[Federal Register: April 28, 2004 (Volume 69, Number 82)]
[Proposed Rules]
[Page 23329-23367]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28ap04-23]
[[Page 23329]]
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Part III
Department of Agriculture
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Agricultural Marketing Service
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7 CFR Part 929
Cranberries Grown in the States of Massachusetts, Rhode Island,
Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon,
Washington, and Long Island in the State of New York; Recommended
Decision and Opportunity to File Written Exceptions to Proposed
Amendment of Marketing Agreement and Order No. 929; Proposed Rule
[[Page 23330]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 929
[Docket Nos. AO-341-A6; FV02-929-1]
Cranberries Grown in the States of Massachusetts, Rhode Island,
Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon,
Washington, and Long Island in the State of New York; Recommended
Decision and Opportunity To File Written Exceptions to Proposed
Amendment of Marketing Agreement and Order No. 929
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule and opportunity to file exceptions.
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SUMMARY: This recommended decision invites written exceptions on
proposed amendments to the marketing agreement and order for
cranberries grown in Massachusetts, Rhode Island, Connecticut, New
Jersey, Wisconsin, Michigan, Minnesota, Oregon, Washington, and Long
Island in the State of New York. The amendments were proposed by the
Cranberry Marketing Committee (Committee), which is responsible for
local administration of the order, and other interested parties
representing independent growers and handlers. The proposed amendments
would: Revise the volume control provisions; Add authority for paid
advertising; Authorize the Committee to reestablish districts within
the production area and reapportion grower membership among the various
districts; Clarify the definition of handle; and incorporate
administrative changes. The proposed amendments are intended to improve
the operation and functioning of the cranberry marketing order program.
DATES: Written exceptions must be filed by May 28, 2004.
ADDRESSES: Written comments should be filed with the Hearing Clerk,
U.S. Department of Agriculture, room 1081-S, Washington, DC 20250-9200,
FAX number (202) 720-9776. Four copies of all written exceptions should
be submitted and they should reference the docket numbers and the date
and page number of this issue of the Federal Register, or you may send
your comments by the electronic process available at Federal
eRulemaking portal at http://www.regulations.gov Comments can be viewed at: http://www.ams.usda.gov/fv/moab.html.
FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn, Marketing Order
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400
Independence Avenue, SW., STOP 0237, Washington, DC 20250-0237;
telephone: (202) 720-2491, or Fax: (202) 720-8938. Small businesses may
request information on compliance 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.
SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice
of Hearing issued on April 23, 2002, and published in the May 1, 2002,
issue of the Federal Register (67 FR 21854); Secretary's Decision on
partial amendments issued on December 4, 2003, and published in the
December 12 issue of the Federal Register (68 FR 69343).
This administrative action is governed by the provisions of
sections 556 and 557 of title 5 of the United States Code and,
therefore, is excluded from the requirements of Executive Order 12866.
Preliminary Statement
Notice is hereby given of the filing with the Hearing Clerk of this
recommended decision with respect to the proposed amendment of
Marketing Agreement and Order No. 929, regulating the handling of
cranberries in 10 States (hereinafter referred to as the order), and
the opportunity to file written exceptions thereto. Copies of this
decision can be obtained from Kathleen Finn whose address is listed
above.
This action is issued pursuant to the provisions of the
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601
et seq.), hereinafter referred to as the ``Act,'' and the applicable
rules of practice and procedure governing the formulation of marketing
agreements and orders (7 CFR part 900).
The proposed amendment of Marketing Agreement and Order No. 929 is
based on the record of a public hearing held in Plymouth, Massachusetts
on May 20 and 21, 2002; in Bangor, Maine on May 23, 2002; in Wisconsin
Rapids, Wisconsin on June 3 and 4, 2002; and in Portland, Oregon on
June 6, 2002. Notice of this hearing was published in the Federal
Register on May 1, 2002. The notice of hearing contained numerous
proposals submitted by the Committee, other interested parties and one
proposed by the Agricultural Marketing Service (AMS). A Secretary's
Decision and Referendum Order on 6 of the proposals determined
necessary to be expedited was published in the Federal Register on
December 12, 2003. This action recommends amendments on the remainder
of the proposals.
The proposed amendments included in this proceeding would:
Authorize the Committee to reestablish districts within the production
area and reapportion grower membership among the various districts;
simplify criteria considered and set forth more appropriate dates in
establishing the Committee's marketing policy; revise the formula for
calculating sales histories under the producer allotment program in
Sec. 929.48; allow compensation of sales history for catastrophic
events that impact a grower's crop; remove specified dates relating to
when information is required to be filed by growers/handlers in order
to issue annual allotments; clarify how the Committee allocates unused
allotment to handlers; allow growers who decide not to grow a crop
flexibility in deciding what to do with their allotment; allow growers
to transfer allotment during a year of volume regulation; authorize the
implementation of the producer allotment and withholding programs in
the same year; require specific dates for recommending volume
regulation; add specific authority to exempt fresh, organic or other
forms of cranberries from order provisions; allow for greater
flexibility in establishing other outlets for excess cranberries;
update and streamline the withholding volume control provisions; modify
the buy-back provisions under the withholding volume control
provisions; add authority for paid advertising under the research and
development provision of the order; modify the definition of handle to
clarify that transporting fresh cranberries to foreign countries is
considered handling and include the temporary cold storage or freezing
of withheld cranberries as an exemption from handling; relocate some
reporting provisions to a more suitable provision and streamline the
language relating to verification of reports and records; and Delete an
obsolete provision from the order relating to preliminary regulation.
The Fruit and Vegetable Programs of AMS proposed to allow such
changes as may be necessary to the order, if any of the proposed
amendments are adopted, so that all of the order's provisions conform
to the effectuated amendments.
Five proposed amendments are not being recommended for adoption and
are discussed in this decision.
Thirty-two witnesses testified at the hearing. These witnesses
represented cranberry growers and handlers in States currently covered
by the order
[[Page 23331]]
and in Maine. Some witnesses supported the proposed amendments, while
others were opposed to the recommended changes or suggested
modifications to them.
At the conclusion of the hearing, the Administrative Law Judge
fixed August 9, 2002, as the final date for interested persons to file
proposed findings and conclusions or written arguments and briefs based
on the evidence received at the hearing on proposal numbers 1, 3, 7 and
13. The Administrative Law Judge fixed September 13, 2002, as the final
date for interested persons to file proposed findings and conclusions
or written arguments and briefs based on evidence received at the
hearing on all other proposals. This briefing period was extended until
September 20, 2002. A total of 17 briefs were filed, of which 7 related
to the proposals being addressed in this decision.
The Committee filed a brief in support of its proposed amendments.
Stephen L. Lacey, attorney for Clement Pappas & Company and Cliffstar
Corporation, filed a brief in support of his and other proposals, in
opposition to some proposals or suggestions for modifications. Linda
and Paul Rinta filed a brief in support of many proposals and
suggesting modification to others. The Cape Cod Cranberry Growers'
Association (CCCGA) filed a brief opposing one proposal, supporting
others, and suggesting modifications to others. All discussions in
briefs pertaining to the proposals being recommended in this decision
have been considered.
Introduction
The U.S. cranberry industry is experiencing an oversupply
situation. Recent increases in acreage and yields have resulted in
greater supplies, while demand has remained fairly constant. The result
has been building inventories and reduced grower returns.
The cranberry industry has operated under a Federal marketing order
since 1962. The order's primary regulatory authority is volume
regulation. At that time, production was trending sharply upward, due
primarily to improving yields, and demand was not keeping pace. The
intent of the program was to limit the volume of cranberries available
for marketing in fresh market outlets in the United States and Canada,
and in all processing outlets, to a quantity reasonably in balance with
the demand in such outlets. This method of controlling volume was the
``withholding'' provisions whereby ``free'' and ``restricted''
percentages would be established. Growers would deliver all contracted
cranberries to their respective handlers. Free cranberries could be
marketed by handlers in any outlet, while restricted berries would have
to be withheld from handling and, if possible, diverted by handlers to
noncompetitive markets. The withholding program has not been used since
1971.
The order was amended in 1968 to authorize another form of volume
regulation--producer allotments. The intent was to discourage new
plantings and allow growers to remove surplus berries in a more
economical manner, by reducing their production to approximate the
marketable quantity or by leaving excess berries unharvested.
Production had continued to increase, and the industry was
reluctant to recommend a sufficient restricted percentage under the
withholding regulations. Under the producer allotment program, growers
were issued base quantities. Base quantity was the quantity of
cranberries equal to a grower's established cranberry acreage
multiplied by such grower's average per acre sales made from the
acreage during a representative period. If the allotment base program
were activated, each handler would be allowed to acquire for normal
marketing only a certain percentage of each grower's base quantity.
This authority was used to establish a regulation for the 1977-78
season, but that regulation was subsequently rescinded.
In 1992, the producer allotment provisions were amended to change
the method of calculating growers' annual allotments from the base
quantity method to a sales history method. Under this amendment, a
grower's sales history is calculated based on a grower's actual sales,
expressed as an average of the best 4 of the previous 6 years of sales.
There were concerns that base quantities did not accurately reflect
actual levels of sales because as growers' acreage increased or
decreased, the base quantity did not change. It was concluded that
basing allotments on actual sales off acreage would be a more realistic
and practical way to determine annual allotments. These provisions were
first used in the 2000-2001 season and again in 2001-2002. No volume
regulations were implemented in 2002-2003.
In recent years, the Committee has been considering ways in which
the marketing order could be improved to better address the oversupply
situation. Although the regulations implemented for volume regulation
were as flexible as the order would allow, the Committee believed there
were improvements that could be made through the amendment process. The
Committee appointed an amendment subcommittee to analyze the marketing
order and make recommendations to the Committee on proposed amendments.
The subcommittee considered the volume control provisions as well as
other provisions of the order, such as Committee structure, production
area, and promotion authorities. The Committee's proposals are the
result of years of discussions on improvements to the marketing order.
In addition, other interested parties included proposed amendments in
the proceeding.
Material Issues
The material issues of record addressed in this decision are as
follows:
Administrative Body
(1) Whether to authorize the Committee to reestablish districts
within the production area and reapportion grower membership among the
various districts.
Volume Regulations
(2) Whether to simplify criteria considered and set forth more
appropriate dates in establishing the Committee's marketing policy.
(3) Whether to revise the formula for calculating sales histories
under the producer allotment program in Sec. 929.48. The revision
includes providing additional sales history to compensate growers for
expected production on newer acres. This proposed change to Sec.
929.48 would also: allow for more flexibility in recommending changes
to the formula; and add authority for segregating fresh and processed
sales.
(4) Whether to allow compensation of sales history for catastrophic
events that impact a grower's crop.
(5) Whether to remove specified dates relating to when information
is required to be filed by growers/handlers in order to issue annual
allotments.
(6) Whether to clarify how the Committee allocates unused allotment
to handlers.
(7) Whether to authorize growers who choose not to grow a crop
during a year of volume regulation to not assign their allotment to
their handler.
(8) Whether to allow growers to transfer allotment during a year of
volume regulation.
(9) Whether to authorize the implementation of the producer
allotment and withholding programs in the same year.
(10) Whether to require the Committee to recommend volume
regulations by specified dates.
(11) Whether to add specific authority to exempt fresh, organic or
other forms of cranberries from order provisions.
[[Page 23332]]
(12) Whether to allow for greater flexibility in establishing other
outlets for excess cranberries. This includes whether to clearly define
what countries are authorized for foreign development with excess
cranberries and whether to establish a limit on foreign markets
eligible for shipments of excess berries.
(13) Whether to update and streamline the withholding volume
control provisions.
(14) Whether to revise the buy-back provisions under the
withholding provisions, including allowing growers to be compensated if
any funds are returned to handlers by the Committee.
(15) Whether to incorporate a handler marketing pool or buy-back
provisions under the producer allotment program to allow handlers
without surplus access to cranberries to meet customer needs.
(16) Whether to authorize an exemption from order provisions for
the first 1,000 barrels of cranberries produced by each grower.
Production Area
(17) Whether to add Maine, Delaware and the entire State of New
York to the production area.
Paid Advertising
(18) Whether to add authority for paid advertising under the
research and development provision of the order.
Definition of Cranberry
(19) Whether to add the species Vaccinium oxycoccus to the
definition of cranberry.
Definition of Handle
(20) Whether to modify the definition of handle to clarify that
transporting fresh cranberries to foreign countries is considered
handling and include the temporary cold storage or freezing of withheld
cranberries as an exemption from handling.
Reporting Requirements
(21) Whether to relocate some reporting provisions to a more
suitable provision and streamline the language relating to verification
of reports and records.
Deletion of Obsolete Provision
(22) Whether to delete an obsolete provision from the order
relating to preliminary regulation.
Findings and Conclusions
The following findings and conclusions on the material issues are
based on evidence presented at the hearing and the record thereof.
Material Issue Number 1--Reestablishment of Districts and
Reapportionment of Committee Membership Among Districts
The order should be amended to add authority to reestablish the
geographic districts set up for purposes of grower representation on
the Committee and to reapportion membership among those districts.
Section 929.20 of the order establishes the Cranberry Marketing
Committee, comprised of 13 growers and 1 public member. Grower
membership is allocated among two groups--growers affiliated with the
major cooperative marketing organization and all other growers. One
grower member represents the production area-at-large, while the
remaining grower members are apportioned among four districts as shown
below.
------------------------------------------------------------------------
No. of
District grower
members
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1--Massachusetts, Rhode Island, and Connecticut................ 4
2--New Jersey and New York..................................... 2
3--Wisconsin, Michigan, and Minnesota.......................... 4
4--Oregon and Washington....................................... 2
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Currently, there is no authority under the order to reestablish the
districts or to reapportion membership among the districts. Testimony
indicated that adding such authority would allow the Committee to
address, in a timely fashion, situations wherein changes are needed to
the districts' makeup to more appropriately align the districts or the
representation of the districts. Adding this authority would allow the
Committee to recommend changes to be made through informal rulemaking
rather than through an order amendment.
The Committee manager testified that before any recommendations
could be made by the Committee regarding reestablishment of districts
or reapportionment of membership, several criteria should be
considered. The criteria to be considered would be: (1) The relative
volume of cranberries produced in each district; (2) the relative
number of cranberry producers within each district; (3) cranberry
acreage within each district; and (4) other relevant factors.
This proposed amendment would allow the Committee to recommend
realigning district boundaries (for example, moving a State from one
district into another); to modify the number of districts; and to
change the number of grower members to represent each district. The
four criteria established would need to be considered prior to any
Committee recommendation.
This proposed amendment would not allow an increase or decrease in
the total number of members on the Committee. It also would not allow
increases or decreases in the total number of members allotted to each
group (growers affiliated with the major cooperative marketing
organization and other growers).
An opponent of adding this authority testified that if this
provision were adopted, unnecessary discord would occur in the
industry. He provided an example using current independent grower
membership. Growers not affiliated with the major cooperative are now
allocated two members from District 1, one member from District 2, two
members from District 3, and one member from District 4. The witness
envisioned a situation where independent representatives from Wisconsin
could want an additional seat on the Committee for their district based
on volume produced and independent representatives from Massachusetts
could want an additional seat for their district based on the number of
growers in that district. It would take a Committee vote to recommend
such an action, which would require a super majority of votes to pass
(11 of 14 members if the public member chose to vote, 10 of 13 members
otherwise). He testified that the decision would ultimately be made by
members representing the major cooperative because the non major
cooperative members would be split on their votes. He did not believe
it would be fair to the group representing other than the major
cooperative if the major cooperative decided which district is entitled
to an additional independent seat. A Committee motion on this issue
could polarize the members, he testified.
The witness testified that the current district makeup and
allocation of membership is well thought out and well reasoned. He
believed that any needs that arise to modify districts should be
accomplished through the formal amendment process, where growers can
vote in a referendum on this issue. He further testified that the
industry structure does not change rapidly as evidenced by the last
amendment on establishing districts, which occurred in 1978.
At the hearing, one witness testified that he believed that adding
this authority would allow the Committee to add States not currently
regulated under the order through informal rulemaking if the Committee
determined it
[[Page 23333]]
necessary. This is not true. Any change in the production area would
require an amendment of Sec. 929.4 of the order through the formal
amendment process. Adding this authority would not allow the Committee
to expand the production area.
As an example of redistricting, there was much testimony on the
significance of the State of New Jersey relative to the States of
Wisconsin and Massachusetts. Some believe it is not equitable to
provide a separate district and two seats to New Jersey based on the
number of growers and volume of production in that State. While it has
been determined that current Committee representation is reasonable,
this situation could change in the future. The Committee should have
the authority to recommend a modification in the district structure,
either by increasing or decreasing the number of districts, reassigning
geographic regions among the districts, or reallocating membership
among the districts, without having to amend the order. The Committee
would recommend the change to USDA and notice and comment rulemaking
would determine if changes are warranted.
A witness stressed the importance of having the experience and
knowledge on the Committee from every growing area. Because the
industry is spread out across the United States, the educational aspect
of representatives reporting Committee activities to growers in their
district is critical, he testified. Although this witness supported
modifying districts by order amendment, he was concerned with the
smaller districts not having representation and the Committee not being
able to address the problem quickly.
Record evidence supports adding the authority to reestablish
districts and reapportion membership among the districts. This
authority would give the Committee greater flexibility in responding to
changes in grower demographics and district significance in the future.
It is possible that if this amendment is adopted, the larger districts
may attempt to attain an additional seat. Since the total number of
seats on the Committee cannot be altered (except through amendment of
the order), the only way to accomplish this would be to transfer a seat
from another district or to eliminate a district and combine the States
in that district with another district. Any recommendation to modify
the districts or representation would need a Committee vote and USDA
approval. Since all Committee actions require a super majority vote to
pass, recommendations to change the districts would require support
from both groups, including the major cooperative. These voting
requirements were established to ensure that all Committee
recommendations are supported by a majority of the industry, regardless
of affiliation. A vote on district makeup would be no different than
any other issue the Committee considers.
In addition to a Committee recommendation, notice and comment
rulemaking would be necessary to implement any modifications in
district representation on the Committee. All growers and handlers
would be provided the opportunity to comment on the Committee
recommendation before it was adopted. USDA considers all comments
before issuing a final rule. Therefore, it is concluded that growers
would have ample opportunity to be heard on issues concerning Committee
representation.
Changes in industry structure could occur more quickly in the
future than they have in the past. For this reason, it is deemed
important that the Committee be provided the flexibility to address any
changes in industry demographics by reestablishing districts and
reapportioning membership.
Record evidence supports adding the authority to reestablish
districts and reapportion Committee membership among the districts.
Therefore, a new Sec. 929.28 is proposed to be added to the order.
Material Issue Number 2--Development of Marketing Policy
Section 929.46 should be revised to simplify the criteria required
to be considered in the Committee's annual marketing policy and
eliminate obsolete dates.
Section 929.46 of the order requires the Committee to develop a
marketing policy each year as soon as practicable after August 1. In
its marketing policy, the Committee projects expected supply and market
conditions for the upcoming season. The marketing policy should be
adopted before any recommendation for regulation, as it serves to
inform USDA and the industry, in advance of the marketing of the crop,
of the Committee's plans for regulation and the bases therefore.
Handlers and growers could then plan their operations in accordance
with the marketing policy. Additionally, the marketing policy is useful
to the Committee and USDA when specific regulatory action is being
considered, since it would provide basic information necessary to the
evaluation of such regulation.
Currently, Sec. 929.46(b) states that as soon as practicable after
August 1 of each crop year and prior to making any recommendations for
a producer allotment or withholding program, the Committee shall submit
a marketing policy which considers nine criteria. The nine criteria
include: (1) The estimated total production of cranberries; (2) the
expected general quality of the crop; (3) the estimated carryover, as
of September 1, of frozen cranberries and other cranberry products; (4)
the expected demand conditions for cranberries in different market
outlets; (5) supplies of competing commodities; (6) trend and level of
consumer income; (7) the recommended desirable total marketable
quantity of cranberries, including an adequate carryover into the
following crop year; (8) any volume regulation expected to be
recommended by the Committee during the crop year; and (9) other
factors having a bearing on the marketing of cranberries. The Committee
proposed that numbers 5, 6 and 8 be deleted.
The proponents testified that there are really no directly
competing commodities for cranberries since they are a fresh seasonal
item for holiday use. Also, cranberry juice competes for shelf space,
but the competition is between the branded companies and private label
companies rather than with other types of juices. The trend and level
of consumer income is another criterion that the Committee does not
believe is of much value to consider. Proponents testified that there
are different cranberry products available at different price levels
that can be purchased by consumers depending on their wishes. Other
factors are more important to consumers, however, in making food
choices. Consumers may buy cranberry products based on health related
issues, for example. The proponents recommended that these two items be
deleted from the marketing policy criteria. However, the Committee may
consider any factors it deems relevant under the language that allows
the Committee to consider ``other factors having a bearing on the
marketing of cranberries.''
With regard to criterion number 8, no testimony was given in
support of deleting this item. However, the record supports that the
Committee's marketing policy should be adopted prior to any
recommendation for volume regulation, and should serve as the
justification for such recommendation. Therefore, it should be removed
as a criterion to be considered in recommending a marketing policy.
The Committee also proposed revising the dates by which the
Committee must estimate the marketable quantity necessary to establish
a producer
[[Page 23334]]
allotment program and the date by which the Committee shall submit its
marketing policy to USDA for consideration. Currently, Sec. 929.46(a)
states the Committee shall estimate the marketable quantity for the
following crop year each year prior to May 1. Section 929.46(b) states
that as soon as practicable after August 1 of each crop year, and prior
to making any recommendation for regulation, the Committee shall submit
to USDA its marketing policy.
The proponents testified that May 1 is too late for cranberry
producers to make informed decisions on the steps they may want to take
if a producer allotment regulation were to be recommended based on the
marketing policy. Witnesses testified that producers need to know the
Committee's intentions as early as possible in the year so they can
make decisions on whether or not to grow a crop, flood their bogs, and
consider cultural practices that could save the producers money. For
example, a producer may want to apply less fertilizer, herbicides, or
pesticides to curtail production in the event of the implementation of
a producer allotment program. The earlier that the decision is made by
the Committee, the more information the producer has to plan for the
necessary cultural practices for the upcoming crop. For these reasons,
the Committee proposed that recommendations for producer allotment
regulations be made no later than March 1.
Record testimony also establishes, however, that a withholding
regulation would not have to be recommended quite as early in the year
because such a regulation is imposed on handler acquisitions of
cranberries rather than on the amount handlers can purchase from their
growers. In the event such a regulation were contemplated, the
marketing policy could be submitted later when more accurate
information about the upcoming crop were available.
The dates by which recommendations for the different types of
volume regulations must be made are being recommended for inclusion in
Sec. 929.51, Recommendations for regulation. This recommendation is
discussed later as Material Issue Number 10.
The Committee also proposed that the Committee be required to
forward its marketing policy for the following crop year prior to
August 31. Currently, Sec. 929.46(b) states that the marketing policy
must be submitted to USDA after August 1 of each crop year. Although
the August 31 date would allow the Committee to evaluate information
that comes available in mid-August, it is inconsistent with the
recommendation that any producer allotment regulation be recommended
prior to March 1.
USDA is recommending that Sec. 929.46 be amended by deleting both
dates that currently appear in that section and by modifying the
criteria to be considered in recommending a marketing policy as
proposed by the Committee. The marketing policy would be submitted
along with any recommendations for a producer allotment and/or a
withholding regulation.
Material Issue Number 3--Revision of Sales History
Calculations
Section 929.48 of the order should be amended to change the way
sales histories are calculated, provide more flexibility in making any
further changes to the calculations, and authorize separate sales
histories to be calculated for fresh and processed sales.
Section 929.49 of the order authorizes cranberry volume controls in
the form of producer allotment regulations. That section provides that
if USDA finds from a Committee recommendation or from other available
information, that limiting the quantity of cranberries that can be
purchased from or handled on behalf of growers during a crop year would
tend to effectuate the declared policy of the Act, USDA shall determine
and establish a marketable quantity for that year. (Marketable quantity
is defined as the number of pounds of cranberries needed to meet total
market demand and to provide for an adequate carryover into the next
season.)
USDA would also establish an allotment percentage that is equal to
the marketable quantity divided by the total of all growers' sales
histories. The allotment percentage would then be applied to each
grower's individual sales history to derive each grower's annual
allotment. Handlers could not handle cranberries unless they are
covered by a grower's annual allotment.
Section 929.48 of the order provides for computing growers' sales
histories. Sales history is defined in Sec. 929.13 as the number of
barrels of cranberries established for a grower by the Committee. The
Committee updates growers' sales histories each season. The Committee
accomplishes this by using information submitted by the grower on a
production and eligibility report filed with the Committee. The order
sets forth that a grower's sales history is established by computing an
average of the best 4 years' sales (out of the most recent 6 years) for
those growers with existing acreage. For growers with 4 years or less
of commercial sales history, the sales history is calculated by
averaging all available years of such grower's sales. A new sales
history for a grower with no sales history is calculated by using the
State average yield per acre or the total estimated commercial sales,
whichever is greater. This section also provides the authority for
calculating new sales histories for growers after each crop year where
a volume regulation was established using a formula recommended by the
Committee and approved by USDA.
In recent years, cranberry production has exceeded market demand,
resulting in building inventories and dramatic declines in grower
prices. In 2000, the Committee recommended the use of a producer
allotment volume regulation to bring supplies more in line with demand.
