[Federal Register: November 14, 2003 (Volume 68, Number 220)]
[Rules and Regulations]
[Page 64494-64499]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14no03-2]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 905
[Docket No. FV03-905-3 FIR]
Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida;
Limiting the Volume of Small Red Seedless Grapefruit
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 limiting the volume of
small red seedless grapefruit entering the fresh market under the
marketing order covering oranges, grapefruit, tangerines, and tangelos
grown in Florida (order). The Citrus Administrative Committee
(Committee) administers the order locally and recommended this action.
This rule limits the volume of sizes 48 and 56 red seedless grapefruit
shipped during the first 22 weeks of the 2003-04 season by continuing
in effect the weekly percentages for each of the 22 weeks, beginning
September 15, 2003. This action supplies enough small red seedless
grapefruit, without saturating all markets with these small sizes. This
rule should help stabilize the market and improve grower returns.
EFFECTIVE DATE: December 15, 2003.
FOR FURTHER INFORMATION CONTACT: William G. Pimental, Southeast
Marketing Field Office, Marketing Order Administration Branch, Fruit
and Vegetable Programs, AMS, USDA, 799 Overlook Drive, Suite A, Winter
Haven, Florida 33884-1671; telephone: (863) 324-3375, Fax: (863) 325-
8793; or George 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
Avenue 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. 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.''
USDA is issuing this rule in conformance with Executive Order
12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is not intended to have retroactive effect.
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 limits the volume of small red seedless grapefruit
entering the fresh market. This rule restricts the volume of sizes 48
and 56 fresh red seedless grapefruit shipped during the first 22 weeks
of the 2003-04 season by establishing a weekly percentage for each of
the 22 weeks, beginning September 15, 2003. This rule supplies enough
small red seedless grapefruit, without saturating all markets with
these small sizes. This action should help stabilize the market and
improve grower returns.
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 a handler may ship during a particular week is
established as a percentage of the total shipments of such variety
shipped by that handler during a prior period, established by the
Committee and approved by USDA.
Section 905.153 of the regulations provides procedures for limiting
the volume of small red seedless grapefruit entering the fresh market.
The procedures specify that the Committee may recommend that only a
certain percentage of sizes 48 and 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 22 weeks long
and begins the third Monday in September. Under such a limitation, the
quantity of sizes 48 and 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 seedless grapefruit handled by
such handler in the previous five seasons, handlers can calculate the
total volume of sizes 48 and 56 they may ship in a regulated week.
This rule continues to limit the volume of sizes 48 (3\9/16\ inches
minimum diameter) and 56 (3\5/16\ inches minimum diameter) red seedless
[[Page 64495]]
grapefruit entering the fresh market by instituting weekly percentages
for the first 22 weeks of the 2003-04 season. This rule continues
established weekly percentages at 45 percent for weeks 1 and 2
(September 15 through September 28, 2003), 35 percent for weeks 3
through 19 (September 29, 2003, through January 25, 2004), and 40
percent for weeks 20, 21, and 22 (January 26 through February 15,
2004). The Committee recommended this action unanimously at a meeting
on July 1, 2003. This action is similar to those taken the previous six
seasons.
The Committee believes the over shipment of smaller-sized red
seedless grapefruit has a detrimental effect on the market. While there
is a market for small-sized red seedless grapefruit, the availability
of large quantities oversupplies the fresh market with these sizes and
negatively impacts the market for all sizes. These smaller sizes, 48
and 56, normally return the lowest prices when compared to the other
larger sizes. However, when there is too much volume of the smaller
sizes available, the overabundance of small-sized fruit pulls the
prices down for all sizes.
For the three seasons prior to the use of percentage size
regulation, 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 $6.87 per box (1\3/5\ bushel) during the 1991-92 season,
to $3.38 per box during the 1993-94 season, to $1.91 per box during the
1996-97 season.
An economic study done by the University of Florida--Institute of
Food and Agricultural Sciences 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.
