[Federal Register Volume 63, Number 222 (Wednesday, November 18, 1998)]
[Proposed Rules]
[Pages 64008-64013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30672]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Docket No. FV98-930-1 PR]
Tart Cherries Grown in the States of Michigan, et al.; Final Free
and Restricted Percentages for the 1998-99 Crop Year for Tart Cherries
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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[[Page 64009]]
SUMMARY: This proposal invites comments on the establishment of final
free and restricted percentages for the 1998-99 crop year. The
percentages are 60 percent free and 40 percent restricted. The
percentages would establish the proportion of cherries from the 1998
crop which may be handled in normal commercial outlets and are intended
to stabilize supplies and prices, and strengthen market conditions. The
percentages were recommended by the Cherry Industry Administrative
Board (Board), the body which locally administers the marketing order.
The marketing order regulates the handling of tart cherries grown in
the States of Michigan, New York, Pennsylvania, Oregon, Utah,
Washington, and Wisconsin.
DATES: Comments must be received by December 3, 1998.
ADDRESSES: Interested persons are invited to submit written comments
concerning this action. Comments must be sent to the Docket Clerk,
Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456,
Washington, DC 20090-6456; Fax: (202) 720-5698 or E-mail:
moabdocket__clerk@usda.gov. All comments should reference the docket
number and the date and page number of this issue of the Federal
Register and will be made available for public inspection in the Office
of the Docket Clerk during regular business hours.
FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G.
Johnson, Marketing Order Administration Branch, Fruit and Vegetable
Programs, AMS, USDA, room 2525-S, P.O. Box 96456, Washington, DC 20090-
6456; telephone: (202) 720-2491. 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 also view the marketing agreements and orders small business
compliance guide at the following website:
http://www.ams.usda.gov/fv/moab.html.
SUPPLEMENTARY INFORMATION: This proposal is issued under marketing
agreement and Order No. 930 (7 CFR part 930), regulating the handling
of tart cherries produced in the States of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington, and Wisconsin, hereinafter
referred to as the ``order.'' The order is 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 of Agriculture (Department) is issuing this rule in
conformance with Executive Order 12866.
This proposal has been reviewed under Executive Order 12988, Civil
Justice Reform. Under the marketing order provisions now in effect,
final free and restricted percentages may be established for tart
cherries handled by handlers during the crop year. This rule would
establish final free and restricted percentages for tart cherries for
the 1998-99 crop year, beginning July 1, 1998, through June 30, 1999.
This rule would 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 requesting a modification of the order or to be exempt
therefrom. Such 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 in equity to review
the Secretary's ruling on the petition, provided an action is filed not
later than 20 days after the date of the entry of the ruling.
The order prescribes procedures for computing an optimum supply and
preliminary and final percentages that establish the amount of tart
cherries that can be marketed throughout the season. The regulations
apply to all handlers of tart cherries that are in the regulated
districts. Tart cherries in the free percentage category may be shipped
immediately to any market, while restricted percentage tart cherries
must be held by handlers in a primary or secondary reserve, or be
diverted in accordance with Sec. 930.59 of the order and Sec. 930.159
of the regulations, or used for exempt purposes (and obtaining
diversion credit) under Sec. 930.62 of the order and Sec. 930.162 of
the regulations. The regulated Districts for this season are: District
one--Northern Michigan; District two--Central Michigan; District
three--Southwest Michigan; District four--New York; and District
seven--Utah. Districts five, six, eight and nine (Oregon, Pennsylvania,
Washington, and Wisconsin, respectively) would not be regulated for the
1998-99 season.
The order prescribes under Sec. 930.52 that upon adoption of the
order, those districts to be regulated shall be those districts in
which the average annual production of cherries over the prior three
years has exceeded 15 million pounds. A district not meeting the 15
million pound requirement shall not be regulated in such crop year.
Therefore, for this season, handlers in the districts of Oregon,
Pennsylvania, Washington, and Wisconsin would not be subject to volume
regulation. They were also not subject to volume regulation during the
last season.
Section 930.50(a) of the order describes procedures for computing
an optimum supply for each crop year. The Board must meet on or about
July 1 of each crop year, to review sales data, inventory data, current
crop forecasts and market conditions. The optimum supply volume shall
be calculated as 100 percent of the average sales of the prior three
years to which is added a desirable carryout inventory not to exceed 20
million pounds or such other amount as may be established with the
approval of the Secretary. The optimum supply represents the desirable
volume of tart cherries that should be available for sale in the coming
crop year.