A marketable quantity of 5.468 million barrels was established for the
2000-01 season, implemented through an allotment percentage of 85
percent. Many growers, particularly those with acreage 4 years old or
less, indicated that the method of sales history calculation placed
them at a disadvantage because they realized more production on their
acreage than their sales history indicated. At that time, it was
determined that approximately 30 percent of all cranberry acreage was
planted in 1995 or later. With the volume of new acres within the
industry, many growers were affected.
Because sales histories are based on an average of past years'
sales, newer growers could be restricted to a greater extent than more
established growers. This is because a cranberry bog does not reach
full capacity until several years after being planted. Using an average
of early years' sales (which are low) can result in sales histories
below future sales potential. A more established grower, on the other
hand, would have a sales history more reflective of his or her
production capacity.
In recommending volume regulations for the 2000 season, the
Committee considered the most equitable method of determining sales
histories within the scope of the order. The final rule on volume
regulation for the 2000 crop year was as flexible as the order would
allow in alleviating the differential impact of the volume regulation
on growers.
The Committee determined that something needed to be done to
address concerns associated in the 2000 crop year with growers with
newer acreage. As stated previously, there is authority under the order
for calculating new sales histories for growers after each crop year
where a volume regulation is established using a formula recommended by
the Committee and
[[Page 23335]]
approved by USDA. In light of this authority, the Committee and USDA
gave much thought to the most equitable method of determining sales
histories in the event volume regulation was recommended in 2001. The
method established specifically addressed growers' concerns by
providing a more equitable determination of their sales histories. The
method developed was based on industry and USDA analysis of average
yields for acreage at different stages of growth. The method provides
additional sales history for growers with newer acres to account for
increased yields for each growing year up to the fifth year by
factoring in appropriate adjustments to reflect rapidly increasing
production during initial harvests. The adjustments were in the form of
additional sales histories based on the year of planting.
The modified method of calculating sales histories was expected to
address concerns associated with using a grower's actual sales history
without taking into account anticipated production when calculating
annual allotments. Ideally, in a year of volume regulation, all
growers' actual crops would be reduced by the same percentage. Because
of uncertainties in making crop predictions, annual allotment
calculations based on averaging growers' sales histories alone does not
provide any adjustment for new acres as they rapidly increase
production during the first several harvests. Therefore, growers can be
impacted differently depending upon their particular situation. The
result is that sales histories for growers with a significant number of
acres being harvested for the first, second, third, or fourth time can
be below what the average crop for these growers is expected to be
during the next harvest. The restriction percentages for these growers
in a year of volume regulation could therefore exceed the average
allotment restriction percentage. The method recommended by the
Committee for the 2001-2002 season addressed that issue by minimizing
the differential impact among growers with newer acreage.
The revised formula provided a specified amount of additional sales
history for newer acreage based on USDA and industry analysis of
cranberry production. The amount of such additional sales history
depended on the year of planting. Also, the formula took into account
different harvesting times for first year harvests by basing first year
averages on the year planted.
The Committee recommended this method at its August 28, 2000,
Committee meeting. The recommendation was set forth in a proposed rule
published in the Federal Register on January 12, 2001, (66 FR 2838)
with a comment period ending February 12, 2001.
At a Committee meeting on February 5, 2001, concerns were raised
that the proposed formula would give an unfair advantage to growers who
only had acres with 1 to 3 years of sales history (as opposed to
growers with mature acres combined with new or replanted acres). The
Committee believed that these growers would be provided an adjusted
sales history in excess of average yields. The Committee recommended
that the proposal be modified to be more equitable to all growers by
providing that growers with acreage with 1 to 3 years of sales
histories divide their total sales by 4 instead of all available years
and then be provided additional sales history in accordance with the
formula for adjusting sales history.
At the February 2, 2001 meeting, the Committee also recommended
using regulation again to continue the effort to restore economic
health to the cranberry industry. The modification to the sales history
calculations was incorporated into the proposed rule for volume
regulation published in the Federal Register on May 14, 2001 (66 FR
24291) and was finalized with a publication in the Federal Register on
June 27, 2001 (66 FR 34332). The marketable quantity for the 2001-2002
crop year was set at 4.6 million barrels and the allotment percentage
was designated at 65 percent.
Specifically, the calculation of sales histories for the 2001-02
season were as follows:
For each grower with acreage with 7 or more years of sales history,
a new sales history was computed using an average of the highest 4 of
the most recent 7 years of sales. If the grower had acreage with 6
years sales history, a new sales history was computed by averaging the
highest 4 of the 6 years. If the grower had acreage with 5 years of
sales history and such acreage was planted prior to 1995, a new sales
history was computed by averaging the highest 4 of the 5 years.
For growers whose acreage had 5 years of sales history and was
planted in 1995 or later, the sales history was computed by averaging
the highest 4 of the 5 years and was adjusted with additional sales
history in accordance with the formula. For growers whose acreage had 4
years of sales history, the sales history was computed by averaging all
4 years and was adjusted with additional sale history in accordance
with the formula. For growers whose acreage had 1 to 3 years of sales
history, the sales history was computed by dividing the total years
sales by 4 and was adjusted with additional sales history in accordance
with the formula.
For growers with acreage with no sales history or for the first
harvest of replanted acres, the sales history was 75 barrels per acre
for acres planted or re-planted in 2000 and first harvested in 2001 and
156 barrels per acre for acres planted or re-planted in 1999 and first
harvested in 2001.
In addition to the sales history for growers, additional sales
history was assigned to growers specified above with acreage planted in
1995 or later. The additional sales histories depending on the date the
acreage was planted are shown in Table 1.
Table 1.--Additional Sales History Assigned to Acreage in 2001
------------------------------------------------------------------------
Additional
2001 sales
Date planted history per
acre
------------------------------------------------------------------------
1995.................................................... 49
1996.................................................... 117
1997.................................................... 157
1998.................................................... 183
1999.................................................... 156
2000.................................................... 75
------------------------------------------------------------------------
The Committee did not recommend volume regulations for the 2002-
2003 crop year. The authority to use a new formula to calculate sales
histories for growers is only applicable after a crop year where a
volume regulation is established. Therefore, the next time the
Committee recommends volume regulation, the Committee will not be able
to use the formula developed for the 2001-2002 crop year. Sales history
calculations would have to be accomplished using the best 4 out of 6
crop years, and no additional sales histories could be assigned to
newer acreage.
The Committee's proposed amendment to Sec. 929.48 would add to
that section the formula for calculating sales histories that was used
for the 2001-2002 crop year. In addition, the proposed amendments to
this section include allowing more flexibility in recommending changes
to the formula, adding authority to calculate fresh and processed
cranberry sales histories separately, and modifying the way growers'
sales histories can be adjusted to compensate for catastrophic events
that impact growers' crops. This material issue will discuss all
proposed
[[Page 23336]]
amendments to this section except for adjusting growers' sales
histories to compensate for catastrophic events. That issue will be
discussed in Material Issue Number 4.
Sales History Formula
The sales history formula used in the 2001-2002 crop year was
specific to that particular season. The Committee developed generic
language to include in Sec. 929.48 that uses the principles of the
2001-02 formula, but can be applied to future crop years.
Under the proposed amendment, sales histories would be computed by
the Committee in the following manner:
For growers with acreage with 6 or more years of sales history, the
sales history would be computed using an average of the highest 4 of
the most recent 6 years of sales. For growers with 5 years of sales
history for acreage planted or replanted 2 years prior to the first
harvest on that acreage, the sales history would be computed by
averaging the highest 4 of the 5 years.
For growers with 5 years of sales history from acreage planted or
replanted 1 year prior to the first harvest on that acreage, the sales
history would be computed by averaging the highest 4 of the 5 years,
and would be adjusted to provide additional sales history to compensate
for increased production on the newer acreage. For growers with 4 years
or less of sales history, the sales history would be computed by
dividing the total sales from that acreage by 4, and would be adjusted
to provide additional sales history to compensate for increased
production on the newer acreage. These two groups of growers would be
provided with additional sales history using a formula x=(a-b)c. The
letter ``x'' constitutes the additional number of barrels to be added
to the grower's sales history. The value ``a'' is the expected yield
for the forthcoming year harvested acreage as established by the
Committee. The value ``b'' is the total sales from the acreage as
established by the Committee. The value ``c'' is the number of acres
planted or replanted in the specified year. For acreage with 5 years of
sales history: ``a'' would equal the expected yield for the forthcoming
sixth year harvested acreage (as established by the Committee); ``b''
would equal an average of the most recent 4 years of expected yields
(as established by the Committee); and ``c'' would equal the number of
acres with 5 years of sales history.
For growers with acreage having no sales history, or the first
harvest of replanted acres, the sales history would be the average
first year yield (depending on whether the first harvest is 1 or 2
years after planting or replanting) as established by the Committee,
multiplied by the number of acres.
There are several variables in the Committee's proposed sales
history formula that would have to be established through the informal
rulemaking process prior to using the formula. These relate to the
adjustments for newer acreage. Specifically, in the formula x=(a-b)c,
the values of a and b would have to be established by the Committee.
The value of c would be an actual acreage number, and x would be a
computed value.
It is likely the Committee would use the results of the analysis
performed prior to the 2001 season to set these values. However,
appropriate adjustments could be made if better information becomes
available in the future. Rulemaking to modify these numbers would be
undertaken as necessary, and need not be done every year.
The Committee's proposed amendment of Sec. 929.48 also provides
that a new sales history would be calculated for each grower, after
each crop year, using the above formula or another formula as
determined by the Committee and approved by USDA. The proposed
amendment further provides that the Committee, with USDA approval, may
adopt regulations to alter the number and identity of years to be used
in computing sales histories, including the number of years to be used
in computing the average.
The Committee manager testified that Sec. 929.48, as currently
written, restricted the Committee from being able to make the best
calculations of sales histories for the 2000-2001 crop year. With that
section authorizing a new formula to calculate sales histories after a
year of volume regulation, the Committee was able to develop a more
equitable system of calculating sales histories for the 2001-02 crop
year. However, the Committee did not recommend a producer allotment
regulation for the 2002-2003 crop year, and as a consequence, the
method of calculating sales histories reverts back to the method in
which initial sales histories were calculated in 2000-2001.
The Committee manager testified that theory and practical
application do not always coincide, and that as situations change, the
Committee needs the opportunity to modify the regulations to correspond
to industry practices, within the scope of order authority. He stated
that with changing circumstances in the future, the Committee may want
to consider calculating sales histories using different inputs. The
proposed amendment is flexible enough to allow the Committee to modify
how sales histories are calculated depending upon grower and handler
practices while still maintaining the fundamental effectiveness of a
producer allotment program.
Testimony indicated that providing the Committee with the
flexibility to recommend changes to the formula may allow some
producers, particularly those with newer or replanted acreage, to
deliver additional fruit. This would improve returns to newer growers,
as the recalculation of sales histories is most critical during periods
when a producer allotment regulation has been established. Allowing
growers additional sales history to recognize expected increases in
yields on newer acres would provide these growers with a sales history
more reflective of their actual sales potential.
A witness testified that a 20 percent reduction in sales history
under volume regulation (through an allotment percentage of 80 percent)
for growers with new acreage might actually reduce these growers' crops
by 40 percent or more if most of their acreage is new. An example used
was a grower with three years of harvests from one acre. In the first
year he harvested 50 barrels, in the second year 90 barrels, and in the
third year 130 barrels. His sales history would be an average of those
years or 90 barrels. If a 20 percent volume regulation were implemented
the next year, his allotment would be 72 barrels (80 percent of 90
barrels). There would not be sufficient sales history built up on that
acre to allow for the fact that it could yield 250 barrels in the year
of volume regulation. If this grower harvested 250 barrels and could
only sell 72, a 20 percent volume regulation would be 70 percent to
this grower.
The intent of the revised method is to predict what the production
of new acreage would be during the upcoming year so that the crop
reduction for growers with new acreage is similar to that of growers
who do not have new acreage.
Some growers believed the revised formula was too restrictive while
others thought it was not restrictive enough. A grower opposed to this
method of computing sales histories testified that providing additional
sales histories to newer growers encourages more production. She
testified that because of strong prices, many new growers entered the
cranberry business between 1990 and 1997 without looking at the long-
range impact. This increase in acreage is what caused the current
oversupply situation. This witness
[[Page 23337]]
believed that it was each grower's responsibility to guard against this
impact. Growers should not be rewarded with additional sales history
for making unwise business decisions.
The record indicates that in developing this method, the Committee
assembled yield data on over 10,000 cranberry acres to understand what
yields are typical for new acreage over the first 5 years after
planting. This data provided the basis for establishing the sales
history formula used for the 2001 season. This data also demonstrated
the need for this change.
USDA worked with cranberry handlers in assembling data. Handlers
were asked to provide information on growers' yield per acre for yearly
harvests made 1, 2, 3, 4 and 5 years after planting for acres harvested
over the past 5 years. The handlers were also asked to indicate which
varieties were planted, specifying the proportion of total new acreage
dedicated to each variety.
Two large handlers supplied detailed information relative to
harvested acres. To supplement this information, data was also gathered
from growers who delivered cranberries to other handlers. This
additional data collection was accomplished to broaden the scope of the
industry data used in the analysis.
The data combined grower information from all cranberry producing
regions, as well as data for all varieties and years of birth (original
date of planting). The data was analyzed to determine what an average
grower, growing in average conditions, would experience in terms of
yield per acre if he or she planted new acreage and then harvested it 5
consecutive years thereafter.
The results were divided into two categories: Group A (growers
harvesting for the first time 1 year after planting) and Group B
(growers waiting 2 years before the first harvest). The data included
the first harvest and four subsequent harvest yields for groups A and
B, respectively, and was analyzed to determine the average yields and
rate of increase in yields over the first 5 harvests for each grower/
bog category.
The analysis of yield progression over the first 5 harvests for
groups A and B revealed significant differences in first harvest
yields, but supported the conclusion that yield progression rates for
subsequent years were comparable. Based on this observation, yield
rates and expected yield/sales histories were averaged based on the
sample size from each group. These averages were 50, 131, 197, 227 and
250 barrels per acre for acres harvested the first, second, third,
fourth and fifth year after planting, respectively.
Since these numbers are based on average yields for the sample
groups, it is reasonable to conclude that the yields of approximately
50 percent of the growers impacted by this proposal would be higher
than the average. To accommodate as many growers as possible, it was
agreed to adjust the averages upward by 25 barrels which would result
in growers receiving a higher amount of additional sales history under
the formula. This would also assure that first harvests (acreage with
no sales history) which were provided the State average yield as a
sales history in the 2000 crop year would receive a comparable sales
history for 2001. The average expected yields for each year, increased
by 25 barrels, were 75, 156, 222, 252 and 275 barrels per acre for
acres harvested the first, second, third, fourth and fifth year after
planting, respectively.
These yield figures were incorporated into the formula for
determining the additional sales history per acre that growers would be
provided, and were applied to acreage planted in 1995 or later.
In addition to the actual sales history, such growers were provided
additional sales history to account for expected increased production
in the forthcoming year.
The formula was a tool used to make an appropriate adjustment in
sales histories for growers harvesting young acreage, which was not yet
producing at optimal capacity. The formula was based on industry data
from all growing areas and from all sizes of growing operations, and
used a higher than mid range of this data.
USDA does not agree that new plantings would be encouraged by
adding this authority to the order or that growers are being rewarded
for making poor business decisions. Incorporating this method into the
order would address equity concerns expressed during the volume
regulations implemented in 2000 and 2001. The formula used in the 2001
season was an improvement from the formula used in 2000. However, the
way the current order language is written, this improved method cannot
be used the next time volume regulations are implemented because the
revised formula can only be implemented after a year of volume
regulation. The formula would compensate growers for anticipated
production on recently planted acres that do not have sales histories
reflective of current production potential. Accommodating the new
acreage is an important element in any attempt to equitably implement a
producer allotment volume regulation.
The proposal would also authorize the Committee, with USDA
approval, to adopt recommendations to alter the number and identity of
years to be used in computing sales histories, including the number of
years to be used in computing the average. This would allow the
Committee to have the flexibility to address unforeseen events that
occur that would make it appropriate to modify the number of years used
in computing sales histories.
Record evidence supports amending Sec. 929.48 by changing the way
sales histories are calculated as proposed by the Committee and
allowing for more flexibility in recommending changes to the sales
history formula. Therefore, this proposal is recommended for adoption.
Calculations of Fresh and Processed Cranberry Sales Histories
The Committee also proposed that sales histories, starting with the
crop year following adoption of this amendment, should be calculated
separately for fresh and processed cranberries. In a year an allotment
percentage is set, that percentage would be applied only to a grower's
processed sales history if fresh fruit is exempt from regulation (as it
was in the recent 2 years of regulation). If fresh fruit was not exempt
from volume regulation, the allotment percentage would be applied to a
grower's total sales history (fresh and processed combined).
As proposed, the amount of fresh fruit sales history may be
calculated based on either the delivered weight of the barrels paid for
by the handler (excluding trash and unusable fruit) or on the weight of
the fruit paid for by the handler after cleaning and sorting for the
retail market. Handlers using the former calculation would allocate
delivered fresh fruit subsequently used for processing to growers'
processing sales. Fresh fruit sales history, in whole or in part, may
be added to processed fruit sales history with the approval of the
Committee in the event that the grower's fruit does not qualify as
fresh fruit at delivery.
Testimony revealed that this proposal would address some of the
inequities experienced in the last two volume regulations. Fresh and
organic fruit were exempt from the 2000 and 2001 volume regulations
under the authority of Sec. 929.58 which provides that the Committee
may relieve from any or all order requirements cranberries in such
minimum quantities as the Committee, with the approval of USDA, may
prescribe. It was determined that fresh and organic fruit did not
contribute to
[[Page 23338]]
the surplus. Fresh cranberry sales constituted less than 5 percent of
the cranberry market. Organically grown cranberries comprised an even
smaller portion of the total crop, about 1,000 barrels sold annually.
All fresh and organically grown cranberries could be marketed and did
not compete with the processed market. For this reason, the Committee
recommended that fresh and organically grown cranberries be exempt from
volume regulations.
In both years, fresh fruit sales were deducted from sales histories
and each grower's sales history represented processed sales only. In
2000, concerns were expressed that this exemption would give an unfair
advantage to some cranberry processors (those that did not handle fresh
fruit) and to their growers. Because of the timing of the rulemaking,
it was decided by the Committee not to recommend any additional changes
to the fresh fruit exemption for 2000. However, the Committee would
consider the way fresh fruit is handled under a volume regulation in
future years. In 2001, the fresh fruit exemption was still recommended
to be deducted from sales histories but the exemption was clarified so
that fresh fruit was handled as it was intended by the Committee.
In addition, in both years of volume regulation, in the event that
the growers' fruit did not qualify as fresh fruit at delivery, the
sales from that fruit were added to the growers' processed fruit sales
histories. Testimony indicated that in the fresh fruit industry, there
are instances when growers deliver fresh fruit that fails the handler's
fresh fruit specifications and therefore is converted to processing
fruit. In this case, the fruit not used as fresh would be applied to
that grower's processed fruit sales history.
It is possible that exempting fresh fruit from volume regulation
may not be appropriate in future years. Testimony indicated that
because of the exemption from volume regulation, there was an increase
in the amount of fresh fruit produced. Many growers took advantage of
the exemption and sold fresh fruit when they normally would not. A
fresh fruit handler testified that many handlers had more fresh fruit
than could be sold. The price fell from 1999 to 2000 and remained
stable for 2001.
For this reason and to have sales histories more reflective of
actual sales, the Committee is recommending that the Committee begin
calculating separate sales histories for fresh and processed sales.
Testimony revealed that this proposal would address the inequities
experienced in the last two volume regulations.
Testimony indicated the reason for incorporating language
specifying that the amount of fresh fruit sales history may be
calculated based on either the delivered weight of the barrels paid for
by the handler (excluding trash and unusable fruit) or on the weight of
the fruit paid for by the handler after cleaning and sorting for the
retail market was because handlers process growers' fruit differently.
For example, the major cooperative accounts for fresh fruit on a
delivered basis. A major cooperative grower delivering 1,000 barrels of
fresh fruit would be paid for 1,000 barrels of fresh fruit. Samples are
taken at delivery and premiums are paid based on quality. On the basis
of its packed out and sold fresh fruit, the cooperative assigns a fresh
fruit sales history back through to its growers proportional to their
original deliveries.
Independent handlers pay growers for fruit on a packed out basis
and pay their growers based on their individual pack outs. If a grower
delivers 1,000 barrels to an independent handler, and the pack out is
80 percent, the grower would be credited with 800 barrels of fresh
fruit and 200 barrels of processed fruit.
It is not the intent of this proposal to force handlers to change
the way they do business with their growers. Therefore, this language
acknowledges the different ways handlers pack fruit and allows them to
continue to do so.
The Committee would calculate the sales histories on fresh and
processed sales separately every year, not just in years of volume
regulation.
Record evidence supports modifying the formula for calculating
sales histories, allowing for more flexibility in recommending changes
to the formula, and adding authority for segregating fresh and
processed sales. Therefore, it is recommended that these amendments to
Sec. 929.48 be adopted.
Material Issue Number 4--Catastrophic Events That Impact Growers' Sales
Histories
The order should be amended to allow more liberal adjustments in
growers' sales histories when they lose production due to catastrophic
events.
The order currently provides in Sec. 929.48(a)(4) that if a grower
has no commercial sales from such grower's cranberry acreage for three
consecutive crop years due to forces beyond the grower's control, the
Committee shall compute a level of commercial sales for the fourth year
for that acreage using an estimated production, obtained by crediting
the grower with the average sales from the preceding 3 years during
which sales occurred. Any and all relevant factors regarding the
grower's lost production may be considered by the Committee prior to
establishing a sales history for such acreage.
During the two recent seasons when volume regulations were in
place, the Committee appointed an appeals subcommittee for growers who
were dissatisfied with their sales histories as calculated by the
Committee. Growers could appeal if they believed the figures used in
the sales history calculation were incorrect or if they believed the
calculation was incorrectly performed by Committee staff.
Testimony revealed that in 2001, there was only one situation that
actually met the 3 years of no production criteria. A grower's acreage
in Massachusetts was destroyed from chemical contamination not of his
doing and this grower was compensated with additional sales history.
The Committee's proposal would provide more flexibility in this
provision by authorizing the Committee to recommend rules and
regulations to adjust a grower's sales history to compensate for
catastrophic events that impact a growers' crop for more than 2 years.
At the hearing, Committee witnesses modified their proposal to make
this provision more flexible by removing the requirement that a
grower's crop had to be impacted for more than 2 years.
The Committee manager testified that growers do experience
catastrophic events and forces beyond their control that do not totally
destroy their ability to produce a portion of their crop. Using the
current criteria of a total loss for 3 concurrent years, few growers,
if any, would ever qualify for such an adjustment.
According to the record, there were many growers who had situations
where their crop was not totally destroyed for 3 consecutive years, but
the losses incurred negatively impacted their sales history. The
Committee was unable to authorize any adjustments.
A grower testified that his crop was impacted by the State of
Wisconsin Department of Natural Resources (DNR) land that borders on
his property. The DNR applied a chemical on a high heat day that spread
across the grower's property. This situation destroyed a good
percentage of his marsh, and dramatically impacted his crop for two
years. The Committee was unable to adjust his sales history because it
was not a total loss that impacted his crop for 3 consecutive years.
Under this proposal, this grower could have been provided with
additional sales history to compensate him for his losses.
Specifically, this grower produced 20,000 barrels of
[[Page 23339]]
cranberries and his allotment was 9,000 barrels. The 2001-02 volume
regulation thus had a greater impact on him than on other growers.
If the language was kept at more than 2 years of loss as originally
proposed by the Committee, this grower would still not have been
provided with additional sales history. This is one of the reasons the
Committee recommended removing the more than 2-year requirement and
leaving it to the Committee's discretion to establish guidelines
through the rulemaking process to determine if the grower should be
provided additional sales history. The reason the Committee included
the more than 2 years restriction initially was because sales histories
are based on the best 4 out of 6 years. A grower's calculation of
initial sales history would allow the 2 lowest years to be excluded in
the calculation. The Committee thought this would cover any situation
involving 1 or 2 years of losses. However, the Committee believes
unique situations could occur where the losses on a grower's crop for
even a single year could warrant an adjustment to that grower's sales
history.
Other discussions at the hearing on this proposal pertained to what
would constitute a ``catastrophic'' event. The Committee recommended
changing the terminology from the current language which states
``forces beyond the growers' control'' to ``catastrophic events''
because they wanted to ensure that normal agricultural problems that
occur, such as long periods of rain that may have a detrimental impact
on a grower's crop or hail damage, would not be situations where
growers would be entitled to additional sales histories. It was
testified that excessive rain or hail is an event that is beyond a
grower's control, but it may not be a catastrophic event. Some of these
situations would be covered by crop insurance, so the grower is already
being compensated for his loss.
Testimony indicated that the intent of the proposal is to allow the
Committee to recommend, through informal rulemaking, specific
determinations of what catastrophic events would entitle growers to
adjustments in their sales histories. The regulation should benefit
growers by allowing them to understand what situations would entitle
them to such adjustments. It could also help reduce the number of
appeals filed and reduce administrative time and expenses in reviewing
appeals.
