[Federal Register Volume 64, Number 155 (Thursday, August 12, 1999)]
[Rules and Regulations]
[Pages 43897-43902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20877]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 64, No. 155 / Thursday, August 12, 1999 /
Rules and Regulations
[[Page 43897]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 989
[Docket No. FV99-989-4 FR]
Raisins Produced From Grapes Grown in California; Use of
Estimated Trade Demand to Compute Volume Regulation Percentages
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This rule authorizes using an estimated trade demand figure to
compute volume regulation percentages for 1999-2000 crop Natural (sun-
dried) Seedless (NS) raisins covered under the Federal marketing order
for California raisins (order). The order regulates the handling of
raisins produced from grapes grown in California and is administered
locally by the Raisin Administrative Committee (Committee). This rule
provides parameters for implementing volume regulation for 1999-2000
crop NS raisins if supplies are short for the purposes of maintaining a
portion of the industry's export markets and stabilizing the domestic
market.
EFFECTIVE DATE: This final rule becomes effective August 13, 1999.
FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Marketing
Specialist, California Marketing Field Office, Fruit and Vegetable
Programs, AMS, USDA, 2202 Monterey Street, suite 102B, Fresno,
California 93721; telephone: (559) 487-5901, Fax: (559) 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, or Fax:
(202) 720-5698.
SUPPLEMENTARY INFORMATION: Small businesses may request information on
complying with this regulation, or obtain a guide on complying with
fruit, vegetable, and specialty crop marketing agreements and orders by
contacting Jay Guerber, Marketing Order Administration Branch, Fruit
and Vegetable Programs, AMS, USDA, P.O. Box 96456, room 2525-S,
Washington, DC 20090-6456; telephone (202) 720-2491, Fax: (202) 720-
5698, or E-mail: Jay.Guerber@usda.gov. You may view the marketing
agreement and order small business compliance guide at the following
web site: http://www.ams.usda.gov/fv/moab.html.
This rule is issued under Marketing Agreement and Order No. 989 (7
CFR part 989), both as amended, regulating the handling of raisins
produced from grapes grown in California, hereinafter referred to as
the ``order.'' The order is effective under the Agricultural Marketing
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter
referred to as the ``Act.''
The Department of Agriculture (Department) is issuing this rule in
conformance with Executive Order 12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is not intended to have retroactive effect.
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 in equity to review the
Secretary's ruling on the petition, provided an action is filed not
later than 20 days after the date of the entry of the ruling.
This rule authorizes using an estimated trade demand figure to
compute volume regulation percentages for 1999-2000 crop NS raisins
covered under the order. This rule provides parameters for implementing
volume regulation for 1999-2000 crop NS raisins if supplies are short
for the purposes of maintaining a portion of the industry's export
markets and stabilizing the domestic market. This action was
recommended by the Committee at a meeting on April 13, 1999.
Volume Regulation Authority
The order provides authority for volume regulation designed to
promote orderly marketing conditions, stabilize prices and supplies,
and improve producer returns. When volume regulation is in effect, a
certain percentage of the California raisin crop may be sold by
handlers to any market (free tonnage) while the remaining percentage
must be held by handlers in a reserve pool (reserve) for the account of
the Committee. Reserve raisins are disposed of through certain programs
authorized under the order. For instance, reserve raisins may be sold
by the Committee to handlers for free use or to replace part of the
free tonnage raisins they exported; used in diversion programs; carried
over as a hedge against a short crop the following year; or disposed of
in other outlets not competitive with those for free tonnage raisins,
such as government purchase, distilleries, or animal feed. Net proceeds
from sales of reserve raisins are distributed to the reserve pool's
equity holders, primarily producers.
Section 989.54 of the order prescribes procedures and time frames
to be followed in establishing volume regulation for each crop year,
which runs from August 1 through July 31. The Committee must meet by
August 15 to review data regarding raisin supplies. At that time, the
Committee computes a trade demand for each varietal type for which a
free tonnage percentage might be recommended. Trade demand is equal to
90 percent of the prior year's domestic and export shipments, adjusted
by subtracting carryin inventory from the prior year, and adding a
desirable carryout inventory for the end of the current year.
By October 5, the Committee must announce preliminary crop
estimates
[[Page 43898]]
and determine whether volume regulation is warranted for the varietal
types for which it computed trade demands. Preliminary volume
regulation percentages are then computed to release 85 percent of the
computed trade demand if a field price has been established, or 65
percent of the trade demand if no field price has been established.