The order also provides that on or about July 1 of each crop year,
the Board is required to establish preliminary free and restricted
percentages. These percentages are computed by deducting the carryin
inventory from the optimum supply figure (adjusted to raw product
equivalent--the actual weight of cherries handled to process into
cherry products) and dividing that figure by the current year's USDA
crop forecast. The carryin inventory figure reflects the amount of
cherries that handlers actually have in inventory. If the resulting
quotient is 100 percent or more, the Board should establish a
preliminary free market tonnage percentage of 100 percent. If the
quotient is less than 100 percent, the Board should establish a
preliminary free market tonnage percentage equivalent to the quotient,
rounded to the nearest whole percent, with the complement being the
preliminary restricted percentage.
The Board met on June 18-19, 1998, and computed, for the 1998-99
crop year, an optimum supply of 287.4 million pounds. The Board
recommended that the carryout figure be zero pounds. Carryout is the
amount
[[Page 64010]]
of fruit required to be carried into the succeeding crop year and is
set by the Board after considering market circumstances and needs. This
figure can range from zero to a maximum of 20 million pounds. The Board
calculated preliminary free and restricted percentages as follows: The
USDA estimate of the crop was 292.5 million pounds; a 46 million pound
carryin added to that equaled a total available supply of 338.5 million
pounds. The carryin figure reflects the amount of cherries that
handlers actually have in inventory. The optimum supply was subtracted
from the total estimated available supply resulting in a surplus of
51.1 million pounds of tart cherries. An adjustment for changed
economic conditions of 37.0 million pounds was added to the surplus,
pursuant to section 930.50 of the order. This adjustment is discussed
later in this document. After the adjustment, the resulting total
surplus is 125.1 million pounds of tart cherries. The surplus was
divided by the production in the regulated districts (258 million
pounds) and resulted in 66 percent free and 34 percent restricted for
the 1998-99 crop year. The Board recommended these percentages by a 15
to 2 vote, with one abstention. Those Board members voting against the
recommendation disagreed with the computation of the carryin figure
because they thought that the figure should also include the amount in
the inventory reserve. Record evidence received during the promulgation
of the order indicated that the carryin figure reflects the amount of
cherries that handlers actually have in inventory (not in the primary
or secondary reserve). The Board recommended the percentages and
announced them to the industry as required by the order.
The preliminary percentages were based on the USDA production
estimate and the following supply and demand information for the 1998-
99 crop year:
------------------------------------------------------------------------
In millions
of pounds
------------------------------------------------------------------------
Optimum Supply Formula:
(1) Average sales of the prior three years.............. 287.4
(2) Less carryout....................................... 0
(3) Optimum Supply calculated by the Board at the June
meeting................................................ 287.4
Preliminary Percentages:
(4) Less carryin as of July 1, 1998..................... 46.0
(5) Tonnage requirement for current crop year........... 241.4
(6) USDA crop estimate.................................. 292.5
(7) Surplus (item 6 minus item 5)....................... 51.1
(8) Economic adjustment to surplus...................... 37.0
(9) Adjusted surplus (item 7 plus item 8)............... 88.1
(10) USDA crop estimate for regulated districts......... 258.0
------------------------------------------------------------------------
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Percentages Free Restricted
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(11) Preliminary percentages (item 9 divided by item
10) x 100.......................................... 66 34
------------------------------------------------------------------------
Between July 1 and September 15 of each crop year, the Board may
modify the preliminary free and restricted percentages by announcing
interim free and restricted percentages to adjust to the actual pack
occurring in the industry.
Section 930.50(d) of the order requires the Board to meet no later
than September 15 to recommend final free and restricted percentages to
the Secretary for approval. The Board met on September 10-11, 1998, and
recommended final free and restricted percentages of 60 and 40,
respectively. The Board recommended that the interim percentages and
final percentages be the same percentages. At that time, the Board had
available actual production amounts to review and made the necessary
adjustments to the percentages.
The Secretary establishes final free and restricted percentages
through an informal rulemaking process. These percentages would make
available the tart cherries necessary to achieve the optimum supply
figure calculated earlier by the industry. The difference between any
final free market tonnage percentage designated by the Secretary and
100 percent is the final restricted percentage.
The Board used a revised optimum supply figure for its final free
and restricted percentage calculations. The figure is 288.6 million
pounds instead of the 287.4 million pound figure used in June. This is
because the 3-year average sales figure used at the June meeting by
necessity required an estimate of June 1998 sales. The 3-year average
sales figure used in the final calculations reflects actual sales
through the 1997-98 crop year.
