[Federal Register: May 30, 2003 (Volume 68, Number 104)]
[Rules and Regulations]
[Page 32325-32328]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30my03-1]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
[[Page 32325]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 982
[Docket No. FV03-982-1 FIR]
Hazelnuts Grown in Oregon and Washington; Establishment of Final
Free and Restricted Percentages for the 2002-2003 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of Agriculture (USDA) is adopting, as a final
rule, without change, an interim final rule establishing final free and
restricted percentages for domestic inshell hazelnuts for the 2002-2003
marketing year under the Federal marketing order for hazelnuts grown in
Oregon and Washington. The final free and restricted percentages are
18.4392 and 81.5608 percent, respectively. The percentages allocate the
quantity of domestically produced hazelnuts that may be marketed in the
domestic inshell market. The percentages are intended to stabilize the
supply of domestic inshell hazelnuts to meet the limited domestic
demand for such hazelnuts and provide reasonable returns to producers.
This rule was recommended unanimously by the Hazelnut Marketing Board
(Board), which is the agency responsible for local administration of
the marketing order.
EFFECTIVE DATE: June 30, 2003.
FOR FURTHER INFORMATION CONTACT: Teresa L. Hutchinson, Northwest
Marketing Field Office, Marketing Order Administration Branch, Fruit
and Vegetable Programs, AMS, USDA, 1220 SW. Third Avenue, suite 385,
Portland, OR 97204; telephone: (503) 326-2724, Fax: (503) 326-7440; or
George J. Kelhart, Technical Advisor, Marketing Order Administration
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence
Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-
2491, Fax: (202) 720-8938.
Small businesses may request information on complying with this
regulation by contacting Jay Guerber, Marketing Order Administration
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence SW.,
STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-2491, Fax:
(202) 720-8938, or e-mail: Jay.Guerber@usda.gov.
SUPPLEMENTARY INFORMATION: This rule is issued under Marketing
Agreement No. 115 and Marketing Order No. 982, both as amended (7 CFR
part 982), regulating the handling of hazelnuts grown in Oregon and
Washington, hereinafter referred to as the ``order.'' The order is
effective under the Agricultural Marketing Agreement Act of 1937, as
amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.''
USDA is issuing this rule in conformance with Executive Order
12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. It is intended that this action apply to all
merchantable hazelnuts handled during the 2002-2003 marketing year
(July 1, 2002, through June 30, 2003). 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 USDA 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, USDA 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 USDA's ruling on the petition,
provided an action is filed not later than 20 days after the date of
the entry of the ruling.
This rule continues in effect marketing percentages that allocate
the quantity of inshell hazelnuts that may be marketed in domestic
markets. The Board is required to meet prior to September 20 of each
marketing year to compute its marketing policy for that year, and
compute and announce an inshell trade demand if it determines that
volume regulations would tend to effectuate the declared policy of the
Act. The Board also computes and announces preliminary free and
restricted percentages for that year.
The inshell trade demand is the amount of inshell hazelnuts that
handlers may ship to the domestic market throughout the marketing
season. The order specifies that the inshell trade demand be computed
by averaging the preceding three ``normal'' years' trade acquisitions
of inshell hazelnuts, rounded to the nearest whole number. The Board
may increase the three-year average by up to 25 percent, if market
conditions warrant an increase. The Board's authority to recommend
volume regulations and the computations used to determine the
percentages are specified in Sec. 982.40 of the order.
The quantity to be marketed is broken down into free and restricted
percentages to make available hazelnuts which may be marketed in
domestic inshell markets (free) and hazelnuts which must be exported,
shelled, or otherwise disposed of by handlers (restricted). Prior to
September 20 of each marketing year, the Board must compute and
announce preliminary free and restricted percentages. The preliminary
free percentage releases 80 percent of the adjusted inshell trade
demand to the domestic market. The purpose of releasing only 80 percent
of the inshell trade demand under the preliminary percentage is to
guard against an underestimate of crop size. The preliminary free
percentage is expressed as a percentage of the total supply subject to
regulation (supply) and is based on the preliminary crop estimate.
The National Agricultural Statistics Service (NASS) estimated 2002-
2003 hazelnut production at 18,000 tons for the Oregon and Washington
area. The majority of domestic inshell hazelnuts are marketed in
October, November, and December. By November, the marketing season is
well under way.
[[Page 32326]]
At its August 29, 2002, meeting, the Board adjusted the NASS crop
estimate up to 19,887 tons by deducting the average crop disappearance
over the preceding three years (5.23 percent) and adding the undeclared
carryin (2,828 tons) to the 18,000 ton production estimate.
