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Federal Register / Vol. 86, No. 167 / Wednesday, September 1, 2021 / Rules and Regulations product wholesale market prices. Under a FMMO, regulated processors are required to pay at least minimum classified values for how they use their milk.
For processors purchasing and processing fresh fluid milk products raw milk, skim milk, cream, or concentrated fluid products, the DDP
will reimburse for the FMMO-minimum classified value applicable on the date of production for fresh fluid milk products used to make the donated eligible dairy product. FMMO prices are a good approximation of what the processor paid for the fresh fluid milk products because they represent observed market values paid for product at the time of purchase. The DDP will not reimburse for powders and other dry dairy products used as an ingredient in eligible dairy products for example, powder used to fortify cheeses or ice cream.
Reimbursement is not extended to these ingredients because the DDP is designed to encourage the use of excess fresh fluid milk for donation, rather than being dumped. Dry milk powders in retail packaging, such as 10-ounce containers of nonfat dry milk, which are made directly from fresh fluid milk, are considered eligible dairy products under this program as it is likely surplus fresh fluid milk was manufactured into dry milk powder as opposed to being dumped.
Since FMMO-minimum classified prices are on a hundredweight basis, the EDO will report its donation in the quantity and size of the donated product, which will be converted to hundredweights with a yield factor how much product can be made from 100 pounds of milk. Applicable announced minimum class skim and butterfat prices will be used in determining the input cost of the donated dairy product. The EDO will have the ability to provide its actual product yield factor or the EDO can use a standard yield factor. Standard yield factors will be posted on the Dairy Donation Program website.
Processors buying bulk dairy commodity products for further processing and donation, as described earlier, will be reimbursed at the classified use value applicable for the month the eligible dairy product was processed in the consumer-type package. The reimbursed value will represent the milk-equivalent market price of the bulk dairy product at the time of conversion into an eligible dairy product.

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4 Manufacturing Costs Processors incur expenses beyond input costs to make dairy products. To encourage dairy product donations, the DDP will reimburse for some of the costs to convert fresh fluid milk product into an eligible dairy product.
Manufacturing costs will be reimbursed at the make manufacturing allowance levels in the FMMO system, which are generally accepted by the industry as representative costs of manufacturing dairy products from raw milk. For Class I and II, the Class IV
make allowance contained in the Class IV price formula will be applied. AMS
lacks data on manufacturing costs for Class I and II products and therefore selects the lower of the two FMMO
make allowances to ensure processors are not reimbursed for more than their actual manufacturing costs. As Class I
and II products require different processing, the actual manufacturing costs could be higher than the Class IV
manufacturing allowance. This rule seeks public comment and supporting data related to actual manufacturing costs for Class I and II products. For Class III and IV products, the manufacturing allowances in the respective class price formulas will be applied.
Currently, the Class III and Class IV
FMMO makes allowances are $3.17 and $2.16 per hundredweight, respectively, for milk containing 3.5 percent butterfat.
If the FMMO make allowances are updated in the future, the DDP will be automatically adjusted to reflect these changes.
5 Transportation Costs Transportation costs from the processor to distribution outlet are often cost prohibitive. Absent reimbursement, processors may not be willing to incur additional transportation costs and feeding organizations may lack the funding to cover these costs to facilitate the donation. DDP aims to facilitate timely donations and reduce food waste.
Therefore, this program will cover part of the transportation costs from the EDO
to the eligible distributor. This may be especially beneficial to rural communities whose donation sites are often far from plants serving them and who may not receive assistance from other government feeding programs with distribution points closer to urban centers.
As the reimbursement value will be paid to the EDO, the DDP will only reimburse for transportation if the EDO
incurred the expense. If donated eligible dairy products are picked up from the plant by the eligible distributor, no
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transportation reimbursement will be paid. The transportation cost reimbursement rate is defined later in this rule.
6 Total Reimbursement Value Section 762d2A of the CAA
specifies the total reimbursementthe sum of input, manufacturing, and transportation costsmust be set neither too high such that it would interfere with the commercial marketing of milk or dairy products nor too low such that it would fail to be sufficient to avoid food waste. The statute further requires total reimbursement to be between the highest and lowest of the classified milk values. To ensure costs can be sufficiently covered for most donations, total reimbursement payment, on a per hundredweight basis, will be capped at the Class I value for the highest FMMO
differential zone Dade County, Florida.
Capping at the higher FMMO zone will allow for Class I handlers to obtain some reimbursement for manufacturing and transportation costs.
Section 762d2Biv of the CAA
further allows the Secretary to maintain traditional price relationshipsClass I
being the highest, followed in sequence by II, III and IVin setting the reimbursement rate. In 2020, dairy markets experienced pronounced class price inversions, where the Class III
price was significantly higher than the Class I price in many areas of the country. However, the Class III price has been above the Class I price in Dade County, Florida only three times since the current pricing system was adopted on January 1, 2000.6 Such extreme inversions are not anticipated in the foreseeable future, as both short-term COVID19-related disruptions and longterm production capacity issues are beginning to ease. While the DDP does not directly determine classified prices and price relationships, the program rules should not exacerbate price inversions if they occur. Therefore, in times of price inversion, where the Class I price is not the highest class price, total reimbursements will continue to be capped at the Class I price for Dade County, Florida.
When do plans and reimbursement claims need to be submitted?
Entities must submit Plan and Eligible Distributor Certification Forms Certification Forms to AMS for approval before they can submit Claim Forms for reimbursement. AMS will approve or disapprove Certification 6 USDA, Federal Milk Marketing Order Statistics, Final Class and Component Prices by Order.

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