95-19323. Raisins Produced From Grapes Grown in California; Change of Desirable Carryout Used in Computing Trade Demand  

  • [Federal Register Volume 60, Number 150 (Friday, August 4, 1995)]
    [Rules and Regulations]
    [Pages 39837-39840]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-19323]
    
    
    
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    DEPARTMENT OF AGRICULTURE
    Agricultural Marketing Service
    
    7 CFR Part 989
    
    [Docket No. FV95-989-3FR]
    
    
    Raisins Produced From Grapes Grown in California; Change of 
    Desirable Carryout Used in Computing Trade Demand
    
    AGENCY: Agricultural Marketing Service, USDA.
    
    ACTION: Final rule.
    
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    SUMMARY: This final rule changes the desirable carryout levels which 
    are used in computing the yearly trade demand for California raisins. 
    The trade demand is used to help determine the volume regulation 
    percentages for each crop year, if necessary. The desirable carryout is 
    being reduced from the current two and one-half months of shipments to 
    two and one-fourth months of shipments during the 1995-96 crop year and 
    to two months of shipments in subsequent crop years. The Raisin 
    Administrative Committee (Committee), which is responsible for local 
    administration of the Federal marketing order, believes that the 
    current desirable carryout level has contributed to excessive supplies 
    of marketable tonnage early in the crop year. This rule is expected to 
    moderate the oversupply of California raisins early in the crop year, 
    thus stabilizing the market conditions for producers and handlers.
    EFFECTIVE DATE: August 4, 1995.
    
    FOR FURTHER INFORMATION CONTACT: Mark Hessel, Marketing Specialist, 
    California Marketing Field Office, Fruit and Vegetable Division, AMS, 
    USDA, 2202 Monterey Street, suite 102B, Fresno, California 93721; 
    telephone: (209) 487-5901, or fax (209) 487-5906; or Valerie L. Emmer, 
    Marketing Specialist, Marketing Order Administration Branch, Fruit and 
    Vegetable Division, AMS, USDA, room 2523-S, P.O. Box 96456, Washington, 
    DC 20090-6456; telephone: (202) 205-2829, or fax (202) 720-5698.
    
    
    [[Page 39838]]
    
    SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing 
    Agreement and Order No. 989 (7 CFR Part 989), as amended, regulating 
    the handling of raisins produced from grapes grown in California, 
    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 12778, 
    Civil Justice Reform. This rule will reduce the desirable carryout for 
    the 1995-96 crop year, beginning August 1, 1995, through July 31, 1996, 
    and for subsequent crop years. 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 a bill in equity is filed 
    not later than 20 days after the date of the entry of the ruling.
        Pursuant to requirements set forth in the Regulatory Flexibility 
    Act (RFA), the Administrator of the Agricultural Marketing Service 
    (AMS) has considered the economic impact of this action on small 
    entities.
        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 marketing order and approximately 4,500 
    producers in the regulated area. Small agricultural service firms have 
    been defined by the Small Business Administration (13 CFR 121.601) as 
    those whose annual receipts (from all sources) are less than 
    $5,000,000, and small agricultural producers are defined as those 
    having annual receipts of less than $500,000. No more than eight 
    handlers and a majority of producers of California raisins may be 
    classified as small entities. Twelve of the 20 handlers subject to 
    regulation have annual sales estimated to be at least $5,000,000, and 
    the remaining eight handlers have sales less than $5,000,000, excluding 
    receipts from any other sources.
        This final rule changes section 989.154 of the administrative rules 
    and regulations of the raisin marketing order. The Committee 
    recommended by a vote of 31 to 15 at its April 28, 1995, meeting, to 
    adjust the desirable carryout level in section 989.154 from the current 
    two and one-half months of shipments to two and one-fourth months of 
    shipments during the 1995-96 crop year and to two months of shipments 
    in subsequent crop years. The crop year includes the 12-month period 
    August 1 through July 31.
        The desirable carryout level is the amount of tonnage from the 
    prior crop year needed during the first part of the succeeding crop 
    year to meet market needs, before new crop raisins are harvested and 
    available for market. Currently, section 989.154 provides that the 
    desirable carryout levels shall be equal to the shipments of free 
    tonnage to all outlets for each varietal type during the months of 
    August, September, and one-half of the total shipments for the month of 
    October of the prior crop year.
        The desirable carryout figure is used in marketing policy 
    calculations to determine trade demand. The trade demand is 90 percent 
    of prior year's shipments, adjusted by the carryin and desirable 
    carryout. The trade demand is then used to help determine the volume 
    regulation percentages for each crop year, if necessary.
        Beginning in the 1991-92 crop year the desirable carryout was 
    reduced from three months of shipments to two and one-half months of 
    shipments. It was determined that the use of the three month desirable 
    carryout level resulted in excessive supplies of marketable tonnage 
    early in the season.
        The Committee has used the two and one-half month desirable 
    carryout figure for four crop years and has determined that the use of 
    this figure has also contributed to an excessive supply of free tonnage 
    at the beginning of the marketing season. A majority of the Committee 
    members believe that this causes unstable market conditions during the 
    early part of the crop year.
        To moderate the oversupply of marketable raisin tonnage early in 
    the season, the Committee recommended that the desirable carryout 
    levels be revised from two and one-half months of the prior year's 
    shipments to two and one-fourth months of the prior year's shipments 
    for the 1995-96 crop year and to two months of the prior year's 
    shipments for subsequent crop years.
        The change in the desirable carryout levels reduces the trade 
    demand and the free tonnage percentage, and makes less free tonnage 
    available to handlers for immediate use. However, handlers will still 
    be provided an opportunity to increase their inventories, if necessary, 
    by purchasing raisins from the reserve pool under order-mandated 10 
    plus 10 offers during November and other releases of reserve pool 
    raisins available under the marketing order. The 10 plus 10 offers are 
    two simultaneous offers of reserve pool raisins which are made 
    available to handlers each season. For each such offer, a quantity of 
    raisins equal to 10 percent of the prior year's shipments is made 
    available for free use. Although this final rule tends to tighten the 
    supply of raisins early in the season, handlers will still have the 
    opportunity to obtain additional supplies to increase their carryouts 
    from the 10 plus 10 offers.
        This rule is intended to stabilize the early season raisin market. 
    Bringing early season supplies more in line with market needs is 
    expected to stabilize market prices. This price stabilization should 
    make raisin buyers less likely to postpone their purchases. Thus, 
    decreasing the desirable carryout could strengthen the market and 
    increase shipments, which would benefit raisin producers and handlers.
        One alternative that was discussed by the Committee prior to 
    recommending the change was to immediately set the desirable carryout 
    level at two months of the prior year's shipments. It was determined 
    that this was too rapid an adjustment and that first setting the 
    desirable carryout levels at two and one-quarter months for the 1995-96 
    season and two months in subsequent crop years would be a more prudent 
    approach.
        Another alternative considered was setting the desirable carryout 
    at a fixed tonnage. However, this alternative does not allow the 
    desirable carryout to fluctuate with changing market conditions from 
    year to year.
        Those voting in opposition to the recommendation to reduce the 
    desirable 
    
    [[Page 39839]]
    carryout level believed that the marketing order should not further 
    restrict supplies during the early part of the crop year. However, the 
    following table shows that adequate supplies of Natural (sun-dried) 
    Seedless raisins have been available early in the crop year to meet 
    demand. Natural (sun-dried) Seedless raisins represent about 90 percent 
    of all raisins produced in California. The other two varieties which 
    had reserve pools for the 1994-95 crop year, Zante Currant raisins and 
    Other Seedless raisins, had carryins far exceeding the annual trade 
    demand. ``Carryin'' is synonymous with the ``carryout'' of the 
    preceding crop year. All figures are in natural condition tons.
    
    ------------------------------------------------------------------------
                                              Desirable                     
                                               carryin                      
                                             (Aug, Sept  Physical   Aug/Sept
                   Crop year                   & \1/2\    carryin  shipments
                                                 Oct                        
                                             shipments)                     
    ------------------------------------------------------------------------
    1994-95................................      84,671    92,248    64,374 
    1993-94................................      81,867    93,752    67,784 
    1992-93................................      82,591   115,440    65,495 
    1991-92................................      84,541   109,306    65,613 
    ------------------------------------------------------------------------
    
