[Federal Register Volume 64, Number 165 (Thursday, August 26, 1999)]
[Proposed Rules]
[Pages 46603-46609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22253]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 905
[Docket No. FV99-905-3 PR]
Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida;
Limiting the Volume of Small Red Seedless Grapefruit
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This proposed rule invites comments on limiting the volume of
small red seedless grapefruit entering the fresh market under the
marketing order covering oranges, grapefruit, tangerines, and tangelos
grown in Florida. The marketing order is administered locally by the
Citrus Administrative Committee (committee). This rule would limit the
volume of size 48 and/or size 56 red seedless grapefruit handlers could
ship during the first 11 weeks of the 1999-2000 season beginning in
September. This rule would establish the base percentage for these
small sizes at 25 percent for the 11 week period. This proposal would
provide a sufficient supply of small sized red seedless grapefruit to
meet market demand, without saturating all markets with these small
sizes. This rule would help stabilize the market and improve grower
returns.
DATES: Comments must be received by September 10, 1999.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposal. Comments must be sent to the Docket Clerk,
Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456,
Washington, DC 20090-6456; Fax: (202) 720-5698 or E-mail:
moab.docketclerk@usda.gov. All comments should reference the docket
number and the date and page number of this issue of the Federal
Register and will be made available for public inspection in the Office
of the Docket Clerk during regular business hours.
FOR FURTHER INFORMATION CONTACT: William G. Pimental, Southeast
Marketing Field Office, F&V, AMS, USDA, P.O. Box 2276, Winter Haven,
Florida 33883-2276; telephone: (941) 299-4770, Fax: (941) 299-5169; or
George Kelhart, Technical Advisor, Marketing Order Administration
Branch, F&V, AMS, USDA, room 2522-S, P.O. Box 96456, Washington, DC
20090-6456; telephone: (202) 690-3919, Fax: (202) 720-5698.
[[Page 46604]]
SUPPLEMENTARY INFORMATION: Small businesses may request information on
compliance with this regulation by contacting Jay Guerber, Marketing
Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA,
room 2525-S, P.O. Box 96456, Washington, DC 20090-6456; telephone (202)
720-2491, Fax: (202) 720-5698 or E-mail: Jay.Guerber@usda.gov. 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 proposal is issued under Marketing Agreement No. 84 and
Marketing Order No. 905, both as amended (7 CFR part 905), regulating
the handling of oranges, grapefruit, tangerines, and tangelos grown in
Florida, hereinafter referred to as the ``order.'' The marketing
agreement and order are effective under the Agricultural Marketing
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter
referred to as the ``Act.''
The Department of Agriculture (Department) is issuing this rule in
conformance with Executive Order 12866.
This proposal has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is not intended to have retroactive effect.
This proposal 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.
The order provides for the establishment of grade and size
requirements for Florida citrus, with the concurrence of the Secretary.
These grade and size requirements are designed to provide fresh markets
with citrus fruit of acceptable quality and size. This helps create
buyer confidence and contributes to stable marketing conditions. This
is in the interest of growers, handlers, and consumers, and is designed
to increase returns to Florida citrus growers. The current minimum
grade standard for red seedless grapefruit is U.S. No. 1, and the
minimum size requirement is size 56 (at least 3\5/16\ inches in
diameter). Section 905.52 of the order provides authority to limit
shipments of any grade or size, or both, of any variety of Florida
citrus. Such limitations may restrict the shipment of a portion of a
specified grade or size of a variety. Under such a limitation, the
quantity of such grade or size that may be shipped by a handler during
a particular week would be established as a percentage of the total
shipments of such variety by such handler in a prior period,
established by the committee and approved by the Secretary, in which
the handler shipped such variety.
Section 905.153 of the regulations provides procedures for limiting
the volume of small red seedless grapefruit entering the fresh market.
The procedures specify that the committee may recommend that only a
certain percentage of sizes 48 and/or 56 red seedless grapefruit be
made available for shipment into fresh market channels for any week or
weeks during the regulatory period. The regulation period is 11 weeks
long and begins the third Monday in September. Under such a limitation,
the quantity of sizes 48 and/or 56 red seedless grapefruit that may be
shipped by a handler during a regulated week is calculated using the
recommended percentage. By taking the recommended weekly percentage
times the average weekly volume of red grapefruit handled by such
handler in the previous five seasons, handlers can calculate the volume
of sizes 48 and/or 56 they may ship in a regulated week.