The Committee believes the over shipment of smaller-sized red
seedless grapefruit contributed to these poor returns for growers and
to lower prices. Based on available statistical information, Committee
members concluded that once shipments of sizes 48 and 56 reached levels
above 250,000 cartons per week, prices declined on those and most other
sizes of red seedless grapefruit. The Committee believed if shipments
of small sizes were maintained at around or below 250,000 cartons a
week, prices would stabilize and demand for larger, more profitable
sizes would increase. Consequently, in 1996, the Committee recommended
changing its rules and regulations to establish the procedures in Sec.
905.153 to limit the volume of small red seedless grapefruit entering
the market. The Committee has successfully used the provisions of Sec.
905.153 to address the problems associated with the over shipment of
small red seedless grapefruit, recommending percentage of size
regulation during the first 11 weeks of the 1997-98, 1998-99, 1999-
2000, and 2000-01 seasons, and for the first 22 weeks of the 2001-02
and 2002-03 seasons. Under percentage of size regulation, prices
increased and movement stabilized when compared to seasons without
regulation.
The Committee believes for the 2003-04 season small-sized red
seedless grapefruit will negatively impact the market for all
grapefruit if not regulated. By regulating the volume of small sizes
entering the fresh market for the first 22 weeks of the season,
shipments of sizes 48 and 56 can be maintained near the 250,000-carton
per week level. To address the volume of small-sized red seedless
grapefruit available and to prevent the over shipment of small sizes,
the Committee voted to utilize the provisions of Sec. 905.153 and
establish percentage of size regulation for each of the 22 weeks of the
regulatory period for the 2003-04 season.
In making its recommendation, the Committee considered the success
of previous percentage of size regulations and their experience from
past seasons. At the meeting, the Committee reviewed the results of a
study commissioned to determine the merit of percentage of size
regulation. The study completed by Robert E. Barber, Jr., Director of
Economics, Florida Citrus Mutual, entitled ``An Econometric Spatial
Equilibrium Analysis of the 48/56 Red Grapefruit Rule,'' dated July 1,
2003, evaluated the effectiveness of past percentage of size
regulation.
One of the Committee's goals in establishing percentage of size
regulation was to stabilize prices and increase returns. The Committee
believes percentage of size regulation has been effective in this area,
and the study shows this to be true. The study estimates that
percentage of size regulation has increased total f.o.b. revenues for
red grapefruit by a total of 12 percent or $18.9 million over the six-
year period from 1997-98 to 2002-03, averaging $3.15 million per
season. Each of the six seasons had an increase in f.o.b. revenues
ranging from a low of $2.52 million during the 1999-2000 season to a
high of $3.73 million for the 2002-03 season. The f.o.b. prices per
carton are also estimated to have increased by an average of 17 percent
or $1.00 per carton during this six-year period.
In the three seasons prior to the first percentage of size
regulation in 1997-98, prices of red seedless grapefruit fell from a
weighted average f.o.b. price of $7.80 per carton in October to a
weighted average f.o.b. price of $5.50 per carton in December. In the
six seasons utilizing percentage of size regulation, red seedless
grapefruit maintained higher prices throughout the season with a
weighted average f.o.b. price of $8.10 per carton in October, $7.06 per
carton in December, and remained at around $6.90 in April.
Average prices for the season have also been higher during seasons
with percentage of size regulation. The average season price for red
seedless grapefruit was $7.00 for the last six years compared to $5.83
for the three years prior to using percentage of size regulation. The
Barber study shows that prices for the past six seasons would have been
from around $0.72 to $1.00 lower per carton without regulation.
On-tree prices for fresh red seedless grapefruit have also been
higher during seasons with percentage of size regulation than for the
three seasons prior to regulation. The average on-tree price for fresh
red seedless grapefruit was $4.42 for the seasons 1997-98 through 2001-
02 with percentage of size regulation compared to $3.08 for the three
years prior to regulation.
