We have before us the recurring question of the validity of a State's attempt to regulate the supply and distribution of milk and milk products. Challenged in this case is Florida's system of regulation of the dealings between milk distributors and local producers.
The appellant, Polar Ice Cream & Creamery Company, located in Pensacola, Florida, 16 miles from the Florida-Alabama state line, is a processor and distributor of fluid milk and milk products. It sells fluid milk and milk products for human consumption to consumers and dealers within the State of Florida in competition with nearby Alabama distributors. Pursuant to contracts let after competitive bidding, it also supplies large quantities of milk to military installations, both within and without the State of Folrida. It purchases, processes and sells as fluid milk or milk products approximately 5,000,000 gallons of milk each year.
Prior to the regulations challenged here, Polar purchased approximately 30% of its milk requirements from dairy farm producers located within the State of Florida. The remaining 70% was procured from producers, producer pools or brokers in other States, such as Alabama, Mississippi, Wisconsin, Minnesota, Missouri, Virginia, and Illinois. Its customary arrangement with Florida producers was to pay 61 cents per gallon for a specified quantity of milk from each producer and approximately 35.5 cents per gallon for all milk over that quantity. The price Polar paid its out-of-state sources varied; some milk was purchased for as low as 30-35 cents per gallon from Alabama, Virginia, and Arkansas sources. Polar's Florida producers could at no time supply all of Polar's milk requirements, but at times produced and sold to Polar amounts equal to or greater than Polar's sales of fluid milk for human consumption to consumers and dealers in Florida, excluding sales to the military, sales on reservations, and sales to local schools.
The statute and the orders of the Florida Milk Commission challenged by Polar regulate the dealings between milk distributors and milk producers located within the Pensacola Milk Marketing Area. First, they require that a Pensacola milk distributor pay a minimum price of 61 cents per gallon for all milk purchased from Pensacola producers and sold in Florida as Class I milk, defined as fluid milk or milk products sold in fluid form with exceptions, and substantially lower minimum prices for milk sold as Class II, III, and IV milk, consisting chiefly of nonbeverage milk such as cream, sour cream and other dairy products.
Second, the Commission has established a method by which a proportion of a distributor's monthly sales in various classes is allocated to designated Pensacola producers. Each Pensacola producer with whom Polar does business between September 1 and November 30 of each year, called the base-fixing period, is assigned an earned base, representing the ratio of milk delivered by such producer to the total milk delivered by all of Polar's Pensacola producers during the base-fixing period. The resultant percentage is then applied to the number of gallons of milk Polar sells in Class I, II, III, and IV channels monthly, in that order, to determine the number of gallons for which each earned-base producer must be paid the minimum prices assigned to each class or utilization. The allocation of a producer's deliveries must first be to Class I utilization, with allocation continued thereafter in descending order through the lower classifications. Only deliveries by Pensacola producers are considered in calculating the ratio of each producer's deliveries to total deliveries to Polar during th base-fixing period and therefore the percentage assigned to these producers totals 100%. The result is that all of Polar's Class I sales must be attributed to its Pensacola earned-base producers. Only then may their milk be used for the less remunerative utilizations, and only if these producers do not fulfill Polar's need for Class I milk may other milk be used for this purpose and thus command a premium price. Moreover, the formula requires that all the milk Polar sells in Florida be first attributed to the purchases that it makes from Pensacola producers. The earned-base percentages remain the same until the next base-fixing period.