This proposed rule would limit the volume of small red seedless
grapefruit entering the fresh market for each week of the 11 week
period beginning the week of September 20. This rule would limit the
volume of sizes 48 and/or 56 red seedless grapefruit entering the fresh
market for each of the 11 weeks at 25 percent. This would allow the
committee to start the season at the most restrictive level allowed
under Sec. 905.153, and if conditions warrant, to release greater
quantities of size 48 and/or size 56 small red grapefruit as more
information becomes available. The committee at its meeting on April 6,
1999, recommended this action, by a unanimous vote. This action is
similar to those taken in the previous two seasons (1997-98 and 1998-
99).
For the seasons 1994-95, 1995-96, and 1996-97, returns for red
seedless grapefruit had been declining, often not returning the cost of
production. On-tree prices for red seedless grapefruit had fallen
steadily from $9.60 per carton (4/5 bushel) during the 1989-90 season,
to $3.45 per carton during the 1994-95 season, to a low of $1.41 per
carton during the 1996-97 season.
The committee determined that one problem contributing to the
market's condition was the excessive number of small sized grapefruit
shipped early in the marketing season. In the 1994-95, 1995-96, and
1996-97 seasons, sizes 48 and 56 accounted for 34 percent of total
shipments during the 11 week regulatory period, with the average weekly
percentage exceeding 40 percent of shipments. This contrasts with sizes
48 and 56 representing only 26 percent of total shipments for the
remainder of the season. While there is a market for early grapefruit,
the shipment of large quantities of small red seedless grapefruit in a
short period oversupplies the fresh market for these sizes and
negatively impacts the market for all sizes.
For the majority of the season, larger sizes return higher prices
than smaller sizes. However, there is a push early in the season to get
fruit into the market to take advantage of the high prices available at
the beginning of the season. The early season crop tends to have a
greater percentage of small sizes. This creates a glut of smaller,
lower priced fruit on the market, driving down the price for all sizes.
Early in the season, larger sized fruit commands a premium price. In
some cases, the f.o.b. price is $4 to $6 a carton more than for the
smaller sizes. In early October, the f.o.b. price for a size 27
averages around $10.00 per carton. This compares to an average f.o.b.
price of $5.50 per carton for size 56. By the end of the 11 week period
covered in this rule, the f.o.b. price for large sizes drops to within
$2 of the f.o.b. price for small sizes.
In the three seasons prior to 1997-98, prices of red seedless
grapefruit fell from a weighted average f.o.b. price of $7.80 per
carton to an average f.o.b. price of $5.50 per carton during the period
covered by this rule. Even though later in the season the crop sized to
naturally limit the amount of smaller sizes available for shipment, the
price structure in the market had already been negatively affected.
During those three seasons, the market did not recover, and the f.o.b.
price for all sizes fell to around $5.00 to $6.00 per carton for most
of the rest of the season.
The committee believes that the over shipment of smaller sized red
seedless
[[Page 46605]]
grapefruit early in the season contributes to below production cost
returns for growers and lower on-tree values. An economic study done by
the University of Florida--Institute of Food and Agricultural Sciences
(UF-IFAS) in May 1997, found that on-tree prices had fallen from a high
near $7.00 per carton in 1991-92 to around $1.50 per carton for the
1996-97 season. The study projected that if the industry elected to
make no changes, the on-tree price would remain around $1.50 per
carton. The study also indicated that increasing minimum size
restrictions could help raise returns.
To address this issue, the committee voted to utilize the
provisions of Sec. 905.153, and establish a weekly percentage of size
regulation during the first 11 weeks of the 1997-98 and 1998-99
seasons. The initial recommendation from the committee was to set the
weekly percentage at 25 percent for each of the 11 weeks. As more
information on the crop became available, and as the season progressed,
the committee met several times and adjusted its recommendations for
the weekly percentages. The committee considered information from past
seasons, crop estimates, fruit size, and other information to make its
recommendations. The Committee has since used this regulation to the
betterment of the industry. Prices have increased, and movement has
been more stable. Actual weekly percentages established during the 11
week period during the 1997-98 season were 50 percent for the first 3
weeks, and 35 percent for the other 8 weeks. Actual weekly percentages
established during the 11 week period during the 1998-99 season were 37
percent for the first 3 weeks, and 32 percent for the other 8 weeks.
