[Federal Register Volume 64, Number 16 (Tuesday, January 26, 1999)]
[Rules and Regulations]
[Pages 3807-3814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1786]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 64, No. 16 / Tuesday, January 26, 1999 /
Rules and Regulations
[[Page 3807]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 905
[Docket No. FV98-905-4 FIR]
Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida;
Limiting the Volume of Small Red Seedless Grapefruit
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Department of Agriculture (Department) is finalizing
without change the provisions of an interim final rule limiting the
volume of small red seedless grapefruit entering the fresh market under
the Florida citrus marketing order. The marketing order regulates the
handling of oranges, grapefruit, tangerines, and tangelos grown in
Florida and is administered locally by the Citrus Administrative
Committee (committee). This rule continues in effect limits on the
volume of size 48 and/or size 56 red seedless grapefruit handlers could
ship during the first 11 weeks of the 1998-1999 season that began in
September. The limits provided a sufficient supply of small sized red
seedless grapefruit to meet market demand, without saturating all
markets with these small sizes. The committee believed this action was
necessary to help stabilize the market and improve grower returns.
EFFECTIVE DATE: February 25, 1999.
FOR FURTHER INFORMATION CONTACT: William G. Pimental, Marketing
Specialist, Southeast Marketing Field Office, Marketing Order
Administration Branch, F&V, AMS, USDA, P.O. Box 2276, Winter Haven,
Florida 33883; telephone: (941) 299-4770, Fax: (941) 299-5169; or Anne
Dec, Marketing Order Administration Branch, F&V, AMS, USDA, room 2522-
S, P.O. Box 96456, Washington, DC 20090-6456; telephone: (202) 720-
2491, Fax: (202) 205-6632. Small businesses may request information on
complying with this regulation, or obtain a guide on complying with
fruit, vegetable, and specialty crop marketing agreements and orders by
contacting Jay Guerber, Marketing Order Administration Branch, Fruit
and Vegetable Programs, AMS, USDA, P.O. Box 96456, room 2525-S,
Washington, DC 20090-6456; telephone (202) 720-2491, Fax: (202) 205-
6632, or E-mail: Jay__N__Guerber@usda.gov. You may view the marketing
agreement and order small business compliance guide at the following
web site: http://www.ams.usda.gov/fv/moab.html.
SUPPLEMENTARY INFORMATION: This rule is issued under Marketing No. 84
and Marketing Order No. 905, both as amended (7 CFR part 905),
regulating the handling of oranges, grapefruit, tangerines, and
tangelos grown in Florida, hereinafter referred to as the ``order.''
The marketing agreement and order are effective under the Agricultural
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674),
hereinafter referred to as the ``Act.''
The Department is issuing this rule in conformance with Executive
Order 12866.
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule limited the volume of size 48 and/or
size 56 red seedless grapefruit handlers could ship during the first 11
weeks of the 1998-99 season beginning in September. This rule is not
intended to have retroactive effect. This rule will not preempt any
State or local laws, regulations, or policies, unless they present an
irreconcilable conflict with this rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with the Secretary a
petition stating that the order, any provision of the order, or any
obligation imposed in connection with the order is not in accordance
with law and request a modification of the order or to be exempted
therefrom. A handler is afforded the opportunity for a hearing on the
petition. After the hearing the Secretary would rule on the petition.
The Act provides that the district court of the United States in any
district in which the handler is an inhabitant, or has his or her
principal place of business, has jurisdiction to review the Secretary's
ruling on the petition, provided an action is filed not later than 20
days after date of the entry of the ruling.
The order provides for the establishment of grade and size
requirements for Florida citrus, with the concurrence of the Secretary.
These grade and size requirements are designed to provide fresh markets
with citrus fruit of acceptable quality and size. This helps create
buyer confidence and contributes to stable marketing conditions. This
is in the interest of growers, handlers, and consumers, and is designed
to increase returns to Florida citrus growers. The current minimum
grade standard for red seedless grapefruit is U.S. No. 1, and the
minimum size requirement is size 56 (at least 3\5/16\ inches in
diameter).
Section 905.52 of the citrus marketing order provides authority to
limit shipments of any grade or size, or both, of any variety of
Florida citrus. Such limitations may restrict the shipment of a portion
of a specified grade or size of a variety. Under such a limitation, the
quantity of such grade or size that may be shipped by a handler during
a particular week is established as a percentage of the total shipments
of such variety by such handler in a prior period, established by the
committee and approved by the Secretary, in which the handler shipped
such variety.
Section 905.153 of the order provides procedures for limiting the
volume of small red seedless grapefruit entering the fresh market. The
procedures specify that the committee may recommend that only a certain
percentage of size 48 and/or 56 red seedless grapefruit be made
available for shipment into fresh market channels for any week or weeks
during the regulatory period. The 11 week period begins the third
Monday in September. Under such a limitation, the quantity of sizes 48
and/or 56 red seedless grapefruit that may be shipped by a handler
during a regulated week is calculated using the recommended percentage.
By taking the recommended weekly percentage times the average weekly
volume of red grapefruit handled by such handler in the previous five
seasons, handlers can calculate the volume of sizes 48 and/or 56 they
may ship in a regulated week.