The University of Florida, Citrus Research and Education Center
published an estimated cost of production for grapefruit for the 2001-
2002 season. The cost to produce grapefruit for the fresh market was
estimated at $1,008.77 per acre for the Indian River area, the major
grapefruit production area in Florida. Indian River grapefruit
production has averaged around 417 boxes per acre. Based on the cost of
production, and the average boxes per acre, growers need to earn a
total on-tree value (fruit going both to the fresh market and to
processing) of approximately $2.42 per box in order to break even. For
the three seasons prior to percentage of size regulation, the total on-
tree value averaged $1.78 per box. Comparatively, for the seasons with
regulation, 1997-98 through 2001-02, the on-tree value has averaged
$2.45 per box for Indian River grapefruit.
Small growers have struggled the last eight seasons to receive
returns near the cost of production. For many, the higher on-tree
returns produced under percentage of size regulation have meant the
difference between profit and loss.
Another of the Committee's goals in establishing percentage of size
[[Page 64496]]
regulation was to help maintain the price differential between the
prices for larger sizes and those for smaller sizes. At the start of
the season, larger-sized fruit command a premium price. The f.o.b.
price can be $4 to $10 more a carton than for the smaller sizes. The
last three seasons, the f.o.b. price for a size 27 has averaged around
$13.50 per carton in October. This compares to an average f.o.b. price
of around $5.80 per carton for a size 56 during the same period. In the
three years before the issuance of a percentage size regulation, the
f.o.b. price for large sizes dropped to within $1 or $2 of the f.o.b.
price for small sizes by the middle of the season due to the oversupply
of the smaller sizes.
Percentage of size regulation has helped sustain the price
differential, maintaining higher prices for the larger-sized fruit.
During the three years before regulation, the average differential
between the carton price for a size 27 and a size 56 was $3.47 at the
end of October and dropped to $1.68 by mid-December. In the six years
with percentage of size regulation, the average differential between
the carton price for a size 27 and a size 56 was $5.43 at the end of
October, $3.78 in mid-December, and remained at around $3.10 the first
week in May.
The Barber study also states that f.o.b. revenues for larger sized
red grapefruit benefited substantially from percentage of size
regulation. Of the $18.9 million increase in total fresh f.o.b.
revenues for red grapefruit the last six seasons, nearly $16.7 million
can be attributed to gains made by fruit larger than sizes 48 and 56.
According to the Economic Analysis and Program Planning Branch,
USDA, the margins between the prices for the various sizes of red
grapefruit have remained fairly constant throughout the seasons covered
under percentage of size regulation. However, if the domestic market
becomes glutted with too many small-sized grapefruit (48 and 56), these
margins would be negatively impacted and total grower returns would be
reduced.
The goal of this percentage of size rule is to reduce the volume of
the least valuable fruit in the market and strengthen grower prices and
revenues. Without this rule, the fresh grapefruit market will become
glutted with small-sized fruit, which will have a negative impact on
prices for larger-sized fruit and grower returns. Absent this rule, the
price margins between sizes (23, 27, 32, 36, 40, 48, and 56) will
diminish and ultimately result in lower grower returns. This rule is
intended to fully supply all markets for small sizes with fresh red
seedless grapefruit size 48 and 56, while avoiding oversupplying these
markets to the detriment of grower revenues.
The Committee believes percentage of size regulation has also
helped stabilize the volume of small sizes entering the fresh market.
During deliberations in past seasons, Committee members concluded once
shipments of sizes 48 and 56 reached levels above 250,000 cartons per
week, prices declined on those and most other sizes of red seedless
grapefruit. The last six seasons during the weeks regulated by a
percentage of size regulation, weekly shipment of sizes 48 and 56 red
seedless grapefruit remained near or below 250,000 cartons for nearly
90 percent of the regulated weeks. Also, based on the Barber study,
while percentage of size regulation has been successful in controlling
the volume of small sizes entering the fresh market, it has had only a
limited effect on total shipments.