Field price is the price that handlers pay for raisins from producers.
By February 15, the Committee must recommend final free and reserve
percentages which release the full trade demand.
The order also requires that, when volume regulation is in effect,
two offers of reserve raisins must be made available to handlers for
free use. These offers are known as the ``10 plus 10'' offers. Each
offer consists of a quantity of reserve raisins equal to 10 percent of
the prior year's shipments. The order also specifies that ``10 plus
10'' raisins must be sold to handlers at the current field price plus a
3 percent surcharge and Committee costs.
Development of Export Markets
With the exception of 10 crop years, volume regulation has been
utilized for NS raisins since the order's inception in 1949. The
procedures for determining volume regulation percentages have been
modified over the years to address the industry's needs. In the past,
volume regulation has been utilized primarily to help the industry
manage an oversupply of raisins. Through the use of various marketing
programs operated through reserve pools and other industry promotional
activities, the industry has also developed its export markets which
now account for almost 40 percent of the industry's shipments.
Between 1980-85, exports of California NS raisins averaged about 26
percent (53,700 packed tons, or raisins which have been processed) of
the industry's total NS raisin shipments (207,600 packed tons,
excluding government purchases) per year. Between 1993-97, NS raisin
exports increased to average about 37 percent (112,000 packed tons) of
the industry's total NS raisin shipments (300,000 packed tons,
excluding government purchases) per year.
Export Replacement Offer
One market development program operated through reserve pools, the
Export Replacement Offer (ERO), has helped California raisins to be
price competitive in export markets. Prices in export markets are
generally lower than the domestic market. The ERO began in the early
1980's as a ``raisin-back'' program whereby handlers who exported
California raisins could purchase, at a reduced price, reserve raisins
for free use. This effectively blended down the cost of the raisins
which were exported. The NS raisin ERO was changed to a ``cash-back''
program in 1996 whereby handlers could receive cash from the reserve
pool for export shipments.
Over the past 5 years, an average of 43,000 natural condition tons
(unprocessed raisins) of reserve raisins have been utilized per year to
fund the ERO. Financing for the cash-back ERO program has been
generated primarily from the Committee's ``10 plus 10'' sales of
reserve raisins to handlers for free use. Under the 1996 and 1997 cash-
back ERO programs, an average of $57 million of reserve pool funds were
utilized to support the export of about 113,000 packed tons of NS
raisins.
Current Industry Situation--Potential of Two, Consecutive Short
Crops
The Committee is concerned with maintaining the ERO program through
potentially two, consecutive short crop years. The 1998-99 California
raisin crop was much smaller than average due to the combined effect of
adverse crop conditions created by the weather phenomenon known as El
Nino, scattered rain during the fall harvest, and a shortage of labor
once the grapes were ready for harvest. The 1998-99 NS raisin crop
totaled about 235,000 natural condition tons, about 35 percent lower
than the 10-year average of 360,183 natural condition tons. Volume
regulation was not implemented for 1998-99 NS raisins, the major
varietal type of California raisin, for the first time in 16 years.
However, about 60,000 natural condition tons of 1997-98 reserve raisins
were available to maintain the industry's ERO program.
The Committee is concerned that the 1999-2000 California raisin
crop may also be short due to an April 1999 frost and anticipated high
demand for raisin-variety grapes from wineries this fall. If no 1999-
2000 reserve is established, the industry will not be able to continue
the ERO program. Without a program to support its export sales, the
Committee is concerned that the industry could lose a significant
portion, perhaps 50 percent, of those markets. Further, handlers who
could not sell their raisins in export may sell their raisins
domestically. Annual domestic shipments of NS raisins for the past 5
years have averaged about 188,000 packed tons. The Committee is
concerned that additional raisins sold into the domestic market could
create instability.
Thus, the Committee formed a working group to review this issue and
consider options to continue to support its export sales while
maintaining stability in the domestic market. After several meetings,
the working group presented its recommendation to a subcommittee, and
then in turn to the Committee. At a meeting on April 13, 1999, the
Committee recommended adding a new paragraph to Sec. 989.154 of the
order's administrative rules and regulations that provides parameters
for implementing volume regulation for 1999-2000 crop NS raisins if
supplies are short. Section 989.154 is divided into two paragraphs, (a)
and (b). Paragraph (a) pertains to an existing regulation regarding
desirable carryout levels, and paragraph (b) pertains to estimated
trade demand.