Testimony also indicated that each case should be reviewed and
considered on its own merits (within guidelines established through the
rulemaking process) and that less than a 100 percent loss can
significantly impact a grower's sales history. The proposed amendment
addresses this situation by not requiring a grower to have suffered a
total crop loss before being eligible for an adjustment in his or her
sales history.
Testimony indicated that the proposed amendment would have a
positive impact on producers, as the Committee would be in a position
to compensate growers who experienced losses due to catastrophic
events. The Committee would recommend procedures and guidelines to be
followed in each year a volume regulation is implemented.
Allowing the Committee to make such recommendations through
informal rulemaking would provide the flexibility to ensure the best
interests of the growers are being served.
Record evidence supports allowing adjustments in sales histories
for catastrophic events that impact a grower's crop. The procedures and
guidelines would be recommended by the Committee and approved by USDA.
Therefore, the addition of paragraph (e) to Sec. 929.48 is recommended
to be adopted.
Material Issue Number 5--Remove Specified Dates Relating To Issuance of
Annual Allotments
Section 929.49, Marketable quantity, allotment percentage, and
annual allotment, should be revised by removing specified dates
relating to the issuance of annual allotment; clarifying the provision
related to calculation of the allotment percentage; and updating
information growers need to submit to the Committee to receive annual
allotments.
Currently, Sec. 929.49 provides that when a producer allotment
regulation is implemented, USDA will establish an allotment percentage
equal to the marketable quantity divided by the total of all growers'
sales histories. The allotment percentage is then applied to each
grower's sales history to determine that individual's annual allotment.
All growers must file an AL-1 form with the Committee on or before
April 15 of each year in order to receive their annual allotments. The
Committee is required to notify each handler of the annual allotment
that can be handled for each grower whose crop will be delivered to
such handler on or before June 1.
Proponents testified that the Committee's experience during the
2000 and 2001 crop years has proven that maintaining a specified date
by which growers are to file a form to qualify for their allotment and
for the Committee to notify handlers of their growers' annual
allotments has been difficult. The proposed amendment would delete the
specified dates and allow a more appropriate date by which growers are
to file forms and the Committee is to notify handlers of their growers'
annual allotments to be established through informal rulemaking. The
Committee would like to establish dates that the industry can
realistically meet each season when a volume regulation is implemented.
Because volume regulation was not recommended until the end of March,
growers had difficulty in submitting the required reports in a timely
manner. Additionally, the rulemaking process to establish the allotment
percentage had not been completed by June 1. Therefore, the Committee
was unable to notify handlers of their growers' allotment by the
specified deadline. For these reasons, the Committee should have the
flexibility to recommend other dates to USDA for approval that can
realistically be met by the industry and serve the purposes of the
marketing order. With this proposed amendment, reasonable filing dates
could be established in line with the timing of the recommendation and
establishment of volume regulation.
The Committee also recommended clarifying the explanation of how an
allotment percentage is calculated. Currently, Sec. 929.49(b) states
that such allotment percentage shall equal the marketable quantity
divided by the total of all growers' sales histories. It does not
specify that ``all growers'' sales histories' includes the sales
histories calculated for new growers. The Committee has proposed in
this amendment proceeding that sales histories given to new growers
each season (growers that have no prior sales history) should also be
included in the calculation of the allotment percentage. Section
929.48(a)(5) as proposed would provide that the Committee compute a
sales history for a grower who has no history of sales associated with
such grower's cranberry acreage during a crop year when a volume
regulation has been established, by taking the average of the first
year yields as established by the Committee and multiplying it by the
number of acres. During the two recent years of volume regulation, new
growers' sales histories were included in the calculation of the
allotment percentage. The amendment is merely a clarification to ensure
that total sales histories are used in this calculation.
The Committee also proposed revising the information required to be
submitted by growers to qualify for an annual allotment. Currently,
Sec. 929.49(d) provides that the Committee shall require all growers
to qualify for allotment by filing with the Committee,
[[Page 23340]]
on or before April 15 each crop year, a form wherein growers include
the following information: (1) The location of their cranberry
producing acreage from which their annual allotment will be produced;
(2) the amount of acreage which will be harvested; (3) changes in
location, if any, of annual allotment; and (4) such other information,
including a copy of any lease agreement, as is necessary for the
Committee to administer the order. Such information is gathered by the
Committee on a form specified as the AL-1 form.
The proposed amendment would modify the criteria by only requiring
pertinent information to be required by growers on the AL-1 form.
Record evidence showed that growers are assigned a grower number and
the amount of acreage on which cranberries are being produced is
maintained. However, the proponents testified that the location of the
cranberry producing acreage is not maintained. Therefore, the Committee
does not see the need to collect this information on the form. The form
also asks about changes in location, if any, of their annual allotment
including the lease agreement. Annual allotment is linked to a grower's
cranberry producing acreage and, since the acreage cannot be moved from
one location to another, information on changes in location is not
relevant. Therefore, the Committee has proposed that the information
required to be submitted by growers be revised by deleting the
information that the Committee does not need to operate a producer
allotment program. Other information that is currently requested
(including identifying the handler(s) to whom the grower will assign
their allotment) would remain unchanged.
The modifications proposed by the Committee add flexibility and
clarity to the order and are therefore recommended for adoption.
Material Issue Number 6--Clarify How the Committee Allocates Unused
Allotment to Handlers
Section 929.49 should be amended to clarify the method by which the
Committee allocates unused allotment to handlers having excess
cranberries. Specifically, the Committee would be required to make such
a distribution in a way that is proportional to each handler's total
allotment.
Currently under the producer allotment volume regulation features
of the order, Sec. 929.49(g) provides that handlers who receive more
cranberries than the sum of their growers' annual allotments have
``excess cranberries'' and shall notify the Committee. Handlers who
have remaining unused allotment are ``deficient'' and shall notify the
Committee. The Committee is required to equitably distribute unused
allotment to all handlers having excess cranberries.
This provision of the order allows handlers to handle additional
cranberries by providing them with unused allotment. During years of a
producer allotment volume regulation program, handlers cannot handle
cranberries unless those berries are covered by an allotment.
The proponents testified that there has been a debate in the
industry on the interpretation of what equitable distribution means and
how it should be accomplished. To add specificity, the Committee
proposed replacing the words ``equitably distribute'' with
``proportional to each handler's total allotment''.
The proponents further testified that the distribution of unused
allotment would only be to those handlers who have excess fruit and are
in need of allotment to cover that fruit. Such handlers would then
receive any available allotment in proportion to the amount such
handler handles. Record evidence indicated that if handlers had excess
fruit and needed allotment from the Committee, they would receive up to
the amount they needed to cover that excess fruit. Allotment would only
be distributed proportionately to handlers when there are more requests
for unused allotment than available unused allotment.
This proposed amendment is supported by record evidence and is
recommended for adoption.
Material Issue Number 7--Growers Who Do Not Produce a Crop During a
Year of Regulation and Assignment of Their Allotment
Section 929.49 should be amended to eliminate the requirement that
growers assign any unused allotment to their handlers under certain
circumstances.
As previously discussed, each year a producer allotment regulation
is in place, each cranberry grower receives an annual allotment. This
allotment represents the volume of that grower's cranberries that can
be handled.
Currently, Sec. 929.49(f) requires growers who do not produce
cranberries equal to their computed annual allotment to transfer their
unused allotment to such growers' handlers. The handlers are then
required to equitably allocate the unused allotment to growers who
deliver excess cranberries to such handlers. Unused allotments
remaining after all such transfers have occurred are then transferred
to the Committee.
The proponents testified that one concern of growers was what
happens to a grower's annual allotment if the grower decides not to
grow a crop during a year of volume regulation. Currently, such growers
have no alternative but to transfer their allotments to their
contracted handlers. The handlers, in turn, can reallocate those
growers' annual allotments among growers delivering excess cranberries
to that handler. Growers felt that the annual allotments are based on
their sales and that they should have more control over what happens to
their unused annual allotment. Further, they believed that their
decision not to grow a crop in a year of oversupply should not result
in other growers being able to deliver a greater portion of their
crops. This dilutes the effectiveness of the allotment regulation.
Concerns were raised at the hearing regarding the contractual
arrangements that growers may have with their handlers, and how this
amendment could affect those arrangements. The proponents testified
that this amendment is not intended to encroach on private contractual
arrangements between growers and handlers. Such arrangements fall
outside the scope of the order.
One grower testified that if a grower does not want to transfer the
allotment to his or her handler, it should be given back to the
Committee and the Committee should be accountable for all the allotment
that is available. It was supported that growers who do not choose to
grow a crop should not be required to transfer such allotment to their
handler.
The hearing testimony did not explain what happens to the allotment
if a grower does not grow a crop and does not transfer the allotment to
such grower's handler. It was suggested that the Committee should have
informal rulemaking authority to further define what would happen to
such allotment.
The concept of allowing growers to choose whether or not to assign
unused allotment to their handlers was not opposed at the hearing. The
modification proposed by the Committee is recommended for adoption.
Material Issue Number 8--Transfers of Allotment
Section 929.50 of the order should be amended to allow growers to
transfer their allotments during a year of a producer allotment volume
regulation, and to provide that a sales history remain with the lessor
when there is a total or partial lease of cranberry acreage to another
grower.
[[Page 23341]]
As previously discussed, in years of a producer allotment volume
regulation, an allotment percentage is established and is applied to
each grower's sales history to determine that grower's allotment. A
grower's allotment represents the amount of cranberries a handler may
purchase from or handle for that grower. A complete discussion of how
growers' sales histories are calculated is contained in the findings
and conclusions regarding Material Issue No. 3.
Currently, Sec. 929.50, Transfers, does not allow the direct
transfer of allotment between growers. What it does provide is that in
the event cranberry acreage is sold or leased, the sales history
associated with that acreage is transferred to the buyer or lessor.
Therefore, the only option available to a grower to accomplish a
transfer of allotment (aside from purchasing additional acreage) is to
complete a lease agreement with another grower. Section 929.50 also
provides that growers who lease their acreage must file a lease
agreement with the Committee before the Committee recognizes it. The
Committee will not recognize such lease agreement until the Committee
is in receipt of a completed lease form. Total and partial leases of
cranberry acreage require the lessor to transfer the appropriate sales
history associated with the acreage being leased.
The Committee manager testified that during 2000 and 2001, when
producer allotment volume regulations were implemented, a grower who
wanted to obtain more allotment from another grower to cover barrels
harvested from his or her acreage had to enter into a short-term lease
agreement. Such a legal agreement had to be filed with the Committee.
Usually this agreement was just for 30 to 60 days in duration, just to
allow growers to transfer sales history (and, indirectly, allotment) to
one another.
The Committee manager testified that many of these lease agreements
were initiated during the two years of volume regulation and created a
burden on the Committee staff as well as on the growers involved. The
Committee staff had to process the transfers, keep track of the
transfers, and then reverse the transfers within a relatively short
period of time. Also, the Committee staff had to recalculate the
allotment available to each handler since it may have changed when
growers' sales histories and allotments are recalculated under the
lease agreement. A problem many growers did not consider at the time
these transfers were taking place is that the sales history transferred
from one grower to another is combined with that second grower's sales
history. The allotment percentage is then applied to that grower's
total sales history. This may not result in as much additional
allotment as that grower expected. Witnesses testified that this
revised process would not affect growers' sales history calculations
since allotment would be transferred, not sales histories.
Record evidence showed that this complex transfer process is
necessary because there is no method currently available under the
order for direct transfers of allotment among growers. The proposed
amendment would allow a simple transfer of allotment between growers.
Under this proposed amendment, growers delivering to the same
handler could transfer allotments among themselves freely. Growers
delivering to different handlers who wish to transfer allotment would
have to receive prior consent in writing from the respective handlers,
and provide documentation to that effect to the Committee prior to the
transfer of allotment. Record evidence shows that the requirement for
handler notification and consent is necessary so that handlers know how
much allotment they will have available during the crop year.
To ensure that the Committee is aware of allotment transfers,
growers would be required to file appropriate forms with the Committee
by such date as the Committee may determine. The Committee manager
testified that such form would likely include such information as the
name of the two growers involved in the transfer, the amount of
allotment being transferred, and the handler or handler(s) to whom the
growers deliver their crops.
The Committee manager also testified that the Committee should be
informed by August 1 of the transfer. This date would be 30 days prior
to the beginning of the crop year and would allow the Committee staff
to complete the required paperwork on the transferred allotment. One
witness testified, however, that growers should be able to transfer
allotment through harvest. Growers should be allowed to transfer
through harvest because they would not know until harvest how much
unused allotment they would have available or how much additional
allotment they would need. The witness suggested a modification to
change the deadline for transfers from August 1 to December 1.
USDA is modifying the Committee's proposal. The order should
provide that the date by which allotment transfers must be completed be
established through informal rulemaking. The Committee needs to
evaluate whether a later date would be administratively feasible to
accomplish and consider the needs of the growers in determining this
date. No opposing testimony was presented on this proposed amendment.
Therefore, this portion of the proposal is recommended with a
modification.
With regard to lease agreements, the Committee manager testified
that currently, the lessor and lessee must provide written details
regarding the lease to the Committee. The lessee then reports and is
credited with the sales from the leased acreage during the lease
period. Sales from leased acreage are calculated to determine the
lessee's new sales history. At the end of the lease period, barring
renewal, the cranberry acreage and all sales history associated with
that leased acreage reverts back to the lessor or the owner. The sales
history includes all sales history accumulated during the lease period
attributable to the leased acreage. The lessee would be required to
notify the handler or handlers to whom they are delivering the sales
from the leased acreage to be credited to the lessor. It would be the
responsibility of the lessor to ensure that the handler receiving the
cranberries from the leased acreage is correctly crediting the lessor
with the appropriate sales figures.
The manager testified that most leases are a temporary situation,
and therefore, most of the grower paperwork is unnecessary because
eventually the sales history attributable to the leased acreage would
revert back to the lessor or the owner of the acreage. Thus, this
proposed amendment provides that in cases where acreage is leased, the
sales history associated with that acreage would remain with the
landowner. However, the amount of allotment that would be transferred
to the lessor could be a part of the lease agreement between the
parties involved.
There was no opposition testimony on this proposal. This proposed
amendment would simplify the process for transfers of allotment and is
recommended for adoption.
Material Issue Number 9--Authorizing Producer Allotment and Withholding
Programs in the Same Year
Section 929.52, Issuance of regulations, should be amended to
authorize the implementation of the producer allotment and withholding
programs in the same year. Currently, that section provides that USDA
may regulate the volume of cranberries that may be handled in a crop
year by either fixing free and restricted percentages (withholding) or
by establishing an allotment percentage (producer allotment).
[[Page 23342]]
The record evidence is that that Public Law 107-76, enacted on
November 28, 2001, amended the Agricultural Marketing Agreement Act of
1937 by adding the following provision to section 8c(1): ``The
Secretary is authorized to implement a producer allotment program and a
handler withholding program under the cranberry marketing order in the
same crop year through informal rulemaking based on a recommendation
and supporting economic analysis submitted by the Cranberry Marketing
Committee. Such recommendation and analysis shall be submitted by the
Committee no later than March 1 of each year.''
Therefore, this proposed amendment is intended to bring the
marketing order into conformity with the Act. The Committee manager
testified that operating both programs during the same year would
likely serve as a safety valve. Since the producer allotment program
would be implemented early in the year prior to harvest, it could be
set too low. A withholding program could therefore be implemented to
take additional fruit off the market. The withholding regulation could
also be suspended later in the year if it was deemed to be unnecessary.
One witness testified that he was in favor of the amendment but was
not clear how both forms of volume regulation would operate in the same
year of regulation. The Committee would have to address how these two
programs should be used together in a given year. This is an area that
could be explored in the economic analysis the Committee would need to
submit in support of such a recommendation for regulation, and would
assist USDA in its review of that recommendation.
This proposed amendment would bring the order into conformity with
the enabling statute. Thus, it is being recommended for adoption.
Material Issue Number 10--Dates for Recommending Volume Regulations
Section 929.51 of the order should be amended to provide deadlines
for Committee recommendations for volume regulations. Specifically, if
only one type of volume regulation were recommended, a producer
allotment regulation would have to be recommended by March 1 each year,
and a withholding program would have to be recommended before August
31. However, in the event the Committee determines it desirable to
recommend both a producer allotment and withholding regulation, such a
recommendation would have to be made by March 1. Currently, Sec.
929.51 does not specify any certain dates by which the Committee must
make a recommendation to USDA for volume regulation of the upcoming
crop.
As previously discussed, to implement both types of volume
regulations during the same year, the Act requires such a Committee
recommendation prior to March 1. This deadline is proposed to be added
to Sec. 929.51 rather than to Sec. 929.52 as proposed by the
Committee. There are no dates specified in the marketing order by which
the Committee must recommend a handler withholding or producer
allotment regulation when only one type of volume regulation is chosen.
The Committee manager testified that recommending a producer
allotment program prior to March 1 would be beneficial to growers.
Growers have indicated they need to know as soon as possible whether
the Committee is going to recommend a regulation, since a producer
allotment program permits handlers to acquire only a portion of their
growers' crops. The Committee's decision influences whether growers
decide to cut back on purchases of chemicals and fertilizer or to take
acreage out of production. The later the decision is made, the greater
the chances are that growers will already have started working on
preparing their bogs to produce a full crop. Therefore, it is in the
best interest of the growers to have a Committee recommendation for a
producer allotment program prior to March 1.
The witness further testified that the Committee would hold its
regularly scheduled winter meeting in February, at which time the
Committee would review the most current information on the upcoming
crop.
It was also testified and supported that the March 1 date should be
flexible to allow for unforeseen circumstances that could arise that
could prevent the Committee from estimating the marketable quantity
prior to that date. Proponents testified that the Committee may not be
able to reach a consensus by that date and may need more time to review
the current situation within the industry. Although the March 1
deadline would apply in most years, USDA is recommending that Sec.
929.51 include a provision that an exception could be made when
unforeseen circumstances preclude the Committee from making an informed
recommendation that early in the year. This modification is consistent
with record testimony and the Committee's brief.
Regarding the handler withholding program, the Committee's original
proposal indicated that such a regulation should be made as soon as
possible after August 1. The record supports a modification--that free
and restricted percentages should be recommended no later than August
31.
The Committee manager testified that the Committee, prior to August
31, should recommend a handler withholding program. This would provide
the Committee staff ample time to prepare reports based on handler
inventory reports through July 31. The Committee could then meet at its
summer meeting (typically held in August) and review the most complete
and accurate information available to make a decision on the
implementation of such program.
Some concerns were raised at the hearing that establishing a
program at the required dates would make the percentages inflexible to
crop conditions as they occur. However, any established regulation
could be modified, suspended, or terminated pursuant to Sec. 929.53 as
crop or market conditions necessitate such action.
Therefore, the Committee's proposal, with appropriate
modifications, is recommended for adoption.
Material Issue Number 11--Exemptions From Regulations
Section 929.58 of the order should be amended to add authority to
exempt fresh, organic or other types or forms of cranberries from any
or all regulatory requirements imposed under the order.
Currently, Sec. 929.58 provides authority for USDA to relieve from
any or all requirements under the order, the handling of cranberries in
such minimum quantities as the Committee may recommend. In 2000 and
2001, the Committee recommended the implementation of producer
allotment volume regulations. In both years, an exemption from the
volume regulations was provided for fresh and organic cranberries. It
was determined that such fruit comprised a small portion of the crop,
did not compete directly with processing fruit cranberries, and did not
add materially to the industry surplus of fruit.
Under current production and marketing practices, there is a
distinction between cranberries for fresh market and those for
processing markets. Cranberries intended for fresh fruit outlets are
grown and harvested differently. Fresh cranberries are dry picked while
cranberries used for processing are water picked, the bog is flooded
and the cranberries that rise to the top are harvested. Dry picking is
a more labor intensive and expensive form of harvesting. Some cranberry
bogs are designated as ``fresh fruit'' bogs and
[[Page 23343]]
are grown and harvested accordingly. Only the lower quality fruit from
a fresh bog goes to processing outlets. Organic cranberries are a
growing niche market and it was believed that regulating them could
have had an adverse effect on the production and marketing of this
product.
In 2000, the first time a volume regulation was implemented in
nearly 35 years, fresh and organic fruit was exempt from that
regulation. The industry experienced an increase in fresh fruit
production because of the exemption. This was caused by processed fruit
growers changing to fresh fruit production. Also, the intent of the
fresh fruit exemption in the 2000-01 volume regulation was to only
exempt cranberries going to retail outlets as fresh cranberries, and
questions arose as to what constituted ``fresh'' under the regulations.
Therefore, the Committee recommended this change to the exemption
provision to clarify the current language and provide guidelines for
the specific forms and types of cranberries that can be exempted. The
Committee manager testified at the hearing that the different forms or
types of cranberries might include cranberries sold as packed-out fresh
fruit and/or organically grown cranberries sold as fresh or processed
fruit.
The witness also testified that extending a minimum exemption to
particular forms or types of cranberries during a period when a
regulation was in effect would ensure that sufficient fruit would be
available to meet current demand, and would encourage the industry to
develop new markets. The amendment, however, would not limit the
different forms or types of cranberries the Committee could consider in
its marketing policy. Such recommendation for exempting cranberries
from volume regulations would take place in the Committee's
deliberations for volume regulation and could be accomplished through
informal rulemaking.
The Committee manager testified that the types of cranberries could
be extended to include different varieties of cranberries. For example,
the witness testified that the Stevens variety of cranberries could be
exempted if circumstances warranted such an exemption.
The Committee would also determine what particular regulations the
exemption would apply to. For example, for the 2000 and 2001 seasons,
fresh and organic cranberries were exempt only from the volume
regulation provisions, but handlers still had to file reports and pay
assessments on those cranberries. The Committee could make a
recommendation to exempt specific types or forms of cranberries from
any or all of the other regulations in effect under the marketing
order.
Therefore, this decision recommends that the exemption provision in
Sec. 929.58 be modified to clarify the current language and provide
that specific forms and types of cranberries can be exempted from any
or all regulatory requirements. There was no opposition testimony
presented on this issue.
Material Issue Number 12--Outlets for Excess Cranberries
Section 929.61 of the order should be amended to broaden the scope
of noncommercial and noncompetitive outlets authorized as outlets for
excess cranberries.
Under the order, the producer allotment program provides for
limiting the amount of the total crop that can be marketed for normal
commercial uses. If a producer allotment program were implemented, USDA
would establish an allotment percentage that would equal the marketable
quantity divided by the total of all growers' sales histories. The
allotment percentage would be applied to each grower's individual sales
history to derive each grower's annual allotment. Handlers cannot
handle cranberries unless they are covered by a grower's annual
allotment.
Handlers who receive more cranberries than are covered by their
growers' annual allotments have excess cranberries. The Committee is
required to equitably distribute any unused allotment it receives to
those handlers who have excess cranberries.
Section 929.59 defines excess cranberries as cranberries withheld
by handlers after all unused allotment has been allocated. It also
provides for handlers to notify the Committee by January 1 of a written
plan to dispose of excess cranberries and to dispose of them by March
1.
There is no need to limit the volume of cranberries that may be
marketed in noncommercial and noncompetitive outlets. Section 929.61 of
the order designates outlets for handlers to dispose of excess
cranberries. Specifically, the provision establishes noncommercial
outlets as charitable institutions and research and development
projects approved by USDA for the development of foreign and domestic
markets, including, but not limited to, dehydration, radiation, freeze
drying, or freezing of cranberries. Noncompetitive outlets are
established under Sec. 929.61 as any nonhuman food use (animal feed)
and foreign markets, except Canada. Canada is excluded because
significant sales of cranberries to Canada could result in
transshipment back to the United States of the cranberries exported
there. This could disrupt the U.S. market, contrary to the intent of
the volume regulation.
To ensure that excess cranberries diverted to the specified outlets
do not enter normal marketing channels, certain safeguard provisions
are established under Sec. 929.61. These provisions require handlers
to provide documentation to the Committee to verify that the excess
cranberries were actually used in a noncommercial or noncompetitive
outlet. This section also provides that the storage and disposition of
all excess cranberries withheld from handling shall be subject to the
supervision and accounting control of the Committee. In addition, the
Committee, with USDA approval, may establish as needed rules and
regulation for the implementation and operation of this section.
Under the final rule establishing and implementing the 2000 volume
regulation, regulations pertaining to excess cranberries were
established under Sec. 929.104. These regulations include all outlets
mentioned in Sec. 929.61. The Committee recommended foreign markets be
excluded as outlets for excess cranberries because the industry is
actively selling cranberries in at least 54 foreign countries today.
When foreign markets were listed as potential outlets for excess
cranberries, cranberry exports were not as significant to the industry
as they are today. However, it was determined that because excess
cranberries could not be ``handled'' and fresh cranberries were exempt
from the 2000 volume regulation, this recommendation was deemed
unnecessary. However, USDA revised Sec. 929.104 to clarify that excess
cranberries cannot be processed and sent to foreign markets.
In the 2001 volume regulation, the provisions on outlets for excess
cranberries were modified to broaden the scope of research and
development projects authorized as outlets for excess cranberries. It
was determined by the Committee that the provision from the 2000 volume
regulation regarding research and development projects was too
restrictive and could exclude some outlets for excess cranberries that
could be deemed noncommercial and noncompetitive. The Committee
unanimously recommended modifying paragraph (a)(4) of Sec. 929.104 to
state that any research and development projects approved by the
Committee would be eligible as outlets for excess cranberries. This
provided more flexibility in determining if a specific project could
[[Page 23344]]
be considered noncompetitive or noncommercial. Research and development
projects were not limited to dehydration, radiation, freeze-drying, or
freezing of cranberries for the development of foreign markets.