In addition, an economic study by Florida Citrus Mutual (Lakeland,
Florida) dated April 1998, also found that the weekly percentage
regulation was 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 prices
were generally higher across the size spectrum with sizes 48 and 56
having the largest gains, and larger-sized grapefruit also registering
modest improvements. The rule shifted the size distribution toward the
higher-priced, larger-sized grapefruit, which helped raise average
f.o.b. prices. It further stated that sizes 48 and 56 accounted for
only 17 percent of domestic shipments during the same period in the
1997-98 season, as small sizes were used to supply export customers
with preferences for small-sized grapefruit.
In addition to the success of past regulations, there are other
circumstances warranting the consideration of establishing percentage
of size regulation. For the three seasons, 1999-2000, 2000-01, and
2001-02, the percentage of the remaining crop represented by small
sizes in February averaged around 53 percent. This compares to an
average of 31 percent for the same month for seasons 1995-96 through
1997-98. These three seasons, 1999-2000 through 2001-02, averaged a
greater percentage of smaller sizes across each month, October through
February, than over the three seasons 1995-96 through 1997-98. For the
seven seasons prior to the 2002-03 season there has been a movement
toward an increased volume of small sizes as a percentage of the
overall crop. For the 2002-03 season, grapefruit sized larger than in
the previous seasons and small sizes were not as dominant a factor.
However, while the crop sized well throughout last season, it is
unclear how the 2003-04 crop will size. It is possible that the 2003-04
crop may produce the volume of small sizes represented in the majority
of past seasons, making an even greater supply of small-sized fruit
available for market.
Problems with the European and Asian markets could also impact the
volume of small sizes available. These markets have shown a strong
demand for the smaller-sized red seedless grapefruit. However, the
reduction in shipments to these areas experienced during the last few
years is expected to continue during the upcoming season due to their
weak economies. This could result in a greater amount of small sizes
for remaining markets to absorb.
The market for processed grapefruit is also a consideration.
Approximately 48 percent of red seedless grapefruit is used for
processing, with the majority being squeezed for juice. However, this
outlet offers limited returns and is currently not profitable. Of the
last six years, only 1999-2000 produced on-tree returns for processed
red seedless grapefruit exceeding $1 per box. When on-tree returns for
processed grapefruit drop below a dollar, there is pressure to shift a
larger volume of the overall crop to the fresh market to benefit from
the higher prices normally paid for fresh fruit. From 1977 through
2000, the differential between fresh prices and processed prices has
averaged $3.55 per box. Consequently, growers prefer to ship grapefruit
to the fresh market.
Statistics from the Florida Department of Citrus estimated that at
the start of the current season over 35 weeks worth of grapefruit juice
remained in inventory. Due to available inventories, on-tree prices for
processed red seedless grapefruit for the 2003-04 season will most
likely mirror prices from past seasons and remain below a dollar. A
fair percentage of red seedless grapefruit shipped for processing are
smaller sizes. With limited returns for processed grapefruit, an
additional volume of small sizes could be shifted toward the fresh
market, further aggravating problems with excessive volumes of small
sizes.
Further, red seedless grapefruit production continues to exceed
demand. This has contributed to the low returns and led to economic
abandonment. According to information from the National Agricultural
Statistics Service, the seasons of 1995-96, 1996-97, 1997-98, 2000-01,
and 2001-02 had an average economic abandonment of
[[Page 64497]]
two million boxes or more of red seedless grapefruit. Final data for
the 2002-03 season will not be published until February 2004. However,
it is likely some economic abandonment did occur last season.
Economic abandonment and prices falling below the cost of
production support the use of percentage of size regulation to control
the volume of small sizes. The percentage of size regulation has a
positive impact on price and is intended to make the most economically
viable fruit available to the fresh market without oversupplying small-
sized fruit. The above considerations further support the need to
control the volume of sizes 48 and 56 during the season to prevent
small sizes from overwhelming all markets.
