1 1 2 3 4 5 6 7 8 9 NATIONAL FEDERAL MILK MARKETING ORDER 10 PRICING FORMULA HEARING 11 12 DOCKET NO.: 23-J-0067; AMS-DA-23-0031 13 14 Before the Honorable Channing D. Strother, Judge 15 16 ---o0o--- 17 18 Carmel, Indiana 19 August 23, 2023 20 21 ---o0o--- 22 23 24 25 26 Reported by: 27 MYRA A. PISH, C.S.R. Certificate No. 11613 28 2 1 A P P E A R A N C E S: 2 FOR THE USDA ORDER FORMULATION AND ENFORCEMENT DIVISION, USDA-AMS DAIRY PROGRAM: 3 Erin Taylor 4 Todd Wilson Lorie Cashman 5 Brian Hill Michelle McMurtray 6 Bradley Vierra Lauren Decker 7 Phoebe Bierman Brian Riordan 8 FOR THE AMERICAN FARM BUREAU FEDERATION: 9 Ryan Cryan 10 Danny Munch 11 FOR THE INTERNATIONAL DAIRY FOODS ASSOCIATION: 12 Steve Rosenbaum 13 FOR THE MILK INNOVATION GROUP: 14 Charles "Chip" English Ashley Vulin 15 Grace Bulger Sally Keefe 16 FOR THE NATIONAL ALL-JERSEY, INC.: 17 Erick Metzger 18 John Vetne 19 FOR THE NATIONAL MILK PRODUCERS FEDERATION: 20 Nicole Hancock Peter Vitaliano 21 Jim Sleper Bradley Prowant 22 Chris Hoeger 23 FOR SELECT MILK PRODUCERS, INC.: 24 Ryan Miltner 25 26 27 28 3 1 A P P E A R A N C E S: 2 FOR THE EDGE DAIRY FARMER COOPERATIVE: 3 Lucas Sjostrom Dr. Marin Bozic 4 Travis Senn Tim Trotter 5 FOR THE MAINE DAIRY INDUSTRY: 6 Daniel Smith 7 8 ---o0o--- 9 10 (Please note: Appearances for all parties are subject to 11 change daily, and may not be reported or listed on 12 subsequent days' transcripts.) 13 14 ---o0o--- 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 1 M A S T E R I N D E X 2 SESSIONS 3 WEDNESDAY, AUGUST 23, 2023 PAGE 4 MORNING SESSION 9 AFTERNOON SESSION 114 5 6 7 ---o0o--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 1 M A S T E R I N D E X 2 WITNESSES IN CHRONOLOGICAL ORDER 3 WITNESSES: PAGE 4 Lorie Cashman: 5 Direct Examination by Mr. Hill 56 Cross-Examination by Mr. English 87 6 Cross-Examination by Mr. Miltner 103 Cross-Examination by Mr. Smith 109 7 Cross-Examination by Dr. Cryan 110 8 Brian Riordon 9 Direct Examination by Mr. Hill 114 Cross-Examination by Mr. English 127 10 Cross-Examination by Mr. Vetne 131 Cross-Examination by Mr. Smith 136 11 Cross-Examination by Mr. Miltner 137 12 Dr. Peter Vitaliano 13 Direct Examination by Ms. Hancock 148 Cross-Examination by Mr. Rosenbaum 175 14 Cross-Examination by Mr. Vetne 191 Cross-Examination by Mr. Miltner 217 15 16 ---o0o--- 17 18 19 20 21 22 23 24 25 26 27 28 6 1 M A S T E R I N D E X 2 INDEX OF EXHIBITS 3 NO. DESCRIPTION I.D. EVD. 4 1 Federal Register Notice 53 53 5 2 Notice to Trade 53 53 6 3 Notice from Northeast 53 53 Marketing Area 7 4 Notice to Appalachian, 53 53 8 Florida, Southeast Marketing Area 9 5 Notice from the Market 53 53 Administrator to the 10 Upper Midwest Marketing Area 11 6 Central Marketing Area from 53 53 Their Market Administrator 12 7 Notice to the Mideast 53 53 13 Marketing Area from Market Administrator 14 8 Notice to the California 53 53 Marketing Area from their 15 Market Administrator 16 9 Notice to the Pacific 53 53 Northwest and Arizona Marketing Areas 17 10 Notice to the Southwest 53 53 18 Marketing Area from the Market Administrator 19 11 Notice from the Department of 53 53 20 Agriculture to the Interested State Governors 21 12 Federal Milk Marketing Order, 53 53 22 2023 Pricing Formula Hearing, Proposed Regulatory Text Changes 23 13 Federal Milk Marketing Order, 53 53 24 2023 Pricing Formula Hearing, Proposed Regulatory Text Changes, 25 Marked-up Version 26 14 Listing of Data Requests 57 27 15 Announcement of Advanced 61 Prices and Pricing Factors, 28 January 2000 through August of 2023 7 1 M A S T E R I N D E X 2 INDEX OF EXHIBITS 3 NO. DESCRIPTION I.D. EVD. 4 16 Announcement of Class 62 5 and Component Prices 6 17 Component Tests in Producer 63 Milk By Order, 7 January 2000 through May of 2023 8 18 Yearly Average Component 64 Tests in Producer Milk 9 By Order and All Market Combined 2000 to 2022 10 19 Final Butter Sales and 66 11 Weighted Average Price 12 20 Final Cheddar 40-Pound 67 Block Sales and Weighted 13 Average Price 14 21 Final Cheddar 500-Pound 68 Barrel Sales 15 22 Final Cheddar 500-Pound 69 16 Barrel Sales 17 23 Final Nonfat Dry Milk Sales 69 18 24 Weekly Dairy Product 69 Sales Volumes 19 25 Monthly Dairy Product Sales 70 20 Volumes in Pounds for Week Ending January 4th, 2014, 21 Through the Week Ending July 15th, 2023 22 26 Annual Dairy Product Sales 71 Volumes in Pounds, 23 Week ending date January 4th, 2014, Through July 15th, 2023 24 27 DPMRP Annual Dairy 72 25 Product Sales Volumes 26 28 Licensed Dairy Herds 74 27 29 Monthly Mailbox Prices 74 28 30 Table 14 78 8 1 M A S T E R I N D E X 2 INDEX OF EXHIBITS 3 NO. DESCRIPTION I.D. EVD. 4 31 Other Uses Milk Pounds 79 Pooled 5 32 Average Diesel Fuel Price 80 6 33 Regulated Pool Distributing 81 7 Plants and Federal Order by Month 8 34 Regulated Pool Supply Plants 83 and Federal Order Number by Month 9 35 Spot Milk Prices Relative 83 10 to Class III Milk 11 36 U.S. Mozzarella Production 85 12 37 Advanced Class III and 116 Class IV Skim Milk Pricing Factors 13 38 Federal Order Statistical 119 14 Uniform Milk Price 15 39 Adjustments to Federal Order 120 Performance Standards 16 40 Requests to Change 121 17 Performance Requirements by Order 18 41 Cooperative and Nonmember 122 19 Producer Count 20 42 Number of Nonmember 124 Producers and Volume Shipped 21 43 Protein Test Range 125 22 by Order, 2022 23 60 MIG-1 42 24 61 Letter of August 23, 2023 47 47 25 62 Dr. Vitaliano Statement 150 26 ---o0o--- 27 28 9 1 WEDNESDAY, AUGUST 23, 2023 - - MORNING SESSION 2 THE COURT: Let's come to order on the record. 3 Good morning, everyone. Welcome. Thank you for joining 4 me here. It's August 23rd, 2023, at approximately 5 9:10 a.m., Eastern time, which is local time set. 6 We're gathered at 502 East Event Center, Carmel, 7 Indiana. My name is Channing Strother. I'm USDA's chief 8 administrative law judge. I will be presiding over this 9 hearing. 10 This hearing is held pursuant to the Agricultural 11 Marketing and Agreement Act of 1937, as amended in the 12 Rules of Practice and Procedure hearing at 7 CFR Part 900. 13 The United States Department of Agriculture, 14 Agricultural Marketing Service, provided notice of this 15 hearing on July 24th, 2023, 88 Federal Register 47, 396. 16 Docket numbers, there are two of them, one from my office, 17 hearing clerks' office, and one for AMS. Our number is 18 23-J0067; it's AMS-DA-230001. 19 Pursuant to this notice, we are here to take 20 testimony and other evidence on and to otherwise consider 21 certain proposals to amend the pricing formulas in the 11 22 Federal Marketing -- Federal Milk Marketing Orders, FMMOs. 23 Evidence will be taken on economic and marketing 24 conditions related to the proposed amendments and any 25 appropriate modifications to the marketing orders. 26 I will administer the hearing to allow the sworn 27 testimony from or on behalf of interested parties, 28 cross-examination of those witnesses by interested parties 10 1 and their representatives, and submission of supporting 2 documents as evidence. 3 Our hearing reporter, to my right, will transcribe 4 verbatim what is said on the record, and that transcript 5 and exhibits made a part of the record here will be made 6 available on the AMS website. 7 As I understand it -- and I should confirm this -- 8 we think the transcript will be available in about two 9 weeks, after the close of the hearing. Okay. 10 As set out in the notice of hearing, certain 11 testimony will be taken virtually, namely that of certain 12 dairy farmers. I want to say I understand also that this 13 hearing, as the deputy administrator indicated, is being 14 broadcast on the Internet. 15 Part of my duties here are to ensure that the 16 hearing adheres to the requirements set forth in the 17 applicable legal provisions, including that the 18 information gathered during this hearing is pertinent to 19 the subject matter of the Federal Register notice. 20 Among other things, if a witness makes comments or 21 testifies to matters outside the scope of the contents of 22 the Federal Register notice, or for that matter, is asked 23 about matters outside the scope of the Federal Register 24 notice, I have the authority to interrupt and not allow 25 the witness to continue. Of course, my interruption may 26 come after objection. 27 I will not be issuing a decision in this matter. 28 Rather, others at USDA will utilize the records we develop 11 1 in determining whether and how to amend the Federal Milk 2 Marketing Orders. 3 As an initial step, we will take, on the record, 4 appearances of all participants, including USDA personnel, 5 technical support people, and industry proponents. I ask 6 each of you to state and spell your name, give your 7 professional title, and describe your role in this 8 hearing, including identifying on whose behalf you are 9 testifying. 10 Let's start with the USDA, AMS. 11 Ms. Taylor? 12 MS. TAYLOR: Good morning. My name is Erin 13 Taylor, E-R-I-N, T-A-Y-L-O-R. I am the director of the 14 order formulation and enforcement division with the 15 Agricultural Marketing Service Dairy Program. 16 MR. WILSON: I'm Todd Wilson, T-O-D-D, 17 W-I-L-S-O-N. I'm with USDA Dairy Programs. 18 MS. CASHMAN: Good morning, my name is Lorie 19 Cashman, L-O-R-I-E, C-A-S-H-M-A-N. I am director of the 20 economics division for AMS Dairy Program, and I will be 21 presenting data. 22 MR. HILL: I am Brian Hill, B-R-I-A-N, H-I-L-L. 23 United States Department of Agriculture's office of the 24 general counsel, representing the Agricultural Marketing 25 Service. 26 MS. McMURTRAY: Good morning. Michelle McMurtray, 27 M-I-C-H-E-L-L-E, M-C-M-U-R-T-R-A-Y. I'm an attorney with 28 the Department of Agriculture representing the 12 1 Agricultural Marketing Service. 2 MR. VIERRA: Bradley Vierra, B-R-A-D-L-E-Y, 3 V-I-E-R-R-A, with USDA Dairy Program. 4 MS. DECKER: Good morning, Lauren Decker, 5 L-A-U-R-E-N, D-E-C-K-E-R, USDA Dairy Program. 6 MS. BIERMAN: Hi, I'm Phoebe Bierman, P-H-O-E-B-E, 7 B-I-E-R-M-A-N, and I'm with the USDA Dairy Program. 8 THE COURT: Will you be gathering the exhibits for 9 us and manning them? 10 MS. BIERMAN: Yes. 11 THE COURT: And just by way of explanation, this 12 is a ministerial task, so I don't think there's any issue 13 of any ex parte issues here, but it relieves the hearing 14 reporter of trying to keep track of things and trying to 15 take things down, so we decided to take this approach this 16 time. So that's where the exhibits -- official copies of 17 the exhibits will go. 18 Anyone else from AMS? Oh, yes, sir. 19 MR. RIORDON: Good morning. I'm Brian Riordon. 20 I'm a supervisory agricultural economist with the 21 Northeast Milk Marketing Order. I'm here today to enter 22 testimony as a witness and provide specific data as 23 requested by proponents. 24 THE COURT: Welcome. 25 Anyone else from AMS? 26 I don't really have an order to do this. Who 27 should be next? Maybe the party presenting the first 28 witness. 13 1 MR. RIORDON: May I spell my name for the -- 2 THE COURT: You may. 3 MR. RIORDON: Brian Riordon, B-R-I-A-N, 4 R-I-O-R-D-O-N. 5 THE COURT: Okay. Who is next? I think that's 6 all the AMS. 7 Okay. First table, as I look down on my left. 8 NMPF, if I can read that. 9 MS. HANCOCK: Hi, I'm Nicole Hancock. I'm with 10 Stoel Rives, and I represent National Milk Producers 11 Federation. 12 THE COURT: Ms. Hancock, thank you. If you could 13 spell your name? 14 MS. HANCOCK: N-I-C-O-L-E. Hancock is 15 H-A-N-C-O-C-K. 16 THE COURT: Stoel Rives is a law firm. 17 MR. VITALIANO: I'm Peter Vitaliano, P-E-T-E-R, 18 V-I-T-A-L-I-A-N-O, the Vice President for economic policy 19 and market research, National Milk Producers Federation. 20 And I'll be testifying on behalf of National Milk 21 Producers Federation. 22 THE COURT: Welcome, Mr. Vitaliano. 23 MR. SLEPER: Jim Sleper, J-I-M, S-L-E-P-E-R. I 24 represent Sleper Consulting, LLC. I'm a consultant with 25 National Milk. 26 THE COURT: Mr. Sleper. 27 MR. PROWANT: Good morning, Bradley Prowant, 28 B-R-A-D-L-E-Y, P-R-O-W-A-N-T, also with the law firm Stoel 14 1 Rives, and also representing National Milk Producers 2 Federation. 3 THE COURT: Welcome, Counsel. 4 MR. PROWANT: Thank you. 5 MR. HOEGER: I'm Chris Hoeger, C-H-R-I-S, 6 H-O-E-G-E-R. I'm Vice President for Prairie Farms Dairy. 7 THE COURT: Okay. Is that everyone for National 8 Milk? 9 Next? Yes, sir. 10 MR. ENGLISH: Good morning, your Honor. My name 11 is Chip English. I'm with Davis Wright Tremaine. We 12 represent the Milk Innovation Group. 13 Online, but here later in the proceeding, will be 14 Ashley Vulin, V-U-L-I-N, also with Davis Wright Tremaine. 15 And other people live will introduce themselves in a 16 moment. 17 The members of the Milk Innovation Group are: 18 Anderson Erickson, A-N-D-E-R-S-O-N, E-R-I-C-K-S-O-N, Dairy 19 Company, Inc.; Aurora Organic Dairy, A-U-R-O-R-A, Organic 20 Dairy; Crystal Creamery, C-R-Y-S-T-A-L, Creamery; Danone 21 North America, D-A-N-O-N-E; Fairlife, F-A-I-R-L-I-F-E; HP, 22 H-P, Hood, LLC; Organic Valley/Cropp, C-R-O-P-P, 23 Cooperative; Shamrock Foods Company, S-H-A-M-R-O-C-K; 24 Shehadey Family Foods, S-H-E-H-A-D-E-Y, which encompasses 25 Producers Dairy Foods, P-R-O-D-U-C-E-R-S, Model Dairy, 26 M-O-D-E-L, and Umpqua Dairy Products, U-M-P-Q-U-A, Dairy 27 Products, Company; and Turner Dairy Farms, T-U-R-N-E-R, 28 Dairy Farms. 15 1 Most of these are small businesses as defined by 2 the Small Business Administration, and a number of these 3 entities include dairy farmers. 4 THE COURT: Thank you, Mr. English. 5 MS. BULGER: Good morning, my name is Grace 6 Bulger, B-U-L-G-E-R. I'm also with the Davis Wright 7 Tremaine, representing Milk Innovation Group. 8 THE COURT: Ms. Bulger. 9 MS. KEEFE: Good morning. My name is Sally Keefe, 10 S-A-L-L-Y, K-E-E-F-E. I'm a consultant. My company is 11 skFigures, LLC, and I'm a consultant for the Milk 12 Innovation Group. 13 THE COURT: Ms. Keefe. Thank you. 14 Next, if that's everyone for MIG? 15 MR. ENGLISH: For now, your Honor, yes. 16 DR. CRYAN: Good morning. Good morning. My name 17 is Roger Cryan, C-R-Y-A-N. I'm not an attorney, but I am 18 an economist. I'm here representing the American Farm 19 Bureau Federation. And later this afternoon we will have 20 Danny Munch, M-U-N-C-H, also from the American Farm Bureau 21 Federation. Thank you. 22 THE COURT: Thank you. Is it Mr. or Dr. Cryan? 23 DR. CRYAN: Dr. Cryan. 24 THE COURT: Dr. Cryan. Thank you. 25 MR. METZGER: Good morning, Erick Metzger, 26 E-R-I-C-K, M-E-T-Z-G-E-R, representing National 27 All-Jersey, Incorporated. 28 THE COURT: Thank you, Mr. Metzger. 16 1 MR. VETNE: My name is John Vetne, V-E-T-N-E, from 2 Bluefield, West Virginia, formerly of Maine, and I'm a 3 consultant for National All-Jersey. 4 THE COURT: Thank you, Mr. Vetne. 5 MR. LOWE: Good morning. My name's Randale Lowe, 6 R-A-N-D-A-L-E, L-O-W-E, also with National All-Jersey. 7 THE COURT: Thank you, Mr. Lowe. 8 MR. ROSENBAUM: I'm Steven, with a V, Rosenbaum, 9 R-O-S-E-N-B-A-U-M, representing the International Dairy 10 Foods Association. And there will be others with me as 11 the hearing proceeds, and I'll have them introduce 12 themselves when they come. 13 THE COURT: Thank you, Mr. Rosenbaum. 14 MR. SJOSTROM: Good morning. My name is Lucas 15 Sjostrom, L-U-C-A-S, S-J-O-S-T-R-O-M. I'm a managing 16 director of the Edge Dairy Farmer Cooperative. We have 17 got some flight delays. Dr. Marin Bozic, Travis Senn, and 18 Tim Trotter will be here later today, and we will likely 19 have farmers testify also and state their names at that 20 time. 21 THE COURT: Thank you. 22 MR. MILTNER: Good morning. My name is Ryan 23 Miltner, M-I-L-T-N-E-R. I'm an attorney with the firm of 24 Miltner Reed, that's R-E-E-D, from Ohio. I'm here 25 representing Select Milk Producers, Incorporated, for the 26 proponents of three different proposals in the hearing 27 today. As we present our testimony, of course, we'll have 28 different people up to testify, and when they arrive, 17 1 we'll put their information on the record. Thank you. 2 THE COURT: Very well, Mr. Miltner. Thank you. 3 MR. SMITH: Good morning. My name is Daniel 4 Smith, S-M-I-T-H, represent the Maine Dairy Industry 5 Association. 6 THE COURT: Thank you, Mr. Smith. 7 Anyone else? Seeing none. 8 In terms of overall procedures, and the deputy 9 administrator went into this a little bit, but henceforth, 10 we're going to be starting the hearing day at 8:00 a.m., 11 as she said, and most days we expect to conclude at around 12 5:00 p.m. I am not sure whether we can go past that at 13 all -- or I guess we can go past that a little bit. I 14 hate to break up -- try not to carry witnesses over, so we 15 don't have to, for more than one day, but -- and we can 16 play some of this stuff by ear as we go along. 17 I don't know if we're going to -- we had discussed 18 the possibility of trying to wrap early on Fridays, 19 because some of us have to catch planes, but I don't know 20 whether that's still on the table or not. We are under 21 time pressure here. 22 Ms. Taylor? 23 MS. TAYLOR: Thanks, Judge. 24 Yes, we -- we would like to -- and this week we 25 are not doing virtual testimony, so we'll still be able to 26 go to around 5:00. But the Fridays where we will have 27 dairy farmers testifying virtually, we would -- that ends 28 around 3:00, and then if everyone's amenable, we would 18 1 conclude for the day at that point -- at that time. 2 THE COURT: Very well. 3 As typical, I'm going to take a lunch break. I 4 think we can do lunch in an hour. There do seem to be 5 some places to eat nearby. We can talk about other 6 arrangements later in the week, I think as things develop, 7 as I think they might. 8 I expect to take one midmorning and one 9 midafternoon break, I'm thinking 10 to 15 minutes each. 10 If our hearing reporter needs something more -- if my 11 hearing reporter needs anything at all, she has my 12 authority to interrupt me, ask or make whatever 13 suggestions are necessary. She's among -- I'm not 14 important compared to her in this room. 15 Okay. We'll convene Monday through Friday, except 16 for Thursday, September 21st; Friday, September 22nd, 17 which are days the hearing room is not available. There 18 is also the Labor Day holiday, as I recall. 19 These hearings may go on continuously for as long 20 as seven weeks, although we'll see. 21 We can discuss the following matters in more 22 details as we get closer to the end of the hearing, but 23 I'll provide some preview now. 24 We are going to need to establish post-hearing 25 procedural dates. My hope is that parties will be able to 26 work out dates we all can agree to. As I said earlier, 27 I'm not going to be the one to write the decision, so I 28 will have less say in it than I might normally. 19 1 And the dates, I think we'll key them to the date 2 the transcript is posted on the AMS website. I would 3 expect that all the exhibits, documentary exhibits entered 4 into this proceeding, would be posted by that time as 5 well. 6 I think we'll need a date for proposed transcript 7 corrections, another date for objections to proposed 8 transcript corrections. Corrections are to go to what is 9 actually said. They are not an opportunity to add 10 testimony to the transcript or to change testimony. 11 It would be useful for participants to try to work 12 out and stipulate the transcript corrections. It may not 13 be possible, especially given the number of participants 14 in this matter, but my office will need some time 15 thereafter to determine and issue transcript corrections. 16 The next date would be first, and maybe the only 17 briefing date, depending on what the participants or what 18 the particular AMS, whoever is writing the decision, 19 wants. And I want you to think of -- if we have more than 20 one brief, think about whether they are simultaneous 21 briefs, initial in answering, or step briefs, versus 22 someone going first, someone answering, and someone having 23 a reply brief. 24 I say no sandbagging. That is, if you have got a 25 position, state it in your first brief, don't wait for 26 some kind of reply when other parties do not have the 27 opportunity to respond. 28 Now, for the presentation of witnesses. We have 20 1 an order of proposals to be heard that we will be 2 following. That's on the -- made available on the AMS 3 website section established for this proceeding. 4 But the first topic we'll take up, I guess, is 5 called USDA Impact Analysis and Data. AMS, as I 6 understand it, has a list of witnesses who will testify. 7 I will bring up those witnesses in order. 8 We also have, I guess before then, a number of 9 exhibits that are put in, sometimes legally required as 10 part of this case, that are not sponsored by any 11 particular witness but go into the record, such as the 12 notice, Federal Register notice of the proceeding, and 13 other documents relating to that. 14 When a witness takes the stand, I'll swear the 15 witness in, where they should be asked to state and spell 16 their name for the record, or they can just go ahead on 17 their own and do it, or I can do the asking, we'll see. 18 But the regulations also provide that the witness 19 provide their occupation and address. However, in 20 deference to concerns about public disclosure of personal 21 protected information, I'd ask that witnesses not divulge 22 an address that is a personal residence, but instead, 23 ensure that the reporter has a working regular mailing 24 address for you, whatever that address is. 25 Before going into their -- if they have a 26 statement -- or before going into their testimony, I think 27 we will have the witness identify each of their proposed 28 exhibits. We will mark each one for identification, but 21 1 will not enter them into the record until after the direct 2 and cross-examination of the witness, in case anyone's got 3 any objection to that -- to the exhibit. 4 As I noted, the AMS will be collecting the 5 exhibits officially. Corner table down there. 6 Again, part of my duties are to keep out anything 7 that's -- that's irrelevant or immaterial to what we're 8 supposed to be considering here based on the notice. 9 Also, to preclude any unduly repetitious testimony or 10 questioning. Failure to -- again, I may do this on my own 11 or pursuant to an objection -- but failure to object may 12 waive any objection of that material. 13 Participants and witnesses, cross-examiners, are 14 to address each other through me rather than directly to 15 each other, to maintain order. 16 Everyone try to speak clearly and slowly, one 17 person at a time, so that the hearing reporter can get 18 down correctly what is said in her transcript. 19 A participant proffering the witness goes first in 20 asking questions, next will be other participants, and AMS 21 will go last. 22 Thanks for bearing with me through all that. 23 So I think we have come to the time to put in 24 unsponsored exhibits. 25 Mr. English. 26 MR. ENGLISH: If I may, your Honor, it may make 27 sense to discuss a couple prospective ground rules or 28 issues, if I may. 22 1 First, we -- all of industry, I think we learned 2 last week, either Thursday or Friday, Friday in my case -- 3 that the typical economic -- preliminary economic analysis 4 that USDA performs will not be available at the beginning 5 of the proceeding, I think I understood that maybe at the 6 end of the proceeding. 7 I want to note that this is the first hearing 8 where I have been at, and I have done a lot of these, 9 where that's the case. That impacts the fact that we had 10 all staged witnesses in a certain way. So we're going to 11 have witnesses here as we can. 12 I just wanted everybody to know, I had that 13 conversation with Ms. Taylor last week, but I think on the 14 record I wanted to note that, you know, there are some 15 factual witnesses who had already made their plane 16 reservations. The experts are here on Issue 1. 17 I think similar to that, the reality is that as 18 opposed to the economist, the professional consultants who 19 will be here, that there are fact witnesses who, you know, 20 they run a business, small businesses, whether they are 21 farmers or processors. And they may show up later in the 22 hearing but talk about multiple issues, because the issues 23 interrelate. 24 And I think my conversation procedure with USDA 25 suggests that's going to be okay. We'll do the best we 26 can to move through the issues. But I think it's fair to 27 say that there are -- the way the hearing was set up with 28 Issue 1 affecting Class I components, and then Issues 4 23 1 and 5 affecting Class I, Class I processors are stuck 2 with, you know, the end of the proceeding. 3 And one other thing I would like to just discuss, 4 and this is something we did in California at the last 5 proceeding that I was at, there may be witnesses where it 6 makes sense that two witnesses for a company appear: One 7 will give testimony, and then the two will be available 8 for cross-examination. In our experience, it makes it 9 more efficient. 10 You know, it's up to you, your Honor, whether you 11 are amenable to that, whether USDA is amenable to that, 12 but we have certainly done that in the past. And I know 13 of at least one entity testifying on Issue 3 where that 14 would be very helpful. 15 So I just -- I wanted to at least lay those out 16 and let anybody else talk about things like that, and at 17 least have the conversation now rather than surprise 18 people. 19 THE COURT: Thank you, Mr. English. If you can 20 stay at the lectern for a minute, I'm going to ask for 21 AMS's thoughts on those things. 22 But on the -- and thanks for the preview of what 23 may be coming up, as I understand it. 24 I'm really here to serve the public interest and 25 to serve the participants in how they want to run this 26 hearing as -- as they can decide what is best for them. 27 You all are going to know this case much better than I 28 ever do. 24 1 On the -- as I understand, there's an economic 2 report that's pertinent to the matters we are talking 3 about here that will not be available now, but may come in 4 later. And the question is what to do about that, and you 5 don't want to exclude -- if I have this right -- you don't 6 want to exclude further testimony on something that 7 doesn't come in until later. 8 Do I have that right? 9 MR. ENGLISH: Well, that was going to be my 10 position, but I think I learned yesterday that it may not 11 come in until the very end. Under the theory that if it's 12 not coming in at the beginning, putting it in the middle 13 sort of disadvantages the people who already went. 14 Putting it at the end sort of puts us all in the same 15 boat, which I'm -- you know, I'm okay with. 16 I was actually getting at a slightly different 17 issue, which is the administrative issue that, at least in 18 California, and in my experience otherwise, the economic 19 analysis is large enough that the examination of it would 20 likely have taken at least a day or so. 21 And we, who have done these a long time, 22 therefore, staged our witnesses based upon the 23 anticipation that the analysis would be after the data 24 that we're discussing, be the next thing. And then as a 25 result, at least we, and I think probably others, thought 26 about their testimony coming staged on that. 27 And so while our experts are here, the fact issue 28 is on Issue 1, who are actually going to come during 25 1 Issue 1 as opposed to later in the hearing, aren't going 2 to be here by Friday, and it may be that we end up moving 3 to Issue 2 because -- and then have to go back to Issue 1, 4 because that's the time they had scheduled. And they are, 5 you know, businesspeople who really just can't jump around 6 and do this, unlike those of us who do this for a living. 7 So that's what I was getting at. And, again, I, 8 you know, procedurally had a brief conversation with USDA 9 about that. 10 THE COURT: Okay. 11 Mr. Hill, can you address these? 12 MR. HILL: Yes. There is no objection to them 13 doing that. We understand the position that they are in, 14 and so we have no objection. 15 THE COURT: Great. So like I said, I'm here to 16 help where I can. If the participants agree to something, 17 that's fine with me. 18 How about the two witnesses on the stand at once? 19 MR. HILL: The same answer for that. We have done 20 that before, as he said, in the California hearing. It's 21 not a problem. 22 THE COURT: Sure. I've experienced that as well. 23 And if it makes sense to you all, I'm sure it makes sense 24 to me. You can bring it up, though, at the appropriate 25 time, and we'll see if anyone else has got an objection. 26 We may have an objection right now. I'm sorry, I 27 forgot your name. 28 MR. MILTNER: That's okay. It's Ryan Miltner. I 26 1 represent Select Milk Producers. And this is not an 2 objection, it's just another issue that kind of arose in 3 my mind as Mr. English was discussing this. 4 That piece of economic testimony informs an awful 5 lot of what the industry as a whole will use to formulate 6 their positions as well as their questioning of witnesses. 7 And I understand if we don't have it, we don't have it. 8 But I would be interested in the Judge's position, 9 and that of AMS, about whether once that data is 10 available, if -- if there will be an opportunity to 11 perhaps put witnesses on for additional examination about 12 that data, which is absolutely critical to evaluating the 13 proposals. 14 THE COURT: Mr. Hill, has AMS formulated any 15 thinking on -- on this? 16 MS. TAYLOR: I guess our thinking is, it's not 17 coming on until the end once everyone's gone, because 18 that's what it will be ready to be on. The hearing ends 19 when the judge says it ends, so if you would like to put 20 witnesses on after that and we still have -- are able to 21 meet, you know, we have time in the -- in the hearing 22 process to do that, I don't think we would object to that, 23 you know. You can bring people back on, if you would 24 like, at any time. 25 MR. MILTNER: Thank you. 26 THE COURT: Yeah, even if -- as I recall the 27 procedural rules, there is provisions for motions to 28 reopen the record. Any new evidence that's developed, I 27 1 mean, creates a possibility of something like this coming 2 up, and if it's important enough and things work 3 otherwise, we'll deal with it at the time. But I do 4 appreciate the heads-up on what may happen. I will not 5 likely have a strong opinion on this now because I don't 6 know enough about it, but it does sound important, and 7 thank you for bringing it to my attention. 8 Yes? 9 MR. ROSENBAUM: This is Steve Rosenbaum. I -- for 10 the International Dairy Foods Association. I do want to 11 reiterate that we would at least like to hold open the 12 potential of calling a witness after -- recalling a 13 witness after the government presents its economic 14 analysis to testify regarding it. 15 We can cross that bridge when we come to it, but 16 normally that has come first in the hearing. I understand 17 the reasons why it is not happening this time. But we can 18 obviously examine the USDA witness, but we may have to 19 have affirmative testimony regarding that analysis. 20 The other issue is a technical one. We may have 21 some exhibits that are Excel spreadsheets that are not 22 really amenable to being printed in some cases. And so I 23 would suggest that if -- and I don't think we would likely 24 to be the only ones in that situation -- I would suggest 25 in that situation, we will commit to providing a copy 26 electronically to USDA. USDA has been posting exhibits as 27 we provided them, and that they would simply post it on 28 the website, and then it would be available to everyone to 28 1 use during the examination of our witnesses. 2 THE COURT: I think that works for me. 3 Does that work for AMS? 4 MR. HILL: Well, we do need to have a paper copy 5 for the -- for the Hearing Clerk's Office. 6 MR. ROSENBAUM: It will be an electronic copy, 7 obviously. In my experience, in the modern world, there 8 is no way to avoid that in trials anymore. People are 9 doing that kind of analysis -- in the modern trial world, 10 people have Excel spreadsheets where they have done 11 calculations, and sometimes printing them out is just 12 impractical and they just are printed. 13 Or, I mean, as a -- one can typically put those 14 onto a thumb drive or on a -- and that can be a physical 15 copy of it, so to speak, if that's -- if that's what's 16 necessary. 17 MR. HILL: Yeah. We're going to have to talk to 18 the Hearing Clerk to make sure that this is acceptable. 19 THE COURT: Sure. I mean, I think we can at least 20 waive the requirement that there be 15 copies or whatever 21 we talked about turning in. I mean, the Hearing Clerk's 22 Office -- I'm trying to think whether there's any possible 23 slippage in there. I mean, the hearing clerk's office can 24 print out an Excel file, if necessary. 25 Thanks for raising that. I mean, good point. I 26 don't think there'll be a -- we'll figure out what to do. 27 You know, we can have an exception for voluminous -- or 28 documents that would be voluminous if printed out, we can 29 1 figure out what to do about that. Thank you, 2 Mr. Rosenbaum. 3 MR. ROSENBAUM: Thank you. 4 THE COURT: Any other preliminary matters before 5 we -- one more. 6 Mr. English. 7 MR. ENGLISH: Charles English for the Milk 8 Innovation Group. Actually, Chip English, I don't know 9 why I used my legal name. 10 So, your Honor, earlier today we posted to the 11 website, to the link, Exhibit MIG-1, and I rise to raise 12 an objection to the USDA decision to exclude price-related 13 proposals submitted by the Milk Innovation Group. 14 I believe we have copies being distributed. 15 May -- may Ms. Bulgur approach both the court reporter and 16 your Honor to provide copies to you? 17 So good morning, again, your Honor. I rise at the 18 outset of this proceeding to lodge a critical objection. 19 My name is Chip English, and together with Ashley Vulin, 20 who is participating today remotely, and Grace Bulger, we 21 at Davis Wright Tremaine represent the Milk Innovation 22 Group. 23 I'm submitting a complete version of this 24 objection as Exhibit MIG-1, but I'm going to admit as I 25 present live some key citations to expedite things. 26 Pursuant to 7 USC, Section 608(c)15, MIG objects 27 to USDA's decision to exclude two of its pricing-related 28 proposals as being not in accordance with law. We request 30 1 a modification of matters open for hearing and/or reversal 2 of the decision to exclude what are known as MIG 3 Proposals 5 addressing, ESL shrink, and 6, a partial 4 exemption from FMMO's pricing regulations of certified 5 organic milk. 6 USDA's decision to exclude MIG's price-related 7 proposals is not in accordance with the Agricultural 8 Marketing Agreement Act, 7 USC, Section 601, et seq., or 9 USDA's obligations under the Administrative Procedure Act. 10 As I discuss a little later, there is a U.S. 11 District Court of District of Columbia case squarely on 12 our side. This objection is timely. 13 As a preliminary matter, I want to explain why I 14 raise the objection now and explain why this objection is 15 timely. 16 Pursuant to USDA's rules governing procedures for 17 this hearing, specifically 7 CFR, Section 900.16, 18 implementing 5 USCA, Section 557(d)(1), once USDA issues a 19 hearing notice, ex parte rules apply to any communication 20 regarding the substance of this proceeding. 21 Given that we were not and could not be aware that 22 USDA had applied an arbitrary and capricious methodology 23 in this proceeding until that hearing notice was issued, 24 the first moment to raise this objection in compliance 25 with ex parte rules is today on the record. Thus, our 26 objection is not only timely, it is perfectly timed for 27 this morning. 28 USDA invited interested parties to submit 31 1 pricing-related proposals. On June 1st of 2023, USDA 2 issued an invitation providing -- "providing the 3 opportunity for interested parties to submit additional 4 proposals regarding potential amendments to the current 5 pricing provisions applicable to all FMMO's." 6 The invitation instructed that "each 7 pricing-related proposal should be accompanied by a 8 comprehensive explanation on the need for, and potential 9 impacts of, the proposed changes, how the proposed changes 10 facilitate more orderly marketing, and any other relevant 11 information." 12 In its action plan issued on the same day, USDA 13 stated that it was "considering initiation of a rulemaking 14 procedure" -- "proceeding that would include a public 15 hearing to collect evidence regarding proposed changes to 16 pricing provisions effective in all 11 FMMO's." 17 Accordingly, MIG submitted six proposals, 18 including the two pricing-related proposals raised here: 19 An extended shelf life shrinkage pricing proposal, MIG's 20 Proposal 5, and an organic milk pricing -- partial 21 pricing -- partial pricing exemption proposal, MIG's 22 Proposal 6. 