Disappearance is the difference between orchard-run production (crop
estimate) and the available supply of merchantable product available
for sale by handlers. Disappearance consists of (1) unharvested
hazelnuts, (2) culled product (nuts that are delivered to handlers but
later discarded), or (3) product used on the farm, sold locally, or
otherwise disposed of by producers. The Board computed the adjusted
inshell trade demand of 3,133 tons by taking the difference between the
average of the past three years' sales (3,563 tons) and the declared
carry-in from last year's crop (430 tons).
The Board computed and announced preliminary free and restricted
percentages of 12.6012 percent and 87.3988 percent, respectively, at
its August 29, 2002, meeting. The Board computed the preliminary free
percentage by multiplying the adjusted trade demand by 80 percent and
dividing the result by the adjusted crop estimate (3,133 tons x 80
percent/19,887 tons = 12.6012 percent.) The preliminary free percentage
thus initially released 2,506 tons of hazelnuts from the 2002 supply
for domestic inshell use, and the preliminary restricted percentage
withheld 17,381 tons for the export and shelled (kernel) markets.
Under the order, the Board must meet again on or before November 15
to recommend interim final and final percentages. The Board uses
current crop estimates to calculate interim final and final
percentages. The interim final percentages are calculated in the same
way as the preliminary percentages and release the remaining 20 percent
(to total 100 percent of the inshell trade demand) previously computed
by the Board. Final free and restricted percentages may release up to
an additional 15 percent of the average of the preceding three years'
trade acquisitions to provide an adequate carryover into the following
season (i.e., desirable carryout). The order requires that the final
free and restricted percentages shall be effective 30 days prior to the
end of the marketing year, or earlier, if recommended by the Board and
approved by USDA. Revisions in the marketing policy can be made until
February 15 of each marketing year, but the inshell trade demand can
only be revised upward, consistent with Sec. 982.40(e).
The Board met on November 15, 2002, and reviewed and approved an
amended marketing policy and recommended the establishment of final
free and restricted percentages. The Board decided that market
conditions were such that immediate release of an additional 15 percent
for desirable carryout would not adversely affect the 2002-2003
domestic inshell market. Accordingly, no interim final free and
restricted percentages were recommended. Final free and restricted
percentages were recommended at 18.4392 and 81.5608 percent,
respectively. The final free percentage released 3,667 tons of inshell
hazelnuts from the 2002 supply for domestic use.
The final marketing percentages are based on the Board's final
production estimate and the following supply and demand information for
the 2002-2003 marketing year:
------------------------------------------------------------------------
Tons
------------------------------------------------------------------------
Inshell Supply:
(1) Total production (crop estimate)....................... 18,000
(2) Less substandard, farm use (disappearance; 5.23 percent 941
of Item 1)................................................
(3) Merchantable production (Board's adjusted crop 17,059
estimate; Item 1 minus Item 2)............................
(4) Plus undeclared carryin as of July 1, 2002, (subject to 2,828
regulation)...............................................
(5) Supply subject to regulation (Item 3 plus Item 4)...... 19,887
Inshell Trade Demand:
(6) Average trade acquisitions of inshell hazelnuts for 3,563
three prior years.........................................
(7) Less declared carryin as of July 1, 2002, (not subject 430
to regulation)............................................
(8) Adjusted Inshell Trade Demand (Item 6 minus Item 7).... 3,133
(9) Desirable carryout on August 31, 2003 (15 percent of 534
Item 6)...................................................
(10) Adjusted Inshell Trade Demand plus desirable carryout 3,667
(Item 8 plus Item 9)......................................
------------------------------------------------------------------------
Percentages Free Restricted
------------------------------------------------------------------------
(11) Final percentages........................ 18.4392 81.5608
(Free percentage = Item 10 divided by Item 5) ........... ...........
x 100........................................ ........... ...........
(Restricted percentage = 100 minus the free
percentage)..................................
(12) Final free in tons (Item 10)............. 3,667 ...........
(13) Final restricted in tons (Item 5 minus ........... 16,220
Item 10).....................................
------------------------------------------------------------------------
In addition to complying with the provisions of the order, the
Board also considered USDA's 1982 ``Guidelines for Fruit, Vegetable,
and Specialty Crop Marketing Orders'' (Guidelines) when making its
computations in the marketing policy. This volume control regulation
provides a method to collectively limit the supply of inshell hazelnuts
available for sale in domestic markets. The Guidelines provide that the
domestic inshell market has available a quantity equal to 110 percent
of prior years' shipments before allocating supplies for the export
inshell, export kernel, and domestic kernel markets. This provides for
plentiful supplies for consumers and for market expansion, while
retaining the mechanism for dealing with oversupply situations. The
established final percentages will make available an additional 534
tons for desirable carryout. The total free supply for the 2002-2003
marketing year is 4,097 tons of hazelnuts, which is the sum of the
final trade demand of 3,563 tons and the 534 ton desirable carryout.
