[Federal Register Volume 63, Number 36 (Tuesday, February 24, 1998)]
[Proposed Rules]
[Pages 9160-9163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4595]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 63, No. 36 / Tuesday, February 24, 1998 /
Proposed Rules
[[Page 9160]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 993
[Docket No. FV98-993-1 PR]
Dried Prunes Produced in California; Undersized Regulation for
the 1998-99 Crop Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This rule invites comments on changes to the undersized prune
regulation for dried prunes received by handlers from producers and
dehydrators under Marketing Order No. 993 for the 1998-99 crop year.
The marketing order regulates the handling of dried prunes produced in
California and is administered locally by the Prune Marketing Committee
(Committee). This rule would remove the smallest, least desirable of
the marketable size dried prunes produced in California from human
consumption outlets, and allow handlers to dispose of the undersized
prunes in such outlets as livestock feed. The Committee estimated that
this rule would reduce the calculated excess of about 78,000 tons of
dried prunes expected at the end of the 1997-98 crop year, by
approximately 7,300 tons, leaving sufficient prunes to fulfill foreign
and domestic trade demand.
DATES: Comments received by March 26, 1998, will be considered prior to
issuance of a final rule.
ADDRESSES: Interested persons are invited to submit written comments
concerning this rule. Comments must be sent in triplicate to the Docket
Clerk, Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box
96456, Washington, DC 20090-6456; Fax: (202) 205-6632. Comments should
reference the docket number and the date and page number of this issue
of the Federal Register and will be available for public inspection in
the Office of the Docket Clerk during regular business hours.
FOR FURTHER INFORMATION CONTACT: Richard P. Van Diest, Marketing
Specialist, California Marketing Field Office, Fruit and Vegetable
Programs, AMS, USDA, 2202 Monterey Street, suite 102B, Fresno,
California 93721; telephone: (209) 487-5901, Fax: (209) 487-5906; or
George Kelhart, Technical Advisor, 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)
205-6632. 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) 205-6632.
SUPPLEMENTARY INFORMATION: This rule is issued under Marketing
Agreement and Order No. 993, both as amended (7 CFR part 993),
regulating the handling of dried prunes produced in California,
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 is not intended to have retroactive effect.
This proposal 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 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.
This proposal invites comments on changes to the undersized
regulation currently in effect for French prunes which pass freely
through a screen opening from 23/32 to 24/32 in diameter and for non-
French prunes from 28/32 to 30/32 of an inch in diameter for the 1998-
99 crop year for volume control purposes. This rule would remove the
smallest, least desirable of the marketable size dried prunes produced
in California from human consumption outlets. The rule would be in
effect from August 1, 1998, through July 31, 1999, and was unanimously
recommended by the Committee at a November 18, 1997, meeting.
Section 993.19b of the prune marketing order defines undersized
prunes as prunes which pass freely through a round opening of a
specified diameter. Since August 1, 1982, the undersized dried prune
regulation specified in Sec. 993.49(c) of the prune marketing order has
been 23/32 of an inch for French prunes and 28/32 of an inch for non-
French prunes. These diameter openings have been in effect continuously
for quality control purposes. Section 993.49(c) also provides that the
Secretary upon a recommendation of the Committee may establish larger
openings for undersized dried prunes whenever it is determined that
supply conditions for a crop year warrant such regulation. Section
993.50(g) states in part: ``No handler shall ship or otherwise dispose
of, for human consumption, the quantity of prunes determined by the
inspection service pursuant to Sec. 993.49(c) to be undersized prunes *
* *.'' Pursuant to Sec. 993.52, minimum standards, pack specifications,
including the openings prescribed in Sec. 993.49(c), may be modified by
the Secretary, on the basis of a recommendation of the Committee or
other information.
Pursuant to the authority in Sec. 993.52 of the order, Sec. 993.400
modifies the undersized openings prescribed in Sec. 993.49(c) to permit
undersized regulations using openings of 23/32 or 24/32 of an inch for
French prunes, and 28/32 or 30/32 of an inch for non-French prunes.