In making its recommendation for the upcoming season, the committee
reviewed its experiences from the past seasons. The committee believes
establishing weekly percentages during the last two seasons was
successful. The committee examined shipment data covering the 11 week
regulatory period for the last two regulated seasons and the three
prior seasons. The information contained the amounts and percentages of
sizes 48 and 56 shipped during each week and weekly f.o.b. price
figures. During the 11 week period, the regulations were successful at
helping maintain prices at a higher level than previously, and sizes 48
and 56 by count and as a percentage of total shipments were reduced.
In comparison with f.o.b. prices from the 1996-97 season, for weeks
when pricing information was available (weeks 6 through 11), last
season's numbers were higher in five of the six weeks. The average
f.o.b. prices for these weeks were $6.28 for the 1996-97 season, $6.55
for the 1997-98 season, and $7.63 for the 1998-99 season. Total fresh
shipments for the 1998-99 season are estimated at 14.6 million cartons
of red grapefruit.
The committee was concerned that the glut of smaller, lower priced
fruit on the early market was driving down the price for all sizes.
There was a steep decline in prices for larger sizes in previous
seasons. During the six weeks from mid-October through November, prices
for sizes 23, 27, 32, and 36 fell by 28, 27, 21, and 20 percent,
respectively, during the 1996-97 season, the last season prior to
establishing percentage size regulations. Prices for the same sizes
fell only 13, 11, 14, and 11 percent, respectively, during the same
period last season with regulation. In fact, prices for all sizes were
firmer during this period for last season when compared to the 1996-97
season, with the weighted average price dropping only 11 percent during
this period as compared to 22 percent during the 1996-97 season.
An economic study done by Florida Citrus Mutual (Lakeland, Florida)
in April 1998, found that the weekly percentage regulation had been
effective. The study stated that part of the strength in early season
pricing appeared to be due to the use of the weekly percentage rule to
limit the volume of sizes 48 and 56. It said that prices were generally
higher across the size spectrum with sizes 48 and 56 having the largest
gains, and larger sized grapefruit registering modest improvements. The
rule shifted the size distribution toward the higher priced, larger
sized grapefruit which helped raise weekly average f.o.b. prices. It
further stated that sizes 48 and 56 grapefruit accounted for around 27
percent of domestic shipments during the same 11 weeks during the 1996-
97 season. Comparatively, sizes 48 and 56 accounted for only 17 percent
of domestic shipments during the same period in 1997-98, as small sizes
were used to supply export customers with preferences for small sized
grapefruit.
The committee recommended that the weekly percentage of size
regulation should be set at 25 percent for the 11 week period. Members
believe that the problems associated with an uncontrolled volume of
small sizes entering the market early in the season would recur without
this action. The committee thought that to provide the most
flexibility, the weekly percentage should be set at 25 percent for each
of the 11 weeks in the regulated period. The committee believes it is
best to set regulation at the most restrictive level, and then relax
the percentage as warranted by conditions later in the season. The
committee intends to meet on a regular basis early in the season to
consider adjustments in the weekly percentage rates, as was done in the
previous two seasons.
In its discussion, the committee recognized the need for and the
benefits of the weekly percentage regulation. The committee recommended
establishing the base percentage at 25 percent for each of the
regulation weeks. This is as restrictive as Sec. 905.153 will allow.
In making this recommendation, the committee considered that by
establishing regulation at 25 percent, they could meet again in August
and the months following and use the best information available to help
the industry and the committee make the most informed decisions as to
whether the established percentages are appropriate.
Based on this information and the experiences from past seasons,
the committee agreed to establish the weekly percentage at the most
restrictive level. They can then meet in late August, or in September
and October, as needed, when additional information is available, and
determine whether the set percentage levels are appropriate. They said
this is essentially what was done in the prior two years, and it had
been very successful. For example, the committee met in May 1998, and
recommended a weekly percentage of 25 percent for each of the first 11
weeks of the 1998-99 season. In September, the committee met again, and
recommended that the weekly percentage be relaxed. They met again in
October, and did not recommend any further relaxation. Any changes to
the weekly percentages proposed by this rule would require additional
rulemaking and the approval of the Secretary.