This amount is 115 percent of prior years' sales and exceeds the goal
of the Guidelines.
Final Regulatory Flexibility Analysis
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of
[[Page 32327]]
this action on small entities. Accordingly, AMS has prepared this final
regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and the 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.
Small agricultural producers are defined by the Small Business
Administration (13 CFR 121.201) as those having annual receipts of less
than $750,000, and small agricultural service firms are defined as
those having annual receipts of less than $5,000,000. There are
approximately 750 producers of hazelnuts in the production area and
approximately 20 handlers subject to regulation under the order.
Average annual hazelnut revenue per producer is approximately $36,500.
This is computed by dividing NASS figures for the average value of
production for 2000 and 2001 ($27,369,500) by the number of producers.
The level of sales of other crops by hazelnut producers is not known.
In addition, based on Board records, about 95 percent of the handlers
ship under $5,000,000 worth of hazelnuts on an annual basis. In view of
the foregoing, it can be concluded that the majority of hazelnut
producers and handlers may be classified as small entities.
Board meetings are widely publicized in advance of the meetings and
are held in a location central to the production area. The meetings are
open to all industry members and other interested persons who are
encouraged to participate in the deliberations and voice their opinions
on topics under discussion. Thus, Board recommendations can be
considered to represent the interests of small business entities in the
industry.
Currently, U.S. hazelnut production is allocated among three market
outlets: domestic inshell, export inshell, and kernel markets. Handlers
and growers receive the highest return on domestic inshell, less for
export inshell, and the least for kernels. Based on Board records of
average shipments for 1992-2001, the percentage going to each of these
markets was 13 percent (domestic inshell), 41 percent (export inshell),
and 46 percent (kernels).
The inshell market can be characterized as having limited demand
and being prone to oversupply and low grower prices in the absence of
supply restrictions. This volume control regulation provides a method
for the U.S. hazelnut industry to limit the supply of domestic inshell
hazelnuts available for sale in the continental U.S. On average, 78
percent of domestic inshell hazelnut shipments occur from October 1
through November 30, primarily to supply holiday nut demand.
Many years of marketing experience led to the development of the
current volume control procedures. These procedures have helped the
industry solve its marketing problems by keeping inshell supplies in
balance with domestic needs. Volume controls fully supply the domestic
inshell market while preventing an oversupply of that market.
The estimated inshell trade demand (3,133 tons) and the high level
of carryin (2,828 tons) were key market factors leading to the 18.4392
percent final free percentage. Hazelnut production in 2002 was only
2,500 tons more than in 1998, which was the shortest crop in the last
ten years. Even if carryin had been zero, the amount that handlers
typically ship into the domestic inshell market (i.e., average trade
acquisitions of 3,563 tons) equals about 18 percent of the supply
(19,887 tons subject to regulation). Although the domestic inshell
market is a relatively small proportion of total sales (13 percent of
average shipments over the last ten years, and 10 percent of average
shipments for the last two years), it remains a profitable market
segment. The volume control provisions of the marketing order are
designed to avoid oversupplying this particular market segment, because
that would likely lead to substantially lower grower prices. The other
market segments, export inshell and kernels, are expected to continue
to provide good outlets for U.S. hazelnut production.
Since high production years typically follow low production years
(a consistent pattern for hazelnuts), higher production is expected in
2003.
Recent production and price data reflect the stabilizing effect of
the volume control regulations. Industry statistics show that total
hazelnut production has varied widely over the 10-year period between
1992 and 2001, from a low of 16,500 tons in 1998 to a high of 49,500
tons in 2001. Production in the shortest crop year and the biggest crop
year was 48 percent and 153 percent, respectively, of the 10-year
average tonnage of 32,240. The coefficient of variation (a standard
statistical measure of variability; ``CV'') for hazelnut production
over the 10-year period is 0.36. In contrast, the coefficient of
variation for hazelnut grower prices is 0.16, less than half the CV for
production. The considerably lower variability of prices versus
production provides an illustration of the order's price-stabilizing
impacts.
Comparing grower cost of production to grower revenue in recent
years highlights the financial impacts on growers at varying production
levels. A recent study from Oregon State University (OSU) estimated the
cost of production per acre of hazelnuts to be approximately $1,340 for
a typical 100-acre hazelnut enterprise. Average grower revenue per
bearing acre (based on NASS acreage and value of production data)
equaled or exceeded the OSU estimate twice between 1995 and 2000.
Average grower revenue was below typical costs in the other years.