23 USDA excluded milk's price-related proposals. In 24 its June 24, '23 response to MIG, USDA based its refusal 25 to hear MIG's extended shelf life shrinkage proposal, 26 MIG's Proposal 5, and MIG's partial organic milk exemption 27 proposal, MIG's Proposal 6, because each proposal price -- 28 each proposed price-related change "does not seek to amend 32 1 the uniform FMMO pricing formulas, and therefore, does not 2 fall within the scope of this hearing." 3 USDA excluded each proposal because the proposal 4 "does not seek to amend the uniform FMMO pricing 5 formulas." 6 Note, your Honor, this critical difference between 7 what USDA invited June 1st and now what it asserts was the 8 limitation. For the first time, USDA now says "pricing 9 formulas," implying that only 7 CFR, Section 1000.50, is 10 open. 11 But that is not what USDA said June 1st. The 12 invitation for additional proposals was not limited only 13 to proposals which directly sought to amend the uniform 14 pricing formulas. Instead, USDA invited additional 15 "pricing-related proposals regarding potential amendments 16 to the current pricing provisions applicable to all 17 FMMO's." 18 USDA likely had to define the hearing in such 19 broad terms if it intended to accept every single one of 20 National Milk Producer Federation -- NMPF's -- five 21 different district proposals that prompted the start of 22 this proceeding. 23 The only unifying umbrella for National Milk's 24 five proposals is "pricing." And contrary to USDA's later 25 and belated assertion, both the extended shelf life 26 shrinkage proposal and the organic milk partial exemption 27 are pricing-related and are directly responsive to the 28 potential amendments proposed by other entities to the 33 1 current pricing provisions applicable to all FMMO's. 2 MIG Proposal 6 seeks to amend the pricing 3 provisions so that they treat organic certified milk 4 differently from conventional milk. The proposal 5 expressly ties to pricing. That is, under MIG Proposal 6, 6 certified organic milk would have to meet certain specific 7 pricing constraints on a nonclassified basis, and then it 8 would be eligible for an exemption from pooling. 9 While this proposal requires harmonizing 10 amendments in other sections of the regulatory code, each 11 primary substance is found in Section 50. 12 Moreover, a critical proponent of FMMO pricing is 13 the payment of significant funds by Class I processors 14 into the Producer Settlement Fund. That is, without a 15 doubt, a significant portion of the price paid by organic 16 handlers for milk and one, by the way, that provides 17 absolutely zero benefits to organic dairy farmers or 18 organic processors. 19 Certified organic milk commands a nonclassified 20 price premium that is higher than, and unrelated to, the 21 FMMO minimum prices. 22 Finally, NMPF proposes to amend the FMMO by 23 raising the Class I differentials. A significant 24 justification historically for the original base 25 differential was the value provided by farmers of 26 balancing the market and incentivizing service of the 27 Class I market. USDA did not accept -- I'm sorry -- USDA 28 did accept MIG's proposal, which is Proposal 20, that 34 1 addresses that issue. 2 MIG will explain how these justifications no 3 longer exist in any circumstance, but they especially do 4 not exist for organic milk. The fact that this proceeding 5 will already be considering and addressing the issues of 6 the treatment of pricing of organic milk within this 7 regulatory framework only further highlights the arbitrary 8 nature of the new line drawn by USDA to exclude a partial 9 organic exemption that is essentially another alternative 10 to the pending proposals. 11 To say now that USDA intended only to hear 12 proposals directly linked to price formula mechanics of 13 NMPF's proposals is an after-the-fact justification for 14 preventing our clients from being heard, when, of course, 15 NMPF got all of its proposals noticed for the hearing. 16 Turning to ESL shrink. MIG's ESL shrink provision 17 is undoubtedly pricing-related. It is a proposal about 18 the price applicable to different levels of shrink. This 19 proposal is designed to address the fact that USDA has 20 long recognized that not all milk produced on a farm makes 21 it to the bottle. Some milk is lost on the tanker, and 22 some is inevitably left behind in milk lines. 23 ESL facilities face unique challenges with respect 24 to shrink and our proposal is designed to impact that. 25 And it is pricing because the amount of milk that is 26 legitimate shrink is subject to the lowest price rather 27 than the highest Class I price. 28 Milk has prepared and is ready to present data 35 1 that supports its contention that ESL shrink is uniformly 2 different from other shrink and so should be priced 3 differently. This proposal is undoubtedly about pricing 4 and should be considered. 5 USDA's decision to prevent MIG's shrink proposal 6 from consideration at the hearing is inconsistent with 7 USDA's decision to include in the hearing notice, Select 8 Milk Producers' proposals on yield factors, including 9 particularly hearing Proposal 11 that directly addresses 10 the same issue of shrink. 11 As -- as discussed by USDA in the hearing notice, 12 the proposal seeks to update the specified yield factors 13 to reflect actual farm-to-plant shrink. USDA did not 14 limit the hearing to one section of the CFR, so it cannot 15 maintain that dairy farmers get to discuss shrink as to 16 butterfat and protein because it is only found in 17 Section 50, but my clients cannot discuss shrink because 18 it is found in a different section. 19 Shrink is shrink, and pricing-related, no matter 20 where it is found in the code. The Secretary has opened 21 the door to discussing shrink as to other classes, but 22 proposes to keep the door closed as to Class I. 23 Likewise, USDA has previously stated that this 24 very similar ESL shrink proposal needs to be considered at 25 a national hearing, just as we have here. A number of us 26 had the privilege of being in California in 2015 for the 27 California Promulgation Hearing, and the Dairy Institute 28 of California put forth a proposal to adjust shrink levels 36 1 for ESL. 2 In its recommended decision, USDA denied making 3 the requested amendment on the basis that "amending 4 provisions that are uniform throughout the Federal Order 5 system to allow an additional shrinkage allowance on ESL 6 production should be evaluated on the basis of a separate 7 national rulemaking hearing." I omit the citation. 8 Your Honor, we are here at that national 9 proceeding, making the request, just as USDA instructed, 10 and yet, are denied again. 11 USDA's explanation for why the proposals were 12 excluded is insufficient and unpersuasive. The AMS 13 administrator is "required to make such an investigation 14 and give such consideration that it deems warranted 15 regarding a proposal and to deny the application only if 16 it includes that, the proposed marketing order, or 17 amendment will not tend to effectuate the declared policy 18 of the act or that for other proper reasons a hearing 19 should not be held on the proposal." 20 I'm citing the National Farmers Organization, 21 Inc., vs. Lynn case. In the NFO case, I have been around 22 just long enough, I was involved -- I was not involved in 23 the actual lawsuit brought by NFO, but I was involved in 24 the underlying Federal Milk Order hearing preceding the 25 case that set the precedent. This was for then Orders 1, 26 2, and 4, in the Northeast. Payment dates for dairy 27 farmers were made open. Producers were then, and are now, 28 paid twice a month. 37 1 NFO proposed a third payment to accelerate some 2 monies paid to dairy farmers. USDA excluded the proposal, 3 but on appeal to a Federal District Court by the 4 proponent, USDA was ordered to reopen the hearing to 5 include a proposal. 6 In other words, the arbitrary exclusion of an 7 irrelevant proposal for the hearing even starts is a 8 reversible error that could be appealed and result in 9 nullification to proceeding as to that portion. 10 Here, that is, you know, the issues for Class I 11 only. I want to emphasize that Class I and the make 12 allowances can, and are, separate. 13 Here, both the extended shelf life shrinkage 14 proposal and organic exemption proposal are related to 15 pricing, and USDA fails to explain a proper reason the 16 proposal should not be heard. 17 USDA's arbitrary exclusion of these proposals 18 means that it is keeping certain proponents from even 19 being heard. Not only does this put the Class I-only 20 portion of the proceeding at risk for later reversal, but 21 it certainly does not reflect the type of open and fair 22 process that our clients deserve. And our clients are not 23 the only losers if that happens, so are consumers. 24 MIG's rejected proposals sought to have the real 25 economics of FMMOs considered and likely would result in 26 decreases in the cost of milk to fluid milk processors. 27 From a public policy consideration, if the economics do 28 not justify current prices, then a failure to address that 38 1 reality by this agency is really a failure for consumers. 2 The issue is not academic or within the agency's 3 discretion. The NFO case applies, and you, your Honor, 4 can cure this today. 5 I'm skipping the next two paragraphs of case 6 citations. 7 At best, USDA's decision to exclude MIG's 8 proposals suggest a decision to change the scope of the 9 hearing, specifically related to the meaning of pricing 10 related and regarding proposed changes to pricing 11 provisions effective in all 11 orders. 12 USDA fails, though, to provide the required 13 explanation as to the difference between the proposals 14 USDA invited and those accepted for the hearing. 15 If USDA made its determination to change the scope 16 of the hearing, permissibly under the AMA and APA 17 standards, USDA's response to MIG and other interested 18 parties excluding proposals fails to provide the 19 reasonable explanation as to the change in scope, and thus 20 is not in accordance with law. 21 I skip the rest of the paragraph, for now. 22 USDA's failure to include proposals properly 23 submitted within the scope of the invitation risks 24 invalidating any final Class I pricing decisions resulting 25 from the FMMO hearing. To be validly promulgated, a final 26 agency rule must be a logical outgrowth of the proposed 27 rule on which the public had the opportunity to comment. 28 To be very clear, our clients object to the fact 39 1 that not all Class I proposals are being heard, 2 tentatively, except for my client's Proposal 20. The 3 Class I proposals all increase Class I prices by some 4 estimates, as much as $1 billion annually. 5 Obviously, this proceeding can and will consider 6 proposals that could increase the Class I price, and MIG 7 has no objection to non-Class I proposals found in Issues 8 2 and 3. 9 But if this proceeding is to address Class I 10 pricing, it is premature, and it is a premature merit 11 determination to exclude nearly all relevant Class I 12 pricing proposals. 13 We believe we are correct here and that the notice 14 of deficiency is not cured. The Secretary risks a 15 successful 15A or 15B proceeding at some point, where a 16 reviewing federal court may well determine long after the 17 fact that any Class I price increases were improbably 18 granted. 19 In past litigation, your Honor, huge fights have 20 been erupted over how refunds to those persons for money 21 are to be distributed by USDA. 22 Zuber v. Allen. I will note that my law firm I 23 started at was involved in the Zuber v. Allen case and in 24 that aftermath of trying to redistribute monies from eight 25 years prior. 26 Let me say here and now to USDA and National Milk, 27 that everyone is on notice of this risk of retroactive 28 refunds for Class I is on the table. No one down the road 40 1 will be credibly permitted to make an equitable argument 2 to the contrary. 3 And by the way, that was made in the Zuber case 4 and rejected. 5 Right now, the hearing notice exclusions reinforce 6 a perception the Class I fluid milk handlers are at best 7 third class participants in the Federal Marketing Orders 8 after dairy farmers and handlers that can voluntarily pool 9 or not pool their milk. 10 Class I fluid milk sales are the only segment of 11 the industry, quite literally, on life support. Class I 12 fluid milk processors are the only segment who cannot exit 13 the FMMO system. Non-Class I handlers can choose not to 14 pool. Farmers can go down an order, or they can choose 15 not to pool. But fluid milk processors are stuck. 16 And it is Class I that essentially funds this 17 program, certainly the Producer Settlement Funds. All 18 handlers pay assessments to fund the USDA operations, to 19 be clear. Yet, despite all of this, Class I processors 20 cannot even get their own proposals heard by the 21 secretary. 22 MIG's proposals, including others not noticed for 23 this hearing that are not in our objection, are designed 24 to take a hard look at the reality of the economic 25 situations before us and how USDA and this industry might 26 actually try something new and different to spur 27 innovation in Class I, rather than simply running it into 28 the ground. 41 1 Now is the moment and time to fix it. And there 2 is no way USDA can do so unless it hears from those on the 3 front lines as to MIG Proposals 5 and 6. 4 We respectfully urge you, as the presiding 5 officer, to provide us with a real opportunity to be heard 6 on MIG Proposals 5 and 6, and I move admission of 7 Exhibit MIG-1. 8 THE COURT: First, any objection to -- I guess we 9 are going to mark this. We didn't mark it but -- and this 10 isn't the normal way of handling an objection -- or I 11 guess it's really -- this is a motion, but it gets it into 12 the record, so this works for me. 13 So this will be -- Exhibit MIG-1 will be marked 14 Exhibit -- 15 MR. HILL: Your Honor? 16 THE COURT: Yes. 17 MR. HILL: We do have one question. Since the 18 government has several exhibits that we're going to offer, 19 we basically have numbered them up to number 59. 20 THE COURT: Okay. 21 MR. HILL: So we would like to see if we can 22 reserve those and start at number 60. 23 MR. ENGLISH: I certainly am not getting in the 24 way of that. I'm certainly happy to make it number 60. 25 THE COURT: Excellent. All right. No objections, 26 I take it, so this -- my -- well, I don't see any 27 objection -- anyone object to this going into the record? 28 So we'll mark Exhibit MIG-1 as Exhibit 60 for 42 1 purposes of this hearing, and put it into evidence as 2 well. 3 (Thereafter, Exhibit Number 60 was marked and 4 received into evidence.) 5 THE COURT: Okay. We have another person -- I'm 6 sorry, I forgot names. But we have another person who 7 stepped up to the mic. 8 Please. 9 MR. VETNE: My name is John Vetne, V-E-T-N-E, 10 consultant for National All-Jersey. And this is an 11 opportune moment for an echo of Mr. English's objection. 12 Early this morning, National All-Jersey submitted 13 to USDA, on the designated website, an objection that is 14 similar to that of Mr. English. That is an objection to 15 exclude two pricing provisions submitted by National 16 All-Jersey for consideration at this hearing. 17 One would be to make uniform to all Federal 18 Marketing Orders a pricing provision -- pricing provisions 19 for multiple component pricing of Class II, III, and IV 20 milk, which exists in all but four orders, and is the 21 basis upon which all prices are established. And the 22 other was to price Class I milk on the -- in all federal 23 markets on the basis of multiple components. 24 As Mr. English said, not all Class I proposals are 25 being heard. That is one that is not being heard, 26 although several are being heard. 27 The objection that has been made is being printed 28 at the moment. I would -- when it's available, I would 43 1 ask that it -- that it be numbered with the next 2 consecutive number, so that the two objections are 3 together on the record. It's the same -- the very, very 4 same issue. 5 One of the issues that was argued in the NFO vs. 6 Lynn case in the District of Columbia was that USDA 7 perceived that the proposal submitted by NFO did not have 8 broad-based support from the primary proponent 9 cooperatives. And that essentially was disavowed by the 10 court as a legitimate reason for excluding a hearing -- an 11 issue in the hearing notice. 12 What we have here is a proposal by National Milk 13 Producers Federation -- multiple proposals by National 14 Milk Producers Federation, and the yardstick chosen by 15 USDA to see which proposal would be heard or not heard is 16 how closely does it relate to the proposals submitted by 17 National Milk Producers Federation, not to the marketing 18 problems or disorder in the existing system, not to the 19 problems identified, but how closely do they relate to the 20 solution proposed by National Milk Producers Federation. 21 Both of National All-Jersey's proposal address the 22 problems, the same problems, addressed in -- by National 23 Milk Producers Federation, but come to a different 24 conclusion as to what's the best solution. 25 In particular, there is a Class I proposal to be 26 made uniform throughout, and there is a proposal for 27 multiple component pricing to be made uniform throughout 28 the system. 44 1 The AMAA in Section 608(c)(5) does not speak to 2 disorderly marketing in the establishment of provisions 3 for Federal Milk Orders. That comes earlier in the New 4 Deal Act and relates to multiple programs. Disorderly 5 marketing is a term of administrative interpretation that 6 has evolved through the past, almost century now, 7 80 years. 8 But what Section 5, 608(c)(5), does speak to is 9 uniform pricing. It requires that prices charged to 10 handlers, minimum prices charged to handlers, be uniform 11 among handlers. The existing system results in 12 non-uniform prices. The proposed system proposed both by 13 National Milk Producers Federation and NAJ comes closer 14 perhaps to making prices uniform but doesn't make prices 15 uniform for Class II, III, and IV, in the four fat skim 16 orders, Southeast and Arizona. 17 The proposal for MCP applied universally in all 18 markets would have produced uniform prices. That is the 19 objective that meets the problems identified in the market 20 better. 21 We're not on the same page substantively with the 22 proposal submitted by Mr. English, on the same page 23 procedurally. 24 So, when -- when the objection comes, I don't know 25 if it has been posted -- and it's pretty clear, by the 26 way, on the USDA website, that, stated overtly, simply 27 because something is posted on the website does not mean 28 it's part of the record. 45 1 My objective today, and Mr. English's objective 2 today, is to make these objections part of this record for 3 consideration by USDA, by the parties, and any other 4 authority in the future. Thank you. 5 THE COURT: Okay. So I think we will reserve 6 Exhibit 61 for this objection, this is really a motion. 7 Okay? And I'll put it into the record that way when -- 8 MR. VETNE: And I don't think our objection -- I 9 don't think our objection has been posted. 10 And the other thing is, part of the reason, 11 apparently, that the NAJ proposals weren't considered was 12 that National Milk Producers Federation submitted an 13 objection, to which NAJ responded and submitted to the 14 agency. 15 The response, also, about a month ago, is still 16 not on the USDA website, and that was submitted on 17 June 30, 2023. 18 So we should have the full record of both 19 submissions and responses available to the parties, at 20 least, if not part of this record. But it is -- it is 21 incorporated in our objection. So thank you. 22 THE COURT: So I would like to hear from the other 23 side. The other side is exactly, we have AMS. Sounds 24 like other participants have a quarrel with NMPF as well. 25 Mr. Hill of AMS is standing. First in time, you 26 get to talk first. 27 MR. HILL: Yes. We do reject these assertions, 28 but seeing that they just came in this morning, we would 46 1 like time to look them over and formulate a response. 2 THE COURT: Okay. I mean, I guess my -- I've got 3 a number of preliminary questions. Some may have to 4 resolve on their own. 5 But I guess it occurs to me as timing, when do we 6 have to make -- when do we need a decision on this? I -- 7 it doesn't seem like these topics would be up first 8 anyway. 9 MR. HILL: That's what it seems like to me, your 10 Honor, we should have time to do this. It's going to be a 11 long hearing. 12 THE COURT: Yes. 13 MR. HILL: But I will get something to you within 14 the next three to four business days and we can discuss 15 this on the record. 16 THE COURT: Okay. 17 And any objection to that? Anyone else who wants 18 to -- to file written materials on this? 19 MR. VETNE: I have a copy now, your Honor. 20 THE COURT: Okay. This is what we're going to 21 mark as Exhibit 61? 22 MR. VETNE: Yes. 23 THE COURT: Okay. Thank you. 24 Okay. You want to identify -- describe what we're 25 identifying as Exhibit 61? Somebody? Just so we have it 26 in the spot in the record. Or I can. 27 MR. VETNE: Pardon? 28 THE COURT: Yeah. Identify for the record what 47 1 we're marking as Exhibit 61. 2 MR. VETNE: Yes. The objection to which I 3 referred, which was submitted onto the website this 4 morning, is an objection on the letterhead of Baker 5 Donelson law firm, signed by Wendy Yoviene, an attorney, 6 and me, dated August 23, 2003 -- 2023. 7 And the footnote at the bottom of the first page 8 refers to both the proposals submitted by National 9 All-Jersey, the letter from National Milk Producers dated 10 June 30, seeking to exclude the NAJ proposals, and the 11 response of June 30 from NMPF and the revised proposal 12 submission, all of which were submitted as part of the 13 objection this morning has been marked here is the letter. 14 THE COURT: Okay. Very well. The above-described 15 letter of August 23rd, 2023, has been marked Exhibit 61. 16 Any objection to introduction of this exhibit into 17 the record? 18 Seeing none. Exhibit 61 is admitted into the 19 record, even though it is, more in the nature of a motion 20 than an evidentiary document. 21 (Thereafter, Exhibit Number 61 was marked and 22 received into evidence.) 23 THE COURT: Yes? 24 MS. HANCOCK: Nicole Hancock on behalf of National 25 Milk Producers Federation. We would also like to reserve 26 the right to respond to both Exhibit 60 and 61 objections 27 that have been filed. 28 THE COURT: Yes. Of course, Ms. Hancock. Okay. 48 1 And anyone else as well. I mean, I can hear 2 from -- we'll hear from whomever has something to say. 3 Yes. Others stood up in this. 4 In any event, it doesn't sound like I need to 5 resolve this today. And I don't think I'll have too much 6 further to say on this. I mean, I suppose it is part of 7 my duties to exclude from the record anything that's 8 beyond the scope of the notice. 9 I guess it also occurs to me that as a general 10 matter, since I'm not writing the decision, I'm loathe to 11 exclude things so that the person that is drafting the 12 decision can consider it later. 13 I don't know -- can anyone -- if we let this into 14 the record, just give me maybe a little preview of this, 15 how much more time would it take? 16 Mr. English? 17 MR. ENGLISH: Your Honor, as to MIG Proposal 5, 18 which is the ESL shrink proposal, I have two things to 19 say. First, the testimony is likely to be very similar to 20 what was given in California. I think it was, at most, 21 three-quarters of a day, but I'll have to go back and look 22 at the record. It might have been half a day. 23 It is a little different in that we do have being 24 prepared a survey, maybe by way of an offer of proof, we 25 have a survey being prepared by Irvine & Company on this 26 subject. 27 I note here for the record -- partly because I 28 think fairly people should know -- that that survey was 49 1 being primarily prepared by Jeff Davis, a longtime member 2 of the dairy industry who was a fluid processor from 3 Pennsylvania and who was a consultant to Irvine. 4 Unfortunately, Mr. Davis was killed in a motorcycle 5 accident on Saturday. 6 A number of people here know who he is, and so I 7 thought it at least appropriate on this proceeding to 8 recognize, Mr. Davis. 9 THE COURT: So recognized. What a tragedy. 10 MR. ENGLISH: Yeah, it is. For the industry and 11 for everybody in his family. 12 Now, that would not delay ultimately because if 13 ESL shrink were added, it would be, you know, I guess near 14 the end of the hearing. It relates to other issues. 15 Frankly, it is my view that the testimony is valid 16 regardless because when we get to Class I, we're going to 17 talk about, you know, raising Class I. And so in a way, 18 it will be a defense to raising Class I. So in fairness 19 to people, it's coming in anyway. So I think the ESL 20 shrink would add very little time to the hearing. 21 I'm not going to make the same claim about a 22 partial organic exemption. That is obviously a bigger 23 question. It is one, frankly, that we raised with the 24 Secretary going back as far as 2015, and have not had the 25 opportunity to have it heard, and we think that it's 26 critical that it be heard. But I will not claim it could 27 be done in the same timeframe. 28 Again, you are likely to hear some of the 50 1 testimony in organic as a defense to higher Class I, as I 2 previewed in my objection, but I would say that that would 3 be more. That would be longer. 4 THE COURT: Let me see if I have this right. It 5 was excluded in 2015, California? 6 MR. ENGLISH: No, it was -- it was a separate 7 hearing request in 2015. 8 THE COURT: Okay. 9 MR. ENGLISH: And the Secretary, under the 10 statute, chose to ask for more information and more time 11 for about 16 months at which time, the proposal was 12 withdrawn, as happened in the case of other proposals on 13 other subjects. 14 So it was -- to be clear, it was not -- it was not 15 part of or excluded. It just happened to be, we submitted 16 the proposal at the same time of the 2015 hearing. 17 THE COURT: Very well. I think I understand. 18 Yes. 19 MR. VETNE: Mea culpa. Mr. Metzger pointed out 20 that NAJ's response of July 13th to the NMPF letter is 21 indeed posted on the AMS website. Thank you. 22 THE COURT: The record's corrected, and thank you 23 for keeping things clear on the record. 24 Anything else on this? I mean, I guess -- I 25 started to say it is my job to keep things consistent with 26 the notice and this, but I'm not the one that makes the 27 decision. So people maybe should give me some guidance as 28 to what my role is as opposed to the role of the USDA 51 1 personnel that set up this hearing and that will decide it 2 in the end, so -- but I think we'll be talking about this. 3 Anything further on this? 4 Is now a good time -- or -- well, I -- we can have 5 a break, or we could put in the 59 exhibits. How are you 6 doing, Ms. Reporter? 7 THE COURT REPORTER: Can we take a break? 8 THE COURT: Break, yes. 9 All right. It's 25 after. Let's come back at 25 10 of 11:00. Off the record. 11 (Whereupon, a break was taken.) 12 THE COURT: Okay. Can we come to order after our 13 morning break? 14 Okay. I'm going to get started. On the record. 15 I think you are up, Mr. Hill, for AMS, with some 16 59 non-sponsored exhibits. 17 MS. McMURTRAY: Yes, good morning, Judge. We have 18 13 exhibits that we would like to place on the record. 19 These are the documents that are required by the 20 regulations. So I will just go through them one by one 21 and have them marked. 22 Marked for Exhibit 1, we have the Federal Register 23 notice, that is just the proposed rules that were 24 published in the Federal Register with the hearing notice. 25 We would like marked for Exhibit 2 is the Notice 26 to Trade. It says "Notice to Trade" at the top, and then 27 "USDA Sets Hearing on Proposed Amendments to the Pricing 28 Provisions of All Eleven Federal Milk Marketing Orders." 52 1 We would like marked for Exhibit 3 the notice that 2 was sent from the Market Administrator of the Northeast 3 Marketing Area. 4 For Exhibit 4 -- or what we would like marked as 5 Exhibit 4 is the Notice to the Appalachian, Florida, 6 Southeast Marketing Areas from that Market Administrator. 7 For Exhibit Number 5, we would -- it would be the 8 notice from the Market Administrator to the Upper Midwest 9 Marketing Area. 10 Marked for Exhibit 6 would be the notice to the 11 Central Marketing Area from their Market Administrator. 12 What we have marked for Exhibit 7 would be the 13 notice to the Mideast Marketing Area from that Market 14 Administrator. 15 What we would like marked as Exhibit 8 would be 16 the notice to the California Marketing Area from their 17 Market Administrator. 18 Exhibit 9 would be the notice to the Pacific 19 Northwest and Arizona Marketing Areas. 20 Exhibit 10 is the notice to the Southwest 21 Marketing Area from the Market Administrator. 22 And then what we would like marked as Exhibit 11 23 is the notice from the Department of Agriculture to the 24 interested state governors. 25 So those are the 11 that are required by the 26 federal -- by the current regulations. 27 We do have two additional exhibits that we would 28 like marked as Exhibit 12 and 13. 53 1 Exhibit 12 is just for reference due to the way 2 the Federal Register requires and publishes these 3 proposals. These two documents are ways that the 4 department has made to allow those who are participating 5 in the hearing to see what the regulations would look 6 like, where those changes go in the current regs. 7 So Exhibit 12 is titled the "Federal Milk 8 Marketing Order, 2023 Pricing Formula Hearing, Proposed 9 Regulatory Text Changes," and it is the clean version. 10 And then marked for Exhibit -- what we would like 11 marked as Exhibit 13 is a very similar document. At the 12 top, it reads "Federal Milk Marketing Order, 2023 Pricing 13 Formula Hearing, Proposed Regulatory Text Changes," and it 14 is a marked-up version. 15 So we would ask that all those be admitted as part 16 of the record just because they are required by the 17 Federal Register, and then we would ask the two, 12 and 18 13, be admitted just so -- as a clarification for the 19 Federal Register so parties can see what is what. 20 THE COURT: Any objection to the admission into 21 evidence of Exhibits 1 through 13? 22 Seeing none, Exhibits 1 through 13 are admitted to 23 the record. 24 (Thereafter, Exhibit Numbers 1 through 13 25 were marked and received into evidence.) 26 MS. BULGER: Your Honor, sorry. 27 THE COURT: I'm sorry. 28 MS. BULGER: Your Honor, I understand there's no 54 1 witness, but I have a question regarding one. 2 My name is Grace Bugler, B-U-L-G-E-R, Milk 3 Innovation Group. 4 Exhibit 1 is USDA's hearing notice, and the notice 5 contains the relevant definitions of small businesses or 6 entities participating here, as I understand correctly. 7 It's -- to be found on the chart on the first page. 8 I raise this issue because we believe that USDA 9 inadvertently included some outdated numbers here. 10 Recall that on February 15th, 2023, the United 11 States Small Business Association updated the small 12 business definition for fluid milk manufacturers from 13 1,000 employers to 1,150 -- or employees, sorry, excuse 14 me. And that can be found at 88 Federal Register, at page 15 9982. 1,250. 16 If I could note for the record that this change is 17 reflected in 13 CFR, Section 121.201. 18 But the USDA's hearing notice lists the old 19 threshold of 1,000 employees, and likewise for small 20 business definition for dry, condensed, and evaporated 21 dairy products, it used to be entities with 750 employees, 22 which is included in USDA's notice, but that was also 23 updated, now at 1,000 employees. 24 We don't believe that a new hearing notice must be 25 issued to reflect this correction given that regulations 26 stand on their own, but we did just want to ensure that 27 the hearing record reflects the updated numbers. 28 MS. McMURTRAY: No objection. 55 1 THE COURT: AMS will stipulate to that? 2 MS. McMURTRAY: Yes. 3 THE COURT: Very well. Okay. 4 MS. BULGER: Thank you. 5 THE COURT: So stipulated. Thank you, Ms. Bugler. 6 I guess I have -- with that -- with that 7 correction, Exhibit 1 is again admitted to the record. 8 And I think I admitted all the other Exhibits 1 through -- 9 2 through 13. 10 Anything -- anything else, Mr. Hill, or AMS, I 11 guess regarding Exhibits 14 through 59, if I understand? 12 MR. HILL: Yes, we have a witness next, your 13 Honor. 14 THE COURT: Okay. Are we ready to call our first 15 witness then? 16 Okay. Go ahead. Mr. Hill, you can call your 17 witness to the stand. 18 And there's no written statement I take it for 19 this witness? 20 MR. HILL: No, there is not. 21 THE COURT: And you are going to have direct 22 examination to -- 23 MR. HILL: Correct. 24 THE COURT: Very well. 25 MS. CASHMAN: While he's doing that, my name is 26 Lorie Cashman. I am the Economics Division director for 27 USDA AMS Dairy Program. I have a Master's degree and a 28 Bachelor's degree in economics from the University of 56 1 Tennessee. I have been with USDA for approximately 2 22 years, the majority is with -- has been with AMS 3 overseeing the dairy products mandatory reporting program 4 and the Federal Order statistics programs. And I have 5 been the Economics Division director for approximately two 6 years now. 7 THE COURT: Ms. Cashman, I should swear you in. 8 MS. CASHMAN: Oh. 9 LORIE CASHMAN, 10 Being first duly sworn, was examined and 11 testified as follows: 12 THE COURT: And that goes for what you just -- the 13 introduction you just gave as well, correct? 14 THE WITNESS: Retroactive. 15 THE COURT: You may continue, or it is your 16 witness, Mr. Hill, whichever procedure you plan on 17 following. And we do have you on the screen. 18 MR. HILL: I'm just waiting to make sure that they 19 are ready, your Honor. 20 DIRECT EXAMINATION 21 BY MR. HILL: 22 Q. Well, good morning, Ms. Cashman. 23 A. Good morning. 24 Q. All right. So -- 25 A. I -- oh, go ahead. 26 Q. In preparation for this hearing, did you prepare 27 any documentation? 28 A. Yes, I did. 57 1 Q. And do you have that with you right now? 2 A. I do. 3 Q. Okay. And were these documents prepared under 4 your supervision, or were you part of preparing them? 5 A. Yes, I was. 6 Q. And were these documents put together sua sponte, 7 or did you receive a request for the data that you are 8 presenting? 9 A. Yes. Or can you repeat the question? 10 Q. Did you -- did you do this of your own accord or 11 did you receive a request for the -- 12 A. Yes, I received requests for these data. 13 Q. Okay. So the data presented here does not in any 14 way reflect your views, but is simply a fulfillment of the 15 data request that you received? 16 A. They do not reflect my views, and they are for the 17 sole purpose of the request. 18 Q. All right. And none of -- none of these are 19 offered in favor -- you are not offering these in favor or 20 against any of these proposals, are you? 21 A. They are not. 22 Q. And you intend that they may be used by all the 23 parties for the purposes that those parties may require? 24 A. Yes. 25 Q. Okay. So let's look at what is marked here for 26 identification as Exhibit 14 on the document. 27 (Thereafter, Exhibit Number 14 was marked for 28 identification.) 58 1 THE WITNESS: Yes. This is the listing of data 2 requests, the requesting entity, and the associated 3 exhibit number. I would like to note that these exhibit 4 numbers are not the same numbers that were posted on the 5 website. We were trying to get the data out in order for 6 the industry to be able to use them. So I will try my 7 best to refer to what the table number is on the website 8 compared to the exhibit that I'm going to put on. 9 BY MR. HILL: 10 Q. Okay. So this document is eight pages long; is 11 that correct? 12 A. Yes. 13 Q. So, if you go to page -- pages 1, 2, 3, and half 14 of page 4, I see that there are exhibit titles. 15 Can you explain what that is? 16 A. Yeah. So pages 1, 2, 3, and 4 will all be the 17 data presented by either myself or our two other 18 witnesses, and the associated exhibit numbers, the exhibit 19 title, and the actual request wording from the proponent, 20 as well as the requesting entity that requested it, and 21 the -- whether or not the data request was fulfilled. 22 Q. So I see further at the bottom of page 4, and 23 continuing through 8, that exhibit title box is empty. 24 Can you tell us -- 25 A. Yes. So on pages 4 and the top part of 5 are data 26 requests that we are pointing towards our websites for the 27 official record. And then, beyond that are data requests 28 that were not able to fulfill, either because the data was 59 1 not available or it was restricted due to confidentiality. 