The committee noted that more information helpful in determining
the appropriate weekly percentages will be available after August. At
the time of the April meeting, grapefruit had not yet begun to size,
giving little indication as to the distribution of sizes. Only the most
preliminary of crop estimates was available, with the official estimate
not to be issued until October.
While information concerning the coming season is limited prior to
September, there are indications that setting the weekly percentage at
25 percent is the appropriate level. During deliberations in past
seasons as to weekly percentages, the committee
[[Page 46606]]
considered how past shipments had affected the market. Based on
available statistical information, the committee members believed that
once shipments of sizes 48 and 56 reached levels above 250,000 cartons
a week, prices declined on those and most other sizes of red seedless
grapefruit. The committee believed that if shipments of small sizes
could be maintained at around 250,000 cartons a week, prices should
stabilize and demand for larger, more profitable sizes should increase.
As is the case for this season, they wanted to recommend a weekly
percentage that would provide a sufficient volume of small sizes
without adversely impacting the markets for larger sizes. They also
originally recommended that the percentage for each of the 11 weeks be
established at the 25 percent level. This percentage, when combined
with the average weekly shipments for the total industry, provided a
total industry allotment of approximately 234,000 cartons of sizes 48
and/or 56 red seedless grapefruit per regulated week. The total
shipments of small red seedless grapefruit would approach the 250,000
carton mark during regulated weeks without exceeding it.
While the committee did eventually vote last season to increase the
weekly percentages, shipments of sizes 48 and 56 during the 11 weeks
regulated during the 1998-99 season remained close to the 250,000
carton mark. This may have contributed to the success of the
regulation.
Based on the shipments from last year, a weekly percentage of 25
percent would not have been that much more restrictive on shipments
than the percentages established, reducing in most cases just the
excess available allotment. In setting the weekly percentage for each
week at 25 percent this season, the total available allotment would
closely approximate the 250,000 carton level. The weekly percentage of
25 percent, when combined with the average weekly shipments for the
total industry, would provide a total industry allotment of nearly
235,000 cartons of sizes 48 and/or 56 red seedless grapefruit per
regulated week.
In addition, the production area is suffering through a period of
insufficient rainfall. While the actual effects are not currently
known, it is possible that this may affect the sizing of the crop as
well as maturity. This could mean a larger volume of small sized red
seedless grapefruit, further exacerbating the problem with small sizes
early in the season.
The situation is also complicated by the ongoing economic problems
affecting the European and Asian markets. In past seasons, the European
market has shown a strong demand for the smaller sized red seedless
grapefruit. The reduction in shipments to these areas experienced
during the last two years is expected to continue during the upcoming
season. This reduction in demand could result in a greater amount of
small sizes for remaining markets to absorb. These factors increase the
need for restrictions to prevent the volume of small sizes from
overwhelming all markets.
Therefore, this rule would establish the weekly percentage at 25
percent for each of the 11 weeks. The committee plans to meet in late
August and as needed during the remainder of the 11 week period to work
to ensure that the set weekly percentages are at the appropriate
levels.
Under Sec. 905.153, the quantity of sizes 48 and/or 56 red seedless
grapefruit that may be shipped by a handler during a regulated week
would be calculated using the recommended percentage of 25 percent. By
taking the weekly percentage times the average weekly volume of red
grapefruit handled by such handler in the previous five seasons,
handlers can calculate the volume of sizes 48 and/or 56 they may ship
in a regulated week.
An average week has been calculated by the committee for each
handler using the following formula. The total red seedless grapefruit
shipments by a handler during the 33 week period beginning the third
Monday in September and ending the first Sunday in May during the
previous five seasons are added and divided by five to establish an
average season. This average season is then divided by the 33 weeks to
derive the average week. This average week would be the base for each
handler for each of the 11 weeks of the regulatory period. The weekly
percentage, in this case 25 percent, is multiplied by a handler's
average week. The product is that handler's allotment of sizes 48 and/
or 56 red seedless grapefruit for the given week.
Under this proposed rule, the calculated allotment is the amount of
small sized red seedless grapefruit a handler could ship. If the
minimum size established under Sec. 905.52 remains at size 56, handlers
could fill their allotment with size 56, size 48, or a combination of
the two sizes such that the total of these shipments are within the
established limits. If the minimum size under the order is 48, handlers
could fill their allotment with size 48 fruit such that the total of
these shipments is within the established limits. The committee staff
would perform the specified calculations and provide them to each
handler.