The Committee proposed amending Sec. 929.61 to provide more
flexibility in establishing outlets for excess cranberries if volume
regulations are recommended and implemented in the future. Testimony
revealed that adoption of this proposal would provide the Committee,
with USDA's approval, the ability to recognize and authorize the use of
additional or new noncommercial and/or noncompetitive outlets for
excess cranberries through informal rulemaking.
Mr. Gregory Gitter, representing a Wisconsin cooperative, also
proposed amending Sec. 929.61. His proposal recommended that foreign
markets only be authorized as outlets for excess cranberries in
countries whose total annual consumption is less than the equivalent of
20,000 barrels of cranberries and/or cranberry products. According to
his testimony, the purpose of the proposal is to expand noncompetitive
outlets for excess cranberries by clearly defining in what countries
excess cranberries can be used. In this regard, Mr. Gitter testified
that this specific information would allow handlers to better manage
their marketing strategies of excess cranberries.
In support of the Committee's proposal, the Committee manager
testified that the current provisions did not allow the Committee the
ability to recognize and authorize the use of additional or new
noncommercial or noncompetitive outlets during the last two volume
regulations. During the 2001 regulation, some handlers suggested
outlets to dispose of their excess cranberries, which could have been
deemed noncommercial or noncompetitive, but were not allowed based on
the current provisions.
The provisions regarding noncommercial outlets are currently
restricted to only charitable institutions and research and development
projects approved by USDA for the development of foreign and domestic
markets, including, but not limited to, dehydration, radiation, freeze-
drying, or freezing of cranberries. The provisions regarding
noncompetitive outlets are restricted to any nonhuman food use and
foreign markets, except Canada.
The Committee's proposal would expand the noncommercial outlet
provisions by specifying charitable institutions and research and
development projects, but not limiting the authority to these outlets.
For noncompetitive outlets, the Committee's proposal would expand the
provisions by specifying nonhuman food uses and ``other outlets
established by the Committee with USDA approval.'' The Committee
manager testified that there could be new and unforeseen noncommercial
and noncompetitive outlets that are not available or even exist today.
Testimony indicated that these changes would allow the Committee
flexibility in making recommendations for these outlets.
There was no opposition testimony regarding the Committee's
proposal to expand the outlets for disposition of excess cranberries.
Testimony did relate to the procedures the Committee uses in approving
these outlets. For the 2001 volume regulation, the Committee developed
guidelines for deciding whether specific research and promotion
projects or foreign market development proposals were noncompetitive or
noncommercial and therefore, authorized for use for excess cranberries.
A review panel was established consisting of Committee staff and USDA
personnel. It was determined that Committee members or any other
industry member should not be a part of the review panel for
confidentiality reasons.
Testimony reflected that the method used in 2001 to review these
proposals to determine whether they should be approved as outlets for
excess cranberries could be improved. It was testified at the hearing
that the intent of the Committee's proposal is to provide latitude to
the Committee in developing guidelines and in determining the best
method of review. This would be accomplished by informal regulation. If
this proposal is adopted, and a producer allotment volume regulation is
recommended, the Committee would include in its recommendation for
volume regulation, guidelines for reviewing proposals for disposal of
excess cranberries.
Different safeguard procedures may be appropriate for different
outlets for excess cranberries as some outlets are well defined and
documentation is required to verify the excess cranberries were
disposed of in such outlets. For example, excess cranberries being
given to a charitable organization could be easily documented by the
organization receiving the excess cranberries. In addition, cranberries
being disposed of as animal feed could be easily documented.
Mr. Gitter stated that his proposal to expand the noncompetitive
outlets for excess cranberries would clearly define what countries are
open for foreign development by specifying a minimum number of barrels
of annual consumption in that country required before an outlet is
considered competitive. Mr. Gitter's proposal would base the
determination of what constitutes a competitive market on the annual
consumption of cranberries in each foreign country. If a country's
consumption exceeded 20,000 barrels, it would be considered a
competitive market and not authorized as an outlet for excess
cranberries. Mr. Gitter testified that 20,000 barrels may be too high a
number, but that some specific minimum number should be required.
The Committee manager testified that data relative to annual
consumption in foreign countries is not available. The Committee
collects information from handlers on the countries where cranberries
are shipped and the quantities sold. In some cases, he testified, the
cranberries are transshipped to other countries.
The Committee manager testified that the Committee's proposal
provides flexibility not available under Mr. Gitter's proposal by
authorizing the Committee to develop guidelines for research and
development projects for excess cranberries at the time the volume
regulation is recommended. The desired results of Mr. Gitter's proposal
can be achieved by adopting the Committee's proposal. Mr. Gitter was
concerned that allowing the Committee to make this determination does
not provide the detail needed prior to the beginning of the season.
Based on record evidence, Sec. 929.61 should be amended to expand
the outlets authorized for excess cranberries. There was no testimony
provided at the hearing that opening new markets with excess
cranberries should not be done. However, defining noncompetitive
markets as those markets having an annual consumption of less than
20,000 barrels of cranberries or cranberry products would not be an
effective way of determining whether a market is competitive.
Information on annual consumption in foreign countries is not currently
available.
Additionally, the record revealed that there are many more factors
that need to be considered when determining if a market is competitive.
The development of new and foreign markets requires significant
investment of time and money prior to achieving significant sales. Some
foreign markets may never achieve the equivalent of 20,000 barrels of
sales. New foreign markets are unfamiliar with cranberries and
cranberry products in general, and it takes several years to work with
processors and consumers to establish a
[[Page 23345]]
foundation on which to build a profitable and sustainable market. A
witness testified that allowing sporadic disposal of excess cranberries
in years of volume regulation in markets where others have been
investing for years would create havoc in those markets, probably
permanently damaging those emerging markets.
The record revealed that during volume regulations in recent years,
some companies emerged to take possession of growers' excess
cranberries with no payment, but with the promise to share profits, if
any, from foreign sales. A witness testified that low-cost cranberries
offered in overseas markets compete with allotment cranberries for the
same markets. Even if the low-cost cranberries are sold in a market
devoid of cranberries, transshipment to established markets is
possible.
It is not the intent of this proposal to restrict sales to foreign
markets. Foreign markets are one area where growth is occurring and
demand is increasing. Exports of cranberries have increased from
184,000 barrels in 1988 to 824,000 barrels in 2000. This provision only
applies to excess cranberries resulting from a producer allotment
volume regulation. Any handler is allowed to compete in any market at
any time with allotment cranberries or free market cranberries.
Because competitive markets can change from season to season and
new and different research ideas can be devised, the Committee should
develop guidelines at the time a producer allotment volume regulation
is recommended. Considerable expense can be involved in developing
markets and planning research and development projects. Therefore, the
Committee should define as specifically as possible noncompetitive and
noncommercial outlets eligible for use with excess cranberries.
For the above reasons, Sec. 929.61 should be amended to broaden
the scope of activities authorized as outlets for excess cranberries.
Material Issue Number 13--General Withholding Provisions
Section 929.54 of the order, which sets forth the general
parameters pertaining to withholding regulations, should be amended to
more closely reflect current production and handling practices.
When the cranberry order was promulgated in 1962, volume regulation
authority was limited to ``withholding'' regulations. Under this form
of regulation, free and restricted percentages are established, based
on market needs and anticipated supplies. The free percentage is
applied to handlers' acquisitions of cranberries in a given season. A
handler may market free percentage cranberries in any chosen manner,
while restricted berries must be withheld from handling.
The withholding provisions of the order were used briefly over
three decades ago. The industry has since developed a second method of
regulation--producer allotments--designed to overcome the difficulties
encountered with the application of withholding regulations. Although
the cranberry industry has not used the authority for withholding
regulations in quite some time, the record evidence supports
maintaining this tool for possible future use. However, substantive
changes in industry practices have rendered current withholding
provisions in need of revision.
The record shows that at the time the withholding provisions were
designed, the cranberry industry was much smaller, producing and
handling much lower volumes of fruit than it does now. In 1960,
production was about 1.3 million barrels; by 1999, a record 6.3 million
barrels were grown. A much higher percentage of the crop was marketed
fresh--about 40 percent in the early 1960's versus less than 10 percent
in recent years.
Changes in harvesting and handling procedures have been made so the
industry is better able to process higher volumes of cranberries. Forty
years ago, virtually all cranberries were harvested dry, and water
harvesting was in an experimental stage of development. Water
harvesting is currently widespread in certain growing regions;
cranberries harvested under this method must be handled immediately as
they are subject to rapid deterioration.
In the early 1960's, handlers acquired some cranberries that had
been ``screened'' to remove extraneous material that was picked up with
the berries as they were being harvested, and ``unscreened'' berries
from which the extraneous material (including culls) had not been
removed. The handler cleaned some of the unscreened berries immediately
upon receipt, while others were placed in storage and screened just
prior to processing.
Paragraph (a) of Sec. 929.54 provides, in part, that when a
withholding regulation is implemented, the restricted percentage will
be applied to the volume of ``screened'' berries acquired by handlers.
Since the term ``screening'' is obsolete, the Committee proposed
eliminating all references to that term. To accomplish this, the
Committee recommended deleting a substantial portion of Sec.
929.54(a). The Committee's proposed revision to this paragraph (as set
forth in the Notice of Hearing) failed to indicate, however, how the
restricted percentage would be applied.
Testimony indicates that it remains the intent of the industry to
apply the withholding regulations to the quantity of marketable
cranberries acquired by handlers; culls and other extraneous material
that are normally discarded during the handling process should not be
used to meet a handler's withholding obligation. However, the record
also indicates that cleaning and processing practices differ somewhat
among the various handling facilities, and there may not be a single,
most efficient means of determining what portion of handlers' receipts
constitutes marketable cranberries. It may not be economical, for
example, to apply the restricted percentage to cranberries only after a
truckload of berries has been dumped and run through the entire
processing line. USDA is therefore recommending a modification to Sec.
929.54(a) to provide that any restricted percentage be applied to the
volume of marketable cranberries acquired by each handler. The manner
in which the marketable volume would be calculated would need to be
developed and set forth through the informal rulemaking process. This
would entail a Committee recommendation and approval by USDA.
Section 929.54 also currently provides that withheld cranberries
must meet such quality standards as recommended by the Committee and
established by USDA. That section further provides that the Federal or
Federal-State Inspection Service will inspect such cranberries and
certify that they meet the prescribed quality standards. The intent of
these provisions is, again, to ensure that the withholding regulations
reduce the volume of cranberries in the marketplace by not allowing
culls to be used to meeting withholding obligations. The inspection and
certification process is also meant to assist the Committee in
monitoring the proper disposition of restricted cranberries, thereby
ensuring handler compliance with any established withholding
requirements.
The need for inspection and certification of withheld cranberries,
and the agency that would be responsible for those activities, were
subject to much debate at the hearing. Several witnesses stated that
the inspection and certification of withheld cranberries would be cost
prohibitive, particularly since most withheld berries would have to
subsequently be dumped,
[[Page 23346]]
therefore generating no revenue for growers or handlers. Witnesses also
expressed concern that inspection requirements could inordinately slow
down handling operations. There was also discussion of potential
differential impacts of such requirements because some handling
facilities operate in ways that lend themselves to more efficient
methods of pulling representative samples (for inspection purposes)
than others.
The preponderance of evidence is that the authority for imposing
inspection and certification requirements be permissive rather than
mandatory. While such requirements may be needed to effectively
implement a withholding program, alternative safeguards could be
developed by the industry to achieve its objectives at lower costs.
Section 929.54 is proposed to be amended accordingly.
Another area of some discussion was designation of the agency that
would be conducting any required inspection and certification
activities. The Committee had recommended (as proposed in the Notice of
Hearing) that its staff be used to perform such functions. It supported
this recommendation at the hearing by stating this may be a more cost
effective manner of monitoring implementation of a withholding program.
Witnesses at the hearing objected, however, stating the Committee
does not currently have sufficient staff with the requisite expertise
to provide such services in a timely manner. These witnesses also
speculated that it might be more expensive for the industry to hire and
train its own personnel to perform this function than to utilize
currently available services of the Federal or Federal-State Inspection
Service. Finally, witnesses expressed the belief an independent, third
party inspection agency would have more credibility than staff hired by
the industry.
In its brief, the Committee recommended that the Federal or
Federal-State Inspection Service be retained as the agency responsible
for any required inspection and certification. USDA is accepting this
recommendation.
In its proposal to streamline the provisions of Sec. 929.54, the
Committee inadvertently eliminated two items that it did not support at
the hearing.
The first of these currently appears in the introductory text of
paragraph (a) of Sec. 929.54. The inadvertently deleted text states
that the withholding requirements do not apply to any lot of
cranberries acquired by a handler for which the withholding obligation
had already been met by another handler. The purpose of this provision
is to allow transfers of free percentage cranberries among handlers
without subjecting those berries to the restricted percentage more than
once. The record shows that handler transfers occur quite frequently in
the cranberry industry and, thus, this provision is still needed.
The second item appears in paragraph (b) of Sec. 929.54, and
provides that the Committee, with approval of USDA, shall prescribe the
manner in which handlers must comply with their withholding
obligations, and the date or dates by which handlers must comply with
those obligations. The record evidence that this provision is also
still needed and should be retained.
Material Issue Number 14--Buy-Back Provisions Under the Handler
Withholding Program
Section 929.56 of the order, which sets forth provisions for
handlers to buy back withheld cranberries under a withholding
regulation, should be amended to: (1) Allow direct handler to handler
buy-back arrangements; (2) add criteria the Committee needs to consider
in establishing buy-back prices; (3) revise the handler payment
schedule; and (4) provide that if the Committee cannot purchase free
cranberries to replace restricted fruit requested to be released under
the buy back provisions, the money deposited by the requesting handler
will be refunded to that handler.
As discussed under the previous Material Issue Number 13, one
method of volume regulation authorized under the order is referred to
as the handler withholding program. Under such regulations, free and
restricted percentages are established. These percentages are applied
to handlers' acquisitions, with the handlers being required to withhold
from handling their restricted cranberries.
Section 929.56 of the order, entitled ``Special provisions relating
to withheld (restricted) cranberries,'' sets forth procedures under
which handlers may have their restricted cranberries released to them.
These provisions are commonly referred to in the industry as the buy-
back provisions.
Under the current buy-back provisions, a handler can request the
Committee to release all or a portion of his or her restricted
cranberries for use as free cranberries. The handler request has to be
accompanied by a deposit equal to the fair market value of those
cranberries. The Committee then attempts to purchase cranberries in an
amount equal to the amount of free cranberries from other handlers.
Cranberries so purchased by the Committee are transferred to the
restricted percentage and disposed of by the Committee in outlets that
are noncompetitive to outlets for free cranberries. The provision that
each handler deposit a fair market price with the Committee for each
barrel of cranberries released and that the Committee use such funds to
purchase an equal amount or as nearly an equal amount as possible of
free cranberries is designed to ensure that the percentage of berries
withheld from handling remains at the quantity established by the
withholding regulation for the crop year.
The Committee has the authority to determine the fair market price
for the release of restricted cranberries. The money deposited with the
Committee by handlers requesting release of their restricted
cranberries is the only money the Committee has available for acquiring
free cranberries. Thus, the amount deposited must be equal to the then
current market price or the Committee will have insufficient funds to
purchase a like quantity of free cranberries.
The Committee is required to release the restricted cranberries
within 72 hours of receipt of a proper request (including the deposit
of a fair market value). The record shows that this release was made
automatic so that handlers would be able to plan their operations, and
very little delay would be encountered.
If the Committee is unable to purchase free berries to replace
restricted cranberries that are released under these provisions, the
funds deposited with the Committee are required to be returned to all
handlers in proportion to the volume withheld by each handler.
The withholding provisions of the order have not been used in many
years. In recent years, when volume regulations were deemed necessary,
the Committee chose to recommend producer allotment regulations rather
than withholding regulations. Nevertheless, the evidence supports
retaining the withholding provisions of the order in the event they are
needed in the future. However, the cranberry industry has identified
several portions of the order pertaining to the withholding program,
including those relating to buy-back, that need to be updated to meet
current industry needs.
The Committee recommended amending Sec. 929.56 to authorize direct
buy-back arrangements between handlers. Under this modification, a
handler would not have to go through the Committee to have his or her
restricted berries released. Instead, that
[[Page 23347]]
handler could arrange for the purchase of another handler's free
cranberries directly. All terms of the deal, including the price paid,
would be between the two parties involved and would not be limited by
the Committee. The Committee recommended this change to add flexibility
to the order. It could offer a more efficient method of buying back
cranberries, since no Committee administrative costs would be incurred.
Handlers would have the option of using this method, or they could buy
back their berries through the Committee, as is currently provided.
There was no objection to this modification at the hearing, and it
is being recommended for adoption.
There are four criteria currently listed in Sec. 929.56 that the
Committee needs to consider in establishing a fair market price under
the buy-back program. These include prices at which growers are selling
their cranberries to handlers; prices at which handlers are selling
fresh berries to dealers; prices at which cranberries are being sold to
processors; and prices at which the Committee has purchased free
berries to replace released restricted berries.
The Committee recommended adding a fifth criterion to the list--the
prices at which handlers are selling cranberry concentrate. A Wisconsin
grower/handler proposed adding growers' costs of production as an
additional criterion. The level of both of these items appear generally
known in the industry and appear to be relevant criteria to take into
consideration in recommending a fair market value. Thus, it is being
proposed that they be added to Sec. 929.56.
Under the current buy-back provisions, handlers are required to
deposit with the Committee the full market value of the berries they
are asking to be released. The Committee proposed a different payment
schedule so that handlers would not have to make a large payment of
cash prior to the sale of their restricted cranberries. The Committee
proposed that 20 percent of the total amount should be paid at the time
of the request, with an additional 10 percent due each month
thereafter. There were no objections to this revision expressed at the
hearing.
However, in its brief, the Committee modified its proposal to
provide that 20 percent of the total amount would be due at the time of
the request, with the balance to be due within 60 days. The Committee's
brief provided no compelling argument for this change, and there was no
opportunity for other parties to express their opinions on this payment
schedule. Thus, this decision recommends including in the order the
payment plan originally proposed by the Committee. However, this
payment plan could be revised through general rulemaking authority
contained in Sec. 929.56. Any such revisions would require a Committee
recommendation and USDA approval.
As previously discussed, releases by the Committee of withheld
berries are currently required to be virtually automatic. In its
proposed amendment of the buy-back provisions, the Committee
recommended that no release be granted unless the Committee was able to
purchase free berries to replace those being bought back. Under this
scenario, if the Committee was unable to purchase the free berries, it
would refund the money received from the requesting handler, and the
request would be denied.
The Committee manager testified that this change is necessary to
maintain an appropriate volume of cranberries in the marketplace. If
withheld berries are released for handling, and no free berries are
purchased to replace them, more cranberries would be available than the
Committee deemed appropriate. This would obviate the effectiveness of
the volume regulation and result in lower grower returns.
Several handlers objected to this portion of the Committee's
proposal. They indicated that it would unduly limit handlers' abilities
to fill their customers' needs.
It would also unduly delay any decisions on handlers' requests for
releases of their restricted berries.
Those opposed to this change also testified that there should be
free cranberries available for purchase. This is because handlers with
inventories (which are free from regulation) would have an economic
incentive to use those inventories to fill current orders, and sell
current year's cranberries to the Committee for its disposal. It was
also pointed out that if the Committee were not able to purchase
unrestricted fruit, that would be an indication that either the market
had improved or that the original free percentage determination was
incorrect. Handlers with additional sales opportunities should not be
placed at a disadvantage because of these situations.
USDA concurs that the Committee's recommendation could unduly
restrict handlers' opportunities for buying back their restricted
fruit. As such, this change is not being recommended for adoption.
One additional proposal to amend Sec. 929.56 was received. Stephen
L. Lacey, on behalf of two cranberry handlers, proposed changing the
refund provisions in the buy-back program. If the Committee is unable
to purchase free berries under the buy-back system, it is currently
required to refund the money to all handlers proportional to the amount
each handler withheld under regulation. Mr. Lacey recommended that the
money be returned to the handler who deposited it to be distributed to
the growers whose fruit was sold. He stated it would be unfair to
penalize growers whose fruit was sold by handlers not being able to pay
them for that fruit because that money went to other handlers' growers.
USDA believes that Mr. Lacey's arguments have merit. Additionally,
this change could provide an incentive for handlers to make available
free cranberries for purchase to replace restricted cranberries that
are released under the buy-back provisions. For these reasons, USDA is
recommending adoption of this proposal.
Section 929.56 is being recommended for amendment as described
above.
Material Issue Number 15--Handler Marketing Pool and Buy-Back Under the
Producer Allotment Program
The order should not be amended to include the establishment of a
handler marketing pool or buy-back under the producer allotment
provisions of the order.
Stephen L. Lacey, on behalf of Clement Pappas and Company, Inc.,
and Cliffstar Corporation, proposed adding a new Sec. 929.47 to the
order establishing a handler marketing pool as part of the marketable
quantity in any crop year in which a producer allotment regulation is
effectuated. As a modification of this proposal, a Massachusetts
handler recommended adding buy-back provisions to the producer
allotment program as well.
Under Mr. Lacey's proposal, in any crop year in which a producer
allotment regulation were recommended, a Handler Marketing Pool would
be established. Handlers determined to be in surplus would have to
contribute fruit to the pool, and handlers determined to be deficit
would have access to those cranberries in the pool. The Committee would
determine which handlers are in surplus and which handlers are in
deficit based on a formula that would appear in the order. The order
would also contain provisions relating to pool pricing and payment
terms.
In support of the proposal, Mr. Lacey testified that during the
2000 and 2001 volume regulations, concerns were raised about the
effects volume controls could have on handlers that do not maintain
inventories of cranberries. He testified that the surplus that
necessitated volume regulations was
[[Page 23348]]
held by two entities, and the regulations put the remaining, non-
surplus handlers at a significant competitive disadvantage because they
experienced difficulty in securing product from the surplus handlers to
fill their customers' needs.
With one exception, Mr. Lacey's proposal is identical to the
language that was drafted by the amendment subcommittee, which
attempted to develop a recommendation for a handler marketing pool. The
difference is the section on pricing. Mr. Lacey's proposal would allow
non-surplus handlers to purchase pool cranberries at a price equal to
the price that handler is paying its growers for the current crop.
In volume regulation discussions over the last 2 years, concerns
were raised that the current producer allotment provisions place
handlers who do not have inventories at a disadvantage. Because some
handlers do not maintain inventories, the restricted percentage does
not provide enough fruit for them to meet their market demands and
maintain market share. Although handler-to-handler purchases are a
normal business practice (with or without a volume regulation), a
producer allotment restriction increases the need for handlers to
purchase from handlers with inventories to maintain market share. Some
handlers believe this places them in a vulnerable position, needing
more fruit than normal from their competitors.
The purpose of the handler marketing pool would be to provide
cranberries to those handlers who do not have a surplus in years of
volume regulation. Some witnesses suggested the existence of such a
mechanism would help to build industry consensus for volume regulation
and for the appropriate marketable quantity which would help facilitate
the use of volume regulation when needed. As proposed, the volume of
cranberries in the pool would be included within the marketable
quantity, not be in addition to the marketable quantity. If the pool
cranberries were in addition to the marketable quantity, the
effectiveness of the volume regulation would be decreased.
Regarding payment terms, the proposal would require handlers
acquiring cranberries from the pool to deposit an initial payment of
$5.00 per barrel with the Committee within 30 days of receipt of
product. Subsequent payments would be made every 60 days in the amount
specified by the Committee based on handler payments to growers. Full
payment would be made by August 31 of the following year. The Committee
would make immediate payments to the surplus handlers.
The proposed amendment would allow the Committee to collect
information necessary to verify prices. Mr. Lacey testified that the
pricing mechanism would ensure that non-surplus handlers would not be
competitively harmed by a volume regulation, and would help maintain
the prices paid to growers that deliver to these handlers. In addition,
this pricing mechanism would establish a fair price to handlers
purchasing cranberries and the growers that produced the cranberries.
Mr. Lacey discussed activities of the amendment subcommittee, which
began discussions on ways to improve the volume regulations in February
2001. Discussed were the concepts of adding buy-back provisions to the
producer allotment program (similar to those currently existing under
the withholding provisions) or establishing a handler marketing pool.
In additional subcommittee meetings in 2001, consensus was reached for
the subcommittee to focus its efforts on establishing a fruit-based
handler marketing pool within the marketable quantity. At an August
2001 teleconference meeting, concerns were raised about the pricing
mechanism and whether it would afford handlers access to cranberries at
below market rates.
As a result of these concerns, the subcommittee did not forward the
amendment proposal for consideration by the full Committee.
Nevertheless, the full Committee did consider a motion to include the
handler marketing pool with the Committee's proposed amendments at an
August 27, 2001, meeting, which motion was rejected.
According to Mr. Lacey, there is overwhelming support from
handlers, growers and the public member for the concept of a handler
marketing pool. In addition, he testified that the information
necessary to administer the program is already collected by the
Committee in connection with its marketing policy report.
Mr. Lacey testified that the proposal would not raise costs to
producers, handlers or USDA. It would require the Committee to
undertake additional efforts to administer the marketing pool, and any
costs associated with this effort would be paid from assessment funds.
Mr. Lacey further testified that the proposal would, over time, improve
producer returns by ensuring stability in the industry and help prevent
further consolidation at the handler level.