2 MR. HILL: Okay. So, your Honor, I'm not sure how 3 you want to do this. It is listed as Exhibit 14 for 4 identification on the document. Would that suffice to 5 leave it as such? 6 THE COURT: Well, we can -- I mean, we can admit 7 this. We have been admitting everything else. Does that 8 answer -- 9 MR. HILL: Yeah. 10 THE COURT: I mean, it is a handy reference. 11 MR. HILL: Correct. 12 THE COURT: I'm not sure what to make of the 13 listings after 59. 14 MR. HILL: That was what I just asked her about, 15 those documents. 16 THE COURT: Yes. Are those to be considered to be 17 in evidence or -- 18 MR. HILL: Can you repeat yourself, Ms. -- 19 THE COURT: She said they are on the website. 20 MR. HILL: Which -- which particular documents are 21 you talking about, your Honor? All of them or just the 22 ones -- 23 THE COURT: Well, anything that's after 59. I 24 think she said that these are -- these are materials that 25 are on the AMS website. And I take it we're not marking 26 those -- 27 MR. HILL: Yeah. 28 THE COURT: -- for identification. I take it 60 1 we're not entering those into evidence? 2 MR. HILL: No. I would like Ms. Cashman to repeat 3 herself because part of that answer is correct, and I 4 think part of it is -- 5 THE COURT: Okay. Better than usual. 6 THE WITNESS: Right. So the first ones on page 4 7 through the first two on page 5, our response to that data 8 request is that the data are available on the website, and 9 we gave the website where they could find it. 10 MR. HILL: And then after that point? 11 THE WITNESS: Okay. And then after that point, 12 are all the data requests that we were not able to 13 fulfill, either for the data is not available or 14 restricted due to confidentiality. 15 MR. HILL: Is that sufficient, your Honor? 16 THE COURT: I think that's sufficient. If 17 something comes up, we start referring to the ones that 18 are on the website, we'll figure out what to do then. 19 And the other, I think the exhibit -- it's in the 20 exhibit. We were asked for this, we didn't have it, okay, 21 or whatever. Okay. 22 Let's -- I guess we'll wait until the end to admit 23 exhibits. 24 BY MR. HILL: 25 Q. Let's please move to what's marked as Exhibit 15 26 for identification. 27 THE COURT: Well, actually, I mean we'll mark it 28 as 15. 61 1 MR. HILL: Right. 2 (Thereafter, Exhibit Number 15 was marked 3 for identification.) 4 THE WITNESS: Just to note, what I have up on the 5 screen here is the data request page on our national 6 hearing site, and that is where the tables and charts have 7 all been posted here. We do intend to update these with 8 the actual exhibits. 9 So Exhibit 15 is the Announcement of Advanced 10 Prices and Pricing Factors, January 2000 through August of 11 2023. The first column is the year. Second column is the 12 month. The base Class I price is next. It should be 13 noted per footnote 1 that these are announced at 3.5% 14 percent butterfat. 15 The next column is base skim milk price for 16 Class I; Advanced Class III pricing factor; Advanced 17 Class IV skim milk pricing factor; advanced butterfat 18 pricing factor; Class II skim milk price; Class II nonfat 19 solids price; and then the two-week product price averages 20 for butter, nonfat dry milk, cheese, and dry whey. These 21 are all announced and published. No new calculations were 22 made on these. The Announcement of Advanced Prices and 23 Pricing Factors are published on or before the 23rd of the 24 month. 25 The second footnote is in reference to November of 26 2013 and states, "Pricing constituent used in calculation. 27 Equivalent Prices computed pursuant to 7 CFR 1000.54." 28 BY MR. HILL: 62 1 Q. And so these calculations were made from 2000, 2 January of 2000, through August of 2023, and they are the 3 same type of calculations each month and year, correct? 4 A. Yes. 5 Q. So let's move on to the next document, please. 6 It's titled Announcement of Class and Component Prices, 7 January of 2000 to June of 2023. 8 MR. HILL: And mark that for identification 9 Exhibit 16. 10 (Thereafter, Exhibit Number 16 was marked 11 for identification.) 12 THE WITNESS: Okay. So as already stated, this is 13 the Announcement of Class and Component Prices. These are 14 announced and published on or before the 5th of the month. 15 There was no new calculations involved in this. 16 So the first column is year. Next is month. Next 17 is the Class II price, as footnote 1 states is announced 18 at 3.5% percent butterfat. Then there's the Class II 19 butterfat price; Class III price, also announced at 20 3.5% butterfat; Class III skim price; Class IV price, also 21 announced at 3.5% butterfat; Class IV skim milk price; 22 butterfat price; nonfat solids price; protein price; other 23 solids price; somatic cell adjustment rate; and then the 24 product price averages for butter, nonfat dry milk, 25 cheese, and dry whey. 26 And footnote 2 is in reference to September and 27 October of 2013, "Pricing constituent was used in 28 calculation. Equivalent Prices computed pursuant to 63 1 7 CFR 1000.54." 2 Q. And these are the same calculations from 2000 3 through 2023; is that correct? 4 A. Yes. 5 Q. Let's move on to the next document, please, which 6 is Component Tests in Producer Milk." 7 MR. HILL: I would like to have this marked for 8 identification as Exhibit Number 17. 9 THE COURT: So marked. 10 (Thereafter, Exhibit Number 17 was marked 11 for identification.) 12 BY MR. HILL: 13 Q. And can you describe this document for us, please? 14 A. I'm just trying to get my bearings here. 15 Q. It's all right. 16 A. Okay. So Component Tests in Producer Milk By 17 Order, January 2000 through May of 2023. Per footnote 1, 18 "Component tests are based on test results submitted by 19 Market Administrator, Cooperative, or outside 20 laboratories." 21 First column is the Federal Order that the data 22 references; the year; the month; the butterfat test; the 23 nonfat solids test; protein test; and other solids test. 24 And per footnote 2, "Orders 5, 6, 7, and 131 do 25 not report protein, other solids, or nonfat solids in 26 their calculation of the uniform price." It should be 27 noted that "the California Federal Milk Marketing Order 28 became effective on November 1st, 2018." That is Federal 64 1 Order 51. And "Order 135 was terminated after March of 2 2004." 3 Q. Thank you. 4 Let's move to the next exhibit, which would be 5 Yearly Average Component Tests. 6 MR. HILL: I would like to have that marked for 7 identification as Exhibit Number 18. 8 THE COURT: So marked. 9 (Thereafter, Exhibit Number 18 was marked 10 for identification.) 11 THE WITNESS: All right. These are the Yearly 12 Average Component Tests in Producer Milk By Order and All 13 Market Combined, 2000 to 2022. The "component tests are 14 based on test results submitted by Market Administrator, 15 Cooperative or outside laboratories," per footnote 1. 16 The first column is the year. Second column is 17 the Federal Order. Third is butterfat test. Next is 18 nonfat solids test; protein test; other solids test; and 19 somatic cell count. 20 Per footnote 2, "Orders 5, 6, 7, and 131 do not 21 report protein, other solids, or nonfat solids in their 22 calculation of the uniform price. Orders 1, 5, 6, 7, 51, 23 124, and 131, do not report somatic cell count." 24 Per footnote 3, the all orders combined total for 25 each year is a yearly average weighted by producer pounds. 26 But it should be noted that "the California Federal Milk 27 Marketing Order (51) became effective on November 1st, 28 2018." And "Order 135 was terminated after March of 65 1 2004." 2 MS. TAYLOR: This is Erin Taylor. Before we get 3 too far down, were you going to let everyone know what 4 tables they are? 5 THE WITNESS: I was, yeah. My bad. All right. 6 Let's back up here. 7 MS. TAYLOR: Yeah. Make it clear. 8 THE WITNESS: Okay. So Exhibit -- this is the 9 wrong table. Exhibit 15, which was the Announcement of 10 Advanced Prices and Pricing Factors, is Table 4 on the 11 data request site. 12 Exhibit 16, the Announcement of Class and 13 Component Prices, is Table 5. Nope, I got lost here. Did 14 I say that right? 4 is advanced; 5 is class -- oh, I got 15 two here, that's why. Okay. Sorry. 16 Exhibit 17, the Component Test in Producer Milk, 17 is Table 2 on the website. 18 Yearly Average Component Tests, Exhibit 18, is 19 Table 3. 20 And I will go through the rest as we go. 21 MS. TAYLOR: Thank you. 22 BY MR. HILL: 23 Q. So let's move on to the next exhibit, Final Butter 24 Sales and Weighted Average Price. 25 MR. HILL: I would like to mark that as Exhibit 19 26 for identification, your Honor. 27 THE COURT: So marked. 28 (Thereafter, Exhibit Number 19 was marked 66 1 for identification.) 2 BY MR. HILL: 3 Q. You may describe this, Ms. Cashman. 4 A. Right. So the next few tables -- or exhibits are 5 19 through 23, but they all relate to Table 7 through 11 6 on the website. 7 Exhibit 19 is the Final Butter Sales and Weighted 8 Average Price. 9 Per footnote 1, "sales volumes and prices are 10 reported as part of the Dairy Products Mandatory Reporting 11 Product (DPMRP) and published in the National Dairy 12 Product Sales Report (NDPSR)." And for more information 13 you can see our website. 14 And then for footnote 2: "Under the Dairy 15 Products Mandatory Reporting Program (DPMRP), each week 16 respondents are required to submit sales volume, total 17 dollars, and dollars per pound for the current week and 18 any revisions to the prices or volumes previously reported 19 for the prior four weeks. 20 "The sales volume and prices shown here include 21 revisions (if any). The weekending date is the week for 22 which the sales volume and prices apply, and the report 23 date is the date of the report in which the final fifth 24 week price was published." 25 It should be noted, "These reported sales volumes 26 and prices may not be the same volumes and prices used in 27 the Announcement of Class and Component Prices; they are 28 the volumes and prices after all of the eligible revisions 67 1 were incorporated." 2 The first column is weekending date; second column 3 is report date; then total sales; then weighted average 4 price. 5 And then, footnote 3, is in reference to so many 6 pages -- 7 Q. I think it appears on the last page. 8 A. Oh, the last page. 9 October 12th, 2013; October -- well, weekending 10 date October 12th, 2013; weekending date October 5th, 11 2013; and weekending date September 28th, 2013. And that 12 states that a "pricing constituent was used in the 13 calculation." And the "Equivalent Prices were computed 14 pursuant to 7 CFR 1000.54." 15 Q. Thank you. 16 Did you say the table number for that one? 17 A. That is Table 7. 18 Q. So let's move on to the next exhibit, Final 19 Cheddar 40-Pound Block Sales. 20 MR. HILL: And I would like to mark that for 21 identification as Exhibit Number 20. 22 THE COURT: So marked. Sorry, everyone. 23 (Thereafter, Exhibit Number 20 was marked for 24 identification.) 25 THE WITNESS: Okay. So Exhibit 20 would be 26 Table 8 on the website. 27 This is the Final Cheddar 40-Pound Block Sales and 28 Weighted Average Price. All the same footnotes from the 68 1 prior table apply to these. It is all the same 2 information, just for 40-pound blocks instead of butter. 3 BY MR. HILL: 4 Q. Very good. 5 So let's move on to the next exhibit, Final 6 Cheddar 500-Pound Barrel Sales. 7 MR. HILL: I would like to mark that for 8 identification as Exhibit Number 21. 9 THE COURT: So marked. 10 (Thereafter, Exhibit Number 21 was marked for 11 identification.) 12 THE WITNESS: So this would be Table 9 on the 13 website. 14 And again, it's, all the same footnotes, and the 15 same pricing information, except for 500-pound barrels, we 16 report a weighted average price, a weighted moisture 17 content, and a weighted average price adjusted to 18 38 percent moisture. 19 BY MR. HILL: 20 Q. And it has the same -- it has the same 21 footnotes -- 22 A. Yes. 23 Q. -- correct? 24 A. All the same footnotes apply. 25 Q. So let's move on to the next document which is 26 Final Dry Whey Sales. 27 MR. HILL: I would like to mark that for 28 identification as Exhibit Number 22. 69 1 THE COURT: So marked. 2 (Thereafter, Exhibit Number 22 was marked 3 for identification.) 4 THE WITNESS: And that would be Exhibit 10 -- or, 5 no, Table 10 on the website. And it is all the same 6 information as the prior table, same footnotes apply. 7 This is for dry whey. 8 BY MR. HILL: 9 Q. Okay. And let's move to the next exhibit, which 10 is Final Nonfat Dry Milk Sales. 11 MR. HILL: I would like to mark that for 12 identification as Exhibit Number 23. 13 THE COURT: So marked. 14 (Thereafter, Exhibit Number 23 was marked 15 for identification.) 16 THE WITNESS: Okay. And Exhibit 23 would be 17 Table 11 on the website. And again, all the same 18 footnotes and information apply to this as the other 19 tables. This is for nonfat dry milk. 20 BY MR. HILL: 21 Q. Okay. Let's move on to the next exhibit, which is 22 the Weekly Dairy Product Sales Volumes. 23 MR. HILL: I would like to mark that for 24 identification as Exhibit Number 24. 25 THE COURT: So marked. 26 (Thereafter, Exhibit Number 24 was marked 27 for identification.) 28 THE WITNESS: So this Exhibit 24 is Table 25 on 70 1 the website. 2 Weekly Dairy Product Sales Volumes in Pounds, for 3 week ending January 4th, 2014, to week ending July 15th, 4 2023. 5 Per footnote 1, "Sales volumes and prices are 6 reported as part of the Dairy Products Mandatory Reporting 7 Program (DPMRP) and published in the National Dairy 8 Product Sales Report (NDPSR)." And for more information 9 you can refer to the website. 10 The first column is year. The second column is 11 weekending date. 12 And per footnote 2, "Sales volumes associated with 13 a specific Week Ending Date include all qualified sales 14 reported for the previous week, starting from Sunday at 15 12:01 a.m. and ending Saturday at midnight." 16 The next column are the products in the Dairy 17 Product Sales Report, and then it's butter, cheddar cheese 18 40-pound blocks, cheddar cheese 500-pound barrels, dry 19 whey, and nonfat dry milk. 20 Q. So let's move to the next exhibit, which is 21 Monthly Dairy Product Sales Volume. 22 MR. HILL: I would like to mark that for 23 identification as Exhibit Number 25. 24 THE COURT: So marked. 25 (Thereafter, Exhibit Number 25 was marked 26 for identification.) 27 THE WITNESS: Okay. So Exhibit 25 is Table 26 on 28 the website. It is the Monthly Dairy Product Sales 71 1 Volumes in Pounds for weekending January 4th, 2014, 2 through the weekending July 15th, 2023. 3 Per footnote 1, "Sales volumes are reported as 4 part of the Dairy Products Mandatory Reporting Program 5 (DPMRP) and published in the National Dairy Product Sales 6 Report (NDPSR)." For more information see our website. 7 And footnote 2, "Monthly sales volumes are equal 8 to the sum of the weekly NDPSR sales volumes with 9 weekending date in the identified month and year." 10 So the first column is year. The second column is 11 month. And then the remaining columns are the products in 12 the report: Butter, cheddar cheese 40-pound blocks, 13 cheddar cheese 500-pound barrels, dry whey, and nonfat dry 14 milk. 15 Q. All right. So let's move to the next exhibit, 16 which starts off Annual Dairy Product Sales Volume. 17 MR. HILL: I would like to mark that for 18 identification as Exhibit Number 26. 19 (Thereafter, Exhibit Number 26 was marked 20 for identification.) 21 THE WITNESS: Yes. So Exhibit 26 is Table 27 on 22 the website. So this is the Annual Dairy Product Sales 23 Volumes in Pounds, week ending date January 4th, 2014, 24 through July 15th, 2023. 25 Per footnote 1, "Sales volumes are reported as 26 Dairy Products Mandatory Reporting Program (DPMRP) and 27 published in the National Dairy Product Sales Report." 28 For more information see the website. 72 1 And then, "Annual sales volumes are the sum of 2 weekly NDPSR sales volumes with weekending dates in the 3 identified year." 4 And I'd like to make a correction that the second 5 footnote should be footnote 2, not 1. 6 Q. Thank you very much for that. 7 So let's move forward to the next exhibit. 8 MR. HILL: And I'd like to mark that, DPMRP Annual 9 Dairy Product Sales Volumes, I would like to mark that as 10 Exhibit Number 27 for identification. 11 THE COURT: So marked. 12 (Thereafter, Exhibit Number 27 was marked 13 for identification.) 14 THE WITNESS: Okay. Exhibit 27 is Table Number 28 15 on the website. This is the DPMRP Annual Dairy Products 16 Sales Volumes and Reporting Entities, NASS Dairy Product 17 Production and Number of Manufacturing Plants, 2014 18 through 2022. 19 Per footnote 1, "Sales volumes are reported as 20 part of the Dairy Product Mandatory Reporting Program 21 (DPMRP) and published in the National Dairy Product Sales 22 Report (NDPSR)." For more information see our website. 23 The footnote Number 2 is "U.S. dairy product 24 production and number of manufacturing plants reported by 25 the USDA National Agricultural Statistics Service (NASS)." 26 For more information, see their website at 27 www.nass.usa.gov. 28 So the first column is the year. The second 73 1 column is the NDPSR sales volume in pounds for butter. 2 Per footnote 3, "Annual sales volumes are the sum 3 of the weekly NDPSR sales volumes with weekending dates in 4 the identified year." 5 The next column is NASS U.S. production in pounds. 6 It should be noted that that was pulled from their 7 website. NDPSR sales volume share of U.S. production 8 percent, so that is the NDPSR sales volume divided by the 9 NASS U.S. production. The next column is NDPSR reporting 10 entities in number. 11 Footnote 4, "Under DPMRP, companies can submit 12 their data as individual plants or as one company. The 13 NDPSR reporting entities totals may include individual 14 plants or multiple plants reported as one entity, i.e., 15 the number of reporting entities does not compare to the 16 NASS Manufacturing Plants totals." 17 The next column is the NASS manufacturing plants 18 in number. 19 Then we continue on through all the same 20 information, but for cheese 40-pound blocks, cheese 21 500-pound barrels, cheese 40-pound blocks and 500 barrels 22 together, nonfat dry milk, and then, finally dry whey. 23 And it should be noted in footnote 5 that "NASS 24 does not report the number of plants manufacturing dry 25 whey." 26 Q. So let's move forward to the next exhibit that 27 starts -- that's titled Licensed Dairy Herds. 28 MR. HILL: I would like to mark that for 74 1 identification as Exhibit Number 28. 2 THE COURT: So marked. 3 (Thereafter, Exhibit Number 28 was marked 4 for identification.) 5 THE WITNESS: That is Table 29 on the website. So 6 this table is the licensed dairy herds from 2003 to 2022. 7 Per footnote 1, "Average number of dairy farms 8 licensed to sell milk, based on counts collected from 9 State and other regulatory agencies." The source was 10 National Agricultural Statistics Service, USDA, and their 11 website is www.nass.usda.gov. 12 It should be noted that these data were from 13 pulled from NASS' website. 14 BY MR. HILL: 15 Q. So we can move forward to the next exhibit which 16 is Monthly Mailbox Prices. 17 MR. HILL: And I would like to mark that for 18 identification as Exhibit Number 29. 19 THE COURT: So marked. 20 (Thereafter, Exhibit Number 29 was marked 21 for identification.) 22 BY MR. HILL: 23 Q. And when you are ready, you can discuss that. 24 A. Okay. Exhibit 29 is Table Number 18 on the 25 website. This table is Monthly Mailbox Prices reported in 26 dollars per hundredweight for January 2000 through April 27 of 2023. 28 Per footnote 1, these are the net pay prices 75 1 received by dairy farmers for milk. Prices reflect all 2 payments received for milk sold (including over-order 3 premiums; quality, component, breed, and volume premiums; 4 payouts from state-run over-order pricing pools; payments 5 from superpool organizations or marketing agencies in 6 common; payouts from programs offering seasonal production 7 bonuses; and monthly distributions of cooperative 8 earnings. Annual distributions of cooperative 9 profits/earnings or equity payments are not included) and 10 all costs associated with marketing the milk, such as 11 hauling charges; cooperative dues, assessments, equity 12 deductions/capital retains, and reblends; the Federal Milk 13 Order deduction for marketing services; Federally-mandated 14 assessments such as the National Promotion Program and 15 budget deficit reduction; and advertising and promotion 16 assessments above the national program level. 17 Other deductions such as loan, insurance, or feed 18 mill assignments are not included. Prices are weighted 19 averages of the prices reported for all orders receiving 20 milk from the reporting area and are reported at the 21 average butterfat tests. 22 For footnote 2, "For dates not shown, data were 23 not published for that reporting area during that 24 timeframe." 25 Okay. So first column is year. Second column is 26 month. Then the following columns are all reporting 27 areas. 28 For footnote 3, this is "areas for which prices 76 1 are reported for at least 75% of the milk marketed under 2 Federal Milk Marketing Orders." 3 The first reporting area is New England states, 4 which includes Connecticut, Maine, Massachusetts, New 5 Hampshire, Rhode Island, and Vermont. 6 The next one is New York. 7 Then Eastern Pennsylvania, which includes all of 8 the counties to the east of those listed in footnote 9, 9 which I will read in a minute. 10 The next is Appalachian states, includes Kentucky, 11 North Carolina, South Carolina, Tennessee, and Virginia. 12 And then we have the Southeast states, which 13 includes Alabama, Arkansas, Georgia, Louisiana, and 14 Mississippi. 15 Then we have Southern Missouri, which includes the 16 counties in Vernon, Cedar, Polk, Dallas, Laclede, Texas, 17 Dent, Crawford, Washington, St. Francois, and Perry, and 18 all those to the south of these. 19 Next we have Florida. 20 Then Western Pennsylvania, which include the 21 counties of Warren, Elk, Clearfield, Indiana, 22 Westmoreland, and Fayette, and all those counties to the 23 west of these. 24 Then we have Ohio, Indiana, Michigan, and 25 Wisconsin. For printing purposes I had to split the 26 tables, so starting on page 10 are the remainder of the 27 reporting areas. 28 So same thing as before, the year, the month, and 77 1 then the reporting areas. So we have Minnesota, Iowa, 2 Illinois, the Corn Belt States, which include Kansas, 3 Nebraska, and the Missouri counties to the north of those 4 listed in footnote 8. 5 Western Texas, which includes all counties to the 6 west of Fanin, Hunt, Van Zandt, Henderson, Houston, 7 Cherokee -- I'm going to spell this one for the court 8 reporter, N-A-C-A-G-D-O-C-H-E-S -- and Shelby. 9 Then we have New Mexico. 10 The Northwest States, which include Oregon and 11 Washington. 12 California -- which I think I skipped something. 13 No, okay. 14 California, which should be noted that 15 January 2000 through October of 2018 were calculated and 16 published by the California Department of Food And 17 Agriculture. 18 Then we have all reporting areas. Footnote 3 19 (sic) notes that it is the "weighted average of prices for 20 all selected reporting areas." 21 Then we have Western FO (135), that was -- yeah, 22 Western FO (135). 23 And then Idaho and Utah. 24 Q. So let's move on to the next exhibit. Starts -- 25 the title starts as Total Eligible Milk Pooled in All 26 Orders. 27 MR. HILL: I would like to mark that for 28 identification as Exhibit Number 30. 78 1 THE COURT: So marked. 2 (Thereafter, Exhibit Number 30 was marked 3 for identification.) 4 THE WITNESS: Okay. So Exhibit Number 30 is 5 Table 14 on the website. This might take me a minute 6 because it is small writing. Total Eligible Milk Pooled 7 in All Orders, Total Eligible Milk Not Pooled in All 8 Orders, Total Eligible Milk Not Pooled in the Upper 9 Midwest Order, Federal Order 30, and Total Estimated 9(c) 10 Milk Not Pooled Pounds, for January 2000 through March of 11 2023. 12 So the first column is year. Second column is 13 month. The third column is the total eligible milk 14 pooled. 15 And per footnote 1, "Only rounded numbers were 16 published prior to 2016." 17 The next column is total eligible milk not pooled 18 estimated. 19 Footnote 2 states, "Only the combined Federal 20 Order totals were published for 2000 and 2001." 21 The next column is total eligible milk not pooled 22 in the Upper Midwest Order, Federal Order 30, estimated. 23 And the "totals may not add due to rounding." 24 And Total Eligible Milk Not Pooled in the Upper 25 Midwest Order 30 and Total 9(c) Milk Not Pooled are 26 mutually exclusive subsets of Total Eligible Milk Not 27 Pooled. 28 And then the final column is total 9(c) milk not 79 1 pooled estimated. And the data were only available from 2 2016 to the present. 3 And there are several places where there is an 4 asterisk located throughout the table, and those refer to 5 data that were restricted due to confidentiality. 6 Q. Thank you very much. 7 So let's move to the next exhibit, which begins 8 Other Uses Milk Pounds Pooled. 9 MR. HILL: I would like that marked for 10 identification as Exhibit Number 31. 11 THE COURT: So marked. 12 (Thereafter, Exhibit Number 31 was marked 13 for identification.) 14 THE WITNESS: Other Uses, Exhibit 31, is Table 19 15 on the website. Okay. So this is Other Uses Milk Pools 16 Pound -- no -- Other Uses, which are in quotation marks, 17 Milk Pounds Pooled By Order, January 2000 through 18 January 2023. 19 Per footnote 1, "'Other Uses' -- in quotation 20 marks -- "for all orders (except order 126 data) includes 21 pooled milk and products of pooled milk that is dumped at 22 plants - including route returns - or at farms, lost by 23 occurrences beyond the handler's control, or used for 24 animal feed. Such uses of pooled milk are assigned to the 25 lowest price class for the month subject to verification 26 by the Market Administrator." 27 Okay. The first column is year. The second 28 column is month. Then the remaining columns are for all 80 1 of the orders. Until the end, we have the monthly order 2 total, and then we have the calendar year totals. 3 Per footnote 2, "Order 126 data does not include 4 dumps at farms or used as animal feed; these were included 5 in the published 'other' category; revision of historical 6 data to conform with the definition in other markets would 7 reveal confidential information." 8 Footnote 3, "The California Federal Milk Marketing 9 Order" -- order 51 -- "became effective on November 1st, 10 2018." 11 Footnote 4 refers to the calendar year totals 12 column. "Some calendar year totals include restricted 13 data that cannot be reported by month and by order. 14 And footnote 5 for the same column is "2023 15 calendar year total is year-to-date." 16 There are some Rs throughout the table, and those 17 represent "restricted data due to confidentiality. Total 18 for all orders includes the restricted amounts." 19 Q. Thank you. 20 So can we move to the next exhibit, which begins 21 Average Diesel Fuel Price. 22 MR. HILL: I would like that marked for 23 identification as Exhibit Number 32. 24 THE COURT: So marked. 25 (Thereafter, Exhibit Number 32 was marked 26 for identification.) 27 THE WITNESS: Okay. Exhibit 32 is Table 24 on the 28 website. These are the Average Diesel Fuel Price -- 81 1 prices, April 2012 through July -- well, that's wrong, 2 should be 2007, sorry -- January 2007 through July 2023. 3 Per footnote 1, this is the "simple four-week 4 average of the Gulf Coast PADD 3 and Lower Atlantic 5 PADD 1C sourced from" the website for -- yeah -- Energy 6 Efficiency Association, and their website is listed there. 7 And these are used in the Announcement of Advanced Prices 8 and Pricing Factors, and our website is listed below. 9 MS. TAYLOR: I just wanted to clarify for the 10 record. It is from the Energy Information Agency. 11 THE WITNESS: Energy Information Agency. 12 BY MR. HILL: 13 Q. So let's move to the next exhibit, which begins I 14 think Regulated Pool Distributing Plants and Federal Order 15 by Month. 16 MR. HILL: I would like to have that marked for 17 identification as Exhibit Number 33. 18 THE COURT: So marked. 19 (Thereafter, Exhibit Number 33 was marked 20 for identification.) 21 THE WITNESS: So Exhibit 33 is Table 16. I 22 believe, on the website. It says Regulated Pool 23 Distributing Plants and Federal Order Number, the Federal 24 Order that the plant was regulated on in that month, by 25 Month, January 2010 through March of 2023. 26 The first column is year; the second column is 27 plant name; city; state; zip code; the next column is 28 effective Class I differentials. 82 1 And prefer -- per footnote 1, the "effective 2 Class I differentials include the Class I differentials 3 adjusted for location listed in 7 CFR 1000.52 and, where 4 relevant, the adjustments to Class I prices listed in 5 7 CFR Sections 1005.51, 1006.51, and 1007.51." 6 The next column is the Federal Order number by 7 month. 8 And per the footnote, "The Federal Order Number 9 refers to the Federal Milk Marketing Order number under 10 which the listed plant is regulated. Current Federal Milk 11 Marketing numbers: 1 - Northeast, 5 - Appalachian, 12 6 - Florida, 7 - Southeast, 30 - Upper Midwest, 13 32 - Central, 33 - Mideast, 51 - California, 124 - Pacific 14 Northwest, 126 - Southwest, and 131 - Arizona. Note: If 15 there is no Federal Order Number listed, the plant was not 16 regulated that month." 17 Q. So just for a moment I would like to go back to 18 Exhibit 32 marked for identification that you just did 19 prior. 20 So on the last page, page 6 of 6, it is true that 21 you have a calculation for August of 2023? Is that 22 correct? 23 A. Yes. 24 Q. So in fact, the title should be January 2007 to 25 August 2023; is that correct? 26 A. Yes. 27 Q. Thank you. 28 So let's move on to the next exhibit begins 83 1 Regulated Pool Supply Plants and Federal Order Number by 2 Month? 3 MR. HILL: I would like to mark that for 4 identification as Exhibit Number 34. 5 THE COURT: So marked. 6 (Thereafter, Exhibit Number 34 was marked 7 for identification.) 8 THE WITNESS: So 34 is Table Number 17 on the 9 website. This is all the same information and footnotes 10 as the prior table. This is for Regulated Pool Supply 11 Plants and Federal Order Number by Month, January 2010 12 through March 2023. 13 BY MR. HILL: 14 Q. And you did say that the footnotes were the same? 15 A. They are the same as the prior table. 16 Q. Thank you. 17 So let's move to the next document, Spot Milk 18 Prices Relative to Class III Milk. 19 MR. HILL: I would like to mark that for 20 identification as Exhibit Number 35. 21 THE COURT: So marked. 22 (Thereafter, Exhibit Number 35 was marked 23 for identification.) 24 THE WITNESS: Exhibit 35 is Table Number 15. This 25 is Spot Milk Prices Relative to Class III Milk Price, 26 reported in dollars per hundredweight, for the Central 27 United States, January 2015 through June of 2023. 28 The first footnote says, "Spot milk price ranges 84 1 relative to the monthly Class III price as reported on the 2 most recent (at the time of the report) Announcement of 3 Class and Component Prices. Price ranges are reported 4 voluntarily by buyers of milk for use in manufacturing 5 cheese." The source is from Dairy Market News Fluid Milk 6 and Cream report for the Central U.S. report, and the 7 website is listed below. 8 Report date is the first column. 9 And per footnote 2, "Report date and report number 10 represent the date and week of the year the report is 11 published. The price ranges reported are for the Friday 12 to Wednesday prior to the report date." 13 Then we have the low, high, and midpoint reported. 14 And the last column is trade activity. 15 It should be noted per footnote 3 that "spot milk 16 Trade Activity reporting began in May of 2019." 17 And anywhere that is listed as not available on 18 the table means that there was no data reported in that 19 week. 20 Q. So I see on the last column, Trade Activity, you 21 do have obviously that footnote. But could you give us 22 any insight into what slow, moderate, active -- 23 A. Yes. So this is -- 24 Q. -- refers to? 25 A. All of this data is self-reported, and they are 26 reporting in their opinion how much spot milk activity was 27 occurring during that week. For example, for -- let me go 28 to one that has numbers -- or moderate. Okay. 85 1 For January 6, 2022, Report Number 1, it would be 2 $4 is the low range, and the high -- negative $4, and 3 negative $1 is the high range, and that represents the -- 4 anywhere from 4 to $1 below the Class III price. And the 5 buyers were saying that there was moderate activity, as 6 self-reported by them, occurring for spot sales that week. 7 Q. Thank you very much. 8 So let's go to the next document, which begins 9 U.S. Mozzarella Production. 10 MR. HILL: And I would like to mark that for 11 identification as Exhibit Number 36. 12 THE COURT: So marked. 13 (Thereafter, Exhibit Number 36 was marked 14 for identification.) 15 THE WITNESS: Okay. This one is Table 30 on the 16 website. So this is U.S. Mozzarella Production in 17 Wisconsin Wholesale Prices, 2000 to 2023. 18 The U.S. Mozzarella Production was sourced from 19 USDA National Agricultural Statistics Service. And the 20 Wisconsin wholesale prices are sourced from the Dairy 21 Market News report, Cheese - Midwestern U.S., and the 22 Wisconsin wholesale selling price for 5- to 6-pound 23 mozzarella loaves, and the associated website below that. 24 The first column is year. Second column is month. 25 The next one is mozzarella production in pounds. The next 26 column is the price range in dollars per pound, the 27 minimum and maximum. And then the average price in 28 dollars per pound. 86 1 Q. Okay. I think -- is that the -- 2 A. That's the end for me. 3 MR. HILL: Okay. Your Honor, I would like to move 4 for the admission into evidence of 14 through 36. 5 THE COURT: Any objections? As to Mr. English? 6 MR. ENGLISH: Chip English for the Milk 7 Innovation. 8 I don't believe we're going to have objections, 9 your Honor, but I think it might be appropriate, 10 nonetheless, as we go through, to allow the parties to ask 11 questions. There may or may not be modifications to the 12 documents as a result of that, maybe there won't be. 13 But I don't have objections per se, but I just 14 wonder as a matter of procedure if we should go through 15 the questions first and then move admission. 16 THE COURT: I think so. And, of course, this 17 witness is vouching for these exhibits, and -- and so we 18 shouldn't actually introduce those exhibits until direct 19 and cross, and any other examination of the witness is 20 completed. 21 MR. ENGLISH: Thank you, your Honor. 22 THE COURT: With that, do you have questions -- 23 does anyone have any questions for this witness? 24 Mr. English does. 25 MR. ENGLISH: Thank you. I would not have done 26 that had I not had questions. 27 THE COURT: Fair enough. 28 CROSS-EXAMINATION 87 1 BY MR. ENGLISH: 2 Q. Bear with me a little bit because we prepared 3 based on the table numbers, and so I'm trying to keep 4 track. You will be glad to know the most questions I had 5 were Table 1, which is not yours apparently. So whoever 6 that lucky person is. 7 So the order I'm going to take this in, though, is 8 the order that I prepared them in, if I could. 9 A. That's fine. 10 Q. So Exhibit 17, which I believe is Table 2. 11 A. That is Table 2. 12 Q. And my first question is going to be hard, and I 13 apologize. How does Table 2 compare to Table 1? And 14 since you didn't do Table 1, I don't know -- 15 A. Oh, yes. Okay. 16 Q. Is it the same data? Do you know? 17 A. No -- yes, it -- I mean we did -- in Table 1 we 18 don't have the actual tests. 19 Q. So Table 1 -- 20 A. But they are related. 21 Q. Okay. And I -- you know, in fairness, I really 22 was hoping one witness would do both, but I'll work out 23 whatever you want me to work out on this. 24 MS. TAYLOR: I think what might be helpful, 25 Table 1 is going to come in this afternoon. 26 Is that correct? 27 THE WITNESS: No, I don't think Table 1 will be 28 until tomorrow. 88 1 MS. TAYLOR: Oh, that's 1. Okay. 2 THE WITNESS: But John and I can come together. 3 MS. TAYLOR: Yes. So we can put that in tomorrow. 4 We have another witness coming on Table 1. And then we 5 would be glad to put that witness and Lorie up together 6 and answer any questions you guys have. 7 MR. ENGLISH: I'm -- I'm hardly going to disagree 8 with that idea since I suggested two people at once 9 earlier today. I think that will make things a lot 10 easier. 11 MS. TAYLOR: That's fine. 12 THE COURT: So we should put a hold on the 13 admission of this -- 14 MR. ENGLISH: Of Exhibit 17 I think. 15 THE COURT: Okay. 16 MR. ENGLISH: All right. 17 BY MR. ENGLISH: 18 Q. You were almost off the hook. 19 A. Until tomorrow, right? 