[Federal Register: September 14, 2005 (Volume 70, Number 177)]
[Rules and Regulations]
[Page 54235-54242]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14se05-1]
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Rules and Regulations
Federal Register
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[[Page 54235]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 905
[Docket No. FV05-905-2 IFR]
Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida;
Modifying Procedures and Establishing Regulations To Limit Shipments of
Small Sizes of Red Seedless Grapefruit
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Interim final rule with request for comments.
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SUMMARY: This rule limits the volume of sizes 48 and 56 red seedless
grapefruit entering the fresh market and changes procedures used for
this purpose under the marketing order for oranges, grapefruit,
tangerines, and tangelos grown in Florida (order). The order is
administered locally by the Citrus Administrative Committee
(Committee). The procedural changes modify the way a handler's average
week is determined by providing that if crop conditions limit shipments
from any of the three prior seasons, a prior season or seasons can be
used for the three-season average. The average week is used by the
Committee in determining the handler shipment allotments. This rule
also limits the volume of small sizes entering the fresh market for the
first 22 weeks of the 2005-2006 season beginning September 19, 2005.
This action is intended to make the regulation more responsive to
industry needs and provide adequate supplies of small red seedless
grapefruit without saturating all markets. It is expected to stabilize
supplies and improve grower returns.
DATES: Effective September 15, 2005; comments received by October 14,
2005, will be considered prior to issuance of a final rule.
ADDRESSES: Interested persons are invited to submit written comments
concerning this rule. Comments must be sent to the Docket Clerk,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC
20250-0237; Fax: (202) 720-8938; E-mail: moab.docketclerk@usda.gov; or
Internet: http://www.regulations.gov. All comments should reference the
docket number and the date and page number of this issue of the Federal
Register and will be made available for public inspection in the Office
of the Docket Clerk during regular business hours, or can be viewed at:
http://www.ams.usda.gov/fv/moab.html.
FOR FURTHER INFORMATION CONTACT: Doris Jamieson, Southeast Marketing
Field Office, Marketing Order Administration Branch, Fruit and
Vegetable Programs, AMS, USDA; Telephone: (863) 324-3375, Fax: (863)
325-8793; or George Kelhart, Technical Advisor, Marketing Order
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400
Independence Avenue, SW., STOP 0237, Washington, DC 20250-0237;
Telephone: (202) 720-2491, Fax: (202) 720-8938.
Small businesses may request information on complying with this
regulation by contacting Jay Guerber, Marketing Order Administration
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence
Avenue, SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202)
720-2491, Fax: (202) 720-8938, or E-mail: Jay.Guerber@usda.gov.
SUPPLEMENTARY INFORMATION: This rule is issued under Marketing
Agreement No. 84 and Marketing Order No. 905, both as amended (7 CFR
part 905), regulating the handling of oranges, grapefruit, tangerines,
and tangelos grown in Florida, hereinafter referred to as the
``order.'' The marketing agreement and order are effective under the
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), hereinafter referred to as the ``Act.''
The Department of Agriculture (USDA) is issuing this rule in
conformance with Executive Order 12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is not intended to have retroactive effect.
This rule will not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with USDA a petition
stating that the order, any provision of the order, or any obligation
imposed in connection with the order is not in accordance with law and
request a modification of the order or to be exempted therefrom. A
handler is afforded the opportunity for a hearing on the petition.
After the hearing USDA would rule on the petition. The Act provides
that the district court of the United States in any district in which
the handler is an inhabitant, or has his or her principal place of
business, has jurisdiction to review USDA's ruling on the petition,
provided an action is filed not later than 20 days after the date of
the entry of the ruling.
This rule changes the procedures used to limit the volume of sizes
48 and 56 red seedless grapefruit entering the fresh market by
modifying the way a handler's average week is determined. The
procedural changes provide that if crop conditions limit shipments from
any of the three prior seasons, a prior season or seasons can be
substituted in the three-season average. This rule also limits the
volume of small sized red seedless grapefruit entering the fresh market
for the first 22 weeks of the 2005-2006 season beginning September 19,
2005. This action is intended to make the regulation more responsive to
industry needs and provide adequate supplies of small red seedless
grapefruit without saturating all markets. It is expected to stabilize
supplies and improve grower returns. The Committee unanimously
recommended this action at a meeting held on May 10, 2005.
