization of its milk that was both produced in and sold as fluid milk within Arkansas for the preceding month. If the dealer's percentage of utilization of milk that was produced in and sold as fluid milk within Arkansas exceeds the percentage of utilization of milk as Class I milk in Federal Milk Marketing Order (FMMO) Number 7, the producer shall be paid an Over-Market Premium, as calculated in Section III, Paragraph B.

B.Over-Market Premium

When an Over-Market Premium is owed to a producer, the premium shall be paid to the producer, or to the producer's cooperative, by the dealer pursuant to the rules for payments to producers set forth below. If the Dealer pays the premium to the cooperative, the cooperative shall make the calculations. The premium shall be calculated as follows:

1. Calculate the Dealer's Class I Utilization Price by multiplying the percentage of its milk produced in and sold in Arkansas as fluid milk by the Class I Price as determined under the FMMO 7 (Dealer's Class I Utilization % x Class I Price);

2. Calculate the FMMO Class I Utilization Price by multiplying the percentage of milk utilized as Class I milk within the FMMO 7 by the Class I Price as determined under the FMMO 7 (FMMO 7 Utilization % x Class I Price); and

3. Subtract the FMMO 7 Class I Utilization Price from the Dealer's Class I Utilization Price (Dealer's Class I Utilization Price - FMMO Class I Utilization Price).

The figure that results from the calculation above is the Over-Market Premium that is owed to producers for every hundredweight of milk produced in and sold as fluid milk within Arkansas.

C.Terms of Payment

1. Producers shall be paid as follows:

(a) Payment to producers, cooperatives and producer settlement funds shall be made under the Federal milk marketing order.

(b) A final settlement payment for all milk and cream purchased shall be made not later than the 17th day of the following month. The final settlement shall include any balances due to the producer, including any Over-Market Premium owed, if applicable, and shall be accompanied by a statement to each producer setting forth the information required under Section III, paragraph D.

(c) If a date required for payment falls on a Saturday, Sunday or State or National Holiday, the payment is due on the following business day.

2. This section may not be interpreted as prohibiting a dealer from paying its producers on a weekly basis; however, when a dealer pays on this basis, it shall also provide its producers with a monthly statement as prescribed by Section III, paragraph D. All advance payments on the weekly basis shall be at least at the lowest announced class price for the previous month for the number of pounds purchased or received during the week in question. The final settlement shall include any balances due for the initial weeks during the month and shall be accompanied by a statement to each producer setting forth the information required under Section III, paragraph D.

D.Monthly Statement to Producers

Dealers purchasing milk or cream from producers shall furnish producers, in addition to any reports to producers that may be required by the FMMO, with statements containing each of the following items at the time of the monthly final settlement payment. Producers receiving their statements through electronic media shall have an agreement to do so on file with the purchasing dealer.

1. The name and address of the dealer issuing statement.

2. The date of statement.

3. The period for which statement is rendered.

4. The name and either the address or the producer number of the producer for whom the statement is intended.

5. The total pounds of milk purchased from the producer.

6. The gross amount paid for milk.

7. The dealer's utilization percentage for milk produced in and sold as fluid milk in Arkansas.

8. The utilization percentage for class I milk in FMMO 7.

7. Itemization of the pounds of milk subject to Over-Market Premiums and additional amounts paid as premiums, bonuses, or similar payments.

8. The gross amount due after addition of premiums, bonuses, or similar payment.

9. Itemization of advance payments and authorized deductions.

10. The total deductions.

11. The net amount due and paid.

12. A listing of the amount of milk picked up each day.

IV.RECORDS, REPORTS, AND INFORMATION

A.Records

Milk dealers shall keep within the State the following records:

1. All records as may be required to be kept or produced under the FMMO.

2. Any records used to determine the dealer's liabilities for Over-Market Premiums under these rules.

3. All reports filed with the Board as required under these rules.

4. Such other records and information as the Board may deem necessary.

The records herein required shall be kept in the possession of the milk dealer for a period not less than two years unless the Board otherwise provides.