Implementing Volume Regulation if Supplies are Short to Maintain
the ERO
Section 989.54(e) contains a list of factors that the Committee
must consider when computing volume regulation percentages. Factor (4)
states that the Committee must consider, if different than the computed
trade demand, the estimated trade demand for raisins in free tonnage
outlets. The Committee recommended using an estimated trade demand
figure for 1999-2000 crop NS raisins, or a figure different than the
computed trade demand, to compute volume regulation percentages to
create a reserve if supplies are short. This will allow the Committee
to continue its ERO program thereby maintaining a portion of its export
sales and stabilizing the domestic market.
Specifically, the Committee recommended that an estimated trade
demand be utilized to compute preliminary, interim, and final free and
reserve percentages for 1999-2000 crop NS raisins if the crop estimate
is equal to, less than, or no more than 10 percent greater than the
trade demand as computed according to the formula specified in
Sec. 989.54(a) of the order. If an estimated trade demand figure is
utilized, the final reserve percentage will be no more than 10 percent.
Finally, volume regulation will not be implemented if the 1999-2000
crop estimate is below 235,000 natural condition tons.
To illustrate how this will work, the Committee will compute a
trade demand for NS raisins by August 15 (as an example, 260,000
natural condition tons). At that time, the Committee will also announce
its intention to use an estimated trade demand of 235,000 natural
condition tons to compute
[[Page 43899]]
volume regulation percentages for the 1999-2000 crop.
Crop Estimate Below 235,000 Tons--No Regulation
The Committee will meet by October 5 to announce a NS crop estimate
and determine whether volume regulation is warranted. If the 1999-2000
crop estimate is under 235,000 natural condition tons, volume
regulation will not be recommended. With a crop of 235,000 natural
condition tons, and about 82,000 natural condition tons of NS raisins
carried forward from the 1998-99 crop year, a supply of about 317,000
natural condition tons of raisins would be available for the 1999-2000
crop year. As previously mentioned, annual NS raisin shipments average
about 300,000 packed tons (about 320,000 natural condition tons),
excluding government purchases.
With an available supply of only 317,000 natural condition tons of
NS raisins, the Committee believes that the industry's first priority
would be to satisfy the needs of the domestic market, which absorbs
annually an average of about 188,000 packed tons (200,000 natural
condition tons). Assuming that 200,000 natural condition tons were
shipped domestically, the Committee estimates that, with no ERO program
to help California raisins be price competitive in export markets, the
industry would export about half of its usual tonnage, or about 60,000
natural condition tons. The remaining 57,000 natural condition tons
would likely be held in inventory for the following 2000-2001 crop
year. Annual carryout inventory for NS raisins for the past 5 years has
averaged about 100,000 natural condition tons.
Crop Estimate Between 235,000 Tons and 10 Percent Above the
Computed Trade Demand--Volume Regulation
If the October 1999-2000 crop estimate for NS raisins falls between
235,000 natural condition tons and 10 percent above the computed trade
demand, the Committee will use an estimated trade demand figure to
compute preliminary free and reserve percentages for the 1999-2000
crop. Thus, using the 260,000 natural condition ton computed trade
demand figure, an estimated trade demand will be used to compute volume
regulation percentages if the crop estimate falls between 235,000 and
286,000 natural condition tons.
The order specifies that preliminary percentages compute to release
85 percent of the computed trade demand as free tonnage once a field
price is established. Producers are paid the field price for their free
tonnage. Normally, when preliminary percentages are computed, producers
receive an initial payment from handlers for 85 percent of the computed
trade demand (or 65 percent of the trade demand if no field price has
been established). Using the 260,000 natural condition ton computed
trade demand figure, this would equate to 238,000 natural condition
tons. However, if the lower, 235,000 natural condition ton estimated
trade demand figure were utilized to compute preliminary percentages,
producers would receive an initial payment from handlers for only
199,750 natural condition tons, or 71 percent of the computed trade
demand.
The Committee is concerned with the preliminary percentage
computation using an estimated trade demand and its impact on producer
returns. The Committee wants to ensure that producers receive the field
price for as much of their crop as possible early in the season while
still establishing a small pool of reserve raisins to maintain the ERO.