The optimum supply, therefore is 288.6 million pounds. The actual
production recorded by the Board was 339.9 million pounds, which is a
47.4 million pound increase from the USDA crop estimate of 292.5
million pounds. The increase in the crop is due to very favorable
growing conditions in portions of the State of Michigan this season.
For the current crop year, 305.3 million pounds of tart cherries were
produced in the regulated districts.
A 38.8 million pound carryin (actual carryin as opposed to the 46
million pounds originally estimated) was subtracted from the optimum
supply of 288.6 million pounds, which yields a tonnage requirement for
the current crop year of 249.8 million pounds. Subtracted from the
actual production in all districts of 339.9 million pounds reported by
the Board is the tonnage required for the current crop year (249.8
million pounds) which results in a 90.1 million pound surplus. An
adjustment for changed economic conditions of 31.4 million pounds was
added to the surplus, pursuant to section 930.50 of the order. This
adjustment is discussed later in this document. After the adjustment,
the resulting total surplus is 121.5 million pounds of tart cherries.
The total surplus of 121.5 million pounds is divided by the 305.3
million pound volume of tart cherries produced in the regulated
districts. This results in a 40 percent restricted percentage and a
corresponding 60 percent free percentage for the regulated districts.
The final percentages are based on the Board's reported production
figures and the following supply and demand information for the 1998-99
crop year:
------------------------------------------------------------------------
In millions
of pounds
------------------------------------------------------------------------
Optimum Supply Formula:
(1) Average sales of the prior three years.............. 288.6
(2) Less carryout....................................... 0
(3) Optimum Supply calculated by the Board at the
September meeting...................................... 288.6
Final Percentages:
(4) Less carryin as of July 1, 1998..................... 38.8
(5) Tonnage required current crop year.................. 249.8
(6) Board reported production........................... 339.9
(7) Surplus (item 6 minus item 5)....................... 90.1
(8) Economic adjustment to surplus...................... 31.4
(9) Adjusted surplus (item 7 plus item 8)............... 121.5
(10) Production in regulated districts.................. 305.3
------------------------------------------------------------------------
------------------------------------------------------------------------
Percentages Free Restricted
------------------------------------------------------------------------
(11) Final Percentages (item 9 divided by item 10) x
100................................................ 60 40
------------------------------------------------------------------------
As previously mentioned, the Board recommended an economic
adjustment be made in computing both the
[[Page 64011]]
preliminary and final percentages for the 1998-99 crop year. This is
authorized under Sec. 930.50. These subsections provide that in its
deliberations of volume regulation recommendations, the Board consider,
among other things, the expected demand conditions for cherries in
different market segments and an analysis of economic factors having
bearing on the marketing cherries. Based on these considerations, the
Board may modify its marketing policy calculations to reflect changes
in economic conditions.
The order provides that the 3-year average of all sales be used in
determining the optimum supply of cherries. In recent seasons, however,
sales to export markets have risen dramatically. In 1997, export sales
of 61.1 million pounds were 379 percent of 1994 sales (16.1 million
pounds). The increase in export sales to those destinations exempt from
volume regulation (countries other than Canada, Japan, and Mexico) was
even greater, rising from 12.2 million pounds to 48.7 million pounds.
Export sales to countries other than Canada, Japan and Mexico were
exempt from volume regulations as a way for the tart cherry industry to
find and expand new markets for their products. Including this volume
of sales in the optimum supply formula, however, results in an
overestimate of the volume of tart cherries that can be profitably
marketed in unrestricted markets. Thus, the Board recommended adjusting
its estimate of surplus cherries by adding exempt export sales.
By recommending this marketing policy modification, the Board
believes that it will provide stability to the marketplace and the
industry will be in a better situation for future years since new
markets will have been developed. Board members were of the opinion
that, if this adjustment is not made, growers could be paid less than
their production costs, because handlers would suffer financial losses
that would probably be passed on. Handlers would have to meet their
reserve obligations by other means. In addition, the value of cherries
already in inventory could be depressed due to the overabundant supply
of available cherries, a result inconsistent with the intent of the
order and the Act.