Section 905.52 of the order provides authority to limit shipments
of any grade or size, or both, of any variety of Florida citrus. Such
limitations may restrict the shipment of a portion of a specified grade
or size of a variety. Under such a limitation, the quantity of such
grade or size a handler may ship during a particular week is
established as a percentage of the total shipments of such variety
shipped by that handler
[[Page 54236]]
during a prior period, established by the Committee and approved by
USDA.
Section 905.153 of the regulations specifies procedures for
limiting the volume of small red seedless grapefruit entering the fresh
market. These procedures specify that the Committee may recommend that
only a certain percentage of sizes 48 and 56 red seedless grapefruit
can be made available for fresh shipment for any week or weeks during
the regulatory period. The regulation period is 22 weeks long and
begins the third Monday in September. Under such a limitation, the
recommended percentage is applied to each handler's average week to
determine the quantity of sizes 48 and 56 red seedless grapefruit the
handler may ship. The average week constitutes the prior period
specified in Sec. 905.52. Therefore, an average week is calculated for
each handler.
Currently, an average week is calculated using the immediately
preceding three seasons. This rule amends Sec. 905.153 to modify the
way a handler's average week is determined. Provisions are added
providing that if crop conditions limit shipments from any of the three
prior seasons, a prior season or seasons can be used for the three-
season average.
An average week is calculated by adding the total red seedless
grapefruit shipments by a handler during the 33-week period beginning
the third Monday in September for the immediately preceding three
seasons. This total is divided by three to establish an average season,
and is then divided by the 33 weeks in a season to derive the average
week. When the Committee utilizes the provisions of Sec. 905.153 and
establishes percentages for the regulatory period, a handler's average
week is multiplied by the applicable percentage to establish that
handler's allotment for shipping small red seedless grapefruit during
that particular week.
In 2004, the major grapefruit growing regions in Florida suffered
significant damage and fruit loss from multiple hurricanes. The
official USDA crop estimate for the 2004-05 season reflected a 69
percent decrease from the previous season's estimate. Fresh shipments
of red grapefruit for the 2004-05 season were reduced by more than 63
percent in comparison to the 2003-04 season. Consequently, the
percentage of size regulation was not utilized for the 2004-05 season.
The Committee met May 10, 2005, to consider implementing a
percentage of size regulation for red seedless grapefruit for the 2005-
06 season. During its discussions, concerns were raised regarding the
impact of the 2004-05 season when calculating a handler's average week.
Most handlers' shipments reflect a significant decline in volume for
the 2004-05 season, with some handlers shipping no volume at all due to
the damage sustained by their packinghouses. The Committee believes
using figures from a season in which adverse crop conditions cause a
reduction in the amount of fruit produced would distort the accuracy of
a handler's average shipments. Committee members agreed including the
2004-05 season in the calculation of a handler's average week would
result in averages that are not reflective of a handler's average
shipments.
When a handler is fairly consistent in the amount of fruit shipped
each season, one season of decreased volume has the potential to
drastically reduce their shipment average. With the handler's average
week based on a three-season average, including a season such as last
season could significantly lower the handler's average week on which
the percentage of size regulation is based, decreasing a handler's
allotment of small grapefruit sizes.
Including the 2004-05 season in base calculations would reduce the
total base available to the industry by more than 20 percent. However,
the impact on individual handlers could be as great as reducing their
base by a third. Therefore, the Committee voted unanimously to change
Sec. 905.153 to exclude the 2004-05 season when calculating a
handler's average week.