The Committee believes the volume of small red seedless grapefruit
available will have a detrimental effect on the market if it is not
controlled. Members believe establishing weekly percentages during the
last six seasons has been effective and that problems successfully
addressed by percentage of size regulation will return without
regulation. Consequently, the Committee believes weekly percentage of
size regulation should be established for each of the 22 weeks of the
regulatory period for the 2003-04 season. The Committee recommended
establishing weekly percentages at 45 percent for the first two weeks,
35 percent for weeks 3 through 19, and 40 percent for weeks 20, 21, and
22.
The Committee considered the percentages set last year as a basis
for discussing percentages for the 2003-04 season. They believe the
percentages set last year worked well, and decided to make their
initial recommendation for each of the 22 weeks at the same levels.
Committee members believed setting last season's percentages higher
than the most restrictive level allowed of 25 percent had worked well,
providing some restriction while affording volume for those markets
that prefer small sizes.
Committee members believe if shipments of small sizes are
maintained at around or below 250,000 cartons a week, prices stabilize
and demand for larger, more profitable sizes increases. The Committee
considered the 250,000-carton level when recommending the weekly
percentages. The first two weeks were set at 45 percent because it was
likely there would only be a limited volume shipped. In the last five
seasons, total shipments of red seedless grapefruit have only exceeded
250,000 cartons once in the first two weeks of the season.
Setting weekly percentages at 35 percent for the majority of weeks
provides a total allotment of 252,610 cartons (35 percent of the total
industry base of 721,743 cartons) per week. While this is slightly more
than 250,000 cartons, it is unlikely all available allotment will be
used each week, and this allows individual handlers some additional
flexibility. The increase to 40 percent for the last three weeks offers
a little more allotment providing some transition to the period without
regulation and helps to prevent the dumping of small sizes following
the end of regulation. The Committee believes these percentages provide
some flexibility while holding weekly shipments at sizes 48 and 56
close to the 250,000-carton mark.
The Committee recognized they could meet again during the
regulation period, as needed, and use the most current information to
consider adjustments in the weekly percentage rates. This will help the
Committee make the most informed decisions as to whether the
established percentages are appropriate. Any changes to the weekly
percentages set by this rule will require additional rulemaking and the
approval of USDA.
Therefore, this rule continues the weekly percentages at 45 percent
for the first two weeks, 35 percent for weeks 3 through 19, and at 40
percent for weeks 20 through 22. This rule is intended to fully supply
all markets for small sizes with fresh red seedless grapefruit sizes 48
and 56, while avoiding oversupplying these markets to the detriment of
grower revenues. The Committee plans to meet as needed during the 22-
week period to ensure weekly percentages are at the appropriate levels.
Under Sec. 905.153, the quantity of sizes 48 and 56 red seedless
grapefruit a handler may ship during a regulated week is calculated
using the set weekly percentage. Handlers can fill their allotment with
size 56, size 48, or a combination of the two sizes such that the total
of these shipments is within the established limits. The Committee
staff performs the specified calculations and provides them to each
handler. The regulatory period began the third Monday in September,
September 15, 2003. Each regulation week begins Monday at 12 a.m. and
ends at 11:59 p.m. the following Sunday.
Section 905.153(d) provides the allowances for overshipments,
loans, and transfers of allotment. These tolerances allow handlers the
opportunity to supply their markets while limiting the impact of small
sizes.
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 will inform each handler of the quantity of sizes
48 and 56 red seedless grapefruit they can handle during a particular
week, making the necessary adjustments for overshipments and loan
repayments.
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 56 red grapefruit that may be
handled. Therefore, no change is necessary in the grapefruit import
regulations as a result of this action.
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 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.
There are approximately 75 grapefruit handlers subject to
regulation under the order and approximately 11,000 growers of citrus
in the regulated area. Small agricultural service firms, including
handlers, are 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 $750,000 (13 CFR 121.201).
