[Federal Register Volume 64, Number 222 (Thursday, November 18, 1999)]
[Rules and Regulations]
[Pages 63160-63166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30168]
[[Page 63159]]
_______________________________________________________________________
Part IV
Department of Agriculture
_______________________________________________________________________
Agricultural Marketing Service
_______________________________________________________________________
7 CFR Part 905
Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida;
Limiting the Volume of Small Red Seedless Grapefruit; Final Rule
Federal Register / Vol. 64, No. 222 / Thursday, November 18, 1999 /
Rules and Regulations
[[Page 63160]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 905
[Docket No. FV99-905-3 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 adopting, as a
final rule, without change, the provisions of an interim final rule
limiting the volume of small red seedless grapefruit entering the fresh
market under the marketing order covering oranges, grapefruit,
tangerines, and tangelos grown in Florida. The marketing order is
administered locally by the Citrus Administrative Committee
(committee). This rule continues to limit the volume of sizes 48 and/or
size 56 red seedless grapefruit handlers can ship during the remainder
of the first 11 weeks of the 1999-2000 season. Through week 7, which
ended November 7, the percentage was 37 percent. For the last four
weeks (November 8 through December 5), the percentage is 32 percent.
This limitation is designed to provide a sufficient supply of small
sized red seedless grapefruit to meet market demand, without saturating
all markets with these small sizes. This rule should help stabilize the
grapefruit market and improve grower returns.
EFFECTIVE DATE: Effective November 19, 1999.
FOR FURTHER INFORMATION CONTACT: William G. Pimental, Southeast
Marketing Field Office, F&V, AMS, USDA, P.O. Box 2276, Winter Haven,
Florida 33883-2276; telephone: (863) 299-4770, Fax: (863) 299-5169; or
George Kelhart, Technical Advisor, Marketing Order Administration
Branch, F&V, AMS, USDA, room 2522-S, P.O. Box 96456, Washington, DC
20090-6456; telephone: (202) 690-3919, Fax: (202) 720-5698.
Small businesses may request information on compliance with this
regulation by contacting Jay Guerber, 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, Fax: (202)
720-5698 or E-mail: Jay.Guerber@usda.gov.
SUPPLEMENTARY INFORMATION: This rule is issued under Marketing
Agreement 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 of Agriculture (Department) is issuing this rule in
conformance with Executive Order 12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule continues to limit the volume of sizes 48
and/or size 56 red seedless grapefruit handlers can ship during the
remainder of the first 11 weeks of the 1999-2000 season which began
September 20. 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 the 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 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 regulations provides procedures for limiting
the volume of small red seedless grapefruit entering the fresh market
(64 FR 51888; September 27, 1999). The procedures specify that the
committee may recommend that only a certain percentage of sizes 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
regulation period is 11 weeks long and 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.
This rule limits the volume of small red seedless grapefruit that
can enter the fresh market for the remaining weeks of the 11 week
period which began the week of September 20, 1999. This rule continues
in effect the interim final rule which established the weekly
percentage for the first two weeks (September 20 through October 3) at
45 percent; for the third week (October 4 through October 10) at 40
percent; for the fourth through seventh weeks (October 11 through
November 7) at 37 percent; and for the last four weeks (November 8
through December 5) at 32 percent. These percentages are different from
those originally recommended by the committee on April 1, 1999. At that
time, the committee unanimously voted to establish a weekly percentage
of 25 percent for each of the 11 weeks. The committee's initial
recommendation was issued as a proposed rule published on August 26,
1999 (64 FR 46603). No comments were received during the comment period
which expired on September 10, 1999. The committee subsequently met on
August 31, 1999, and unanimously recommended adjusting the proposed
percentages. The committee's recommendation was
[[Page 63161]]
issued as an interim final rule published on September 17, 1999 (64 FR
50419). Comments on that action were invited until September 27, 1999.
No comments were received.
This action is similar to actions taken in the previous two seasons
(1997-98 and 1998-99). Prior to those two years, no weekly percentages
were established. During the three seasons prior to implementation of
weekly percentage regulations (1994-95, 1995-96, and 1996-97), returns
for 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 (1\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. price is $4 to $6 a carton more than for the
smaller sizes. In early October, the f.o.b. price for a size 27
averages around $10.00 per carton. This compares to an average f.o.b.
price of $5.50 per carton for size 56. By the end of the 11 week period
covered in this rule, the f.o.b. price for large sizes drops to within
$2 of the f.o.b. price for small sizes.