To accommodate this recommendation and provide a method to handle
similar situations should they occur during future seasons, this rule
amends Sec. 905.153 to provide that should shipments from any or all
of the immediately preceding three seasons be limited because of crop
conditions, the Committee could use a prior season or seasons when
determining the three-season average for the purpose of calculating a
handler's average week. Under this change, the Committee would meet
prior to the issuance of a percentage size regulation and determine
which seasons are to be used to calculate a handler's average week.
This change gives the Committee some additional flexibility to account
for adverse crop conditions and assists in providing an average
reflective of a handler's normal shipments. For the 2005-06 season,
each handler's average week will be computed using the 2001-02, 2002-
03, and the 2003-04 seasons.
This interim final rule also limits the volume of sizes 48 (3\9/16\
inches minimum diameter) and 56 (3\5/16\ inches minimum diameter) red
seedless grapefruit entering the fresh market by instituting weekly
percentages for the first 22 weeks of the 2005-06 season. This rule
establishes weekly percentages at 35 percent for the first six weeks
(September 19, 2005 through October 30, 2005), and 25 percent for weeks
seven through 22 (October 31, 2005 through February 19, 2005). The
Committee also unanimously recommended this action at its May 10, 2005,
meeting. This action is similar to those taken in previous seasons.
A normal season for Florida grapefruit runs from September through
June. During the first 22 weeks, there is usually an oversupply of
small red seedless grapefruit and a reduced demand for such fruit until
later in the season when there is a greater demand for smaller sizes
from export markets. The Committee believes the over shipment of
smaller-sized red seedless grapefruit in the first 22 weeks of the
season has a detrimental effect on the market.
While there is a market for small-sized red seedless grapefruit,
the availability of large quantities oversupplies the fresh market with
these sizes and negatively impacts the market for all sizes. These
smaller sizes, 48 and 56, normally return the lowest prices when
compared to the other larger sizes. When there is too much volume of
the smaller sizes available, the overabundance of small-sized fruit
pulls the prices down for all sizes. This action is intended to
stabilize the early season (22-week) supply of small red seedless
grapefruit and to help improve the prices received by growers. In the
absence of this action, grower prices may be lower than their cost of
production.
For the three seasons prior to the use of percentage size
regulation, 1994-95, 1995-96, and 1996-97, returns for red seedless
grapefruit had been declining, often not returning the cost of
production. On-tree prices for red seedless grapefruit had fallen
steadily from $6.87 per box (1\3/5\ bushel) during the 1991-92 season,
to $3.38 per box during the 1993-94 season, to $1.91 per box during the
1996-97 season.
An economic study done by the University of Florida--Institute of
Food and Agricultural Sciences in May 1997, found that on-tree prices
had fallen from a high near $7.00 per carton in 1991-92 to around $1.50
per carton for the 1996-97 season. The study projected that if the
industry elected to make no changes, the on-tree price would remain
around $1.50 per carton. The study also indicated that increasing
minimum size restrictions could help raise returns.
[[Page 54237]]
The Committee believes the over shipment of smaller-sized red
seedless grapefruit contributed to these poor returns for growers and
to lower prices. Based on available statistical information, Committee
members concluded that once shipments of sizes 48 and 56 reached levels
above 250,000 cartons per week, prices declined on those and most other
sizes of red seedless grapefruit. The Committee believed if shipments
of small sizes were maintained at around or below 250,000 cartons a
week, prices would stabilize and demand for the larger, more profitable
sizes would increase.
Consequently, in 1996, the Committee recommended changing their
rules and regulations to establish the procedures in Sec. 905.153 to
limit the volume of small red seedless grapefruit entering the market.
The Committee has successfully used the provisions of Sec. 905.153 to
address the problems associated with the over shipment of small red
seedless grapefruit, recommending percentage of size regulation during
the first 11 weeks of the 1997-98, 1998-99, 1999-2000, and 2000-01
seasons, and for the first 22 weeks for the 2001-02, 2002-03, and 2003-
04 seasons. Due to the extensive damage from three major hurricanes in
2004, percentage of size regulation was not utilized for the 2004-05
season. When percentage of size regulation has been utilized, prices
have increased and movement stabilized when compared to seasons without
regulation.
