[Federal Register: April 12, 2004 (Volume 69, Number 70)]
[Rules and Regulations]
[Page 19082-19085]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ap04-2]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 982
[Docket No. FV04-982-1 FIR]
Hazelnuts Grown in Oregon and Washington; Establishment of
Interim Final and Final Free and Restricted Percentages for the 2003-
2004 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Department of Agriculture (USDA) is adopting, as a final
rule, without change, an interim final rule establishing interim final
and final free and restricted percentages for domestic inshell
hazelnuts for the 2003-2004 marketing year under the Federal marketing
order for hazelnuts grown in Oregon and Washington. The interim final
free and restricted percentages are 6.8393 percent and 93.1607 percent,
respectively, and the final free and restricted percentages are 8.2303
percent and 91.7697 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 unanimously recommended by the Hazelnut Marketing Board
(Board), which is the agency responsible for local administration of
the marketing order.
EFFECTIVE DATE: May 12, 2004.
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 2003-2004 marketing year
(July 1, 2003, through June 30, 2004). 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
hazelnut production at 35,000 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.
At its August 28, 2003, meeting, the Board adjusted the NASS crop
estimate down to 33,717 tons by deducting the average crop
disappearance over the preceding three years (4.64 percent or 1,624
tons) and adding the undeclared carryin (341 tons) to the 35,000 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.
[[Page 19083]]
The Board computed the adjusted inshell trade demand of 2,306 tons by
taking the difference between the average of the past three years'
sales (3,127 tons) and the declared carryin from last year's crop (821
tons).
The Board computed and announced preliminary free and restricted
percentages of 5.4720 percent and 94.5280 percent, respectively, at its
August 28, 2003, meeting. The preliminary free percentage was computed
by multiplying the adjusted trade demand by 80 percent and dividing the
result by the adjusted crop estimate (2,306 tons x 80 percent / 33,717
tons = 5.4720 percent). The preliminary free percentage thus initially
released 1,845 tons of hazelnuts from the 2003 supply for domestic
inshell use, and the preliminary restricted percentage withheld 31,872
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 crop
estimates that are current at the time 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 13, 2003, and reviewed and approved an
amended marketing policy and recommended the establishment of interim
final and final free and restricted percentages. The interim final free
and restricted percentages were recommended at 6.8393 percent free and
93.1607 percent restricted. Final percentages, which included an
additional 15 percent of the average of the preceding three-years'
trade acquisitions for desirable carryout, were recommended at 8.2303
free and 91.7697 percent restricted effective May 31, 2004. The final
free percentage releases 2,775 tons of inshell hazelnuts from the 2003
supply for domestic inshell use.
The interim and final marketing percentages are based on the
Board's final production estimate and the following supply and demand
information for the 2003-2004 marketing year:
------------------------------------------------------------------------
Tons
------------------------------------------------------------------------
Inshell Supply:
(1) Total production (crop estimate)................... 35,000
(2) Less substandard, farm use (disappearance; 4.64 1,624
percent of Item 1)....................................
(3) Merchantable production (Board's adjusted crop 33,376
estimate; Item 1 minus Item 2)........................
(4) Plus undeclared carryin as of July 1, 2003, 341
(subject to regulation)...............................
(5) Supply subject to regulation (Item 3 plus Item 4).. 33,717
Inshell Trade Demand:
(6) Average trade acquisitions of inshell hazelnuts for 3,127
three prior years.....................................
(7) Less declared carryin as of July 1, 2003, (not 821
subject to regulation)................................
(8) Adjusted Inshell Trade Demand (Item 6 minus Item 7) 2,306
(9) Desirable carryout on August 31, 2004 (15 percent 469
of Item 6)............................................
(10) Adjusted Inshell Trade Demand plus desirable 2,775
carryout (Item 8 plus Item 9).........................
------------------------------------------------------------------------
Percentages Free Restricted
------------------------------------------------------------------------
(11) Interim final percentages (Item 8 6.8393 93.1607
divided by Item 5) x 100.................
(12) Final percentages (Item 10 divided by 8.2303 91.7697
Item 5) x 100............................
(13) Final free in tons (Item 10)......... 2,775 ...........
(14) Final restricted in tons (Item 5 ........... 30,942
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 469
tons for desirable carryout effective May 31, 2004. The total free
supply for the 2003-2004 marketing year is 3,596 tons of hazelnuts,
which is the sum of the final trade demand of 3,127 tons and the 469
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 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
[[Page 19084]]
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 17 handlers subject to regulation
under the order. Average annual hazelnut revenue per producer is
approximately $36,133. This is computed by dividing NASS figures for
the average value of production for 2001 and 2002 ($27,100,000) 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 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 1993-2002, the percentage going to each of these
markets was 13 percent (domestic inshell), 43 percent (export inshell),
and 44 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 United States. On
average, 77 percent of domestic inshell hazelnuts are shipped during
the period October 1 through November 30, primarily to supply the
holiday nut market.
The current volume control procedures have helped the industry to
improve its marketing situation 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 adjusted inshell trade demand (2,306 tons) and the larger 2003
crop were key market factors leading to the Board's recommendation for
the 8.2303 percent final free percentage. The 35,000 ton hazelnut
production for 2003 is 15,500 tons more than in 2002, and 14,500 tons
less than the production level in 2001, the largest crop in the last
ten years.
Although the domestic inshell market is a relatively small
proportion of total sales (13 percent of average shipments over the
last ten years, and 11 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 domestic kernel market and
inshell exports are both expected to continue to be good outlets for
U.S. hazelnut production.
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
1993 and 2002, from a low of 15,400 tons in 1998 to a high of 49,500
tons in 2001. Production in the shortest crop year and the biggest crop
year was 49 percent and 159 percent, respectively, of the 10-year
average tonnage of 31,220. Since low production years typically follow
high production years (a consistent pattern for hazelnuts), lower
production is expected in 2004.
The coefficient of variation (a standard statistical measure of
variability; ``CV'') for hazelnut production over the 10-year period is
0.39. In contrast, the coefficient of variation for hazelnut grower
prices is 0.12, less than one third of 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 hazelnut cost of production 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 twice between 1995
and 2002. 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
fluctuates, the 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 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 an 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 hazelnut crop during the 2003-2004 marketing year.
However, without any regulations in effect, the Board believes that the
industry would oversupply the inshell domestic 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 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 2002-2003 season, 87 percent of the kernels were
marketed in the domestic market and 13 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 new markets and expand demand, 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 5,249 tons, 40 percent of total
average exports of 12,478 tons. The largest share went to Germany. In
1995, 70 percent of export shipments went to
[[Page 19085]]
Europe. Recent years have seen a significant shift in export
destinations, however, with Europe's share declining to 30 percent of
inshell shipments (3,321 tons) in the 2002-2003 season. Inshell
shipments to Asia have increased dramatically in the past few years,
growing to 55 percent of total exports of 10,979 tons in the 2002-2003
season. Hong Kong is the largest export destination, followed by China.
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 28 and November 13, 2003, were public
meetings and all entities, both large and small, were able to express
their views on this issue. Finally, interested persons were invited to
submit information on the regulatory and informational impacts of this
action on small businesses.
An interim final rule concerning this action was published in the
Federal Register on January 16, 2004. 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
March 16, 2004. Two comments were received during that period. However,
because the comments did not address the substance of the interim final
rule, they are not being considered in this finalization.
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 (69 FR 2493, January 16, 2004) 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 69 FR 2493 on January 16, 2004, is adopted as a final rule
without change.
Dated: April 6, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-8213 Filed 4-9-04; 8:45 am]
BILLING CODE 3410-02-P