[[Page 9161]]
During the 1974-75 and 1977-78 crop years, the undersized prune
regulation was established by the Department at 23/32 of an inch in
diameter for French prunes and 28/32 of an inch in diameter for non-
French prunes. These diameter openings were established in
Secs. 993.401 and 993.404, respectively (39 FR 32733; September 11,
1974; and 42 FR 49802; September 28, 1977). During the 1975-76 and
1976-77 crop years, the undersized prune regulation was established at
24/32 of an inch for French prunes, and 30/32 of an inch for non-French
prunes. These diameter openings were established in Secs. 993.402 and
993.403, respectively (40 FR 42530; September 15, 1975; and 41 FR
37306; September 3, 1976). The prune industry had an excess supply of
prunes, particularly small size prunes. Rather than recommending volume
regulation percentages for the 1975-76, 1976-77, and 1977-78 crop
years, the Committee recommended the establishment of an undersized
prune regulation applicable to all prunes received by handlers from
producers and dehydrators during each of those crop years. For the
1994-95 crop year, the Committee recommended and the Department
established volume regulation percentages and an undersized regulation
at the aforementioned 23/32 and 28/32 inch diameter screen sizes.
The objective of the undersized regulations during each of those
crop years was to preclude the use of small prunes in manufactured
prune products, such as juice and concentrate. Handlers could not
market undersized prunes for human consumption, but could dispose of
them in nonhuman outlets such as livestock feed.
With these experiences as a basis, the marketing order was amended
on August 1, 1982, establishing the continuing quality-related
regulation for undersized French and non-French prunes under
Sec. 993.49(c). That regulation has removed from the marketable supply
those prunes which are not desirable for use in prune products.
As in the 1970's, the prune industry is currently experiencing an
excess supply of prunes, particularly in the smaller sizes. At its
meeting on November 18, 1997, the Committee unanimously recommended
establishing an undersized prune regulation at 24/32 of an inch in
diameter for French prunes and 30/32 of an inch in diameter for non-
French prunes for volume control purposes for the 1998-99 crop year.
That crop year begins August 1, 1998, and ends July 31, 1999.
The Committee estimated that this rule would reduce the calculated
excess of about 78,000 natural condition tons of dried prunes as of
July 31, 1998, by approximately 7,300 natural condition tons, still
leaving sufficient prunes to fill domestic and foreign trade demand
during the 1998-99 crop year, and provide an adequate carryout on July
31, 1999, for early season shipments until the new crop is available
for shipment. According to the Committee, the desired inventory level
to keep trade distribution channels full while awaiting the new crop is
almost 41,000 natural condition tons.
In its deliberations, the Committee reviewed statistics reflecting:
(1) A worldwide prune demand which has been relatively stable at about
260,000 tons; (2) a world wide oversupply that is expected to continue
growing into the next century (estimated at 387,170 natural condition
tons by the year 2001); (3) a continuing oversupply situation in
California caused by increased production from increased plantings and
higher yields per acre (between the 1993-94 and 1996-97 crop years, the
yield ranged from 2.3 to 2.8 versus a 10 year average of 2.2 tons per
acre); and (4) a worsening of California's excess supply situation,
even though dried prune shipments in 1996-97 reached a near-record high
of 183,252 packed tons. The Committee also considered the quantity of
``D'' screen (24/32 of an inch in diameter for French prunes and 30/32
of an inch in diameter for non-French prunes) prunes produced during
the 1990-91 through 1996-97 crop years. The production of these small
sizes ranged from 2,575 to 8,778 natural condition tons during that
period. The Committee concluded that it had to utilize supply
management techniques to accelerate the return to a balanced supply/
demand situation in the interest of California dried prune producers
and handlers. The proposed changes to the undersized regulation for the
1998-99 crop year are the result of these deliberations, and the
Committee's desire to bring supplies more in line with market needs.
The current oversupply situation facing the California prune
industry has been caused by four consecutive large crops of over
180,000 natural condition tons. Another large crop of 215,000 natural
condition tons is forecast for the 1997-98 crop year, which will add to
the existing oversupply. The yield per acre is forecast at 2.6 tons per
acre. With an anticipated increase in bearing acreage, the 1998-99
season crop could be larger.
