[Federal Register Volume 62, Number 131 (Wednesday, July 9, 1997)]
[Rules and Regulations]
[Pages 36646-36650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17867]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Docket No. FV-96-985-4 FR]
Spearmint Oil Produced in the Far West; Salable Quantities and
Allotment Percentages for the 1997-98 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This final rule establishes the quantity of spearmint oil
produced in the Far West, by class, that handlers may purchase from, or
handle for, producers during the 1997-98 marketing year. The Spearmint
Oil Administrative Committee (Committee), the agency responsible for
local administration of the marketing order for spearmint oil produced
in the Far West, recommended this rule for the purpose of avoiding
extreme fluctuations in supplies and prices, thus helping to maintain
stability in the spearmint oil market.
DATES: This final rule becomes effective July 10, 1997 and applies to
all spearmint oil handled from the beginning of the 1997-98 marketing
year.
FOR FURTHER INFORMATION CONTACT: Robert J. Curry, Northwest Marketing
Field Office, Marketing Order Administration Branch, Fruit and
Vegetable Division, AMS, USDA, 1220 SW Third Avenue, room 369,
Portland, Oregon 97204; telephone: (503) 326-2043; Fax: (503) 326-7440;
or Anne M. Dec, Marketing Order Administration Branch, Fruit and
Vegetable Division, AMS, USDA, room 2525, South Building, P.O. Box
96456, Washington, D.C. 20090-6456; telephone: (202) 720-2491; 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 Division, AMS, USDA, P.O.
Box 96456, room 2523-S, Washington, DC 20090-6456; telephone (202) 720-
2491; Fax (202) 720-5698.
SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing
Order No. 985 (7 CFR Part 985), as amended, regulating the handling of
spearmint oil produced in the Far West (Washington, Idaho, Oregon, and
designated parts of Nevada and Utah), hereinafter referred to as the
``order.'' This 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 final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. Under the provisions of the marketing order now
in effect, salable quantities and allotment percentages may be
established for classes of spearmint oil produced in the Far West. This
final rule establishes the quantity of spearmint oil produced in the
Far West, by class, that may be purchased from or handled for producers
by handlers during the 1997-98 marketing year, which begins on June 1,
1997. This final rule will not preempt any State or local laws,
regulations, or policies, unless they present an irreconcilable
conflict with this rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with the Secretary a
petition stating that the order, any provision of the order, or any
obligation imposed in connection with the order is not in accordance
with law and request a modification of the order or to be exempted
therefrom. A handler is afforded the opportunity for a hearing on the
petition. After the hearing the Secretary would rule on the petition.
The Act provides that the district court of the United States in any
district in which the handler is an inhabitant, or has his or her
principal place of business, has jurisdiction to review the Secretary's
ruling on the petition, provided an action is filed not later than 20
days after date of the entry of the ruling.
Pursuant to authority contained in Secs. 985.50, 985.51, and 985.52
of the order, the Committee recommended the salable quantities and
allotment
[[Page 36647]]
percentages for the 1997-98 marketing year at its October 2, 1996,
meeting, and reconfirmed its recommendation following review of
additional information at its meeting held on November 14, 1996. The
Committee recommended the establishment of a salable quantity and
allotment percentage for Scotch spearmint oil with one member opposing
the motion because he favored the establishment of a higher salable
quantity and allotment percentage. In a unanimous vote, the Committee
recommended the establishment of a salable quantity and allotment
percentage for Native spearmint oil.
This final rule establishes a salable quantity of 996,522 pounds
and an allotment percentage of 55 percent for Scotch spearmint oil, and
a salable quantity of 1,125,351 pounds and an allotment percentage of
56 percent for Native spearmint oil. This rule limits the amount of
spearmint oil that handlers may purchase from, or handle for, producers
during the 1997-98 marketing year, which begins on June 1, 1997.
Salable quantities and allotment percentages have been placed into
effect each season since the order's inception in 1980.
The U.S. production of spearmint oil is concentrated in the Far
West, primarily Washington, Idaho, and Oregon (part of the area covered
by the order). Spearmint oil is also produced in the Midwest. The
production area covered by the order accounts for approximately 75
percent of the annual U.S. production of both classes of spearmint oil.
When the order became effective in 1980, the United States produced
nearly 100 percent of the world's supply of Scotch spearmint oil, of
which approximately 80 percent was produced in the regulated production
area in the Far West. International production characteristics have
changed in recent years, however, with foreign Scotch spearmint oil
production contributing significantly to world production. Although
still a leader in production, the Far West's market share has decreased
to approximately 65 percent of the world total. Thus, in recent
marketing years, the Committee has taken a different approach in its
method of addressing the historical fluctuations in supply and price.
