[Federal Register Volume 64, Number 180 (Friday, September 17, 1999)]
[Rules and Regulations]
[Pages 50419-50425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-24238]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 64, No. 180 / Friday, September 17, 1999 /
Rules and Regulations
[[Page 50419]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 905
[Docket No. FV99-905-3 IFR]
Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida;
Limiting the Volume of Small Red Seedless Grapefruit
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Interim final rule with request for comments.
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SUMMARY: This interim final rule limits 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 limits the volume of
size 48 and/or size 56 red seedless grapefruit handlers can ship during
the first 11 weeks of the 1999-2000 season. The weekly percentage for
the first two weeks (September 20 through October 3) is 45 percent; for
the third week (October 4 through October 10) is 40 percent; for the
fourth through seventh weeks (October 11 through November 7) is 37
percent; and for the last four weeks (November 8 through December 5) is
32 percent. This limitation is designed to provide a sufficient supply
of small sized red seedless grapefruit to meet market demand, without
saturating all markets with these small sizes. This rule should help
stabilize the grapefruit market and improve grower returns.
DATES: Effective September 20, 1999. Comments received by September 27,
1999 will be considered prior to issuance of a final rule.
ADDRESSES: Interested persons are invited to submit written comments
concerning this rule. 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. 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.
SUPPLEMENTARY INFORMATION: This rule 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 rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule limits the volume of size 48 and/or size 56
red seedless grapefruit handlers can ship during the first 11 weeks of
the 1999-2000 season which begins in September. 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 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
is 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
[[Page 50420]]
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 rule limits the volume of small red seedless grapefruit that
can enter the fresh market for each week of the 11 week period
beginning the week of September 20, 1999. This rule establishes the
weekly percentage for the first two weeks (September 20 through October
3) at 45 percent; for the third week (October 4 through October 10) at
40 percent; for the fourth through seventh weeks (October 11 through
November 7) at 37 percent; and for the last four weeks (November 8
through December 5) at 32 percent. This is a change in the percentages
originally recommended by the committee. On April 6, 1999, the
committee unanimously voted to establish a weekly percentage of 25
percent for each of the 11 weeks. The committee's initial
recommendation was issued as a proposed rule published on August 26,
1999 (64 FR 46603). No comments were received during the comment period
which expired on September 10, 1999. The committee subsequently met on
August 31, 1999, and unanimously recommended adjusting the proposed
percentages.
This action is similar to actions taken in the previous two seasons
(1997-98 and 1998-99). Prior to those two years, there were no weekly
percentages established. During the three seasons prior to
implementation of weekly percentage regulations (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 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 recommendations from the committee were 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 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 in 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.
During the first 11 weeks of the 1996-97 season, shipments of sizes 48
and 56 were 3,076,474 cartons, or 40 percent of total shipments. In the
first 11 weeks of the last two seasons, under regulation, shipments of
sizes 48 and 56 averaged 2,517,080 cartons and accounted for 33 percent
of total shipments.
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
[[Page 50421]]
fresh shipments for the 1998-99 season are estimated at 27.5 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 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 initially recommended that the weekly percentage of
size regulation be set at 25 percent for each week during the
regulatory period. Members believed that the problems associated with
an uncontrolled volume of small sizes entering the market early in the
season would recur without such 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's intent was to meet again 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 its initial recommendation, the committee considered that
by establishing regulation at 25 percent, they could meet again in
August and subsequent months 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 initial weekly percentages at the
most restrictive level. They could 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 established 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 would 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.
The committee met again on August 31, 1999, and revisited the
weekly percentage issue and reviewed information it had acquired since
its April 6, 1999, meeting. At the meeting, the committee unanimously
recommended that the weekly percentages be changed from 25 percent for
each of the 11 regulated weeks to 45 percent for the first two weeks
(September 20 through October 3); 40 percent for the third week
(October 4 through October 10); 37 percent for the fourth through
seventh weeks (October 11 through November 7); and 32 percent for the
last four weeks (November 8 through December 5).
In its discussion of these changes, the committee reviewed the
initial percentages recommended and the current state of the crop. The
committee also reexamined shipping information from past seasons,
looking particularly at volume across the 11 weeks. Based on this
review, the committee agreed that maintaining the weekly percentage at
25 percent would be too restrictive.
During deliberations in past seasons as to weekly percentages, the
committee 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 reach 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 that 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 were lower by count and by
percentage than in the unregulated seasons of 1994-95 through 1996-97.
This may have contributed to the success of the regulation.
In setting the weekly percentage for each week at 25 percent this
season, the total available allotment would approximate 234,000 cartons
(25 percent of the total industry base of 937,257 cartons). The
committee thus believed the percentages should be increased, as was
done last year. While satisfied with the level of regulation last
season (37 percent for the first 7 weeks and 32 percent for the last 4
weeks), the committee believes that the unique circumstances this
season warrant more liberal percentages during the first 3 weeks of the
1999-2000 season.