[[Page 3808]]
This rule finalizes the provisions of an interim final rule
limiting the volume of small red seedless grapefruit entering the fresh
market for each week of an 11 week period beginning the week of
September 21, 1998. A proposed rule was published on August 11, 1998,
in the Federal Register (63 FR 42764). Subsequently, an interim final
rule was published September 28, 1998, in the Federal Register (63 FR
51511). That rule limited the volume of small red seedless grapefruit
entering the fresh market for each week of an 11 week period beginning
the week of September 21. That rule limited the volume of sizes 48 and/
or 56 red seedless grapefruit by establishing a weekly percentage for
each of the 11 weeks. This rule finalizes the interim final rule
without change. The interim rule established the weekly percentage for
the first seven weeks (September 21 through November 8) at 37 percent
and for the final four weeks (November 9 through December 6) at 32
percent.
The interim final rule included a change in the percentages
originally recommended by the committee. The committee had voted to
establish a weekly percentage of 25 percent for each of the 11 weeks in
a vote of 14 in favor to 2 opposed at its meeting on May 22, 1998. The
committee's initial recommendation was issued as a proposed rule
published on August 11, 1998 (63 FR 42764). No comments were received
during the comment period which expired August 31, 1998. The committee
subsequently recommended adjusting the proposed percentages at its
meeting September 3, 1998, in a vote of 13 in favor to 1 opposed.
For the seasons 1994-95, 1995-96, and 1996-97, returns on red
seedless grapefruit had been declining, often not returning the cost of
production. On tree prices for red seedless grapefruit had fallen
steadily from $9.60 per carton (\3/5\ bushel) during the 1989-90
season, to $3.45 per carton during the 1994-95 season, to a low of
$1.41 per carton during the 1996-97 season.
The committee determined that one problem contributing to the
market's condition was the excessive number of small sized grapefruit
shipped early in the marketing season. In the 1994-95, 1995-96, and
1996-97 seasons, sizes 48 and 56 accounted for 34 percent of total
shipments during the 11 week regulatory period, with the average weekly
percentage exceeding 40 percent of shipments. This contrasts with sizes
48 and 56 representing only 26 percent of total shipments for the
remainder of the season. While there is a market for early grapefruit,
the shipment of large quantities of small red seedless grapefruit in a
short period oversupplies the fresh market for these sizes and
negatively impacts the market for all sizes.
For the majority of the season, larger sizes return higher prices
than smaller sizes. However, there is a push early in the season to get
fruit into the market to take advantage of the high prices available at
the beginning of the season. The early season crop tends to have a
greater percentage of small sizes. This creates a glut of smaller,
lower priced fruit on the market, driving down the price for all sizes.
Early in the season, larger sized fruit commands a premium price. In
some cases, the f.o.b. is $4 to $6 a carton more than for the smaller
sizes. In early October, the f.o.b. for a size 27 averages around
$10.00 per carton. This compares to an average f.o.b. of $5.50 per
carton for size 56. By the end of the 11 week period covered in this
rule, the f.o.b. for large sizes dropped to within two dollars of the
f.o.b. for small sizes.
In the three seasons prior to 1997-98, prices of red seedless
grapefruit fell from a weighted average f.o.b. of $7.80 per carton to
an average f.o.b. of $5.50 per carton during the period covered by this
rule. Even though later in the season the crop sized to naturally limit
the amount of smaller sizes available for shipment, the price structure
in the market had already been negatively affected. During the three
seasons, the market did not recover, and the f.o.b. for all sizes fell
to around $5.00 to $6.00 per carton for most of the rest of the season.
The committee believes that the over shipment of smaller sized red
seedless grapefruit early in the season has contributed to below
production cost returns for growers and lower on tree values. An
economic study done by the University of Florida--Institute of Food and
Agricultural Sciences (UF-IFAS) in May 1997, found that on tree prices
had fallen from a high near $7.00 in 1991-92 to around $1.50 for the
1996-97 season. The study projected that if the industry elected to
make no changes, the on tree price would remain around $1.50. The study
also indicated that increasing minimum size restrictions could help
raise returns.
To address this issue, the committee voted to utilize the
provisions of Sec. 905.153, and establish weekly percentage of size
regulation during the first 11 weeks of the 1997-98 season. The initial
recommendation from the committee was to set the weekly percentage at
25 percent for each of the 11 weeks. As more information on the crop
became available, and as the season progressed, the committee met
several times and adjusted its recommendations for the weekly
percentages. The committee considered information from past seasons,
crop estimates, fruit size, and other information to make their
recommendations. Actual weekly percentages established during the 11
week period during the 1997-98 season were 50 percent for the first
three weeks, and 35 percent for the other eight weeks.
In making this recommendation, the committee reviewed its
experiences from the past season, and those of prior seasons. The
committee believes establishing weekly percentages last season was
successful. The committee examined shipment data covering the 11 week
regulatory period for the last season and the four prior seasons. The
information contained the amounts and percentages of sizes 48 and 56
shipped during each week and weekly f.o.b. figures. During the 11 week
period, the regulation was successful at helping maintain prices at a
higher level than the prior season, and sizes 48 and 56 by count and as
a percentage of total shipments were reduced.