In conjunction with the goal of maintaining price and market stability,
the Committee seeks a moderate growth rate in terms of total North
American market share. The Committee's recommendation is intended to
find a stable price level while keeping Far West Scotch spearmint oil
in a competitive and viable position in the international market. To
that end, the Committee is targeting a specific percentage of the North
American market share for use in its salable quantity and allotment
percentage calculations. For 1997-98, the Committee is targeting 73
percent of the North American market, compared to the nearly 65 percent
targeted for the 1996-97 season. Preliminary figures indicate that the
Far West Scotch spearmint oil market share in North America will reach
approximately 60 percent in 1996-97, up from 55 percent in 1995-96.
The order has contributed extensively to the stabilization of
producer prices, which prior to 1980 experienced wide fluctuations from
year to year. For example, between 1971 and 1975 the price of Native
spearmint oil ranged from $3.00 per pound to $11.00 per pound. In
contrast, under the order, prices have stabilized between $10.50 and
$11.50 per pound for the past ten years. With approximately 90 percent
of U.S. production of Native spearmint oil located in the Far West, the
method of calculating the Native spearmint oil salable quantity and
allotment percentage primarily utilizes information on price and
available supply as they are affected by the estimated trade demand for
Far West Native spearmint oil.
The salable quantity and allotment percentage for each class of
spearmint oil for the 1997-98 marketing year is based upon the
Committee's recommendation and the data presented below.
(1) Class 1 (Scotch) Spearmint Oil
(A) Estimated carry-in on June 1, 1997--309,927 pounds. This figure
is derived by subtracting the estimated 1996-97 marketing year trade
demand of 900,000 pounds from the revised 1996-97 marketing year total
available supply of 1,209,927 pounds.
(B) Estimated North American production (U.S. and Canada) for the
1997-98 marketing year--1,511,461 pounds. This figure is an estimate
based on information provided to the Committee by producers and buyers.
(C) Percentage of North American market targeted--73 percent. This
figure is an approximate average of the recommended target percentages
made at each of the five regional producer meetings held throughout the
Far West production area during the month of September, 1996.
(D) Total quantity of Scotch spearmint oil needed to reach targeted
percentage--1,103,367 pounds. This figure is the product of the
estimated 1997-98 North American production and the targeted
percentage.
(E) Minimum amount desired to have on hand throughout the season--
200,000 pounds. Producers at all of the five regional meetings had
recommended this amount, which continues to reflect the Committee's
commitment to regain market share by maintaining a minimum quantity on
hand.
(F) Total supply required--1,303,367 pounds. This figure is derived
by adding the minimum desired on hand amount to the total quantity
required to meet the targeted percentage.
(G) Additional quantity required--993,440 pounds. This figure
represents the actual amount of additional or new oil needed to meet
the Committee's projections, and is computed by subtracting the
estimated carry-in of 309,927 pounds from the total supply required of
1,303,367 pounds.
(H) Total allotment base for the 1997-98 marketing year--1,811,859
pounds.
(I) Computed allotment percentage--54.8 percent. This percentage is
computed by dividing the required salable quantity by the total
allotment base.
(J) Recommended allotment percentage--55 percent. This is the
Committee's recommendation based on the computed allotment percentage.
(K) The Committee's recommended salable quantity--996,522 pounds.
This figure is the product of the recommended allotment percentage and
the total 1997-98 allotment base.
(2) Class 3 (Native) Spearmint Oil
(A) Estimated carry-in on June 1, 1997--71,764 pounds. This figure
is derived by subtracting the estimated 1996-97 marketing year trade
demand of 1,162,500 pounds from the revised 1996-97 marketing year
total available supply of 1,234,264 pounds.
(B) Estimated trade demand (domestic and export) for the 1997-98
marketing year--1,212,500 pounds. This figure represents an average of
buyer estimates and the amounts recommended at the regional producer
meetings.
(C) Salable quantity required from 1997 production--1,140,736
pounds. This figure is the difference between the estimated 1997-98
marketing year trade demand and the estimated carry-in on June 1, 1997.
(D) Total allotment base for the 1997-98 marketing year--2,009,556
pounds.
(E) Computed allotment percentage--56.8 percent. This percentage is
computed by dividing the required salable quantity by the total
allotment base.
(F) Recommended allotment percentage--56 percent. This is the
[[Page 36648]]
Committee's recommendation based on the computed allotment percentage.
(G) The Committee's recommended salable quantity--1,125,351 pounds.
This figure is the product of the recommended allotment percentage and
the total 1997-98 marketing year allotment base.