Because of the oversupply situation, producer prices for undersized
prunes during the 1997-98 crop year have declined to $40-50 per ton.
This represents a loss to the producer of about $260-270 per ton. The
lower pricing of the smaller prunes is expected to provide producers an
incentive to produce larger sizes which the industry needs to meet the
increasing market demand for pitted prunes. However, the Committee felt
that the undersized rule change was needed to expedite the reduction of
the inventories of small prunes, and more quickly bring supplies in
line with needs. Attainment of this goal would benefit all of the
producers and handlers of California prunes.
The recommended decision of June 1, 1981 (46 FR 29271) regarding
undersized prunes states that the undersized prune regulation at the
23/32 and 28/32 inch diameter size openings would be continuous for the
purposes of quality control even in above parity situations. It further
states that any change (i.e., increase) in the size of those openings
would not be for the purpose of establishing a new quality-related
minimum. Larger openings would only be applicable when supply
conditions warranted the regulation of a larger quantity of prunes as
undersized prunes. Thus, any regulation prescribing openings larger
than those in Sec. 993.49(c) should not be implemented when the grower
average price is expected to be above parity. As discussed later, the
average grower price for prunes during the 1998-99 crop year is not
expected to be above parity, and implementation of this more
restrictive undersized regulation would be appropriate as far as parity
is concerned.
Section 8e of the Act requires that when certain domestically
produced commodities, including prunes, are regulated under a Federal
marketing order, imports of that commodity must meet the same or
comparable grade, size, quality, or maturity requirements for the
domestically produced commodity. This action does not impact the dried
prune import regulation because the action to be implemented is for
volume control, not quality control, purposes. The smaller diameter
openings of 23/32 of an inch for French prunes and 28/32 of an inch for
non-French prunes were implemented for the purpose of improving product
quality. The recommended increases to 24/32 of an inch in diameter for
French prunes and 30/32 of an inch in diameter for non-French prunes
are for purposes of volume control. Therefore, the increased diameters
would not be applied to imported prunes.
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of
[[Page 9162]]
this rule on small entities. Accordingly, AMS has prepared this initial
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 1,400 producers of dried prunes in the
production area and approximately 21 handlers subject to regulation
under the marketing order. Small agricultural producers have been
defined by the Small Business Administration (13 CFR 121.601) as those
having annual receipts less than $500,000, and small agricultural
service firms are defined as those whose annual receipts are less than
$5,000,000.
Last year, as a percentage, about 34 percent of the handlers
shipped over $5,000,000 worth of dried prunes and 66 percent of the
handlers shipped under $5,000,000 worth of prunes. In addition, based
on production, producer prices, and the total number of dried prune
producers provided by the Committee, the average annual producer
revenue is approximately $136,000. The majority of handlers and
producers of California dried prunes may be classified as small
entities.
This proposed rule would establish an undersized prune regulation
of 24/32 of an inch in diameter for French prunes and 30/32 of an inch
in diameter for non-French prunes for the 1998-99 crop year for volume
control purposes. This change in regulation would result in more of the
smaller sized prunes being classified as undersized prunes, and is
expected to benefit producers, handlers, and consumers. The prune
industry currently uses a ``D'' screen (24/32 of an inch in diameter
for French prunes and 30/32 of an inch in diameter for non-French
prunes) for separating small prunes from the larger sizes. Thus,
producers and handlers, both small and large, would not incur extra
costs from having to purchase new screen sizes. Moreover, because the
quality related undersized regulation has been in place continuously
since the early 1980's, the only additional cost resulting from the
increased openings would be the disposal of additional undersized prune
tonnage (about 1,600 natural condition tons) to nonhuman consumption
outlets as required by the order. With the less restrictive openings,
only 5,686 natural condition tons or 3.4 percent of the marketable
production has been removed on average over the past seven crop years
since 1990-91. Since the benefits and costs of the proposed action
would be directly proportional to the quantity of ``D'' screen prunes
produced or handled, small businesses should not be disproportionately
affected by the proposal. Sugar content, prune density, and dry-away
ratio vary from county-to-county, from orchard-to-orchard, and from
season-to-season in the major producing areas of the Sacramento and San
Joaquin Valleys. These areas account for over 99 percent of the State's
production, and the prunes produced are homogeneous enough so that the
proposal would not be inequitable to producers, both large and small,
in any area of the State.