In comparison with f.o.b. prices from the 1996-97 season, for weeks
when pricing information was available (weeks 6 through 11), last
season's numbers were higher in five of the six weeks. The average
f.o.b. for these weeks was $6.28 for the 1996-97 season and $6.55 for
the 1997-98 season. Last season, sizes 48 and 56 represented only 31
percent of total shipments during the 11 week regulatory period as
compared to 38 percent during the previous season. There was also a 15
percent reduction in shipments of sizes 48 and 56 by count for the 11
weeks.
Other information also indicates the regulation was successful. In
past seasons, the on tree price had been dropping steadily. However, on
tree prices for the month following the 11 weeks of regulation indicate
that in December 1997 the on tree price for grapefruit was $2.26
compared to $1.55 for the previous season.
The committee was concerned that the glut of smaller, lower priced
fruit on the early market was driving down the price for all sizes.
There was a steep decline in prices for larger sizes in previous
seasons. During the six weeks for mid-October through November, prices
for sizes 23, 27, 32, and 36 fell by 28, 27, 21, and 20 percent,
respectively, during the 1996-97 season. Prices for the same sizes
during the same period fell only 5, 5, 2, and 7 percent, respectively,
last season with regulation. In fact, prices for all sizes were firmer
during this period for last season when compared to the previous
[[Page 3809]]
year, with the weighted average price dropping only 9 percent during
this period as compared to 22 percent for the previous season.
An economic study done by Florida Citrus Mutual (Lakeland, Florida)
in April 1998, found that the weekly percentage regulation had been
effective. The study stated that part of the strength in early season
pricing appeared to be due to the use of the weekly percentage rule to
limit the volume of sizes 48 and 56. It said that prices were generally
higher across the size spectrum with sizes 48 and 56 having the largest
gains, with larger sized grapefruit registering modest improvements.
The rule shifted the size distribution toward the higher priced, larger
sized grapefruit which helped raise weekly average f.o.b. prices. It
further stated that sizes 48 and 56 grapefruit accounted for around 27
percent of domestic shipments during the same 11 weeks during the 1996-
97 season. Comparatively, sizes 48 and 56 accounted for only 17 percent
of domestic shipments during the same period last season, as small
sizes were used to supply export customers with preferences for small
sized grapefruit.
A subcommittee had been formed to examine how weekly percentage of
size regulation could best be used. The subcommittee recommended to the
full committee that the weekly percentage of size regulation should be
set at 25 percent for the 11 week period. Members believed that the
problems associated with an uncontrolled volume of small sizes entering
the market early in the season would continue. The subcommittee thought
that to provide the committee with the most flexibility, the weekly
percentage should be set at 25 percent for each of the 11 weeks in the
regulated period. The subcommittee believed it was best to set
regulation at the most restrictive level, and then relax the percentage
as warranted by conditions later in the season. The subcommittee also
recommended that the committee meet on a regular basis early in the
season to consider adjustments in the weekly percentage rates as was
done in the previous season.
The recommendations of the subcommittee were reviewed by the
committee at its meeting on May 22, 1998. In its discussion, the
committee recognized the need for and the benefits of the weekly
percentage regulation. The committee agreed with the findings of the
subcommittee, and recommended establishing the base percentage at 25
percent for each of the regulation weeks. This is as restrictive as
Sec. 905.153 will allow.
In making this recommendation, the committee considered that by
establishing regulation at 25 percent, they could meet again in August
and the months following and use the best information available to help
the industry and the committee make the most informed decisions as to
whether the established percentage is appropriate.
Based on this information and the experiences from last season, the
committee agreed to establish the weekly percentage at the most
restrictive level, then meet in late August, and in September and
October as needed when additional information is available and
determine whether the set percentage level is appropriate. They said
this is essentially what was done the prior year, and it had been very
successful. The committee had met in May 1997, and recommended a weekly
percentage be established at 25 percent for each of the eleven weeks.
In August, the committee met again, and recommended that the weekly
percentage be relaxed. They met again in October, and recommended
further relaxations. Changes to any established weekly percentages
require additional rulemaking and the approval of the Secretary.
The committee noted that more information helpful in determining
the appropriate weekly percentages would be available after August. At
the time of the May meeting, grapefruit had not yet begun to size,
giving little indication as to the distribution of sizes. Only the most
preliminary of crop estimates was available, with the official estimate
not to be issued until October.
The committee met again on September 3, 1998, and revisited the
weekly percentage issue and reviewed the information it had acquired
since its May 22, 1998, meeting. At the meeting, the committee
recommended that the weekly percentages be changed from 25 percent for
each of the 11 regulated weeks to 37 percent for the first seven weeks
(September 21 through November 8), and 32 percent for the next four
weeks (November 9 through December 6).
In its discussion of this change, the committee reviewed the
initial percentages recommended and the current state of the crop. The
committee also reexamined shipping information from past seasons,
looking particularly at volume across the 11 weeks. Based on this
review, the committee agreed that setting the weekly percentage at 25
percent would be too restrictive and that allowing 37 percent for the
first seven weeks and 32 percent for the final four weeks was more
appropriate.
In its deliberations, the committee agreed that the weekly
percentage of 35 percent that was in place for the majority of the
weeks regulated last season was effective. This percentage seemed to
have provided a sufficient volume of small sizes to service those
markets, while being restrictive enough to prevent over supply.