In the three seasons prior to 1997-98, prices of red seedless
grapefruit fell from a weighted average f.o.b. price of $7.80 per
carton to an average f.o.b. price 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 those three seasons, the market did not recover, and the f.o.b.
price 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 contributes 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 per carton in 1991-92 to around $1.50 per carton
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
per carton. 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 a weekly percentage of size
regulation during the first 11 weeks of the 1997-98 and 1998-99
seasons. The initial recommendations from the committee were 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 and adjusted its recommendations for the weekly
percentages. The committee considered information from past seasons,
crop estimates, fruit size, and other information to make its
recommendations. The committee has since used this regulation to the
betterment of the industry. Prices have increased, and movement has
been more stable. Actual weekly percentages established during the 11
week period during the 1997-98 season were 50 percent for the first 3
weeks, and 35 percent for the other 8 weeks. Actual weekly percentages
established during the 11 week period during the 1998-99 season were 37
percent for the first 3 weeks, and 32 percent for the other 8 weeks.
In making its recommendation for the 1999-2000 season, the
committee reviewed its experiences in past seasons. The committee
believes establishing weekly percentages during the last two seasons
was successful. The committee examined shipment data covering the 11
week regulatory period for the last two regulated seasons and the three
prior seasons. The information contained the amounts and percentages of
sizes 48 and 56 shipped during each week and weekly f.o.b. price
figures. During the 11 week period, the regulations were successful at
helping maintain prices at a higher level than previously, and sizes 48
and 56 by count and as a percentage of total shipments were reduced.
During the first 11 weeks of the 1996-97 season, shipments of sizes 48
and 56 were 3,076,474 cartons, or 40 percent of total shipments. In the
first 11 weeks of the last two seasons, under regulation, shipments of
sizes 48 and 56 averaged 2,517,080 cartons and accounted for 33 percent
of total shipments.
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. prices for these weeks were $6.28 for the 1996-97 season, $6.55
for the 1997-98 season, and $7.63 for the 1998-99 season. Total fresh
shipments for the 1998-99 season are estimated at 14.6 million cartons
of red grapefruit.
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 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, the last season prior to
establishing percentage size regulations. Prices for the same sizes
fell only 13, 11, 14, and 11 percent, respectively, during the same
period last season with regulation. In fact, prices for all sizes were
firmer during this period last season when compared to the 1996-97
season, with the weighted average price dropping only 11 percent during
this period as compared to 22 percent during the 1996-97 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, and 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
[[Page 63162]]
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 in 1997-98, as small sizes
were used to supply export customers with preferences for small sized
grapefruit.
The committee initially recommended that the weekly percentage of
size regulation be set at 25 percent for each week during the
regulatory period. Members believed that the problems associated with
an uncontrolled volume of small sizes entering the market early in the
season would recur without such action. The committee thought that to
provide the most flexibility, the weekly percentage should be set at 25
percent for each of the 11 weeks in the regulated period. The committee
believes it is best to set regulation at the most restrictive level,
and then relax the percentage as warranted by conditions later in the
season. The committee intends to meet on a regular basis early in the
season to consider adjustments in the weekly percentage rates, as was
done in the previous two seasons.
In its discussion, the committee recognized the need for and the
benefits of the weekly percentage regulation. The committee 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 its initial recommendation, the committee considered that
by establishing regulation at 25 percent, they could meet again in
August and subsequent months and use the best information available to
help the industry and the committee make the most informed decisions as
to whether the established percentages are appropriate.
Based on this information and the experiences from past seasons,
the committee agreed to establish the initial weekly percentages at the
most restrictive level. They could then meet in late August, or in
September and October, as needed, when additional information is
available, and determine whether the set percentage levels are
appropriate. They said this is essentially what was done in the prior
two years, and it had been very successful. For example, the committee
met in May 1998, and recommended a weekly percentage of 25 percent for
each of the first 11 weeks of the 1998-99 season. In September 1998,
the committee met again, and recommended that the weekly percentage be
relaxed. Any changes to the weekly percentages established by this rule
for 1999-2000 would require additional rulemaking and the approval of
the Secretary.
The committee noted that more information helpful in determining
the appropriate weekly percentages will be available after August 1999.
At the time of the April 1999 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 1999.
The committee met again on August 31, 1999, and revisited the
weekly percentage issue and reviewed information it had acquired since
its April 6, 1999, meeting. At the meeting, the committee unanimously
recommended that the weekly percentages be changed from 25 percent for
each of the 11 regulated weeks to 45 percent for the first two weeks
(September 20 through October 3); 40 percent for the third week
(October 4 through October 10); 37 percent for the fourth through
seventh weeks (October 11 through November 7); and 32 percent for the
last four weeks (November 8 through December 5).