The quantity of small prunes in a lot is not dependent on whether a
producer or handler is small or large, but is primarily dependent on
cultural practices, soil composition, and water costs. The cost to
minimize the quantity of small prunes is similar for small and large
entities. The anticipated benefits of this rule are not expected to be
disproportionately greater or lesser for small handlers or producers
than for larger entities. While this proposed rule may initially impose
some additional costs on producers and handlers, the costs are expected
to be minimal, and would be offset by the benefits derived by the
elimination of some of the excess supply of small sized prunes.
At the November 18, 1997, meeting, the Committee discussed the
impact of this change on handlers and producers in terms of cost.
Handlers and producers receive higher returns for the larger size
prunes. According to industry members, the small size prunes being
eliminated through this rule have very little value. As mentioned
earlier, the current situation for these small sizes is quite bleak
with producers losing money on every ton they deliver to handlers. The
1997 grower field price for ``D'' screen prunes is ranging between $40
and $50 per ton. The cost of drying a ton of such prunes is $260 per
ton at a 4 to 1 dry-away ratio, the cost to haul these prunes is at
least $20 per ton, and the producer assessment that must be paid to the
California Prune Board (a body which administers the State marketing
order for promotion) is $30 per ton. The total cost is about $310 per
ton which equates to a loss of about $260 per ton for every ton of
``D'' screen prunes produced and delivered to handlers.
The proposed rule is expected to benefit all producers and handlers
by eliminating the smallest, least valuable prunes from the crop. This
is expected to help reduce the oversupply situation and lessen the
downward pressure on small prune prices to producers. Further,
producers may alter their cultural practices to grow the larger sizes
needed by the industry to meet the market demand for pitted prunes.
Utilizing data provided by the Committee, the Department has
evaluated the impact of the proposed undersized regulation change upon
producers and handlers in the industry. The analysis shows that a
reduction in the marketable production and handler inventories would
result in higher season-average prices which would benefit all
producers. The removal of the smallest least desirable of the
marketable dried prunes produced in California from human consumption
outlets would eliminate an estimated 7,300 tons of small-sized dried
prunes during the 1998-99 crop year from the marketplace. This would
help lessen the negative marketing and pricing effects resulting from
the excess supply situation facing the industry. California prune
handlers reported that they held 102,386 tons of natural condition
prunes on July 31, 1997, the end of the 1996-97 crop year. This was the
largest year-end inventory reported since the Committee began
collecting such statistics in 1949. The desired inventory level, which
is based on an average 12-week supply deemed desirable to keep trade
distribution channels full while awaiting new crop, is 40,991 natural
condition tons. This leaves an inventory surplus of over 61,000 tons
which will likely take the industry several years to market.
Further burdening this oversupply situation will be larger
California prune crops over the next few years caused by the new prune
plantings of recent years and higher yields per acre. During the 1990-
91 crop year, the non-bearing acreage totaled 5,900 acres, but by 1996-
97, the non-bearing acreage had quadrupled to more than 23,000 acres.
Yields have ranged from 2.3 to 2.8 tons to the acre over the most
recent three-year period, compared to a 10-year average of 2.2 tons to
the acre. The 1997-98 crop is expected to be 215,000 natural condition
tons which will add to the existing oversupply. Barring unforeseen
circumstances, the 1998-99 crop may be larger further worsening the
industry's oversupply problems.
As the marketable dried prune production and surplus prune
inventories are reduced through this proposal, the trade should begin
taking a position early in the season for their dried prune needs,
which would help firm up market prices and eventually reflect a higher
overall price to the
[[Page 9163]]
producers. In addition, as producers implement improved cultural and
thinning practices, the overall size of the prunes will get larger. As
a result, producer returns would increase because producers will no
longer be receiving $40-50 per ton for the small-sized fruit at a $260-
270 per ton loss, but be receiving the higher prices paid for the
larger sizes.