During deliberations last season on weekly percentages, the
committee considered how past shipments had affected the market. Based
on statistical information, committee members believed there was an
indication that once shipments of sizes 48 and 56 reached levels above
250,000 cartons a week, prices declined on those and most other sizes
of red seedless grapefruit. The committee believed that if shipments of
small sizes could be maintained at around 250,000 cartons a week,
prices should stabilize and demand for larger, more profitable sizes
should increase.
As for this season, the committee wanted to recommend a weekly
percentage that would provide a sufficient volume of small sizes
without adversely impacting the markets for larger sizes. They also
originally recommended that the percentage for each of the 11 weeks be
established at the 25 percent level. This percentage, when combined
with the average weekly shipments for the total industry, provided a
total industry allotment of approximately 244,000 cartons of sizes 48
and/or 56 red seedless grapefruit per regulated week. The total
shipments of small red seedless grapefruit would approach the 250,000
carton mark during regulated weeks without exceeding it.
However, during the 11 week period of weekly percentage regulation
last season, the committee recommended increasing the weekly
percentages to 35 percent for the majority of the 11 weeks, similar to
what was recommended for this season. Even with the weekly percentage
at 35 percent, shipments of sizes 48 and 56 remained close to the
250,000 carton mark during the 11 weeks. In only 3 of the 11 weeks did
the volume of sizes 48 and 56 exceed 250,000 cartons, and even then, by
not more than 35,000 cartons.
The committee recognized that since last season a number of
packinghouses have gone out of business, lowering the total allotment
available to the industry. The committee believed that adjusting the 35
percent to 37 percent would provide for the allotment lost and increase
the total allotment available to the industry for loan or transfer.
Therefore, the committee recommended relaxing the weekly percentage to
37
[[Page 3810]]
percent for the first seven weeks of the regulated period.
The committee further recommended that the weekly percentage for
the last four weeks of the 11 weeks be established at 32 percent. The
committee resolved that a lower percentage was desirable moving into
the last four weeks of regulation. The committee believed that 32
percent was a viable figure as the season progressed because the crop
would have begun to size and there would be a greater availability of
larger sizes. The committee believed that as the industry moved into
the season and shipments increased, a weekly percentage of 32 percent
would provide the best balance between supply and demand for small
sized red seedless grapefruit.
The committee again included in its deliberations that if crop and
market conditions should change, the committee could recommend that the
percentages be increased or eliminated to provide for the shipment of
more small sizes in any one, or all of the 11 weeks. After examining
the way the crop was sizing and maturing, the committee believed the
rule at 25 percent was too restrictive and that the change to 37
percent for the first seven weeks and 32 percent for the last four
weeks was preferable. They decided that a loosening of the regulated
percentages could be done without adversely affecting the marketable
quantity and returns on these small sizes. The interim final rule
allowed all packinghouses to take advantage of the increased
percentages, while not oversupplying the market.
While the official crop estimate was not available until October,
there were indications that the grapefruit crop was not as large as in
1997-98. Also, grapefruit had been slow in maturing this season due to
scattered rains and hot summer temperatures. This caused the harvest
season to start late and may mean a greater volume of smaller sizes.
Using this information on the 1998-99 crop, the committee members
believed that relaxing the weekly percentages as recommended provided
enough small sizes to supply those markets without disrupting the
markets for larger sizes.
Under Sec. 905.153, the quantity of sizes 48 and/or 56 red seedless
grapefruit that could be shipped by a handler during a regulated week
was calculated using the recommended percentage of 37 or 32 percent
depending on the regulated week. By taking the weekly percentage times
the average weekly volume of red grapefruit handled by such handler in
the previous five seasons, handlers could calculate the volume of sizes
48 and/or 56 they could ship in a regulated week.
An average week was calculated by the committee for each handler
using the following formula. The total red seedless grapefruit
shipments by a handler during the 33 week period beginning the third
Monday in September and ending the first Sunday in May during the
previous five seasons were added and divided by five to establish an
average season. This average season was then divided by the 33 weeks to
derive the average week. This average week was the base for each
handler for each of the 11 weeks of the regulatory period. The weekly
percentage, in this case 37 or 32 percent, was multiplied by a
handler's average week. The product was that handler's allotment of
sizes 48 and/or 56 red seedless grapefruit for the given week.
The calculated allotment is the amount of small sized red seedless
grapefruit a handler could ship. The minimum size was established under
Sec. 905.52 at size 56, and handlers could fill their allotment with
size 56, size 48, or a combination of the two sizes such that the total
of these shipments were within the established limits. The committee
staff performed the specified calculations and provided them to each
handler.
To illustrate, suppose Handler A shipped a total of 50,000 cartons,
64,600 cartons, 45,000 cartons, 79,500 cartons, and 24,900 cartons of
red seedless grapefruit in the last five seasons, respectively. Adding
these season totals and dividing by five yields an average season of
52,800 cartons. The average season is then divided by 33 weeks to yield
an average week, in this case, 1,600 cartons. This is Handler A's base.
The weekly percentage of 37 percent is then applied to this amount.
This provides this handler with a weekly allotment of 592 cartons
(1,600 x .37) of size 48 and/or 56.
