Section 70. Classification and allocation of milk, computation of sales and shrinkage

This section shall apply to all established marketing areas and all milk and dairy products handled by distributors and shall be presumed to come within the jurisdiction of the approving authority unless proven otherwise by records of the distributors.

A. Classification.

1. Class I milk shall include all skim milk and butterfat in fluid form, including aseptically processed and packaged ultra high temperature pasteurized products (UHT) for human consumption in approving authority defined markets, which is not accounted for as Class II milk, provided that any fluid milk products fortified with added nonfat milk solids shall be Class I in amount equal only to the weight of the equal volume of like unfortified products of the same butterfat content. Eggnog is classified as a Class I product.

2. Class I-A milk shall include all fluid milk products identified in subdivision 1 of this subsection and sold for fluid human consumption in areas other than approving authority defined markets.

3. Class II milk shall include all skim milk and butterfat:

a. Used to produce sterilized products, other than those identified in subdivision 1 of this subsection, butter, cheese (including cottage cheese), yogurt, plastic and frozen cream, sour cream, dips, dry milk (skim or whole), condensed milk (skim or whole), ice cream, ice milk, and frozen desserts, or ice cream, ice milk or frozen dessert mixes, including basic mixtures for use in preparation of ice cream, ice milk, frozen desserts, or ice cream or frozen dessert mixes. All cream sales containing more than 10% butterfat, including half and half cream, light cream and heavy cream.

b. Disposed of for animal feed.

c. Contained in inventory of fluid milk products on hand at the end of the month.

d. Disposed of in bulk to any commercial food establishment for use on the premises in the production of soup, candy, bakery products, or any other nondairy food products.

e. In shrinkage of skim milk and butterfat, respectively, as computed pursuant to subsection B of this section, but not to exceed the following:

(1) Two percent of producer milk received at the distributor's plant, plus

(2) Two percent of milk received at the distributor's plant in bulk tanks from other distributors exclusive of the quantity for which Class II utilization was requested, less 2.0% of milk moved in bulk tanks to another distributor.

f. In shrinkage of skim milk and butterfat, respectively, prorated to other source milk in accordance with subsection B of this section.

4. Skim milk or butterfat contained in any fluid milk products dumped shall be Class II provided that the distributor dumping fluid milk products shall give the agency, during normal office hours, not less than four hours advance notice of his intention to dump such fluid milk products and the quantities to be so disposed.

5. Skim milk and butterfat in fluid form transferred by a distributor to another distributor shall be classified as follows:

a. Skim milk and butterfat in packaged fluid milk products shall be classified as Class I-A or Class I in accordance with the requested and agreed upon classification by the transferring and receiving distributors, provided that:

(1) The skim milk and butterfat so assigned to each class shall be limited to the appropriate class utilization remaining in the plant of the receiving distributor after computations have been made according to subsection D of this section; and

(2) Other source milk in the transferring plant is not allocated to Class I as a result of such classification of transferred milk.

b. Skim milk and butterfat in bulk fluid form shall be classified as Class II, provided that:

(1) The skim milk and butterfat so assigned to each class shall be limited to the appropriate class utilization remaining in the plant of the receiving distributor after computations have been made according to subsection D of this section; and

(2) Other source milk in the transferring plant is not allocated to Class I as a result of such classification of transferred milk.

c. Skim milk and butterfat in bulk fluid form shall be classified as Class II milk if transferred by a distributor to a plant which is not licensed as a distributor by the approving authority.

d. Skim milk and butterfat in packaged fluid form shall be classified as Class I-A if transferred to a fluid milk plant which is not licensed as a distributor by the approving authority.

6. Shrinkage in excess of that allowed to be classified as Class II in accordance with subdivision 3 e of this subsection shall be prorated over a distributor's Class I and Class I-A sales as follows:

a. Compute the total excess shrinkage of skim milk and butterfat, respectively, by subtracting the total amount of skim milk and butterfat classified as Class II under provision of subdivisions 3 e and f of this subsection, from the total shrinkage as determined in accordance with subdivision B 1 b of this section.

b. Prorate skim milk and butterfat excess shrinkage, respectively, obtained in subdivision 6 a of this subsection between (i) skim milk and butterfat sold in Class I products and (ii) skim milk and butterfat sold in Class I-A products.

B. Computation and allocation of shrinkage. Shrinkage shall be allocated over a distributor's receipts from all sources as follows:

1. Compute the total shrinkage of skim milk and butterfat, respectively, by subtracting the total amount of skim milk and butterfat accounted for from the total amount of skim milk and butterfat to be accounted for; and

2. Prorate skim milk and butterfat shrinkage, respectively, obtained in subdivision 1 a of this subsection, between (i) skim milk and butterfat in producer receipts as defined in 2VAC15-20-10 and (ii) skim milk and butterfat contained in other source milk as defined in 2VAC15-20-10.

C. Computation of skim milk and butterfat in each class.

1. For each month the total pounds of skim milk and butterfat utilized in each class shall be reported by each distributor to the agency on forms specified by the agency.

2. Computation of skim milk and butterfat used in each classification shall be made in accordance with the conversion factors specified by the approving authority on the forms used for computation and reporting of utilization provided that in the case of products not listed on these forms, the conversion factor used by a distributor shall be approved by the approving authority.

3. If any of the water contained in the milk from which a product is made has been removed before the product is received, utilized or disposed of by a distributor, the pounds of milk to be accounted for shall be the weight of the total milk solids in the product plus all of the water originally associated with the solids.