        The desirable carryin is set to meet the demand for the early part 
    of the crop year (August and September) before the new crop becomes 
    available. The actual physical carryin has far exceeded the desirable 
    carryin and has resulted in an oversupply of free tonnage during the 
    early part of the crop year. The reduction in desirable carryout 
    contributes to correcting the problem by adjusting the free tonnage 
    market supply, which brings it more in line with demand.
        The desirable carryout levels that are established by this rule 
    apply uniformly to all handlers in the industry, whether small or 
    large, and there will be no known additional costs incurred by small 
    handlers. The stabilizing effects of the revised desirable carryout 
    levels impact both small and large handlers positively by helping them 
    maintain and expand markets.
        In the event that the prior year's shipments are limited because of 
    crop conditions, a proviso in section 989.154 allows the committee to 
    select the total shipments during the months of August, September and 
    one-half of the total shipments for October during one of the three 
    years preceding the prior crop year. Consistent with the need to reduce 
    early season supplies, this rule makes a corresponding revision to this 
    proviso, by changing the total shipments from August, September, and 
    one-half of the total shipments for October to the total shipments from 
    August and September only.
        The proposed rule concerning this action was published in the June 
    21, 1995, Federal Register (60 FR 32280), with a 15-day comment period 
    ending July 6, 1995. Four comments were received, three in favor and 
    the other in opposition to the proposed rule.
        The three comments in favor of the proposed rule were submitted by 
    Mr. Vaughn Koligian, General Manager of the Raisin Bargaining 
    Association (RBA) and a raisin grower; Mr. Gerald Chooljian of Del Rey 
    Packing, a raisin handler and grower; and Mr. Ernest A. Bedrosian of 
    National Raisin Company and EKK Bedrosian Farms, a raisin handler and 
    grower. The RBA represents approximately 2,000 raisin growers. Mr. 
    Koligian further stated that 15 raisin packers, including Mr. Chooljian 
    and Mr. Bedrosian, support the change in the desirable carryout level 
    as set forth in the proposed rule. The three comments in favor of 
    implementing the change set forth in the proposed rule reiterate the 
    justification specified in the proposed rule.
        The comment in opposition to the proposed rule was submitted by Mr. 
    Barry F. Kriebel, President of Sun-Maid Growers of California (Sun-
    Maid), an agricultural marketing cooperative comprised of approximately 
    1,300 growers.
        Mr. Kriebel claims that the reduction of the desirable carryout 
    levels would create an artificial shortage and drive up consumer 
    prices. He presents as evidence, a table showing that the field prices 
    for Natural (sun-dried) Seedless raisins increased dramatically from 
    1984 until the desirable carryout level was changed from 60,000 tons 
    for Natural (sun-dried) Seedless raisins to three months of shipments 
    (103,090 tons) beginning in the 1989-90 crop year. Mr. Kriebel contends 
    that this increase in field prices should not have occurred from 1984 
    to 1989 because there was a consistent oversupply of raisins.
        For example, Mr. Kriebel points out that the field price for 
    Natural (sun-dried) Seedless raisins was $1,300 per ton during the 
    1983-84 crop year, even though only 37.5 percent of the crop was 
    declared ``free.'' Although this price was historically high, it was 
    caused for the most part by factors other than the desirable carryout 
    level for Natural (sun-dried) Seedless raisins. In the 1983-84 crop 
    year, the industry attempted to market the large raisin supply without 
    decreasing the field price from the prior year. The raisin industry 
    managed to moderately increase shipments over the prior year's 
    shipments, but not in sufficient quantities to account for the drastic 
    increase in raisin supply. An oversupply situation occurred in the 
    1983-84 crop year partly because the amount of raisin-variety grapes 
    purchased by wineries decreased 57 percent from 1982 to 1983 resulting 
    in unusually high Natural (sun-dried) Seedless raisin inventories at 
    the end of the 1983-84 crop year. The Natural (sun-dried) Seedless 
    raisin field price cannot be adjusted to react to such changes in 
    market conditions because it is established early in the crop year 
    (normally on or before October 5). It was not until the beginning of 
    the 1984-85 crop year that the industry drastically lowered the field 
    price to $700 per ton.
        Mr. Kriebel does not provide sufficient evidence that desirable 
    carryout levels are solely responsible for the increase in field 
    prices. The lowering of the desirable carryout levels has its greatest 
    impact on supply during the early part of the crop year, before the new 
    crop is harvested. As stated earlier, the decrease in the desirable 
    carryout levels from two and one-half months to two months adjusts the 
    free market supply during the early part of the crop year and brings it 
    more in line with demand. As for the remaining part of the crop year, 
    handlers are still provided an opportunity to increase their 
    inventories, if necessary, by purchasing raisins from the reserve pool 
    under order-mandated 10 plus 10 offers and other releases of reserve 
    pool raisins available under the marketing order.
        The desirable carryout was reduced from three months to two and 
    one-half months of shipments beginning in the 1991-92 crop year. 
    However, the field price has only risen 4 percent from $1115/ton in the 
    1990-91 crop year to $1160/ton in 1994-95 crop year. In comparison, the 
    consumer price index for food products increased 14.4 percent from 1990 
    to 1994.
        Mr. Kriebel also implies that the reduction in the desirable 
    carryout will result in a greater amount of raisins being ``aborted'' 
    through the Raisin Diversion Program (RDP). The order allows raisin 
    growers to participate in the RDP by not growing their grape crop when 
    a surplus of raisins exists in the market. Mr. Kriebel does not provide 
    evidence of a correlation between the use of the RDP and the desirable 
    carryout levels. It may be the case that it is more likely consistent 
    surpluses, and thus a need for the RDP, have been caused by the 
    downward trend in sales of raisin-variety grapes, particularly Thompson 
    Seedless, to wineries. This is because wineries have been receiving a 
    greater percentage of their distillation materials from wine-variety 
    grapes or from other sugar sources, such as apples. This may also 
    partially explain 
    