For the 1992-93 through the 1996-97 crop years, the season average
price received by the producers ranged from a high of $1,121 per ton to
a low of $838 per ton during the 1996-97 crop year. The season average
price received by producers averaged about 60 percent of parity during
the 1992-93 through 1996-97 crop years. Based on available data and
estimates of prices, production, and other economic factors, the season
average producer price for the 1997-98 and 1998-99 seasons is expected
to be below $800 per ton, or about 40 percent of parity.
The Committee discussed alternatives to this change, including
making no changes to the undersized prune regulation and allowing
market dynamics to foster prune inventory adjustments through lower
prices on the smaller prunes. While reduced grower prices for small
prunes are expected to contribute toward a slow reduction in dried
prune inventories, the Committee believed that the undersized rule
change was needed to expedite that reduction. With the excess tonnage
of dried prunes, the Committee also considered establishing a reserve
pool and diversion program to reduce the oversupply situation. These
initiatives were not supported because they would not specifically
eliminate the smallest, least valuable prunes which are in oversupply.
Instead the reserve pool and diversion program would eliminate larger
size prunes from human consumption outlets. Reserve pools for prunes
have historically been implemented on dried prunes regardless of the
size of the prunes. While the marketing order also allows handlers to
remove the larger prunes from the pool by replacing them with small
prunes and the value difference in cash, this exchange would be
cumbersome and expensive to administer compared to the proposal.
Section 8e of the Act requires that when certain domestically
produced commodities, including prunes, are regulated under a Federal
marketing order, imports of that commodity must meet the same or
comparable grade, size, quality, or maturity requirements for the
domestically produced commodity. This action does not impact the dried
prune import regulation because the action to be implemented is for
volume control, not quality control, purposes. The smaller diameter
openings of 23/32 of an inch for French prunes and 28/32 of an inch for
non-French prunes were implemented for the purpose of improving product
quality. The recommended increases to 24/32 of an inch in diameter for
French prunes and 30/32 of an inch in diameter for non-French prunes
are for purposes of volume control. Therefore, the increased diameters
would not be applied to imported prunes.
This action would not impose any additional reporting or
recordkeeping requirements on either small or large California dried
prune handlers. 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.
The Department has not identified any relevant Federal rules that
duplicate, overlap, or conflict with this rule.
In addition, the Committee's meeting was widely publicized
throughout the prune industry and all interested persons were invited
to attend the meeting and participate in Committee deliberations on all
issues. Like all Committee meetings, the November 18, 1997, meeting was
a public meeting and all entities, both large and small, were able to
express views on this issue. The Committee itself is composed of
twenty-two members, of which seven are handlers, fourteen are
producers, and one is a public member. The majority of the producer and
handler members are small entities. Moreover, the Committee and its
Supply Management Subcommittee have been reviewing this supply
management problem for almost a year, and this proposed rule reflects
their deliberations completely. Finally, interested persons are invited
to submit information on the regulatory and informational impacts of
this action on small businesses.
A 30-day comment period is provided to allow interested persons to
respond to this proposal. Thirty days is deemed appropriate because
this rule, if adopted, needs to be in place as soon as possible so that
handlers and producers will be informed of any regulation for the 1998-
99 crop year (beginning August 1, 1998). Producers would need time to
thin prune-plums in order to obtain larger sizes. Producers generally
begin thinning in late April. All written comments timely received will
be considered before a final determination is made on this matter.
List of Subjects in 7 CFR Part 993
Marketing agreements, Plums, Prunes, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 7 CFR part 993 is
proposed to be amended as follows:
PART 993--DRIED PRUNES PRODUCED IN CALIFORNIA
1. The authority citation for 7 CFR part 993 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. A new Sec. 993.405 is added to read as follows:
Sec. 993.405 Undersized prune regulation for the 1998-99 crop year.
Pursuant to Secs. 993.49(c) and 993.52, an undersized prune
regulation for the 1998-99 crop year is hereby established. Undersized
prunes are prunes which pass through openings as follows: for French
prunes, 24/32 of an inch in diameter; for non-French prunes, 30/32 of
an inch in diameter.
Dated: February 17, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-4595 Filed 2-23-98; 8:45 am]
BILLING CODE 3410-02-P