To illustrate, suppose Handler A shipped a total of 50,000 cartons,
64,600 cartons, 45,000 cartons, 79,500 cartons, and 24,900 cartons of
red seedless grapefruit in the last five seasons, respectively. Adding
these season totals and dividing by five yields an average season of
52,800 cartons. The average season would then be divided by 33 weeks to
yield an average week, in this case, 1,600 cartons. This would be
Handler A's base. The weekly percentage of 25 percent would then be
applied to this amount. This would provide this handler with a weekly
allotment of 400 cartons (1,600 x .25) of size 48 and/or 56.
The average week for handlers with less than five previous seasons
of shipments would be calculated by the committee by averaging the
total shipments for the seasons they did ship red seedless grapefruit
during the immediately preceding five years and dividing that average
by 33. New handlers with no record of shipments would have no prior
period on which to base their average week. Therefore, under this
proposal, a new handler could ship small sizes equal to 25 percent of
their total volume of shipments during their first shipping week. Once
a new handler has established shipments, their average week will be
calculated as an average of the weeks they have shipped during the
current season.
This proposed rule would establish a weekly percentage of 25
percent for each of the 11 weeks to be regulated. The regulatory period
begins the third Monday in September. Each regulation week would begin
Monday at 12:00 a.m. and end at 11:59 p.m. the following Sunday, since
most handlers keep records based on Monday being the beginning of the
work week. If necessary, the committee could meet and recommend a
percentage above 25 percent to the Secretary at any time during the
regulatory period.
The rules and regulations contain a variety of provisions designed
to provide handlers with some marketing flexibility. When regulation is
established by the Secretary for a given week, the committee calculates
the quantity of small red seedless grapefruit which may be handled by
each handler. Section 905.153(d) provides allowances for overshipments,
loans, and transfers of allotment. These allowances should allow
handlers the opportunity to supply their markets while limiting the
impact of small sizes on a weekly basis.
During any week for which the Secretary has fixed the percentage of
[[Page 46607]]
sizes 48 and/or 56 red seedless grapefruit, any handler could handle an
amount of sizes 48 and/or 56 red seedless grapefruit not to exceed 110
percent of their allotment for that week. The quantity of overshipments
(the amount shipped in excess of a handler's weekly allotment) would be
deducted from the handler's allotment for the following week.
Overshipments would not be allowed during week 11 because there would
be no allotments the following week from which to deduct the
overshipments.
If handlers fail to use their entire allotments in a given week,
the amounts undershipped would not be carried forward to the following
week. However, a handler to whom an allotment has been issued could
lend or transfer all or part of such allotment (excluding the
overshipment allowance) to another handler. In the event of a loan,
each party would, prior to the completion of the loan agreement, notify
the committee of the proposed loan and date of repayment. If a transfer
of allotment is desired, each party would promptly notify the committee
so that proper adjustments of the records could be made. In each case,
the committee would confirm in writing all such transactions prior to
the following week. The committee could also act on behalf of handlers
wanting to arrange allotment loans or participate in the transfer of
allotment. Repayment of an allotment loan would be at the discretion of
the handlers party to the loan.
The committee would compute each handler's allotment by multiplying
the handler's average week by the percentage established by regulation
for that week. The committee would notify each handler prior to that
particular week of the quantity of sizes 48 and 56 red seedless
grapefruit such handler could handle during a particular week, making
the necessary adjustments for overshipments and loan repayments.
The committee chose to use the past five seasons to provide the
most accurate picture of an average season. When recommending
procedures for establishing weekly percentage of size regulation for
red seedless grapefruit, the committee discussed several methods of
measuring a handler's volume to determine this base. It was decided
that shipments for the five previous years and for the 33 weeks
beginning the third Monday in September to the first Sunday the
following May should be used for calculation purposes.
This bases allotment on a 33 week period of shipments, not just a
handler's early shipments. This was done specifically to accommodate
small shippers or light volume shippers, who may not have shipped many
grapefruit in the early season. The use of an average week based on 33
weeks also helps adjust for variations in growing conditions that may
affect when fruit matures in different seasons and growing areas. After
considering different ways to calculate the average week, the committee
settled on this definition of prior period as the method that would
provide each handler with an equitable base from which to establish
shipments.