The salable quantity is the total quantity of each class of oil
which handlers may purchase from or handle on behalf of producers
during a marketing year. Each producer is allotted a share of the
salable quantity by applying the allotment percentage to the producer's
allotment base for the applicable class of spearmint oil.
The Committee's recommended Scotch spearmint oil salable quantity
of 996,522 pounds and allotment percentage of 55 percent are based on
anticipated supply, demand, and a targeted percentage of the North
American market during the 1997-98 marketing year. The Committee's
recommended Native spearmint oil salable quantity of 1,125,351 pounds
and allotment percentage of 56 percent are based on anticipated supply
and trade demand during the 1997-98 marketing year. The salable
quantities are not expected to cause a shortage of spearmint oil
supplies. Any unanticipated or additional market demand for spearmint
oil which may develop during the marketing year can be satisfied by an
increase in the salable quantities. Both Scotch and Native spearmint
oil producers who produce more than their annual allotments during the
1997-98 season may transfer such excess spearmint oil to a producer
with spearmint oil production less than his or her annual allotment or
put it into the reserve pool.
This regulation is similar to those which have been issued in prior
seasons. Costs to producers and handlers resulting from this action are
expected to be offset by the benefits derived from a stable market, a
greater market share, and possible improved returns. In conjunction
with the issuance of this rule, the Committee's marketing policy
statement for the 1997-98 marketing year has been reviewed by the
Department. The Committee's marketing policy, a requirement whenever
the Committee recommends volume regulations, fully meets the intent of
section 985.50 of the order. During its discussion of potential 1997-98
salable quantities and allotment percentages, the Committee considered:
(1) The estimated quantity of salable oil of each class held by
producers and handlers; (2) the estimated demand for each class of oil;
(3) prospective production of each class of oil; (4) total of allotment
bases of each class of oil for the current marketing year and the
estimated total of allotment bases of each class for the ensuing
marketing year; (5) the quantity of reserve oil, by class, in storage;
(6) producer prices of oil, including prices for each class of oil; and
(7) general market conditions for each class of oil, including whether
the estimated season average price to producers is likely to exceed
parity. Conformity with the Department's ``Guidelines for Fruit,
Vegetable, and Specialty Crop Marketing Orders'' has also been reviewed
and confirmed.
The establishment of these salable quantities and allotment
percentages allow for anticipated market needs. In making its
recommendation, the Committee reviewed available information including
historical sales and changes and trends in production and demand. This
rule also provides spearmint oil producers with information on the
amount of oil which should be produced for next season in order to meet
anticipated market demand.
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities. Accordingly, the 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 8 spearmint oil handlers subject to regulation under the
order and approximately 250 producers of spearmint oil in the regulated
production area. Of the 250 producers, approximately 135 producers hold
Class 1 (Scotch) spearmint oil allotment base, and approximately 115
producers hold Class 3 (Native) spearmint oil allotment base. Small
agricultural service firms are defined by the Small Business
Administration (SBA)(13 CFR 121.601) as those having annual receipts of
less than $5,000,000, and small agricultural producers have been
defined as those whose annual receipts are less than $500,000.
Based on the SBA's definition of small entities, the Committee
estimates that none of the eight handlers regulated by the order would
be considered small entities. All of the handlers are large
corporations involved in the international trading of essential oils
and the products of essential oils. Further, the Committee estimates
that 17 of the 135 Scotch spearmint oil producers and 10 of the 115
Native spearmint oil producers would be classified as small entities
under the SBA definition. Thus, a majority of handlers and producers of
Far West spearmint oil may not be classified as small entities.
The Far West spearmint oil industry is characterized by producers
whose farming operations generally involve more than one commodity, and
whose income from farming operations is not exclusively dependent on
the production of spearmint oil. Crop rotation is an essential cultural
practice in the production of spearmint oil for weed, insect, and
disease control. A normal spearmint oil producing operation would have
enough acreage for rotation such that the total acreage required to
produce the crop would be about one-third spearmint and two-thirds
rotational crops. An average spearmint oil producing farm would thus
have to have considerably more acreage than would be planted to
spearmint during any given season. Most spearmint oil producing farms
would fall into the SBA category of large businesses in order to remain
economically viable due to the added costs associated with the
production of spearmint oil.
This final rule establishes the quantity of spearmint oil produced
in the Far West, by class, that handlers may purchase from, or handle
for, producers during the 1997-98 marketing year. The Committee
recommended this rule for the purpose of avoiding extreme fluctuations
in supplies and prices, and thus help to maintain stability in the
spearmint oil market. This action is authorized by the provisions of
Secs. 985.50, 985.51 and 985.52 of the order.