Thus, the Committee recommended that, if an estimated trade demand
figure is utilized, preliminary percentages be computed to release 85
percent of the crop estimate. However, the order specifies that
preliminary percentages be computed to release 85 percent of the trade
demand, not the crop estimate, once a field price is established.
To achieve the same objective but remain within the order's
parameters, the Committee could compute interim percentages to equal 85
percent free and 15 percent reserve. Pursuant to Sec. 989.54(c),
interim percentages may be computed prior to February 15 to release
less than the trade demand. As an example, with a crop estimate of
265,000 natural condition tons and an estimated trade demand of 238,500
natural condition tons, a free percentage of 85 percent of the crop
estimate would release 225,250 natural condition tons of raisins, or 94
percent of the estimated trade demand. This action will mollify the
impact of implementing volume regulation when supplies are short on
producers by allowing them to be paid for as much of their free tonnage
raisins as possible early in the season.
Finally, the Committee will meet by February 15 to compute final
free and reserve percentages. The Committee recommended that if an
estimated trade demand figure is used to compute percentages, the final
reserve percentage be computed to equal no more than 10 percent.
Producers would ultimately be paid the field price for 90 percent of
their crop, or their free tonnage.
The remaining 10 percent of the crop would be held in reserve and
offered for sale to handlers in the ``10 plus 10'' offers. As
previously described, the ``10 plus 10'' offers are two offers of
reserve raisins that are made available to handlers for free use. The
order specifies that each offer consists of a quantity of reserve
raisins equal to 10 percent of the prior year's shipments. This
requirement would not be met if volume regulation were implemented when
raisin supplies were short. However, all of the raisins held in reserve
would be made available to handlers for free use. Handlers would pay
the Committee for the ``10 plus 10'' raisins and that money would be
utilized to fund a 1999-2000 ERO program. Any unused 1999-2000 reserve
pool funds could be loaned forward to initiate a 2000-2001 ERO program.
However, the Committee recommended that such funds be paid back to the
1999-2000 reserve pool and ultimately be returned to 1999-2000 equity
holders.
Crop Estimate More Than 10 Percent Above the Computed Trade Demand
Finally, the Committee recommended that, if the 1999-2000 crop
estimate is more than 10 percent greater than the computed trade demand
(or above 286,000 natural condition tons in the earlier example), the
computed trade demand (as an example, 260,000 natural condition tons)
be utilized to compute volume regulation percentages. Under this
scenario, enough raisins (over 28,000 natural condition tons) would be
available in reserve to continue the ERO program.
It is anticipated that allowing the use of an estimated trade
demand figure to compute volume regulation percentages for 1999-2000
crop NS raisins if supplies are short will assist the industry in
maintaining a portion of its export markets and stabilize the domestic
market. If the crop estimate is below 235,000 natural condition tons,
no volume regulation will be implemented. If this occurs, it is
anticipated that domestic market needs would be met, while export
markets would likely not be satisfied.
However, if the crop falls between 235,000 natural condition tons
and slightly higher than the computed trade demand, establishing a
small reserve pool will allow the industry to not only satisfy the
needs of the domestic market, but also maintain a portion of its export
sales, which now account for almost 40 percent of the industry's annual
shipments. By maintaining an ERO program, even at a reduced level,
exporters could continue to be price
[[Page 43900]]
competitive and sell their raisins abroad. The domestic market would
remain stable because it would not have to absorb any additional
raisins that handlers could not afford to sell in export markets.
Final Regulatory Flexibility Analysis
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, 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 20 handlers of California raisins who are
subject to regulation under the order and approximately 4,500 raisin
producers in the regulated area. Small agricultural service firms have
been defined by the Small Business Administration (13 CFR 121.601) as
those having annual receipts of less than $5,000,000, and small
agricultural producers are defined as those having annual receipts of
less than $500,000. No more than 7 handlers, and a majority of
producers, of California raisins may be classified as small entities.
Thirteen of the 20 handlers subject to regulation have annual sales
estimated to be at least $5,000,000, and the remaining 7 handlers have
sales less than $5,000,000, excluding receipts from any other sources.
This rule adds a new paragraph to Sec. 989.154 of the order's
administrative rules and regulations that provides parameters for using
an estimated trade demand figure specified in Sec. 989.54(e)(4) of the
order to compute volume regulation percentages for 1999-2000 crop NS
raisins. This rule provides guidelines for the use of volume regulation
if 1999-2000 NS raisin supplies are short for the purposes of
maintaining a portion of the industry's export markets and stabilizing
the domestic market.