20 Q. All right. So then I would turn to Exhibit 18, 21 which I believe is the same thing as -- you know what, my 22 second question is, you know, how does it compare to 23 Tables 1 and 2, so I think it makes sense to do the same 24 thing with Exhibit -- 25 A. Well, it could help for tomorrow to note that 26 Exhibit 18 is the annual averages of the tests reported in 27 Exhibit 17. 28 Q. Okay. So they are directly related? 89 1 A. They are directly related. 2 Q. Okay. So whatever questions I have would -- they 3 are going to connect up. 4 MR. ENGLISH: So I would -- I would say, your 5 Honor, for efficiency purposes that we treat Exhibit 18 6 like Exhibit 17, and the questions I have will be for two 7 witnesses tomorrow, just to make sure we cover it. 8 THE COURT: Yes, we will hold consideration of the 9 admission into evidence of Exhibit 18 as well as 17. 10 MR. HILL: Your Honor? 11 THE COURT: Yes, Mr. Hill. 12 MR. HILL: If it's -- we're fine with holding off 13 on the admission of all of these until we go through them 14 rather than go piecemeal exhibit by exhibit. 15 MR. ENGLISH: So what you are just saying is we'll 16 wait until the end tomorrow and then do it all at once? 17 MR. HILL: Correct. 18 MR. ENGLISH: That makes sense to me. 19 THE COURT: Does to me as well. In that case, 20 just to be clear, we're -- we're not going to rule on the 21 admission of Exhibits 14 through 36 until we hear from a 22 couple of other witnesses. 23 BY MR. ENGLISH: 24 Q. All right. I would then turn to Exhibit 29, which 25 I believe is Table 18, monthly mailbox. 26 A. Yeah. 27 Q. Just to make sure we're talking about the same 28 thing, I understand Exhibit 29 to be the monthly mailbox 90 1 prices, and I understand that to be the same as Table 18 2 on the website. 3 A. That's correct. 4 Q. All right. So, the first question is how did USDA 5 develop this table? 6 A. These were all reported prices monthly, and we 7 compiled them into one table with all the years and 8 months. 9 Q. Is this the NASS all milk data series or the AMS 10 milk? 11 A. This is AMS' monthly mailbox prices. 12 Q. And how did -- how did you get the data? 13 A. The Federal Orders submit data to headquarters 14 every month, and we compile it and publish the report. 15 Q. So if the Market Administrators report the data, 16 is it audited data? Is it coming as -- as having been 17 audited? 18 A. Yes. Brian said yes, but we're going to have to 19 get back to you on that one. 20 THE COURT: Can I ask what "audited" means in this 21 context? 22 MR. ENGLISH: In this context my question meant, 23 has USDA -- has somebody at USDA, whether Market 24 Administrator or somebody at headquarters, confirmed 25 through the usual processes of -- because this -- this 26 whole system depends on accurate data that USDA has 27 confirmed. And so, that's what I'm getting at, is audited 28 means that you have confirmed it, okay, in a way that USDA 91 1 would so you can trust the data -- you know, basically, a 2 handler reports 10 million pounds of volume 3 hypothetically, correct? 4 A. Hypothetically. 5 Q. Yes; is that correct? 6 A. Yes. 7 Q. And if so, USDA is going to find some way of 8 confirming that, correct, to make sure they are not lying 9 to you and they really had 20 million pounds, correct? 10 A. Oh, yes. Correct. 11 Q. Okay. That's what I mean by audited. 12 MR. ENGLISH: Does that help, your Honor? 13 THE COURT: Yes. 14 And your answer remains the same, yes, this is 15 audited data -- 16 THE WITNESS: Well, not in the same way that we -- 17 so we say audited data as in the data's reported monthly, 18 and then at some point thereafter, a Federal Order auditor 19 goes out and performs an audit on it. 20 BY MR. ENGLISH: 21 Q. Right. 22 A. So the monthly mailbox prices are not audited in 23 the same way as a, you know, pool handler report or 24 something would be audited. But it is confirmed. We 25 do -- much like DPMRP, we analyze all the data that's 26 submitted to us. We look for outliers. We go back to the 27 orders and confirm their data, or the orders go back and 28 confirm their data. 92 1 So all of the data that is in the mailbox price 2 has been scrutinized multiple times by multiple people in 3 my division, and if there are errors, then we do revise. 4 And so everything that's here would -- could and would 5 have been revised at some point, if there was some need to 6 do that. 7 Q. But I thought I heard -- and again, listen, I'm 8 just trying to understand. I thought I heard you say it 9 is not audited in the same way as, say, going back and 10 looking at pool handler reports. 11 So how is it different? 12 A. I might have to confer with my colleagues to 13 explain that correctly. So I can come back up after I 14 confer. 15 Q. All right. And I guess if you will be back 16 tomorrow, we can just add that at some point. 17 A. Yeah. 18 Q. Thank you very much. 19 All right. There's a very long footnote 1. I do 20 not propose to read it into the record just to do that. 21 When I look at all the data and look at 22 footnote 1, can you confirm this data does reflect 23 variations in component pricing? 24 THE COURT: This is footnote 1 of Exhibit -- 25 BY MR. ENGLISH: 26 Q. Well, it is the whole exhibit, but taking into 27 consideration footnote 1. Can you confirm that the data 28 in Exhibit 29, which is Table 18, reflects variations in 93 1 component pricing? 2 A. I believe the answer is yes, it does. But I -- 3 again, I will confer and get back to you. 4 Q. Gerat. 5 Let me try this, and if it doesn't work, then we 6 can just confirm. So assuming yes is the right answer -- 7 and by the way, I do, but that's okay, I'm not 8 testifying -- but presuming yes is the right answer, that 9 would mean that it would be impossible to do a direct 10 comparison with this data with Federal Order announced 11 prices? 12 A. I'm going to -- I'm going to refer -- or get back 13 to you on that one. 14 Q. All right. 15 THE COURT: I hate to say imposs- -- and maybe I'm 16 not familiar -- not fully understanding what impossible to 17 compare. I mean you can compare apples to oranges, right? 18 MR. ENGLISH: Well -- 19 THE COURT: What is the -- what is the -- from 20 where does the impossibility in comparing stem, 21 Mr. English? 22 MR. ENGLISH: It is our view that the answer to 23 the question a moment ago -- again, I'm not testifying -- 24 THE COURT: I understand. 25 MR. ENGLISH: -- but it is correct, that it 26 does -- it does actually reflect variations of component 27 pricing. It is our view that Federal Order announced 28 prices do not reflect that, and therefore, you can't 94 1 compare the two if you are looking at two different 2 documents. 3 And we think that some witnesses may make a 4 comparison, and the purpose of this examination, your 5 Honor, is for the record to be able to reflect what is it 6 and isn't a fair comparison. 7 THE COURT: Do you have that in mind, Ms. Cashman? 8 Beginning -- 9 MR. ENGLISH: It is not a criticism of the data. 10 THE COURT: Understood. 11 MR. ENGLISH: It is the recognition of what's 12 collected and how it's reported is different in our view, 13 whether she needs to confirm or not, and therefore, if 14 somebody chooses to say, hey, I want to compare mailbox 15 data to announced prices, we -- we believe, at least, it 16 is an invalid comparison. And I'm not saying anybody is 17 going to do that, but in case somebody does that, you 18 know, we want to be able to have that on the record. 19 THE COURT: I understand. I just want the witness 20 to -- and her staff, the people that work on that side, 21 understand the question so we don't get an answer to a 22 different question tomorrow. 23 MR. ENGLISH: Yeah. 24 THE COURT: And as much as I enjoy talking with 25 you all, we -- no criticism whatsoever. 26 MR. ENGLISH: At day one at 11:48 you say that 27 now. Let's see what you are saying on a different day 28 but -- 95 1 THE COURT: Fair enough. 2 BY MR. ENGLISH: 3 Q. So in fairness, and not expecting an answer now, 4 but I might as well let you know what the next question 5 is. 6 A. Sure. 7 Q. The data, can you confirm -- as obviously, I'm not 8 testifying again -- can you confirm the data reflects 9 variations without providing the background component test 10 information that would explain the variations? 11 A. Definitely going to have to get back to you on 12 that one. 13 Q. Okay. 14 A. But can you repeat the question one more time for 15 me? 16 Q. Sure. That the data -- if the data reflects 17 variations, without providing the background component 18 test information, that would explain such variations. 19 THE COURT: Yes, Ms. Taylor? 20 MS. TAYLOR: Let's see if I can help with this 21 conversation a little bit, maybe, because I think I know 22 what you are asking. 23 Lorie, so for our announced prices that the 24 Federal Orders announce, are they announced -- standard 25 prices, are they announced at 3.5% butterfat -- 26 THE WITNESS: Yes. 27 MS. TAYLOR: -- standard components? 28 THE WITNESS: Yes. 96 1 MS. TAYLOR: Not market components or components 2 of a dairy farmer's check? 3 THE WITNESS: Yes. 4 MS. TAYLOR: And the mailbox price series reflects 5 what dairy farmers actually get paid, however they get 6 paid? 7 THE WITNESS: Yes. 8 MS. TAYLOR: So that's -- it could be 25,000 dairy 9 farmers and they are paid 25,000 different ways, and 10 that's all in that number? 11 THE WITNESS: Yes. 12 MS. TAYLOR: Okay. 13 MR. ENGLISH: And I think you -- I think you just 14 helped me with the first two questions. I think the last 15 one may be just a slightly bit different. So let's see if 16 we can cover it tomorrow. 17 MS. TAYLOR: That's fine. 18 MR. ENGLISH: I definitely -- I think that covered 19 prior to, but not the one I just asked about the 20 variations not providing the background component test 21 information in the mailbox data. 22 BY MR. ENGLISH: 23 Q. I'm going to try to conclude, at least on this 24 exhibit, with an easy question, or what I think is an easy 25 question. 26 Does the data in Exhibit 29, Table 18, include 27 specialty milk supplies such as organic milk? 28 A. Yes. 97 1 Q. How about grass fed, does it include that? 2 A. Yes, it could. 3 Q. How about A2 milk, does it include that? 4 A. It could. 5 Q. It could or it does, do you know? 6 A. I mean, like Erin said, there's 25,000 farmers 7 going into all these prices. They all have different 8 things, so -- I mean, I couldn't speak directly to every 9 farmer's paycheck. 10 Q. Okay. All right. Thank you. And if we could 11 just clarify the question of auditing and the variations 12 issues tomorrow. 13 A. Yes. 14 Q. All right. My next one is Exhibit 30, which is 15 Table 14. 16 So how is -- how is this data developed by USDA? 17 By generality, so for January of 2000, you know, total 18 eligible milk pooled, that is obvious, that comes from the 19 statistics, correct? 20 A. Yes. 21 Q. And then because it's up time when it wasn't being 22 collected for other orders necessarily, you only have 23 total eligible milk not pooled, it wasn't collected in 24 2000, just as restricted, until for, for the total? 25 A. Correct. 26 Q. It was restricted except the total? 27 A. I mean -- I mean that was prior to me. That was 28 all the way back. 98 1 Q. Okay. 2 A. But it just isn't available. We don't have it. 3 Q. All right. But how does USDA estimate, for any 4 one of these times, but for instance, for January of 5 2000 -- well, let me jump ahead. When you were here, so 6 let's come to -- let's come to January of 2023. 7 For the third column, total eligible milk not 8 pooled for Order 30, how did USDA estimate 664,327,162? 9 A. So those are reported by the orders, and they use 10 their best knowledge and understanding of their markets 11 and come to an estimate. 12 Q. Do you know if the Market Administrators talk to 13 each other and try to use the same methodology? 14 A. I do not. 15 Q. And do you know what's changed between 2015 and 16 2016 that's, you know, allowed you to report total 9(c) 17 milk not pooled estimated in January of 2016 but not prior 18 to that time? 19 A. I'm not sure. I think, you know, it just -- it 20 wasn't published prior to that. There was probably a 21 request at that point to start publishing it. But we did 22 not have the information to compile it prior to that. 23 Q. All right. Exhibit 31 which is Table 19. 24 I admit I'm struggling here. I'm trying to 25 understand what actually this shows. What -- what exactly 26 are other uses in -- I understand the -- I know there's a 27 footnote. But I have been doing this for a while, and so 28 I'm trying to understand exactly what the concept is and 99 1 how footnote 1 relates to footnote 2 with respect to 2 Order 126. 3 That's a pretty big round question, but I mean if 4 you can help me out here about -- because I -- for this 5 one I really am just struggling to understand what it 6 shows. 7 A. Sure. So other uses, for all orders, except 126, 8 you know, it's -- it includes pooled milk and products of 9 pooled milk that are dumped, could be at the farm, route 10 returns, anything like that, loss at the farm by, you 11 know, some act of God or something, and used for animal 12 feed. So, you know, just all those kind of, you know, 13 things that would be covered like that. 14 For Order 126, it does not include the dumps at 15 farms or used as animal feed, and that was because 126 16 publishes their data in a different manner, so revising 17 their historical data to meet this data request would 18 reveal confidential information, so it is slightly 19 different than the other orders. 20 Q. Okay. I appreciate the answer, as I may still be 21 where I was, but that's not your fault, that's mine. 22 Okay. If we could turn to Table 24, which is 23 Exhibit 32. 24 So by regulation, USDA uses the simple four-week 25 average -- 26 A. Yes. 27 Q. -- data? Okay. 28 Are you aware that there is weekly data available? 100 1 A. Well, that is -- oh, well, you mean that went into 2 these prices? 3 Q. Well, this is -- this is simple -- is this simple 4 average? This is simple four-week average. So this takes 5 four weeks, and it simply averages it, correct? 6 A. Yes. 7 Q. Are you aware -- so there may be weekly data out 8 there that varies enough so -- so if you used the weekly 9 number for a different calculation, the simple average 10 wouldn't necessarily give you the same answer, correct? 11 MR. HILL: Objection. This calls for speculation 12 here. And she provided -- she provided what the request 13 was. 14 MR. ENGLISH: Well, let me -- 15 THE COURT: Yeah, sustained. I -- you asked 16 her -- asked her what other data -- if she knows that 17 other data is there. You can ask her -- and it is cross, 18 you can lead and all that. But I -- that question didn't 19 quite make sense to me either. 20 MR. ENGLISH: Okay. Let me try again. 21 BY MR. ENGLISH: 22 Q. Are there other sources of data than the Gulf 23 Coast data that you are using, if you know? 24 A. There are, but per the regulation, these are the 25 regions that we use. 26 Q. Are you aware of U.S. Energy Information 27 information that you are not using because of the 28 regulation? 101 1 MR. HILL: I -- I don't understand the question, 2 your Honor, Mr. English. 3 MR. ENGLISH: I'm trying. I'm trying. 4 THE COURT: Take a shot at rephrasing. I'm not 5 sure I did either. You are asking whether there's other 6 sources of the EIA data? 7 MR. ENGLISH: Okay. Let me -- let me get at it 8 from a different way. 9 THE COURT: I'll try not to interfere. 10 MR. ENGLISH: No, no, no. 11 BY MR. ENGLISH: 12 Q. How much familiarity do you have -- and so you may 13 be the wrong witness -- how much familiarity do you have 14 with the U.S. DSFS -- U.S. DFS model? They are the ones 15 that started with Cornell. The one that is used by Mark 16 Stephenson and Chuck Nicholson. How -- 17 MR. HILL: I'm going to -- I'm going to object 18 again here, your Honor. I'm not sure of the relevance of 19 this. 20 MR. ENGLISH: Well, I'm trying to get at if 21 USDA -- okay. This data was requested by someone with 22 respect to Issue 5. Issue 5 is the Class I pricing. 23 Class I price surface is largely based upon the study that 24 started in the 1980s and then was used in the 1990s and is 25 going to be relied on by multiple parties. 26 And what I'm getting at is given the fact that 27 that study has been around for a long time and USDA relies 28 on it, does -- is USDA aware that diesel prices in that 102 1 study are done differently. If you are not, fine. That's 2 the question. 3 THE WITNESS: Well, I'm here to present the data 4 that was requested, and this is what was requested. 5 MR. ENGLISH: Okay, thank you. I will -- I will 6 take that answer. 7 BY MR. ENGLISH: 8 Q. So my next question will be, really simple I 9 think. Exhibit 33 and Exhibit 34, which is the list of 10 regulated pool distributing plants. Really long list. 11 Would it be safe to say that you might know the 12 names of the ultimate owners of the plant from the name, 13 but you might not know the names of the ultimate owner 14 from the list of the plants? 15 A. I'm sorry, the names of what? 16 Q. The ultimate owner. In other words, there's all 17 these companies, but they may be owned by an entity that 18 isn't the name of the plant; is that correct? 19 A. That could be. 20 Q. Okay. 21 THE COURT: You are talking about column 2 on the 22 first page of each of these exhibits? 23 MR. ENGLISH: Yeah, the plant name. 24 BY MR. ENGLISH: 25 Q. The plant name may not necessarily reflect the 26 name of the owner? 27 A. That's true. 28 Q. I seem to have not brought up all of my materials. 103 1 I'm sorry. 2 So Table 30, which is -- this is Exhibit 36, which 3 is the mozzarella production table. Do you know how 4 mozzarella is defined as used in Exhibit 36? 5 A. It is however NASS defines it. 6 Q. Do you know the water content of the mozzarella 7 listed on Exhibit 36? 8 A. You would have to refer to NASS. 9 Q. Do you know how NASS collects the information? 10 A. They conduct a survey monthly. 11 Q. And unlike, you know, the survey that AMS conducts 12 weekly on dairy product prices, do you know if that survey 13 by NASS is audited? 14 A. It is not. 15 MR. ENGLISH: Your Honor, subject to the reserved 16 questions on Tables 1, 2, and 3, and I think there was one 17 other question that I have asked, and obviously with 18 questions of the other tables, I am -- I appreciate -- 19 very much appreciate the effort, and I am completed for 20 now. 21 THE COURT: Okay. Mr. English has stepped down. 22 Do we have additional cross-examination? Any of 23 the other participants? 24 Yes. 25 MR. MILTNER: Ryan Miltner representing Select 26 Milk Producers. 27 CROSS-EXAMINATION 28 BY MR. MILTNER: 104 1 Q. I have some questions here, and I am going to try 2 to keep these in order. 3 I want to look at Exhibit 29 where we look at the 4 monthly mailbox prices. 5 So if I -- if I look at the source data that goes 6 into this table, am I correct that it encompasses more 7 than 75% of the milk that's within the Federal Order 8 system? Is that -- did I -- did I pull that correctly 9 from the source data? 10 A. Yes. 11 Q. And so as I look through the regions that are 12 included in the tables here, as well as the source data, 13 am I correct that there is no reported monthly mailbox 14 price for Central Texas or East Texas? 15 A. Yeah. I mean, what's listed here is what we 16 publish in the mailbox price and report, and there are no 17 others reported except for maybe one order reports theirs. 18 Q. Is there a reason why the data is not collected 19 nor reported for Central Texas, Arizona, or Minnesota? 20 A. Well, it's -- it's not that they may not be 21 collected. It is that they are not reported separately, 22 probably due to confidentiality. 23 Q. And Idaho would not be reported, at least here, 24 because it's not part of the Federal Orders? 25 A. I apologize. I'm trying to think back through all 26 the past -- I think I'm going to have to get back to you 27 on that one. 28 Q. So it could be that Idaho is collected and just 105 1 not included in this table? 2 A. It could be, yeah. But I'll -- I'll get back to 3 you for the record. 4 Q. Thank you. 5 A. Yeah. 6 Q. Okay. On Exhibit 30, a lot of folks in this room 7 understand what it means to be 9(c) milk. 8 But for the purposes of the record, can you 9 explain what it means in column 4 where you refer to 9(c) 10 milk not pooled? 11 A. That's cooperative milk. 12 Q. And 9(c) refers to a particular section of the 13 regulations? 14 A. Oh, yes, it does refer to a particular section of 15 the CFR, but I don't have that handy. But I can get that 16 for you for the record. 17 Q. We can -- we can go from there. 18 A. Yeah. 19 Q. I had a question about footnote 4. It reads, 20 "Total Eligible Milk Not Pooled in the Upper Midwest 21 Order" -- Order 30 -- "and Total 9(c) Milk Not Pooled are 22 mutually exclusive subsets of Total Eligible Milk Not 23 Pooled." 24 And maybe I'm not processing this right, but if 25 they -- if those two are mutually exclusive, if I then 26 added those two mutually exclusive numbers together, 27 should I not have something that is less than the total 28 eligible milk not pooled? 106 1 A. I would think so, yeah. 2 Q. Okay. So then if I'm looking at the second 3 column, and I'm looking -- I just happen to be looking at 4 page 4. So for 2018, 824 million pounds of total eligible 5 milk not pooled, and then the two next columns which are 6 mutually exclusive, you get -- 7 A. Okay. I know what you are asking me. 8 Q. Okay. 9 A. Okay. So there is milk -- so let's say -- let 10 me -- I'm trying and just say this understandably. 11 Okay. So total eligible milk not pooled in the 12 Upper Midwest may or may not include also total 9(c) milk 13 not included -- or not pooled, I mean. 14 So -- but the two columns together do not -- are 15 not some -- you know, all the total eligible milk not 16 pooled is not equal to the eligible milk not pooled in the 17 Upper Midwest and total 9(c) milk added together. So 18 there could be duplication in the columns is what I'm 19 saying. So like, you know, a co-op could be in the Upper 20 Midwest and be reported there and also be reported in the 21 co-op number. 22 Q. Okay. So what do you mean then by they are 23 mutually exclusive subsets of total eligible milk not 24 pooled? 25 A. I meant that, you know, column 1, 2, 3, 4 may or 26 may not be equal to 5 and 6 added together. And really 27 aren't equal to that. 28 Q. Okay. Okay. Thank you. 107 1 A. Uh-huh. 2 Q. Mr. English asked some questions about Exhibit 31 3 and what other uses are, and I -- you went through those, 4 and I appreciate that clarification. 5 You put other uses in quotes. Is that -- that 6 term "other uses," is that something that was kind of 7 defined for the purposes of this table or is that -- -- 8 A. Yes. 9 Q. -- that's not a term that appears in any of the 10 order language or any -- 11 A. No. 12 Q. -- of the definitions, right? 13 A. That's correct. 14 Q. On Exhibit 32, in the footnote, it refers to this 15 data being used in the Announcement of Advanced Prices and 16 Pricing Factors. Just to clarify for the record, the only 17 place where those numbers are used in advanced prices are 18 with relationship to the transportation credit programs in 19 Orders 5 and 7, correct? 20 A. 5, 6, and 7. 21 Q. 5, 6, and 7. Thank you. 22 In Exhibit 33 -- yes, Exhibit 33 -- give you a 23 second to grab that one -- footnote 2, the last line, "if 24 there is no Federal Order number listed, the plant was not 25 regulated that month." 26 Am I correct that that means the plant would not 27 be fully regulated that month, it could have been 28 partially regulated and not listed here; is that correct? 108 1 A. I'll get back to you. 2 Q. Okay. I think because at the top, you know, you 3 have regulated pool distributing plants, that usually a 4 pooled distributing plant and partially regulated 5 distributing plant, as least as I use those terms, they 6 don't overlap. But if you could confirm that, that would 7 be great. 8 The last question I think I have here is on 9 Exhibit 35. And when I looked at the summary of the data 10 request that was made, I don't think it specifically 11 referred to the Central U.S. It was looking for milk 12 prices wherever -- spot prices regardless of where they 13 would be. 14 Is there data for any other region of the country 15 available in addition to the Central U.S. that would be 16 responsive? 17 A. No. 18 Q. Okay. 19 MR. MILTNER: Thank you much. That's all I have. 20 THE COURT: Thank you, Counsel. 21 Any further cross-examination? 22 Yes. 23 MR. HILL: Your Honor, I note that it is about a 24 quarter after 12:00. Might we think about taking a lunch 25 at this time? 26 THE COURT: How much more cross -- does anyone 27 else have cross for this witness? 28 Have you got some cross? How many minutes, 109 1 Gentlemen? 2 MR. SMITH: Five minutes. 3 THE COURT: How about you, sir? 4 DR. CRYAN: Two minutes. 5 THE COURT: Two minutes. Okay. 6 Do you know if you are going to have redirect, 7 Mr. Hill? 8 MR. HILL: Yes, we will, but we can wait after 9 lunch. 10 THE COURT: All right. We'll wait for you, and 11 we'll let these two gentlemen have the witness on cross. 12 MR. SMITH: Thank you, your Honor. 13 THE COURT: You're welcome. 14 MR. SMITH: Daniel Smith for the Maine Dairy 15 Industry Association. 16 CROSS-EXAMINATION 17 BY MR. SMITH: 18 Q. If I could direct you to Exhibit 14, which I hope 19 is the listing of the exhibits. 20 A. Okay. 21 Q. With regard to Exhibit 29, there is an 22 identification that you are unable to provide the organic 23 data because of the confidentiality restrictions. 24 Could you just explain the confidentiality 25 restrictions briefly? 26 A. Yes. So if it is three or less handlers, we will 27 not report it. 28 Q. So the Federal Order 1 reports the organic pool 110 1 volume. So I'm -- what is the difference between the 2 reporting for mailbox prices versus the reporting of the 3 pool volume on the price announcement? 4 A. I think I need -- can you repeat the question or 5 rephrase? 6 Q. Yeah. Let me break it up a little bit. 7 A. Yes. 8 Q. The Federal Order 1 reports the pool volume of 9 organic Class I whole milk, and I think it's nonfat milk 10 in two categories. So it would appear that the 11 confidentiality restrictions don't apply to that reporting 12 because that -- that volume is reported. 13 So why is it -- are you able to report that pool 14 volume for organic milk and not the mailbox prices? 15 What's the difference? 16 MR. HILL: I will -- I will ask for a little break 17 here. I think that she's probably not the person to be 18 asking this. There is another person that we can have 19 answer that question who is more knowledgeable. 20 THE COURT: Okay. We'll get back after the lunch 21 period, and you can come back and ask more questions. 22 MR. SMITH: I don't want to get in the middle of 23 lunch. 24 DR. CRYAN: My name is Roger Cryan. I'm with the 25 American Farm Bureau Federation. Thank you. 26 CROSS-EXAMINATION 27 BY DR. CRYAN: 28 Q. Hello, Mrs. Cashman. It's very nice to see you. 111 1 A. You, too. 2 Q. So a bunch of the data you have submitted -- you 3 have provided, goes -- goes back to -- the DPMRP, goes 4 back to 2012 or 2013. 5 Before that, NASS generated data that was used in 6 the formula; is that correct? 7 A. Yes. 8 DR. CRYAN: I would like to ask just that the 9 published -- the published -- I'm not sure -- I think -- 10 again, I'm not an attorney. I think -- I would like to 11 ask that the published NASS data -- the published NASS 12 reports with dairy products prices products reports from 13 20 -- from 2000 -- from 2000 until they were superseded by 14 the NDPSR be recognized on -- on the record of this 15 hearing. 16 How do I do that? Is that -- is that the right -- 17 is that the right way to do it, to ask that? 18 THE COURT: I'm -- 19 DR. CRYAN: That published reports, I'm asking 20 that they be recognized. 21 MR. HILL: Can you get those reports so we can see 22 what they are? 23 DR. CRYAN: They are available on the internet, on 24 the NASS website. 25 THE WITNESS: Well, I mean, it's on nass.usda.gov. 26 DR. CRYAN: We can talk about it. Yes, I'm happy 27 to talk about it. All I'm asking is that that be 28 recognized. 112 1 Also, one of the things that AFBF requested was -- 2 was some sort of data on unsalted and salted butter, and 3 the indication was it is not available, that breakdown is 4 not available. 5 And I would request of AMS -- AMS collects -- I'm 6 sorry -- AMS grades AA butter that's in high demand for 7 the retail trade. The retail trade asks for it to be 8 graded. It is the one product that is graded in very 9 large volumes. AMS -- AMS grades AA butter, both salted 10 and unsalted. And I'm not asking you to confirm that you 11 will do this, but I'm requesting that you provide -- that 12 AMS provide data on the volume of unsalted butter and 13 salted butter graded AA for the entire year, just the 14 annual number for 2022, and the annual number for 20 -- 15 for 2000 -- if that's available. I understand that -- 16 THE WITNESS: For 2000 and 2022? 17 DR. CRYAN: Right. So just four numbers. That's 18 the request. 19 THE COURT: Sounds like it's in the nature of a 20 data request. Does AMS have any objection with this or -- 21 you can take it over lunch. 22 By the way, I'm not keeping track of all these 23 housekeeping things. If something falls through the 24 cracks, you can blame me, but I can't -- I just -- I'm 25 here by myself. I can't take responsibility. 26 DR. CRYAN: That's it. That's all I have got. 27 THE COURT: Very well. 28 DR. CRYAN: Thank you. Thank you very much. 113 1 THE COURT: Thank you, Counsel. 2 Okay. With that, it's -- that's right, Doctor. 3 Okay. No further cross, I take it? We have a few 4 minutes. 5 All right. So it is 12:20. Let's come back in an 6 hour at 1:20. And this witness will come back on the 7 stand at that time for redirect by AMS. 8 Any other housekeeping we need to take care of 9 before -- 10 MR. HILL: No, your Honor. 11 THE COURT: -- we take lunch? 12 Okay. Thank you, everyone. See you back at 13 1:20 p.m. 14 (Whereupon, a luncheon break was taken.) 15 ---o0o--- 16 17 18 19 20 21 22 23 24 25 26 27 28 114 1 WEDNESDAY, AUGUST 23, 2023 - - AFTERNOON SESSION 2 THE COURT: Let's come to order. Back on the 3 record. Ms. Cashman, I guess, should take the stand. No? 4 MR. HILL: Your Honor, we are proposing to have 5 the next witness come on and then recall Ms. Cashman with 6 that witness to testify dually afterwards. 7 THE COURT: Okay. Is that okay with everybody? 8 So your redirect will take place at some point in 9 the future? 10 MR. HILL: That would be correct. 11 THE COURT: All right. Let's call your next 12 witness, Mr. Hill. 13 BRIAN RIORDON, 14 Being first duly sworn, was examined and 15 testified as follows: 16 THE COURT: Mr. Hill, your witness. 17 MR. HILL: Thank you, your Honor. 18 DIRECT EXAMINATION 19 BY MR. HILL: 20 Q. Can you please again, for the second time, state 21 your name and spell it for the record, please? 22 A. Yes. My name is Brian Riordon, B-R-I-A-N, last 23 name R-I-O-R-D-O-N. 24 Q. And your occupation, please? 25 A. I am the supervisory agricultural economist in the 26 Northeast Federal Milk Market Order. 27 Q. And for how long have you been doing that? 28 A. I've been in that position since 2019, in the last 115 1 four years. 2 Q. So can you describe your duties, please? 3 A. Yes. I supervise the economics and research 4 section in that Northeast Market Order. I supervise the 5 dissemination of statistics, any publications from our 6 office and price announcements, that type of thing. 7 Q. All right. So in preparation for this hearing, 8 did you prepare any documents? 9 A. Yes, I did. 10 Q. And do you have those with you right now? 11 A. Yes, I do. 12 Q. All right. And under your supervision -- were 13 these documents created under your supervision or were you 14 part of preparing them? 15 A. Yes, both. I was -- supervised the preparation, 16 and I also directly worked on the documents. 17 Q. And to your knowledge, were -- did you receive a 18 request for the data that you are presenting? Is that how 19 you came about -- 20 A. Yes, the data I'm presenting were requested by the 21 proponents. 22 Q. So the data presented does not in any way reflect 23 your views, but is simply fulfillment of their request 24 pursuant to the regulations? 25 A. They do not at all. 26 Q. All right. And none of these are offered in favor 27 of or against any of the proposals? 28 A. Excuse me. Repeat the question, please? 116 1 Q. None of these are offered in favor of or against 2 any of the proposals; is that correct? 3 A. No, they -- that is correct, they are not in favor 4 or opposed. 5 Q. Okay. So let's look at the first document. I'm 6 missing a little bit of the title on mine, but it's 7 Exhibit 37 -- there you go. Thank you. 8 It starts the title -- the title starts as 9 Advanced Class III and Class IV Skim Milk Pricing Factors. 10 MR. HILL: I would like to mark that for 11 identification as Exhibit 37. 12 THE COURT: Yes, so marked. 13 (Thereafter, Exhibit Number 37 was marked 14 for identification.) 15 THE WITNESS: Yes. Exhibit 37 -- and those 16 viewing online, that's Table 12 on the website -- that is 17 showing the Advanced Class III and Class IV Skim Milk 18 Pricing Factors, in a dollars per hundredweight, and 19 Comparison of the "Higher-Of" and "Average-Of" Methods of 20 Calculating the Base Skim Milk Price for Class I. 21 The data are shown for January 2000 through 22 current. 23 I'm going to skip to footnote on the title. The 24 footnote in the title the "'Higher-Of' refers to the 25 method determining the base skim milk price for Class I by 26 setting it equal to the higher of the Advanced Class III 27 and Class IV skim milk price factors implemented in 28 January 2000 and used through April 2019. 'Average-Of' 117 1 refers to the method used under current regulation to 2 calculate the average of the Advanced Class III and 3 Class IV skim milk pricing factors and adds $0.74 to 4 determine the base skim milk price for Class I." 5 Now I will explain the columns in the table. 6 So the first two columns, year and month. 7 Column 3 is the Advanced Class III skim milk pricing 8 factor. The next column over, column 4, is the Advanced 9 Class IV skim milk pricing factor. Class 5 -- I'm sorry 10 -- column 5, not class five -- column 5 is the base skim 11 milk price for Class I using higher-of method. And the 12 next column over, column 6 is the base skim milk price for 13 Class I using the average-of method. 14 The next column over, column 7, is the average 15 Advanced Class III and Class IV skim milk pricing factors. 16 And that's essentially adding columns 3 and 4 together. 17 The next column over, column 8, is the higher-of method 18 less the average-of method. That would represent 19 columns 5 minus column 6. 20 BY MR. HILL: 21 Q. Can you go back -- can you go back one second -- 22 A. Yes, go ahead. 23 Q. -- to the averaged -- the average Advanced 24 Class III and Class IV skim milk pricing factors. I see 25 there's a footnote there. 26 Could you explain that footnote for us? 27 A. Yes, certainly. 28 So the footnote on that column is "the average-of 118 1 the Advanced Class III and IV skim milk pricing factors 2 calculated in this column does not include the $0.74 3 adjuster added under current regulations to compute the 4 base Class I skim milk price," meaning it is just the 5 average of the two factors. Yes, thank you. 6 And the next column, which is the second to the 7 last column, so column 8, higher-of method less average-of 8 method. 9 There's also a footnote there, footnote 3. I'll 10 read that for you. All right. The footnote states, "This 11 calculation depicts the difference between the 'Higher-Of' 12 method implemented in January of 2000 and used through 13 April 2019 and the 'Average-Of' method used under current 14 regulation including the $0.74 adjuster." 15 The final column is showing the higher-of method 16 less the average Advanced Class III and Class IV skim milk 17 pricing factors. 18 So there's another footnote. I'll read that 19 footnote that explains that column. "This calculation 20 depicts the difference between the 'Higher-Of' method 21 implemented in January 2000 and used through April 2019 22 and the average of the Advanced Class III and IV skim milk 23 pricing factors without the $0.74 adjuster used under 24 current regulation." 25 BY MR. HILL: 26 Q. And so that just continues from 2000 to the 27 present, basically? 28 A. That's correct. 2000 through August of 2023 is 119 1 presented on the table. 2 Q. Okay. Thank you. 3 Let's move forward to the next exhibit. I'd like 4 to have -- it's Difference Between the Federal Order 5 Statistical Uniform Milk Price. 6 MR. HILL: And I would like to mark for -- that 7 for identification as Exhibit 38. 8 THE COURT: So marked. 9 (Thereafter, Exhibit Number 38 was marked 10 for identification.) 11 THE WITNESS: Exhibit 38 -- and for the online 12 viewing audience, that's Table 13 on your website -- this 13 is showing the Difference Between the Federal Order 14 Statistical Uniform Milk Price and the Announced Class IV 15 Price Multiplied by the Class IV Utilization, by Order and 16 Month. The time period is shown for January 2010 through 17 April 2023. 