B.Reports

By the 20^th of every month, each milk dealer shall submit to the Board a report for the preceding month stating whether the percentage of its milk produced in and sold as fluid milk within Arkansas is greater or less than the percentage of milk utilized as Class I milk in FMMO 7. The report shall list in detail the total amount of the dealer's milk produced in and sold within Arkansas and the total amount of the dealer's milk produced in and sold as fluid milk within Arkansas. If an Over-Market Premium is owed for the preceding month, the following additional information shall be included in the monthly report:

1. The Over-Market Premium price per hundredweight, as calculated under Section III Paragraph B.

2. An accounting of how much milk was subject to the Over-Market Premium.

3. Identification of producers owed an Over-Market Premium, including the names and addresses of the producers.

4. A copy of the statement provided to each producer upon final settlement payment, as required under Section III, Paragraph D.

V.COOPERATIVES

A. No provision of this rule shall prevent or interfere with, and no provision contained herein shall be deemed or construed to prevent or interfere with, any agreement between producers and milk cooperative agricultural association or corporation organized under the laws of this State, or a similar association or corporation organized under the laws of this or any other state.

B. Nothing herein contained shall prevent any milk dealer from contracting for his milk with such cooperative agricultural association or corporation.

C. Dealer payments of Over-Market Premiums made to cooperatives shall be passed through, in whole, to producers for the premium owed to the producer under this rule.

VI.VIOLATIONS

A. It shall be a violation of these rules for a milk dealer to fail to pay an Over-Market Premium as required under these rules.

B. It shall be a violation of these rules for a cooperative to fail to pass through Over-Market Premium payments in whole as required in Section V(C).

C. A producer who is not paid an Over-Market Premium as required under these rules may file an action in a circuit court with proper jurisdiction to recover the Over-Market Premium and any other applicable damages under Arkansas law or rule.

2022 Arkansas Milk Stabilization Board Rule Comment Summary

123 for

6 against

1 general

130 total

FOR:

Tana Henson, Mount Judea, AR; Angela Moore, Conway, AR; Austin Lester, Quitman, AR; Ben Gander, Greene County, AR; Benton Felts, Joiner, AR; Bill Haak, Gentry, AR; Brenda Patton, Bentonville, AR; Brian Roper, Fox, AR; Caleb Fielder, Greenbrier, AR; Caleb Plyler, Hope, AR; Caroline Lester, Rose Bud, AR; Charles Coffelt, Centerton, AR; Chase Groves, Garland City, AR; Chris Acre, Greenbrier, AR; Chris Ferguson, Booneville, AR; Chris Schaefers, Conway, AR; Chuck Davis, Ashdown, AR; Clay Antley, Fulton, AR; Corbin Brown, Wynne, AR; Dan Wright, Waldron, AR; Danny Dalmut, Mansfield, AR; Danny Naegle, Little Rock, AR; Danny Wood, Bee Branch, AR; David Head, Mena, AR; Debbie Douglas, Gentry, AR; Don Bradford, Greenbrier, AR; Donna Bemis, Little Rock, AR; Dwayne Burns, Austin, AR; Emily Holland, Des Arc, AR; Everett Mason, Brinkley, AR; Flora Harrington, Casa, AR; Fredese Wheetley, Judsonia, AR; Garrett Moix, Bigelow, AR; George Tidwell, Austin, AR; Gordon Greene, Fordyce, AR; Harlie Treat, Leslie, AR; Heather Graves, Huntsville, AR; Howell Fielder, Conway, AR; Jack Evans, Carlisle, AR; James Harvey, Adona, AR; James Singleton, Gravette, AR; Jessica Brothers, Waldron, AR; Joel Pace, Wilmar, AR; John Bailey, Benton, AR; John Freeman, Centerton, AR; John Petrus, Carlisle, AR; Jonathan Dent, Beebe, AR; Judith Armstrong, Ozark, AR; Kara Wheeler, Beebe, AR; Kathy Ratcliffe, Little Rock, AR; Keith Martin, Searcy, AR; Kimie Head, Mena, AR; Larry Strack, Conway, AR; Laura Busbee, Marshall, AR; Laura Craig, Sulphur Springs, AR; Leah Kloss, Beebe, AR; Lester Tracy, Quitman, AR; Lonni Davis, Hamburg, AR; Lucas Whittenton, Forrest City, AR; Luke Hooks, Hazen, AR; Maggie Dent, Beebe, AR; Mark Keaton, Mountain Home, AR; Mark Lockhart, Hope, AR; Mary Hastings, Austin, AR; Melanie Fosko, Clinton, AR; Melanie Malone, Conway, AR; Michael Lee, Conway, AR; Mike Freeze, Keo, AR; Monica Simon, Conway, AR; Nancy Corley, Beebe, AR; Randy Clark, Harriet, AR; Reed Storey, Marvell, AR; Reginald Smith, Bentonville, AR; Rich Hillman, Carlisle, AR; Rita Garrett, Fayetteville, AR; Robert Balentine, Conway, AR; Robert Balloun, Dardanelle, AR; Rocky Harrell, Mayflower, AR; Roger Pitchford, Norfork, AR; Roger Thompson, Mansfield, AR; Russell Smith, Des Arc, AR; Scott Kloss, Beebe, AR; Seth Moore, Beebe, AR; Stanley Hill, Little Rock, AR; Steven Jones, Conway, AR; Sue Billot, Smithville, AR; Terry Laster, Strong, AR; Tommy Sorrells, Royal, AR; Tommy Thompson, Morrilton, AR; Tony Suit, Bonnerdale, AR; William Groce, Little Rock, AR; Phillip Steed, Zion, AR