Small spearmint oil producers generally are not extensively
diversified and as such are more at risk to market fluctuations. Such
small farmers generally need to market their entire annual crop and do
not have the luxury of having other crops to cushion seasons with poor
spearmint oil returns. Conversely, large diversified producers have the
potential to endure one or more seasons of poor spearmint oil markets
because incomes from alternate crops could support the operation for a
period of time. Being reasonably assured of a stable price and market
provides small producing entities with the ability to maintain proper
cash flow and to
[[Page 36649]]
meet annual expenses. Thus, the market and price stability provided by
the order potentially benefit the small producer more than such
provisions benefit large producers. Even though a majority of handlers
and producers of spearmint oil may not be classified as small entities,
the volume control feature of this order has small entity orientation.
The order has contributed extensively to the stabilization of
producer prices, which prior to 1980 experienced wide fluctuations from
year to year. For example, between 1971 and 1975 the price of Native
spearmint oil ranged from $3.00 per pound to $11.00 per pound. In
contrast, under the order, prices have stabilized between $10.50 and
$11.50 per pound for the past ten years.
Alternatives to the proposal included not regulating the handling
of spearmint oil during the 1997-98 marketing year, and recommending
either higher or lower salable quantities and allotment percentages.
The Committee reached its recommendation to establish salable
quantities and allotment percentages for both classes of oil after
careful consideration of available information, including: (1) The
estimated quantity of salable oil of each class held by producers and
handlers; (2) the estimated demand for each class of oil; (3)
prospective production of each class of oil; (4) total of allotment
bases of each class of oil for the current marketing year and the
estimated total of allotment bases of each class for the ensuing
marketing year; (5) the quantity of reserve oil, by class, in storage;
(6) producer prices of oil, including prices for each class of oil; and
(7) general market conditions for each class of oil, including whether
the estimated season average price to producers is likely to exceed
parity. Based on its review, the Committee believes that the salable
quantity and allotment percentage levels recommended will achieve the
objectives sought.
Without any regulations in effect, the Committee believes the
industry would return to the pattern of cyclical prices of prior years,
as well as suffer the potentially price depressing consequence that a
release of the nearly 1,300,000 pounds of spearmint oil reserves would
have on the market. According to the Committee, higher or lower salable
quantities and allotment percentages would not achieve the intended
balance between market and price stability, and market share
maintenance and growth.
Annual salable quantities and allotment percentages have been
issued for both classes of spearmint oil since the order's inception.
Reporting and recordkeeping requirements have remained the same for
each year of regulation. Accordingly, this action will not impose any
additional reporting or recordkeeping requirements on either small or
large spearmint oil producers and handlers. All reports and forms
associated with this program are reviewed periodically in order to
avoid unnecessary and duplicative information collection by industry
and public sector agencies. The Department has not identified any
relevant Federal rules that duplicate, overlap, or conflict with this
final rule.
A proposed rule was published in the Federal Register (62 FR 942)
on January 7, 1997. A 30-day comment period was provided to allow
interested persons the opportunity to respond to the proposal,
including any regulatory and informational impacts of this action on
small businesses. Copies of the rule were faxed and mailed to the
Committee office, which in turn notified Committee members and
spearmint oil producers and handlers of the proposed action. In
addition, the Committee's meetings were widely publicized throughout
the spearmint oil industry and all interested persons were invited to
attend and participate on all issues. A copy of the proposal was also
made available on the Internet by the U.S. Government Printing Office.
One comment was received from the U.S. Small Business
Administration, Office of Advocacy, regarding the Department's initial
regulatory flexibility analysis (IRFA). The SBA noted that a brief
overview of the facts supported the Department's decision not to
certify the proposal as not having a significant economic impact on a
substantial number of small entities. Further, SBA was of the view that
AMS should flesh out some of its assumptions and statements.
The assumptions and statements of concern to SBA include references
to the fact that records show that the marketing order has contributed
extensively to the stabilization of grower prices, which prior to 1980
experienced wide fluctuations from year to year. The commenter
questioned whether current information suggested that the spearmint oil
market would experience instability under today's market conditions
without the order. Also, based upon the statement in the IRFA that the
Committee reached its recommendation to establish salable quantities
and allotment percentages after careful consideration of all available
information, the commenter was of the view that the Committee seemed to
be privy to information not contained in the proposed rule. SBA went on
to raise questions concerning alternative allotment percentages and
quantities of spearmint oil producers must have in order to survive.