18 So I can explain again. Here we have those 19 values. We have the year and month for all the months 20 reported in the title, January 2010 through April '23. 21 And we do have orders spread across left to right and a 22 total at the far right column. 23 The Order 51 column that at the top is blank, 24 that's due, obviously, to the non-existence at the earlier 25 period of the California Order, Order 51, until November 26 2018 when we should see those values in the table. 27 Q. Thank you very much. 28 So let's move ahead to the -- to the one entitled 120 1 Adjustments to Federal Order Performance Standards. 2 MR. HILL: And I would like to mark that for 3 evidence as Exhibit Number 39. 4 THE COURT: So marked. 5 (Thereafter, Exhibit Number 39 was marked 6 for identification.) 7 BY MR. HILL: 8 Q. You may proceed. 9 A. Exhibit 39 is Table 31 on the website. The table 10 covers Adjustments to Federal Order Performance Standards, 11 and specifically the shipping requirements and diversion 12 limits on these orders from 2010 through the current 13 period. 14 The table on the left-hand column identifies the 15 order by number, and then the next column over are the 16 pool months that an adjustment was granted, basically 17 either of the two adjustments. And it -- it -- it 18 identifies -- it gives a little detail about the period of 19 time that that was granted. 20 The next two columns are showing the reduction in 21 shipping standards. And we have got the -- the "from" 22 column is presenting what the orders originally stated 23 percentage should be, and the "to" column is showing what 24 was granted, the adjustment level. 25 The final two columns are showing the increase in 26 diversion limits, and the same "from" and "to" definition 27 from what's originally stated in the order language and 28 that may have been to. 121 1 Q. Thank you very much. 2 A. There's a note on the bottom, as was asked also, 3 but "no order received any call for or had any issuance of 4 milk to be shipped to Class I plants in their order." 5 That's not a footnote. That is just a note related to 6 what the requester had also asked. 7 Q. Thank you. 8 A. You're welcome. 9 Q. So let's move to head to the next document, 10 Requests to Change Performance Requirements by Order. 11 MR. HILL: I would like to mark that for 12 identification as Exhibit Number 40. 13 THE COURT: So marked. 14 (Thereafter, Exhibit Number 40 was marked 15 for identification.) 16 THE WITNESS: Okay. So Exhibit 40, this exhibit, 17 I don't have a table number on the website. So I'll 18 describe. It's titled Requests to Change Performance 19 Requirements by Order, from 2010 through the current 20 period. This table is similar to the immediately -- 21 immediate prior exhibit, Exhibit 39. This exhibit does 22 also include some requested performance requirement 23 adjustments that may have been denied. 24 The table is going to show on the left-hand column 25 the different orders by their order number. And then the 26 next column over, the only other column, is just policies 27 and decisions, as they are called here. 28 So as example in Order 1, in the very first -- 122 1 well, second row, but Order 1 had -- we stated "numerous 2 instances occurred during the time period requested. All 3 request, approvals, and denials can be found at," and then 4 we presented the website there for folks to go to for the 5 record. 6 This table does acknowledge there are some -- 7 there are some of these policies and decisions that may 8 not be found on a website, and they are included in the 9 exhibit following as attachments to be viewed. 10 Q. All right. So let's move ahead to the next 11 document, Cooperative and Nonmember Producer Count. 12 MR. HILL: I would like to mark that for 13 identification as Exhibit Number 41. 14 THE COURT: So marked. 15 (Thereafter, Exhibit Number 41 was marked 16 for identification.) 17 THE WITNESS: Exhibit 41 does have a table number 18 on our website, and it is Table 20. This table is 19 covering -- titled the Cooperative and Nonmember Producer 20 Count and Producer Milk Volume for December 2015 through 21 December 2022, and includes April 2023. 22 The column -- the columns would be left to right. 23 The first two columns, again, are year and month. You 24 will notice that it is year and each month December. And 25 then the very last at the very bottom you will find 2023, 26 and then the April is the month that we did for that, this 27 year. 28 The third column, you will see the categories for 123 1 each year, where we categorized cooperative, 2 non-cooperative, total, and then presented our -- the 3 associated or related cooperative share and 4 non-cooperative share. That's basically taking the 5 cooperative and non-cooperative figures under pounds and 6 producers that we'll get to a minute and displaying those 7 as share, so dividing the -- those numbers by the total. 8 So the next column -- so the next column over, you 9 will see -- so under Federal Order 1 there's two columns, 10 and it is the same style for each of the Federal Orders 11 you will see across the top of the table. Federal Order 1 12 presents pounds and producers and the related shares for 13 those. And then we go across -- so this is a table that's 14 spread across a little bit wide, left to right. So 15 there's a second page. 16 So the first page, we get over there to Federal 17 Order 32, and the second page starts with Federal 18 Order 33, and moving from left to right, you know, going 19 Federal Order 51, 124, and so forth. And we have a final 20 column for all Federal Orders where we total the pounds. 21 Federal Order 51, I'll start with that, Federal 22 Order 51, obviously, is not shown for Decembers 2015 23 through '17 as that order did not exist during that 24 period. It -- we will pick that up in 2018 where that 25 order began. 26 There is a footnote for restricted data. And you 27 will see restricted data anywhere there's a letter -- 28 capital letter R. 124 1 And then lastly, let's see, we got -- "all Federal 2 Orders calculations do not include restricted data in 3 totals or shares." So that would be a footnote on the 4 final all Federal Orders column. Again, that was that 5 "all Federal Orders calculations do not include restricted 6 data in the totals or shares." 7 Q. Let's move ahead one more to one titled -- 8 beginning Number of Nonmember Producers and Volume 9 Shipped. 10 MR. HILL: I would like to mark that for 11 identification as Exhibit Number 42. 12 (Thereafter, Exhibit Number 42 was marked 13 for identification.) 14 THE WITNESS: Exhibit 42 is labeled as Table 21 on 15 the website. This table is showing -- is titled Number of 16 Nonmember Producers and Volume Shipped to Pool 17 Distributing and Pool Supply Plants. The period of time 18 covered is December 2017 through 2022 and the month of 19 April 2023. 20 The first two columns of this table are also year 21 and month. This table also shows the month of December 22 for each of the years. In column 3, we break out the 23 plant type and total. So you'd see, distributing plants, 24 pool supply plants, and total for each year. And the 25 final two columns are the sum of all Federal Orders, and 26 we show the pounds in the second to last sub column and 27 then producers in the final column. 28 Q. Thank you. 125 1 So on to your final exhibit I believe. 2 A. Yes. 3 Q. I would like to -- it's titled Protein Test Range 4 by Order, 2022. 5 MR. HILL: And I would like to mark that for 6 identification as Exhibit Number 43. 7 THE COURT: So identified. 8 (Thereafter, Exhibit Number 43 was marked 9 for identification.) 10 THE WITNESS: So Exhibit 43 will be shown on the 11 website as charts 1, 2, and 3 on the website. There are 12 three charts that make up this exhibit. I'll explain the 13 first chart, and then we'll -- the other two charts are 14 similar, but we'll get into those. 15 So this chart is titled Protein Test Range by 16 Order for 2022, the year 2022. The footnote on range is 17 simply stating the range here is the difference between 18 the maximum and the minimum of protein tests. 19 So, Protein in Skim Utilized in Class I For 20 Distributing Plants With 10 Million Pounds Or More of 21 Total Class I Use for Multiple Component Orders. So this 22 title is also reflecting that the request was for multiple 23 component orders, and that's what's shown here. 24 The order -- I guess the vertical column is the 25 degree of range over the months on the bottom, and then 26 the Federal Order by number is shown at the very -- just 27 underneath the chart. 28 We move on to the second chart. It's exactly the 126 1 same structure of exhibit. This is for other solids. 2 This is the Other Solids Test Range by Order, again, for 3 the year 2022. And it is also the Other Solids in the 4 Skim Utilized in Class I for Distributing Plants With 5 10 Million Pounds Or More of Total Class I Use for 6 Multiple Component Orders. Similar footnote on the range, 7 similar setup. 8 The third chart, final chart of the exhibit, 9 presents Nonfat Solids Test Range by Order, again, for the 10 year 2022. And the title continues with Nonfat Solids in 11 Skim Utilized in Class I for Distributing Plants with 12 10 Million Pounds Or More of Total Class I Use for 13 Multiple Component Orders. 14 MR. HILL: I think that concludes our direct, your 15 Honor. 16 THE COURT: I had a -- one question. I had a note 17 to myself that the regs required that witnesses provide an 18 address for themselves in my opening remarks, no personal 19 addresses, please, if that's all you've got. But I take 20 it for both your witnesses it is just AMS at United States 21 Department of Agriculture, Independence Avenue or -- 22 THE WITNESS: I would really like to handle this. 23 THE COURT: Go ahead. Yeah, please. 24 THE WITNESS: I work at the office 302A Washington 25 Avenue Extension in Albany, New York, 12203. 26 THE COURT: That would not be the headquarters. 27 How about Ms. Cashman, just while I'm thinking 28 about this? 127 1 MR. HILL: She'll be back, so if she wants to give 2 that. Yeah, she's at headquarters but... 3 THE COURT: Okay. That's not that important. I'm 4 not sure why the regs require that, but I'm persnickety. 5 Okay. So that completes direct examination. 6 Any cross for this witness? 7 Yes, Mr. English, your witness. 8 CROSS-EXAMINATION 9 BY MR. ENGLISH: 10 Q. Chip English, Milk Innovation Group. Good 11 afternoon, sir. 12 A. Good afternoon to you, sir. 13 Q. So I'm going to focus on Exhibit 43, and I may or 14 may not quickly get myself back to where I was this 15 morning. 16 What is the source of the data for Exhibit 43? 17 A. The source of these data, these -- this is pool 18 data, I believe. Yeah. 19 Q. I understand that. 20 But are there any tables in the record -- 21 A. Oh. 22 Q. -- or exhibits in the record, or tables that may 23 be in the record tomorrow, from which this data was -- can 24 be found as opposed to just looking at this chart? 25 A. There is nothing additional in the record. 26 Q. So when you say protein and skim utilized in 27 Class I for distributing plants -- 28 A. Uh-huh. 128 1 Q. -- I would like to know what the underlying data 2 is and see if it can be provided, assuming it is not 3 Table 1. 4 A. I'm not sure I understand specifically what you 5 are asking for. 6 Q. Okay. So in order to do a range, you had to know 7 the actual number for each month, correct? 8 A. Correct. 9 Q. And I'm asking what -- where is that actual data? 10 And I'm not questioning, you know, the fact the charts are 11 accurate. But I am wondering whether the chart is derived 12 using the same data that is in Table 1 that is not yet an 13 exhibit, but I believe it will be Exhibits 44, etcetera. 14 A. No, I don't believe that the data are -- what is 15 coming from Table 1. Now, these -- these were data that 16 were requested separately -- 17 Q. Well, I understand it's -- but it'd have to come 18 from somewhere, right, sir? 19 A. Yes. 20 Q. Okay. 21 A. Yes. 22 Q. So -- 23 A. This is a -- sorry. This is separate request -- 24 Q. I understand it is a separate request. 25 A. -- for all information. And it represents -- so 26 it represents the highest maximum of the plants that 27 qualified under this -- at how it defined, and the lowest 28 minimum, and that provided us the range. There is that -- 129 1 that number does exist, obviously, to create the chart. 2 MR. ENGLISH: Okay. I think -- so I'm requesting, 3 having not known this request -- you know, this chart was 4 going to be in there necessarily, what the request was, 5 I'm requesting the underlying data for this. 6 THE COURT: Okay. What say you, AMS? 7 MS. TAYLOR: We'll look into it. We -- 8 THE COURT: Yeah. 9 MS. TAYLOR: We have to look and see what might be 10 confidential or not to release, but we can certainly look 11 into it. 12 THE COURT: Okay. Very well. 13 BY MR. ENGLISH: 14 Q. So let me -- I'm getting ahead of myself 15 because -- okay, I get it, Table 1 is all milk and not 16 just plants with 10 million pounds or more because, 17 obviously, there are smaller plants in the Table 1. 18 USDA knows the total test of milk received at a 19 plant defined in this Class I plant, correct? 20 A. Correct. 21 Q. But it assumes that the usage of the components by 22 class will track by percentage, that is to say you are not 23 actually following how a plant might use components in the 24 plant, correct? 25 A. I'm -- I'm not exactly confident on that answer to 26 say that's correct, sir. 27 Q. Okay. Okay. All right. 28 MR. ENGLISH: I -- I would like to see if we can 130 1 look into whether that data is available. I mean, I get 2 it, if there's an order where there's fewer than three 3 separately owned facilities of 10 million pounds, it might 4 affect what we get, but I would like to get the data if 5 possible. 6 MS. TAYLOR: Can I clarify the request? 7 THE COURT: Yes. 8 MS. TAYLOR: I just want to clarify. 9 THE COURT: Ms. Taylor, you may clarify. I have 10 not enforced talking through me, and I don't think it's 11 been necessary at all. But, yeah, please go ahead. And 12 I'm -- and I'm not fully -- doesn't matter whether I fully 13 understand the situation or not. 14 MS. TAYLOR: It doesn't matter if I know either 15 because I'm not the one who pulls the data, but for the 16 people in the back who will have to work on this. 17 First, you are asking for the min and the max, 18 basically, that gave us the range. That's my first 19 question was I think you have asked for that? 20 MR. ENGLISH: Give me one second. 21 MS. TAYLOR: That's fair. 22 MR. ENGLISH: Since the chart shows a range, it 23 does seem to me that the data I'm asking for would be the 24 minimum and the maximum. 25 MS. TAYLOR: Okay. 26 MR. ENGLISH: I believe that is correct. 27 MS. TAYLOR: Okay. 28 And the second request I think is you wanted to 131 1 know if we can release -- and maybe it's just for this 2 chart of Class I plants with 10 million or more pounds or 3 maybe it is for every class, how the components are used 4 in the plant? 5 MR. ENGLISH: Well, this gets back to Table 1. 6 We're -- we're -- we're back at Table 1 in no time. 7 MS. TAYLOR: Yes. And that one is to be put on 8 tomorrow. 9 MR. ENGLISH: So it may be that we have to revisit 10 this issue once I get answers to Table 1. 11 MS. TAYLOR: Okay. So how about you hold off on 12 that second piece, but we can look into the first piece -- 13 MR. ENGLISH: Thank you. 14 MS. TAYLOR: -- if that makes sense. 15 MR. ENGLISH: And that is all the questions I have 16 of this witness. 17 THE COURT: Thank you, Counsel. 18 Any additional cross-examination? 19 A couple of volunteers here? Yes. 20 MR. VETNE: John Vetne for National All-Jersey. 21 THE COURT: Your witness, Mr. Vetne. 22 CROSS-EXAMINATION 23 BY MR. VETNE: 24 Q. Going back to this exhibit that Chip asked you 25 about the range. As I understand it -- let's see if you 26 understand the same thing -- at a high number and a low 27 number for plants, not -- this is not individual 28 producers, this is a measure of milk used at plants. 132 1 A. That is correct. 2 Q. Okay. And I understand what he's looking for is 3 the high number and the low number, not just a line that 4 chose shows the range. 5 A. That's correct. 6 Q. All right. Okay. So we both understand what he's 7 looking for. 8 A. Uh-huh. 9 Q. For distributing plants that both receive milk and 10 divert milk, there are plants that do that, correct? 11 A. Yes. 12 Q. And diverted milk, so that there's no confusion 13 from those listening, means the plant operator makes 14 arrangement for a producer that normally supplies the 15 plant to have that producer not send the milk to the 16 distributing plant, but rather to send it some place else, 17 to a manufacturing plant, for example. 18 Is that your understanding of diverted milk? 19 A. Yes. 20 Q. Okay. So again, looking at the exhibit and the 21 range, do you know if what was measured in the range is 22 the composition of milk used in Class I versus the 23 composition of producer milk reported by the plant in all 24 uses, including diversions? 25 A. Used in Class I. 26 Q. Used in Class I. 27 So if during a month a distributing plant with 28 milk going to diversion found it advantageous to send high 133 1 composition milk to a diverted plant, would you expect the 2 composition of what is retained for Class I to go down? 3 A. I wouldn't be able to state what I would expect to 4 happen. 5 Q. Okay. Would you agree that there are economic 6 circumstances from month to month which make it 7 advantageous for a plant with milk available for diversion 8 to divert either its high composition milk or its low 9 composition milk? 10 MR. HILL: Objection, your Honor. This witness is 11 here to present data. He's not here to give opinions on 12 how this works. 13 THE COURT: Counsel? 14 MR. VETNE: I'm exploring if this witness has 15 knowledge of what may account for the range variation and 16 the sharp increases or decreases. And if the witness 17 doesn't know, he can let me know. 18 THE COURT: What do you think about that, 19 Mr. Hill? It doesn't sound like an opinion to me. 20 MR. HILL: Yeah, that's what it is. It's -- I 21 don't think he should be testifying to this. He's here to 22 present data. He came here for a data request. He's 23 supplying that data. And anything besides that is outside 24 the realm of his testimony. 25 THE COURT: Well, I'm not sure. Let's hear from 26 the witness. 27 I think the question is, you've worked with 28 certain data. Do you know the limitations? Or the -- 134 1 what that -- that seems like a legit question to me, 2 Counsel. But if the witness knows. If the witness 3 doesn't know, the witness can say so. 4 THE WITNESS: Yeah, I would agree with counsel 5 that, you know, I see the data that I reported here. I 6 wouldn't want to, you know, get into what may be the 7 decisions at the plant or, you know, why they chose milk 8 to go one way or the other. My -- my objective here is 9 just to put on and present the data that was asked for, 10 sir. 11 MR. VETNE: All right. 12 THE COURT: Does that work, Counsel? 13 MR. VETNE: Don't need to go any further. Thank 14 you. 15 THE COURT: Oh, thank you. Are you through? 16 Do we have one more cross? 17 There we go. You again, Mr. English, very well. 18 MR. ENGLISH: Chip English. Well, it is direct 19 follow-up. I'm not bringing new stuff. 20 THE COURT: That's okay. 21 (CONTINUED) CROSS-EXAMINATION 22 BY MR. ENGLISH: 23 Q. Exhibit 43 -- so I'm -- I'm following up on 24 Mr. Vetne, whom I should call John, but for the record 25 I'll call Mr. Vetne. 26 For the data that's here, does it include all milk 27 whether it's used as Class I, II, III, or IV, for this 28 reporting handler? 135 1 A. This report is showing -- this is -- it is giving 2 you -- it is just skim utilized in that Class I plant. 3 Q. Skim milk used -- utilized in that plant 4 regardless of whether it's been used -- 5 A. Yes. 6 Q. -- as something other than Class I, correct? 7 A. That's my understanding. 8 Q. Okay. And going to Mr. Vetne's questions, if milk 9 were diverted, it wasn't used in that plant, so you are 10 saying it would not be included here? 11 A. That is correct. 12 Q. Thank you. 13 THE COURT: I hesitate to weigh in here, but do we 14 know -- I'll ask the witness first, but do we know whether 15 any milk is diverted, in fact? This is an awfully naive 16 question, I'm sure. 17 THE WITNESS: I wouldn't know that now without -- 18 no. 19 THE COURT: Okay. 20 Do you know that, Mr. English? You don't have to 21 answer that. I know you are not a witness. 22 MR. ENGLISH: I -- I -- 23 THE COURT: I'm guessing you think there is some. 24 MR. ENGLISH: I have an opinion, but I am not a 25 witness, and I will not be on the witness stand, I assure 26 you. 27 THE COURT: Fair enough. 28 Yes, Counsel? 136 1 MR. SMITH: Is Mr. Riordon available to respond to 2 my questions or did you have another plan for that? 3 MS. TAYLOR: Yes, he is going to respond to your 4 questions. 5 THE COURT: Yes. 6 MR. SMITH: Dan Smith for Maine Dairy Industry 7 Association. 8 CROSS-EXAMINATION 9 BY MR. SMITH: 10 Q. Mr. Riordon, do you recall the questions I asked 11 earlier this morning or should I go through them again? 12 A. I recall the last question you did have. Yes, 13 Mr. Smith. I can answer that. 14 Q. Okay. Do you want to repeat the question and 15 then -- 16 A. I believe you were looking -- well, maybe you just 17 repeat it to make sure I'm answering the question that you 18 think I remember. 19 Q. Briefly to recount, the press announcement for 20 Order 1 reports organic milk pooled, the volume of milk 21 pooled on the order, and the exhibit for mailbox prices 22 indicates there is a confidentiality issue? 23 The question is, what's the distinction between 24 the pool volume and the mailbox price -- 25 A. Okay. 26 Q. -- reported? 27 A. Yes, I can address that for you, Mr. Smith. 28 The data I believe you are referring to that is 137 1 reported is off the monthly statistical report of the 2 Northeast Order, not a price announcement that. 3 Q. Fair enough. 4 A. That data -- that data is showing route sales, so 5 that does include Class milk, and it's one source of data 6 that is different than the source of data that feed into 7 the monthly mailbox price data we have. That data are -- 8 that's pool milk, and when we -- that pool milk we do not 9 have -- where we do capture the characterization of the 10 route sales as organic, we do not do that with the 11 producer milk. That basically feeds to the mailbox price 12 data. They're two different data sources basically. 13 Q. Okay. I get it. Thanks. 14 A. You're welcome. 15 THE COURT: Does that complete your cross, 16 Mr. Smith? 17 MR. SMITH: Yes. 18 THE COURT: Yes. 19 MR. MILTNER: Ryan Miltner representing Select 20 Milk Producers. 21 CROSS-EXAMINATION 22 BY MR. MILTNER: 23 Q. Mr. Riordon, I just have a few here just to 24 clarify what I think I understand. 25 On Exhibit 41, it expressly states that this is 26 producer milk volume, so it does -- this exhibit does 27 exclude all milk that would have been depooled. It is 28 only that if it's classified as producer milk within the 138 1 respective orders? 2 A. Yes -- yes, that is correct, they should be all 3 just pooled milk. 4 Q. Great. 5 On Exhibit 42 -- actually you will need Exhibit 41 6 to look at this kind of in tandem. 7 A. Uh-huh. 8 Q. So I'm looking on page 2 of Exhibit 41 and the 9 column for all Federal Orders, and I'm looking at 10 December 2017. And on Exhibit 42 I'm looking at the row 11 that includes December of 2017. 12 So on Exhibit 41, for all Federal Orders, 3,701 13 non-cooperative producers. And for the same month on 14 Exhibit 42, I have 3,346 nonmember producers. 15 What would account for that difference of 355 16 producers? 17 A. I'm sorry, I'm looking for -- what's the -- let's 18 see, December -- on the Exhibit 41, you are looking at 19 which -- 20 Q. December of 2017, it's non -- the row is 21 non-cooperative all Federal Order producers, yeah, the 22 3,701. 23 A. Okay. 24 Q. And maybe rather than focusing on the numbers, 25 maybe the question should be: Are these two exhibits 26 trying to convey the same information as far as the number 27 of producers that are encompassed there? 28 A. I would say the Exhibit 42 is -- looks like it is 139 1 the total of distributing plants and -- you know, 2 associated with -- producers associated with distributing 3 plants and pool supply plants. 4 Other than that I would have to -- I'd have to 5 look further into it to see if there's a better reason for 6 that. 7 Q. Just a follow-up question. 8 A. Yes. 9 Q. If you were a non-cooperative producer on the 10 order, and you are not shipping your milk to a pool 11 distributing plant or a pool supply plant, where else 12 might your milk end up? 13 A. Yeah. I'd have to look at the -- 14 Q. Okay. 15 A. -- total statistic and make sure these all add up 16 correctly. 17 Q. And then we don't need to go through the same 18 questions, but I note that if we look at the volume as 19 well for the same months, non-cooperative share -- I'm 20 sorry -- the non-cooperative volume in December 2017 on 21 Exhibit 41 is -- let's just call it 1,076,000,000 pounds, 22 and for the same month on Exhibit 42 it is 1,037,000,000 23 pounds, so the same -- the same variance. If you are able 24 to provide any more on that discrepancy, that would be 25 great. 26 THE COURT: Is AMS all right with getting back to 27 counsel on this point? 28 MS. TAYLOR: Yes. 140 1 THE COURT: Very well, thanks. 2 MS. TAYLOR: I'm not sure I got all the points I 3 need to get back to you on. 4 MR. MILTNER: I can help you with that. 5 MS. TAYLOR: Yeah. We'll get to it. 6 BY MR. MILTNER: 7 Q. Exhibit 43, and all I'm trying to clarify -- 8 again, I think I know the answer to this, but I want to 9 make sure that I do. 10 Your Y axis, the units there, those are just 11 points on the protein count, right? So 3.10 to 3-point, 12 you know, 25, would be 15 on there, right, .15? 13 A. That is correct. 14 Q. Okay. 15 MR. MILTNER: Thank you. I don't have anything 16 else. 17 THE COURT: Any more cross? 18 Okay. The witness is yours, Mr. Hill, for 19 redirect examination. 20 MR. HILL: One second, your Honor. 21 THE COURT: Yes. 22 MS. TAYLOR: Let's see if we can clarify one of 23 the things, I think, between 41 and 42 in the 24 discrepancies that Mr. Miltner just pointed out. 25 The title to 42 is Number of Nonmember Producers 26 and Volume Shipped to Pool Distributing Plants and Pool 27 Supply Plants. 28 THE WITNESS: Correct. 141 1 MS. TAYLOR: So would that include nonmembers that 2 milk was diverted to a non-pool plant? 3 THE WITNESS: No. 4 MS. TAYLOR: So on Exhibit 41, the title is 5 Cooperative and Nonmember Producer Count and Producer Milk 6 Volume, that does not specify what type of plant it went 7 to? 8 THE WITNESS: Correct. 9 MS. TAYLOR: So that would include nonmembers that 10 were shipped or diverted? 11 THE WITNESS: Correct. 12 MS. TAYLOR: Okay. So that would account for why 13 the numbers would be different? 14 THE WITNESS: Yes, that would. 15 MS. TAYLOR: Okay. If I remember, we were going 16 to put Ms. Cashman up with Mr. Riordon to do cross 17 together if anybody needed to ask additional questions. 18 And I know there were some clarifications that Ms. Cashman 19 wanted to put on the record as well. 20 THE COURT: Very well. I'll recall Ms. Cashman to 21 the stand to join Mr. Riordon. It looks like we need 22 another chair. 23 Off the record for a second. 24 (Off-the-record.) 25 THE COURT: Back on the record. 26 Ms. Cashman, welcome back. I remind you that you 27 are still under oath. 28 MS. CASHMAN: Do you need my address? 142 1 THE COURT: Sure. 2 MS. CASHMAN: 1400 Independence Avenue Southwest, 3 Room 2535 -- we just moved -- Washington D.C., 20250. 4 THE COURT: Thank you. 5 MS. CASHMAN: Okay. 6 THE COURT: Okay. So how are we doing this? This 7 is -- we're going to have redirect basically for these two 8 witnesses to draw out things we have agreed? 9 MR. HILL: That's the plan, your Honor. 10 MS. TAYLOR: Yes, your Honor, for things we can 11 answer today. 12 THE COURT: That's a good plan. 13 MS. TAYLOR: Okay. Thank you for your indulgence. 14 THE COURT: Of course. 15 LORIE CASHMAN, 16 Having been previously sworn, was reexamined 17 and testified as follows: 18 REDIRECT EXAMINATION 19 BY MS. TAYLOR: 20 Q. Okay. I wanted to start with Mr. Miltner I think 21 had questions on Exhibit -- well, I didn't write it 22 down -- the energy price exhibit, the diesel prices. Let 23 me see if I have -- I don't know which one that was. 24 A. 32. 25 Q. Thank you. Those diesel prices are used in which 26 orders? 27 A. 5 and 7. I misspoke earlier. 28 Q. And they are not used in Order 6? 143 1 A. They are not used in Order 6. 2 Q. Okay. Then on Exhibit 33, which was the listing 3 of regulated distributing plants, there was a question I 4 believe on whether that included partially regulated 5 plants. 6 A. It does not include partially regulated plants. 7 Q. Just fully regulated plants? 8 A. Yes. 9 Q. Okay. There was another question on Exhibit 50, 10 which was your other uses -- 11 A. Yes. 12 Q. -- table. And I don't know if you got a chance to 13 look up, but I think there was some discussion on is that 14 definition in the regulations. 15 Did you look up where it was in the regulations? 16 A. Yes, I did. It is CFR -- 7 CFR, Part 1000.40(e) 17 states: "Other uses. Other uses include skim milk and 18 butterfat used in any product described in this section 19 that is dumped, used for animal feed, destroyed, or lost 20 by a handler in a vehicular accident, flood, fire, or 21 similar occurrence beyond the handler's control. Such 22 uses of skim milk and butterfat shall be assigned to the 23 lowest priced class for the month to the extent that the 24 quantities destroyed or lost can be verified from records 25 satisfactory to the Market Administrator." 26 Q. Thank you. 27 Then there was another question, we'll skip to 28 Exhibit 29, your mailbox price series. I think 144 1 Mr. Miltner asked about Idaho specifically, and that 2 starts on page 10. 3 A. Yes. So Idaho was discontinued in 2004 when the 4 Western Order was terminated. 5 Q. That's why there's no data after that -- 6 A. Correct. 7 Q. -- date? 8 But before then it was in a Federal Order? 9 A. Yes. 10 Q. And I think on that same exhibit, there was the 11 other question of Mr. English had on dealing with the 12 background information on components that make up the 13 mailbox price. 14 And so do you have an answer to that line of 15 questioning? 16 A. Yes. There is no background included. 17 Q. So we don't publish any? 18 A. We don't publish any background information 19 related to that. 20 Q. Okay. That's all the notes I had. I know there's 21 a couple outstanding data requests that we're going to 22 look into, so we'll have answers to those -- 23 A. I had a couple other ones. 24 Q. -- later. 25 Ms. Cashman, please. 26 A. So one of the questions was what is a 9(c) 27 plant -- or what does 9(c) mean. It is from 7 CFR 28 1000.9(c), hence the 9(c). And that's "any cooperative 145 1 association with respect to milk that it receives for its 2 account from the farm of a producer and delivers to pool 3 plants or diverts to non-pool plants pursuant to .13 4 section of the order. The operator of a pool plant 5 receiving milk from a cooperative association may be the 6 handler for such milk if both parties notify the market 7 administrator of this agreement prior to the time that the 8 milk is delivered to the pool plant and the plant operator 9 purchases the milk on the basis of form bulk tank weights 10 and samples." 11 Q. Thank you. 12 Do you have any other items? 13 A. One of the questions from Mr. English was on the 14 auditing of the mailbox. The mailbox is verified as part 15 of pooled milk, but we don't audit the premiums, 16 deductions, all those other, etcetera, things. It's -- 17 it's basically as reported from the data pulled from the 18 handlers' producer payroll as was requested by the 19 industry many years ago. 20 And then one other difference that may be leading 21 to the difference between the Exhibits 41 and 42 is that 22 Exhibit 41 does not include restricted data and Exhibit 42 23 includes all data. 24 MR. HILL: I think we're done with our questions 25 for now. If anyone else has cross-examination, I think 26 we'll leave them available for that now. 27 THE COURT: Okay. Any cross or re-cross? For 28 either witness? Okay. 146 1 I guess that's it for these witnesses. It sounds 2 like we have a couple of things AMS is committed to 3 provide, and we'll figure out how to -- 4 MR. HILL: Thank you very much. 5 THE COURT: -- address that. 6 You're very welcome. 7 You may -- Mr. Riordon, Ms. Cashman, you may step 8 down. Thank you. 9 Okay. It is 2:15. It's a little early for even a 10 break. What are we doing next? 11 MR. HILL: Sir, we do have one more witness. 12 THE COURT: Okay. 13 MR. HILL: That witness is not available until 14 tomorrow morning. 15 THE COURT: Okay. 16 MR. HILL: Yeah, he will put the rest of the data 17 on. I think we have like 13 more exhibits through him. 18 THE COURT: Okay. Well, I guess, we have got some 19 things still outstanding, but this is witness by witness, 20 I guess. I mean, is it appropriate to move into evidence 21 the -- well, I don't know, you tell me, that 14 through 36 22 for Ms. Cashman? Is it not -- we're not quite ready for 23 that, or we are? 24 MR. HILL: I think we'll hold off until we get the 25 last witness in and finish up. 26 THE COURT: Okay. And same thing for Mr. 27 Riordon -- 28 MR. HILL: Yes. 147 1 THE COURT: -- 37 through 43? 2 MR. HILL: Yes, that would be correct. 3 THE COURT: Okay. Is there anything else we can 4 do to make use of this time? I'm impressed. I didn't 5 know -- we're not going to make September 30th. 6 MR. HILL: We are going to try. But if National 7 Milk is ready -- 8 THE COURT: I don't mean we won't finish by 9 September 30. I mean we won't be done -- I guess the 10 next -- are you suggesting we put a National Milk witness 11 on? 12 MR. HILL: If they're ready. 13 THE COURT: What do you think, National Milk? 14 MS. HANCOCK: Nicole Hancock with National Milk. 15 Your Honor, if we could just take our break now, and I 16 think we could be ready when we come back from the break. 17 THE COURT: Okay. Do you need more than ten 18 minutes? 19 MS. HANCOCK: No. 20 THE COURT: Okay. It is 2:17. I don't know. 21 Let's just come back at 2:30. 22 MS. HANCOCK: Thank you, your Honor. 23 MR. HILL: Thank you. 24 THE COURT: Off the record. 25 (Whereupon, a break was taken.) 26 THE COURT: Let's come to order. Back on the 27 record. 28 We just completed our afternoon break. If the 148 1 hearing reporter needs another one as we go on, we took 2 that one kind of early. 3 So as I understand it, we're following -- we have 4 completed the AMS witnesses for the time being. We'll 5 have another witness tomorrow. But in the meantime, we're 6 going to start down the order of presentation set out on 7 the web page by proposals. 8 Our first topic, as I understand it, is milk 9 composition, and National Milk Producers Federation I 10 think had two proposals with respect to this. We'll take 11 up their first witness. 12 Ms. Hancock, counsel for NMPF, the floor is yours. 13 MS. HANCOCK: Thank you, your Honor. Nicole 14 Hancock with Stoel Rives on behalf of National Milk. 15 Your Honor, did you want to swear in the witness 16 or -- 17 THE COURT: Yes. 18 Raise your right hand, please. 19 PETER VITALIANO, 20 Being first duly sworn, was examined and 21 testified as follows: 22 THE COURT: You may take the stand. 23 DIRECT EXAMINATION 24 BY MS. HANCOCK: 25 Q. Good afternoon. Can you state and spell your name 26 for the record? 27 A. Peter Vitaliano, P-E-T-E-R, V as in Victor, 28 I-T-A-L-I-A-N-O. 149 1 Q. And is it Dr. Vitaliano? 2 A. It is, yes. 3 Q. Okay. And would you mind providing your mailing 4 address for the record? 5 A. My business mailing address is 2107 Wilson 6 Boulevard, Suite 600, in Arlington, Virginia, 22201. 7 Q. Thank you. 8 And, Mr. Vitaliano, where are you employed? 9 A. I am employed with the National Milk Producers 10 Federation at that address. 11 Q. And I called you Mister right after I just said 12 you were the doctor. I apologize for that. 13 Dr. Vitaliano, have you prepared a statement on 14 behalf of National Milk? 15 A. I have. 16 Q. And is that identified as Exhibit NMPF-1? 17 A. It is. 18 MS. HANCOCK: And, your Honor, I don't know if you 19 want to follow the same procedure and admit it at the end 20 or for written statements if you are okay with us 21 admitting that into the record now? 22 THE COURT: Well, let's just admit it at the end 23 is the standard thing. And I guess we need an exhibit 24 number, ad seriatim kind of exhibit number for this as the 25 next one. What is our next exhibit number? 26 MR. HILL: This would be 62. 