In its discussion of these changes, the committee reviewed the
initial percentages recommended and the current state of the crop. The
committee also re-examined 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.
During deliberations in past seasons as to weekly percentages, the
committee considered how past shipments had affected the market. Based
on available statistical information, the committee members believed
that once shipments of sizes 48 and 56 reach 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 is the case for the 1999-2000 season, they 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 that would approach the 250,000 carton mark
during the regulated weeks without exceeding it.
While the committee did eventually vote last season to increase the
weekly percentages, shipments of sizes 48 and 56 during the 11 weeks
regulated during the 1998-99 season were lower by count and by
percentage than in the unregulated seasons of 1994-95 through 1996-97.
This may have contributed to the success of the regulation.
In setting the weekly percentage for each week at 25 percent for
the 1999-2000 season, the total available allotment would have
approximated 234,000 (25 percent of the total industry base of 937,257
cartons). The committee thus believed that the percentages should be
increased, as was done last season. While satisfied with the level of
regulation last season (37 percent for the first 7 weeks and 32 percent
for the last 4 weeks), the committee believed that the unique
circumstances for 1999-2000 warranted more liberal percentages during
the first 3 weeks of the 1999-2000 season.
The committee still projects fresh shipments of red seedless
grapefruit during 1999-2000 to be equal to or lower than in previous
seasons. The quality of the crop is anticipated to be normal or above
normal, although shape of the fruit is estimated to be below normal.
All growing districts appear to be affected by poorly shaped fruit,
which could reduce the packout percentages for the 1999-2000 crop. The
smaller sizes were expected to be the better shaped fruit during the
first part of the season, which supports allowing ample shipments of
the smaller sizes.
At the time the Committee made its recommendations, the individual
fruit size for the 1999-2000 crop was projected to be a little smaller
than normal, but not as small as last season. Additionally, the lack of
rain during much of the growing season delayed the maturity of the crop
and early shipments were expected to be lower than in previous seasons.
Unusual weather patterns in the past eight months resulted in multiple
blooms in most groves in Florida. The problem with multiple blooms is
that it is difficult for fruit harvesters to determine which of the
fruit is mature. This was expected to cause a higher percentage of
smaller sizes to be harvested early in the season, because the small
fruit tends to mature earlier. Therefore, the committee recommended a
higher percentage in the first three weeks of the season than in later
weeks.
The situation was complicated by the ongoing economic problems
affecting the European and Asian markets. In past seasons, the European
market has shown a strong demand for the smaller sized red seedless
grapefruit. The
[[Page 63163]]
reduction in shipments to these areas experienced during the last two
years is expected to continue during the upcoming season. This
reduction in demand could result in a greater amount of small sizes for
remaining markets to absorb. These factors increase the need for
restrictions to prevent the volume of small sizes from overwhelming all
markets.
Therefore, this rule continues in effect the interim final rule
which established the weekly percentage at 45 percent for the first two
weeks (September 20 through October 3); 40 percent for the third week
(October 4 through October 10); 37 percent for the fourth through
seventh weeks (October 11 through November 7); and 32 percent for the
last four weeks (November 8 through December 5). The committee plans to
meet as needed during the remainder of the 11 week period to work to
ensure that the weekly percentages are at the appropriate levels. If
crop and market conditions should change, the percentages could be
changed to provide for the shipment of more small sizes during the
remainder of the 11 week regulatory period.
Under Sec. 905.153, the quantity of sizes 48 and/or 56 red seedless
grapefruit that may be shipped by a handler during a regulated week
would be calculated using the recommended percentage of 45, 40, 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 can calculate the
volume of sizes 48 and/or 56 they may ship in a regulated week.
An average week has been 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 are added and divided by five to establish an
average season. This average season is then divided by the 33 weeks to
derive the average week. This average week would be the base for each
handler for each of the 11 weeks of the regulatory period. The weekly
percentage, in this case 45, 40, 31, or 32 percent, is multiplied by a
handler's average week. The product is that handler's allotment of
sizes 48 and/or 56 red seedless grapefruit for the given week.