Because of the damage from the 2004 hurricanes, production of red
seedless grapefruit for the 2005-06 season is not anticipated to be as
large as in seasons past. The crop is expected to rebound from last
season's weather reduced volume. However, an accurate estimate of the
crop will not be available until the official USDA crop estimate is
released in October. In addition, for four of the last five seasons
prior to the hurricanes, the crops have displayed a tendency toward a
greater volume of small sizes than in previous seasons. It is possible
that trees stressed by last season's storms may produce an even greater
volume of small-sized fruit.
Based on the available information, the Committee believes that for
the 2005-06 season, small sized red seedless grapefruit would again
negatively impact the market for all grapefruit if not regulated. By
regulating the volume of small sizes entering the fresh market for the
first 22 weeks of the season, shipments of sizes 48 and 56 can be
maintained near the 250,000 carton per week level. To address the
volume of small-sized red seedless grapefruit available and to prevent
the over shipment of small sizes, the Committee voted unanimously to
utilize the provisions of Sec. 905.153 and establish percentage of
size regulation for each week of the 22-week regulatory period for the
2005-06 season.
In making its recommendation, the Committee considered the success
of previous percentage of size regulations and their experience from
past seasons. One such indicator is a study commissioned by the
Committee to determine the merit of percentage of size regulation. The
study completed by Robert E. Barber, Jr., Director of Economics,
Florida Citrus Mutual, entitled ``An Econometric Spatial Equilibrium
Analysis of the 48/56 Red Grapefruit Rule,'' dated July 1, 2003,
evaluated the effectiveness of past percentage of size regulations.
One of the Committee's goals in establishing percentage of size
regulation was to stabilize prices and increase returns. The Committee
believes percentage of size regulation has been effective in this area,
and the study shows this to be true. The study estimates that
percentage of size regulation has increased total f.o.b. revenues for
red grapefruit by a total of 12 percent or $18.9 million over the six-
year period from 1997-98 to 2002-03, averaging $3.15 million per
season. Each of the six seasons had an increase in f.o.b. revenues
ranging from a low of $2.52 million during the 1999-2000 season to a
high of $3.73 million for the 2002-03 season. The f.o.b. prices per
carton are also estimated to have increased by an average of 17 percent
or $1.00 per carton during this six-year period.
In the three seasons prior to the first percentage of size
regulation in 1997-98, prices of red seedless grapefruit fell from a
weighted average f.o.b. price of $7.80 per carton in October to a
weighted average f.o.b. price of $5.50 per carton in December. In the
seven seasons utilizing percentage of size regulation, red seedless
grapefruit maintained higher prices throughout the season with a
weighted average f.o.b. price of $8.26 per carton in October, $7.12 per
carton in December, and remained at around $7.09 in April. Average
prices for the season have also been higher during seasons with
percentage of size regulation. The average season price for red
seedless grapefruit was $7.10 for the last seven seasons compared to
$5.83 for the three seasons prior to using percentage of size
regulation. The Barber study shows that prices for the seasons 1997-98
to 2002-03 would have been from around $0.72 to $1.00 lower per carton
without regulation.
On-tree prices for fresh red seedless grapefruit have also been
higher during seasons with percentage of size regulation than for the
three seasons prior to regulation. The average on-tree price for fresh
red seedless grapefruit was $5.28 for the seasons 1998-99 through 2003-
04 with percentage of size regulation compared to $3.08 for the three
seasons prior to regulation.
In September 2004, the University of Florida, Citrus Research and
Education Center published an estimated cost of production for
grapefruit for the 2003-04 season. The cost to produce grapefruit for
the fresh market was estimated at $1,089.13 per acre for the Indian
River area, the major grapefruit production area in Florida. Indian
River grapefruit production ranges from 325 boxes per acre to 525 boxes
per acre and has averaged around 445 boxes per acre. Based on the cost
of production, and the average boxes per acre, growers need to earn a
total on-tree value (fruit going both to the fresh market and to
processing) of approximately $2.45 per box in order to break even. For
the three seasons prior to percentage of size regulation, the total on-
tree value averaged $1.78 per box. Comparatively, for the seasons with
regulation, 1998-99 through 2003-04, the on-tree value has averaged
$2.88 per box for red grapefruit.