The Department's ``Guidelines for Fruit, Vegetable, and Specialty
Crop Marketing Orders'' specify that 110 percent of recent years' sales
should be made available to primary markets each season before
recommendations for volume regulation are approved. This goal would be
met by the establishment of a preliminary percentage which releases 100
percent of the optimum supply and the additional release of tart
cherries provided under Sec. 930.50(g). This release of tonnage, equal
to 10 percent of the average sales of the prior three years sales, is
made available to handlers each season. The Board recommended that such
release shall be made available to handlers the first week of December
and the first week of May. Handlers can decide how much of the 10
percent release they would like to receive during the December and May
release dates. Once released, such cherries are released for free use
by such handler. Approximately 29 million pounds would be made
available to handlers this season in accordance with Department
Guidelines. This release would be made available to every handler and
released to such handler in proportion to its percentage of the total
regulated crop handled. If such handler does not take such handler's
proportionate amount, such amount shall remain in the inventory
reserve.
The Regulatory Flexibility Act and Effects on Small Businesses
The Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities and has prepared this
initial regulatory flexibility analysis. The Regulatory Flexibility Act
(RFA) would allow AMS to certify that regulations do not have a
significant economic impact on a substantial number of small entities.
However, as a matter of general policy, AMS' Fruit and Vegetable
Programs (Programs) no longer opt for such certification, but rather
perform regulatory flexibility analyses for any rulemaking that would
generate the interest of a significant number of small entities.
Performing such analyses shifts the Programs' efforts from determining
whether regulatory flexibility analyses are required to the
consideration of regulatory options and economic or regulatory impacts.
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 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 40 handlers of tart cherries who are
subject to regulation under the tart cherry marketing order and
approximately 1,400 producers of tart cherries in the regulated area.
Small agricultural service firms, which includes handlers, have been
defined by the Small Business Administration (13 CFR 121.601) as those
having annual receipts of less than $5,000,000, and small agricultural
producers are defined as those having annual receipts of less than
$500,000.
Board and subcommittee meetings are widely publicized in advance
and are held in a location central to the production area. The meetings
are open to all industry members (including small business entities)
and other interested persons--who are encouraged to participate in the
deliberations and voice their opinions on topics under discussion.
Thus, Board recommendations can be considered to represent the
interests of small business entities in the industry.
The principal demand for tart cherries is in the form of processed
products. Tart cherries are dried, frozen, canned, juiced and pureed.
During the period 1993/94 through 1997/98, approximately 89 percent of
the U.S. tart cherry crop, or 281.1 million pounds, was processed
annually. Of the 281.1 million pounds of tart cherries processed, 63
percent was frozen, 25 percent canned and 4 percent utilized for juice.
The remaining 8 percent was dried or assembled into juice packs.
Based on National Agricultural Statistics Service data, acreage in
the United States devoted to tart cherry production has been trending
downward. In the ten-year period, 1987/88 through 1997/98, tart cherry
area decreased from 50,050 acres, to less than 40,000 acres. In 1997/
98, approximately 88 percent of domestic tart cherry acreage is located
in four States: Michigan, New York, Utah and Wisconsin. Michigan leads
the nation in tart cherry acreage with 67 percent of the total.
Michigan produces about 78 percent of the U.S. tart cherry crop each
year. In 1997/98, tart cherry acreage in Michigan decreased to 26,800
from 27,300 in the previous year.
In crop years 1987/88 through 1997/98, tart cherry production
ranged from a high of 359 million pounds in 1987/88 to a low of 189.9
million pounds in 1991/92. The price per pound to tart cherry growers
ranged from a low of 7.3 cents in 1987 to a high of 46.4 cents in 1991.
These problems of wide supply and price fluctuation in the tart cherry
industry are national in scope and impact. Growers testified during the
order promulgation process that the prices which they received often
did not come close to covering the costs of production. They also
testified that production costs for most growers range
[[Page 64012]]
between 20 and 22 cents per pound, which is well above average prices
received during 1993-1995.
The industry has demonstrated a need for an order during the
promulgation process of the marketing order because large variations in
annual tart cherry supplies tend to lead to fluctuations in prices and
disorderly marketing. As a result of these fluctuations in supply and
price, growers realize less income. The industry chose a volume control
marketing order to even out these wide variations in supply and improve
returns to growers. During the promulgation process, proponents
testified that small growers and processors would have the most to gain
from implementation of a marketing order because many such growers and
handlers had been going out of business due to low tart cherry prices.
They also testified that, since an order would help increase grower
returns, this should increase the buffer between business success and
failure because small growers and handlers tend to be less capitalized
than larger growers and handlers.
