[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