Since 1995, the highest level of revenue per bearing acre was $1,552
(1997) and the lowest was $561 in 1996. Without the stabilizing impact
of the order, growers may have lost more money. While crop size has
fluctuated, volume regulations contribute to orderly marketing and
market stability, and help to moderate the variation in returns for all
producers and handlers, both large and small.
While the level of benefits of this rulemaking is difficult to
quantify, the stabilizing effects of volume regulations impact both
small and large handlers positively by helping them maintain and expand
markets even though hazelnut supplies fluctuate widely from season to
season. This regulation provides equitable allotment of the most
profitable market, the domestic inshell market. That market is
available to all handlers, regardless of size.
As an alternative to this regulation, the Board discussed not
regulating the 2002-2003 hazelnut crop. However, without any
regulations in effect, the Board believed that the industry would
oversupply the inshell domestic market. Although the 2002-2003 hazelnut
crop is much smaller than last year, the release of 18,000 tons on the
domestic inshell market would cause producer returns to decrease
drastically, and completely disrupt the market.
Section 982.40 of the order establishes a procedure and
computations for the Board to follow in recommending to USDA the
preliminary, interim final, and final quantities of hazelnuts to be
released to the free and restricted markets each marketing year. The
program results in plentiful supplies for consumers and for market
expansion while retaining the mechanism for dealing with oversupply
situations.
Hazelnuts produced under the order comprise virtually all of the
hazelnuts
[[Page 32328]]
produced in the U.S. This production represents, on average, less than
4 percent of total U.S. production for other tree nuts, and less than 4
percent of the world's hazelnut production.
During the 2001-2002 season, 78 percent of the kernels were
marketed in the domestic market and 22 percent were exported.
Domestically produced kernels generally command a higher price in the
domestic market than imported kernels. The industry is continuing its
efforts to develop and expand other markets with emphasis on the
domestic kernel market. Small business entities, both producers and
handlers, benefit from the expansion efforts resulting from this
program.
Inshell hazelnuts produced under the order compete well in export
markets because of quality. Based on Board statistics, Europe has
historically been the primary export market for U.S. produced inshell
hazelnuts, with a 10-year average of 5,436 tons out of total average
exports of 12,132 tons. Recent years have seen a significant shift in
export destinations. Inshell shipments to Europe totaled 4,526 tons in
the 2001-2002 season, representing 17 percent of exports, with the
largest share going to Germany. Inshell shipments to Southwest Pacific
countries, and Hong Kong in particular, have increased dramatically in
the past few years, rising to 73 percent of total exports of 25,868
tons in the 2001-2002 season. The industry continues to pursue export
opportunities.
There are some reporting, recordkeeping, and other compliance
requirements under the order. The reporting and recordkeeping burdens
are necessary for compliance purposes and for developing statistical
data for maintenance of the program. The information collection
requirements have been previously approved by the Office of Management
and Budget under OMB No. 0581-0178. The forms require information which
is readily available from handler records and which can be provided
without data processing equipment or trained statistical staff. As with
all Federal marketing order programs, reports and forms are
periodically reviewed to reduce information requirements and
duplication by industry and public sector agencies. This rule does not
change those requirements. In addition, as noted in the initial
regulatory flexibility analysis, USDA has not identified any relevant
Federal rules that duplicate, overlap or conflict with this rule.
Further, as mentioned earlier, the Board's meetings were widely
publicized throughout the hazelnut industry and all interested persons
were invited to attend the meetings and participate in Board
deliberations. Like all Board meetings, those held on August 29, and
November 15, 2002, were public meetings and all entities, both large
and small, were able to express their views on this issue.
An interim final rule concerning this action was published in the
Federal Register on March 12, 2003. The Board's staff mailed copies of
this rule to all Board members. In addition, the rule was made
available through the Internet by the Office of the Federal Register
and USDA. That rule provided for a 60-day comment period that ended May
12, 2003. No comments were received.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html.
Any questions about the compliance
guide should be sent to Jay Guerber at the previously mentioned address
in the FOR FURTHER INFORMATION CONTACT section.
After consideration of all relevant material presented, including
the Board's recommendation, and other information, it is found that
finalizing the interim final rule, without change, as published in the
Federal Register (68 FR 11733, March 12, 2003) will tend to effectuate
the declared policy of the Act.
List of Subjects in 7 CFR Part 982
Filberts, Hazelnuts, Marketing agreements, Nuts, Reporting and
recordkeeping requirements.
PART 982--HAZELNUTS GROWN IN OREGON AND WASHINGTON
0
Accordingly, the interim final rule amending 7 CFR part 982 which was
published at 68 FR 11733 on March 12, 2003, is adopted as a final rule
without change.
Dated: May 23, 2003.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 03-13520 Filed 5-29-03; 8:45 am]
BILLING CODE 3410-02-P