In discussing the possibility of marketing percentages for the
1998-99 crop year, the Board considered the following factors contained
in the marketing policy: (1) The estimated total production of tart
cherries; (2) the estimated size of the crop to be handled; (3) the
expected general quality of such cherry production; (4) the expected
carryover as of July 1 of canned and frozen cherries and other cherry
products; (5) the expected demand conditions for cherries in different
market segments; (6) supplies of competing commodities; (7) an analysis
of economic factors having a bearing on the marketing of cherries; (8)
the estimated tonnage held by handlers in primary or secondary
inventory reserves; and (9) any estimated release of primary or
secondary inventory reserve cherries during the crop year.
The Board's review of the factors resulted in the computation and
announcement in June 1998 of preliminary free and restricted
percentages and in the final and free and restricted percentages
proposed in this rule (60 percent free and 40 percent restricted).
The Board discussed the demand for tart cherries is inelastic at
high and low levels of production. At the extremes, different factors
become operational. The order's promulgation record stated that in very
short crops there is limited but sufficient exclusive demand for
cherries that can cause processor prices to double and grower prices to
triple. In the event of large crops, there seems to be no price low
enough to expand tart cherry sales in the marketplace sufficient to
market the crops.
In considering alternatives, the Board discussed not having volume
regulation this season. Board members stated that no volume regulation
would be detrimental to the tart cherry industry. Returns to growers
would not even cover their production costs for this season. Growers
would continue to go out of business since many would not receive any
money for their crop.
The Board discussed the fact that the general quality of the crop
for this season is fair to good. Alternative products used by food
processing and preparation establishments instead of cherries are
apples and blueberries which can be substituted for cherries if
cherries cannot be sold at consistent prices.
As mentioned earlier, the Department's ``Guidelines for Fruit,
Vegetable, and Specialty Crop Marketing Orders'' specify that 110
percent of recent years' sales should be made available to primary
markets each season before recommendations for volume regulation are
approved. The quantity available under this rule is 110 percent of the
quantity shipped in the prior three years.
The free and restricted percentages proposed to be established by
this rule release the optimum supply and apply uniformly to all
regulated handlers in the industry, regardless of size. There are no
known additional costs incurred by small handlers that are not incurred
by large handlers. The stabilizing effects of the percentages impact
all handlers positively by helping them maintain and expand markets,
despite seasonal supply fluctuations. Likewise, price stability
positively impacts all producers by allowing them to better anticipate
the revenues their tart cherries will generate.
The Department has not identified any relevant Federal rules that
duplicate, overlap, or conflict with this regulation.
While the level of benefits of this rulemaking is difficult to
quantify, the stabilizing effects of the volume regulations impact both
small and large handlers positively by helping them maintain markets
even though tart cherry supplies fluctuate widely from season to
season.
In compliance with Office of Management and Budget (OMB)
regulations (5 CFR part 1320) which implement the Paperwork Reduction
Act of 1995 (Pub. L. 104-13), the information collection and
recordkeeping requirements have been previously approved by OMB and
assigned OMB Number 0581-0177.
There are some reporting, recordkeeping and other compliance
requirements under the marketing order. The reporting and recordkeeping
burdens are necessary for compliance purposes and for developing
statistical data for maintenance of the program. The forms require
information which is readily available from handler records and which
can be provided without data processing equipment or trained
statistical staff. As with other, similar marketing order programs,
reports and forms are periodically studied to reduce or eliminate
duplicate information collection burdens by industry and public sector
agencies. This rule does not change those requirements.
A 15-day comment period is provided to allow interested persons to
respond to this proposal. Fifteen days is deemed appropriate because
this rule needs to be in place as soon as possible to achieve its
intended purpose of making the optimum supply quantity computed by the
Board available to handlers marketing 1998-99 crop year cherries. All
written comments timely received will be considered before a final
determination is made on this matter.
List of Subjects in 7 CFR Part 930
Marketing agreements, Reporting and recordkeeping requirements,
Tart cherries.
For the reasons set forth in the preamble, 7 CFR part 930 is
proposed to be amended as follows:
PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK,
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN
1. The authority citation for 7 CFR part 930 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. Subpart--Supplementary Regulations is added, consisting of
Sec. 930.251, to read as follows:
Subpart--Supplementary Regulations
Note: This section will not appear in the annual Code of Federal
Regulations.
Sec. 930.251 Final free and restricted percentages for the 1998-99
crop year.
The final percentages for tart cherries handled by handlers during
the crop year beginning on July 1, 1998, which shall be free and
restricted, respectively, are designated as follows: Free percentage,
60 percent and restricted percentage, 40 percent.
[[Page 64013]]
Dated: November 9, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-30672 Filed 11-17-98; 8:45 am]
BILLING CODE 3410-02-P
