[Federal Register: December 21, 2004 (Volume 69, Number 244)]
[Rules and Regulations]
[Page 76385-76389]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21de04-6]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 982
[Docket No. FV05-982-1 IFR]
Hazelnuts Grown in Oregon and Washington; Establishment of Final
Free and Restricted Percentages for the 2004-2005 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Interim final rule with request for comments.
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SUMMARY: This rule establishes final free and restricted percentages
for domestic inshell hazelnuts for the 2004-2005 marketing year under
the Federal marketing order for hazelnuts grown in Oregon and
Washington. The final free and restricted percentages are 6.4921 and
93.5079 percent, respectively. The percentages allocate the quantity of
domestically produced hazelnuts which may be marketed in the domestic
inshell market (free) and the quantity of domestically produced
hazelnuts that must be disposed of in outlets approved by the Board
(restricted). Volume regulation is intended to stabilize the supply of
domestic inshell hazelnuts to meet the limited domestic demand for such
hazelnuts with the goal of providing producers with reasonable returns.
This rule was recommended unanimously by the Hazelnut Marketing Board
(Board), which is the agency responsible for local administration of
the marketing order.
DATES: Effective Date: December 22, 2004. This interim final rule
applies to all 2004-2005 marketing year restricted hazelnuts until they
are properly disposed of in accordance with marketing order
requirements. Comments received by February 22, 2005 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,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC
20250-0237; Fax: (202) 720-8938; E-mail: moab.docketclerk@usda.gov; or
Internet: http://www.regulations.gov. All comments should reference the
docket number and the date and page number of this issue of the Federal
Register and will be available for public inspection in the Office of
the Docket Clerk during regular business hours, or can viewed at:
http://www.ams.usda.gov/fv/moab.html.
FOR FURTHER INFORMATION CONTACT: Barry Broadbent, 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.''
The Department of Agriculture (USDA) is issuing this rule in
conformance with Executive Order 12866.
[[Page 76386]]
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 2004-2005 marketing year
(July 1, 2004, through June 30, 2005). 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 establishes marketing percentages which 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. At
the same time, the Board computes and announces preliminary free and
restricted percentages for that marketing 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. The Board may increase the computed inshell trade
demand by up to 25 percent, if market conditions warrant an increase.
The Board may also modify the inshell trade demand to account for
abnormalities due to crop or marketing conditions. 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.
Volume regulation under the order utilizes free and restricted
percentages to allocate 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.
On August 24, 2004, the National Agricultural Statistics Service
(NASS) released an estimate of 2004 hazelnut production for the Oregon
and Washington area at 44,000 dry orchard-run tons. On August 26, 2004,
the Board met and estimated total available supply for the 2004 crop
year at 44,954 tons. The Board arrived at this estimate by using the
crop estimate compiled by NASS (44,000 tons) and then adjusting that
estimate to account for disappearance and carryin. The order requires
the Board to reduce the estimate by the average disappearance over the
preceding three years (1,584 tons) and to increase it by the amount of
undeclared carryin from previous years' production (2,538 tons.)
Disappearance is the difference between the estimated orchard-run
production and the actual supply of merchantable product available for
sale by handlers. Disappearance can consist of (1) unharvested
hazelnuts, (2) culled product (nuts that are delivered to handlers but
later discarded), (3) product used on the farm, sold locally, or
otherwise disposed of by producers, and (4) statistical error in the
orchard-run production estimate.
The Board computed the adjusted inshell trade demand of 2,064 tons
by taking the average of the past three years' sales (2,952 tons) and
reducing it by the declared carry-in from last year's crop (888 tons).
Declared carry-in is product regulated under the order during a
preceding marketing year but held in inventory for future sale.
Undeclared carry-in is product that was produced in a previous
marketing year but was not subject to regulation at that time.
Undeclared carry-in is subject to regulation under the order and is
accounted for as such by the Board.