27 THE COURT: All right. The statement of 28 Dr. Vitaliano is marked for identification Exhibit 62. 150 1 (Thereafter, Exhibit Number 62 was marked for 2 identification.) 3 THE COURT: Does the -- does our keeper of the 4 exhibits have this exhibit? 5 All right. So we're all set. 6 BY MS. HANCOCK: 7 Q. Dr. Vitaliano, would you mind reading your 8 prepared statement into the record? 9 A. Certainly. 10 I am Peter Vitaliano, Vice President of Economic 11 Policy and Market Research for the National Milk Producers 12 Federation. This testimony is presented in support of 13 Proposal 1, one of five proposals submitted by NMPF, the 14 acronym, and NMPF is the national trade association that 15 represents dairy farmers and the cooperative marketing 16 associations they own and operate throughout the United 17 States. 18 I have been employed by NMPF for almost 38 years 19 essentially as chief economist, in which capacity I have 20 been responsible for all economic and market analysis that 21 supports the programs of NMPF. 22 NMPF is the voice of America's dairy farmers 23 through its 25 dairy cooperative members, and NMPF 24 represents two-thirds of the approximately 28,000 25 commercial dairy farmers in the United States. 26 NMPF's member cooperatives reflect both the 27 geographic and the product mix diversity of the dairy 28 market -- dairy producer and cooperative sectors of the 151 1 United States. 2 NMPF's member cooperatives process a majority of 3 the Class I milk pooled under Federal Orders and 4 distribute it on routes within the 11 Federal Order 5 marketing areas and include one of the largest fluid dairy 6 ESL manufacturers in the United States. 7 NMPF members have significant Class II, Class III, 8 and Class IV manufacturing operations and manufacture a 9 majority of U.S. produced butter and nonfat dried milk 10 product. 11 Given the diversity and breadth of its membership, 12 NMPF is the dairy industry organization best able to 13 undertake a comprehensive review of the Federal Order 14 system and to weigh its impacts on both dairy farmers as 15 well as processors and manufacturers. 16 NMPF's five proposals presented at this hearing 17 represent a balanced and integrated program of needed and 18 long overdue updates that are in the best interest of the 19 entire U.S. dairy industry and which appropriately balance 20 the economic interests of dairy farmers and dairy plant 21 operators. 22 NMPF strongly supports the Federal Milk Marketing 23 Order program, but also believes that the program requires 24 several regulatory and technical updates to continue to 25 operate in the best interest of dairy farmers, processors, 26 and manufacturers of dairy products and the dairy 27 product-consuming public. 28 The current system of Federal Order minimum class 152 1 prices, which has been in effect since January of 2000, is 2 the hybrid product of Federal Order Reform rulemaking and 3 Congressional action. The dairy product price formulas 4 for determining Federal Order Class III and Class IV 5 prices implemented in January 2000 replace the basic 6 formula price of BFP, which used the survey of milk 7 prices, as did the preceding Minnesota/Wisconsin price 8 series as the basic means of price discovery for 9 establishing milk prices to operate the Federal Order 10 program. 11 Discontinuing the BFP represented a major change 12 because it replaced this previous system of direct 13 survey-based price discovery with a system that indirectly 14 discovered raw milk prices entirely by calculation from 15 market prices of the products manufactured from that milk. 16 The intricate product price formulas and their 17 constituent coefficients that resulted took on the 18 important function of accurately simulating the market 19 realities of the complex transfer of price discovery for 20 the markets for dairy products to the markets for 21 unprocessed milk used to produce them. 22 At the same time, the Class I prices that were 23 established by Congress updated the pre-existing Class I 24 differentials by adopting an optional USDA-suggested price 25 surface, which had been generated on the basis of 1990s 26 milk market conditions and extended it coast to coast. 27 All of the prices and price formulas of Federal Order 28 Reform were premised upon the costs and realities of milk 153 1 production and dairy product manufacturing which prevailed 2 at that time. 3 Those market realities have subsequently changed 4 as the U.S. dairy industry has undergone dynamic 5 structural change since 2000, while the critical Federal 6 Order dairy product price formulas and Class I 7 differentials have for the most part remained static. 8 For example, the location of U.S. milk production 9 has shifted westward, manufacturing and transportation 10 costs have increased significantly, and the southeastern 11 states have been progressively more milk deficit. Also, 12 the industry has seen the successful deployment of very 13 large manufacturing plants, and yet, many smaller-sized 14 manufacturing plants remain critically important to 15 satisfying the domestic and export demands of the U.S. 16 milk supply. 17 Additionally, the United States currently sells 18 about 18% of its milk production as manufactured in 19 export -- manufactured products in export markets compared 20 to about 5% in 2000. 21 These realities and others necessitate a pricing 22 formula review that incorporates the Class I mover, 23 Class I differentials, manufacturing costs, or make 24 allowances, and other factors in the class price formulas. 25 The constituent parts of those formulas, including the 26 products used, the make allowances, and the yield factors 27 in the component formulas, the assumed composition of 28 producer milk as well as the Class I differentials, have 154 1 become increasingly outdated, even those few that have 2 been previously updated to the extent that the effective 3 administration of the Federal Order program has become 4 increasingly difficult. 5 NMPF has engaged in an almost two-year-long 6 comprehensive study of needed updates to the Federal Order 7 pricing formula provisions. NMPF has undertaken this 8 important activity with the essential and dedicated 9 assistance of dozens of marketing experts from the staff 10 of its member cooperative marketing associations. 11 In a series of well over 200 mostly virtual 12 meetings, this team has examined every detail in each of 13 the current product pricing formulas of the Federal Order 14 uniform pricing regulations in 7 CFR, Paragraph 1000.50 15 through 52. The goal was to develop a comprehensive, 16 integrated, and balanced program of updates to those 17 formulas to realign them more fully with the structural 18 realities of the current dairy industry, and to address 19 the disorderly marketing conditions, which that growing 20 misalignment has allowed to develop. 21 This effort included considerations of mechanisms 22 for making further updates in the future as the industry 23 continues to evolve. The comprehensive package which 24 resulted includes seeking additional legislative authority 25 for USDA to conduct mandatory studies of manufacturing 26 costs and product yield factors, seeking a change via 27 ordinary rulemaking to the regulations implementing the 28 Dairy Product Mandatory Reporting Program, and five 155 1 recommendations for amendments to the uniform pricing 2 regulations of all Federal Orders. 3 The NMPF Board of Directors unanimously approved 4 this package of recommendations, including the five 5 recommendations for proposed amendments to all Federal 6 Orders, which NMPF has submitted as the following 7 proposals: 8 One, Proposal 1: Update the milk component 9 factors for protein, other solids, and nonfat solids in 10 the Class III and Class IV skim milk price formulas; 11 Proposal 3: Discontinue the use of barrel cheese 12 in the protein component price formula; 13 Proposal 7: Increase the make allowances in the 14 component price formulas to the following: Butter, $0.21 15 per pound; nonfat dry milk, $0.21 per pound; cheese, $0.24 16 per pound; dry whey, $0.23 per pound; 17 Return to the higher-of Class I skim milk price 18 mover, that's Proposal 13; 19 And then finally Proposal 19: Update the Class I 20 differentials throughout the United States. 21 Implementation of all five components of NMPF's 22 comprehensive proposal will require amendment of certain 23 provisions of the Federal Order uniform pricing 24 regulations in 7 CFR, Paragraph 1000.50 through 52, 25 applicable to all Federal Milk Marketing Orders and 7 CFR 26 paragraph 1005.51(b), Paragraph 1006.51(b), and 27 Paragraph 1007.51(b). This testimony today is in support 28 of Proposal 1, concerning milk composition. 156 1 Proposal 1, again, is to update the milk component 2 factors in the skim milk pricing formulas. NMPF requests 3 that the Secretary amend 7 CFR, Paragraph 1000.50(f), (i), 4 (k), and (q), as well as 7 CFR, Paragraph 1000.51, 5 applicable to all Federal Orders as specified at the 6 conclusion of this testimony, which would increase the 7 milk component factors in the Class I and Class IV skim 8 milk price formulas and provide a method for updating them 9 periodically to reflect anticipated continued increases in 10 the average milk component compositions in the future. 11 The milk component condition -- composition 12 factors in the skim milk formula. Federal Order skim milk 13 price formulas were constructed in Federal Order Reform to 14 be reflective of the content of the skim portion of 15 producer milk. Over the course of 23 years, the milk 16 component content has increased through improved genetics, 17 better feeds, and feeding practices, and better cow 18 comfort management, among other factors. 19 USDA's National Agricultural Statistics Service, 20 or NASS, reports the average butterfat content of producer 21 milk in the United States was 3.68% in calendar year 2000 22 and 4.08% in calendar year 2022, an increase of 10.9%. 23 Over the same period, USDA's Economic Research Service, or 24 ERS, reported the average nonfat or skim solids content of 25 producer milk in the United States rose from 8.72% in 2000 26 to 9.03% in 2022, an increase of 3.5%. Based on this 27 data, the average nonfat solids content of producer milk 28 in the United States rose from 9.05% in 2000 to 9.41% in 157 1 2022, also an increase of 4.0%. 2 Note that the component content of producer skim 3 milk increases just from higher butterfat tests as well as 4 from higher skim solids tests because there are fewer 5 pounds of skim containing the same pounds of nonfat solids 6 in a given unit of higher butterfat testing milk. 7 For manufacturing class prices and Federal Orders 8 with multiple component pricing, or MCP, these increases 9 in milk component levels are reflected in Classes II, III, 10 and IV prices and pool values because Federal Orders with 11 MCP price every pound of skim components, not skim milk. 12 However, the recognition of these higher component tests 13 has not occurred in determining Class I skim prices in all 14 orders and in determining Class II, III, and IV prices in 15 the Southeast, Appalachian, Florida, and Arizona orders. 16 With Federal Order Reform, the component averages 17 used to calculate the Class III skim milk price and the 18 Advanced Class III skim milk pricing factor were set at 19 3.1% protein and 5.9% other solids. Adding the protein 20 and other solids values of those values resulted in the 21 9.0% nonfat solids factor used in the Class IV and 22 Class II skim milk prices and the Advanced Class IV skim 23 milk pricing factor. 24 These original, and still current, component 25 factors in the Federal Order skim milk class price 26 formulas were based on the standard practice of using 3.5% 27 butterfat composition for milk to quote class prices for 28 producer milk, not the actual composition of producer skim 158 1 milk at the time of Federal Order Reform. 2 Disorderly marketing caused by the current milk 3 component factors in the skim milk price formulas. Seven 4 of the 11 Federal Orders, representing almost 90% of 5 Federal Order producer milk, use MCP. Dairy farmers have 6 responded to MCP's economic signals by significantly 7 increasing not just the butterfat but also the protein and 8 other solids levels in the skim portion of the milk they 9 produce. 10 Based on AMS data for the MCP orders for 2022, the 11 protein and other solids content of Federal Order producer 12 skim milk have averaged 3.39% and 6.02%, respectively, a 13 significant increase over the past 22 years. The nonfat 14 solids content of Federal Order producer skim milk has 15 therefore averaged 9.41% in 2022, thus matching the value 16 derived from the previously cited NASS and ERS data for 17 the entire United States. 18 Two major functions of Federal Orders are: One, 19 to ensure consumers have an adequate supply of milk for 20 fluid consumption; and two, to promote orderly marketing 21 of milk. 22 In the seven Federal Orders with MCP, increased 23 protein and other solids component levels have decreased 24 the price difference between the Class I skim milk price 25 and skim milk prices for Classes II, III, and IV, and have 26 also caused skim milk prices to increase relative to the 27 other four Federal Orders without MCP. 28 In the four orders without MCP, producers have 159 1 been increasingly unpaid for the true value of all their 2 skim milk. In all orders the increase in component levels 3 has resulted in producers being increasingly underpaid for 4 the true value of their skim milk that is used in Class I. 5 This structural change in the U.S. dairy industry 6 has made it increasingly difficult for Federal Orders to 7 meet the two major functions for the following reasons. 8 One, in MCP orders the producer share of the 9 generally higher Class I pool value was provided through 10 the producer price differential. As previously stated, 11 higher component levels increase manufacturing skim 12 values. By contrast, and because the fixed formula 13 factors for protein, other solids, and nonfat solids in 14 the Class I formula, milk containing higher protein and 15 other solids levels does not increase the Class I skim 16 value. This, in turn, allows manufacturing milk prices to 17 rise relative to the Class I price. As pooled components 18 increased and revenue from Class I skim values remained 19 static, more dollars have been paid out on all pooled milk 20 components, which has diluted the dollars left to pay the 21 PPD. Consequently, the potential to depool milk has 22 increased, which has created disorderly marketing 23 conditions. 24 Number two, three of these non-MCP orders, 25 Appalachian, Florida, and Southeast, do not have an 26 adequate supply of producer milk within their marketing 27 areas to meet consumer fluid milk demand. Supplemental 28 milk must be transported into those markets to meet this 160 1 demand. The supplemental milk is typically supplied from 2 Federal Orders using MCP. The higher relative value of 3 skim milk in MCP versus non-MCP markets increases the cost 4 of supplemental milk for non-MCP deficit fluid milk 5 markets and therefore decreases the incentive to move milk 6 from reserve supply areas to deficit fluid milk markets, 7 making it more costly and difficult to ensure consumers 8 have access to an adequate supply of fluid milk. 9 The Proposed Solution: Update the current milk 10 component factors in the skim milk price formulas to 11 reflect current actual composition of producer milk and 12 provide for further periodic updates as needed. 13 NMPF proposes that the skim component factors and 14 the skim milk pricing formulas to be increased to equal 15 the weighted average nonfat solids true protein and other 16 solids factors for milk pooled in Federal Orders. The 17 data to be used are USDA's average component tests of 18 producer milk in all orders during calendar year 2022. 19 For producer skim milk, the average component 20 factors are protein 3.39, other solids 6.02, and nonfat 21 solids 9.41. Implementation of the new skim milk factors 22 would occur 12 months after adoption of the order updating 23 the skim factors. 24 Due to the significant use of risk management 25 programs by dairy producers and handlers and the intricate 26 nature of the transactions tied to the skim milk formulas, 27 the new factors should not be implemented for a period of 28 12 months to allow the hedge transactions established 161 1 prior to the change and the formulas to roll off. 2 To ensure this progressive misalignment in skim 3 component factors does not recur, NMPF also proposes that 4 the pricing factors be updated regularly, no less than 5 every three years. However, no change shall occur until 6 the weighted average of the nonfat solids component in the 7 skim portion of milk pooled on Federal Orders for the 8 prior three years changes by at least 0.07 percentage 9 points. 10 The updated component values would be calculated, 11 and if a change is warranted, it would be formally 12 announced in February of such year, and the changes would 13 be implemented 12 months later, with March being the first 14 month of implementation. If this threshold condition is 15 not met by the third year following the last update of the 16 skim milk component factors, the calculation would be 17 repeated in the fourth year, and subsequent years, until 18 the 0.07 percentage point nonfat solids composition 19 condition is met, and the factors consequently updated, 20 whereupon the calculation would not be repeated until 21 another three years have passed. 22 The proposed 0.07 percentage point threshold level 23 is slightly less than the observed change in the average 24 nonfat solids composition of Federal Order producer skim 25 milk for three consecutive years compared with the prior 26 three consecutive years as calculated for the years ending 27 in 2018 through 2022. 28 Calculated just arithmetically, the initial update 162 1 from the current skim milk component factors to those 2 based on the 2022 data would increase the Class III skim 3 milk price by $0.80 per hundredweight and the Class IV 4 skim milk price by $0.41 per hundredweight, using ten-year 5 average product prices for 2013 through 2022. 6 Subsequent adjustments under Proposal 1 would be 7 much smaller. An increase from the 2022-based skim milk 8 component factors by the proposed 0.07 percentage point 9 threshold, parsed between protein and other solids based 10 on analysis of the data, would increase the Class III 11 price by $0.14 per hundredweight and the Class IV price by 12 $0.07 per hundredweight, based on the same ten-year 13 average product price data. 14 This testimony provides an overview of our 15 justification for adoption of Proposal 1. More detailed 16 testimony will follow that supports all or key portions of 17 Proposal 1, including testimony provided by Calvin 18 Covington, representing NMPF member cooperative Southeast 19 Milk, other members of the NMPF task force that developed 20 our Federal Order modernization proposals. Also included 21 will be several expert witnesses from other organizations 22 testifying on particular parts of our Proposal 1, several 23 aspects of it, and several producers who are members of 24 NMPF member dairy cooperatives. 25 Shifting now to the economic and market impacts of 26 NMPF's proposed changes. Dr. Scott Brown of the 27 University of Missouri will testify later at this hearing 28 on his analysis of the economic impact of adopting NMPF's 163 1 five proposals previously described. His analysis will 2 show that these proposals will have a modestly positive 3 impact on the average price of milk received by dairy 4 farmers, which will dissipate fairly rapidly. The 5 resulting average prices are expected to converge within a 6 few years to their baseline levels, i.e., levels expected 7 to be prevail in the absence of any order changes. 8 The changes provide -- proposed by National Milk 9 will not affect the cost of producing milk nor constrain 10 the supply of milk freely produced by the nation's dairy 11 farmers in response to market price signals. Without 12 either of these effects, the price of milk will continue 13 to reflect the longer term costs of producing it, which 14 are not directly affected by the Federal Order regulatory 15 changes proposed by NMPF. 16 Any and all changes to the prices of individual 17 dairy products, or to the Federal Order regulated costs of 18 milk for processing individual dairy products generated by 19 these proposals, will be limited to those necessary to 20 reflect changes in the cost of manufacturing these 21 products, changes in the cost of supplying milk to 22 processors of those products, changes in the value of milk 23 supplied by producers to those processors, or changes -- 24 other changes necessary to more closely align the 25 regulated minimum value of milk with the market value of 26 the products into which it is produced, as translated by 27 the Federal Order product price formulas. 28 Such realignment is critical to the effective 164 1 functioning of the Federal Order program to ensure orderly 2 market -- marketing given the fixed parametric nature of 3 the product price formulas coupled with the rapid 4 evolution of the basic structural features of the U.S. 5 dairy industry that those parameters are intended 6 accurately to reflect. 7 Figure -- give me a second here. My computer is 8 normally set up for two-screen operation, so I don't have 9 the presentation view, but this should be large enough. 10 Figure 1, as shown on the screen, provides a 11 perspective on the key issue of the impact on consumers of 12 the Federal Order program and potential changes to the 13 regulatory provisions of that program. It charts the 14 monthly Consumer Price Indices, or CPIs, reported by the 15 U.S. Bureau of Labor Statistics (BLS) over the past decade 16 and a half for, progressively, all items, also referred -- 17 which is the general measure -- most general measure of 18 overall consumer price inflation, also referred to as the 19 overall cost of living. That's shown in red on this 20 chart. 21 Together with the aggregate CPIs for all food and 22 beverages, shown in green; for all dairy products, shown 23 in the sort of navy blue; and for all food milk products, 24 the principal regulatory focus of the Federal Order 25 program. These CPIs reflect actual retail prices paid for 26 all U.S. cities -- in all U.S. cities, but they are 27 expressed in the form of indices with their respective 28 U.S. average retail prices during the 36-month period of 165 1 1982 to '84, each set to the value 100 to facilitate 2 comparisons between them. 3 Figure 1 shows that the retail prices represented 4 by all four of these measures had increased as of 2008 on 5 the left-hand side of the chart by about the same amount, 6 slightly more than doubling during the quarter century 7 since the index base period. That's what index values of 8 about 210 reflect, slightly more than doubling over that 9 25-year period. 10 From 2008, the overall cost of living and the cost 11 of all food and beverages have both continued to increase 12 at a relatively steady pace, which accelerated during the 13 recent bout of inflation, with food and beverage prices 14 slightly outpacing the overall inflation rate, 15 particularly in recent months. 16 The less aggregated dairy and fluid milk CPIs have 17 shown a greater sensitivity to the price of producer milk, 18 including the 2009 price plunge, the price spikes of 2014 19 and 2022, and the stagnation of prices between those two 20 peaks. This closer connection between farm and retail 21 prices for dairy stems from the fact that the cost of raw 22 milk has averaged about 31% of the retail value of dairy 23 products since 2002, while the farm value of most fluid 24 and beverage products represents a much smaller share of 25 the total retail value of finished food products, which 26 accordingly reflect more closely the main drivers of all 27 overall retail price inflation, including such factors as 28 energy, labor, and transportation. 166 1 However, these factors have also caused retail 2 inflation for dairy products to outpace general food and 3 beverage price inflation during the recent bout of general 4 price inflation, shown in that steeper curve of the blue 5 lines, but also to recover more quickly from it with dairy 6 product retail prices actually dropping this year while 7 the two more general CPIs -- that is overall CPI for all 8 items and for all food and beverages -- continue to 9 increase. 10 But, of particular significance for the current 11 purpose, the overall cost to consumers of dairy products 12 and fluid milk products in particular has declined during 13 the illustrated period relative to both overall inflation 14 as well as to general food and beverage price inflation. 15 One noteworthy datum is that the simple difference 16 by which the monthly CPI for all fluid milk has fallen 17 below the CPI for all food and beverages has reached its 18 highest level ever in July 2023. 19 Agricultural production enjoys built-in 20 productivity advantages due to its biological basis, which 21 can generate increases in production per animal or 22 increases in production per planted unit as a result of 23 genetic improvements and other productivity enhancements 24 unique to biological production processes. These advances 25 generate unit cost reductions, which the competitive 26 nature of farming passes on up the various agricultural 27 and food marketing channels, eventually to consumers. 28 This consumer cost reduction aspect of agriculture 167 1 varies in direct relation to the proportion which the 2 basic agricultural commodity represents to the total 3 retail value of the resulting food products, which, as 4 mentioned, is relatively high for dairy products. This 5 aspect of agricultural production coupled with the great 6 productivity of U.S. agriculture has resulted in the 7 general cost of food representing one of the smallest 8 proportions of total consumer income in the United States 9 compared to that in all other countries. 10 It is, therefore, very difficult to consider the 11 facts presented in Figure 1, which reflect the relative 12 influence of all the economic factors at play in producing 13 general, food and beverage, overall dairy product, and 14 fluid milk product price inflation over the past decade 15 and a half, a period that includes the continuous 16 operation of the Federal Order program, it's very 17 difficult to consider all of that, and conclude that 18 Federal Orders have had a deleterious effect on consumer 19 welfare via the retail price of fluid milk and retail 20 prices of dairy products in general. And given the 21 results of Dr. Brown's analysis, this will continue to be 22 the case under the Federal Order modernization changes 23 proposed by NMPF. 24 Another key issue is the impact of the Federal 25 Order program and potential changes to the regulatory 26 provisions of that program on small businesses. As stated 27 in the notice for this hearing, most parties subject to a 28 Federal Milk Marketing Order are considered a small 168 1 business. A large majority of these are dairy farm 2 businesses, which for the purpose of the Regulatory 3 Flexibility Act, 5 USC 601 to 612, or the RFA, are defined 4 as a small business if they have an annual gross income of 5 three and a three-quarters million dollars or less. 6 Table 1 provides simple estimates of the average 7 herd size and average milk sales per herd of producers 8 pooled on the individual Federal Orders in 2022. These 9 estimates, which are mine, are weighted averages by herd 10 size of the individual states that lie wholly or partially 11 in the respective Federal Order Marketing areas. These 12 estimates would indicate that most of the producers pooled 13 in Federal Orders in 2022 would qualify as small 14 businesses for the purposes of the RFA. 15 As previously mentioned, Dr. Brown's analysis 16 will -- and testimony will show that the Federal Order 17 modernization changes proposed by NMPF will have a modest 18 positive impact on the average price of milk received by 19 the mostly small businesses that are dairy farmers in the 20 United States. 21 Also, as previously mentioned, any and all changes 22 in the price of individual dairy products and to the 23 Federal Order component of class prices resulting from 24 these proposals and, therefore, to the uniform prices 25 received by dairy farmers in individual orders and 26 regions, will be limited to those necessary to reflect 27 changes in the cost of manufacturing those products, 28 changes in the cost of supplying milk to processors of 169 1 those products, changes in the value of milk supplied by 2 producers to those processors, or other changes necessary 3 to more closely align the regulated minimum value of milk 4 with the market value of the products from which it is 5 produced, as translated by the Federal Order product price 6 formulas. This will also apply to any processors and 7 manufacturers of dairy products which are also small 8 businesses. 9 Concluding comment and proposed regulatory 10 changes. NMPF sincerely wishes to thank Secretary Vilsack 11 and the Department for holding this important hearing and 12 for thoroughly considering adoption -- thoughtfully 13 considering adoption of its proposed amendments to the 14 Federal Milk Marketing Order regulations. 15 NMPF has devoted considerable time and resources 16 to thoughtfully considering and recommending the important 17 changes it considers necessary to correct the growing 18 misalignment between the dynamic changes in the U.S. dairy 19 industry since Federal Order Reform and the largely 20 unchanged factors in the critical Federal Order component 21 and class price formulas originally adopted at that time. 22 Together, NMPF is requesting the Secretary to 23 amend certain provisions of 7 CFR, Paragraph 1000.50 24 through 52, applicable to all Federal Milk Marketing 25 Orders, and 7 CFR, Paragraph 2005.51(b), 2006.51(b), and 26 2007.51(b). The changes to these regulations that 27 Proposal 1 would entail are as follows: 28 In paragraph 1000.50, section (f), would be 170 1 amended by striking the Figure 9 with the words, "the 2 applicable nonfat solids component factor described in 3 Paragraph 1000.51." 4 To number (i), on the Class III skim milk price, 5 strike the number 3.1 and substitute "the applicable 6 protein component factor described in Paragraph 1000.51." 7 Also strike the number 5.9 and substitute, therefore, "the 8 applicable other solids component factor described in 9 Paragraph 1051." 10 And then in (k), Class IV skim milk price, strike 11 the number 9 and substitute, therefore, "the applicable 12 federal nonfat solids component factor described in 13 Paragraph 1051." 14 Under (q), advanced pricing factors, in number 15 (1), Roman numeral (ii), strike again the 3.1 number and 16 substitute "the applicable component" -- "protein 17 component factor described in Paragraph 1000.51." 18 Roman numeral iii, strike the number 5.9 and 19 substitute, therefore, "the applicable other solids 20 component factor described in Paragraph 1051." 21 Then in (2), Roman numeral (ii) again, strike the 22 number 9 by the applicable -- and substitute, therefore, 23 "the applicable nonfat solids component factor described 24 in Paragraph 1000.51." 25 We would also amend Paragraph 1000.51, which is 26 currently reserved, by striking reserved and substitute a 27 section entitled "Milk Component Factors." 28 (1): Upon implementation of this Order, the 171 1 component factor for protein, other solids, and nonfat 2 solids should be the following: Protein, 3.1; other 3 solids, 5.9; and nonfat solids, 9.0. 4 (2): Beginning the first day of the 12th month 5 after implementation of this order, the component factors 6 for protein, other solids, and nonfat solids shall be the 7 following: (i), protein, 3.39; (ii), other solids, 6.02; 8 and (iii), nonfat solids, 9.41. 9 (3): By February 28th of the third year following 10 the announcement of any change in the protein, other 11 solids, and nonfat solids component factors of producer 12 skim milk under this section, those component factors 13 shall each be updated to the simple averages of their 14 respective three most recent calendar year weighted 15 average component tests of producer skim milk in all 16 orders, rounded to two decimal places, as calculated by 17 AMS, if the resulting nonfat solids factor differs by at 18 least 7 -- 0.07 percentage points from that currently in 19 effect. 20 Roman numeral (i): Implementation of the updated 21 component factors under this paragraph shall be announced 22 no later than five days after the calculation that 23 triggers the change and shall become effective the first 24 day of March of the following year. 25 (ii): If a change in the component factors is not 26 indicated by the calculation described by this paragraph, 27 then the calculation shall be repeated the following year 28 and any change in the existing skim milk component factors 172 1 shall be announced, as described in this paragraph. 2 Your Honor, this completes my testimony. 3 THE COURT: Thank you. Ms. Hancock. 4 MS. HANCOCK: Not quite. 5 BY MS. HANCOCK: 6 Q. Dr. Vitaliano, thank you for reading your 7 statement into the record, Exhibit 62. I'd like to just 8 learn a little bit more about your background before we 9 turn you over. 10 Can you tell me about your educational background? 11 A. I have a Bachelor's degree in mathematics from the 12 University -- Indiana University. I have a Master's 13 degree in mathematics from the Pennsylvania State 14 University. I have a Master's of science degree and a 15 Ph.D. in agricultural economics from the University of 16 Wisconsin at Madison. 17 Q. And what year did you obtain your Ph.D.? 18 A. 1979. 19 Q. Okay. And throughout the course of your career, 20 can you give me an overview of the roles that you have 21 held in the various organizations? 22 A. My first job after the -- earned my Ph.D. was on 23 the faculty of agricultural economics at Virginia 24 Polytechnic Institute and State University in Blacksburg, 25 Virginia. In that capacity, I worked with the local dairy 26 industry, including some of the local dairy cooperatives, 27 and got -- got a lot -- basically built substan- -- 28 significantly on my education in agricultural economics. 173 1 And subsequent to that position I came directly to the 2 position I currently occupy. 3 Q. Okay. And -- and the role that you have now, can 4 you tell me what falls under the scope of your 5 responsibilities? 6 A. National Milk is involved in a lot of policy 7 issues, domestic pricing policy, formerly the Dairy -- 8 Dairy Price Support Program, now the basically two 9 versions of Dairy Margin Protection Program, previously 10 the Margin Protection Program, or MPP, currently the Dairy 11 DMC, Dairy Margin Coverage Program, doing economic 12 analysis, doing -- you know, preparing materials for our 13 lobby staff and others. 14 We also do a lot of analysis on trade policy, 15 particularly back in somewhat prior years when the United 16 States was more active in promulgating -- in negotiating 17 free trade agreements with other countries, both bilateral 18 and multilateral. 19 I was responsible -- in addition to being the 20 chief economist -- I was responsible for about ten years 21 for the -- actually handling our eco- -- our policy 22 advocacy during the year -- during -- during the 23 development and -- and approval of the Uruguay Round 24 multilateral trade negotiations that formed the World 25 Trade Organization and also for the North American Free 26 Trade Agreement. I was very active in developing 27 proposals and was successful in implementing concepts into 28 the -- into the U.S. scheduled concessions under those 174 1 trade agreements. 2 We also handle a lot of regulatory issues working 3 with USDA on milk quality and things of that sort. 4 So anything that National Milk does that basically 5 involves policy, mostly federal policy, both the 6 administrative -- both legislative as well as the 7 administrative implementation of the legislation, anything 8 that has policy, I'm responsible for providing, if 9 particularly asked, economic analysis showing how that 10 benefits dairy farmers and our members. For policies that 11 we are opposed to, we're also responsible for developing 12 economic analysis that shows why it would be harmful to 13 the interest of our members. 14 So it's a very broad range of responsibilities 15 that, again, it covers primarily, again, economic 16 analysis, but, you know, in all aspects that affect our 17 member cooperatives and their dairy farmer members, you 18 know, both in terms of Congressional legislation and 19 administrative implementation of all the various policies 20 that affect our members. 