[[Page 50422]]
While the official crop estimate will not be available until
October, there are indications that the grapefruit crop will be lower
than last year. The committee projects fresh shipments of red seedless
grapefruit to be equal to or below levels in previous seasons. The
quality of this year's crop is anticipated to be normal or above
normal. However, the shape of the fruit is expected to be below normal.
All growing districts appear to be affected by poorly shaped fruit,
which could reduce the packout percentages for the 1999-2000 crop. The
smaller sizes will most likely be the better shaped fruit during the
first part of the season, which supports allowing ample shipments of
the smaller sizes.
The individual fruit size for the upcoming crop is projected to be
a little smaller than normal, but not as small as last season. However,
if the rain currently being received in the production area does not
continue for the next 10 to 20 days, the crop will cease sizing. This
would put pressure on the industry to ship more of the smaller sizes.
Additionally, the lack of rain during much of the growing has
delayed maturity of the crop and early shipments are anticipated to be
below levels in previous seasons. Unusual weather patterns in the past
eight months has resulted in multiple blooms in most groves in Florida.
The problem with multiple blooms is that it is difficult for fruit
harvesters to determine which of the fruit is mature. This could cause
a higher percentage of smaller sizes to be harvested early in the
season, because the small fruit tends to mature earlier. Therefore, the
committee recommended a higher percentage in the first three weeks of
the season than in later weeks.
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 recent 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 establishes the weekly percentage at 45
percent for the first two weeks of the regulatory period (September 20
through October 3); 40 percent for the third week (October 4 through
October 10); 37 percent for the fourth through seventh weeks (October
11 through November 7); and 32 percent for the last four weeks
(November 8 through December 5).
The committee again included in its deliberations that if crop and
market conditions should change, the committee could recommend that the
percentages be increased or eliminated to provide for the shipment of
more small sizes in any or all of the 11 weeks.
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
will be calculated using the recommended percentage of 45, 40, 37 or 32
percent, depending on the regulated week. 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 is the base for each handler
for each of the 11 weeks of the regulatory period. The weekly
percentage, in this case 45, 40, 31 or 32 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 rule, the calculated allotment is the amount of small
sized red seedless grapefruit a handler may ship. If the minimum size
established under Sec. 905.52 remains at 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
limits. If the minimum size under the order is 48, handlers can fill
their allotment with size 48 fruit such that the total of these
shipments is within the established limits. The committee staff will
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 is then divided by 33 weeks to yield
an average week, in this case, 1,600 cartons. This is Handler A's base.
For the first week of the regulatory period, the weekly percentage of
45 percent is then applied to this amount. This provides this handler
with a weekly allotment of 720 cartons (1,600 X .45) of size 48 and/or
56. Similar calculations, using the appropriate weekly percentage, will
be performed for the remaining 10 weeks of regulation.
The average week for handlers with less than five previous seasons
of shipments is 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 have no prior period on which
to base their average week. Such new handlers can ship small sizes
equal to a 45, 40, 37, or 32 percent of their total volume of shipments
during their first shipping week (depending on when they begin
shipping). 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 rule establishes a weekly percentage of 45 percent for the
first two weeks (September 20 through October 3); 40 percent for the
third week (October 4 through October 10); 37 percent for the fourth
through seventh weeks (October 11 through November 7); and 32 percent
for the last four weeks (November 8 through December 5). The regulatory
period begins the third Monday in September. Each regulation week
begins Monday at 12:00 a.m. and ends 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 different percentage for any given week or weeks of the
regulatory period. Any such recommendation would require approval of
the Secretary.
The rules and regulations contain a variety of provisions designed
to provide handlers with some marketing flexibility. When a 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.
[[Page 50423]]
During any week for which the Secretary has fixed the percentage of
sizes 48 and/or 56 red seedless grapefruit, any handler can 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) is
deducted from the handler's allotment for the following week.
Overshipments are not allowed during week 11 because there will 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 are not carried forward to the following week.
However, a handler to whom an allotment has been issued can lend or
transfer all or part of such allotment (excluding the overshipment
allowance) to another handler. In the event of a loan, each party must,
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 will promptly notify the committee so that proper
adjustments of the records can be made. In each case, the committee
confirms in writing all such transactions prior to the following week.
The committee can also act on behalf of handlers wanting to arrange
allotment loans or participate in the transfer of allotment. Repayment
of an allotment loan is at the discretion of the handlers party to the
loan.
The committee computes each handler's allotment by multiplying the
handler's average week by the percentage established by regulation for
that week. The committee will notify each handler prior to that
particular week of the quantity of sizes 48 and 56 red seedless
grapefruit such handler can 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 provides
each handler with an equitable base from which to establish shipments.
The procedures under which this rule is established 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
in past seasons 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
determined that this rule is needed to regulate shipments of small red
seedless grapefruit during the 1999-2000 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 rule limits
the volume of small red seedless grapefruit that can enter 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. This rule establishes a weekly percentage of 45 percent
for the first two weeks of the regulatory period (September 20 through
October 3); 40 percent for the third week (October 4 through October
10); 37 percent for the fourth through
[[Page 50424]]
seventh weeks (October 11 through November 7); and 32 percent for the
last four weeks (November 8 through December 5). This is a change from
the committee's original recommendation of a 25 percent weekly
percentage for each of the 11 weeks. Under this limitation, the
quantity of sizes 48 and/or 56 red seedless grapefruit that may be
shipped by a handler during a particular week is calculated using the
established percentage.
