Farmers Union Milk Marketing Cooperative v. Yeutter

930 F.2d 466, 1991 WL 50247
CourtCourt of Appeals for the Sixth Circuit
DecidedApril 11, 1991
DocketNo. 89-2298
StatusPublished
Cited by6 cases

This text of 930 F.2d 466 (Farmers Union Milk Marketing Cooperative v. Yeutter) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Farmers Union Milk Marketing Cooperative v. Yeutter, 930 F.2d 466, 1991 WL 50247 (6th Cir. 1991).

Opinion

BOGGS, Circuit Judge.

This case concerns a fight between two different groups of dairy farmers over who will get certain benefits of federal milk price regulations. The Producers Equalization Committee (“PEG”) persuaded the Department of Agriculture to enact regulations that help its members at the expense of the plaintiff, Farmers Union, and its members. Having lost before the Department of Agriculture, Farmers Union sued to overturn the Secretary’s decision. The district court held that Farmers Union did not have the right to sue over this particular type of regulation (promulgated pursuant to the Agricultural Marketing Agreement Act (“AMAA”), 7 U.S.C. § 601, et seq.) and dismissed the case.

The milk industry has long been subject to extensive government regulation. These regulations cover every aspect of the industry and are not limited to regulations designed to assure that only pure wholesome milk is sold. Since the 1980s, Congress has eschewed reliance on market forces to price milk and has substituted a complex regulatory scheme to control the prices paid to producers.

[467]*467In this case, the Department of Agriculture has modified the price regulations in a way that adversely affects the plaintiffs. The PEC and the Department of Agriculture maintain that the plaintiffs can’t sue because review is precluded by law. The district court agreed and dismissed the case. Because we believe that the purpose of the statutory scheme — raising the price that milk producers receive for their milk— would be undermined if producers could not challenge regulations of this type in federal court, we now reverse.

I

Government regulation of the milk industry is, according to the conventional wisdom, based on a number of facts that are unique to that particular industry. The degree to which these facts mirror economic reality is not before us; the belief, on the part of Congress and federal regulators, that the milk industry is subject to certain deficiencies that are incurable by market forces has led to a particular regulatory structure. This regulatory structure makes sense only when viewed against the backdrop of the perceived exigencies that have given rise to it. This court has previously had occasions to discuss the structure of milk industry regulation. Defiance Milk Products Co. v. Lyng, 857 F.2d 1065 (6th Cir.1988). There, we explained the underlying basis and structure of the price regulatory scheme set out in the AMAA:

Two conditions peculiar to the milk industry led to the establishment of a federally regulated price structure. The first is that raw milk has essentially two end uses: as fluid milk and as an ingredient in manufactured dairy products such as butter or cheese. The second condition is seasonality. Dairy cows produce more milk in the spring “flush” season than they do in the fall and winter.
The confluence of these two conditions created problems which Congress decided necessitated regulation. Raw milk to be used as fluid milk commands a higher price than milk to be used in manufactured products. Fluid milk is highly perishable, and if it cannot be marketed quickly it must be manufactured into other dairy products.

Id. at 1066.

Dairy farmers would obviously prefer selling milk at a higher price than at a lower price. Accordingly, they would like to sell all of their milk for use as fluid milk. Unfortunately, “[a] dairy herd sufficient to produce a supply of fluid milk adequate for consumer needs in the fall and winter will produce a glut in the spring.” Ibid. Absent some sort of regulatory regime, it is likely that some sort of market equilibrium would develop. The parties tell us that, prior to regulation, milk producers would compete with each other to assure themselves of selling all their milk during the flush periods. “Before regulation, milk distributors (‘handlers’) would obtain bargains during glut periods, engendering cutthroat competition among diary farmers (‘producers’). To maintain income, farmers would increase production even more.” Ibid. We assume that, as with most products, the increased production led to a drop in prices. The AMAA sets up a complex scheme in order to prevent this competition among milk producers.

The key portion of this regulatory scheme allows individual producers of milk to receive a uniform price for their milk regardless of the ultimate end use while handlers pay different rates depending on the ultimate end use to which the milk is put. The device by which this is accomplished is the producer settlement fund.

The AMAA allows the Secretary of Agriculture to promulgate “market orders” regulating the minimum price of milk to be paid to producers. 7 U.S.C. § 608c(5). The Secretary can do so only after formal, on-the-record rulemaking. 7 U.S.C. § 608c(3) & (4). The location where the handler sells the majority of its milk to the ultimate consumers determines which market order governs the particular handler. This case concerns Market Order No. 40, which governs the price of milk sold in the Southern Michigan area. Though all of the handlers governed by the order sell a majority of their milk in the Southern Michigan area, some handlers located in the upper penin[468]*468sula and in Wisconsin are governed by Market Order No. 40. This appeal involves producers located in the upper peninsula of Michigan and Wisconsin who sell their product to handlers regulated by Order 40.

Order 40 divides all milk sold to handlers into three categories. Class I milk is the most expensive and includes fluid milk commonly used for drinking. Class II milk is milk used to produce intermediate-level milk products such as yogurt and cottage cheese. And class III milk is used for the-production of manufactured milk products such as cheese and butter. 7 C.F.R. § 1040.40. The regulations set out a complicated pricing mechanism by which the price for milk sold for ultimate use in each different category is calculated. See 7 C.F.R. §§ 1040.50, 1040.51, 1040.51(a).

Although the regulatory scheme sets out different prices for each category of milk, the purpose of the statute is, as we have said, to eliminate competition among producers to place milk with handlers who are believed to be willing to pay more because they are using the milk for fluid milk purposes. Accordingly, producers receive from purchasing handlers a uniform minimum “blend price” that is determined by a complicated formula that approximates the weighted average class price of all milk sold in the Order 40 area. 7 C.F.R. § 1040.60. As individual handlers generally do not sell milk for use in each class in the same proportion as the market as a whole, some handlers end up paying too much and some end up paying too little to the dairy farmers.

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Bluebook (online)
930 F.2d 466, 1991 WL 50247, Counsel Stack Legal Research, https://law.counselstack.com/opinion/farmers-union-milk-marketing-cooperative-v-yeutter-ca6-1991.