I. Finding

    What level of prices will assure that producers receive a price
sufficient to cover their costs of production and will elicit an
adequate supply of milk for the inhabitants of the regulated area and
for manufacturing purposes.\1\
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    \1\ The Compact Commission has determined that the findings here
required need not contain any determination with respect to the
provision of milk supplies utilized for manufactured purposes. Under
current circumstances, the Compact Commission is authorized to
regulate only the price of milk used for fluid consumption. See 7
U.S.C. Sec. 7256(2) (``The Northeast Interstate Dairy Compact
Commission shall not regulate Class II, Class III, or Class III-A
milk used for manufacturing purposes or any other milk, other than
Class I fluid milk, as defined by a Federal milk marketing order
issued under 7 U.S.C. Sec. 608c of this title, reenacted with
amendments by the Agricultural Marketing Agreement Act of 1937.'')
The Commission has concluded that the finding provision with regard
to milk used for manufactured purposes stems from the Compact's
alternative authority to regulate that additional milk supply with a
Commission marketing order. See Compact, Article IV, Sec. 9(c).
Under the Compact, however, this authority could be utilized only in
the event the federal Market Order System is eliminated. See Compact
Article IV, Secs. 9(a) and (c). This is not presently the case.
Morever, this residual authority was struck by the Congress when it
approved the Compact. Pub. L. 104-127(2). Accordingly, because the
Commission has authority only to regulate the price of milk used for
fluid milk purposes, its findings only deal with fluid milk supply
and consumption issues.
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    This finding requires consideration of the core issues regarding
the financial health of the region's dairy farmers and the Compact's
associated purpose of assuring the region's adequate supply of milk.
More specifically, this finding requires the Commission to make a
determination of the price level necessary both to ensure the
continuing financial viability of New England dairy farms and to elicit
an adequate supply for the region's fluid, or milk beverage,
consumption.
    Section 9(e) of the Compact provides guidance to the Commission
with regard to the factors to be considered in analyzing the cost of
production issue. That section directs the Commission.

to consider the * * * costs of production including, but not limited
to the price of feed, the cost of labor including the reasonable
value of the producer's own labor and management, machinery expense,
and interest expense. Section 9(e) also guides this inquiry by
requiring the Commission to consider ``the price necessary to yield
a reasonable return to the producer and distributor.

    Based upon this statutory guidance, the Commission sought testimony
and comment on the following subjects and issues:

    (1) Farmer costs of production, including the components
identified by Compact Section 9(e), and the pay price needed to
yield a reasonable rate of return to producers; and
    (2) Prevailing pay prices received by dairy farmers in the New
England region; and
    (3) The balance between production and consumption of fluid milk
products.\2\
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    \2\ 61 CFR 65604.
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