The Board computed and announced preliminary free and restricted
percentages of 3.6726 percent and 96.3274 percent, respectively, at its
August 26, 2004, 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 (2,064 tons x 80
percent/44,954 tons = 3.6726 percent). The preliminary free percentage
thus initially released 1,651 tons of hazelnuts from the 2004 supply
for domestic inshell use, and the preliminary restricted percentage
withheld 43,303 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 3, 2004, and reviewed and approved an
amended marketing policy and recommended the establishment of final
free and restricted percentages. The NASS crop production estimate was
44,000 tons. However, based upon industry information, the Board
reduced the estimate to 37,425 tons. The Board also decided that market
conditions were such that the immediate release of an additional 15
percent for desirable carryout would not adversely affect the 2004-2005
domestic inshell market. No interim final free and restricted
percentages were recommended. The Board recommended final free and
restricted percentages of 6.4921 and 93.5079 percent, respectively. The
final free percentage releases 2,507 tons of inshell hazelnuts from the
2004 supply for domestic use.
The final marketing percentages are based on the Board's final
production estimate (which is lower than its initial estimate) and the
following supply and
[[Page 76387]]
demand information for the 2004-2005 marketing year:
------------------------------------------------------------------------
Tons
------------------------------------------------------------------------
Total Available Supply:
(1) Production forecast (crop estimate)............. 37,425
(2) Less disappearance (three year average; 3.60 1,347
percent of Item 1).................................
(3) Merchantable production (Item 1 minus Item 2)... 36,078
(4) Plus undeclared carryin as of July 1, 2004 2,538
(subject to regulation)............................
(5) Available supply subject to regulation (Item 3 38,616
plus Item 4).......................................
Inshell Trade Demand:
(6) Average trade acquisitions of inshell hazelnuts 2,952
(three prior years domestic sales).................
(7) Less declared carryin as of July 1, 2004 (not 888
subject to 2004-2005 regulation)...................
(8) Adjusted inshell trade demand (Item 6 minus Item 2,064
7).................................................
(9) Desirable carryout on August 31, 2005 (15 443
percent of Item 6).................................
(10) Adjusted inshell trade demand plus desirable 2,507
carryout (Item 8 plus Item 9)......................
------------------------------------------------------------------------
Free Restricted
------------------------------------------------------------------------
Percentages:
(11) Final percentages (Item 10 6.4921 93.5079
divided by Item 5) x 100...........
(12) Final free tonnage (Item 10)... 2,507 ..............
(13) Final restricted tonnage (Item .............. 36,109
5 minus 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 443
tons for desirable carryout. The total free supply for the 2004-2005
marketing year is 3,395 tons of hazelnuts, which is the sum of the
final trade demand of 2,952 tons and the 443 ton desirable carryout.
This amount is 115 percent of prior years' sales and exceeds the goal
of the Guidelines.
Initial 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 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 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 18 handlers subject to regulation under the order.
Average annual hazelnut revenue per producer is $38,888. This is
computed by dividing NASS figures for the average value of production
for 2002 and 2003 ($29,166,000) 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 89 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 main
market outlets: domestic inshell, export inshell, and kernel markets.
Handlers and growers receive the highest return for sales in the
domestic inshell market. They receive less for product going to export
inshell, and the least for kernels. Based on Board records of average
shipments for 1994-2003, the percentage going to each of these markets
was 11 percent (domestic inshell), 43 percent (export inshell), and 34
percent (kernels). Other minor market outlets in total make up the
remaining 12 percent.
The inshell hazelnut market can be characterized as having limited
and inelastic demand with a very short primary marketing period. On
average, 78 percent of domestic inshell hazelnut shipments occur
between October 1 and November 30, primarily to supply holiday nut
demand. The inshell market is, therefore, prone to oversupply and low
grower prices in the absence of supply restrictions. Volume 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.
and to prevent oversupplied market conditions.
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 ensure that the domestic
inshell market is fully supplied while protecting the market from the
negative effects of oversupply.
[[Page 76388]]
The relatively high level of production in 2004 and the large
carryin from previous year's production were key market factors leading
to the relatively low 6.4921 percent final free percentage. Hazelnut
production was originally estimated by NASS to be 44,000 tons, which
would have made it the third largest crop on record. The Board revised
the forecast to 37,425 tons after harvest was completed, a level that
is still 22 percent above the 10 year average. Even if carryin had been
zero, the amount of production that handlers typically ship into the
domestic inshell market (i.e., average trade acquisitions of 2,952
tons) equals only about 8.1 percent of supply (the 36,078 tons subject
to regulation).