    [[Page 39840]]
    why field prices for Natural (sun-dried) Seedless raisins have 
    increased less during the 1990's. Since competition from wineries for 
    raisin-variety grapes has decreased, there has been less pressure to 
    increase field prices.
        The Department does not find evidence that this rule will cause 
    more raisins to be ``aborted'' in the RDP or that raisin prices will 
    increase significantly. Instead, this rule seems to provide the 
    industry with the means of mitigating the oversupply of raisins early 
    in the crop year, and help stabilize market conditions for producers 
    and handlers. Thus, no change is being made in response to the above 
    comment.
        After thoroughly analyzing the comments received and other 
    available information, the Department has concluded that this final 
    rule is an appropriate means of solving the marketing problems 
    discussed herein.
        Based on available information, the Administrator of the AMS has 
    determined that this action will not have a significant economic impact 
    on a substantial number of small entities.
        After consideration of all available information, it is found that 
    the action, as hereinafter set forth, will tend to effectuate the 
    declared policy of the Act.
        Pursuant to 5 U.S.C. 553, it is also found and determined that good 
    cause exists for not postponing the effective date of this action until 
    30 days after publication in the Federal Register because: (1) The 
    1995-96 crop year begins August 1, 1995, and this rule should be 
    effective promptly because the order requires that the committee meet 
    on or before August 15 to compute and announce the trade demand, and 
    the desirable carryout level is a necessary item in that calculation; 
    and (2) growers and handlers are aware of this rule which was discussed 
    and recommended at a public meeting.
    
    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. Section 989.154 is revised to read as follows:
    
    
    Sec. 989.154  Desirable carryout levels.
    
        The desirable carryout levels to be used in computing and 
    announcing a crop year's marketing policy shall be equal to the total 
    shipments of free tonnage of the prior crop year during the months of 
    August and September, for each varietal type, converted to a natural 
    condition basis: Provided, That the desirable carryout levels to be 
    used in computing and announcing the 1995-96 crop year's marketing 
    policy shall be equal to the total 1994 shipments of free tonnage for 
    the months of August and September, and one-fourth of the total 
    shipments for the month of October: Provided further, 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 
    and September during one of the three crop years preceding the prior 
    crop year.
    
        Dated: July 31, 1995.
    Martha B. Ransom,
    Acting Deputy Director, Fruit and Vegetable Division.
    [FR Doc. 95-19323 Filed 8-3-95; 8:45 am]
    BILLING CODE 3410-02-P
    
    

Document Information

Effective Date:
8/4/1995
Published:
08/04/1995
Department:
Agricultural Marketing Service
Entry Type:
Rule
Action:
Final rule.
Document Number:
95-19323
Dates:
August 4, 1995.
Pages:
39837-39840 (4 pages)
Docket Numbers:
Docket No. FV95-989-3FR
PDF File:
95-19323.pdf
CFR: (1)
7 CFR 989.154