21 Q. Is there anyone at National Milk who has served in 22 an economics role, analysis role longer than you? 23 A. Probably not. I haven't measured. But I have 24 been with National Milk for more than a third of its 25 entire existence, which is longer than a hundred years 26 now. National Milk was founded in 2016 (sic). 27 Q. Thank you, Dr. Vitaliano. 28 MS. HANCOCK: Your Honor, I would offer this 175 1 witness as an expert in dairy policy and economics. 2 THE COURT: Any -- any objection? This is voir 3 dire I guess. 4 Very well, yes. I find this witness to be 5 qualified to testify on the -- as an expert on the subject 6 matter of his testimony as contained in Exhibit 62 and 7 otherwise. 8 MS. HANCOCK: Thank you, your Honor. No further 9 questions. 10 THE COURT: Okay. We have time for 11 cross-examination. 12 MR. ROSENBAUM: Steve Rosenbaum for the 13 International Dairy Foods Association. 14 CROSS-EXAMINATION 15 BY MR. ROSENBAUM: 16 Q. Dr. Vitaliano, if I could ask you to turn to 17 page 5 of Exhibit 62, which is the testimony you just read 18 into the record. 19 Just to orient ourselves, Proposal 1 would 20 increase the protein assumption in the calculation of 21 class prices to 3.39, other solids would increase to 6.02, 22 and the nonfat solids would increase to 9.41, correct? 23 A. That is correct. 24 Q. Okay. And the 9.41 is adding the other two 25 together; is that right? 26 A. Yeah. 27 Q. Now, at the bottom of page 5, you state, and I'll 28 quote: "The data to be used are USDA's average component 176 1 tests of producer milk in all Federal Orders during 2 calendar area 2022." 3 Do you see that? 4 A. That's correct. 5 Q. Now, would it, in fact, be more accurate to state 6 that, under your proposal, the data to be used are USDA's 7 average component tests of producer milk in the seven 8 multiple component pricing orders? 9 A. USDA obviously has a long published data series of 10 the component factors in the seven multiple component 11 pricing orders. But we are proposing, very clearly stated 12 in this proposal, that it be -- it be extended to all 13 Federal Orders, all classes, at which point it would seem 14 to be far more appropriate to include the data from all 15 orders, including those that don't have component pricing. 16 Q. But the numbers you are proposing, the specific 17 numbers you are proposing, those are derived solely from 18 the seven multiple component pricing orders? 19 A. That is incorrect. 20 Q. Okay. 21 A. Calculating them from the seven component pricing 22 orders, you get those numbers. But USDA has subsequently 23 basically given -- produced data for all 11 orders, and I 24 double-checked those numbers, and you come to -- basically 25 rounding to two decimal places, to come to the same -- the 26 same numbers. 27 Q. Okay. Let me -- the numbers that are set forth in 28 your proposal, those are to two decimal points -- 177 1 A. That is correct. 2 Q. -- the numbers you get using the reported numbers 3 by USDA for the seven multiple component pricing orders, 4 correct? 5 A. Yeah. Because, again, the volume of milk, that's 6 skim milk, represented by the seven component pricing 7 orders, is like 90% of all the milk. So when you include 8 the other 10% of the non-MCP orders, you -- you know, you 9 will get a slightly different number, but rounding it to 10 two decimal places. You know, in a sense, it doesn't make 11 a big difference in the numbers, but in the sense that 12 extending this to all classes of milk in all orders, it 13 would seem to make sense that you use the data in all the 14 orders. 15 Q. Well, so, what was -- what's the purpose, sir, of 16 multiple component pricing? 17 A. Excuse me? 18 Q. Why does multiple component pricing exist? 19 A. Multiple component pricing exists to pay dairy 20 farmers individually for the value of their individual 21 milk. 22 Q. And that -- and that was adopted starting back in 23 1994, correct? 24 A. Yes. But this testimony and this proposal does 25 not deal with multiple component pricing. We do not have 26 an advocacy position for multiple component pricing. We 27 have an advocacy position that we are addressing in 28 Proposal 1 that affects the existing price formulas for 178 1 the default values of the skim milk component composition. 2 They are clearly stated in the -- in the Class III and 3 Class IV and Advanced Class -- 4 Q. And -- 5 A. -- and pricing factors. 6 Q. And it is -- 7 A. That's all we're addressing. 8 Q. And I'm addressing that very question as to 9 whether that's an appropriate thing to do. 10 So my -- my question is as follows: What -- was 11 there -- was there thought to be extra value being 12 provided by farmers by having milk with higher component 13 levels? 14 A. The value of Class III milk basically to farmers, 15 on average, because the pricing formulas that we have 16 in -- you know, particularly in Class I, reflects 17 basically, you know, milk -- you know, prices that are 18 paid, you know to -- ultimately to all dairy farmers. 19 National -- USDA established the current 3.1, 5.9, and 20 9.0% factors for a purpose, to reflect the average 21 component composition for all producer milk for a number, 22 basically, subsequent to that and -- 23 Q. You are -- 24 A. -- multiple component pricing was adopted -- 25 Q. You are answering a question that has nothing to 26 do with the question I asked. 27 MS. HANCOCK: Your Honor, if he could be permitted 28 to finish his answer. 179 1 MR. ROSENBAUM: I'd like an answer. 2 THE COURT: Go ahead. What's the problem? 3 BY MR. ROSENBAUM: 4 Q. What purpose was served by establishing multiple 5 component pricing? 6 A. Multiple component pricing was -- was -- basically 7 the purpose was to -- after many, many years -- to pay 8 dairy farmers individually for the value of the milk they 9 were producing. And dairy farmers subsequently reacted to 10 those economic signals by substantially increasing the 11 rate at which they were increasing the composition of 12 their milk, giving rise to the increasing disconnect that 13 Proposal 1 is designed to address. 14 Q. And there are four orders that don't have multiple 15 component pricing? 16 A. That's correct. 17 Q. And those are Appalachia, Southeast, Florida, and 18 Arizona, correct? 19 A. That's correct. 20 Q. And in those four orders, there has been -- 21 there's -- there's not -- there's not the financial 22 incentive provided, that multiple component pricing 23 provides, that is to say, they don't get a higher price 24 for their milk based upon components. 25 A. Under the current system, that's correct. 26 Q. And you are not -- okay. 27 Now, the -- your proposal, when it comes to 28 Class II -- correct me if I'm wrong, but I think I'm 180 1 right. When it comes to Class II, III, and IV, your 2 proposal actually has no impact on multiple component 3 price orders; is that correct? 4 A. On Class II, III, and IV, that would be correct, 5 because component values are paid into the pool by 6 processors at those component values, and are paid back 7 out to farmers -- 8 Q. So just going to state what you said a little 9 different way. In multiple component pricing orders, 10 farmers are paid based upon the actual components in their 11 milk, not upon any assumptions as to what the component 12 levels are, correct? 13 A. That is correct. Except for the value that they 14 derive from Class I in those pools. 15 Q. And I'm not talking about -- Class I is a 16 different set of issues, which I'll get to in a minute. 17 We're talking about Class II, III, and IV. 18 So when -- so just -- your proposal really has no 19 effect on Class II, III, and IV in the seven MCP orders, 20 correct? 21 A. It has no direct effect on the pool value of milk 22 in those three -- II, III, and IV classes. 23 Q. But your proposal would have a material effect on 24 Class II, III, and IV, in the four what I'll call the fat 25 skim orders, correct? 26 A. That is correct, and that is one of the specific 27 intentions of our proposal. 28 Q. Okay. Well -- okay. And what you're -- and just 181 1 so we're clear the term, fat skim orders, that's a way to 2 describe the four orders I discussed a minute ago, 3 correct? 4 A. I use those terms myself. 5 Q. Sometimes they are called the non-MPC orders, and 6 sometimes they are called the fat skim orders. 7 Those terms are synonymous, correct? 8 A. Yes, we can -- there will be no confusion in both 9 of our understanding of -- 10 Q. Okay. 11 A. -- what you mean. 12 Q. Okay. So -- and on your proposal in the four fat 13 skim orders, you are proposing to change the regulations 14 so that they pay farmers, in those four orders, as if the 15 milk components in their milk is equal to the average milk 16 components in the MCP orders; is that true? 17 A. That's correct. But that is no different than how 18 that -- those same things operated at the beginning of 19 Federal Order Reform, where a uniform national set of 20 assumed pricing factors was adopted and applied nationally 21 to all orders. 22 Q. Well, sir, but at that time, MCP was already in 23 place, indeed, it was expanded in 2000 to include 24 additional orders, so that those assumed values actually 25 had no impact in the MCP orders, just like they still have 26 no impact, correct? 27 A. The question is what was the purpose of USDA 28 establishing the current factors in Class III and Class IV 182 1 skim milk. 2 Q. But -- but I am correct that, under your proposal, 3 farmers in the four fat skim orders will be paid as if the 4 milk components in their milk was equal to the average 5 milk component levels in the seven MCP orders. That's how 6 it works, correct? 7 A. That's correct. But again -- 8 Q. And even though those farmers have never been 9 provided the financial -- let me -- strike that. Let me 10 start something else. 11 In order to achieve -- I mean, in order to achieve 12 the higher protein levels and higher solids nonfat levels 13 that you have recited, I take it that farmers and MCP 14 orders have undertaken a series of steps and efforts, 15 correct? That's a yes or no. 16 A. Farmers in the MCP orders you say? 17 Q. Yes. 18 A. They apparently have because they have increased 19 their component content. 20 Q. For example, changes in breeding perhaps? 21 A. Uh-huh. 22 Q. You need to answer yes or no. Sorry. You are 23 shaking your head. The recorder needs to have 24 something -- 25 A. Yes, it included those things you mentioned. 26 Q. Changes in feed maybe? 27 A. That too. 28 Q. Feed might be more expensive as a result? I mean, 183 1 maybe it is more expensive feed, but you make it up 2 through the -- getting paid more; is that fair? 3 A. Farmers are very good at reacting to the financial 4 incentives that -- 5 Q. Believe -- 6 A. -- and reacting to them. 7 Q. Believe me, this is no criticism of the MPC 8 system -- MCP system. 9 Okay. But farmers in the fat skim orders have -- 10 just have never had those financial incentives, correct? 11 A. They currently do not have those same financial 12 incentives -- 13 Q. Okay. 14 A. -- as -- as those in the MCP orders. 15 Q. Well, and they still won't have that incentive 16 over -- under your proposal, correct? They will get it 17 automatically, right? They will get paid under the 18 assumption that their levels of components in their milk 19 is equal to the average level of components in the MCP 20 orders? 21 A. Under our proposal, farmers in the fat skim orders 22 would be paid a price much closer to the value of the milk 23 they produce than under the current regulations. 24 Q. Well, am I right that they will be paid as -- as 25 if they were producing milk that had the average component 26 levels that exist in the seven MCP orders? 27 A. They would be paid based on a uniform national 28 pricing formula that reflects the average prices, 184 1 including data from their individual orders. 2 Q. And you have -- well, you have said 90% of the 3 milk is in the MCP orders -- 4 A. That's true. 5 Q. -- to begin with, correct? 6 A. It would have -- it would make a small difference 7 but... 8 Q. Well, but -- have you tried to calculate actually 9 what the -- how many -- what the financial impact is? 10 A. Subsequent testimony by -- as I indicated in my -- 11 my testimony, mine is just the first overview of this 12 issue. We have many more witnesses, including expert 13 witnesses, that will testify in more detail, including 14 basically those answering those questions. So let me 15 defer to other experts that are going to be testifying on 16 behalf of Proposal 1. 17 Q. Okay. But just on a -- I appreciate what you just 18 said. 19 There are seven MCP orders, correct? 20 A. Currently there are seven MCP orders. 21 Q. Okay. And if your proposal is adopted -- and we 22 know -- strike that. 23 And we know what the average MCP levels are in 24 those seven orders, correct? 25 A. Yes. But we -- USDA has data for the component 26 levels of skim milk in all orders, but certainly in the 27 seven MCP orders. 28 Q. They don't have actual -- I mean, they haven't 185 1 presented any actual data from the -- from the fat skim 2 orders, correct? 3 A. I think that was -- that data was available in one 4 of -- basically one of our data requests and -- 5 Q. Actual data as opposed to estimated data? 6 A. I will defer that question to one of our experts, 7 Mr. Calvin Covington, to follow me, who knows these 8 numbers extremely well. 9 Q. Okay. 10 A. So he'll be able to answer your questions. 11 Q. In any event, doubtlessly, there are some MCP 12 orders where the component levels are higher than the 13 average and some where they are lower than the average, 14 correct? 15 A. That's generally the way you would define an 16 average. 17 Q. And under your proposal, the four fat skim orders, 18 the farmers there will be paid more for their milk than 19 the farmers in half of the MCP orders, correct? 20 A. Well, I don't know that it would be half. It 21 could be, you know, somewhere -- somewhere above the 22 lowest and somewhere below the highest. 23 Q. Everybody below the average is going to be -- in 24 the MCP orders, is going to be being paid less than all 25 the farmers in the four fat skim orders? 26 A. Could you repeat that question again, please? 27 Q. Sure. 28 So all of -- all of the farmers with average 186 1 component levels -- strike that again. 2 All of the farmers in the MCP orders with 3 component levels less than the average will be being paid 4 for their milk less than all of the farmers in the four 5 fat skim orders, correct? 6 A. That is correct. Because they are paid in those 7 orders -- in the MCP orders they will be paid for the 8 value of their individual components. 9 Q. And that will not be the case for any farmer in 10 the four fat skim orders, correct? 11 A. But the farmers in these orders will have the 12 opportunity to consider whether or not they would want to 13 adopt MCP. It is always -- it is always an option. 14 Q. Absent their doing that, and I'm not suggesting 15 they shouldn't, but absent their doing that, what I -- my 16 statement's correct, yes? 17 A. Well, let me -- let me put that in the context -- 18 those farmers have been paid from the get-go less than the 19 value of their milk, and increasingly over time they have 20 been underpaid progressively for the actual value of their 21 milk. And that's going to continue. We have an expert 22 witness who will testify to that effect. 23 So the fact that adopting our proposal may 24 adopt -- you know, because we have to have a uniform set 25 of class price formulas, there may be some farmers in 26 those fat skim orders that will be paid more than the 27 value of their milk, some will be paid less. 28 But the point is our proposal is designed to 187 1 address the fact that farmers in those orders have been 2 progressively underpaid, more -- increasingly so, for the 3 value of the milk they have been producing since Federal 4 Order Reform. 5 Q. Well, so since -- the MCP system first came into 6 effect in 1994 some places, correct? 7 A. I'm not -- I can't put that particular date on it, 8 but I will -- I will accept your -- 9 Q. Okay. And in 2000, it was extended to the seven 10 orders where it currently exists; is that right? The 11 California obviously was -- 12 A. The legislation that mandated Federal Order Reform 13 from Congressman Steve Gunderson specifically mentioned 14 that multiple component pricing will be -- will be offered 15 in all the Federal Orders, and it kind of -- to that 16 extent kind of gave it a boost. 17 Q. And -- but the farmers in the four orders that are 18 fat skim orders today determined they didn't want to be 19 MCP orders, correct? 20 A. Apparently, or they would have asked to do so. 21 Q. Right. I may not, essentially -- well, and when 22 MCP orders came into effect -- I'm going to give you the 23 date 1994, you have to accept that as being the accurate 24 date, I believe it is -- 25 A. I'll accept your -- 26 Q. -- in any event, extended in 2000 -- it was the 27 anticipation that this would incentivize farmers in MCP 28 orders to increase their component levels, correct? 188 1 A. I would say the intent was to pay farmers for the 2 value of their individual milk. 3 Q. All right. 4 A. They could choose to consider that an incentive. 5 If the cost of increasing the -- the content, and 6 therefore the value of their milk, was less than the value 7 of doing so, they would -- they would do so; if not, they 8 would -- they would not increase. They would not change. 9 But they had the opportunity to, again, be more fairly 10 paid for the value of their milk. 11 Q. And the reality is it did incentivize them, and 12 the component levels went up, correct? 13 A. That is correct. 14 Q. The class -- it was understood from the get-go, 15 wasn't it, that Class I was not going to be tied to that? 16 A. I don't know what was understood, but the 17 regulations made it clear that it was not tied, that -- 18 that basically the value of -- of skim milk in Class I was 19 going to be at the regulated 3.1 protein, 5.9, and 9.0 20 nonfat solids. 21 Q. And there was never a provision that said if -- I 22 mean -- let me start that again. 23 The MCP orders provide that as component levels go 24 up, the payments go up, correct, for Class II, III, and 25 IV? 26 A. Yeah. The payments into the pool for Class II, 27 III, and IV, but not Class I, could go up. 28 Q. Right. 189 1 A. And farmers would be paid basically the value of 2 their components, plus or minus PPD. 3 Q. And the value of their components -- start that 4 again. 5 Which components you're evaluating depends upon 6 which class milk is being used in, correct? 7 A. To a great extent. But to dairy farmers, they 8 produce -- they produce milk that could be used in any 9 class. 10 Q. Right. 11 A. And when they -- when their milk is increased -- 12 has increased value in its components, they realize the 13 value of those components -- or the value of those 14 components are realized when that milk is manufactured 15 into Class III or Class IV products. 16 If they -- if producers, including the fat skim 17 orders, sell their milk as Class I and are not paid for 18 the value of those components, there's an opportunity cost 19 for them, that they could have received a higher -- 20 basically gotten a -- you know, a higher price could have 21 been paid for their -- for their milk in the manufacturing 22 classes. 23 And that gets back to the points that I was making 24 in my testimony about, you know, the growing disconnect 25 between the value of producer milk and what they are being 26 paid for in -- in Class I in all orders, including the MCP 27 orders, is leading increasingly to disorderly marketing. 28 Q. For Class IV, if the milk is going into Class IV, 190 1 which components count for increase -- 2 A. Total nonfat solids. 3 Q. Okay. And for Class III, which components count? 4 A. Protein and other solids. 5 Q. Okay. And that's -- that's because components 6 that you get paid more for in Class IV, those are the 7 components you need to make Class IV products, correct? 8 A. Yes. 9 Q. And similarly, the components you get paid more 10 for in Class III, those are the components you need more 11 of to make Class III products, correct? 12 A. I think that's correct. 13 Q. You don't need more components to make Class I 14 milk, do you? 15 I mean just that simple question. Those higher 16 components are not needed to make Class I milk, are they? 17 A. In most states. In California, they are. 18 Q. That's -- California has a special standard, 19 correct? 20 A. Last time I checked, they did. 21 Q. They are unique in that regard, correct? 22 Is that right, they are -- I'm just asking you, is 23 California unique? 24 A. California has a -- basically has a higher 25 standard for -- for fluid milk. 26 Q. Okay. 27 A. I have not done a survey of other states to know 28 whether or not they might have a higher standard. 191 1 Q. Okay. You can't make more fluid milk, you can't 2 fill more gallon jugs of milk because you have a higher 3 other solids level, other higher protein level? 4 A. If the protein level of fluid milk goes up, it has 5 a higher value for -- for consumers. 6 Q. You have seen people pay more for that milk? 7 A. I have not, but I have not done supermarket 8 pricing surveys. But my understanding is that high 9 protein is one of the -- one of the increasing focuses of 10 marketing Class I milk. 11 Q. Do you have any idea what percentage of milk sold 12 in this country are marketed on that basis? 13 A. No, I don't. 14 MR. ROSENBAUM: That's all I have, your Honor. 15 THE COURT: Thank you, Counsel. So let's take a 16 further afternoon break at the request of our hearing 17 reporter. It's 3:50. Let's come back at 4:00. Is that 18 sufficient? 19 Okay. We'll be back at 4 o'clock. Off the 20 record. 21 (Whereupon, a break was taken.) 22 THE COURT: Back on the record at 4:04 p.m. 23 Okay. Cross-examination continues. I remind you 24 that you are still under oath, Doctor. 25 MR. VETNE: Thank you, your Honor. John Vetne, 26 consultant for National All-Jersey. 27 CROSS-EXAMINATION 28 BY MR. VETNE: 192 1 Q. Dr. Vitaliano, thank you for your testimony. 2 You referred -- I'm going to page 2. I'm just 3 going to go page by page. I made some notes here. 4 You referred to on page 2 to dynamic structural 5 change since the year 2000. Are you referring there to 6 Federal Order Reform when you are referring back to the 7 year 2000? 8 A. Yes, the year 2000 was selected to indicate the 9 initiation of Federal Order Reform, which is pertinent 10 because that's when these component -- the -- you know, 11 these end product pricing formulas were adopted. Prior to 12 the adoption of those, where we had a direct survey method 13 of determining basic prices for Federal Order operations, 14 that issue of reflecting the dynamic and the changing 15 structure of the industry was not so critical. 16 Q. Federal Order Reform, you were involved in that, 17 part of your responsibility? 18 A. Yes, I was working for National Milk at the time 19 the Federal Reform was developed. 20 Q. So the rules that were adopted in 2000 in Federal 21 Order Reform followed a Federal Order Reform recommended 22 decision in 1998. 23 Do you recall that? 24 A. All I remember about that was the Federal Order 25 Reform was not -- was done more by informal rulemaking -- 26 Q. It was. 27 A. -- and not by the official Federal Order -- normal 28 Federal Order amendment process through a hearing. 193 1 Q. Do you recall that the Federal Order Reform 2 economic data, including product price formulas, 3 production, composition, were based upon the market in 4 1997 and 1998? In other words, a year -- a decision in 5 the year 2000 wasn't based on data in 2000, it was based 6 on some prior? 7 A. I don't have an encyclopedic knowledge of all of 8 those aspects. But as far as Proposal 1 is concerned, I 9 specifically studied the -- the hearing record, it was 10 basically the final decision, reflecting, you know, why 11 they adopted the current 3.1, 5.9, etcetera. 12 Q. And do you recall -- 13 A. And those -- those were based -- those were not 14 based on actual composition data from what I have gathered 15 from the record. That was basically developed based on 16 the nominal 3.5% butterfat test and the associated protein 17 tests and other solids tests for milk in 35, and that was 18 done for the purpose of comparing the new Class III and IV 19 prices to the existing prices to make sure there was 20 continuity, namely the BFP, California, and the 3A price, 21 and the California 4A and 4B prices. That's explicitly 22 spelled out in the decision. 23 Q. So my question is, when you refer to structural 24 change, do you recall the period of time in which the 25 structure was examined? 26 You are talking about change since the year 2000, 27 but if the data that they looked at was from 1997, it is 28 not 23 years old, it is a quarter century old? 194 1 A. That could be. As I say, in terms of the specific 2 data for the milk composition factors, it was not clear 3 whether they referred to any particular year. They were 4 adopted in the year 2000. So, all of my references to 5 things happening since 2000 were with reference to the 6 factors that were established that year, not necessarily 7 based on data from that year because they don't seem to 8 have been based on -- on specific data but on a comparison 9 with existing analogous prices from pre-reform Federal 10 Orders and the California orders to ensure that they were 11 consistent with those -- those prices. 12 Q. Okay. You reference in the first full paragraph 13 at the top of that page to the transfer of price discovery 14 for markets for dairy products to markets for unprocessed 15 milk used to produce them. There you are referring to the 16 transition from MW survey to -- to the product price 17 method of reaching -- 18 A. You can consider that a capsule description or 19 definition of end product pricing. 20 Q. Okay. And that end product price actually does 21 two things: It establishes a value of the components used 22 to produce various manufactured products, correct? 23 A. Valuing the components of milk used to produce the 24 various products is a critical step in the -- in the 25 operation of end product pricing. In order to transfer, 26 you know, pricing information from the sold products back 27 to the value of milk, you have to do it through the 28 components. 195 1 Q. Okay. And in your statement and in questions and 2 answers up to this point, and probably for the next few 3 weeks, you used the term value and you used the term 4 price. What's the difference? When you use value, are 5 you referring to something different than price? 6 A. Well, under the current system, you know, the 7 price that farmers are paid for their Class III and 8 Class IV milk and not MCP orders is different from the 9 value that they -- that that milk actually has. 10 Q. Well, let's -- 11 A. But -- 12 Q. -- let's refer to all -- all circumstances. Let's 13 say, include MCP orders. Does value mean something 14 different than price? 15 A. In a perfectly competitive market that the 16 economists often start their economic -- you know, 17 economic 101 classes about, value equals price. But value 18 does not necessarily equal price under -- in a lot of real 19 world markets. You have to look at the particular 20 circumstances. 21 Q. Okay. Is the objective of transferring this price 22 discovery to determine, step one, the value of a product; 23 step two, the value of the components used to produce that 24 product; and then step three, transferring that to 25 establish the regulated price reflecting that value? 26 A. That should be the whole purpose of end product 27 pricing, and has been the objective of National Milk's 28 very intensive effort to come up with recommendations to 196 1 modernize the system. As I have emphasized at several 2 points in my testimony, it was to basically improve the 3 accuracy of that transfer process, which is becoming, you 4 know, with the static coefficients in many cases, becoming 5 increasingly outdated and causing disorderly -- increasing 6 disorderly marketing. 7 Q. Okay. And you are referring in the penultimate 8 paragraph at the bottom of the page, "factors in the class 9 price formulas." Again, you are referring to the factors 10 of value that are examined to produce a class price; is 11 that correct? 12 A. Are you still on page 2? 13 Q. I'm still on page 2, about ten lines up. The 14 second -- the paragraph -- the last full paragraph on the 15 page, second line, last words are "factors in the class 16 price formulas." 17 A. That's correct. 18 Q. Okay. And there you are referring to those 19 elements of value that are looked at to determine the 20 class price? 21 A. And that includes the component price formulas and 22 the skim milk price formulas. 23 Q. Okay. The class prices that are established 24 through this process are a multiple component class price, 25 correct? 26 There are two elements of multiple component 27 prices. One is pricing to handlers when you have a 28 Class III price that is based on protein, other solids; a 197 1 Class IV price that is based on solids and nonfat and 2 butterfat; or for cheese, butterfat components, protein 3 components, the other solids component. It's those 4 elements together that make a multiple component class 5 price. 6 A. Could you be more specific in how you are using 7 the term multiple component class price, please? 8 Q. For cheese, three components: Fat, protein, and 9 other solids. Those three components, you ascertain a 10 value to come up with a Class III price, correct? 11 A. Yes. If you are not using the term "multiple 12 component pricing" to refer to the multiple component 13 pricing mechanism for paying producers, then by, 14 themselves, the product price formulas are derived by 15 working through the value of the components and building 16 up to a -- to a milk price. 17 Q. Three components. Three is multiple, correct? 18 A. For Class III; three for Class II; and Class IV, 19 it is two. 20 Q. So, a handler receiving -- that makes cheese, 21 receiving 3.9% protein in milk, if that handler pays the 22 same price as a handler receiving 4.2% protein, somebody 23 has an advantage, somebody is not paying the full value, 24 correct? 25 A. If the handler receiving 4-point whatever it 26 was -- 27 Q. 4.2% versus 3.9%. 28 A. -- presumably will -- will achieve a higher value 198 1 from the products produced. As he pays the same price, 2 then he's getting a bit of an advantage over somebody's 3 who is paying the same price for lower testing milk. 4 Q. Right. Those handlers, assuming they make 5 identical products, do not have a uniform price for the 6 components they receive, do they? 7 A. Yes. If they are not required to pay for the 8 specific components they receive and are manufacturing 9 products from that milk, yes, they are not -- there's not 10 a uniform price being paid by processors under your -- 11 your assumptions there. 12 Q. Okay. When you used the term "multiple component 13 price" in response to some questions from Mr. Rosenbaum, 14 you were referring to the way producers are paid, not to 15 the way handlers are charged; is that correct? 16 A. That's correct. Because that was the sense in 17 which, Mr. Rosenbaum was using those terms -- 18 Q. Okay. 19 A. -- that term. 20 Q. Maybe. 21 And to muddy the waters a bit further, I'm looking 22 at page 3 in the paragraph that begins after the bold 23 print, bold print paragraph, bold print line number 19, 24 the first line says, "Implementation of all five 25 components of NMPF's comprehensive proposal." 26 You don't mean this word component to have 27 anything to do with milk component, do you? 28 A. No, I do not. You can substitute the word 199 1 constituents. 2 Q. Constituents. The English language is sometimes 3 imprecise. 4 Okay. Going over to the next page, in the middle 5 of the first full paragraph, right in the middle, there is 6 a sentence that begins, "Over the same period, USDA's 7 Economic Research Service" -- 8 See that? 9 A. Yes. 10 Q. Reported skim solids content of producer milk rose 11 from 8.72 to 9.03. 12 Is that the skim solids of milk at test? 13 A. Yes, because it's the average composition, and ERS 14 also reports average butterfat tests, which they get from 15 NASS. They use the same numbers as NASS. 16 Q. Okay. So if that's a rise in the skim solids of 17 milk at test, presumably it would be even a greater rise 18 in the skim portion of -- 19 A. Yeah. 20 Q. -- producer milk? 21 A. That's covered in the rest of that paragraph where 22 I say -- first of all, I give the raw reported numbers 23 from NASS and ERS on the respective tests of producer 24 milk, and then I translate that to the simple calculation 25 to corresponding tests of producer skim milk. That's in 26 the rest of that paragraph. 27 Q. Yes. Okay. 28 A. And I explicitly draw attention to the aspect of 200 1 that conversion from tests of producer milk at test to 2 producer skim milk by pointing out that the butterfat 3 content of the producer milk will affect the composition 4 of the producer skim milk because it affects, effectively, 5 the denominator. A lot of -- sometimes there's confusion 6 in that because we're talking about the composition of 7 producer skim milk; what does butterfat have to do with 8 that? Well, it affects it, as explained. 9 Q. Okay. Next paragraph. Beginning with "For 10 manufactured class prices." At the end of the second line 11 of the next paragraph, you refer to Class II, III, and IV 12 prices and pool values. 13 Again, my question has to be: Do you mean 14 something different when you use the word values compared 15 to when you use the word price in that context? 16 A. No. I'm simply referring to the Class II and III 17 prices per unit of skim milk, and the pool values are the 18 resultant total monies paid by processors for those three 19 classes, paid into the pools, at those per unit prices. 20 Q. On the aggregate value of the pool, not the unit 21 price for what goes into the pool? 22 A. The term "prices" refers to the unit values, and 23 the "pool values" refer to the portion of the total pool 24 value that is contributed by the processors of 25 Class III -- II, III, and IV. 26 Q. Okay. So that would be the aggregate of the value 27 of protein solids, nonfat, and other solids? 28 A. In those three classes. 201 1 Q. In those -- well, yes. 2 A. That's what that sentence is referring to. 3 Q. That's the only place that a contribution comes to 4 the pool in the form of a value for -- or price for 5 protein, solids nonfat, and other solids, would be in 6 these three classes? 7 A. You are correct. There's none of that value paid 8 in in the fat skim orders, and none of that is paid in on 9 Class I in all in any order. So the only component value 10 that's paid into the pools, as you are implying, on strict 11 component levels, is Classes II, III, and IV, in the 12 component pricing -- multiple component pricing orders. 13 Q. Okay. Turn the page, please, to page 5. 14 The first full paragraph beginning, "In the seven 15 orders with MCP"? 16 A. Uh-huh. 17 Q. And it goes on to say, "In the four orders without 18 MCP, producers have been increasingly underpaid for the 19 true value of their skim milk." 20 Now, let me paraphrase what I think you meant, and 21 you can tell me if I'm wrong in my interpretation. 22 The factors that evolved out of Federal Order 23 Reform, almost a quarter century ago, represent less 24 protein, less solids nonfat, less other solids, than are 25 in average milk in the non-MCP orders; is that correct? 26 A. That's correct. 27 Q. And -- 28 A. Today. 202 1 Q. And because of that, those producers have been 2 underpaid for the value of their product? 3 A. That's correct. 4 Q. Which wouldn't make a difference if it's going to 5 Class I. Or would it? 6 A. Well, we are proposing that the increased skim 7 milk composition -- component composition factors be 8 extended through the Advanced Class III and Class IV 9 pricing factors, via the mover, to be extended to Class I. 10 Q. I understand that. But it makes a huge difference 11 if it is going to Class II, III or IV, producers being 12 underpaid. 13 A. Well, I guess it depends on what you mean by 14 underpaid. 15 Q. Well -- 16 A. If a producer is producing milk, it goes -- who 17 knows where it goes. That milk when it leaves the farm 18 has an objective value. And -- and basically you could 19 say they are being underpaid for the value of all their 20 milk. 21 Q. So are you aware that, on occasion, milk with high 22 component levels originating in Appalachia or the 23 Southeast moves up into non-pool plants in -- 24 A. I don't know data on that, but since those markets 25 are milk deficit, and increasingly so, I would assume that 26 most of that milk stays in -- in that order, but if it's 27 particularly high test -- I'll defer that question again, 28 as I have done several, to Mr. Calvin Covington who has 203 1 great knowledge of those exact circumstances -- 2 Q. You would -- 3 A. -- like those you are asking. 