Although the domestic inshell market is a relatively small
proportion of total sales (11 percent of total shipments), 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.
Recent production and price data reflect the stabilizing effect of
the volume control regulations. Data from USDA's National Agricultural
Statistics Service (NASS) show that total hazelnut production has
varied widely over the 10-year period between 1994 and 2003, 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 were 50 percent and
160 percent, respectively, of the 10-year average tonnage of 30,920.
Grower price has not fluctuated to the extent of production. Prices in
the lowest price year and the highest price year were 93 percent and
115 percent, respectively, of the 10-year average price of $898 per
ton. The considerable lower variability of price versus production
provides an illustration of the order's price-stabilizing impacts.
Comparing grower revenue to cost is useful in highlighting the
impact on growers of recent product and price levels. A recent hazelnut
production cost study from Oregon State University estimated cost-of-
production per acre 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 that
typical cost level only twice from 1994 to 2003. Average grower revenue
was below typical costs in the other years. 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 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 the 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 2004-2005 hazelnut crop. However, without any
regulations in effect, the Board believes that the industry would tend
to oversupply the inshell domestic market. The 2004-2005 hazelnut crop
is larger than last year and much larger than expected. The unregulated
release of 38,616 tons on the domestic inshell market would oversupply
that small market and would cause producer returns to decrease, thereby
disrupting the market.
Section 982.40 of the order establishes a procedure and
computations for the Board to follow in recommending to USDA release of
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 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 5 percent of the world's hazelnut production.
Last season, 79 percent of the kernels were marketed in the
domestic market and 21 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 5,255 tons out of total average
exports of 14,048 tons. Recent years have seen a significant shift in
export destinations. Last season, inshell shipments to Europe totaled
5,526 tons, representing 24 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 70 percent of total exports of 23,319 tons in 2003.
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, USDA has not identified any
relevant Federal rules that duplicate, overlap or conflict with this
rule.
Further, 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 26, and November 3, 2004, were public
meetings and all entities, both large and small, were able to express
their views on this issue. Finally, interested persons are invited to
submit information on the regulatory and informational impacts of this
action on small businesses.
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.
This rule invites comments on the establishment of final free and
restricted percentages for the 2004-2005 marketing year under the
hazelnut marketing order. Any comments
[[Page 76389]]
received will be considered prior to finalization of this rule.
After consideration of all relevant material presented, including
the Board's recommendation, and other information, it is found that
this interim final rule, as hereinafter set forth, will tend to
effectuate the declared policy of the Act.
Pursuant to 5 U.S.C. 553, it is also found and determined 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 action until 30 days after publication in the Federal Register
because: (1) The 2004-2005 marketing year began July 1, 2004, and the
percentages established herein apply to all merchantable hazelnuts
handled from the beginning of the crop year; (2) handlers are aware of
this rule, which was recommended at an open Board meeting, and need no
additional time to comply with this rule; and (3) interested persons
are provided a 60-day comment period in which to respond, and all
comments timely received will be considered prior to finalization of
this action.
List of Subjects in 7 CFR Part 982
Filberts, Hazelnuts, Marketing agreements, Nuts, Reporting and
recordkeeping requirements.
0
For the reasons set forth in the preamble, 7 CFR part 982 is amended as
follows:
PART 982--HAZELNUTS GROWN IN OREGON AND WASHINGTON
0
1. The authority citation for 7 CFR part 982 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
0
2. A new section 982.252 is added to read as follows:
[Note: This section will not be published in the annual Code of
Federal Regulations.]
Sec. 982.252 Free and restricted percentages--2004-2005 marketing
year.
The final free and restricted percentages for merchantable
hazelnuts for the 2004-2005 marketing year shall be 6.4921 and 93.5079
percent, respectively.
Dated: December 15, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-27907 Filed 12-20-04; 8:45 am]
BILLING CODE 3410-02-P