Regarding the impact of the action on producers and handlers, if an
estimated trade demand figure is used to compute volume regulation
percentages, the final reserve percentage would compute to no more than
10 percent. Producers would thus be paid the field price for at least
90 percent of their crop, but would lose being paid the field price for
about 10 percent of their crop that would go into a reserve pool. The
field price for NS raisins for the past 5 years has averaged $1,216 per
ton. Handlers in turn would purchase 90 percent of their raisins
directly from producers at the field price, but would have to buy
remaining raisins out of the reserve pool at a higher price (field
price plus 3 percent and Committee costs). The ``10 plus 10'' price of
NS reserve raisins has averaged about $100 higher than the field price
for the past 5 years, or $1,316 per ton. Proceeds from the ``10 plus
10'' sales would be used to support export sales.
While there may be some initial costs for both producers and
handlers, the long term benefits of this action far outweigh the costs.
The Committee believes that with no reserve pool and hence no ERO
program, export sales would decline dramatically, perhaps up to 50
percent. Handlers would likely sell into the domestic market raisins
that they were unable to sell into lower priced export markets.
Additional NS raisins sold into the domestic market, which typically
absorbs about 188,000 packed tons, could create instability. The
industry would likely lose a substantial portion of its export markets,
which now account for about 37 percent (112,000 packed tons) of the
industry's annual shipments (300,000 packed tons, excluding government
purchases). Committee members have also commented that, once export
markets were lost, it would be difficult and costly for the industry to
recover those sales.
Maintaining the industry's export markets will, in turn, help the
industry maximize its 1999-2000 total shipments and prevent handlers
from carrying forward large quantities of inventory into the 2000-2001
crop year. If the industry is unable to maximize its 1999-2000
shipments, carryin inventory could be high which would result in a
lower computed trade demand figure for the 2000-2001 crop year. If the
industry returns to its pattern of relatively large crops in 2000-2001,
a low trade demand and large crop estimate would compute to a low free
tonnage percentage. Since producers are paid significantly more for
their free tonnage than for reserve tonnage, this would mean reduced
returns to producers. Projected reduced 2000-2001 returns to raisin
producers, coupled with the risks of rain and labor shortages during
harvest, may influence producers to ``go green,'' or sell their raisin-
variety grapes to the fresh-grape, wine, or juice concentrate markets.
Additional supplies to those outlets could potentially reduce ``green''
returns as well.
A similar scenario occurred in the California raisin industry in
the early 1980's where the industry experienced two consecutive, short
crop years. The 1981-82 and 1982-83 crops were short followed by
relatively large crops for the remainder of the 1980's. The producer
field price for NS raisins was $1,275 per ton for 1981-82 crop raisins,
and $1,300 per ton for 1982-83 crop raisins. No volume regulation was
implemented in 1982-83. However, a large inventory of high-priced
raisins was carried forward into the 1983-84 crop year. When coupled
with the largest crop on record at the time, volume regulation was
implemented for the 1983-84 crop with the free tonnage percentage at a
historically low 37.5 percent. By 1984, the producer field price for
free tonnage raisins fell to $700 per ton, causing producers to
experience large financial losses. Thus, the industry wants to help
avoid a repeat of what happened in the 1980's by utilizing the Federal
order to maintain export sales and provide stability in the domestic
market.
Several alternatives to this action were considered by the
industry. As previously mentioned, the Committee formed a working group
to address its concerns. The working group considered utilizing money
remaining in the 1997-98 reserve pool to fund some portion of an ERO.
About $22 million would be available. However, because there was no
1998-99 reserve, the 1997-98 pool will ultimately fund at least 16
months of an ERO program. Ideally, the Committee would like to see each
reserve pool support one year of an ERO program. Unfortunately, because
of variances in crop size, the spread in price between the domestic and
export markets, and other factors, this goal is not always met. In any
event, the Committee agreed that any remaining 1997-98 reserve pool
funds could be loaned forward to initiate a 1999-2000 ERO program, but
those funds would have to be paid back and ultimately returned to the
1997-98 equity holders.