A Massachusetts independent handler testified in support of the
handler marketing pool. He also proposed adding a buy-back provision
under the producer allotment program similar to the provisions under
the handler withholding program. He testified that he would support
adopting one or the other or both of these provisions, as long as the
cranberries he has cleaned, frozen and put in the freezer are made
available to him.
In support of the handler marketing pool, this handler testified
that this proposal is essential to make any allotment volume regulation
a fair and reasonable regulation. Some handlers are smaller than others
and some have inventories while others do not. He testified that these
differences among handlers must be recognized and without this
provision, the allotment option, as opposed to the withholding option,
would remain as it presently exists, the lesser of two evils. He
further testified that a handler marketing pool with a fair pricing
formula would dramatically alter the existing environment where
consensus in unachievable. According to his testimony, this proposal
would alleviate the many difficulties experienced in garnering support
for a volume regulation.
This handler testified that if the handler marketing pool concept
is rejected, the entire amendment process would have failed to address
the real issues that keep the industry polarized. He recommended a
modification to the proposal's pricing provisions. He suggesting adding
to the paragraph on pool pricing that the handlers purchasing from the
pool would pay the price that they are paying their growers, or the
average price that all handlers purchasing from the pool are paying
their growers, whichever is higher. He believed adding this language
would avoid the possibility of handlers manipulating their pool price
by not paying their growers a reasonable price.
Regarding this handler's proposal to add a buy-back provision under
the producer allotment program, he testified that this would further
improve the allotment option and do so in a way that would generate
industry-wide support. The proposed provision would allow handlers to
buy back excess cranberries delivered by their growers. The proposed
buy-back mechanics of the producer allotment program would be identical
to the provisions under the withholding (as previously discussed under
Material Issue Number 14). The same pricing formula would apply to
purchases of cranberries as is set forth in the handler marketing pool
proposal.
This handler stated that there would not be an incentive for
growers to deliver fruit over their allotment
[[Page 23349]]
because they would not be paid for any deliveries over their allotment.
Growers' only incentive to exceed their allotment would be to help
their handler maintain its market share. He further stated that it is
in the growers' best interests to allow non-surplus handlers to buy
cranberries back even though the growers are not compensated. It was
unclear under this proposal who would be responsible for cleaning,
processing and storage charges for excess cranberry deliveries. This
handler believed that because growers would not be compensated for any
excess cranberry deliveries, there would only be a minimal amount of
excess cranberries to buy back.
As an example of how the producer allotment program negatively
impacted his business, the handler testified that during the last
volume regulation, his company lost a large customer to a Canadian
handler because his company was no longer able to be a reliable
supplier. Although the relationship continued, sales to the customer
went from 200,000 gallons of concentrate to 50,000 gallons. He does not
believe the volume regulation should drive customers out of the
country. He also testified that the smaller handlers, although not
small businesses under the SBA definition, are at a distinct
disadvantage when competing with the larger volume handlers.
Regarding this handler's proposal to add buy-back provisions under
the producer allotment program, he testified that to be consistent,
similar provisions should be in place under both the withholding and
the producer allotment programs.
A Massachusetts grower testified that although he was not opposed
to a buy-back provision or a handler marketing pool, he believed that
there should also be a provision guaranteeing the grower reasonable
returns. He testified that during the last two volume regulations, the
focus has been on handlers fighting for market share, and little
attention was given to growers. He further testified that if there is
going to be a pool for handlers to be able to have access to
cranberries to compete with one another, the growers should be
guaranteed the cost of production.
A Wisconsin handler in opposition had two main objections to the
handler marketing pool as proposed. He testified that the definition of
a handler's ``needs'' should be based on purchases from growers of
domestic cranberries rather than basing the needs on a percentage of
prior years' sales. He believes this definition favors handlers that do
not purchase all their cranberries from growers.
As an example, he discussed a handler that would purchase 50,000
barrels of cranberries from growers and 200,000 barrels from other
handlers. This handler's needs would be defined as 250,000 barrels. If
a volume regulation were implemented, only the 50,000 barrels would be
subject to the allotment, and that handler would be considered in
deficit and authorized to purchase a minimum of 200,000 barrels from
the marketing pool.
This would encourage handlers to not purchase directly from growers
because their needs would be better met with purchases from the
marketing pool. This handler testified that the proposal is clearly an
attempt to limit a handler's risk of entering contracts with growers,
and to reward the handler for not entering contracts with growers. This
proposal, as written, would have the potential to seriously reduce the
competitive marketplace for grower fruit, thus depressing prices paid
to growers. It would also discourage normal handler-to-handler
purchases, because the deficit handler would wait and buy cranberries
from the pool at a lower price.
The handler testified that the proposal is especially troublesome
in light of the fact that the industry clearly acknowledges that the
international supply of fruit is expected to exceed annual sales for
the next few years. The proposal would devastate individual growers
because it would insulate any handler from having to directly compete
for grower fruit by offering better prices or terms because they would
be protected by the marketing pool. This handler would support the
proposal if the calculation of need used a maximum need number as the
number of barrels directly purchased from growers in the production
area. As in the example provided, the handler who purchases 50,000
barrels from growers and 200,000 from handlers would have its need
limited to 50,000 barrels.
In addition, he believed that the pricing mechanism should be
linked to the market price for cranberries during the year of volume
regulation rather than what handlers are paying their growers. He did
not believe it was equitable to allow a handler to purchase cranberries
from the marketing pool at a price that could be lower than what the
surplus handler paid its growers. As an example, he testified that his
company can sell cranberries to Tropicana Company for $20 per barrel,
but could have to sell to a competitor handler for $17, if that is what
that handler paid its growers.
This handler further testified that the handler marketing pool
concept is potentially highly detrimental to growers and highly
beneficial to handlers that choose to contract directly from growers
for less fruit than their needs. He believes that if this proposal were
adopted, handlers would be encouraged to make fewer contracts with
growers and buy their cranberries directly from the pool. Also, buyers
(or second handlers) would be encouraged to purchase a minimal amount
of fruit from growers, so they can become a handler and have access to
the pool.
Based on record evidence, the order should not be amended to
include a handler marketing pool. Conceptually, the handler marketing
pool showed promise in addressing the concerns of some handlers.
However, an effective means of establishing a pool under the producer
allotment program has not been presented.
Opponents of this proposal discussed relevant flaws in how this
pool would be implemented in an effective manner. The pricing mechanism
of the pool is a major concern. In addition, the methodology used to
determine a handler's status, whether surplus or deficit, is
problematic.
As previously indicated, one handler suggested that a handler buy-
back provision be added to the producer allotment program in order to
be consistent with the handler withholding program. However, including
a buy-back provision under the producer allotment program would be
counterproductive.
The withholding method of volume regulation is applied at the
handler level. Growers deliver to their handler everything they grow.
Free and restricted percentages are applied to each handler's
acquisitions of cranberries. Because handlers apply the percentage
after delivery, the restricted cranberries are in the possession of the
handlers and available to be sold.
The intent under the producer allotment program is to discourage
production at the grower level so that less fruit is delivered to
handlers. Establishing a buy-back under a producer allotment program is
problematic for that reason. If growers believed that some of their
excess fruit would eventually be bought back, increased production
could be encouraged, defeating the purpose of the program. Even if the
growers were not paid for any deliveries in excess of their allotment,
handlers could encourage them to deliver excess cranberries.
If buy-back provisions were added to the producer allotment
program, handlers and growers whose deliveries exceed their allotment
are rewarded, and the handlers who comply with the
[[Page 23350]]
allotment are at a detriment. Although the Massachusetts handler
testified that only a minimal amount of cranberries would be excess, it
would set the stage for growers to be encouraged to deliver in excess
of their allotment, defeating the purpose of the program. Encouraging
growers to deliver excess cranberries with no compensation to assist
their handler in maintaining market share is contrary to the objectives
of a producer allotment volume regulation.
Therefore, the proposal to add buy back provisions under the
producer allotment program is not being accepted.
During the discussions at the subcommittee level, there was never
industry consensus on the pricing mechanism for cranberry purchases
from the pool. Some handlers believed the price should be set at the
same price they pay their growers. Some growers believed this price
would give handlers an incentive to pay them less as testified by one
grower. Growers believe the price should be set to reflect the cost of
production. Some believed the price should be set at fair market value
at the time of purchase, including recovery costs for cleaning,
shipping, storage, etc. Without resolution of this issue and
cohesiveness from all segments of the industry, the handler marketing
pool concept would not work.
The volume regulation authority of the order is intended to address
industry oversupply problems and enhance grower returns on an industry-
wide basis.
Regarding foreign cranberry production, volume regulation can only
be imposed on cranberries grown in the production area. The impact of
foreign competition is also an item that may be taken into
consideration prior to recommending volume regulation.
For the above reasons, record evidence does not support adding a
handler marketing pool or buy-back provisions under the producer
allotment program.
Material Issue Number 16--Grower Exemption
The order should not be amended to allow the first 1,000 barrels of
each grower's production to be exempt from regulations issued under the
order.
A Massachusetts grower proposed an amendment to the order to
authorize an exemption from order provisions for the first 1,000
barrels of cranberries produced by each grower. This proposal appeared
in the Notice of Hearing, although it was subsequently withdrawn by the
grower who submitted it. Nevertheless, two witnesses testified on the
proposed amendment at the hearing.
One witness testified in favor of the proposal. He believed it
would offer relief to small cranberry growers who are facing difficult
economic circumstances.
The Committee manager testified in opposition to the proposal.
Based on his review of the 1999 crop, which was the last crop not
regulated, if the exemption was in place 510 farm units out of a total
of 1,124 farm units would have been totally exempted from the volume
regulation. The witness testified that these farm units represented
203,778 barrels of cranberries that would have been exempt from the
producer allotment volume regulation.
The Committee manager also testified that within the Ocean Spray
cooperative, 35 percent of its members are growers that produce less
than 1,000 barrels. In Massachusetts alone, the number is 50 percent,
and in Wisconsin, 90 percent of the cooperative's growers produce less
than 1,000 barrels. The witness also testified that handlers that
handle a large number of small growers' cranberries would receive more
relief from such an exemption than handlers that handle the fruit of
larger growers. A particular handler would not be regulated at all if
all the growers delivered less than 1,000 barrels of their production
from their individual farm units. The witness also was concerned that
growers could split their farm units into units that produce 1,000
barrels or less so that all of their production would be exempt. For
example, if a grower produces 2,000 barrels, such grower could split
his or her farm unit and have two farms that produce 1,000 barrels each
to take advantage of the exemption.
Record evidence does not support the amendment as proposed. This
exemption could result in such a magnitude of fruit being unregulated
that any volume control program would be rendered ineffective. This
proposal could have the effect of requiring growers that produce more
than 1,000 barrels--roughly half of the grower population--to hold back
more of their fruit to meet the increased allotment percentage that
would be required as a result of the exemption. Additionally, the
proposal could provide an incentive for growers to reorganize their
businesses so that all of their production would be exempt.
For the above reasons, USDA recommends that the proposed amendment
to exempt the first 1,000 barrels of each grower's production should
not be adopted.
Material Issue Number 17--Expansion of Production Area
The production area should not be expanded to include the States of
Maine, Delaware and the entire State of New York.
The marketing order and its rules and regulations apply only to
cranberries grown in the production area, as defined in Sec. 929.4 of
the order. Currently, the production area is defined to include the
States of Massachusetts, Rhode Island, Connecticut, New Jersey,
Wisconsin, Michigan, Minnesota, Oregon, Washington, and Long Island in
the State of New York.
The marketing order was promulgated in 1962. The order's primary
regulatory authority is volume regulation, but it also provides for
research and promotion activities to promote the consumption of
cranberries and increase demand. The order also provides the authority
to collect and disseminate information on industry statistics to
benefit the entire industry.
Currently, cranberries are produced in 12 States, but the vast
majority of farms and production are concentrated in Massachusetts, New
Jersey, Oregon, Washington, and Wisconsin. Massachusetts was the number
one producing State until 1990, when Wisconsin took over the lead.
Since 1995, Wisconsin has been the top producing State. Together, both
States account for over 80 percent of cranberry production. Average
farm size for cranberry production is very small. The average across
all producing States is about 33 acres. Wisconsin's average is twice
the U.S. average, at 66.5 acres, and New Jersey averages 83 acres.
Average farm size is below the U.S. average for Massachusetts (25
acres), Oregon (17 acres) and Washington (14 acres).
Small cranberry growers dominate in all States: 84 percent of
growers in Massachusetts harvest 10,000 or fewer barrels of
cranberries, while another 3.8 percent harvest fewer than 25,000
barrels. In New Jersey, 62 percent of growers harvest less than 10,000
barrels, and 10 percent harvest between 10,000 and 25,000 barrels. More
than half of Wisconsin growers raise less than 10,000 barrels, while
another 29 percent produce between 10,000 and 25,000 barrels. Similar
production patterns exist in Washington and Oregon.
Evidence produced at the hearing indicated that there are 39
growers in Maine and approximately 265 producing acres. Testimony
indicated that one producer in Maine produces 75 percent of Maine's
production on 111 acres. The remaining 38 growers thus have combined
acreage of 154 acres, or
[[Page 23351]]
an average of 4 acres apiece. This is substantially below the average
of the major producing States of Wisconsin (66.5 acres) and
Massachusetts (25 acres). The range of acreage for the remaining Maine
growers is from 1 to 5 acres bogs, averaging about 110 barrels per
farm.
In 2000, 9,000 barrels were harvested in Maine compared with 18,000
barrels in 2001. This represents a very small proportion of total U.S.
production of 5.6 million barrels in 2000 (0.2 percent) and of 5.4
million barrels in 2001 (0.3 percent).
There are 2 growers in New York and 1 grower in Delaware
commercially producing cranberries. Combined, these two States have
less acreage and production than the totals in Maine, and are thus of
less consequence in the scheme of the total domestic industry.
According to testimony received at the hearing, most Maine
cranberries were utilized in the processed markets until 1999. There is
no juice market for Maine cranberries, and most processed cranberries
are used in the ingredient market. At the time of the hearing, it was
estimated that about 20 percent of Maine production was used in the
fresh market, primarily in Maine and New Hampshire. Maine handlers
source additional cranberries from Canadian rather than U.S. growers
due to transportation costs, the value of the dollar, and trade-off
agreements with blueberry handlers in Canada.
For many years, the cranberry industry enjoyed increasing demand
for cranberry products, primarily due to the success of cranberry
juice-based drinks. This situation encouraged additional production.
While production capacity increased dramatically, demand leveled off.
This has resulted in supplies outpacing demand, high levels of
inventories, and dramatic drops in grower prices. Grower prices rose
from $8.83 per barrel in 1960 to a peak level of $65.90 per barrel in
1996. By 1998, grower prices had decreased to $36.60 per barrel, and
returns for the 2000 crop year were only $19.60 per barrel, well below
the cost of production, which ranges from $15 to $45 per barrel. This
situation led to the Committee recommending, and USDA establishing,
volume regulations for the 2000 and the 2001 crops.
The record indicates that domestic growers, including those in
Maine, benefited from the volume controls under the order. Grower
returns in Maine were estimated at $12 in 2000 and $23 in 2001. A
grower testified that the increase in grower returns was directly
related to the volume regulation under the order in 2001.
Proponents testified that all cranberries produced in the U.S. are
connected and compete for markets. It was expressed by proponents that
cranberry growers share a common bond relative to the decline in prices
and increasing returns to growers will take a concentrated effort by
the entire industry. It was further testified that production from
unregulated areas flows freely into the marketplace, which counteracts
the Committee's ability to establish and maintain equilibrium.
Proponents also expressed the opinion that all growers benefit from the
operation of the marketing order and, thus, all should share the burden
of regulation necessary to restore economic health to the industry.
Opponents testified that States with insignificant production
should be exempt from the marketing order. One opponent recommended
having a State threshold of 500 acres or 50,000 barrels of production
before inclusion under the marketing order. If there were several non-
regulated States producing 50,000 barrels of cranberries annually, this
could have a significant negative impact on the regulated States.
Maine is a relatively new cranberry growing State. Testimony
indicated that the maximum number of years producers have been growing
cranberries is 10 years, with many growers just beginning to grow
cranberries in the last 3 years. The average yield per acre in Maine is
only 60 barrels. This compares with average yields in the major
producing States of 186 barrels in Wisconsin and 133 barrels in
Massachusetts.
Testimony indicated that Maine has the potential to increase its
acreage from the current 265 acres to 2,000 acres. At 2,000 acres,
Maine would represent about 13 percent of the total U.S. acreage of
15,100 acres. However, with current yields, Maine production would
still be less than one-half of one percent of the U.S. total.
Although Maine's current production represents 0.3 percent of total
domestic production, proponents of expanding the production area
claimed that the potential for increased production and more efficient
yields exists. It was further testified that growers and handlers in
the regulated States would have an incentive to develop acreage in
Maine if it is not included under the order.
Opponents testified that given the state of the industry, new
cranberry acreage in Maine is not likely. In addition, opponents
testified that strict environmental regulations and associated costs
would deter development of any additional acreage. Anyone wanting to
develop new bogs would elect to develop them in Canada before Maine
because of the environmental restrictions and climate. It was further
testified that yields would not increase dramatically because of the
climatic conditions in Maine.
Certain aspects of growing cranberries in Maine are restrictive and
the climatic conditions may not be ideal for growing cranberries. It
would be risky financially to develop and plant new bogs in any great
degree given the current oversupply situation.
To help stabilize market supply and demand conditions, volume
regulation was introduced under the order in 2000, marking the first
time in over 30 years that such regulation was implemented. Volume
regulation was again implemented in 2001. No volume regulations were
recommended in 2002. Proponents of expanding the production area
testified that production in non-regulated areas diminishes the
effectiveness of volume regulation. It was testified that growers in
non-regulated areas benefit from the sacrifice of those in the
regulated area. In addition, recommending volume regulations is very
controversial for regulated producers and handlers, partly because of
non-regulated production. If all U.S. growers were regulated, it was
testified that there would be more grower support for a volume
regulation.
If Maine was included in the production area, the allotment
percentage established under a producer allotment volume regulation
would not change because that State produces such small volumes of
cranberries. Thus, there would be no benefit to regulated growers to
including production of Maine growers at the current time.
Additionally, Maine growers testified that any volume regulation
would have a negative impact on Maine growers because they are mostly
newer acres not in full production. These growers believed that they
would be at a disadvantage in the allocation of sales histories.
Proponents testified that many acres were planted in the production
area at the same time Maine was planting, and the current order
provides adjustments in sales histories for growers with newer acreage
and growers with no sales histories.
Opponents testified that Maine cranberries are superior, and
premium prices are received for cranberries grown in Maine. One grower
cited a study that showed Maine cranberries have a higher sugar content
than other cranberries. Another grower testified that testing on Maine
cranberries demonstrates it is a superior product,
[[Page 23352]]
probably due to the younger bogs and less pollution in Maine. A
Committee witness countered by testifying that if Maine shipped their
cranberries to the Massachusetts wholesale market, they would not
receive a premium price. Growers testified that Maine's economy would
be further damaged if Maine cranberries were included under the
marketing order. Washington County--accounting for most of Maine's
production--has the lowest income and highest unemployment in Maine.
Testimony revealed that Washington County is designated a Federal HUB
zone or depressed area.
Proponents testified that Maine benefits from the domestic and
foreign generic promotion sponsored by the Committee and should
contribute to those promotions. The additional revenue generated from
assessing Maine handlers would allow for increased promotion funds.
However, the additional revenue to be expected from regulating Maine
cranberries would be minimal (18,000 barrels times the assessment rate
of 18 cents a barrel would yield assessment income of only $3,240).
Additionally, opponents testified that Maine does not benefit from
promotion of juice and/or concentrate since no Maine production is used
for juice and/or concentrate. Testimony indicated that Maine does not
want to fund out-of-State companies in the juice market. Further,
growers testified that generic promotion could actually harm the Maine
industry because much has been done to establish Maine products as
unique. A grower testified that a generic promotion would put the Maine
branding program in jeopardy as funds used to promote ``the Maine
mystique'' would be diminished. The Maine Growers Association collects
a voluntary assessment of $.20 per barrel. These funds are used for
promoting Maine products, including cranberries.
Proponents also testified that the Committee would have access to
more information on cranberry imports, acquisitions, and dispositions
if the production area were expanded. This would enable the Committee
to more accurately establish its marketing policy.
Currently, the Committee has no access to data on foreign cranberry
imports into Maine and New York, and it has had no success in
requesting this information voluntarily. In October 1999, authority was
granted to USDA to collect information from processors and handlers
outside the production area. It also allows collection of information
on cranberry imports. However, to implement this authority, the order
need not be amended for this reason. Additionally, opponents testified
that Maine growers would continue to provide production information to
the National Agricultural Statistics Services.
The Act requires that a marketing order be limited in its
application to the smallest regional production area practicable. USDA
finds that expanding the production area under the cranberry marketing
order would be contrary to the Act at this time. Production in the
areas proposed to be added to the current production area is so minimal
that their inclusion under the order would have no impact on the level
of volume regulation that may need to be imposed to reduce oversupply
situations. Additionally, little additional assessment revenue would be
generated for generic promotion purposes, and information collection
needs could be accomplished through other means.
For the above reasons, USDA concludes that the definition of
production area should not be revised to include the States of Maine,
Delaware and New York.
Material Issue Number 18--Adding Authority for Paid Advertising
Section 929.45 of the order, Research and development, should be
amended to add authority for the Committee to fund paid advertising.
Currently, Sec. 929.45 authorizes the Committee, with the approval
of USDA, to participate in production research, marketing research, and
market development projects designed to assist, improve, or promote the
marketing, distribution, consumption, or efficient production of
cranberries. There is no specific authority for the Committee to fund
paid advertising.
The Act lists specific commodities for which paid advertising may
be conducted under marketing order programs. Until recently, the Act
did not include cranberries in that list. The record shows that
authority to allow paid advertising for cranberries was added to the
Act by Public Law 106-78, Agricultural Appropriation Bill, signed on
October 22, 1999.
As previously discussed in this decision, the domestic cranberry
industry has recently been experiencing an oversupply situation.
Increases in cranberry production have exceeded growth in demand for
cranberries and cranberry products. One marketing order tool the
industry has used to help cope with the current situation is volume
control through producer allotment regulations.
The Committee has also engaged in promotion activities designed to
increase demand for cranberries. For example, in recent years the
Committee has participated in USDA's Foreign Agricultural Service's
Market Access Program (MAP). Under this program, industry funds are
augmented by USDA funds to promote the use of domestic products in
overseas markets. The record shows that the Committee's export
promotion program has resulted in increased foreign sales.
Additionally, at the time of the hearing, the Committee was in the
process of developing a domestic promotion program. The Committee
believes that expanding demand will benefit growers and handlers in the
industry.
The Committee proposed adding paid advertising authority to the
order to provide it with another tool to promote the consumption of
cranberries in its export and domestic programs. Currently, paid
advertising of cranberries is limited to branded advertising by
individual handlers or processors in the industry. The Committee would
like to use assessments or other available funding sources (such as MAP
funds) for paid advertising as a component of its promotion programs to
meet its stated objectives of increasing demand and consumption of
cranberries and cranberry products. There may be opportunities, for
example, to use paid advertising as a means of providing consumers with
relevant information on the health-related benefits of cranberries.
There was no opposition expressed to this Committee proposal. For
the above reasons, it is recommended that Sec. 929.45 be amended by
adding authority for paid advertising.
Material Issue Number 19--Definition of Cranberries
Section 929.5 of the order should not be amended to revise the
definition of ``cranberries.''
The order's provisions, including volume regulations, assessments,
and reporting requirements, apply to all cranberries grown in the
production area. Currently, Sec. 929.5 defines cranberries to mean all
varieties of the fruit Vaccinium macrocarpon, known as cranberries,
grown in the production area.
The Committee proposed that the genus and species Vaccinium
oxycoccus be added to the definition of cranberries. Vaccinium
oxycoccus, also known as European cranberry, grows wild in Europe,
Canada, and some parts of the United States. The record evidence
established that it is not commercially produced in the United States.
During shortfalls in domestic
[[Page 23353]]
production, the industry has imported Vaccinium oxycoccus to use in
cranberry products.
The Committee recommended adding Vaccinium oxycoccus to the
definition of cranberries so that the Committee could obtain
information on the quantity of that species handlers acquire. This
would enable the Committee to make better marketing decisions in
recommending such things as volume regulations, and keep data separate
from the regulated species of cranberry during years of volume
regulation. The record shows that there is no intent to subject this
species to marketing order requirements (such as volume controls) other
than those relating to reporting.
Witnesses testified that this change would make the marketing order
definition consistent with the Food and Drug Administration's (FDA)
definition of cranberry, which includes Vaccinium macrocarpon and
Vaccinium oxycoccus. Witnesses however, do not agree with the FDA
definition because the two varieties are distinctly different in
flavor, appearance and acid content. Some witnesses testified that the
industry should work with FDA to change its definition rather than
change the marketing order definition. Further, concerns were raised
that inclusion of the term in the definition would legitimize Vaccinium
oxycoccus fruit as ``true'' cranberries, which is not the Committee's
or the domestic industry's intent.
Currently, Sec. 929.105 of the rules and regulations in effect
under the order requires handlers to report to the Committee the total
quantity of cranberries and Vaccinium oxycoccus cranberries the
handlers acquire and the amount they have in inventory. This
information is required to be submitted to the Committee on a quarterly
basis. Witnesses acknowledged through testimony that the needed
information regarding Vaccinium oxycoccus is and can be obtained
through these reports.