Ninety-two (92) comments submitted by Farm Bureau members:

As an Arkansan and Farm Bureau member, I am writing to support the Arkansas Department of Agriculture's proposed Milk Stabilization Rules. I believe the proposed rules will help breathe life back into our dairy industry by ensuring our hard-working dairy farmers are paid the Class I price.

Agency Response: The board appreciates your comments and believes the rule is the way the legislature intended for the law to be implemented and will benefit the Arkansas dairy industry. Mark Fratu; Kathy Swapp; Mike Fisher, Beebe, AR; Abid Anjum Masih, Pakistan; Eugene Taylor; Tamra Dozer; Courtney Daniels; Andy Evers; Robert Gatz; Kevin McCartney; Jann McKenzie, San Tan Valley, AZ; Eduard Ban; Kim McInturff; Wayne Smith, Glendale, AZ; Julie Huver, AZ; Kristen Hargett, Siloam Springs, AR; Summer Kelley; Karian Tjader; Karian Manev; Kathy Thompson; Kareth Hoffer; Matt Hargett; Jake Haak; Chris Whorton, Siloam Springs, AR; Robert Haak; Lyn Dilbeck, Mena, AR; Jan Tjader, Ozark, AR; J Bledsoe; Harold Kelley

Thirty (30) comments submitted contained one or more of the following:

* Support the rule

* The rule will benefit consumers

* The rule will benefit dairy producers

Agency Response: The board appreciates your comments and believes the rule is the way the legislature intended for the law to be implemented and will benefit the Arkansas dairy industry.

Bill Haak, Gentry, Arkansas Dairy Farmer:

Dairy Farmers of America (DFA) is shipping my Arkansas-produced milk out of state to Springfield, Missouri. They are giving me approximately $0.50 per hundredweight to do that and that DFA is paying $4.50 per mile to transport my milk from Gentry, Arkansas to Springfield. It costs DFA $5.00 a hundredweight to transport out-of-state milk into Arkansas to replace my milk that they ship out. DFA deducts transportation costs from my milk check. If my milk was instead transported to Fayetteville, I would receive Class 1 price under the proposed rule. By DFA routing my milk out of state and paying increased costs to replace my milk, DFA is "re-blending the blend price," canceling out the small premium I receive for producing pasture-based milk and sometimes deducting more for transportation expenses such that I receive less money for my milk.