A second alternative considered by the working group was to fund
the ERO through an increased assessment rate. The current assessment
rate is $8.50 per ton for raisins acquired by handlers. The Committee
estimated that the rate would need to be increased to at least $60 per
ton for acquired raisins. The Department had concerns with such an
increase as well as whether the ERO could be funded through the order's
assessment authority.
A third alternative considered by the working group was to change
the order's desirable carryout formula. Desirable carryout is part of
the order's trade demand formula and is the amount of
[[Page 43901]]
tonnage from the prior crop year needed during the first part of the
next crop year to meet market needs, before new crop raisins are
available for shipment. Desirable carryout is specified in the order's
regulations and is equal to 2\1/2\ months of the prior year's
shipments. Changing the desirable carryout changes the trade demand
computation. The working group considered developing a sliding scale
which would match crop estimates with levels of carryout inventory.
However, after much discussion, the working group ultimately
recommended to the Committee using an estimated trade demand to compute
volume regulation percentages next year if NS raisin supplies are
short.
There are some reporting, recordkeeping and other compliance
requirements under the order. The reporting and recordkeeping burdens
are necessary for compliance purposes and for developing statistical
data for maintenance of the program. If volume regulation were
implemented this year using an estimated trade demand figure, the
requirements on handlers would be identical to those requirements
imposed in past seasons when volume regulation was implemented. As
previously stated, volume regulation has been utilized in all but 10
seasons for NS raisins since the inception of the order in 1949. Thus,
handlers are familiar with the requirements.
Furthermore, this action imposes no additional reporting or
recordkeeping burden on either small or large handlers. The forms
require information which is readily available from handler records and
which can be provided without data processing equipment or trained
statistical staff. The information and recordkeeping requirements have
been previously approved by the Office of Management and Budget (OMB)
under OMB Control No. 0581-0178. As with other similar marketing order
programs, reports and forms are periodically reviewed to reduce
information requirements and duplication by industry and public sector
agencies. Finally, the Department has not identified any relevant
Federal rules that duplicate, overlap or conflict with this rule.
In addition, the Committee's working group meetings held on
February 24, March 10, March 18, April 6, 1999, and the subcommittee
and Committee meetings on April 13, 1999, where this action was
deliberated were all public meetings widely publicized throughout the
raisin industry. The Committee held a follow-up meeting on June 10,
1999, to further educate the industry on its recommendation. All
interested persons were invited to attend the meetings and participate
in the industry's deliberations.
Further, two major industry organizations, Sun-Maid Growers of
California (Sun-Maid) and the Raisin Bargaining Association (RBA), have
held meetings to provide additional information to their members on the
Committee's recommendation. Sun-Maid and the RBA represent about 70
percent of the California raisin industry.
A proposed rule concerning this action was published in the Federal
Register on June 28, 1999 (64 FR 34571). A 20-day comment period, which
ended on July 19, 1999, was provided to allow interested persons to
respond to this proposal. Copies of the rule were mailed to all
Committee members and alternates, handlers, and producers. The rule was
also made available through the Internet by the Office of the Federal
Register. Three comments were received.
All three commenters expressed concern with the impact of
implementing volume regulation in short crop years on producers. One
commenter stated that he supports maintaining the industry's export
markets, but only if it is profitable for producers. The commenters
also stated that the ERO program benefits handlers with producers
assuming the burden of financing the program.
The evidence before the Committee indicates that the domestic
market can currently only absorb a limited quantity of California
raisins annually, or about 188,000 packed tons (200,000 natural
condition tons). If the crop significantly exceeded this level and if
no ERO program were established, handlers who could not sell their
raisins in export might sell their raisins domestically. Additional NS
raisins sold into the domestic market would create instability and
reduce producer returns.
In addition, while the domestic market generates the highest return
for producers (about $1,216 per ton), the export market generates the
second highest level of return (about $800 per ton). Other outlets for
raisins such as government purchase, diversion, and distilleries or
animal feed provide much lower returns. Thus, since the domestic market
can only absorb a limited amount of raisins, it is prudent to help
ensure that as much of the remainder of the crop as possible be sold to
the next profitable outlet--export.
Two of the commenters expressed concern with the relationship
between the world supply of raisins and the proposal's concern with a
potential loss of export markets. Early season forecasts predict
relatively smaller crops in some other raisin-producing countries. The
commenters contend that, if the world supply of raisins this year is
short, along with a short California crop, the California raisin
industry would not lose its export markets because other raisin-
producing countries would not be able to supply those markets.