The evidence supported that the Committee is able to obtain the
information intended under this proposal through current provisions.
With the regulations already in place requiring handlers to report all
receipts and dispositions of Vaccinium oxycoccus, and the lack of the
need to regulate such variety, the definition of cranberries should
remain as it is.
Record evidence does not support amending the marketing order to
change the definition of ``cranberries,'' and the proposed amendment is
not being recommended for adoption.
Material Issue Number 20--Clarification of the Definition of Handle
The order should be amended to clarify the definition of handle
that appears in Sec. 929.10. This definition serves to identify those
activities that are subject to regulation under the order.
Currently, the definition of handle specifies, in part, that handle
means to sell, consign, deliver, or transport fresh cranberries or in
any other way to place fresh cranberries in the current of commerce
within the production area or between the production area and any point
outside thereof in the United States or Canada.
The Committee proposed modifying this language to clarify that the
transporting of fresh cranberries to foreign markets other than Canada
is also considered handling. According to testimony, the current
language could be confusing as it could be construed that handling of
fresh cranberries is only applicable to movement within the production
area, the United States and Canada. However, the Committee manager
testified that fresh cranberries are exported to many foreign countries
including the United Kingdom, Germany and Japan. Placing fresh
cranberries into the current of commerce within these and other foreign
countries would constitute handling. The Committee proposal merely
clarifies this language to avoid any confusion in the definition of
handle. There was no opposition testimony on this proposed change.
In addition, the definition of handle currently excludes from
handling, the cold storage or freezing of excess cranberries for the
purpose of temporary storage during periods when an annual allotment
percentage is in effect prior to their disposal. Section 929.10 does
not currently exclude the temporary cold storage or freezing of
withheld cranberries when a withholding provision is in effect.
The Committee proposed including the cold storage or freezing of
withheld cranberries as an exemption from handling for the purpose of
temporary storage during periods when withholding provisions are in
effect prior to their disposal. The Committee manager testified that
handlers should be allowed to temporarily use cold storage or freezing
of restricted cranberries when a handler withholding regulation is in
effect just as the authority exists for excess cranberries under a
producer allotment. The period in which handlers could temporarily use
cold storage or freezing storage of either excess and/or restricted
cranberries could not exceed the date set by the Committee (with USDA
approval) for the disposition of excess and/or withheld cranberries.
There was no opposition testimony to this proposal.
Record evidence supports modifying the definition of handle to
clarify that handling includes the placing fresh cranberries within the
stream of commerce to markets within the United States, as well as to
all foreign countries. In addition, record evidence supports adding an
exemption from handling for the temporary freezing or cold storage of
restricted cranberries under a handler withholding program.
USDA is recommending that Sec. 929.10 be amended as proposed by
the Committee.
Material Issue Number 21--Reporting Requirements
Currently under the order, there is a reference to a reporting
requirement for growers under Sec. 929.48, Sales History. The
reporting requirement specifies that growers shall file a report with
the Committee by January 15 of each crop year, indicating the total
acreage harvested, the total commercial cranberry sales in barrels from
such acreage, and the amount of any new or renovated acreage planted,
and to allow the committee to compute a sales history for each grower.
Section 929.62 currently includes reporting requirements for
handlers. The requirements include reports relating to handler
inventories, receipts, amount of cranberries handled, withheld and
other reports deemed necessary.
Section 929.64 sets forth that the Committee shall have access to
handler records for the purpose of assuring compliance and checking and
verifying records and reports filed by handlers.
The Committee proposed moving the grower reporting requirements to
Sec. 929.62, Reports, in order to maintain all reporting functions of
growers and handlers in one section of the order for ease of
referencing. In addition, the Committee proposed adding more specific
requirements under the grower reporting provisions. The Committee
proposed modifying grower reporting requirements by: Having the grower
specify whether their acreage is owned or leased; Having the grower
specify the amount of acreage either in production, but not harvested
or taken out of production and the reason(s) why; Changing the word
renovated acreage to replanted acreage; Having the grower specify the
name of the handler(s) to whom commercial cranberry sales were made;
and Having the grower supply
[[Page 23354]]
such other information as may be needed for implementation and
operation of this section.
Under the handler reporting requirements, the Committee recommended
changing the word ``handler'' to ``person'' under the inventory
reporting requirement. The reason for this was because of legislation
enabling USDA to require persons engaged in the handling or importation
of cranberries or cranberry products to provide information on
acquisitions, inventories, and dispositions of cranberries and
cranberry products. The Committee's intent was to broaden the scope of
the entities required to report certain information.
The Committee also recommended deleting a paragraph relating to
handlers reporting of withheld cranberries when a withholding volume
regulation is in effect. The reason specified for this deletion was
that the paragraph requiring handlers to file reports on the quantity
of cranberries handled would cover the reporting of withheld
cranberries as well as excess cranberries under a producer allotment
program.
The Committee's proposed changes to Sec. 929.64, Verification of
Reports, are to simplify and clarify the language as to the Committee's
authority to have access to any handler's premises where records are
maintained for the purpose of assuring compliance and checking and
verification of records and reports filed by handlers. The Committee
believed this proposal to be administrative in nature as no changes are
being proposed to the current regulations or requirements contained in
the marketing order regarding the checking and verifying of handle
records.
There was no opposition testimony on the changes to the reporting
requirements as proposed by the Committee. However, USDA is modifying
some of the proposals.
The grower reporting requirements should be moved to the section of
the order relative to reports. This will allow them to be located
easily. Expanding the requirements to include additional information
would ensure that the Committee staff is provided with appropriate
information to accomplish its mission. In addition, because of the
changes being recommended in how sales histories are computed and in
authorizing growers to transfer their sales histories to other growers,
more information from growers is necessary, such as planting dates and
whether the acreage is leased or owned. This will assist the Committee
in assembling the most accurate information as possible. The addition
of language requiring such other information as may be needed for
implementation and operation of this section will allow additional
reporting requirements to be recommended if any unforeseen need arises.
Orders with producer allotment programs are unique in that specific
information is needed from growers in order to implement a program.
Under the cranberry order, growers benefit from reporting the
information by being provided accurate and timely sales histories that
reflect their production and allow equitable allotments to be
determined on their acreage during years of volume regulation. The
failure of growers to file these reports could be detrimental to them
in the event volume regulations are implemented.
Therefore, record evidence supports relocating the grower reporting
requirements to the reporting requirements section of the order and
expanding the information needed from growers. This proposal is
recommended for adoption.
The Committee's proposal to change the word ``handler'' to
``person'' is not being recommended. The reason the Committee proposed
the change was due to legislation expanding the data collection
requirements for cranberries and cranberry products. Regulations
regarding this legislation are being developed apart from the order.
Any regulations adopted from this legislation would include appropriate
reporting requirements for those impacted by the regulations. This
proposed change is, therefore, unnecessary and is not being recommended
for adoption.
The Committee proposal to delete the paragraph relating to
handlers' reporting of cranberries withheld under a withholding volume
regulation is not being recommended. However, a modification is being
recommended. The Committee's reason for deleting this paragraph was
that the handler requirement for reporting quantities of cranberries
handled would cover this instance. Withheld cranberries under a
withholding provision as well as excess cranberries under a producer
allotment program are not allowed to be handled. Therefore, there
should be specific requirements for handlers to report these
quantities. The current language in that section, however, only relates
to withheld cranberries and should also include excess cranberries.
Therefore, USDA is recommending retaining that paragraph in this
section but modifying it to include that handlers are required to
report information on the quantities of excess cranberries as well as
withheld cranberries. Record evidence supports this modification.
The Committee also proposed adding a paragraph under this provision
authorizing that the committee may establish, with the approval of the
Secretary, rules and regulations for the implementation and operation
of this section. This paragraph is being recommended to allow the
Committee to develop and recommend rules and regulations needed to
implement these provisions.
Any additional reporting requirements resulting from adoption of
this proposed amendment would be submitted to the Office of Management
and Budget prior to implementation.
The Committee proposal to simplify and clarify the language
relating to verification of reports is being recommended. This is an
administrative change and should be made.
Material Issue Number 22--Deletion of Obsolete Provision
The order should be amended to delete Sec. 929.47, as it is
obsolete.
Section 929.47, entitled Preliminary Regulation, refers to base
quantity, which is a term that is no longer used under the marketing
order. The order was amended in 1992 to improve the producer allotment
program to base annual allotments on sales histories rather than base
quantities. This section is obsolete, serves no purpose, and therefore
should be removed from the order.
Small Business Considerations
Pursuant to the requirements set forth in the Regulatory
Flexibility Act (RFA), AMS has considered the economic impact of this
action on small entities. Accordingly, AMS has prepared this initial
regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions so that small businesses will not be
unduly or disproportionately burdened. Marketing orders and amendments
thereto are unique in that they are normally brought about through
group action of essentially small entities for their own benefit. Thus,
both the RFA and the Act are compatible with respect to small entities.
Small agricultural producers have been defined by the Small
Business Administration (SBA) (13 CFR 121.201) as those having annual
receipts of less than $750,000. Small agricultural service firms, which
include handlers regulated under the order, are defined as those with
annual receipts of less than $5,000,000.
Interested persons were invited to present evidence at the hearing
on the probable regulatory and informational
[[Page 23355]]
impact of the proposed amendments on small businesses. The record
indicates that these amendments could result in additional regulatory
requirements being imposed on some cranberry growers and handlers.
Overall benefits are expected to exceed costs.
The record indicates that there are about 20 handlers currently
regulated under Marketing Order No. 929. In addition, the record
indicates that there are about 1,250 producers of cranberries in the
current production area.
Based on recent years' price and sales levels, AMS finds that
nearly all of the cranberry producers and some of the handlers are
considered small under the SBA definition. In 2001, a total of 34,300
acres were harvested with an average U.S. yield per acre of 156.2
barrels. Grower prices in 2001 averaged $22.90 per barrel. Using these
figures, average total annual grower receipts for 2001 are estimated at
$153,375 per grower. However, there are some growers whose estimated
sales would exceed the $750,000 threshold. Thus, the consequences of
this decision would apply almost exclusively to small entities.
Five handlers handle over 97 percent of the cranberry crop. Using
Committee data on volumes handled, AMS has determined that none of
these handlers qualify as small businesses under SBA's definition. The
remainder of the crop is marketed by about a dozen grower-handlers who
handle their own crops. Dividing the remaining 3 percent of the crop by
these grower-handlers, all would be considered small businesses.
This decision proposes that the order be amended: (1) To authorize
the Committee to reestablish districts within the production area and
reapportion grower membership among the various districts; (2) to
simplify criteria considered and set forth more appropriate dates in
establishing the Committee's marketing policy; (3) to revise the
formula for calculating sales histories under the producer allotment
program in Sec. 929.48, which includes providing additional sales
history to compensate growers for expected production on younger acres.
This proposed changed to Sec. 929.48 would also allow for more
flexibility in recommending changes to the formula and add authority
for segregating fresh and processed sales; (4) to allow compensation of
sales history for catastrophic events that impact a grower's crop; (5)
to remove specified dates relating to when information is required to
be filed by growers/handlers in order to issue annual allotments; (6)
to clarify how the Committee allocates unused allotment to handlers;
(7) to allow growers to decide whether to assign allotment if no crop
is produced; (8) to allow growers to transfer allotment during a year
of volume regulation; (9) to authorize the implementation of the
producer allotment and withholding programs in the same year; (10) to
set dates by which volume regulations must be recommended; (11) to add
specific authority to exempt fresh, organic or other forms of
cranberries from order provisions; (12) to allow for greater
flexibility in establishing other outlets for excess cranberries; (13)
to update and streamline the withholding volume control provisions;
(14) to modify the withholding volume regulations by allowing growers
to be compensated under the buy-back provisions if any funds are
returned to the handler by the Committee; (15) to add authority for
paid advertising under the research and development provision of the
order; (16) to modify the definition of handle to clarify that
transporting fresh cranberries to foreign countries is considered
handling and include the temporary cold storage or freezing of withheld
cranberries as an exemption from handling; (17) to relocate some
reporting provisions to a more suitable provision and streamline the
language relating to verification of reports and records; and (18) to
delete an obsolete provision from the order relating to preliminary
regulation.
This decision does not recommend for adoption the following
proposed amendments: (1) To incorporate a handler marketing pool or
buy-back provisions under the producer allotment program; (2) to
authorize an exemption from order provisions for the first 1,000
barrels of cranberries produced by each grower; (3) to add Maine,
Delaware and the entire State of New York to the production area; (4)
to add the species Vaccinium oxycoccus to the definition of cranberry.
Historical Trends and Near Term Outlook
The cranberry industry has operated under a Federal marketing order
since 1962. For many years, the industry enjoyed increasing demand for
cranberry products, primarily due to the success of cranberry juice-
based drinks. This situation encouraged additional production. Between
1960 and 1999, production increased from 1.34 million barrels (one
barrel equals 100 pounds of cranberries) to a record 6.3 million
barrels. This represents a 370 percent increase from 1960 and a 17-
percent gain from the 1998 crop year. Production in the 2000 crop year
declined to 5.6 million barrels and to 5.4 million barrels in 2001, due
to the use of volume control by the industry and a decrease in yields
in some production areas due to adverse weather conditions during the
growing season.
Production increased for each of the five major producing States
from 1960 to 2001. In 1995, Wisconsin surpassed Massachusetts to become
the largest producing State. Production in all States is highly
variable. This variation in production is mainly due to the variation
in yields, which is influenced by weather in each of the producing
States. The variation in production is one of the primary reasons the
industry likes to carry out a reasonable volume of inventory into the
next crop year to insure against a short crop.
Cranberries are produced in at least 10 States, but the vast
majority of farms and production are concentrated in Massachusetts, New
Jersey, Oregon, Washington, and Wisconsin. Area harvested for the U.S.
has increased from 21,140 acres in 1960 to 34,300 acres in 2001. Most
of this increase has come from Wisconsin, where area harvested has
increased from 4,200 acres in 1960 to 15,100 acres in 2001. Currently,
Wisconsin has the highest amount of area harvested at 15,100 acres,
followed by Massachusetts with 12,200, New Jersey with 3,100 acres,
Oregon with 2,300 acres, and Washington with 1,600 acres. Total U.S.
area harvested has declined from a peak of 37,500 in 1999 to 34,300
acres in 2001. This decline is likely due to the surplus situation the
industry has experienced over the last several crop years.
Massachusetts has traditionally had the largest area harvested.
However, in 1998, Wisconsin became the State with the largest area
harvested. Since 1998, Wisconsin area harvested has continued to
increase, while Massachusetts area harvested has declined. Together,
both States account for over 80 percent of cranberry production.
Average farm size for cranberry production is very small. The
average across all producing States is about 27 acres. Wisconsin's
average is twice the U.S. average, at 56 acres, and New Jersey averages
66 acres. Average farm size is below the U.S. average for Massachusetts
(20 acres), Oregon (13 acres) and Washington (11 acres).
Yields are highly variable from year to year and yields have been
increasing over time. For the U.S., yields have more than doubled from
the 1960's to the 2000's. Increasing yields suggest that cranberry
growers have become more productive. Over the last five crop years
(1997-2001), Wisconsin has had the highest yield at 185.9 barrels per
acre,
[[Page 23356]]
followed by New Jersey with an average yield of 154.0 barrels per acre,
then Oregon with an average yield of 151.2 barrels per acre, then
Massachusetts with an average yield of 133.2 barrels per acre, and then
Washington with an average yield of 104.1 barrels per acre.
While production capacity continues to rise, demand has leveled
off. Per capita consumption of fresh cranberries has remained stable
ranging from 0.07 to 0.10 pounds per person. The per capita consumption
of processed cranberries increased to 1.70 pounds per person in 1994.
In 1994, total domestic production was 4,682,000 barrels, while total
sales increased to 4,692,507 barrels. This increase in sales and per
capita consumption, accompanied by increasing grower prices provided
further incentives for growers to increase plantings and productivity.
However, after 1994, sales of processed cranberries began to stagnate.
Stagnant sales of processed cranberry products continued until 2000. In
the 2000 crop year, per capita consumption of processed cranberries
increased to 1.87 pounds and sales of processed cranberries increased
to over 5 million barrels for the first time.
About 92 percent of the cranberry crop is processed, with the
remainder sold as fresh fruit. In the 1950's and early 1960's, fresh
production was considerably higher than it is today, and in many years,
constituted as much as 25 to 50 percent of total production. Fresh
production began to decline in the 1980's, while processed utilization
and output soared as cranberry juice products became popular. Today,
fresh fruit claims only about 8 percent of total production. Three of
the top five States produce cranberries for fresh sales. New Jersey and
Oregon produce fruit for processed products only. There has been
tremendous growth in processed cranberries, while the fresh market has
remained relatively stable.
When supply is greater than demand, inventories are carried over
into the next crop year. Carryin inventories are reported by the
Committee. In many agricultural industries, modest levels of
inventories are believed to be desirable in situations of a late
harvest or a disastrous production year. From 1987 through 1997, annual
carryin inventories were relatively stable, averaging 1.1 million
barrels. Beginning with the 1998 crop, carryin inventories exceeded 2
million barrels. For the 2000 crop year, carryin inventories exceeded 4
million barrels. Large and increasing inventories provide an indication
of how far supply is outpacing demand. Larger inventories, beginning in
1997, have resulted in prices paid to growers dropping dramatically.
From 1974 through 1996, prices trended up. Prices increased from
$11.00 per barrel in 1974 to $65.90 per barrel in 1996. Since 1996,
prices have decreased. Prices reached a recent low of $17.20 per barrel
in 1999. In 2001, prices are reported at $22.90 per barrel. The period
of increasing prices provided an incentive for producers to expand
planted acres and to increase yields. The price decline over the past
several crop years is due to the surplus situation which resulted from
the increase in planted acreage and yields and the lack of significant
sales increases to keep pace with increased production.
Grower prices do not vary greatly among the five major producing
States. This provides an indication that domestic market forces
similarly impact all U.S. cranberry growers. Further evidence that
prices for the five producing States follow very similar movements is
provided by computing the correlation coefficient for the five
producing States from 1960 to 2001. Correlation is a statistical
measure, which shows how variables are related and a figure of 1.0
would mean perfect correlation. The price correlation among the five
States is greater than 0.97.
Real prices are derived by deflating the actual (nominal) prices by
a price index (Prices Received by Farmers All Farm Products Index 1990-
92=100). Real prices have the effects of inflation removed. Real prices
show whether there has been any change in a commodity's price behavior
absent the effects of inflation. Real cranberry prices reached a peak
in 1997. Currently, real prices have fallen to levels similar to the
mid 1970's.
The value of production increased dramatically from 1960, reaching
a peak of $350 million in 1997. In 2000, the value of production fell
below $100 million for the first time since 1980. Between 1997 and
2001, growers lost 69 percent of the value of production due to the
surplus situation. The value of production has declined in all of the
major producing States.
With most agricultural commodities, there is a pronounced inverse
relationship between production and prices. When production is high,
prices are generally low and when production is low, prices are
generally high. From 1960 through 1996, prices and production are
positively correlated (the correlation coefficient is 0.93). However,
beginning in 1997, as production continued to increase, prices started
to decline and continued to decline as production increased in crop
years 1998 and 1999. Starting in 1996, supply began to outpace demand,
ultimately resulting in declining prices.
To help stabilize market supply and demand conditions, volume
regulation was introduced in 2000 and again in 2001, marking the first
time in 30 years that such regulations were implemented. Crop sizes in
2000 and 2001 have been reduced by the use of the producer allotment
program, which limits the amount of product that a producer can deliver
to a handler. Reduced crop sizes for these two crop years, combined
with increased sales and USDA purchases, have resulted in a reduction
of inventories.
In an industry such as cranberries, where the product can be stored
for long periods of time, volume control is a method that can be used
to reduce supplies so that they are more in line with market needs.
Large inventories are costly to maintain and, with the outlook for
continued high production levels, these inventories are difficult to
market. Producers may not receive full payment for cranberries
delivered to storage for several years, and storage costs are deducted
from their final payment.
The demand for cranberries is inelastic. A producer allotment
program results in a decrease in supply because producers can only
deliver a certain portion of their past sales history. With an
inelastic demand, a small shift (decrease) in the supply curve results
in relatively large impacts on grower prices. An allotment program
results in increasing grower prices and grower revenues.
The level of unsold inventory, the current capacity to produce in
excess of expected demand, and continuing low grower prices have
resulted in the industry debating various alternatives under their
marketing order.
Reestablishment of Districts and Reapportionment of Grower Membership
Among the Districts
The proposed amendment to authorize the Committee to reestablish
and/or reapportion districts would give the Committee greater
flexibility in responding to changes in grower demographics and
district significance in the future. This authority would allow the
Committee to recommend changes through informal rulemaking rather than
through an order amendment. The proposal includes specific criteria to
be considered prior to making any recommendations.
This proposed authority does not change the districts. It only
authorizes the Committee to recommend changes more efficiently. No
additional administrative costs are anticipated
[[Page 23357]]
with this proposed amendment. This proposal should be favorable to both
large and small entities.
Development of Marketing Policy
Section 929.46 of the order requires the Committee to develop a
marketing policy each year as soon as practicable after August 1. In
its marketing policy, the Committee projects expected supply and market
conditions for the upcoming season. The marketing policy should be
adopted before any recommendation for regulation, as it serves to
inform USDA and the industry, in advance of the marketing of the crop,
of the Committee's plans for regulation and the bases therefore.
Handlers and growers can then plan their operations in accordance with
the marketing policy.
The Committee is currently required to consider nine criteria in
developing its marketing policy. The criteria include such items as
expected production, expected demand conditions, and inventory levels.
This rule recommends removing criteria not considered to be relevant in
making a decision on the need for volume regulation.
The marketing order section of the order also states that the
Committee must estimate the marketable quantity necessary to establish
a producer allotment program by May 1, and must submit its marketing
policy to USDA after August 1. These dates are inconsistent with the
dates by which the Committee must recommend a volume regulation (if one
or both are deemed necessary) for the upcoming crop. USDA is
recommending that both dates be removed.
These changes are non-substantive in nature. They remove
unnecessary criteria and obsolete dates from the order. As such, they
will have no economic impact on growers or handlers.
Sales History Calculations Under the Producer Allotment Program
The proposed amendment to modify the method for calculating sales
histories would provide growers with additional sales histories to
compensate them for expected increases in yields on newer acres during
a year of volume regulation, which would result in sales histories more
reflective of actual sales. This proposed amendment would also allow
more flexibility in recommending changes to the formula and add the
authority to calculate fresh and processed cranberries separately.
The proposed amendment to the sales history calculations would
benefit a majority of growers, especially growers who planted some or
all of their acreage within the previous 5 years. The proposal would
also help ensure that growers with mature acres who also have newer
acreage and growers with only newer acres are treated equitably.
During the 2000 volume regulation, many growers, particularly those
with acreage 4 years old or less, indicated that the method of sales
history calculation placed them at a disadvantage because they realized
more production on their acreage than their sales history indicated.
With the volume of new acres within the industry, this would affect
many growers.
The Committee determined that something needed to be done to
address the concerns associated in the 2000 crop year with growers with
newer acreage. The Committee discussed other alternatives to this
method. One suggestion was to allow growers with newer acreage to add a
percentage of the State average yield to their sales history each year
up to the fourth year. The example presented was that acreage being
harvested for the second time during a year of volume regulation would
receive a sales history that was 25 percent of the State average yield,
a third year harvest would receive 50 percent of State average yield,
and a fourth year harvest would receive 75 percent of State average
yield. Although this method would address some of the problems
experienced in 2000, it was determined that the method established by
this action would be a simpler and more practical method for growers to
obtain the most realistic sales history.
This action addresses grower concerns regarding determination of
their sales histories. The method provides additional sales history for
growers with newer acres to account for increased yields for each
growing year up to the fifth year by factoring in appropriate
adjustments to reflect rapidly increasing production during initial
harvests. The adjustments are in the form of additional sales histories
based on the year of planting.
An appeals process would be in place for growers to request a
redetermination of their sales histories. For the 2000-2001 volume
regulation, over 250 appeals were received by the appeals subcommittee
(the first level of review for appeals). In 2001-2002, a total of 49
appeals were filed. The decrease in appeals filed was a direct result
of the formula for calculating sales histories that was implemented in
2001. This proposed amendment represents a generic version of the
formula that was used in 2001.
This proposal, if adopted, would not impose any immediate
regulations on large or small growers and handlers. It would only
modify the formula for calculating sales histories in the event volume
regulations are implemented in the future. Adopting this proposal would
benefit small businesses by allowing them more flexibility in receiving
a more equitable sales history if volume regulations are recommended
and implemented in future years. If this proposal is adopted, growers
and handlers would know specifically how sales histories would be
calculated so that they can be informed and make business decisions
well ahead of the future season.
The proposal also includes that sales histories, starting with the
crop year following adoption of this amendment, would be calculated
separately for fresh and processed cranberries. Fresh and organic fruit
were exempt from the 2000 and 2001 volume regulations because it was
determined that they did not contribute to the surplus. In both years,
fresh fruit sales were deducted from sales histories and each grower's
sales history represented processed sales only. To have sales histories
more reflective of sales, the Committee proposed calculating separate
sales histories for fresh and processed cranberries. Also, in future
years, fresh cranberry sales could contribute to the surplus. This
proposed change would make sales history calculations more equitable.