The average week for handlers with less than five previous seasons
of shipments is calculated by the committee by averaging the total
shipments for the seasons they did ship red seedless grapefruit during
the immediately preceding five years and dividing that average by 33.
New handlers with no record of shipments have no prior period on which
to base their average week. Therefore, under the established
procedures, a new handler could ship small sizes equal to 37 percent of
their total volume of shipments during their first shipping week. Once
a new handler had established shipments, their average week would be
calculated as an average of the weeks they shipped during the current
season.
This rule finalizes, without change, the weekly percentages for
each of the eleven weeks of the regulatory period (September 21 through
December 6) that appeared in the interim final rule.
The rules and regulations contain a variety of provisions designed
to provide handlers with some marketing flexibility. When regulation is
established by the Secretary for a given week, the committee calculates
the quantity of small red seedless grapefruit which may be handled by
each handler. Section 905.153(d) provides allowances for overshipments,
loans, and transfers of allotment. These allowances should allow
handlers the opportunity to supply their markets while limiting the
impact of small sizes on a weekly basis.
During any week for which the Secretary has fixed the percentage of
sizes 48 and/or 56 red seedless grapefruit, any handler could handle an
amount of sizes 48 and/or 56 red seedless grapefruit not to exceed 110
percent of their allotment for that week. The quantity of overshipments
(the amount shipped in excess of a handler's weekly allotment) is
deducted from the handler's allotment for the following week.
Overshipments are not allowed during week 11 because there are no
allotments the following week from which to deduct the overshipments.
If handlers fail to use their entire allotments in a given week,
the amounts undershipped will not be carried forward to the following
week. However, a handler to whom an allotment has been issued could
lend or transfer all or part of such allotment (excluding the
overshipment allowance) to another handler. In the event of a loan,
each party will, prior to the completion of the loan agreement, notify
the committee of the proposed loan and date of repayment. If a transfer
of allotment is desired, each party will promptly notify the committee
so that proper adjustments of the records could be made. In each case,
the committee confirms in writing all such transactions prior to the
following week. The committee could also act on behalf of handlers
wanting to arrange allotment loans or participate in the transfer of
allotment. Repayment of an allotment loan is at the discretion of the
handlers party to the loan.
The committee computed each handler's allotment by multiplying the
handler's average week by the percentage established by regulation for
that week. The committee notified each handler prior to that particular
week of the quantity of sizes 48 and 56 red seedless grapefruit such
handler could
[[Page 3811]]
handle during a particular week, making the necessary adjustments for
overshipments and loan repayments.
During committee deliberations at the May 22, 1998, meeting,
several concerns were raised regarding the regulation. One area of
concern was the way allotment base is calculated. Two members commented
that the rule was not fair to those handlers that shipped the majority
of their grapefruit shipments during the 11 week period. They said that
using a 33 week season as the basis for allotment was not reflective of
their shipments during the regulated period, and that their allotment
was not enough to cover their customer base.
The committee chose to use the past five seasons to provide the
most accurate picture of an average season. When recommending
procedures for establishing weekly percentage of size regulation for
red seedless grapefruit, the committee discussed several methods of
measuring a handler's volume to determine this base. It was decided
that shipments for the five previous years and for the 33 weeks
beginning the third Monday in September to the first Sunday the
following May should be used for calculation purposes.
This bases allotment on a 33 week period of shipments, not just a
handler's early shipments. This was done specifically to accommodate
small shippers or light volume shippers, who may not have shipped much
grapefruit in the early season. The use of an average week based on 33
weeks also helps adjust for variations in growing conditions that may
affect when fruit matures in different seasons and growing areas. After
considering different ways to calculate the average week, the committee
settled on this method as the definition of prior period that provides
each handler with an equitable base from which to establish shipments.
In its discussion, the committee recognized that there were
concerns regarding the way base is calculated. However, committee
members also stated that this type of regulation is intended to be
somewhat restrictive, and providing a system that satisfies everyone is
difficult, if not impossible, to achieve. There was general agreement
that this method was the best option considered thus far. Another
member commented that this option also provides a larger industry base
than an 11 week calculation, supplying a greater amount of available
base overall.
In regards to whether their allotment is enough to cover their
customer base, the procedures under which this rule was recommended
provide flexibility through several different options. Handlers could
transfer, borrow or loan allotment based on their needs in a given
week. Handlers also had the option of overshipping their allotment by
10 percent in a week, as long as the overshipment was deducted from the
following week's shipments. Statistics show that in none of the
regulated weeks was the total available allotment used. The closest it
came was 83 percent of available base used. However, this still left an
available allotment for loan or transfer of over 57,000 cartons.
Approximately 190 loans and transfers were utilized last season. To
facilitate this process, the committee staff provided a list of handler
names and telephone numbers to help handlers find possible sources of
allotment if needed for loan or trade. Also, this regulation only
restricts shipments of small sized red grapefruit. There are no volume
restrictions on larger sizes.
Another concern expressed was that the rule only covers red
seedless grapefruit. One member wanted the committee to consider adding
white grapefruit to the regulation. The member also asked that the
committee continue to consider other possibilities on which to base
regulation. The committee agreed that the provisions by which this
regulation is recommended should be reviewed on a continuous base. It
was also stated that should the committee want to change Sec. 905.153,
the section outlining the procedures for setting weekly percentage of
size regulation, they could consider it as part of the current meeting.
