1. Surplus Production

Compact Requirement
    Compact Section 9(f) provides that ``when establishing a Compact
over-order price, the Commission shall take such action as necessary
and feasible to ensure that the over-order price does not create an
incentive for producers to generate additional supplies of milk.''
    Compact, Article IV, Sec. 9(f).
    Accordingly, the Compact Commission sought comment on:

    The appropriate, necessary and feasible, action to take, as
required by the Compact, to ensure that Compact Over-order Price
Regulation does not result in additional supplies of milk.\110\

    \110\ 62 CFR 12252.
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    The Commission concludes that specific action is not necessary at
the present time in light of the limited duration of the price
regulation established by this rule. The Commission draws this
conclusion from actual and projected data of regional and national
production levels,\111\ which indicate it is most unlikely that
additional supplies of milk will be produced by New England as a
region. The Commission also concludes from the testimony of farmers
about their production planning decisions that it is unlikely
individual farmers will make decisions to increase production based
upon imposition of this price regulation.
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    \111\ See discussion, infra, of CCC purchase requirement.
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    The record contains abundant evidence demonstrating that farmers
plan their activities based on the anticipated long-run rather than
short-range changes in market structure. As cited previously, one dairy
economist

[[Page 23054]]

testified that price fluctuations and market instability ``makes it
very difficult for farmers to effectively plan and make the type of
investment necessary to position themselves for the future.'' \112\ Jim
Jenks, a dairy farmer from Vermont, echoed these sentiments. He
testified, in essence, that the instabilities in the prices and in the
market structure made such an investment too risky of a proposition to
pursue. ``[I]f we're going to make a good decision with respect to
putting my family's equity on the line, we need to know something about
the stability of our markets and our future.'' \113\
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    \112\ Smith, 12/17/96 HT at 38.
    \113\ Jenks, 12/17/96 HT at 153.
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    Similar sentiments were expressed by Charlie Telly, a dairy farmer
from Massachusetts. ``It is difficult for me to plan out--to
financially plan out my future three, five or ten years in advance
because of the uncertainty I face each month with the ever changing
milk price.'' \114\
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    \114\ Telly, 12/19/96 HT at 123.
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    Combined with the statistical data of the lack of probability of
region-wide production increases, this individual testimony leads the
Commission to conclude that a price regulation of limited duration
likely would not affect production behavior within the meaning of
Section 9(f).\115\
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    \115\ The rule's intended benefit regarding the maintenance and
stabilization of the milkshed relates to promoting the viability of
farming units rather than the promotion of increased production. It
is expected that the rule will promote this benefit, despite its
limited duration, by serving as a basis for existing producers to
remain in production.
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