These changes will have a positive effect on all growers and
handlers because they will result in a more equitable allocation of the
marketable quantity among growers. The proposal would be favorable to
both large and small entities.
Catastrophic Events That Impact Growers' Sales Histories
The proposed amendment would provide more flexibility in the
provision under the sales history calculations that compensates growers
with additional sales histories for losses on acreage due to forces
beyond the grower's control.
The current provisions require that if a grower has no commercial
sales from acreage for 3 consecutive crop years due to forces beyond
the grower's control, the Committee shall compute a level of commercial
sales for the fourth year for that acreage using an estimated
production. The record revealed that this provision was too stringent
as evidenced by only one grower meeting these criteria in two years of
volume regulation.
The proposal would authorize the Committee to recommend rules and
[[Page 23358]]
regulations to allow for adjustments of a grower's sales history to
compensate for catastrophic events that impact a grower's crop. The
Committee would recommend procedures and guidelines to be followed in
each year a volume regulation is implemented. The proposed amendment
would have a positive impact on both large and small growers as the
Committee would be in a position to compensate more growers who
experienced losses due to catastrophic events than the current order
provides.
Remove Specified Dates Relating to Issuing Annual Allotments
The order currently provides that when a producer allotment
regulation is implemented, USDA establishes an allotment percentage
equal to the marketable quantity divided by the total of all growers'
sales histories. The allotment percentage is then applied to each
grower's sales history to determine that individual's annual allotment.
All growers must file an AL-1 form with the Committee on or before
April 15 of each year in order to receive their annual allotments. The
Committee is required to notify each handler of the annual allotment
that can be handled for each grower whose crop will be delivered to
such handler on or before June 1.
Experience during the 2000 and 2001 crop years has proven that
maintaining a specified date by which growers are to file a form to
qualify for their allotment and for the Committee to notify handlers of
their growers' annual allotments has been difficult. This proposed
change would delete the specified dates and allow the Committee to
determine, with the approval of USDA, more appropriate dates by which
growers are to file forms and the Committee is to notify handlers of
their growers' annual allotments. The Committee would like to have
established dates that the industry can realistically meet each season
when a volume regulation is implemented.
Because volume regulation was not recommended until the end of
March during 2000 and 2001, growers had difficulty in submitting the
required reports in a timely manner. Additionally, the rulemaking
process to establish the allotment percentage had not been completed by
June 1. Therefore, the Committee was unable to notify handlers of their
growers' allotment by the specified deadline. With this proposed
amendment, dates could be established in line with the timing of the
recommendation and establishment of volume regulation. Allowing the
Committee to set dates that can realistically be met by the industry
would better serve the purposes of the marketing order. Thus, this
modification should benefit the entire industry, both large and small
entities.
The Committee also recommended clarifying the explanation of how an
allotment percentage is calculated. Currently, Sec. 929.49(b) states
that such allotment percentage shall equal the marketable quantity
divided by the total of all growers' sales histories. It does not
specify that ``all growers' sales histories'' includes the sales
histories calculated for new growers. This rule proposes a
clarification to ensure that total sales histories (including those of
new growers) are used in this calculation. To the extent this
clarification makes the terms of the order easier to understand, it
should benefit cranberry growers and handlers.
This rule also proposes revising the information to be submitted by
growers to qualify for an annual allotment. Currently, all growers must
qualify for allotment by filing with the Committee a form including the
following information: (1) The location of their cranberry producing
acreage from which their annual allotment will be produced; (2) the
amount of acreage which will be harvested; (3) changes in location, if
any, of annual allotment; and (4) such other information, including a
copy of any lease agreement, as is necessary for the Committee to
administer the order. Such information is gathered by the Committee on
a form specified as the AL-1 form.
The proposed amendment would modify these criteria by not including
information that is not pertinent. Currently, growers are assigned a
grower number and the amount of acreage on which cranberries are being
produced is maintained. The location of the cranberry producing acreage
is not maintained. Therefore, there is no need to specify this
information on the form. It is also unnecessary to include changes in
location, if any, of growers' annual allotment including the lease
agreement. Annual allotment is linked to a grower's cranberry producing
acreage and, since the acreage cannot be moved from one location to
another, information on changes in location is not relevant.
Therefore, the information to be submitted by growers is being
recommended for revision by removing the information that the Committee
does not need to operate a producer allotment program. Other
information that is currently requested (including identifying the
handler(s) to whom the grower will assign his or her allotment) would
remain unchanged.
The AL-1 form was modified (and approved by OMB) prior to the 2001
volume regulation. At that time, the Committee did not include this
information on the form. Therefore, there is no reporting burden change
as a result of this amendment. This change removes the unnecessary
information from the order language.
Clarify How the Committee Allocates Unused Allotment to Handlers
The proposed amendment would change the method by which the
Committee allocates unused allotment to handlers having excess
cranberries to proportional distribution of each handler's total
allotment.
Currently under the producer allotment volume regulation features
of the order, section 929.49(h) provides that handlers who receive
cranberries more than the sum of their growers' annual allotments have
``excess cranberries'' and shall notify the Committee. Handlers who
have remaining unused allotment are ``deficient'' and shall notify the
Committee. The Committee shall equitably distribute unused allotment to
all handlers having excess cranberries.
The proponents testified that there has been a debate in the
industry on the interpretation of what equitable distribution means and
how it should be accomplished. To add specificity, the Committee
proposed replacing the words ``equitably distribute'' with
``proportional to each handler's total allotment''.
The proponents testified that the distribution of unused allotment
would only be given to those handlers who have excess fruit and are in
need of allotment to cover that fruit. Allotment is only distributed
proportionately to handlers when there are more requests for unused
allotment than available unused allotment. In this situation, handlers
would then receive the allotment in proportion to the volume of
cranberries they handle.
This amendment would have a positive impact on large and small
handlers since handlers may be able to acquire the additional allotment
they need for their excess berries than they would have under the
current provisions.
Growers' Assignment of Allotment if No Crop Is Produced
The proposed amendment to authorize growers who choose not to
produce a crop in years of volume regulation to not assign their
allotment to their handler would provide growers with flexibility to
decide what happens with their unused allotment. Currently,
[[Page 23359]]
the order requires the allotment to go to the handlers.
Prior to implementing this provision, the Committee would consider
what would happen to the unused allotment and recommend, with USDA
approval, implementing regulations. This amendment would benefit
growers who choose not to grow a crop by providing them with input into
the allocation of that allotment. This proposal should be favorable to
both large and small growers.
Transfers of Allotment During Years of Volume Regulation
The proposed amendment would allow growers to transfer allotment
during a year of volume regulation and allow the sales history to
remain with the lessor when there is a total or partial lease of
cranberry acreage to another grower. Currently, growers are not allowed
to transfer allotment to other growers. The only option available to
growers to accomplish a transfer of allotment is to complete a lease
agreement between the two growers. This involves filing paperwork,
including signed leases and only transferring the sales history, not
the allotment. Many of the lease agreements were initiated during the
two years of volume regulation and created a burden on Committee staff.
It also made recalculations of growers sales histories difficult.
This proposal would simplify the process for growers by authorizing
growers to transfer all or part of his or her allotment to another
grower. Safeguards are in place to ensure that the transferred
allotment remains with the same handler unless consent is provided by
both handlers. In addition, the Committee may establish dates by which
transfers may take place.
This proposal would be beneficial to both large and small growers
as it provides flexibility in transferring allotment.
Implementing Both Forms of Volume Regulation in the Same Year
The proposal to require authorizing both forms of volume regulation
in the same year was proposed in accordance with an amendment to the
Act in November 2001. The amendment specified that USDA is authorized
to implement a producer allotment program and a handler withholding
program in the same crop year through informal rulemaking based on a
recommendation and supporting economic analysis submitted by the
Committee. If such recommendation is made by the Committee, it must be
made no later than March 1 of each year. The amendment would provide
additional flexibility to the Committee when considering its marketing
policy each year.
This proposal should be favorable to both large and small entities.
Dates for Recommending Volume Regulation
The proposal to require the Committee to recommend a producer
allotment program by March 1 each year would allow growers to alter
their cultural practices in an efficient manner in the event that a
producer allotment is implemented. Growers have indicated that they
need to know as soon as possible whether the Committee is going to
recommend a regulation since a producer allotment program requires
growers to only deliver a portion of their crop. The Committee's
decision influences whether growers can cut back on purchases of
chemicals, fertilizer or possibly take acreage out of production. This
can result in growers' savings. The later the decision is made, the
chances are growers will have already invested these costs on their
acreage.
The proposal to require the Committee to recommend a handler
withholding program by August 31 each year would provide the Committee
staff with ample time to prepare reports based on handler inventory
reports and crop projection data received from the National
Agricultural Statistics Service (NASS). Because the withholding program
does not impact grower deliveries, this date is more appropriate for
making an informed decision on whether to recommend this type of
program.
Another proposal would authorize both forms of volume regulation to
be implemented each year in accordance with an amendment to the Act
authorizing such proposal. The amendment states that if both forms of
volume regulation are recommended, it should be done by March 1.
Therefore, this proposed amendment would require that if both forms of
regulation are recommended in the same year that it be recommended by
March 1. The same reasoning for recommending a producer allotment alone
would apply to this proposed requirement. Growers need to know as soon
as possible if production costs can be mitigated if a producer
allotment is recommended. All growers, both large and small, should
benefit from this change.
Exemptions From Order Provisions
The proposed amendment recommending that specific authority be
added to exempt fresh, organic or other forms of cranberries from order
provisions would clarify the current language and provide guidelines
for the specific forms or types of cranberries that could be exempted.
Fresh and organic cranberries were exempted from the 2000 and 2001
volume regulations under the minimum quantity exemption authority of
the order. This proposal would merely clarify that authority in the
order to ensure that fresh and organic and other forms of cranberries
could be exempted if warranted in the future. This proposal should be
beneficial to large and small entities.
Expand Outlets for Excess Cranberries
The proposed amendment to the outlets for excess cranberries
provisions would broaden the scope of noncommercial and noncompetitive
outlets for excess cranberries. Adoption of this proposal would provide
the Committee, with USDA's approval, the ability to recognize and
authorize the used of additional or new noncommercial and/or
noncompetitive outlets for excess cranberries through informal
rulemaking.
Because competitive markets can change from season to season and
new and different research ideas can be devised, the Committee would
develop guidelines each year a volume regulation is recommended that
would be used in determining appropriate outlets for excess
cranberries. This would benefit growers and handlers by providing
flexibility in determining outlets. This proposal would be particularly
useful in determining which foreign markets can be used as outlets for
excess cranberries. Foreign markets are one area where growth is
occurring and demand is increasing. Exports of cranberries have
increased from 184,000 barrels in 1988 to 824,000 barrels in 2000. Both
large and small entities should benefit from this proposal.
General Withholding Provisions
Section 929.54 of the order sets forth the general parameters
pertaining to withholding regulations. Under this form of regulation,
free and restricted percentages are established, based on market needs
and anticipated supplies. The free percentage is applied to handlers'
acquisitions of cranberries in a given season. A handler may market
free percentage cranberries in any chosen manner, while restricted
berries must be withheld from handling.
The withholding provisions of the order were used briefly over
three decades ago. Although the cranberry industry has not used the
authority for
[[Page 23360]]
withholding regulations in quite some time, the record evidence
supports maintaining this tool for possible future use. However,
substantive changes in industry practices have rendered current
withholding provisions in need of revision. Thus, this decision
recommends updating and streamlining those provisions.
The record shows that at the time the withholding provisions were
designed, the cranberry industry was much smaller, producing and
handling much lower volumes of fruit than it does now. In 1960,
production was about 1.3 million barrels; by 1999, a record 6.3 million
barrels were grown. A much higher percentage of the crop was marketed
fresh--about 40 percent in the early 1960's versus less than 10 percent
in recent years.
Changes in harvesting and handling procedures have been made so the
industry is better able to process higher volumes of cranberries. Forty
years ago, virtually all cranberries were harvested dry, and water
harvesting was in an experimental stage of development. Water
harvesting is currently widespread in certain growing regions;
cranberries harvested under this method must be handled immediately as
they are subject to rapid deterioration.
In the early 1960's, handlers acquired some cranberries that had
been ``screened'' to remove extraneous material that was picked up with
the berries as they were being harvested, and ``unscreened'' berries
from which the extraneous material (including culls) had not been
removed. The handler cleaned some of the unscreened berries immediately
upon receipt, while others were placed in storage and screened just
prior to processing.
The order currently provides that when a withholding regulation is
implemented, the restricted percentage will be applied to the volume of
``screened'' berries acquired by handlers. Since the term ``screening''
is obsolete, all references to that term are being deleted.
The order also currently provides that withheld cranberries must
meet such quality standards as recommended by the Committee and
established by USDA. The Federal or Federal-State Inspection Service
must inspect such cranberries and certify that they meet the prescribed
quality standards. The intent of these provisions is, again, to ensure
that the withholding regulations reduce the volume of cranberries in
the marketplace by not allowing culls to be used to meeting withholding
obligations. The inspection and certification process is also meant to
assist the Committee in monitoring the proper disposition of restricted
cranberries, thereby ensuring handler compliance with any established
withholding requirements.
The need for inspection and certification of withheld cranberries
is not as great today as in the past. Additionally, it could be costly,
particularly since most withheld berries would subsequently be dumped,
generating no revenue for growers or handlers. The inspection process
could also inordinately slow down handling operations, and there could
be differential impacts of such requirements because some handling
facilities operate in ways that lend themselves to more efficient
methods of pulling representative samples (for inspection purposes)
than others.
Removing the requirements for mandatory inspection and
certification requirements would allow the industry to develop
alternative safeguards to achieve its objectives at lower cost. While
the inspection process may be deemed the best method by the Committee,
this proposal provides flexibility by allowing the Committee to
consider other, less costly alternatives.
Eliminating the mandatory inspection under the withholding program
and deleting obsolete terminology would make the program more flexible
for the industry and allow the Committee to operate more efficiently.
As such, this amendment should benefit cranberry growers and handlers
by providing an additional tool they could use in times of cumbersome
oversupply.
Buy-Back Provisions Under the Handler Withholding Program
Section 929.56 of the order, entitled ``Special provisions relating
to withheld (restricted) cranberries,'' sets forth procedures under
which handlers may have their restricted cranberries released to them.
These provisions are commonly referred to in the industry as the buy-
back provisions.
Under the current buy-back provisions, a handler can request the
Committee to release all or a portion of his or her restricted
cranberries for use as free cranberries. The handler request has to be
accompanied by a deposit equal to the fair market value of those
cranberries. The Committee then attempts to purchase as nearly an equal
amount of free cranberries from other handlers. Cranberries so
purchased by the Committee are transferred to the restricted percentage
and disposed of by the Committee in outlets that are noncompetitive to
outlets for free cranberries. The provision that each handler deposit a
fair market price with the Committee for each barrel of cranberries
released and that the Committee use such funds to purchase an equal
amount or as nearly an equal amount as possible of free cranberries is
designed to ensure that the percentage of berries withheld from
handling remains at the quantity established by the withholding
regulation for the crop year.
The Committee has the authority to establish a fair market price
for the release of restricted cranberries under the buy-back program.
The money deposited with the Committee by handlers requesting release
of their restricted cranberries is the only money the Committee has
available for acquiring free cranberries. Thus, the amount deposited
must be equal to the then current market price or the Committee will
have insufficient funds to purchase a like quantity of free
cranberries.
The Committee is required to release the restricted cranberries
within 72 hours of receipt of a proper request (including the deposit
of a fair market value). This release was made automatic so that
handlers would be able to plan their operations, and very little delay
would be encountered.
If the Committee is unable to purchase free berries to replace
restricted cranberries that are released under these provisions, the
funds deposited with the Committee are required to be returned to all
handlers in proportion to the volume withheld by each handler.
This rule proposes authorizing direct buy-back between handlers.
With this option, a handler would not have to go through the Committee
to have his or her restricted berries released. Instead, that handler
could arrange for the purchase of another handler's free cranberries
directly. All terms, including the price paid, would be between the two
parties involved and would not be prescribed by the Committee. This
change would add flexibility to the order and could offer a more
efficient method of buying back cranberries. Also, no Committee
administrative costs would be incurred. Handlers would have the option
of using this method, or they could buy back their berries through the
Committee, as is currently provided.
There are four criteria the Committee needs to consider in
establishing a fair market price under the buy-back program for
purchasing restricted cranberries. These include prices at which
growers are selling their cranberries to handlers; prices at which
handlers are selling fresh berries to dealers; prices at which
cranberries are being sold to processors; and prices at
[[Page 23361]]
which the Committee has purchased free berries to replace released
restricted berries.
This action proposes adding two criteria to the list--the prices at
which handlers are selling cranberry concentrate and growers' costs of
production. Both of these items are relevant to consider in determining
a fair market value. Consideration of these criteria by the Committee
would benefit handlers.
Under the current buy-back provisions, handlers are required to
deposit with the Committee the full market value of the berries they
are asking to be released. This decision proposes a different payment
schedule so that handlers would not have to make a large cash payment
prior to the sale of their restricted cranberries. Twenty percent of
the total amount would be due at the time of the request, with an
additional 10 percent due each month thereafter. This change would
facilitate handlers buying back their restricted berries by reducing
the costs of such a venture. Thus, handlers should benefit.
If the Committee is unable to purchase free berries under the buy-
back system, it is currently required to refund the money back to all
handlers proportionate to the amount each handler withheld under
regulation. USDA is proposing a modification that would provide that
the money be returned to the handler who deposited it for distribution
to the growers whose fruit was sold. This should benefit growers whose
fruit was sold. Additionally, this change could provide an incentive
for handlers to make available free cranberries for purchase to replace
restricted cranberries that are released under the buy-back provisions.
For these reasons, this change should benefit the cranberry industry.
Paid Advertising
The proposal to add authority for paid advertising under the
research and development provisions of the order would provide the
Committee the flexibility to use paid advertising to assist, improve,
or promote the marketing, distribution, and consumption of cranberries
in either its export or domestic programs. The authority for
authorizing paid advertising under the cranberry marketing order was
added to the Act in October, 1999.
If a paid advertising program is recommended by the Committee, it
could entail an increase in assessments to administer the program,
which would have an impact on handlers. According to testimony, it is
the Committee's intent to use paid advertising sparingly as a means to
provide consumers with relevant information to the health-related
benefits of cranberries. Paid advertising authority is viewed as an
additional tool available to the Committee to meet its objectives of
increasing demand and consumption of cranberries and cranberry
products. It is anticipated that any additional costs incurred to all
handlers, both large and small, would be outweighed by the benefits of
increasing demand for cranberries. Any paid advertising program and
increase of assessment must proceed through notice and comment
rulemaking before it is implemented.
Definition of Handle
The proposal to modify the definition of handle under the order
would clarify that the transporting of fresh cranberries to foreign
markets other than Canada is also considered handling. This proposed
change would merely clarify language.
The proposal would also modify the definition by including the cold
storage or freezing of withheld cranberries as an exemption from
handling for the purpose of temporary cold storage during periods when
withholding provisions are in effect prior to their disposal. The
provision already applies this exemption to excess cranberries under
the producer allotment program and it was determined that handlers
could benefit from this provision under a withholding program as well.
This would benefit large and small handlers by allowing temporary
storage of withheld cranberries, which could be critical during a
withholding volume regulation.
Reporting Requirements
The proposal to modify the reporting requirements would relocate a
paragraph on a grower reporting requirement to the section on Reports
for ease of referencing and is only administrative in nature.
The proposal would also add more specific information under the
grower reporting provisions to incorporate additional information
necessary from growers if the sales history and transfer of allotment
proposals are adopted. This will assist the Committee in assembling the
most accurate and effective information as possible. Orders with
producer allotment programs are unique in that specific information is
needed from growers in order to implement a program. Both large and
small growers benefit from reporting the information by being provided
accurate and timely sales histories that reflect their production and
allow equitable allotments to be determined on their acreage during
years of volume regulation. The failure of growers to file these
reports could be detrimental to them in the event volume regulations
are implemented. Any additional reporting requirements resulting from
adoption of this proposed amendment would be submitted to the Office of
Management and Budget prior to implementation.
The proposal would also include that handlers report on the
quantities of excess cranberries as well as withheld cranberries. This
is a clarification and administrative in nature. The proposal would
also simplify and clarify the provision on verification of reports. The
proposal should be favorable to large and small growers.
Obsolete Provision
The proposal to delete an obsolete provision relating to
preliminary regulation is administrative in nature and is being
recommending for adoption. There would be no impact on growers or
handlers.
Proposed Amendments Not Recommended For Adoption in This Decision
Five proposed amendments are not being recommended for adoption.
Therefore, there would be no economic impact resulting from these
proposals.
The proposed amendments not recommended would have: (1)
Incorporated a handler marketing pool and/or buy-back provisions to the
producer allotment program (Material Issue 15); (2) authorized an
exemption from order provisions for the first 1,000 barrels of
cranberries produced by each grower (Material Issue 16); (3) expanded
the production area to include the States of Maine and Delaware and the
entire State of New York (Material Issue 17); and (4) modified the
definition of cranberry by adding the species Vaccinium oxycoccus to
the definition (Material Issue 19).
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.
35), the reporting and recordkeeping provisions that would be generated
by the proposed amendments would be submitted to the Office of
Management and Budget (OMB).
None of the changes, if implemented, would generate any reporting
burden to growers or handlers.
Many of the changes have no reporting ramifications if they are
established. As examples, adding the authority for redistricting and
reapportionment of the Committee,
[[Page 23362]]
changing the deadlines for filing volume regulations, or adding the
authority for paid advertising would not create any additional
reporting requirements.
Some of the proposed amendments would not generate any reporting
burdens by amendment of the order alone. If these authorities were
added to the order, reporting burdens would occur at the time
regulations were established to activate the order authority. Examples
of these amendments are those that impact the two forms of volume
regulations. If a producer allotment volume regulation were
implemented, regulations would be needed to set forth any forms of
cranberries exempt from the volume regulation or what outlets (and
appropriate safeguards) would be established for excess cranberries.
Also, at the time of recommendation, the process for making adjustments
for catastrophic events would need to be recommended by the Committee.
In these instances, the reporting burdens, if any, would not exist
until the volume regulation was in place. In addition, if a handler
withholding volume regulation is established, additional reporting
burdens may be necessary to cover the handler-to-handler buy-back
program.
Reporting burdens that would be immediately generated by these
amendments are the grower reporting requirements. However, prior to the
2001 volume regulation, the Committee modified the AL-1 form to
accommodate needed requirements for implementing the producer allotment
volume regulation.
Specifically, the way growers' sales histories were calculated that
is being recommended to be added to the order was used in the 2001
volume regulation. The AL-1 form was modified at that time (and
approved by OMB) to include the additional information required, such
as year of planting and year of first harvest.
Likewise, growers are already reporting fresh and processed sales
separately on form GSAR-1. This information was included on the form
prior to the 2001 volume regulation to accommodate the regulations.
The amendment to remove dates regarding issuance of annual
allotments does not require a modification of the form as no dates are
specified on the form.
Therefore, there would be no modification to reporting and
recordkeeping burdens generated from these proposed amendments. Current
information collection requirements for part 929 are approved by OMB
under OMB number 0581-0189.
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.
USDA has not identified any relevant Federal rules that duplicate,
overlap or conflict with this proposed rule. These amendments are
designed to enhance the administration and functioning of the marketing
order to the benefit of the industry.
Committee meetings regarding these proposals as well as the hearing
dates were widely publicized throughout the cranberry industry, and all
interested persons were invited to attend the meetings and the hearing
and participate in Committee deliberations on all issues. All Committee
meetings and the hearing were public forums and all entities, both
large and small, were able to express views on these issues. Finally,
interested persons are invited to submit information on the regulatory
and informational impacts of this action on small businesses.
A 30-day comment period is provided to allow interested persons to
respond to this proposal. Thirty days is deemed appropriate so that
this rulemaking may be completed prior to the 2005-2006 season. All
written exceptions timely received will be considered and a grower
referendum will be conducted before these proposals are implemented.
Civil Justice Reform
The amendments proposed herein have been reviewed under Executive
Order 12988, Civil Justice Reform. They are not intended to have
retroactive effect. If adopted, the proposed amendments would not
preempt any State or local laws, regulations, or policies, unless they
present an irreconcilable conflict with the amendments.
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 date of the
entry of the ruling.
Rulings on Briefs of Interested Persons
Briefs, proposed findings and conclusions, and the evidence in the
record were considered in making the findings and conclusions set forth
in this recommended decision. To the extent that the suggested findings
and conclusions filed by interested persons are inconsistent with the
findings and conclusions of this recommended decision, the requests to
make such findings or to reach such conclusions are denied.
General Findings
The findings hereinafter set forth are supplementary to the
findings and determinations which were previously made in connection
with the issuance of the marketing agreement and order; and all said
previous findings and determinations are hereby ratified and affirmed,
except insofar as such findings and determinations may be in conflict
with the findings and determinations set forth herein.