Small growers have struggled the last ten seasons to receive
returns above the cost of production. For many, the higher on-tree
returns produced under percentage of size regulation have meant the
difference between profit and loss.
Another of the Committee's goals for percentage of size regulation
was maintaining the price differential between larger and smaller
sizes. At the start of the season, larger-sized fruit command a premium
price. The f.o.b. price can be $4 to $10 more a carton than for the
smaller sizes. For 2003-04, the f.o.b. price for a size 27 averaged
$12.38 per carton in October 2003. This compares to an average f.o.b.
price of around $6.38 per carton for a size 56 during the same period.
In the three seasons before the issuance of a percentage size
regulation, the f.o.b. price for large sizes dropped to within $1 or $2
of the f.o.b. price for small sizes by the middle of the season due to
the oversupply of the smaller sizes.
Percentage of size regulation has helped sustain the price
differential, maintaining higher prices for the larger-sized fruit.
During the three seasons before regulation, the average differential
between the carton price for a size 27 and a size 56 was $3.47 at the
end of October and dropped to $1.68 by mid-December. In the seven
seasons
[[Page 54238]]
with percentage of size regulation, the average differential between
the carton price for a size 27 and a size 56 was $5.51 at the end of
October, $3.83 in mid-December, and remained at around $3.36 the first
week in May. The Barber study also states that f.o.b. revenues for
larger sized red grapefruit benefited substantially from percentage of
size regulation. Of the $18.9 million increase in total fresh f.o.b.
revenues for red grapefruit the last six seasons, nearly $16.7 million
can be attributed to gains made by fruit larger than sizes 48 and 56.
According to the Economic Analysis and Program Planning Branch,
USDA, the margins between the prices for the various sizes of red
grapefruit have remained fairly constant throughout the seasons covered
under percentage of size regulation. However, they further indicated
that if the domestic market becomes glutted with too many small-sized
grapefruit (48 and 56), the margins would be negatively impacted and
total grower returns would be reduced.
The goal of this percentage of size rule is to reduce the volume of
the least valuable fruit in the market and strengthen grower prices and
revenues. Without this rule, the fresh grapefruit market will become
glutted with small-sized fruit, which will have a negative impact on
prices for larger-sized fruit and grower returns. Absent this rule, the
price margins between sizes (23, 27, 32, 36, 40, 48, and 56) will
diminish and ultimately result in lower grower returns. This rule is
intended to fully supply all markets for small sizes with fresh red
seedless grapefruit sizes 48 and 56, while avoiding oversupplying these
markets to the detriment of grower revenues.
The Committee believes percentage of size regulation has also
helped stabilize the volume of small sizes entering the fresh market.
During deliberations in past seasons, Committee members concluded once
shipments of sizes 48 and 56 reached levels above 250,000 cartons per
week, prices declined on those and most other sizes of red seedless
grapefruit. The last seven seasons during the weeks regulated by a
percentage of size regulation, weekly shipment of sizes 48 and 56 red
seedless grapefruit remained near or below 250,000 cartons for nearly
80 percent of the regulated weeks. Also, based on the Barber study,
while percentage of size regulation has been successful in controlling
the volume of small sizes entering the fresh market, it has had only a
limited affect on total shipments.
In addition, an economic study by Florida Citrus Mutual (Lakeland,
Florida) dated April 1998, also found that the weekly percentage
regulation was effective. The study stated that part of the strength in
early season pricing appeared to be due to the use of the weekly
percentage rule to limit the volume of sizes 48 and 56. It said prices
were generally higher across the size spectrum with sizes 48 and 56
having the largest gains, and larger-sized grapefruit also registering
modest improvements. The rule shifted the size distribution toward the
higher-priced, larger-sized grapefruit, which helped raise average
f.o.b. prices. It further stated that sizes 48 and 56 accounted for
only 17 percent of domestic shipments during the same period in the
1997-98 season, as small sizes were used to supply export customers
with preferences for small-sized grapefruit.
