[Federal Register Volume 59, Number 116 (Friday, June 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14741]
[[Page Unknown]]
[Federal Register: June 17, 1994]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 1250
RIN 0581-AB32
[Docket No. PY-94-002]
Amendment to Egg Research and Promotion Order To Increase the
Rate of Assessment
AGENCY: Agricultural Marketing Service.
ACTION: Proposed Rule.
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SUMMARY: This proposed rule would amend the Egg Research and Promotion
Order to increase the assessment rate from 5 cents to 10 cents per 30-
dozen case of commercial eggs. The increase is authorized by amendments
to the Egg Research and Consumer Information Act must be approved by
egg producers voting in a referendum. This proposal would also make a
conforming amendment to regulations.
DATES: Comments must be received on or before August 16, 1994.
ADDRESSES: Written comments are to be mailed to Janice L. Lockard,
Chief, Standardization Branch, Poultry Division, AMS, USDA, Room 3944-
South, P.O. Box 96456, Washington, DC. 20090-6456. Comments received
may be inspected at this location between 8 a.m. and 4:30 p.m., Monday
through Friday, except holidays. State that your comments refer to
Docket No. PY-94-002.
FOR FURTHER INFORMATION CONTACT:
Janice L. Lockard, 202-720-3506.
SUPPLEMENTARY INFORMATION:
Executive Orders 12866 and 12778
This rule has been determined not-significant for purposes of
Executive Order 12866, and has been reviewed by the Office of
Management and Budget.
This proposed rule has been reviewed under Executive Order 12778,
Civil Justice Reform. It is not intended to have retroactive effect.
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 14 of the Act, a
person subject to an order may file a petition with the Secretary
stating that such order, any provisions of such order or any
obligations imposed in connection with such order are not in accordance
with law; and requesting a modification of the order or an exemption
therefrom. Such person is afforded the opportunity for a hearing on the
petition. After a hearing, the Secretary would rule on the petition.
The Act provides that the district court of the United States in any
district in which such person is an inhabitant, or has his principal
place of business, has jurisdiction to review the Secretary's ruling on
the petition, if a complaint is filed within 20 days after date of the
entry of the ruling.
Effect on Small Entities
The Administrator of the Agricultural Marketing Service has
determined that this proposed rule will not have a significant economic
impact on a substantial number of small entities, as defined by the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
Currently, 618 egg producers pay assessments to the American Egg
Board (AEB). A proposed rule to increase the exemption level from
30,000 to 75,000 laying hens was published in the Federal Register on
March 22, 1994 (59 FR 13460). The increased exemption level would
exempt 253 small egg producers who represent 41 percent of the egg
producers currently paying assessments, but only 4 percent of AEB's
total assessment income. It is anticipated that the 75,000-hen
exemption level would be in place before the referendum on the
assessment rate increase. Therefore, a change in the assessment rate
would affect only egg producers owning more than 75,000 laying hens.
There are an estimated 365 producers who own more than 75,000 hens.
Currently, egg producers must pay a mandatory assessment of 5 cents per
30-dozen case of eggs marketed to fund the research and promotion
activities authorized by the Act. The present 5-cent assessment is
equivalent to approximately 0.231 percent of the wholesale price of a
1-dozen carton of Large eggs. An assessment rate of 10 cents per 30-
dozen case would be equivalent to approximately 0.463 percent of the
wholesale price of a1-dozen carton of Large eggs. This is based on the
Economic Research Service's 3-year average wholesale price for New York
City Grade A Large cartoned eggs (1991-93) of 72 cents per dozen. AEB
collects approximately $7.5 million annually from the 5-cent
assessment, and it is estimated that it would collect $14 million for a
10-cent assessment. It is estimated that any additional costs would be
offset by the benefits to be derived from strengthened research and
promotion programs.
Paperwork Reduction
Information collection requirements and recordkeeping provisions
contained in 7 CFR Part 1250 have been previously approved by the
Office of Management and Budget and assigned OMB Control No. 0581-0093
under the Paperwork Reduction Act of 1980.
No additional recordkeeping requirements would be imposed as a
result of this proposed rule.
Background and Proposed Changes
On December 14, 1993, the Egg Research and Consumer Information Act
(7 U.S.C. 2711) was amended (Pub. L. 103-188) to increase the maximum
rate of assessment, raise the exemption level, and provide for research
project funding.
Under the amended section 8 of the Act, the maximum rate of
assessment was raised from 10 cents to 20 cents per case of commercial
eggs. The actual assessment rate is prescribed by the Egg Research and
Promotion Order and is currently 5 cents per case. Producers owning
30,000 or fewer laying hens are exempt from paying assessments and
other provisions of the Act. Section 12 of the Act was amended to
increase the exemption level to 75,000 or fewer hens. A proposed rule
to raise the exemption level in the Order was published in the Federal
Register on March 22, 1994. The new exemption level will become
effective after publication of the final rule.
The Act amendments provide that AEB may recommend an increase in
the assessment rate to the Secretary. The recommendation must be based
on a scientific study, marketing analysis, or other evidence
demonstrating a need for the increase. Consequently, AEB conducted a
marketing analysis and evaluated the advertising and nutrition research
programs.
Advertising
AEB began its first advertising campaign in 1977. For the next 3
years, media expenditures averaged $3.5 million annually. In 1980, the
American Association of Advertising Agencies noted that, during that 3-
year period, per capita consumption of eggs had increased and consumer
attitudes toward eggs had improved.
Considering inflation, an estimated $9 million would be required
for AEB to conduct a media program in 1994 comparable to that in 1977.
Further, because consumers have grown more concerned with a variety of
issues affecting egg consumption, an even greater level of funding
would be needed to achieve the same results today.