As noted earlier in the regulatory flexibility analysis, the market
and price stability provided by the order potentially benefit the small
producer more than such provisions benefit large producers. Although a
majority of handlers and producers of spearmint oil may not be
classified as small entities, the volume control feature of this order
has small entity orientation. Furthermore, were salable quantity and
allotment percentage regulations not issued, the Committee believes the
industry would return to the pattern of cyclical prices of prior years,
as well as potentially suffer the significant, and likely negative
economic impact that a release of the nearly 1,300,000 pounds of
spearmint oil reserves would have on the market.
In accordance with Sec. 985.50 of the order, the Committee is
required to submit on an annual basis to the Secretary recommendations
for volume regulations deemed necessary to meet market requirements and
establish orderly market conditions. In determining a marketing policy,
the Committee is required to consider certain factors including but not
limited to (1) the estimated quantity of salable oil of each class held
by producers and handlers; (2) the estimated demand for each class of
oil; (3) prospective production of each class of oil; (4) total of
allotment bases of each class of oil for the current marketing year and
the estimated total of allotment bases of each class for the ensuing
marketing year; (5) the quantity of reserve oil, by class, in storage;
(6) producer prices of oil, including prices for each class of oil; and
(7) general market conditions for each class of oil, including whether
the estimated season average price to producers is likely to exceed
parity.
The information available to the Committee includes just such
information as is contained in the marketing policy which is developed
by the Committee. At the public meetings held prior to the Committee's
recommendation for the 1997-98 marketing year salable quantities and
allotment percentages, the marketing policy was considered and
discussed. Further, discussion of the history of the marketing order
and market conditions from 1980 to the present represents some of the
background and experience that is brought to bear in arriving at a
recommendation for regulation. In making its recommendation, the
Committee looked at and considered current and prospective marketing
[[Page 36650]]
conditions to determine whether the marketing policy considerations
indicated a need for limiting the quantity of spearmint oil in a
particular class.
Finally, the SBA questioned why the proposed rule did not contain
reference to the number of new producers who will be allocated base of
sufficient quantity so as to ensure their entry into the industry next
season. The procedures for determining how new producers are selected
and how additional allotment bases are distributed is provided for in
Secs. 985.53 and 985.153 of the order and its regulations and is
separate from this action. Under these provisions, an additional \1/2\
percent of the current total allotment base for each class of spearmint
oil is annually allocated to new producers. For the 1997-98 marketing
year, three new Class 1 producers were issued an equal proportion of
the Scotch spearmint oil additional allotment base, and four new Class
3 producers were issued an equal proportion of the Native spearmint oil
additional allotment base. This increased the total number of producers
in the regulated production area by nearly three percent. As provided
for in Sec. 985.153, the Committee determined that the levels of
issuance for the 1997-98 marketing year, approximately 3,000 pounds per
new producer for Scotch spearmint oil and 2,500 pounds per new producer
for Native spearmint oil, are at levels sufficient for a minimum
economic enterprise to produce each class of spearmint oil.
Accordingly, based on the comment received, no changes are made to
the rule as proposed.
After consideration of all relevant matter presented, including the
information and recommendation submitted by the Committee and other
available information, it is hereby found that this rule, as
hereinafter set forth, will tend to effectuate the declare policy of
the Act.
It is further found that good cause exists for not postponing the
effective date of this rule until 30 days after publication in the
Federal Register (5 U.S.C. 553) because handlers need to be able to
ship their spearmint oil for the 1997-98 season which began June 1,
1997. Further, handlers are aware of this rule, which was recommended
at a public meeting. Also, a 30-day comment period was provided for in
the proposed rule.
List of Subjects in 7 CFR Part 985
Marketing agreements, Oils and fats, Reporting and recordkeeping
requirements, Spearmint oil.
For the reasons set forth in the preamble, 7 CFR Part 985 is
amended as follows:
PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL
PRODUCED IN THE FAR WEST
1. The authority citation for 7 CFR Part 985 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. A new section 985.216 is added to read as follows:
[Note: This section will not appear in the Code of Federal
Regulations.]
Sec. 985.216 Salable quantities and allotment percentages--1997-98
marketing year.
The salable quantity and allotment percentage for each class of
spearmint oil during the marketing year beginning on June 1, 1997,
shall be as follows:
(a) Class 1 (Scotch) oil--a salable quantity of 996,522 pounds and
an allotment percentage of 55 percent.
(b) Class 3 (Native) oil--a salable quantity of 1,125,351 pounds
and an allotment percentage of 56 percent.
Dated: July 2, 1997.
Robert C. Keeney,
Director, Fruit and Vegetable Division.
[FR Doc. 97-17867 Filed 7-8-97; 8:45 am]
BILLING CODE 3410-02-P