The procedures under which this rule is recommended provide
flexibility through several different options. Handlers can transfer,
borrow or loan allotment based on their needs in a given week. Handlers
also have the option of over shipping their allotment by 10 percent in
a week, as long as the overshipment is deducted from the following
week's shipments. Statistics show that in none of the regulated weeks
was the total available allotment used. Approximately 190 loans and
transfers were utilized last season. To facilitate this process, the
committee staff provides a list of handler names and telephone numbers
to help handlers find possible sources of allotment if needed for loan
or trade. Also, this regulation only restricts shipments of small sized
red grapefruit. There are no volume restrictions on larger sizes.
After considering the available information, the committee
recommended that shipments of small sized red seedless grapefruit
should be regulated this season.
This rule does not affect the provision that handlers may ship up
to 15 standard packed cartons (12 bushels) of fruit per day exempt from
regulatory requirements. Fruit shipped in gift packages that are
individually addressed and not for resale, and fruit shipped for animal
feed are also exempt from handling requirements under specific
conditions. Also, fruit shipped to commercial processors for conversion
into canned or frozen products or into a beverage base are not subject
to the handling requirements under the order.
Section 8e of the Act requires that whenever grade, size, quality,
or maturity requirements are in effect for certain commodities under a
domestic marketing order, including grapefruit, imports of that
commodity must meet the same or comparable requirements. This rule does
not change the minimum grade and size requirements under the order,
only the percentages of sizes 48 and/or 56 red grapefruit that may be
handled. Therefore, no change is necessary in the grapefruit import
regulations as a result of this action.
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), AMS has considered the economic impact of this action on
small entities. Accordingly, AMS has prepared this 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 rules issued thereunder, are unique in that
they are brought about through group action of essentially small
entities acting on their own behalf. Thus, both statutes have small
entity orientation and compatibility.
There are approximately 80 grapefruit handlers subject to
regulation under the order and approximately 11,000 growers of citrus
in the regulated area. Small agricultural service firms, which includes
handlers, have been defined by the Small Business Administration (SBA)
as those having annual receipts of less than $5,000,000, and small
agricultural producers are defined as those having annual receipts of
less than $500,000 (13 CFR 121.601).
Based on industry and committee data, the average annual f.o.b.
price for fresh Florida red grapefruit during the 1998-99 season was
around $7.20 per 4/5 bushel carton, and total fresh shipments for the
1998-99 season are estimated at 14.6 million cartons of red grapefruit.
Approximately 20 percent of all handlers handled 60 percent of Florida
grapefruit shipments. In addition, many of these handlers ship other
citrus fruit and products which are not included in committee data but
would contribute further to handler receipts. Using the average f.o.b.
price, about 80 percent of grapefruit handlers could be considered
small businesses under SBA's definition, and about 20 percent of the
handlers could be considered large businesses. The majority of Florida
grapefruit handlers and growers may be classified as small entities.
Under the authority of Sec. 905.52 of the order, this proposed rule
would limit the volume of small red seedless grapefruit entering the
fresh market during the first 11 weeks of the 1999-2000 season,
beginning the third Monday in September. This rule utilizes the
provisions of Sec. 905.153. The proposal would limit the volume of
sizes 48 and/or 56 red seedless grapefruit by setting the weekly
percentage for each of the 11 weeks at 25 percent. Under such a
limitation, the quantity of sizes 48 and/or 56 red seedless grapefruit
that may be shipped by a handler during a particular week is
[[Page 46608]]
calculated using the recommended percentage.
By taking the recommended percentage times the average weekly
volume of red grapefruit handled by such handler in the previous five
seasons, the committee would calculate a handler's weekly allotment of
small sizes. The rule would set the weekly percentage at 25 percent for
the 11 week period. This proposal would provide a supply of small sized
red seedless grapefruit sufficient to meet market demand, without
saturating all markets with these small sizes. This rule would help
stabilize the market and improve grower returns during the early part
of the season.