No motions for change were received.
Another concern expressed was that the committee was considering
meeting too often during the regulatory period to consider changing the
weekly percentages. The member said that marketing plans are made
further in advance than two to three weeks. The committee responded
that information that is valuable in considering the appropriate
percentage levels is not available until the regulatory period begins.
Members agreed that it was important to meet and adjust percentages as
necessary as seasonal information becomes available.
At the September 3, 1998, meeting, the concern was raised that the
weekly percentages recommended were not high enough. One member
expressed that they had routinely shipped all their allotment and that
the weekly percentages should be higher. The committee responded that
the provisions for loans, transfers, and overshipment were available to
offset such problems. With the weekly percentages established, total
industry allotment should exceed shipments for the majority of the 11
weeks, so that some allotment should be available for loan or transfer.
After considering the concerns expressed, and the available
information, the committee determined that this rule is needed to
regulate shipments of small sized red seedless grapefruit.
This rule does not affect the provision that handlers may ship up
to 15 standard packed cartons (12 bushels) of fruit per day exempt from
regulatory requirements. Fruit shipped in gift packages that are
individually addressed and not for resale, and fruit shipped for animal
feed are also exempt from handling requirements under specific
conditions. Also, fruit shipped to commercial processors for conversion
into canned or frozen products or into a beverage base are not subject
to the handling requirements under the order.
Section 8(e) of the Act requires that whenever grade, size, quality
or maturity requirements are in effect for certain commodities under a
domestic marketing order, including grapefruit, imports of that
commodity must meet the same or comparable requirements. This rule does
not change the minimum grade and size requirements under the order,
only the percentages of sizes 48 and/or 56 red grapefruit that may be
handled. Therefore, no change is necessary in the grapefruit import
regulations as a result of this action.
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities. Accordingly, AMS has
prepared this final regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and the rules issued thereunder, are unique in
that they are brought about through group action of essentially small
entities acting on their own behalf. Thus, both statutes have small
entity orientation and compatibility.
There are approximately 80 grapefruit handlers subject to
regulation under the order and approximately 11,000 growers of citrus
in the regulated area. Small agricultural service firms, which includes
handlers, have been defined by the Small Business Administration (SBA)
as those having annual receipts of less than $5,000,000, and small
agricultural producers are defined as
[[Page 3812]]
those having annual receipts of less than $500,000 (13 CFR 121.601).
Based on the industry and committee data for the 1997-98 season,
the average annual f.o.b. price for fresh Florida red grapefruit during
the 1997-98 season was around $6.30 per \4/5\ bushel cartons, and total
fresh shipments for the 1997-98 season are estimated at 15.5 million
cartons of red grapefruit. Approximately 20 percent of all handlers
handled 60 percent of Florida grapefruit shipments. In addition, many
of these handlers ship other citrus fruit and products which are not
included in committee data but would contribute further to handler
receipts. Using the average f.o.b. price, about 80 percent of
grapefruit handlers could be considered small businesses under SBA's
definition and about 20 percent of the handlers could be considered
large businesses. The majority of Florida grapefruit handlers, and
growers may be classified as small entities.
Under the authority of Sec. 905.52 of the order, this rule limits
the volume of small red seedless grapefruit entering the fresh market
during the 11 weeks beginning the third Monday in September for the
1998-99 season. This rule utilizes the provisions of Sec. 905.153. This
rule limits the volume of sizes 48 and/or 56 red seedless grapefruit by
setting the weekly percentage for each of the 11 weeks at 37 percent
for the first seven weeks (September 21 through November 8), and 32
percent for the next four weeks (November 9 through December 6). This
is a change from the committee's original recommendation of a 25
percent weekly percentage for each of the 11 weeks. Under such a
limitation, the quantity of sizes 48 and/or 56 red seedless grapefruit
that may be shipped by a handler during a particular week is calculated
using the established percentage.
By taking the established percentage times the average weekly
volume of red grapefruit handled by such handler in the previous five
seasons, the committee calculates a handler's weekly allotment of small
sizes. The rule sets the weekly percentage at 37 percent for the first
seven weeks (September 21 through November 8), and 32 percent for the
next four weeks (November 9 through December 6) of the 11 week period.
This rule provides a supply of small sized red seedless grapefruit
sufficient to meet market demand, without saturating all markets with
these small sizes. This rule is necessary to help stabilize the market
and improve grower returns during the early part of the season.
At the May 22, 1998, meeting, the committee recommended that the
percentage for each of the 11 weeks be established at the 25 percent
level. They reasoned that this percentage, when combined with the
average weekly shipments for the total industry, would provide a total
industry allotment of 239,243 cartons of sizes 48 and/or 56 red
seedless grapefruit per regulated week. This percentage would have
allowed total shipments of small red seedless grapefruit to approach
the 250,000 carton mark during regulated weeks without exceeding it.
The committee met again September 3, 1998, and revisited the weekly
percentage issue. The committee recommended that the weekly percentages
be set to 37 percent for the first seven weeks (September 21 through
November 8), and 32 percent for the next four weeks (November 9 through
December 6).