Under this rule, the calculated allotment is the amount of small
sized red seedless grapefruit a handler may ship. If the minimum size
established under Sec. 905.52 remains at size 56, handlers can fill
their allotment with size 56, size 48, or a combination of the two
sizes such that the total of these shipments are within the established
limits. If the minimum size under the order is 48, handlers can fill
their allotment with size 48 fruit such that the total of these
shipments is within the established limits. The committee staff would
perform the specified calculations and provide 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 would then be divided by 33 weeks to
yield an average week, in this case, 1,600 cartons. This would be
Handler A's base. Using the first week of the regulatory period as an
example, the weekly percentage of 45 percent was applied to this
amount. This provided the handler with a weekly allotment of 720
cartons (1,600 x .45) of sizes 48 and/or 56. Similar calculations,
using the appropriate weekly percentage, will be performed for the
balance of the regulatory period.
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. Such new handlers can ship small sizes
equal to 45, 40, 37, or 32 percent of their total volume of shipments
during their first shipping week (depending on when they begin
shipping). Once a new handler has established shipments, their average
week will be calculated as an average of the weeks they have shipped
during the current season.
The interim final rule established a weekly percentage of 45
percent for the first two weeks (September 20 through October 3); 40
percent for the third week (October 4 through October 10); 37 percent
for the fourth through the seventh weeks (October 11 through November
7); and 32 percent for the last four weeks of the regulatory period
(November 8 through December 5). The regulatory period begins the third
Monday in September. Each regulation week begins Monday at 12:00 a.m.
and end at 11:59 p.m. the following Sunday, since most handlers keep
records based on Monday being the beginning of the work week. If
necessary, the committee could meet and recommend a different
percentage for any given week or weeks of the regulatory period. Any
such recommendation would require approval of the Secretary.
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 are intended to
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 can 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 will be 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 are not carried forward to the following week.
However, a handler to whom an allotment has been issued can lend or
transfer all or part of such allotment (excluding the overshipment
allowance) to another handler. In the event of a loan, each party must,
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 can be made. In each case, the committee
confirms in writing all such transactions prior to the following week.
The committee can 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 computes each handler's allotment by multiplying the
handler's average week by the percentage established by regulation for
that week. The committee notifies each handler prior to that particular
week of the quantity of sizes 48 and 56 red seedless grapefruit such
handler can handle during a particular week, making
[[Page 63164]]
the necessary adjustments for overshipments and loan repayments.
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.
Thus, allotment is based 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 many
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 definition of prior period as the method that provides
each handler with an equitable base from which to establish shipments.
The procedures under this rule provide flexibility through several
different options. Handlers can transfer, borrow, or loan allotment
based on their needs in a given week. Handlers also have the option of
over shipping their allotment by 10 percent in a week, as long as the
overshipment is deducted from the following week's shipments.
Statistics show that in none of the regulated weeks in past seasons was
the total available allotment used. Approximately 190 loans and
transfers were utilized last season. To facilitate this process, the
committee staff provides 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.
After considering the available information, the committee
determined that the interim final rule was needed to regulate shipments
of small red seedless grapefruit during the 1999-2000 season.
Continuation of the percentage size regulation for the remainder of
the 11 week period 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 8e 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), 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 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 those having annual receipts of
less than $500,000 (13 CFR 121.601).
Based on industry and committee data, the average annual f.o.b.
price for fresh Florida red grapefruit during the 1998-99 season was
around $7.20 per \4/5\ bushel carton, and total fresh shipments for the
1998-99 season are estimated at 14.6 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
continues to limit the volume of small red seedless grapefruit entering
the fresh market during the remainder of the first 11 weeks of the
1999-2000 season, that began the third Monday in September. This rule
utilizes the provisions of Sec. 905.153, and it continues in effect the
percentages established for the remainder of the 11 week regulatory
period. The interim final rule established a weekly percentage of 45
percent for the first two weeks of the regulatory period (September 20
through October 3); 40 percent for the third week (October 4 through
October 10); 37 percent for the fourth through the seventh weeks
(October 11 through November 7); and 32 percent for the last four weeks
(November 8 through December 5). This was a change from the committee's
original recommendation of a 25 percent weekly percentage for each of
the 11 weeks. Under this 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. This final rule continues in effect the interim final rule which
established the weekly percentage at 45 percent for the first two weeks
(September 20 through October 3); 40 percent for the third week
(October 4 through October 10); 37 percent for the fourth through
seventh weeks (October 11 through November 7); and 32 percent for the
last four weeks (November 8 through December 5). This rule will
continue to provide a supply of small sized red seedless grapefruit
sufficient to meet market demand, without saturating all markets with
these small sizes. It also will help stabilize the market and improve
grower returns during the early part of the season.