There are also other conditions warranting the consideration of
establishing percentage of size regulation for the 2005-06 season. For
the five seasons, 1999-2000 through 2003-04, the percentage of the
remaining crop represented by small sizes in February averaged around
45 percent. This compares to an average of 31 percent for the same
month for seasons 1995-96 through 1997-98. These five seasons, 1999-
2000 through 2003-04, averaged a greater percentage of smaller sizes
across each month, October through February, than over the three
seasons 1995-96 through 1997-98.
For the eight of the nine seasons prior to the 2004-05 season,
there has been a movement toward an increased volume of small sizes as
a percentage of the overall crop. Currently, it is unclear how the
2005-06 crop will size. Due to hurricane damage in 2004, it is
anticipated that the 2005-06 crop will be smaller than in past seasons,
but production will be significantly greater than last season. However,
it is possible that because of the weather damage sustained during the
2004-05 seasons, a larger quantity of the fruit produced may be small
sizes, making an even greater supply of small-sized fruit available for
market.
European and Asian markets also impact the volume of small sizes
available. These markets have shown a strong demand for the smaller-
sized red seedless grapefruit. The increase in the value of currency in
these markets compared to the dollar resulted in more shipments of
smaller-sized red seedless grapefruit to these markets. However, a
reduction in shipments to these areas could occur during the coming
season if market conditions change. This could result in a greater
amount of small sizes for remaining markets to absorb.
The market for processed grapefruit is also a consideration.
Approximately 48 percent of red seedless grapefruit was used for
processing in 2003-04, with the majority being squeezed for juice.
However, this outlet offers limited returns. Of the last eight seasons,
only 1999-2000 produced on-tree returns for processed red seedless
grapefruit exceeding $1 per box. Returns for 2003-04 processed red
seedless grapefruit averaged a negative $0.13 per box. When on-tree
returns for processed grapefruit drop below a dollar, there is pressure
to shift a larger volume of the overall crop to the fresh market to
benefit from the higher prices normally paid for fresh fruit. From
1999-2000 through 2003-04, the differential between fresh prices and
processed prices has averaged $5.06 per box. Consequently, growers
prefer to ship grapefruit to the fresh market.
By the start of the season, the Florida Department of Citrus
projects that around 26 weeks worth of juice will remain in inventory.
Due to current inventories, on-tree prices for processed red seedless
grapefruit for the 2005-06 season are expected to remain below a
dollar. A fair percentage of red seedless grapefruit shipped for
processing are smaller sizes. With limited returns for processed
grapefruit, an additional volume of small sizes could be shifted toward
the fresh market, as was the case last season, further aggravating
problems with excessive volumes of small sizes.
The percentage of size regulation has a positive impact on grower
returns and is intended to make the most economically viable fruit
available to the fresh market without oversupplying small-sized fruit.
The above considerations further support the need to control the volume
of sizes 48 and 56 during the season to prevent small sizes from
overwhelming all markets.
The Committee believes the volume of small red seedless grapefruit
available will have a detrimental effect on the market if it is not
controlled. Members believe establishing weekly percentages during the
seven seasons prior to the hurricanes have been effective and that
problems successfully addressed by percentage of size regulation will
return without regulation. In its discussion of this issue, the
Committee recognized that the crop size would reflect the damage
sustained from last season's hurricanes. However, they still support
the use of percentage size regulation for the 2005-06 season.
Even though the overall crop may be reduced, a substantial increase
in volume is expected in comparison to the 2004-05 season. In addition,
as was the case last season, a greater percentage of the overall volume
may be shifted to the
[[Page 54239]]
fresh market, further increasing fresh shipments. In the seasons prior
to last season, approximately 50 percent of the crop went for
processing. However, with last season's weather reduced crop,
approximately 65 percent of the crop was shipped to the fresh market.