The weekly percentage of 25 percent, when combined with the average
weekly shipments for the total industry, would provide a total industry
allotment of nearly 250,000 cartons of sizes 48 and/or 56 red seedless
grapefruit per regulated week. Based on shipments from seasons 1993-97,
a total available weekly allotment of 250,000 cartons would exceed
actual shipments for each of the first three weeks that will be
regulated under this rule. In addition, if a 25 percent restriction on
small sizes had been applied during the 11 week period in the three
seasons prior to the 1996-97 season, an average of 4.2 percent of
overall shipments during that period would have been affected. This
rule affects even fewer shipments by establishing less restrictive
weekly percentages. In addition, a large percentage of this volume most
likely could have been replaced by larger sizes. Under this rule a
sufficient volume of small sized red grapefruit will still be allowed
into all channels of trade, and allowances will be in place to help
handlers address any market shortfall. Therefore, the overall impact on
total seasonal shipments and on industry cost should be minimal.
The early season crop tends to have a greater percentage of small
sizes. This creates a glut of smaller, lower priced fruit, driving down
the price for all sizes. Early in the season, larger sized fruit
commands a premium price. In some cases, the f.o.b. is $4 to $6 a
carton more than for the smaller sizes. In early October, the f.o.b.
for a size 27 averages around $10.00 per carton. This compares to an
average f.o.b. of $5.50 per carton for size 56. By the end of the 11
week period covered in this rule, the f.o.b. for large sizes has
dropped to within two dollars of the f.o.b. for small sizes.
The over shipment of smaller sized red seedless grapefruit early in
the season has contributed to below production cost returns for growers
and lower on tree values. An economic study done by the University of
Florida--Institute of Food and Agricultural Sciences (UF-IFAS) in May
1997, found that on tree prices had fallen from a high near $7.00 in
1991-92 to around $1.50 for the 1996-97 season. The study projected
that if the industry elected to make no changes, the on tree price
would remain around $1.50. The study also indicated that increasing
minimum size restrictions could help raise returns.
This regulation will have a positive impact on affected entities.
The purpose of this rule is to help stabilize the market and improve
grower returns by limiting the volume of small sizes marketed early in
the season. There are no volume restrictions on larger sizes.
Therefore, larger sizes could be substituted for smaller sizes with a
minimum effect on overall shipments. While this rule may necessitate
spot picking, which may entail slightly higher harvesting costs, many
in the industry are already using the practice, and because this
regulation is only in effect for part of the season, the overall effect
on costs is minimal. This rule is not expected to appreciably increase
costs to producers.
This rule helps limit the effects of an over supply of small sizes
early in the season. A similar rule was enacted successfully last
season. During the 11 week period, the regulation was successful at
helping maintain prices at a higher level than the prior season, and
sizes 48 and 56 by count and as a percentage of total shipments were
reduced. Therefore, this action should have a positive impact on grower
returns.
For the weeks when pricing information was available, last season's
prices were higher in five of the six weeks when compared with f.o.b.
prices from the 1996-97 season. The average f.o.b. for these weeks was
$6.28 for the 1996-97 season and $6.55 for the 1997-98 season. It also
reduced sizes 48 and 56 as a percentage of the crop. Last season sizes
48 and 56 represented 31 percent of shipments during the 11 week
regulatory period, compared to 38 percent during the previous season.
There was also a 15 percent reduction in shipments of sizes 48 and 56
by count. Numbers from the month following the 11 weeks of regulation
also indicate that in December 1997 the on tree price for grapefruit
was $2.26 compared to $1.55 for the previous season.
[[Page 3813]]
The rule was also successful in reducing the steep drop in prices
for larger sizes that had occurred in previous seasons. During the six
weeks from mid-October through November, prices for sizes 23, 27, 32,
and 36 fell by 28, 27, 21, and 20 percent, respectively, during the
1996-97 season. Prices for the same sizes during the same period last
season only fell by 5, 5, 2, and 7 percent, respectively, under
regulation. Prices for all sizes were firmer during this period last
season when compared to the previous year, with the weighted average
price dropping only 9 percent during this period last season as
compared to 22 percent for the previous season.
An economic study done by Florida Citrus Mutual (Lakeland, Florida)
in April 1998, found that the weekly percentage regulation had been
effective. The study indicated that part of the strength in early
season pricing appeared to be due to the use of the weekly percentage
rule to limit the volume of sizes 48 and 56. Prices were generally
higher across the size spectrum with sizes 48 and 56 having the largest
gains, with larger sized grapefruit registering modest improvements. It
also stated that sizes 48 and 56 grapefruit accounted for around 27
percent of domestic shipments during the 11 weeks during the 1996-97
season, compared to only 17 percent during the same period last season,
as small sizes were used to supply export customers with preferences
for small sized grapefruit.
Even with restrictions in place, total shipments during the 11 week
period last season were higher than the previous season. There was also
no noticeable drop in exports. Therefore, shipments remained strong and
prices were stabilized during the regulated period.