Based on industry and Committee data, the average annual f.o.b.
price for fresh Florida red seedless grapefruit during the 2002-03
season was approximately $7.24 per \4/5\-bushel carton, and total fresh
shipments for the 2002-03 season are estimated at 22.9 million cartons
of red grapefruit. Approximately 25 percent of all handlers handled 75
percent of Florida's grapefruit shipments. Using the average f.o.b.
price, at least 75 percent of the grapefruit handlers could be
considered small businesses under SBA's definition. Therefore, the
majority of
[[Page 64498]]
Florida grapefruit handlers may be classified as small entities. The
majority of Florida grapefruit producers may also be classified as
small entities.
The overshipment of small-sized red seedless grapefruit contributes
to poor returns and lower on-tree values. This rule continues to limit
the volume of sizes 48 and 56 red seedless grapefruit shipped during
the first 22 weeks of the 2003-04 season by establishing weekly
percentages for each of the 22 weeks, beginning September 15, 2003.
This rule sets the weekly percentages at 45 percent for weeks 1 and 2,
35 percent for week 3 through week 19, and at 40 percent for weeks 20,
21, and 22. The quantity of sizes 48 and 56 red seedless grapefruit
that may be shipped by a handler during a particular week is calculated
using the percentages set. This action supplies enough small red
seedless grapefruit, without saturating all markets with small sizes.
This action will help stabilize the market and improve grower returns.
This rule uses the provisions of Sec. 905.153. Authority for this
action is provided in Sec. 905.52 of the order. The Committee
unanimously recommended this action at a meeting on July 1, 2003.
While the establishment of volume regulation may necessitate
additional spot picking, which could entail slightly higher harvesting
costs, in most cases this is already a standard industry practice. The
Barber study indicates spot picking will only fractionally increase
harvesting costs on just a small segment of the boxes picked. In
addition, with spot picking, the persons harvesting the fruit are more
selective and pick only the desired sizes and qualities. This reduces
the amount of time and effort needed in sorting fruit, because
undersized fruit is not harvested. This may result in a cost savings
through reduced processing and packing costs. In addition, because this
regulation is only in effect for part of the season, the overall effect
on costs is minimal. Consequently, this rule is not expected to
appreciably increase costs to producers.
If a 25 percent restriction on small sizes had been applied during
the 22-week period for the three seasons prior to the 1997-98 season,
an average of 3.1 percent of overall shipments during that period would
have been constrained by regulation. A large percentage of this volume
most likely could have been replaced by larger sizes for which there
are no volume restrictions. Under regulation, larger sizes have been
substituted for smaller sizes with a nominal effect on overall
shipments.
In addition, 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, provided the over
shipment is deducted from the following week's shipments. Approximately
227 loans and transfers were utilized last season. Statistics for 2002-
03 show that, in only 2 weeks of the regulated period was the total
available allotment used. Therefore, with the weekly percentages for
the 2003-04 season set at the same levels as last season, the overall
impact of this regulation on total shipments should be minimal.
The Committee believes establishing percentage of size regulation
during the 2003-04 season will have benefits similar to those realized
under past regulations. Handlers and producers have received higher
returns under percentage of size regulation. In the three seasons prior
to the first percentage of size regulation in 1997-98, prices of red
seedless grapefruit fell from a weighted average f.o.b. price of $7.80
per carton in October to a weighted average f.o.b. price of $5.50 per
carton in December. In the six seasons utilizing percentage of size
regulation, red seedless grapefruit maintained higher prices throughout
the season with a weighted average f.o.b. price of $8.10 per carton in
October, to an average f.o.b. price of $7.06 per carton in December,
and remained at around $6.90 in April. Average prices for the season
have also been higher during seasons with percentage of size
regulation. The average season price for red seedless grapefruit was
$7.00 for the last six years compared to $5.83 for the three prior
years.
On-tree earnings per box for fresh red seedless grapefruit have
also improved under regulation, providing better returns to growers.
The average on-tree price for fresh red seedless grapefruit was $4.42
for the seasons 1997-98 through 2001-02 with percentage of size
regulation, compared to $3.08 for the three years prior to regulation.