Agency Response: The board appreciates your comments and believes the rule is the way the legislature intended for the law to be implemented and will benefit the Arkansas dairy industry.

AGAINST:

Brad Holt, CA Dairy Farmer; Perry Tjaarda, Shafter, CA; Stephen Maddox, Holstein USA; Ray S. Prock Jr., Former CA Dairy Farmer

Four comments submitted by current and former California Dairy Farmers:

Although the Arkansas law has the best of intentions, there are serious unintended consequences. Will cause cheaper out-of-state milk to be brought in, and if out-of-state milk cannot be controlled, it will destroy the competitiveness of Arkansas milk.

Agency Response: The Board appreciates your comments. Arkansas milk is already a small percentage of the milk processed in Arkansas, so the situation here is different than California.

Steve Goode, on behalf of the Arkansas Grocers and Retail Merchants Association:

I am a farmer and the owner of a supermarket. There is only one dairy from which my business is able to buy milk, which drives prices up at the retail and consumer levels. I and my association are afraid that the rule will cause the prices of milk to rise for retailers and for end-consumers. The rule will create an unlevel playing field for those who buy from Arkansas suppliers versus retailers that buy their milk from out of state. I estimate that the price of a gallon of milk for retailers will increase $0.16 to $0.23 due to the change in legislation. I do not want in-state retailers to be put at an unfair price disadvantage to processors who are located out of state.

Agency Response: The Board appreciates your comments. Arkansas milk is already a small percentage of the milk processed in Arkansas, so the cooperative should be able to absorb the cost.

Dennis Rodenbaugh, Dairy Farmers of America, Kansas City, KS

I recommend the rule not be adopted but that the legislature should change the law. The rule is not fair to DFA and may result in other cooperatives not marketing Arkansas milk. Arkansas processors will not be able to pass the extra premium costs on to retailers and consumers, and as a result the processors would be forced to displace milk produced in Arkansas.

Pennsylvania's milk premium program is not supported by Pennsylvania Farm Bureau or the Pennsylvania Department of Agriculture due to an inequity in the benefits of that program's premium among dairy farmers in that state. Arkansas's rules may create the same inequities.

Act 521 is flawed and unconstitutional, and the proposed rules suffer the same legal problems. The Act and the rules violate the federal commerce clause in the United States Constitution and unlawfully interferes with the relationship between an out-of-state cooperative association and its members. The rules take money due to out-of-state farmer cooperative members and reallocates that money to others in Arkansas, which is an illegal taking of property. The rules unlawfully create a cause of action.

The proposed rule's definition of "dealer" is vague and could be interpreted to include cooperatives, which would require the cooperatives to prepare information gathering, information sharing and overmarket premium calculations. It claims that would cause the cooperative to share proprietary and confidential information and it is unreasonably burdensome.

DFA's concerns cannot be addressed with a rewrite of the proposed rules. The Board should work with the industry and policymakers on a new law to implement an industry change.

Agency Response:

* Act 521 requires the Arkansas Milk Stabilization Board to ensure that Arkansas producers receive Class 1 price for milk produced and sold as fluid milk within Arkansas, and adopting a rule is the only mechanism the Board has to ensure so.

* Arkansas law and rules are substantially different from Pennsylvania's, as is the number of cooperatives in both states. The rule does not prohibit cooperatives from taking deductions from producers' milk checks to offset the costs of marketing and balancing costs in the future, so long as the producers continue to receive class 1 price for milk produced and sold as fluid milk within Arkansas.

* Act 521 is presumed constitutional, and the legislature has mandated the rule. Research regarding the issues raised do not support DFA's arguments.

* The definition of "dealer" was amended by the board to more closely meet the intent of the board's rule.

GENERAL:

Mike Fisher:

Change Section III. A and B from "produced in and sold as" to "produced and processed".

Agency Response: Changing that could have the appearance of conflicting with the law.

238.00.22 Ark. Code R. 003

Adopted by Arkansas Register Volume 47 Number 06, Effective 6/2/2022