The interim final rule increased the weekly percentages over the
percentages originally recommended at the May 22, 1998, meeting. The
changes recommended by the committee at its September 3, 1998, meeting
set the percentages at a higher level, and at levels comparable to last
season. These percentages were still restrictive, but allowed the
utilization of more small sized fruit. During the 11 week period of
weekly percentage regulation last season, the committee recommended
increasing the weekly percentages to 35 percent for the majority of the
11 weeks, similar to what was recommended for this season. Even with
the weekly percentage at 35 percent, shipments of sizes 48 and 56
remained close to the 250,000 carton mark during the 11 weeks. In only
3 of the 11 weeks did the volume of sizes 48 and 56 exceed 250,000
cartons, and even then, by not more than 35,000 cartons.
Over 50 percent of red seedless grapefruit is shipped to the fresh
market. Because of reduced demand and an oversupply, the processing
outlet is not currently profitable. Consequently, it is essential that
the market for fresh red grapefruit be fostered and maintained. Any
costs associated with this action will only be for the 11 week
regulatory period. However, benefits from this action could stretch
throughout the entire 33 week season.
This rule is intended to stabilize the market during the early
season and increase grower returns. Information available from last
season suggests the regulation could do both. A stabilized price that
returns a fair market value benefits both small and large growers and
handlers. The opportunities and benefits of this rule are expected to
be available to all red seedless grapefruit handlers and growers
regardless of their size of operation.
One alternative to the actions approved was considered by the
committee prior to making the recommendations at the May 22, 1998,
meeting. The alternative discussed was whether to amend Sec. 905.153 in
conjunction with setting a weekly percentage. Two members suggested
that the calculation used to determine a handler's allotment base
should be changed from 33 weeks to a calculation that used the 11 weeks
regulated by the rule. In its discussion, the committee recognized that
there were concerns regarding the way base is calculated. However,
committee members also stated that this type of regulation is intended
to be somewhat restrictive, and providing a system that satisfies
everyone is difficult, if not impossible, to achieve. There was general
agreement that though this method had its concerns, it was the best
option considered thus far. Therefore, the committee rejected this
alternative, concluding the recommendations previously discussed were
appropriate for the industry.
Another alternative action was considered at the September 3, 1998,
meeting. Rather than changing all the weekly percentages, it was
suggested that the committee only consider three weeks at a time in
making its recommendations for change. The committee would then meet
before each three week period began to consider the appropriate weekly
percentages for those three weeks. The committee agreed that it was
important to meet on a regular basis during the regulation period to
help ensure that the weekly percentages are at the appropriate level.
However, the committee also recognized that marketing plans are made
more than three weeks in advance, and that it was important to try to
provide handlers with as much advance notice of their allotment of
small sizes as possible. Therefore, the committee rejected this
alternative.
Handlers utilizing the flexibility of the loan and transfer aspects
of this action will be required to submit a form to the committee. The
rule increases the reporting burden on approximately 80 handlers of red
seedless grapefruit who will be taking about 0.03 hour to complete each
report regarding allotment loans or transfers. The information
collection requirements contained in this section have been approved by
the Office of Management and Budget (OMB) under the provisions of the
Paperwork Reduction Act of 1995 (Pub. L. 104-13) and assigned OMB
number 0581-0094. As with all Federal marketing order programs, reports
and forms are periodically reviewed to reduce information requirements
and duplication by industry and public sector agencies.
As noted in the initial regulatory flexibility analysis, the
Department has not identified any relevant Federal rules that
duplicate, overlap or conflict with this rule. However, red seedless
grapefruit must meet the requirements as specified in the U.S.
Standards for Grades of Florida Grapefruit (7 CFR 51.760 through
51.784) issued under the Agricultural Marketing Act of 1946 (7 U.S.C.
1621 through 1627).
In addition, the committee's meetings were widely publicized
throughout the citrus industry and all interested persons were invited
to attend the meetings and participate in committee deliberations on
all issues. Like all committee meetings, the May 22, 1998, meeting, and
the September 3, 1998, meeting were public meetings and all entities,
both large and small, were able to express views on this issue.
A proposed rule concerning this action was published in the Federal
Register on Tuesday, August 11, 1998 (63 FR 42764). A 20-day comment
period was provided to allow interested persons to respond to the
proposal. The comment period ended August 31, 1998. No comments were
received. An interim final rule concerning this action was published in
the Federal Register on Monday, September 28, 1998 (63 FR 51511). A 10-
day comment period was provided to allow interested persons to respond
to the rule. The comment period ended October 8, 1998. No comments were
received. Copies of both rules were mailed or sent via facsimile
[[Page 3814]]
to all committee members and to grapefruit growers and handlers. The
rules were also made available through the Internet by the Office of
the Federal Register.
After consideration of all relevant matter presented, including the
information and recommendations submitted by the committee and other
available information, it is found that finalizing the interim final
rule, without change, as published in the Federal Register (63 FR
51511, September 28, 1998) will tend to effectuate the declared policy
of the Act.
List of Subjects in 7 CFR Part 905
Grapefruit, Marketing agreements, Oranges, Reporting and
recordkeeping requirements, Tangelos, Tangerines.
PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN
FLORIDA
Accordingly, the interim final rule amending 7 CFR part 905 which
was published at 63 FR 51511 on September 28, 1998, is adopted as a
final rule without change.
Dated: January 21, 1999.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-1786 Filed 1-25-99; 8:45 am]
BILLING CODE 3410-02-U