Small growers have struggled the last eight seasons to receive returns
near the cost of production. For many, the higher returns provided by
percentage of size regulation meant the difference between profit and
loss.
Shipments during the 22 weeks covered by this regulation account
for nearly 60 percent of the total volume of red seedless grapefruit
shipped to the fresh market. Considering this volume and the very
limited returns from grapefruit for processing, it is imperative that
returns from the fresh market be maximized during this period. Even a
small increase in price when coupled with the volume shipped represents
a significant increase in the overall return to growers.
The Barber study stated that prices rose anywhere from 12.9 percent
or $.72 to 17.5 percent or $1.00 per \4/5\-bushel carton during
percentage of size regulation. Even if this action were only successful
in raising returns by $.10 per carton, this increase in combination
with the substantial number of shipments generally made during this 22-
week period, would represent an increased return of nearly $1.4
million. Consequently, any increased returns generated by this action
should more than offset any additional costs associated with this
regulation.
The purpose of this rule is to help stabilize the market and
improve grower returns. Percentage of size regulation is intended to
reduce the volume of the least valuable fruit in the market, and shift
it to those markets that prefer small sizes. This regulation helps the
industry address marketing problems by keeping small sizes (sizes 48
and 56) more in balance with market demand without glutting the fresh
market with these sizes.
This rule provides a supply of small-sized red seedless grapefruit
sufficient to meet market demand, without saturating all markets with
these small sizes. This action is not expected to decrease the overall
consumption of red seedless grapefruit. With supply in excess of
demand, this rule is not expected to impact consumer prices or demand.
The benefits of this rule are expected to be available to all red
seedless grapefruit growers and handlers regardless of their size of
operation. This rule will likely help small under-capitalized growers
who need additional weekly revenues to meet operating costs.
The Committee considered several alternatives when discussing this
action. One alternative discussed was changing the way loans and
transfers are handled. Another alternative discussed was changing the
way allotment base is calculated. The Committee agreed both
alternatives should first be thoroughly reviewed by the Regulation
Subcommittee to consider options to bring before the full Committee.
Therefore, these alternatives were rejected.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Chapter 35), the information collection requirements contained in this
rule have been previously approved by the Office of Management and
Budget (OMB) and assigned OMB No. 0581-0189. As with all Federal
marketing order programs, reports and forms are periodically reviewed
to reduce information
[[Page 64499]]
requirements and duplication by industry and public sectors.
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. However, red seedless
grapefruit must meet the requirements as specified in the U.S.
Standards for Grades of Florida Grapefruit (7 CFR 51.760 through
51.784) issued under the Agricultural Marketing Act of 1946 (7 U.S.C.
1621 through 1627).
The Committee's meeting was widely publicized throughout the citrus
industry and all interested persons were invited to attend the meeting
and participate in Committee deliberations on all issues. Like all
Committee meetings, the July 1, 2003, meeting was a public meeting and
all entities, both large and small, were able to express views on this
issue.
An interim final rule concerning this action was published in the
Federal Register on September 9, 2003. Copies of the rule were mailed
by the Committee's staff to all Committee members and grapefruit
handlers. In addition, the rule was made available through the Internet
by the Office of the Federal Register and USDA. That rule provided for
a 30-day comment period, which ended October 9, 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 Committee's recommendation, and other information, it is found that
finalizing the interim final rule, without change, as published in the
Federal Register (68 FR 53015) on September 9, 2003 will tend to
effectuate the declared policy of the Act.
List of Subjects in 7 CFR Part 905
Grapefruit, Marketing agreements, Oranges, Reporting and
recordkeeping requirements, Tangelos, Tangerines.
PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN
FLORIDA
0
Accordingly, the interim final rule amending 7 CFR part 905 which was
published at 68 FR 53015, September 9, 2003, is adopted as a final rule
without change.
Dated: November 7, 2003.
A. J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 03-28520 Filed 11-13-03; 8:45 am]
BILLING CODE 3410-02-P