The weekly percentage of 25 percent, when combined with the average
weekly shipments for the total industry, would have provided a total
industry allotment of nearly 235,000 cartons of sizes 48 and/or 56 red
seedless grapefruit per regulated week. If a 25 percent restriction on
small sizes had been applied during the 11 week period in the three
seasons prior to the 1997-
[[Page 63165]]
98 season, an average of 4.2 percent of overall shipments during that
period would have been affected. This rule affects even fewer shipments
by continuing to establish 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 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 costs 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. price is $4 to $6 a
carton more than for the smaller sizes. In early October, the f.o.b.
price for a size 27 averages around $10.00 per carton. This compares to
an average f.o.b. price of $5.50 per carton for size 56. By the end of
the 11 week period covered in this rule, the f.o.b. price for large
sizes typically drops to within $2 of the f.o.b. price for small sizes.
The overshipment 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 per
carton in 1991-92 to around $1.50 per carton 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 per carton. The study also
indicated that increasing minimum size restrictions could help raise
returns.
This regulation will continue to 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
minimal effect on overall shipments. While this rule may necessitate
spot picking, which could entail slightly higher harvesting costs, many
in the industry are already using the practice. In addition, 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 will continue to help limit the effects of an over supply
of small sizes early in the season. Similar rules were enacted
successfully the last two seasons. During the 11 week period, the
regulations were successful in helping maintain prices at a higher
level than in prior seasons, 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, $6.55 for the 1997-98 season, and $7.63
for the 1998-99 season.
The rules were 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 25, 25, 20, and 14 percent, respectively, during the
1997-98 season. Prices for the same sizes fell only 13, 11, 14, and 11
percent, respectively, during the same period last season with
regulation. Prices for all sizes were firmer during this period last
season when compared to the 1996-97 season, with the weighted average
price dropping only 11 percent during this period last season as
compared to 22 percent during the 1996-97 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 and larger sized grapefruit registering modest
improvements.
The report 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 1997-98
season, as small sizes were used to supply export customers with
preferences for small sized grapefruit.
Over 50 percent of red seedless grapefruit are 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 the last
two seasons suggests that the regulation could do both. A stabilized
price that returns a fair market value would be beneficial to 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.
Accordingly, this action would provide the most beneficial results for
the industry given any other alternatives.
Handlers utilizing the flexibility of the loan and transfer aspects
of this action would be required to submit a form to the committee.
Moreover, handlers will be required to submit a form to the committee
on their daily shipments of sizes 48 and/or 56 red seedless grapefruit,
and new handlers also will have to submit a registration form to ship
fruit pursuant to any allotment percentage established by the
Secretary. The rule would increase the reporting burden on
approximately 80 handlers of red seedless grapefruit who would be
taking about 0.05 hour to complete each report regarding allotment
loans or transfers, and shipments. New handlers without a record of
shipments registering with the committee will take about 0.03 of an
hour to complete the ``new handler'' registration form. The information
collection requirements contained in Sec. 905.153 have been approved by
the Office of Management and Budget (OMB) under the provisions of the
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) 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 sectors. 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 51.750 through 51.784) issued under the Agricultural
Marketing Act of 1946 (7 U.S.C. 1621 through 1627).
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
[[Page 63166]]
on all issues. Like all committee meetings, the April 6, 1999, and
August 31, 1999, meetings were public meetings and all entities, both
large and small, were able to express views on this issue.
An interim final rule concerning this action was published in the
Federal Register on September 17, 1999. Copies of the rule were mailed
by the Committee's staff to all Committee members and grapefruit
handlers. In addition, the rule was made available through the Internet
by the Office of the Federal Register. That rule provided for a 10-day
comment period which ended September 27, 1999. No comments were
received.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at the
following web site: http://www.ams.usda.gov/fv/moab.html. Any questions
about the compliance guide should be sent to Jay Guerber at the
previously mentioned address in the FOR FURTHER INFORMATION CONTACT
section.
After consideration of all relevant material presented, including
the Committee's recommendation, and other information, it is found that
finalizing the interim final rule, without change, as published in the
Federal Register (64 FR 50419, September 17, 1999) will tend to
effectuate the declared policy of the Act.
Pursuant to 5 U.S.C. 553, it is further found and determined that
good cause exists for not postponing the effective date of this rule
until 30 days after publication in the Federal Register because: (1)
The volume limitations implemented by this action apply through
December 5, 1999; (2) written comments were invited on this action and
no comments were received; and (3) no useful purpose would be served by
delayed the effective date of this rule.
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 64 FR 50419 on September 17, 1999, is adopted as a
final rule without change.
Dated: November 12, 1999.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-30168 Filed 11-17-99; 8:45 am]
BILLING CODE 3410-12-P