Even in light of a relatively short world supply of raisins,
however, an ERO program would be necessary to continue to help
California raisins attract buyers in export markets. Raisins are not a
necessary product for consumers, and export markets would disappear if
prices sharply advanced to free tonnage levels. It would be very
difficult and costly for the industry to regain export markets once
they were lost.
One of the commenters expressed concern with the composition of the
Committee, and another commenter expressed concern with the composition
of the working group which deliberated the issue. Specifically, one
commenter contends that the Committee is suppose to be made up of an
equal number of producers and handlers, and that many handlers who are
also producers hold producer positions on the Committee. The commenter
contends that this results in Committee discussions which usually favor
the interests of handlers rather than producers.
Consistent with the terms of the order, the Committee is composed
of 47 members--35 producers, 10 handlers, 1 representing the RBA, and 1
public member. Nothing under the current order prohibits a producer
member from having a handler interest, or a handler member from having
a producer interest. In addition, the Committee can change its
composition through formal rulemaking (public hearing and producer
referendum) if desired.
As stated above, one commenter expressed concern with the make-up
of the working group which held preliminary meetings to discuss this
issue. The commenter contends that the working group was composed of
five Committee members--one public member and four members affiliated
with a handler. However, the working group was composed of 13 Committee
members representing a cross-section of producers and handlers.
Further, all of the working group meetings were open to any interested
person who would have liked to attend.
The Department believes that the group to which the commenter is
referring is the group of Committee members who responded to industry
questions on this issue at the meeting on June 10, 1999. That group
consisted of only a few members of the original
[[Page 43902]]
working group who visited the Department's headquarters' office in
April 1999 to discuss the Committee's proposal.
Finally, regardless of the recommendation of the Committee or its
working group, it is the Department of Agriculture that makes the
decision to adopt this rule after a thorough consideration of all the
evidence and views of the entire industry.
Accordingly, no changes have been made to the rule as proposed,
based on the comments received.
After consideration of all relevant matter presented, including the
information and recommendation submitted by the Committee, the comments
received in response to the proposed rule, and other available
information, it is hereby found that this rule, as hereinafter set
forth, will tend to effectuate the declared 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: (1) This action needs to be in
effect by August 12, 1999, which is the date of the Committee's meeting
where the 1999-2000 trade demand will be announced; (2) producers and
handlers are aware of this action which was recommended at a public
meeting; and (3) a 20-day comment period was provided in the proposed
rule, and the comments received in response to that rule were addressed
herein.
List of Subjects in 7 CFR Part 989
Grapes, Marketing agreements, Raisins, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 7 CFR part 989 is
amended as follows:
PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA
1. The authority citation for 7 CFR part 989 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. The undesignated center heading preceding Sec. 989.154 is
revised to read ``Marketing Policy.''
3. Section 989.154 is revised to read as follows:
Sec. 989.154 Marketing policy computations.
(a) Desirable carryout levels. The desirable carryout levels to be
used in computing and announcing a crop year's marketing policy shall
be equal to total shipments of free tonnage of the prior crop year
during August, September, and one-half of October, for each varietal
type, converted to a natural condition basis: Provided, That, should
the prior year's shipments be limited because of crop conditions, the
Committee may select the total shipments during the months of August,
September, and one-half of October during one of the three crop years
preceding the prior crop year.
(b) Estimated trade demand. Pursuant to Sec. 989.54(e)(4),
estimated trade demand is a figure different than the trade demand
computed according to the formula in Sec. 989.54(a). The Committee
shall use an estimated trade demand to compute preliminary and interim
free and reserve percentages, or determine such final percentages for
recommendation to the Secretary for 1999-2000 crop Natural (sun-dried)
Seedless (NS) raisins if the crop estimate is equal to, less than, or
no more than 10 percent greater than the computed trade demand:
Provided, That the final reserve percentage computed using such
estimated trade demand shall be no more than 10 percent, and no reserve
shall be established if the final 1999-2000 NS raisin crop estimate is
less than 235,000 natural condition tons.
Sec. 989.157 [Amended]
4. A new undesignated center heading is added preceding
Sec. 989.157 to read ``Quality Control.''
Dated: August 9, 1999.
Kathleen A. Merrigan,
Administrator, Agricultural Marketing Service.
[FR Doc. 99-20877 Filed 8-9-99; 1:55 pm]
BILLING CODE 3410-02-P