(1) The marketing agreement and order, as amended, and as hereby
proposed to be further amended, and all of the terms and conditions
thereof, would tend to effectuate the declared policy of the Act;
(2) The marketing agreement and order, as amended, and as hereby
proposed to be further amended, regulate the handling of cranberries
grown in the production area in the same manner as, and are applicable
only to, persons in the respective classes of commercial and industrial
activity specified in the marketing agreement and order upon which a
hearing has been held;
(3) The marketing agreement and order, as amended, and as hereby
proposed to be further amended, are limited in their application to the
smallest regional production area which is practicable, consistent with
carrying out the declared policy of the Act, and the issuance of
several orders applicable to subdivisions of the production area would
not effectively carry out the declared policy of the Act;
(4) The marketing agreement and order, as amended, and as hereby
proposed to be further amended, prescribe, insofar as practicable, such
different terms applicable to different parts of the production area as
are necessary to give due recognition to the differences in the
production and marketing of cranberries grown in the production area;
and
(5) All handling of cranberries grown in the production area as
defined in the
[[Page 23363]]
marketing agreement and order, as amended, and as hereby proposed to be
further amended, is in the current of interstate or foreign commerce or
directly burdens, obstructs, or affects such commerce.
List of Subjects in 7 CFR Part 929
Cranberries, Marketing agreements, Reporting and recordkeeping
requirements.
Recommended Amendment of the Marketing Agreement and Order
For the reasons set out in the preamble, 7 CFR part 929 is proposed
to be amended as follows:
PART 929--CRANBERRIES GROWN IN THE STATES OF MASSACHUSETTS, RHODE
ISLAND, CONNECTICUT, NEW JERSEY, WISCONSIN, MICHIGAN, MINNESOTA,
OREGON, WASHINGTON, AND LONG ISLAND IN THE STATE OF NEW YORK
1. The authority citation for 7 CFR part 929 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. Amend Sec. 929.10 by revising paragraphs (a)(2) and (b)(4) to
read as follows:
Sec. 929.10 Handle.
(a) * * *
(2) To sell, consign, deliver, or transport (except as a common or
contract carrier of cranberries owned by another person) fresh
cranberries or any other way to place fresh cranberries in the current
of commerce within the production area or between the production area
and any point outside thereof.
(b) * * *
(4) The cold storage or freezing of excess or restricted
cranberries for the purpose of temporary storage during periods when an
annual allotment percentage and/or a handler withholding program is in
effect prior to their disposal, pursuant to Sec. Sec. 929.54 or
929.59.
3. Add a new Sec. 929.28 to read as follows:
Sec. 929.28 Redistricting and reapportionment.
(a) The committee, with the approval of the Secretary, may
reestablish districts within the production area and reapportion
membership among the districts. In recommending such changes, the
committee shall give consideration to:
(1) The relative volume of cranberries produced within each
district.
(2) The relative number of cranberry producers within each
district.
(3) Cranberry acreage within each district.
(4) Other relevant factors.
(b) The committee may establish, with the approval of the
Secretary, rules and regulations for the implementation and operation
of this section.
4. Revise Sec. 929.45 to read as follows:
Sec. 929.45 Research and development.
(a) The committee, with the approval of the Secretary, may
establish or provide for the establishment of production research,
marketing research, and market development projects, including paid
advertising, designed to assist, improve, or promote the marketing,
distribution, consumption, or efficient production of cranberries. The
expense of such projects shall be paid from funds collected pursuant to
Sec. 929.41, or from such other funds as approved by the Secretary.
(b) The committee may, with the approval of the Secretary,
establish rules and regulations as necessary for the implementation and
operation of this section.
5. Revise Sec. 929.46 to read as follows:
Sec. 929.46 Marketing policy.
Each season prior to making any recommendation pursuant to Sec.
929.51, the committee shall submit to the Secretary a report setting
forth its marketing policy for the crop year. Such marketing policy
shall contain the following information for the current crop year:
(a) The estimated total production of cranberries;
(b) The expected general quality of such cranberry production;
(c) The estimated carryover, as of September 1, of frozen
cranberries and other cranberry products;
(d) The expected demand conditions for cranberries in different
market outlets;
(e) The recommended desirable total marketable quantity of
cranberries including a recommended adequate carryover into the
following crop year of frozen cranberries and other cranberry products;
(f) Other factors having a bearing on the marketing of cranberries.
Sec. 929.47 [Removed]
6. Remove Sec. 929.47.
7. Revise Sec. 929.48 to read as follows:
Sec. 929.48 Sales history.
(a) A sales history for each grower shall be computed by the
committee in the following manner:
(1) For growers with acreage with 6 or more years of sales history,
the sales history shall be computed using an average of the highest
four of the most recent six years of sales.
(2) For growers with 5 years of sales history from acreage planted
or replanted 2 years prior to the first harvest on that acreage, the
sales history is computed by averaging the highest 4 of the 5 years.
(3) For growers with 5 years of sales history from acreage planted
or replanted 1 year prior to the first harvest on that acreage, the
sales history is computed by averaging the highest 4 of the 5 years and
shall be adjusted as provided in paragraph (a)(6) of this section.
(4) For a grower with 4 years or less of sales history, the sales
history shall be computed by dividing the total sales from that acreage
by 4 and shall be adjusted as provided in paragraph (a)(6).
(5) For growers with acreage having no sales history, or for the
first harvest of replanted acres, the sales history will be the average
first year yields (depending on whether first harvested 1 or 2 years
after planting or replanting) as established by the committee and
multiplied by the number of acres.
(6) In addition to the sales history computed in accordance with
paragraphs (a)(3) and (4) of this section, additional sales history
shall be assigned to growers using the formula x=(a-b)c. The letter
``x'' constitutes the additional number of barrels to be added to the
grower's sales history. The value ``a'' is the expected yield for the
forthcoming year harvested acreage as established by the committee. The
value ``b'' is the total sales from that acreage as established by the
committee divided by four. The value ``c'' is the number of acres
planted or replanted in the specified year. For acreage with five years
of sales history: a = the expected yield for the forthcoming sixth year
harvested acreage (as established by the committee); b = an average of
the most recent 4 years of expected yields (as established by the
committee); and c = the number of acres with 5 years of sales history.
(b) A new sales history shall be calculated for each grower after
each crop year, using the formulas established in paragraph (a) of this
section, or such other formula(s) as determined by the committee, with
the approval of the Secretary.
(c) The committee, with the approval of the Secretary, may adopt
regulations to change the number and identity of years to be used in
computing sales histories, including the number of years to be used in
computing the average. The committee may establish, with the approval
of the Secretary, rules and
[[Page 23364]]
regulations necessary for the implementation and operation of this
section.
(d) Sales histories, starting with the crop year following adoption
of this part, shall be calculated separately for fresh and processed
cranberries. The amount of fresh fruit sales history may be calculated
based on either the delivered weight of the barrels paid for by the
handler (excluding trash and unusable fruit) or on the weight of the
fruit paid for by the handler after cleaning and sorting for the retail
market. Handlers using the former calculation shall allocate delivered
fresh fruit subsequently used for processing to growers' processing
sales. Fresh fruit sales history, in whole or in part, may be added to
process fruit sales history with the approval of the committee in the
event that the grower's fruit does not qualify as fresh fruit at
delivery.
(e) The committee may recommend rules and regulations, with the
approval of the Secretary, to adjust a grower's sales history to
compensate for catastrophic events that impact the grower's crop.
8. Revise Sec. 929.49 to read as follows:
Sec. 929.49 Marketable quantity, allotment percentage, and annual
allotment.
(a) Marketable quantity and allotment percentage. If the Secretary
finds, from the recommendation of the committee or from other available
information, that limiting the quantity of cranberries purchased from
or handled on behalf of growers during a crop year would tend to
effectuate the declared policy of the Act, the Secretary shall
determine and establish a marketable quantity for that crop year.
(b) The marketable quantity shall be apportioned among growers by
applying the allotment percentage to each grower's sales history,
established pursuant to `` 929.48. Such allotment percentage shall be
established by the Secretary and shall equal the marketable quantity
divided by the total of all growers' sales histories including the
estimated total sales history for new growers. Except as provided in
paragraph (g) of this section, no handler shall purchase or handle on
behalf of any grower cranberries not within such grower's annual
allotment.
(c) In any crop year in which the production of cranberries is
estimated by the committee to be equal to or less than its recommended
marketable quantity, the committee may recommend that the Secretary
increase or suspend the allotment percentage applicable to that year.
In the event it is found that market demand is greater than the
marketable quantity previously set, the committee may recommend that
the Secretary increase such quantity.
(d) Issuance of annual allotments. The committee shall require all
growers to qualify for such allotment by filing with the committee a
form wherein growers include the following information:
(1) The amount of acreage which will be harvested;
(2) A copy of any lease agreement covering cranberry acreage;
(3) The name of the handler(s) to whom their annual allotment will
be delivered;
(4) Such other information as may be necessary for the
implementation and operation of this section.
(e) On or before such date as determined by the committee, with the
approval of the Secretary, the committee shall issue to each grower an
annual allotment determined by applying the allotment percentage
established pursuant to paragraph (b) of this section to the grower's
sales history.
(f) On or before such date as determined by the committee, with the
approval of the Secretary, in which an allotment percentage is
established by the Secretary, the committee shall notify each handler
of the annual allotment that can be handled for each grower whose total
crop will be delivered to that handler. In cases where a grower
delivers a crop to more than one handler, the grower must specify how
the annual allotment will be apportioned among the handlers.
(g) Growers who do not produce cranberries equal to their computed
annual allotment shall transfer their unused allotment to such growers'
handlers. The handler shall equitably allocate the unused annual
allotment to growers with excess cranberries who deliver to such
handler. Unused annual allotment remaining after all such transfers
have occurred shall be reported and transferred to the committee by
such date as established by the committee with the approval of the
Secretary.
(h) Handlers who receive cranberries more than the sum of their
growers' annual allotments have ``excess cranberries,'' pursuant to
Sec. 929.59, and shall so notify the committee. Handlers who have
remaining unused allotment pursuant to paragraph (g) of this section
are ``deficient'' and shall so notify the committee. The committee
shall allocate unused allotment to all handlers having excess
cranberries, proportional to each handler's total allotment.
(i) Growers who decide not to grow a crop, during any crop year in
which a volume regulation is in effect, may choose not to assign their
allotment to a handler.
(j) The committee may establish, with the approval of the
Secretary, rules and regulations necessary for the implementation and
operation of this section.
9. Revise Sec. 929.50 to read as follows:
Sec. 929.50 Transfers of sales histories and annual allotments.
(a) Leases and sales of cranberry acreage.
(1) Total or partial lease of cranberry acreage. When total or
partial lease of cranberry acreage occurs, sales history attributable
to the acreage being leased shall remain with the lessor.
(2) Total sale of cranberry acreage. When there is a sale of a
grower's total cranberry producing acreage, the committee shall
transfer all owned acreage and all associated sales history to such
acreage to the buyer. The seller and buyer shall file a sales transfer
form providing the committee with such information as may be requested
so that the buyer will have immediate access to the sales history
computation process.
(3) Partial sale of cranberry acreage. When less than the total
cranberry producing acreage is sold, sales history associated with that
portion of the acreage being sold shall be transferred with the
acreage. The seller shall provide the committee with a sales transfer
form containing, but not limited to the distribution of acreage and the
percentage of sales history, as defined in Sec. 929.48(a)(1),
attributable to the acreage being sold.
(4) No sale of cranberry acreage shall be recognized unless the
committee is notified in writing.
(b) Allotment transfers. During a year of volume regulation, a
grower may transfer all or part of his/her allotment to another grower.
If a lease is in effect the lessee shall receive allotment from lessor
attributable to the acreage leased. Provided, That the transferred
allotment shall remain assigned to the same handler and that the
transfer shall take place prior to a date to be recommended by the
Committee and approved by the Secretary. Transfers of allotment between
growers having different handlers may occur with the consent of both
handlers.
(c) The committee may establish, with the approval of the
Secretary, rules and regulations, as needed, for the implementation and
operation of this section.
10. Revise Sec. 929.51 to read as follows:
Sec. 929.51 Recommendations for regulation.
(a) Except as otherwise provided in paragraph (b) of this section,
if the
[[Page 23365]]
committee deems it advisable to regulate the handling of cranberries in
the manner provided in Sec. 929.52, it shall so recommend to the
Secretary by the following appropriate dates:
(1) An allotment percentage regulation must be recommended by no
later than March 1;
(2) A handler withholding program must be recommended by not later
than August 31. Such recommendation shall include the free and
restricted percentages for the crop year;
(3) If both programs are recommended in the same year, the
Committee shall submit with its recommendation an economic analysis to
the USDA prior to March 1 of the year in which the programs are
recommended.
(b) An exception to the requirement in paragraph (a)(1) of this
section may be made in a crop year in which, due to unforeseen
circumstances, a producer allotment regulation is deemed necessary
subsequent to the March 1 deadline.
(c) In arriving at its recommendations for regulation pursuant to
paragraph (a) of this section, the committee shall give consideration
to current information with respect to the factors affecting the supply
of and demand for cranberries during the period when it is proposed
that such regulation should be imposed. With each such recommendation
for regulation, the committee shall submit to the Secretary the data
and information on which such recommendation is based and any other
information the Secretary may request.
11. Revise Sec. 929.52 to read as follows:
Sec. 929.52 Issuance of regulations.
(a) The Secretary shall regulate, in the manner specified in this
section, the handling of cranberries whenever the Secretary finds, from
the recommendations and information submitted by the committee, or from
other available information, that such regulation will tend to
effectuate the declared policy of the Act. Such regulation shall limit
the total quantity of cranberries which may be handled during any
fiscal period by fixing the free and restricted percentages, applied to
cranberries acquired by handlers in accordance with Sec. 929.54, and/
or by establishing an allotment percentage in accordance with Sec.
929.49.
(b) The committee shall be informed immediately of any such
regulation issued by the Secretary, and the committee shall promptly
give notice thereof to handlers.
12. Revise Sec. 929.54 to read as follows:
Sec. 929.54 Withholding.
(a) Whenever the Secretary has fixed the free and restricted
percentages for any fiscal period, as provided for in Sec. 929.52(a),
each handler shall withhold from handling a portion of the cranberries
acquired during such period. The withheld portion shall be equal to the
restricted percentage multiplied by the volume of marketable
cranberries acquired. Such withholding requirements shall not apply to
any lot of cranberries for which such withholding requirement
previously has been met by another handler in accordance with Sec.
929.55.
(b) The committee, with the approval of the Secretary, shall
prescribe the manner in which, and date or dates during the fiscal
period by which, handlers shall have complied with the withholding
requirements specified in paragraph (a) of this section.
(c) Withheld cranberries may meet such standards of grade, size,
quality, or condition as the committee, with the approval of the
Secretary, may prescribe. The Federal or Federal-State Inspection
Service shall inspect all such cranberries. A certificate of such
inspection shall be issued which shall include the name and address of
the handler, the number and type of containers in the lot, the location
where the lot is stored, identification marks (including lot stamp, if
used), and the quantity of cranberries in such lot that meet the
prescribed standards. Promptly after inspection and certification, each
such handler shall submit to the committee a copy of the certificate of
inspection issued with respect to such cranberries.
(d) Any handler who withholds from handling a quantity of
cranberries in excess of that required pursuant to paragraph (a) of
this section shall have such excess quantity credited toward the next
fiscal year's withholding obligation, if any--provided that such credit
shall be applicable only if the restricted percentage established
pursuant to Sec. 929.52 was modified pursuant to Sec. 929.53; to the
extent such excess was disposed of prior to such modification; and
after such handler furnishes the committee with such information as it
prescribes regarding such withholding and disposition.
(e) The Committee, with the approval of the Secretary, may
establish rules and regulations necessary and incidental to the
administration of this section.
13. Revise Sec. 929.56 to read as follows:
Sec. 929.56 Special provisions relating to withheld (restricted)
cranberries.
(a) A handler shall make a written request to the committee for the
release of all or part of the cranberries that the handler is
withholding from handling pursuant to Sec. 929.54(a). Each request
shall state the quantity of cranberries for which release is requested
and shall provide such additional information as the committee may
require. Handlers may replace the quantity of withheld cranberries
requested for release as provided under either paragraph (b) or (c) of
this section.
(b) The handler may contract with another handler for an amount of
free cranberries to be converted to restricted cranberries that is
equal to the volume of cranberries that the handler wishes to have
converted from his own restricted cranberries to free cranberries.
(1) The handlers involved in such an agreement shall provide the
committee with such information as may be requested prior to the
release of any restricted cranberries.
(2) The committee shall establish guidelines to ensure that all
necessary documentation is provided to the committee, including but not
limited to, the amount of cranberries being converted and the
identities of the handlers assuming the responsibility for withholding
and disposing of the free cranberries being converted to restricted
cranberries.
(3) Cranberries converted to replace released cranberries may be
required to be inspected and meet such standards as may be prescribed
for withheld cranberries prior to disposal.
(4) Transactions and agreements negotiated between handlers shall
include all costs associated with such transactions including the
purchase of the free cranberries to be converted to restricted
cranberries and all costs associated with inspection (if applicable)
and disposal of such restricted cranberries. No costs shall be incurred
by the committee other than for the normal activities associated with
the implementation and operation of a volume regulation program.
(5) Free cranberries belonging to one handler and converted to
restricted cranberries on the behalf of another handler shall be
reported to the committee in such manner as prescribed by the
committee.
(c) Except as otherwise directed by the Secretary, as near as
practicable to the beginning of the marketing season of each fiscal
period with respect to which the marketing policy proposes regulation
pursuant to Sec. 929.52(a), the committee shall determine the amount
per barrel each handler shall deposit with the committee for it to
release to him, in accordance with this section, all or part of the
cranberries he is withholding; and the committee shall
[[Page 23366]]
give notice of such amount of deposit to handlers. Such notice shall
state the period during which such amount of deposit shall be in
effect. Whenever the committee determines that, by reason of changed
conditions or other factors, a different amount should therefore be
deposited for the release of withheld cranberries, it shall give notice
to handlers of the new amount and the effective period thereof. Each
determination as to the amount of deposit shall be on the basis of the
committee's evaluation of the following factors:
(1) The prices at which growers are selling cranberries to
handlers,
(2) The prices at which handlers are selling fresh market
cranberries to dealers,
(3) The prices at which cranberries are being sold for processing
in products,
(4) The prices at which handlers are selling cranberry concentrate,
(5) The prices the committee has paid to purchase cranberries to
replace released cranberries in accordance with this section, and
(6) The costs incurred by growers in producing cranberries.
(7) Each request for release of withheld cranberries shall include,
in addition to all other information as may be prescribed by the
committee, the quantity of cranberries the release is requested and
shall be accompanied by a deposit (a cashier's or certified check made
payable to the Cranberry Marketing Committee) in an amount equal to the
twenty percent of the amount determined by multiplying the number of
barrels stated in the request by the then effective amount per barrel
as determined in this paragraph (c).
(8) Subsequent deposits equal to, but not less than, the ten
percent of the remaining outstanding balance shall be payable to the
committee on a monthly basis commencing on January 1, and concluding by
no later than August 31 of the fiscal period.
(9) If the committee determines such a release request is properly
filled out, is accompanied by the required deposit, and contains a
certification that the handler is withholding such cranberries, it
shall release to such handler the quantity of cranberries specified in
his request.
(d) Funds deposited for the release of withheld cranberries,
pursuant to paragraph (c) of this section, shall be used by the
committee to purchase from handlers unrestricted (free percentage)
cranberries in an aggregate amount as nearly equal to, but not in
excess of, the total quantity of the released cranberries as it is
possible to purchase to replace the released cranberries.
(e) All handlers shall be given an equal opportunity to participate
in such purchase of unrestricted (free percentage) cranberries. If a
larger quantity is offered than can be purchased, the purchases shall
be made at the lowest price possible. If two or more handlers offer
unrestricted (free percentage) cranberries at the same price, purchases
from such handlers shall be in proportion to the quantity of their
respective offerings insofar as such division is practicable. The
committee shall dispose of cranberries purchased as restricted
cranberries in accordance with Sec. 929.57. Any funds received by the
committee for cranberries so disposed of, which are in excess of the
costs incurred by the committee in making such disposition, will accrue
to the committee's general fund.
(f) In the event any portion of the funds deposited with the
committee pursuant to paragraph (c) of this section cannot, for reasons
beyond the committee's control, be expended to purchase unrestricted
(free percentage) cranberries to replace those withheld cranberries
requested to be released, such unexpended funds shall, after deducting
expenses incurred by the committee, be refunded to the handler who
deposited the funds. The handler shall equitably distribute such refund
among the growers delivering to such handler.
(g) Inspection for restricted (withheld) cranberries released to a
handler is not required.
(h) The committee may establish, with the approval of the
Secretary, rules and regulations for the implementation of this
section. Such rules and regulations may include, but are not limited
to, revisions in the payment schedule specified in paragraphs (c)(7)
and (c)(8) of this section.
14. Revise Sec. 929.58 to read as follows:
Sec. 929.58 Exemptions.
(a) Upon the basis of the recommendation and information submitted
by the committee, or from other available information, the Secretary
may relieve from any or all requirements pursuant to this part the
handling of cranberries in such minimum quantities as the committee,
with the approval of the Secretary, may prescribe.
(b) Upon the basis of the recommendation and information submitted
by the committee, or from other available information, the Secretary
may relieve from any or all requirements pursuant to this part the
handling of such forms or types of cranberries as the committee, with
the approval of the Secretary, may prescribe. Forms of cranberries
could include cranberries intended for fresh sales or organically grown
cranberries.
(c) The committee, with the approval of the Secretary, shall
prescribe such rules, regulations, and safeguards as it may deem
necessary to ensure that cranberries handled under the provisions of
this section are handled only as authorized.
15. Revise Sec. 929.61 to read as follows:
Sec. 929.61 Outlets for excess cranberries.
(a) Noncommercial outlets. Excess cranberries may be disposed of in
noncommercial outlets that the committee finds, with the approval of
the Secretary, meet the requirements outlined in paragraph (c) of this
section. Noncommercial outlets include, but are not limited to:
(1) Charitable institutions; and
(2) Research and development projects.
(b) Noncompetitive outlets. Excess cranberries may be sold in
outlets that the committee finds, with the approval of the Secretary,
are noncompetitive with established markets for regulated cranberries
and meet the requirements outlined in paragraph (c) of this section.
Noncompetitive outlets include but are not limited to:
(1) Any nonhuman food use; and
(2) Other outlets established by the committee with the approval of
the Secretary.
(c) Requirements. The handler disposing of or selling excess
cranberries into noncompetitive or noncommercial outlets shall meet the
following requirements, as applicable:
(1) Charitable institutions. A statement from the charitable
institution shall be submitted to the committee showing the quantity of
cranberries received and certifying that the institution will consume
the cranberries;
(2) Research and development projects. A report shall be given to
the committee describing the project, quantity of cranberries
contributed, and date of disposition;
(3) Nonhuman food use. Notification shall be given to the committee
at least 48 hours prior to such disposition;
(4) Other outlets established by the committee with the approval of
the Secretary. A report shall be given to the committee describing the
project, quantity of cranberries contributed, and date of disposition.
(d) The storage and disposition of all excess cranberries withheld
from handling shall be subject to the supervision and accounting
control of the committee.
(e) The committee, with the approval of the Secretary, may
establish rules and
[[Page 23367]]
regulations for the implementation and operation of this section.
16. Revise Sec. 929.62 to read as follows:
Sec. 929.62 Reports.
(a) Grower report. Each grower shall file a report with the
committee by January 15 of each crop year, or such other date as
determined by the committee, with the approval of the Secretary,
indicating the following:
(1) Total acreage harvested and whether owned or leased.
(2) Total commercial cranberry sales in barrels from such acreage.
(3) Amount of acreage either in production, but not harvested or
taken out of production and the reason(s) why.
(4) Amount of new or replanted acreage coming into production.
(5) Name of the handler(s) to whom commercial cranberry sales were
made.
(6) Such other information as may be needed for implementation and
operation of this section.
(b) Inventory. Each handler engaged in the handling of cranberries
or cranberry products shall, upon request of the committee, file
promptly with the committee a certified report, showing such
information as the committee shall specify with respect to any
cranberries and cranberry products which were held by them on such date
as the committee may designate.
(c) Receipts. Each handler shall, upon request of the committee,
file promptly with the committee a certified report as to each quantity
of cranberries acquired during such period as may be specified, and the
place of production.
(d) Handling reports. Each handler shall, upon request of the
committee, file promptly with the committee a certified report as to
the quantity of cranberries handled during any designated period or
periods.
(e) Withheld and excess cranberries. Each handler shall, upon
request of the committee, file promptly with the committee a certified
report showing, for such period as the committee may specify, the total
quantity of cranberries withheld from handling or held in excess, in
accordance with Sec. Sec. 929.49 and 929.54, the portion of such
withheld or excess cranberries on hand, and the quantity and manner of
disposition of any such withheld or excess cranberries disposed of.
(f) Other reports. Upon the request of the committee, with the
approval of the Secretary, each handler shall furnish to the committee
such other information with respect to the cranberries and cranberry
products acquired and disposed of by such person as may be necessary to
enable the committee to exercise its powers and perform its duties
under this part.
(g) The committee may establish, with the approval of the
Secretary, rules and regulations for the implementation and operation
of this section.
17. Revise Sec. 929.64 to read as follows:
Sec. 929.64 Verification of reports and records.
The committee, through its duly authorized agents, during
reasonable business hours, shall have access to any handler's premises
where applicable records are maintained for the purpose of assuring
compliance and checking and verifying records and reports filed by such
handler.
Dated: April 21, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-9424 Filed 4-27-04; 8:45 am]
BILLING CODE 3410-02-P