There being no objective evidence to support its validity, the order of August 20, 1969, must be set aside.
II. Milk Production, Inter-Regional Price Relationships, and the Agricultural Adjustment Act.
There is another reason why the decision of August 20, 1969, 34 F.R. 13601, cannot stand: its factual determinations and reasoning do not support its conclusion. This deficiency was not cured by the subsequent opinions of January 20, 1970, December 13, 1970, and February 22, 1971.
A marketing order of the type here in question is issued by the Secretary of Agriculture to effectuate certain policies of Congress set forth in the Agricultural Adjustment Act:
1. To establish and maintain orderly marketing conditions so that parity prices will be paid to farmers;
2. To protect the interest of the consumer so far as prices are concerned;
3. To establish and maintain minimum standards of quality and maturity, grading and inspection, so there will be orderly marketing of agricultural commodities in the public interest;
4. In the interests of producers and consumers, to establish and maintain an orderly flow of agricultural commodities to the market and avoid unreasonable fluctuations in supplies and prices; and
5. To continue such regulations that will tend to avoid a disruption of the orderly marketing of any commodity and be in the public interest.
The Act states that the Secretary of Agriculture shall issue a marketing order if he finds, and sets forth in it, upon the evidence produced at a hearing that the issuance of such an order and all of the terms and conditions thereof, will tend to effectuate the declared Congressional policies. Amendment proceedings are also governed by the hearing of evidence.
Upon an appeal of this type, it is the function of the court to determine whether or not the Secretary's decision is in accordance with law.
This limited inquiry is concerned with whether there is substantial evidence to support the Secretary's findings. In no way does it constitute a trial de novo on the issues: Windham Creamery, Inc. v. Freeman, 230 F. Supp. 632 (D.C.N.J.1964), aff'd 350 F.2d 978 (3rd Cir. 1965), cert. denied 382 U.S. 979, 86 S. Ct. 551, 15 L. Ed. 2d 470 (1966).
As a basis for his decision of August 20, 1969, the Secretary found that milk production in the United States was down and that there was a need to maintain inter-regional price relationships. More specifically, his decision gave these reasons for the removal of bracketing:
1. Milk production in the United States has been declining since 1965.
2. Milk production has been declining in the 12 Northeastern states, from Maine through Virginia, during this same period. The Northeast is an important market area; more than 32 percent of all milk marketed under Federal orders comes from this region as do almost 34 percent of all producers whose milk is priced under Federal regulation.
3. Other than in the Northeast, milk prices in the United States move up or down as those in the Minnesota-Wisconsin area vary. In the Northeast, however, milk prices are established by reference to certain economic formulas.
4. For the years 1966, 1967, and 1968, the Department of Agriculture took a number of price actions to stimulate milk production.
5. Farmers in the Northeastern states have not received the most recent price increase which other farmers have obtained.
6. This increased price has caused a further deterioration of the previously established inter-regional price relationship with markets outside the Northeast.
7. Whether further price increases may occur during the marketing year in the Minnesota-Wisconsin area cannot be forecast.
8. If the general level of milk production is to be maintained, dairy farmers in the Northeast must continue to have assurance that their prices will be increased to the same extent as other dairy farmers.
9. Therefore, the price paid for milk to farmers in the Northeast should increase each month by the amount which is paid in the Minnesota-Wisconsin area. It is intended that producers in all markets receive similar treatment and pegging prices to the Minnesota-Wisconsin area is the best designed method to achieve this objective.
10. There is no method of bracketing which would provide the same increase each month in the Northeast that will be ordered in other market areas.
Initially, it must be noted that the Secretary does not indicate the bracketing system is related at all to the lowered rate of milk production. To the contrary, he pointed out that it was "attributable to factors such as high prices for cull cattle, better returns from alternative farm enterprises, more attractive off farm opportunities for labor, increased costs of farm labor and equipment, and increased taxes and interest rates."
Even more striking, there is no indication in this decision that a downward trend in milk production during the years from 1965 through 1969 was not completely desirable. For all that is said, 1965 may well have been a year of severe overproduction. Recently, medical experts have warned that too much milk, ice cream, butter, and cheese may have an adverse effect on the health of an adult. Many milk substitutes, from margarine to "non-dairy creamers" for coffee, may be receiving greater customer acceptance. These factors and others may indicate that a lowered production rate is both expected and desirable. The Secretary made no finding that on either a national basis or in the Northeast was the decline in milk production causing hardship to the consumer or any segment of the dairy industry. There was simply nothing to indicate why a lowered rate of milk production was inconsistent with the policies of Congress as set forth in the Agricultural Adjustment Act.
The Secretary is just as mysterious with regard to his statement concerning the need to maintain inter-regional price relationships. Apparently these relationships have been satisfactory for many years during which the Northeast was on a bracketing price system. That being the case, there is no indication as to why a bracketing system in the Northeast, and specifically in the Delaware Valley, would now destroy satisfactory price alignments. For example, there is no analysis of how the bracketing system which provides for fewer, but greater monetary increases or decreases, is incompatible with a system where the changes take place on a monthly, but smaller cash basis. The Secretary does not contend that there is any relationship between inter-regional price differences and the decline in milk production. He observes that recent price increases outside of the Northeast have caused a deterioration of the previously established inter-regional price relationships existing between the Northeast and other markets. He points out that if production is to be maintained in the Northeast, the farmers in that area must be assured that their prices will be increased to the same extent as those relating to other milk marketing areas. However, he also notes that while the bracketing system was still in effect, the decline in milk production in the Northeast slowed down as contrasted with the decline in milk production nationwide, citing these figures:
Milk Production 1967 1968 1969(1/2)
Nationwide -1% -1.3% -1.9%
Northeast Mkts. -1.4% -2.2% -.5%
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