AEB's analysis establishes that egg consumption has been steadily
declining over many years. In fact, USDA statistics show that per
capita consumption dropped from 402 in 1945 to 234 in 1993. In general,
the decline is attributed to fewer egg-consuming households and less
frequent egg consumption.
Eggs face certain barriers in the marketplace which have
contributed to the declining consumption. Considered by consumers to be
primarily a breakfast food, eggs must compete with a variety of
breakfast alternatives: cold cereal; pancakes and waffles; rolls,
muffins, and toast; and hot cereal. The total measured media spending
for the breakfast food category was $937 million in 1993. Egg industry
advertising-including that funded by AEB, State and regional
associations, and companies promoting name brands-represents only 0.7
percent of that amount.
In addition, consumer concerns with fat and cholesterol have
significantly affected consumer eating habits. The judgment that eggs
are high in cholesterol has further contributed to consumers using
fewer eggs. Overcoming negative consumer attitudes is even more
difficult when other breakfast foods are more heavily promoted.
AEB's current advertising strategy is three-fold: (1) Educate
consumers about eggs and cholesterol by providing facts on egg
cholesterol in a healthy diet; (2) remind consumers how much they love
the great taste of eggs; and (3) connect eggs with the rich,
pleasurable associations people have with eggs and egg-eating
occasions.
The current ``I Love Eggs'' advertising campaign based on this
strategy proved effective in consumer testing. Prior to being exposed
to the advertising, 43 percent of consumers tested had extremely
positive or very positive attitudes about eggs. This number increased
by 13 percent after consumers were exposed to the advertising. Further,
almost half of the consumers tested reported an increased likelihood of
eating and serving eggs more often.
With current funding, AEB has earmarked about $2.8 million for this
campaign in 1995. This budget supports 15-second television commercials
and 30-second radio spots. A 5-cent increase in the assessment rate
would allow for an advertising budget of $7.5 million. This budget
would enable the use of more effective 30-second television spots;
allow advertising to be aired almost every other week, as opposed to
the 10 weeks per year now; and provide for over 1,000 additional
commercial announcements. Most significantly, an additional one million
target households would be reached by AEB advertising each week.
Nutrition Research
The nutrition portion of AEB's budget encompasses two programs of
importance both for the egg industry and the consuming public-nutrition
research and nutrition education.
In recent years, an increased amount of the AEB budget has been
used for research to evaluate the effects of dietary cholesterol on
plasma lipids. Since 1991, $1.3 million has funded research projects at
various universities, all of which have focused on this issue. For
example, a recently completed study was published in the April issue of
the American Heart Association's ``Arteriosclerosis and Thrombosis''
journal. The results of this study found that blood cholesterol levels
in young healthy men did not significantly increase when they were fed
1 or 2 eggs per day. Additional funding would allow the egg industry to
study the same effects across other population groups.
Increased funding also would allow AEB to expand its contacts with
scientists, health professionals, and the media in developing nutrition
materials, sponsoring scientific symposiums and related forums, and
compiling research data.
AEB Recommendation
At the March 17, 1994, Board meeting in Chicago, Illinois, AEB
members voted unanimously to recommend that the assessment rate be
increased from 5 cents to 10 cents per 30-dozen case of commercial
eggs. Their decision was based on the marketing analysis as well as an
overall sense from producers nationwide that more funds are necessary
to help improve the position of the industry's products in the
marketplace through strengthened advertising and research programs. AEB
further requested that a referendum on this increase be held as soon as
possible.
Referendum
After an opportunity for public comment, a referendum will be held
among egg producers not exempt from the Act. Producers engaged in the
production of commercial eggs during a representative period determined
by the Secretary will be eligible to vote on the assessment rate change
proposed by AEB.
All known eligible egg producers will receive information in the
mail regarding the referendum. It is anticipated that the 75,000-hen
exemption level will be in place before the referendum.
The increase in the assessment rate shall become effective if the
change is approved or favored by not less than two-thirds of the
producers voting in the referendum, or a majority of such producers if
they represent not less than two-thirds of the commercial eggs produced
by those voting.
List of Subjects in 7 CFR Part 1250
Administrative practice and procedure, Advertising, Agricultural
research, Eggs and egg products, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble 7 CFR Part 1250 is
proposed to be amended as follows:
PART 1250--EGG RESEARCH AND PROMOTION
1. The authority citation of Part 1250 is revised to read as
follows:
Authority: 7 U.S.C. 2701-2718.
2. Section 1250.347 is revised to read as follows:
Sec. 1250.347 Assessments.
Each handler designated in Sec. 1250.349 and pursuant to
regulations issued by the Board shall collect from each producer,
except for those producers specifically exempted in Sec. 1250.348, and
shall pay to the Board at such times and in such manner as prescribed
by regulations issued by the Board an assessment at a rate of not to
exceed 10 cents per 30-dozen case of eggs, or the equivalent thereof,
for such expenses and expenditures, including provisions for a
reasonable reserve and those administrative costs incurred by the
Department of Agriculture after this subpart is effective, as the
Secretary finds are reasonable and likely to be incurred by the Board
and the Secretary under this subpart, except that no more than one such
assessment shall be made on any case of eggs.
3. In section 1250.514, the first sentence is revised to read as
follows:
Sec. 1250.514 Levy of assessments.
An assessment rate of 10 cents per case of commercial eggs is
levied on each case of commercial eggs handled for the account of each
producer. * * *
Dated: June 9, 1994.
L. P. Massaro,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 94-14741 Filed 6-16-94; 8:45 am]
BILLING CODE 3410-02-P