By taking the established percentage times the average weekly
volume of red grapefruit handled by such handler in the previous five
seasons, the committee calculates a handler's weekly allotment of small
sizes. This rule sets the weekly percentage at 45, 40, 37 or 32 percent
for each of the 11 weeks in the regulatory period. This rule should
provide a supply of small sized red seedless grapefruit sufficient to
meet market demand, without saturating all markets with these small
sizes. This rule is needed to 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 have provided 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. This
rule will affect even fewer shipments by establishing less restrictive
weekly percentages. In addition, a large percentage of this volume most
likely could have been replaced by larger sizes. Under this rule, a
sufficient volume of small sized red grapefruit will be allowed into
all channels of trade, and allowances will 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 overshipment 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 will 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 will 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 will be required to submit a form to the committee. The
rule will increase the reporting burden on approximately 80 handlers of
red seedless grapefruit who will be taking about 0.03 hour to complete
each report regarding allotment loans or transfers. The information
collection requirements
[[Page 50425]]
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, overlap or
conflict with this 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 meetings were widely publicized throughout the
citrus industry and all interested persons were invited to attend the
meetings and participate in committee deliberations on all issues. Like
all committee meetings, the April 6, 1999, and August 31, 1999,
meetings were public meetings 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 proposed rule concerning this action was published in the Federal
Register on Thursday, August 26, 1999 (64 FR 46603). Copies of the rule
were mailed or sent via facsimile to all committee members and to
grapefruit growers and handlers. The rule was also made available
through the Internet by the Office of the Federal Register, the
Department and the committee.
A 15-day comment period was provided to allow interested persons to
respond to the proposal. The comment period ended September 10, 1999.
No comments were received.
As previously stated, subsequent to the issuance of the proposed
rule, the committee met and recommended modifying its original
recommendation. The committee recommended that the weekly percentages
be changed from 25 percent for each of the 11 regulated weeks to 45
percent for the first two weeks (September 20 through October 3); 40
percent for the third week (October 4 through October 10); 37 percent
for the fourth through seventh weeks (October 11 through November 7);
and 32 percent for the last four weeks (November 8 through December 5).
Because of this recommendation, the Department has determined that
interested parties should be provided the opportunity to comment on the
changes to the original recommendations. However, the Department has
further determined that extending the comment period with no
percentages in effect limiting the shipment of small red seedless
grapefruit when the period of regulation begins would be detrimental to
the industry. Therefore, the Department is instituting the regulations
on small red seedless grapefruit through this interim final rule that
allows 10 additional days to comment.
After consideration of all relevant matter presented, including the
information and recommendations submitted by the committee 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.
A 10-day comment period is provided to allow interested persons to
respond to this interim final rule. Ten days is deemed appropriate
because the regulation period begins on September 20, 1999, and
continues for 11 weeks. Adequate time will be necessary so that any
changes made to the regulations based on comments filed could be made
effective during the 11-week period. All written comments timely
received will be considered before a final determination is made on
this matter.
Pursuant to 5 U.S.C. 553, it is also found and determined upon good
cause that it is impracticable, unnecessary and contrary to the public
interest to give preliminary notice prior to putting this rule into
effect and that good cause exists for not postponing the effective date
of this rule until 30 days after publication in the Federal Register
because this rule needs to be in place when the regulatory period
begins on September 20, 1999, and handlers begin shipping grapefruit.
The committee has kept the industry well informed on this issue. It has
also been widely discussed at various industry and association
meetings. Interested persons have had time to determine and express
their positions. In addition, these size small red grapefruit are
already being harvested and handlers need to know the amount they will
be allowed to ship in order to determine harvesting quantities that
will allow these increased amounts to be shipped. This rule is
necessary to help stabilize the market and improve grower returns.
Further, handlers are aware of this rule, which was recommended at
public meetings. Also, a 15-day comment period was provided for in the
proposed rule and a 10-day comment period is provided in this rule.
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
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................................. 45
(b) 9/27/99 through 10/3/99................................. 45
(c) 10/4/99 through 10/10/99................................ 40
(d) 10/11/99 through 10/17/99............................... 37
(e) 10/18/99 through 10/24/99............................... 37
(f) 10/25/99 through 10/31/99............................... 37
(g) 11/1/99 through 11/7/99................................. 37
(h) 11/8/99 through 11/14/99................................ 32
(i) 11/15/99 through 11/21/99............................... 32
(j) 11/22/99 through 11/28/99............................... 32
(k) 11/29/99 through 12/5/99................................ 32
------------------------------------------------------------------------
Dated: September 13, 1999.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-24238 Filed 9-16-99; 8:45 am]
BILLING CODE 3410-02-P