4 Q. You would agree with me, however, would you not, 5 that if a producer or marketer can make an extra buck by 6 moving milk to a non-pool plant up north, a buck that 7 would not be available if it stayed in the south, that -- 8 that that -- 9 A. Theoretically, yes. Theoretically, the question 10 is, how many options in that milk def- -- to producers in 11 those milk deficit orders are there to ship their milk 12 greater distances, out of order, you know, those orders, 13 cover the transportation costs, and still make money by 14 doing so. 15 Q. Yeah. 16 A. That -- that is a data question that even USDA is 17 probably not collecting data for. 18 Q. The answer is, if they can make money, they will 19 do it, that's human nature. 20 A. Farmers generally are good at taking actions that 21 make them money. 22 Q. And that's true for any industry. 23 A. If they have the opportunity. 24 Q. Yes. 25 A. Now, whether or not there are cooperatives with 26 enough milk of that sort is available to put on a truck to 27 make an economic shipment to a distant plant, you know, 28 those are -- you know, we're starting to get into a lot of 204 1 hypotheticals here. 2 Q. Okay. Let me go back -- back to this underpaid 3 for true value. What else, if anything, did you mean when 4 you used the term "true value," other than it is not a 5 hardware store? 6 A. The true value is basically -- the true value 7 would be -- and I think like an economist, not necessarily 8 a marketer -- that milk that that farmer produces with 9 higher components has a higher value. 10 Now, you know, I agree that in terms of realizing 11 that higher value, you know, producers have an option, you 12 know -- or don't necessarily have an option to magically 13 be paid by some all -- you know, all powerful regulatory 14 agency what their milk is really worth. But the fact is 15 that the farmers are being underpaid in those orders under 16 the current formulas, and we are proposing to increase 17 them to where they should be now. 18 Q. Okay. In three or four places in your testimony, 19 including at the end of the second full paragraph, the one 20 that begins with number one on page 5, you use "disorderly 21 marketing conditions." 22 And that's a term that we like to throw around in 23 milk order hearings, but we almost never define it. So 24 what do you mean by disorderly marketing conditions in 25 this context? 26 A. Okay. I think number one pretty much describes in 27 general terms what we're talking about. And I appreciate 28 your -- you know, after a couple hours of 205 1 cross-examination finally leading to some of the -- back 2 to some of our arguments for why we need to increase the 3 skim milk component composition factors to achieve some of 4 the fundamental purposes of the Federal Order program, 5 which is to promote orderly marketing. 6 And when we have this growing disconnect between 7 the values, and particularly of Class I, and the value of 8 Class II, III, and IV, and multiple component pricing 9 orders, we have, you know, basically that classic 10 difference between Class I and the other class prices, 11 which is designed to ensure that an adequate supply of 12 milk is available for fluid consumption purposes. That 13 gets progressively undermined, and you have more and more 14 manufacturing milk being depooled, pretty much as I 15 provide in the capsule explanation under paragraph one. 16 Q. So I'm still not clear. Are you stating that 17 depooling milk is a disorderly practice? 18 A. That's the way it is generally understood. 19 Q. How do you -- how do you -- as an economist, 20 explain how that is true and why that is true. 21 A. Well, let me explain that as a -- as an employee 22 of a trade association that works for the benefit of dairy 23 farmers and their marketing cooperatives, I hear a lot 24 from dairy farmers that would indicate that depooling 25 is -- creates a disorderly marketing condition, creates 26 great unhappiness amongst dairy farmers where one, you 27 know, farm gets paid a certain price, and the farm not too 28 far away that ships to another handler in another order 206 1 that -- you know, where the pooling is different, that's 2 disorderly marketing. That creates unhappiness with the 3 Federal Order program. And -- 4 Q. And how is depooling contributing to that problem? 5 A. One of the fundamental purposes of the Federal 6 Order program, the fundamental reason we have pooling, is 7 to take the use of milk in a given marketing area, that 8 has different values in the different product production, 9 particularly Class I versus the manufacturing price -- 10 uses, and ends up with a market-wide pooling where 11 producers get paid the same price regardless of where 12 their milk goes. 13 You know, I have taught introductory marketing 14 regulation classes when I was at Virginia Tech about the 15 fundamental reason for Federal Orders. You create 16 market-wide pooling to create orderly marketing by 17 removing the incentive from any one group of dairy farmers 18 to try to undercut pricing in direct sales for Class I, 19 particularly to get that higher price. 20 The whole purpose of Federal Order pooling, one of 21 the foundations stones of Federal Orders, is to create 22 orderly marketing by paying producers the same uniform 23 price. Depooling undermines that fundamental purpose and 24 thereby creates disorderly marketing because uniform 25 pooling is designed to create orderly marketing. 26 Q. You are saying, I can paraphrase, that producers 27 located in the same area, not receiving a uniform or same 28 price, for the product of their labor, is disorderly? 207 1 A. It's been my experience that that is -- that 2 creates disorderly marketing, yes. 3 Q. That -- 4 A. And you will hear --you will hear other 5 testimony -- 6 Q. Okay. 7 A. -- following me on this issue that will make the 8 same case. 9 Q. Okay. 10 THE COURT: Yeah, my question too, Counsel -- 11 actually, Mr. Witness, is that disorderly marketing, or is 12 it creates something else that's disorderly? Let's cut 13 through this a little bit. 14 MR. VETNE: Is it disorderly or does it lead to 15 disorderly? 16 THE WITNESS: It is disorderly marketing. 17 THE COURT: Okay. 18 BY MR. VETNE: 19 Q. Okay. And I agree with you. The whole history of 20 the program is history of one farmer cutting another 21 farmer's throat for a better market and -- 22 A. That's why we have Federal Orders. 23 Q. So we create -- we create -- we created these 24 markets so that everybody would receive the same price and 25 there would be no reason to slash anybody's throat. 26 One of the things that would be accomplished under 27 NMPF proposal, as well as National All-Jersey's proposal, 28 is raising the price -- the skim milk price in -- in 208 1 Class I. 2 Would you agree with me that one of the current 3 disincentives for supplying milk from surplus markets to 4 the Southeast or Appalachian market, is that the low skim 5 value in the fat skim markets is a disincentive to provide 6 fluid milk to bottling plants in the Southeast? 7 A. Yes. And I basically made that case on page 5, 8 and others to follow me testifying to Proposal 1 will 9 provide additional support for that. 10 Q. All right. In response to -- in response to a 11 question from Mr. Rosenbaum, you said that a good reason 12 for applying the NMPF skim formula to the Southeast for 13 Class I, and maybe overpaying relative to half the 14 producers in the MCP markets, is that producers in the 15 Southeast markets have been underpaid for years. 16 Do you recall that answer? 17 A. Yes. Producers in the Southeast markets have been 18 underpaid for all their milk based on the fundamental 19 description, you know -- 20 Q. Okay. So is one of the -- 21 A. -- based on our proposal, yes. 22 Q. So is one of the purposes of your proposal to 23 capture back past losses? 24 A. No. We are proposing to increase -- again, USDA 25 has these formulas put in place during Federal Order 26 Reform. They had a purpose. They are outdated. We are 27 proposing to increase them to their currently appropriate 28 levels, not to go back and recapture, but to -- also to 209 1 provide a more regular mechanism for keeping them updated 2 in the future rather than having -- again, having to go 3 for many years where -- where the values of actual milk 4 increasingly outpace the static values that are in the 5 formulas. 6 Q. Yes. 7 A. The -- basically the current Federal Order 8 formulas do not really contain very many mechanisms for 9 kind of keeping those important factors updated on a more 10 regular basis without going through the -- you know, 11 basically a formal hearing. 12 Q. Okay. 13 A. And that's what we're proposing. Not recapturing 14 the past -- 15 Q. In that case -- 16 A. -- updating and continuing to update. 17 Q. In that case, maybe I misunderstood you, because I 18 understood that you thought an important element of this 19 was to -- for the fat skim markets, was because they have 20 been underpaid for so long, it didn't matter if they were 21 maybe overpaid a little bit now. 22 A. Well, the point is that they have been 23 increasingly underpaid. We are proposing that a change 24 needs to be made to address that. 25 Now, the Federal Order pricing formulas generally 26 need to be adopted on a nationwide basis. USDA made that 27 case very, very clear in the California promulgation 28 decision. There will be no special exemptions for, you 210 1 know, regional -- regional considerations in individual 2 orders. Federal Order will have -- in terms of the 3 fundamental product price formulas, will have the same 4 formulas nationwide. We accept that. We are not 5 challenging that provision. 6 And so if you adopt a nationwide standard, based 7 on nationwide data, you are going to have some situations 8 where some farmers are going to be overpaid, some are 9 going to be underpaid. 10 What I'm saying is that that issue compared to 11 the -- you know, basically the years of being 12 progressively underpaid, in my opinion, is a relatively 13 minor issue by comparison. I'm not saying that it is 14 designed to recoup those specific losses in the past, but 15 they are designed to be -- our proposal is designed to be 16 the best way to update those formulas. Again, USDA had 17 those factors and those formulas. They mean something. 18 We are proposing current values that make them mean the 19 most -- you know, basically the most logical thing now and 20 going forward. 21 Again, I was not implying that there's any 22 recouping of past -- past losses. 23 Q. Okay. The second full paragraph in the bottom, on 24 page 7, a little bit up, halfway up, more than halfway up, 25 you talk about "changes in the value of milk supplied by 26 producers to those processors." 27 What value has changed? 28 A. What we have been discussing all along, basically, 211 1 producers are producing consistently higher testing milk, 2 and in the cases that we have been discussing, they have 3 been progressively underpaid for that. 4 Q. Well, doesn't -- doesn't the marketplace take care 5 of value? 6 A. Not under the current regulatory system in the 7 Federal Orders where -- where basically producers are paid 8 the same value based on the outdated component 9 assumption -- skim milk component assumptions for their 10 milk that is increasingly more valuable. 11 Q. Well, there's -- 12 A. Maybe I'm failing to understand your question. 13 Q. No. Well, there's a regulated price -- if you 14 read Federal Order Reform decision, there was an 15 administrative determination that the regulated price 16 should be something less than the market price. In other 17 words, we don't regulate full value. We don't regulate 18 more than full value. We regulate something, safety net, 19 something to the close value. 20 A. If you are referring to the basic idea of minimum 21 pricing -- 22 Q. Yes. 23 A. -- that's correct. But I did not read that that 24 specific idea was built-in intentionally into the skim 25 milk component composition factors. 26 Q. Okay. But what -- what value to processors has 27 been increasing that processors have not paid for? 28 A. Well, that refers particularly -- again, this is 212 1 one of several criteria, not -- not designed for each and 2 every phrase in that thing to apply uniformly in all 3 cases. Processors of Class II, Class III, and Class IV 4 products in the class -- in the fat skim orders fit that 5 definition. And so that phrase was designed to refer 6 specifically to that part of the Federal Order system. 7 Q. Okay. So -- 8 A. It is not designed to -- basically, if you look at 9 that long sentence, it covers a series of misalignments 10 that apply in different cases, not -- each one of those 11 things I delineate is designed to apply everywhere to all 12 classes in all orders. 13 Q. Okay. So producers supplying Class II, III, and 14 IV processors in the fat skim Southeast Orders, three of 15 them, really haven't been paying what the product is 16 worth, and that's what you are referring to. 17 A. That's what that particular phrase in that 18 sentence refers to. 19 Q. Okay. And you are not referring to Class I 20 processors in that sentence? 21 A. Well, that's a more subtle question. 22 Q. That's -- that's a relationship between 23 manufacturing and a Class I question? 24 A. To a great extent, yes. 25 Q. Okay. And where does competitive or over-order 26 payments fit in this evaluation of underpayment or 27 overpayment? 28 A. What competitive over-order payments are you 213 1 referring to? 2 Q. I'm asking you. There's a mailbox price, and 3 there's a regulated price. There are competitive 4 premiums. There are negotiated premiums. There are -- 5 A. In the past there have been negotiated over-order 6 premiums, in Class I in the Class I markets, Class III in 7 the Class III markets. My understanding is those have 8 largely disappeared in -- in all cases. So -- so hence my 9 question, what -- what over-order payments specifically 10 are you referring to? 11 Q. I'm asking you if you know -- if your 12 understanding is that over-order payments have 13 disappeared, do you or does the subsequent witness intend 14 to put on any data suggesting that the only thing that's 15 not being paid is the federal minimum? 16 A. I can't answer that question in detail, and I 17 would refer that to the witnesses that are going to be 18 presenting, you know, more data and more fuller 19 explanations. 20 Q. Okay. 21 A. What I'm here to do is provide an overview of 22 our -- 23 Q. Thank you. 24 A. -- process and our general -- our general 25 argumentation. 26 Q. Okay. At the bottom of that same paragraph, the 27 last line, last full line, you use the word "structural 28 features." 214 1 Are you referring to the changes in composition of 2 producer milk at that point? 3 A. Among many other things. 4 Q. What are the other -- 5 A. I would -- 6 Q. What are the other structural features? 7 A. Okay. I would refer back to the middle paragraph 8 on page 2. The "market realities have subsequently 9 changed as the U.S. dairy industry has undergone dynamic 10 structural change since 2000, while the critical Federal 11 Order dairy product price formulas and Class I 12 differentials have, for the most part, remained static." 13 And "for example," okay, "for example," of 14 structural features, "the location of U.S. milk production 15 shifted westward, manufacturing and transportation costs 16 have increased significantly," "southeastern states have 17 become progressively more milk deficit," and so on and so 18 forth. 19 It's a term referring to the panoply of structural 20 features of the U.S. dairy industry that have changed that 21 have affected all aspects of the end product pricing 22 formulas. It is a general term because that section that 23 we're examining now is -- as you note, is headed by the 24 heading "economic and market impacts of NMPF's proposed 25 changes," and that refers to our whole package of proposed 26 changes, not just to the particular Proposal 1 on milk 27 composition. 28 Q. Okay. 215 1 A. This entire section is designed, again, to go back 2 to what I was talking about in section -- in the first 3 section, our overall process, our holistic approach to 4 examine -- examining all of the Federal Order pricing 5 formulas to determine what's working, what's not working, 6 what's outdated, what can we do, what are the most 7 important priorities to do to basically modernize those 8 formulas. 9 Q. Okay. And finally, believe it or not, in response 10 to several questions, I think from Mr. Rosenbaum, you 11 referred back to Federal Order Reform and said, for 12 whatever reason they put in these factors, they are not 13 working anymore, we need to update them. 14 A. In many cases, yes. 15 Q. I want to go back to the "for whatever reason" 16 part. If -- if we didn't have whatever that was in 17 federal reform, how would you approach it differently? 18 A. Well, I'm not suggesting revolutionary changes 19 here. I'm saying that during Federal Order Reform, there 20 was a fundamental change to the price discovery mechanism 21 of Federal Orders to relying on end product -- product 22 markets to transfer value through -- through formulas that 23 were to mimic the transformational process of raw milk 24 into those end product prices. That was a fundamental 25 change, and that's why I keep referring to Federal Order 26 Reform as a starting place because that represented a 27 fundamental change in how the Federal Orders operated and 28 how the pricing took place. 216 1 And as I have explained many times in the 2 testimony, those factors are generally static. They 3 are -- I can't think of a single Federal Order price 4 formula that has anything other than fixed coefficients. 5 The make allowances are fixed numbers. The yield factors 6 are fixed numbers in the formulas. The skim milk 7 composition factors that we're talking about now are fixed 8 factors. They have change- -- in many cases the Class I 9 differentials are fixed factors, in many cases. 10 They have -- they are basically set as fixed 11 formulas, with fixed numerical coefficients that are 12 designed to capture these relationships in a dynamically 13 changing industry, and therefore, those things need to 14 change from time to time. Some have changed. Make 15 allowances have been updated. Class I differentials have 16 been updated in a few orders. 17 But what we're suggesting is we need a more 18 fundamental update at this point, and where possible, 19 to -- to create some more automatic mechanisms for keeping 20 them updated in the future, such as that that we have 21 suggested and proposed in Proposal 1 for the skim milk 22 composition factors. 23 Q. Which is what NAJ proposes, too, to update. 24 A. We -- welcome your -- your support for the general 25 concept. 26 MR. VETNE: Thank you. 27 THE COURT: Cross by anyone else for this witness? 28 Yes. 217 1 MR. MILTNER: Ryan Miltner, counsel for Select 2 Milk Producers. 3 CROSS-EXAMINATION 4 BY MR. MILTNER: 5 Q. Dr. Vitaliano, I have to start with what I think 6 are relatively simple questions about the construction of 7 your statement that Mr. Vetne touched on, but I want to 8 make sure that I have this understood. 9 The first three pages of your testimony are what I 10 would describe as kind of an overview of National Milk's 11 proposals, all five of them? 12 A. Yes. And including a couple of them that were not 13 Federal Order regulatory. 14 Q. Okay. 15 A. Our process and the resulting package of 16 proposals, yes, you are correct. 17 Q. Great. 18 And then -- so beginning at the bottom of page 3 19 and really up through the bottom of page 6, that testimony 20 speaks directly to Proposal 1? 21 A. Correct. 22 Q. And then, thereafter, your testimony is more about 23 the totality of National Milk's proposal set up until the 24 bottom part of page 10? 25 A. Yes. That's correct. 26 Q. And then 10, 11, and 12 go -- 27 A. Go back to Proposal 1. 28 Q. Just the regulatory text for Proposal 1? 218 1 A. Yes. 2 Q. Okay. Great. 3 A. The purpose of that was to basically -- there was 4 no overall, you know, overview, segment on the proposed 5 agenda. But I did want to get some testimony in about our 6 process, all the proposals together as a package. And 7 there will be some testimony, again, by Dr. Scott Brown on 8 the impact of this proposal. But you are correct in 9 interpreting what my statement, how it was structured. 10 Q. Thank you. And as someone who's got a client with 11 three proposals, I understand kind of that dance that has 12 to be done. 13 Do you intend to testify at all on other proposals 14 throughout the hearing? 15 A. Yes. I intend to be the lead-off, setup witness, 16 whatever you want to call it, for the other four National 17 Milk proposals at this proceeding. I will summarize those 18 two sections, 1 and 4, and not -- they will be introduced 19 in my testimony for those other four issues as they are 20 here, but I will not take time in this proceeding to read 21 those into the record. This -- this -- those two sections 22 will be read into the record in this testimony one time, 23 and they will be then just referred to briefly in passing. 24 And my subsequent testimony will focus primarily on that 25 section that will apply specifically to those other four 26 proposals and the proposed regulatory language. And they 27 will be much shorter testimony. 28 Q. Great. That will help me cull through some 219 1 questions, then, and we'll reserve those for the other 2 proposal -- 3 A. Yes, you will have opportunities to question me 4 again on the other four proposals. 5 Q. All right. And just a few things here that I do 6 want to touch on. I'm looking at page 2 of your 7 statement, and it's -- it's toward the middle. The 8 paragraph that begins with "Those market realities." 9 A. Yes. 10 Q. Okay. In the middle of that paragraph you have 11 written and stated: "The industry has seen the successful 12 deployment of very large manufacturing plants." 13 And I wondered if -- if you had any further 14 context about how those large manufacturing plants and 15 their successful deployment have -- have influenced 16 National Milk's proposals? 17 A. They have basically altered the balance of -- 18 depending on the ownership of those plants, kind of what I 19 as an economist would call kind of the market power 20 balance between processors and groups of producers. 21 But again, this is basically a list put together 22 by our group of people of all of the different factors 23 that have resulted in change in the industry, that the 24 industry -- the point is basically that the industry is 25 changing structurally and the Federal -- the Federal Order 26 end product pricing formulas and their coefficients have 27 largely remained static and are increasingly not 28 reflecting that change dynamic. 220 1 In our -- in National Milk's proposals and our 2 test- -- my testimony and all of our other, you know, 3 witnesses testifying in support of National Milk's 4 testimony, they will be focusing only on the proposals we 5 adopted and how those -- the specific structural changes 6 have -- are pertinent to the proposed changes that we are 7 bringing to this hearing. 8 We're not pretending to teach an introductory 9 class on how the federal -- how the U.S. dairy industry 10 has changed in totality over the years. This is basically 11 a scene-setting statement. And we will be focusing in 12 particular on our specific proposed testimony in support 13 of our proposals on those features that have changed that 14 are directly -- pertain directly to the proposals we are 15 advocating. 16 Q. In that same sentence when you use the term 17 "manufacturing plants," are you -- are you restricting 18 that definition to what I think most of the industry 19 considers, manufacturing like Class III and IV plants, 20 maybe II? 21 A. It could be interpreted that way, but I would look 22 at it more generally. Basically any -- any -- any plant 23 that man- -- that produces a dairy product from raw milk. 24 Q. Including a Class I plant? 25 A. It could -- it could be extended to Class I 26 plants. It is not a precise statement that has, you know, 27 implications for particular products. 28 Q. And in the following paragraph, you -- you refer 221 1 to the yield factors and the component formulas and state 2 that they have become increasingly outdated. 3 Are there any particular yield factors that you 4 are referencing in that? 5 A. No, it's a general statement. We looked at the 6 yield factors. We looked at available studies. But we 7 determined in our fairly comprehensive look at what 8 information was available to bear on which factors have 9 become outdated. 10 We found very little data on yield factors. So 11 we're not proposing that they are necessarily outdated, 12 but they -- we do not know. That's why in our interest in 13 securing legislative authority on the Farm Bill, that's 14 not a -- that's not an issue pertinent to this hearing 15 but -- directly, we are proposing -- as I will testify 16 later on the make allowances -- we are proposing to 17 basically establish legislative authority for USDA to do 18 mandatory audited cost studies so that we will basically 19 get the kind of data on both make allowances and yield 20 factors to, you know, basically, more effectively 21 implement currently appropriate levels for those important 22 component -- coefficients in the component pricing 23 formulas. 24 Q. And I'll reserve more questioning on that for when 25 the make allowances come up. But I want to make sure that 26 I have understood. 27 In the statement, it says, "the yield factors in 28 the component formulas, the assumed composition of 222 1 producer milk, as well as Class I differentials, have 2 become increasingly outdated." 3 I think I heard you say that your task force 4 concluded that they weren't certain if the yields were 5 outdated. So -- 6 A. We're not certain. 7 Q. Okay. 8 A. It is -- given the fact that manufacturing 9 operations have become more efficient, we would suspect 10 that with proper data we would find that those yield 11 factors have -- have changed. And I'm aware that Select 12 Milk has proposals that is, basically, substantiating that 13 fact, in effect. But the point is that, as I will get to 14 when we deal with make allowances and the yield factors, 15 we need better data. 16 Q. I think my last question on this page, at least, 17 and not to get too deep into particular word choice or 18 things like that, but the paragraph in -- that follows the 19 one we were just looking at, in the last line, says, 20 "effective administration of the Federal Order program has 21 become increasingly difficult." 22 Other than the -- your previous testimony about 23 disorderly marketing and how we define that, is there 24 anything specific you mean to reference there about how 25 administering the orders has become difficult? 26 A. No. It -- it kind of refers to the general -- you 27 know, the general sense of increasing disorderly marketing 28 because of that fundamental disconnect, goes back to the 223 1 fundamental purpose of what we're doing. The industry has 2 changed. The fixed factors in the pricing formulas have 3 not. They need to be updated to conform to the current 4 reality in the industry. That's what that refers to. 5 Q. But in terms of the mechanical operation of the 6 order and things like that -- 7 A. Yeah. 8 Q. -- okay, you weren't trying to -- to pull that 9 concept in then. 10 On page 6, the paragraph at the top of the page, 11 you describe the intent and then regulatory language in 12 Proposal 1. They would delay implementation for 13 12 months, and you cite risk management programs by both 14 producers and handlers as the reason for doing so. 15 Will any of the other National Milk witnesses 16 speak more to this issue of risk management and why the 17 proposal is constructed in that manner? 18 A. Yes. We will have a witness that will speak 19 exclusively to that issue in connection with Proposal 1. 20 Q. Are you aware of -- how many Federal Order 21 hearings have you had the chance to testify at or be a 22 part of? 23 A. This is my second one. National Milk rarely, 24 rarely testifies in Federal Order hearings. Only those 25 that are entirely national in scope. National Milk does 26 not get involved in any regional, individual order 27 hearings. We have -- you know, that is basically the 28 responsibility of their member -- our members, and that's 224 1 their preference. We only get involved -- in all the 2 years I have spent at National Milk, we have been -- 3 National Milk has only been involved in four national 4 hearings. I have -- including this one. 5 I will have testified -- or already have -- 6 testified in two of those, and two of those were handled 7 by somebody who was on our staff, Mr. Roger Cryan, who is 8 in the audience, now the chief economist for the American 9 Farm Bureau Federation. He handled the other two that 10 came up while he was in our employ. And so, again, the 11 set of Federal Order hearings that National Milk directly 12 gets involved in is very small, four in almost 40 years. 13 Once every ten years on average. 14 Q. And I realize that now I have been at all four of 15 those. So I'm not sure how that makes me feel. 16 A. Join the club. 17 Q. Well, my question, which I'll slightly rephrase 18 then, assuming -- or having assumed you had been to more 19 of these hearings, are you aware of any other time where a 20 Federal Order proposal or a Federal Order regulation was 21 delayed in implementation for purposes of risk management? 22 A. I'm not aware of that. But I would say that the 23 growing importance of risk management is something that we 24 feel and -- well, I have a witness testifying to this in 25 more detail -- is something that is increasingly 26 intertwined with the effective operation of Federal 27 Orders. And so this may be a first, but again, I would 28 say that I -- I don't have an encyclopedic knowledge of 225 1 things of this sort in the past, but my guess is that this 2 may be a first, yes. 3 Q. As an economist and your work with National Milk, 4 are part of your duties monitoring the futures markets? 5 A. I monitor the futures markets. Not -- we do not 6 market milk, obviously, so we have no need to -- to do 7 practical risk management, you know, for bottom line 8 purposes. But I closely monitor the futures markets for 9 the purpose of making price forecasts, which are quite 10 popular amongst farmer audiences and processor audiences. 11 Q. When you -- when you construct those price 12 forecasts, how far would you be looking out when you are 13 constructing those? 14 A. The open interest in the dairy futures falls off 15 with time. I would say that there's -- it is still pretty 16 robust out to 12 months and -- do you know the order -- 17 the futures go out 24 months. It tends to fall off more 18 quickly after you get to a year out. 19 Q. And have you observed or studied the volatility of 20 far-out futures versus close-in futures? 21 A. Not -- no, I'm not a detailed student of Federal 22 Order -- of futures prices. I use the current futures 23 prices for price and, you know, margin forecasting 24 purposes, but I'm -- I don't consider myself an expert in 25 understanding how the futures operate in -- in that sort 26 of fine scale sense that you just asked. 27 Q. Do you -- do you find that the futures markets 28 price in any amount of regulatory uncertainty, especially 226 1 in far-out contracts? 2 A. I assume that the -- that the futures markets take 3 all the available information and -- and synthesize it 4 into -- you know, into their forecast. It's a -- it is a 5 joint process of all of the people who take positions. 6 I have -- the one thing I have studied is that the 7 few instances that I have observed where the futures 8 markets have not taken some important information into 9 account are areas in which I have successfully outguessed 10 the futures. Now, I don't -- I don't do that often 11 because I don't consider myself to be -- have knowledge 12 superior to all the people who are taking positions in the 13 futures and, therefore, determining the futures prices. 14 But there have been a few instances in which a key 15 piece of information, mostly having to do with the export 16 markets, which had not been thoroughly followed in 17 previous years -- that's changing, has changed -- where a 18 key piece of information, such as China's massive 19 purchasing of imported dairy product, particularly whole 20 milk powder, in 2013-2014 period, following their massive 21 restructuring in the -- in the wake of the melamine 22 crisis, I was able to successfully outguess the futures 23 markets at that point. 24 So they sometimes miss something important, but 25 not very often. I will use the futures markets for my 26 predictions in almost all cases because I think that 27 distills the best wisdom of taking into account all 28 factors, presumably including regulatory factors. 227 1 I'm not aware of any detailed studies that parse 2 out the extent to which the futures markets countenance, 3 regulatory issues versus weather issues versus, you know, 4 other issues that affect prices. All I know is that in my 5 limited experience I have had a few occasions when I have 6 been able to notice that the markets have missed a 7 critical piece of information and that has -- has badly 8 skewed those forecasts. Doesn't happen too often. 9 Q. Information that would -- was available, just not 10 recognized by the markets? 11 A. Available, if you knew how to use it, and not 12 recognized by the markets. 13 Q. So our markets aren't perfectly efficient after 14 all, huh? 15 A. Based on my experience, they are pretty good. But 16 nothing is perfect in this world. 17 MR. MILTNER: I don't have anything further. 18 Thank you. 19 THE COURT: Very well, Counsel. Thank you. 20 Any further cross? 21 Okay. We've got two more cross-examiners. 22 How many minutes do we have here? It is ten 23 minutes after 5:00, which is -- 24 MR. ENGLISH: Your Honor, I mean, if we are 25 starting at 8:00 a.m., I'm going to say we got to stop -- 26 if we're going to be efficient at all starting at 27 8:00 a.m., we've got to stop today. I can tell you that 28 using overnight my cross-examine will be significantly 228 1 shorter. But if you want me to start, I will start, but 2 we're going a couple of hours. 3 THE COURT: Well, if you could make it shorter 4 overnight, that is persuasive, Counsel. 5 MR. ENGLISH: I sort of thought it might be, your 6 Honor. 7 THE COURT: I vote for the back, and the same 8 thing. I think -- I think we've probably had enough 9 today, so we'll carry this witness over for further cross 10 and for Ms. Hancock to do some redirect if she chooses 11 tomorrow. 12 Yes, Mr. English. 13 MR. ENGLISH: Your Honor, if I may -- 14 THE COURT: You may. 15 MR. ENGLISH: -- and I know it was our first day, 16 but at the California hearing we tried very hard, as 17 collaborative people with some differences, to at least 18 understand the schedule a little bit. And I'm not saying 19 we need to do it every day, but since this is the first 20 day, it would be helpful to just have an idea of how many 21 witnesses as we try to get people. I know we have the 22 USDA witness. I certainly know some of the submitted 23 testimony, but I'm not sure how many of those witnesses 24 are tomorrow or not, I mean, in terms of order. 25 So it would be helpful for us, I think, and I 26 promise to do the same when it's, you know, when we're 27 ready. So I think if we can share that information, we 28 might have a better idea of what we need to do tomorrow 229 1 and Friday. 2 THE COURT: Are you proposing we have a discussion 3 of that now? 4 MR. ENGLISH: I would like to -- we can do it off 5 the record. We don't have -- 6 THE COURT: I was going to suggest. I don't think 7 this -- 8 MR. ENGLISH: Yeah. 9 THE COURT: Does that work for AMS? I mean, since 10 we're all in the same room, that obviates any ex parte -- 11 MR. ENGLISH: Well, we're not talking about 12 substance, we're only talking about who the witnesses are. 13 THE COURT: I understand. 14 MR. HILL: That works for us, yes. 15 THE COURT: Okay. So let's go off. 16 Ms. Hancock rises. 17 Did you have something to say? 18 MS. HANCOCK: We can go off the record. 19 THE COURT: We can go off the record now. I'll 20 ask the hearing reporter to hang around in case we have to 21 put something on the record at then end of these 22 discussions, we may not. 23 (Whereupon, the proceedings concluded.) 24 ---o0o--- 25 26 27 28 230 1 STATE OF CALIFORNIA ) 2 ) ss. COUNTY OF FRESNO ) 3 4 I, MYRA A. PISH, Certified Shorthand Reporter, do 5 hereby certify that the foregoing pages comprise a full, 6 true and correct transcript of my shorthand notes, and a 7 full, true and correct statement of the proceedings held 8 at the time and place heretofore stated. 9 10 DATED: September 1, 2023 11 FRESNO, CALIFORNIA 12 13 14 15 16 17 MYRA A. PISH, RPR CSR Certificate No. 11613 18 19 20 21 22 23 24 25 26 27 28