The weekly percentage of 25 percent, when combined with the average
weekly shipments for the total industry, would provide a total industry
allotment of nearly 235,000 cartons of sizes 48 and/or 56 red seedless
grapefruit per regulated week. If a 25 percent restriction on small
sizes had been applied during the 11 week period in the three seasons
prior to the 1997-98 season, an average of 4.2 percent of overall
shipments during that period would have been affected. A large
percentage of this volume most likely could have been replaced by
larger sizes. Under this proposal, a sufficient volume of small sized
red grapefruit would still be allowed into all channels of trade, and
allowances would be in place to help handlers address any market
shortfall. Therefore, the overall impact on total seasonal shipments
and on industry costs should be minimal.
The early season crop tends to have a greater percentage of small
sizes. This creates a glut of smaller, lower priced fruit, driving down
the price for all sizes. Early in the season, larger sized fruit
commands a premium price. In some cases, the f.o.b. price is $4 to $6 a
carton more than for the smaller sizes. In early October, the f.o.b.
price for a size 27 averages around $10.00 per carton. This compares to
an average f.o.b. price of $5.50 per carton for size 56. By the end of
the 11 week period covered in this rule, the f.o.b. price for large
sizes typically drops to within $2 of the f.o.b. price for small sizes.
The over shipment of smaller sized red seedless grapefruit early in
the season has contributed to below production cost returns for growers
and lower on tree values. An economic study done by the University of
Florida--Institute of Food and Agricultural Sciences (UF-IFAS) in May
1997, found that on tree prices had fallen from a high near $7.00 per
carton in 1991-92 to around $1.50 per carton for the 1996-97 season.
The study projected that if the industry elected to make no changes,
the on tree price would remain around $1.50 per carton. The study also
indicated that increasing minimum size restrictions could help raise
returns.
This regulation would have a positive impact on affected entities.
The purpose of this rule is to help stabilize the market and improve
grower returns by limiting the volume of small sizes marketed early in
the season. There are no volume restrictions on larger sizes.
Therefore, larger sizes could be substituted for smaller sizes with a
minimal effect on overall shipments. While this rule may necessitate
spot picking, which could entail slightly higher harvesting costs, many
in the industry are already using the practice. In addition, because
this regulation is only in effect for part of the season, the overall
effect on costs is minimal. This rule is not expected to appreciably
increase costs to producers.
This rule would help limit the effects of an over supply of small
sizes early in the season. Similar rules were enacted successfully the
last two seasons. During the 11 week period, the regulations were
successful in helping maintain prices at a higher level than in prior
seasons, and sizes 48 and 56 by count and as a percentage of total
shipments were reduced. Therefore, this action should have a positive
impact on grower returns.
For the weeks when pricing information was available, last season's
prices were higher in five of the six weeks when compared with f.o.b.
prices from the 1996-97 season. The average f.o.b. for these weeks was
$6.28 for the 1996-97 season, $6.55 for the 1997-98 season and $7.63
for the 1998-99 season.
The rules were also successful in reducing the steep drop in prices
for larger sizes that had occurred in previous seasons. During the six
weeks from mid-October through November, prices for sizes 23, 27, 32,
and 36 fell by 25, 25, 20, and 14 percent, respectively, during the
1997-98 season. Prices for the same sizes fell only 13, 11, 14, and 11
percent, respectively, during the same period last season with
regulation. Prices for all sizes were firmer during this period last
season when compared to the 1996-97 season, with the weighted average
price dropping only 11 percent during this period last season as
compared to 22 percent during the 1996-97 season.
An economic study done by Florida Citrus Mutual (Lakeland, Florida)
in April 1998, found that the weekly percentage regulation had been
effective. The study indicated that part of the strength in early
season pricing appeared to be due to the use of the weekly percentage
rule to limit the volume of sizes 48 and 56. Prices were generally
higher across the size spectrum, with sizes 48 and 56 having the
largest gains and larger sized grapefruit registering modest
improvements.
The report also stated that sizes 48 and 56 grapefruit accounted
for around 27 percent of domestic shipments during the 11 weeks during
the 1996-97 season, compared to only 17 percent during the 1997-98
season, as small sizes were used to supply export customers with
preferences for small sized grapefruit.
Over 50 percent of red seedless grapefruit are shipped to the fresh
market. Because of reduced demand and an oversupply, the processing
outlet is not currently profitable. Consequently, it is essential that
the market for fresh red grapefruit be fostered and maintained. Any
costs associated with this action would only be for the 11 week
regulatory period. However, benefits from this action could stretch
throughout the entire 33 week season.