D. Allocation of skim milk and butterfat utilized.

1. Skim milk shall be allocated as follows:

a. Subtract from the total pounds of skim milk in Class II the pounds of skim milk classified as Class II under subdivision A 3 e of this section.

b. Subtract from the total pounds of skim milk in each class, in series beginning with Class II, the pounds of skim milk in the inventory of fluid milk products on hand at the beginning of the month, and the pounds of skim milk in beginning inventory that was subtracted from Class I the preceding month.

c. Subtract from the remaining pounds of skim milk in each class the pounds of skim milk in Class I-A requested products received in packaged form from other distributors as follows:

(1) From Class I-A, the lesser of the pounds remaining in Class I-A, or such receipts; and

(2) From Class I, the remainder of such receipts, with reclassification of this quantity in the transferring plant.

d. Subtract from the remaining pounds of skim milk in each class the pounds of skim milk in Class I requested products received in packaged form from other distributors as follows:

(1) From Class I, the lesser of the pounds remaining in Class I, or such receipts; and

(2) From Class I-A, the remainder of such receipts, with reclassification of this quantity in the transferring plant.

e. Subtract, in the order specified below, from the pounds remaining in each class, in series beginning with Class II, next Class I-A, and then Class I, the pounds of skim milk in each of the following:

(1) Other source milk in a form other than that of a fluid milk product.

(2) Receipts of fluid milk products from a producer-distributor.

(3) Other source milk in the form of fluid milk products.

(4) Receipts of fluid milk products in bulk from other distributors; however, if the pounds remaining in each class are less than the quantity of bulk milk remaining to be allocated, then the remaining quantity must be subtracted from the next highest use classification with reclassification of this quantity in the transferring plant.

(5) Receipts of fluid milk products from other distributors not already allocated.

f. Add to the remaining pounds of skim milk in Class II the pounds subtracted pursuant to subdivision 1 a of this subsection.

g. If the pounds of skim milk remaining in all classes exceeds the pounds of skim in producer milk, subtract such excess from the pounds of skim milk remaining in each class in series beginning with Class II. Any amount so subtracted shall be known as "overage."

h. Add to Class I the pounds of skim milk in beginning inventory that was subtracted from Class I the preceding month.

2. Butterfat shall be allocated by the same method specified for skim milk in subdivision 1 of this subsection.

3. Combine the amounts of skim milk and butterfat determined in accordance with the procedures specified in subdivisions 1 and 2 of this subsection into one total for each class and determine the weighted average butterfat content of producer milk in each class.

E. Allocation of classified sales.

1. Producer milk classified as Class I shall be allocated to base deliveries to the extent that base deliveries are available. Producer milk classified as Class I that exceeds base deliveries shall be allocated to excess deliveries.

2. Producer milk classified as Class I-A and Class II shall be allocated to excess deliveries to the extent that excess deliveries are available. Producer milk classified as Class I-A and Class II that exceeds excess deliveries shall be allocated to base deliveries.

3. Producers or cooperative associations shall be paid a base price for base deliveries and an excess price for excess deliveries computed monthly for each distributor in accordance with the following procedure:

a. To determine the excess price for 3.5% milk, add to the value obtained by multiplying the excess deliveries allocated to Class I-A and Class II by the Class II price for 3.5% milk, the value obtained by multiplying the excess deliveries allocated to Class I by the Class I price for 3.5% milk and divide the sum by the total excess deliveries.

b. To determine the base price for 3.5% milk, add to the value obtained by multiplying the base deliveries allocated to Class I by the Class I price for 3.5% milk, the value obtained by multiplying the base deliveries allocated to Class I-A and Class II by the Class II price for 3.5% milk and divide the sum by the total base deliveries.

4. Delivered base shall be determined in accordance with the following:

a. Delivered base for deliveries made in accordance with 2VAC15-20-50 B shall be the assigned base unless deliveries are less than assigned base. When deliveries are less than the assigned base, the delivered base shall be 92% of deliveries.

b. Delivered base for deliveries made in accordance with 2VAC15-20-50 C shall be the lesser of assigned base or deliveries.

5. Excess deliveries for producers or cooperative associations shall be the difference between total deliveries and delivered base.

6. If a producer or cooperative association fails to make delivery of milk or delivers milk which is not merchantable or does not meet the requirements of the health authorities having jurisdiction in the market, the base of that producer or cooperative association shall be reduced by a percentage. That percentage shall be determined by dividing the number of days which the producer or cooperative association failed to make delivery of acceptable milk by the number of days in the delivery period.

Historical Notes

Derived from VR475-02-02 § 7, eff. July 1, 1974; March 1, 1975; October 1, 1975; March 1, 1976; April 1, 1977; July 1, 1977; September 2, 1978; March 1, 1979; May 1, 1980; January 1, 1981; August 1, 1981; May 1, 1982; December 1, 1982; September 1, 1983; September 1, 1984; October 15, 1984; August 1, 1985; May 1, 1987; July 1, 1987; March 1, 1988; September 1, 1988; March 1, 1989; July 1, 1989, February 1, 1990; March 1, 1990; June 1, 1990; September 1, 1990; May 1, 1991; August 1, 1991; November 1, 1991; December 1, 1991; amended, Volume 16, Issue 09, eff. January 1, 2000.

Statutory Authority

§ 3.2-3204 of the Code of Virginia.