This rule is intended to stabilize the market during the early
season and increase grower returns. Information available from the last
two seasons suggests the regulation could do both. A stabilized price
that returns a fair market value would be beneficial to both small and
large growers and handlers. The opportunities and benefits of this rule
are expected to be available to all red seedless grapefruit handlers
and growers regardless of their size of operation. Accordingly, this
action would provide the most beneficial results for the industry given
any other alternatives.
Handlers utilizing the flexibility of the loan and transfer aspects
of this action would be required to submit a form to the committee. The
rule would increase the reporting burden on approximately 80 handlers
of red seedless grapefruit who would be taking about 0.03 hour to
complete each report regarding allotment loans or transfers. The
information collection requirements contained in this section have been
approved by the Office of Management and Budget (OMB) under the
provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter
35) and assigned OMB number 0581-0094. As with all Federal marketing
order programs, reports and forms are periodically reviewed to reduce
information requirements and duplication by industry and public
sectors. The Department has not identified any relevant Federal rules
that duplicate,
[[Page 46609]]
overlap or conflict with this proposed rule. However, red seedless
grapefruit must meet the requirements as specified in the U.S.
Standards for Grades of Florida Grapefruit (7 CFR 51.760 through
51.784) issued under the Agricultural Marketing Act of 1946 (7 U.S.C.
1621 through 1627).
The committee's meeting was widely publicized throughout the citrus
industry and all interested persons were invited to attend the meeting
and participate in committee deliberations on all issues. Like all
committee meetings, the April 6, 1999, meeting was a public meeting and
all entities, both large and small, were able to express views on this
issue. Interested persons are invited to submit information on the
regulatory and informational impacts of this action on small
businesses.
A 15-day comment period is provided to allow interested persons to
respond to this proposal. Fifteen days is deemed appropriate because
this rule would need to be in place as soon as possible since handlers
will begin shipping grapefruit in September. In addition, because of
the nature of this rule, handlers need time to consider their allotment
and how best to service their customers. Also, the industry has been
discussing this issue for some time, and the committee has kept the
industry well informed. It has also been widely discussed at various
industry and association meetings. Interested persons have had time to
determine and express their positions. This action is similar to those
taken in the previous two seasons, and it was unanimously recommended
by the committee. All written comments timely received will be
considered before a final determination is made on this matter.
List of Subjects in 7 CFR Part 905
Grapefruit, Marketing agreements, Oranges, Reporting and
recordkeeping requirements, Tangelos, Tangerines.
For the reasons set forth in the preamble, 7 CFR part 905 is
proposed to be amended as follows:
PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN
FLORIDA
1. The authority citation for 7 CFR part 905 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. Section 905.350 is revised to read as follows:
Sec. 905.350 Red seedless grapefruit regulation.
This section establishes the weekly percentages to be used to
calculate each handler's weekly allotment of small sizes. If the
minimum size in effect under Sec. 905.306 for red seedless grapefruit
is size 56, handlers can fill their allotment with size 56, size 48, or
a combination of the two sizes such that the total of these shipments
are within the established weekly limits. If the minimum size in effect
under Sec. 905.306 for red seedless grapefruit is 48, handlers can fill
their allotment with size 48 red seedless grapefruit such that the
total of these shipments is within the established weekly limits. The
weekly percentages for sizes 48 and/or 56 red seedless grapefruit grown
in Florida, which may be handled during the specified weeks are as
follows:
------------------------------------------------------------------------
Weekly
Week percentage
------------------------------------------------------------------------
(a) 9/20/99 through 9/26/99................................. 25
(b) 9/27/99 through 10/3/99................................. 25
(c) 10/4/99 through 10/10/99................................ 25
(d) 10/11/99 through 10/17/99............................... 25
(e) 10/18/99 through 10/24/99............................... 25
(f) 10/25/99 through 10/31/99............................... 25
(g) 11/1/99 through 11/7/99................................. 25
(h) 11/8/99 through 11/14/99................................ 25
(i) 11/15/99 through 11/21/99............................... 25
(j) 11/22/99 through 11/28/99............................... 25
(k) 11/29/99 through 12/5/99................................ 25
------------------------------------------------------------------------
Dated: August 23, 1999.
Bernadine M. Baker,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-22253 Filed 8-25-99; 8:45 am]
BILLING CODE 3410-02-P