Further, it is anticipated that a greater percentage of the crop will
be small sizes. Consequently, the Committee believes weekly percentage
of size regulation should be established for each of the 22 weeks of
the regulatory period for the 2005-06 season. The Committee recommended
establishing weekly percentages at 35 percent for the first six weeks
and 25 percent for weeks seven through 22.
The Committee considered the percentages set in previous seasons as
a basis for the 2005-06 season. They also took into consideration the
damage to the citrus industry as a result of the 2004 hurricanes and
how more information regarding the crop would be available following
the start of the season. Members of the Committee agreed that there
will be a smaller than usual crop of red seedless grapefruit for the
2005-06 season, but believe that percentages need to be established to
prevent a glut on the market to provide some restriction while
affording volume for those markets that prefer small sizes.
Committee members believe if shipments of small sizes are
maintained at around or below 250,000 cartons a week, prices stabilize
and demand for larger, more profitable sizes increases. The Committee
considered the 250,000-carton level when recommending the weekly
percentages, and set the first six weeks at 35 percent. Setting the
percentages at 35 percent provides a total industry base of 242,739
cartons (35 percent of the total industry base of 693,540 cartons).
This allows total industry shipments to approach the 250,000 carton
level without exceeding it.
For the remaining 16 weeks, the Committee recommended setting
weekly percentages at 25 percent, the tightest restriction allowed
under the order's rules and regulations. At the time of the May
meeting, grapefruit had not yet begun to size, giving little indication
as to the distribution of sizes, the size of the overall crop, or the
impact of the lingering effects of last season's storms. The Committee
recognized the first reports on how the crop is sizing will not be
available until after September, and that more information regarding
the current season will be available following the official USDA crop
estimate in October.
Setting the weekly percentages at 25 percent for each of the
remaining weeks provides the Committee with the greatest flexibility in
responding to the information regarding this season as it comes
available. As was their practice during the first seasons of percentage
of size regulation, the Committee believes it is best to set regulation
for these weeks at the most restrictive level, and then relax the
percentage as conditions warrant.
Because of the likelihood that this season will differ considerably
from previous seasons where percentage of size regulation was
implemented, the Committee wants to ensure it has the best information
available when considering the established percentages. Consequently,
the Committee intends to meet as needed during the season to consider
adjustments in the weekly percentage rates, as was done in previous
seasons. Further, at the May 10, 2005, meeting, it was stated that the
48 and Smaller Red Grapefruit Subcommittee (subcommittee) will meet
shortly after the 2005-06 crop estimate is released on October 11,
2005. At that time, the subcommittee will review the information
available and develop recommendations for consideration by the full
Committee, including increasing the set percentages to release greater
quantities of sizes 48 and 56, or even withdrawing regulation should
conditions warrant.
Therefore, the Committee believes it is best to set regulation at
these levels, and then relax the percentages later in the season based
on the additional information as it comes available. Any changes to the
weekly percentages set by this rule will require additional rulemaking
and the approval of USDA.
This rule establishes weekly percentages at 35 percent for the
first six weeks and 25 percent for weeks seven through 22. This rule is
intended to fully supply all markets for small sizes with fresh red
seedless grapefruit sizes 48 and 56, while avoiding oversupplying these
markets to the detriment of grower revenues. The Committee plans to
meet as needed during the 22-week period to ensure weekly percentages
are at the appropriate levels.
Under Sec. 905.153, the quantity of sizes 48 and 56 red seedless
grapefruit a handler may ship during a regulated week is calculated
using the set weekly percentage. The set percentage is applied to a
handler's average week to determine that handler's allotments of small
sizes. Utilizing the provisions discussed in the first part of this
rule and the Committee's recommendation at its May 10, 2005, meeting, a
handler's average week for the 2005-06 season will be calculated using
the 2001-02, 2002-03, and 2003-04 seasons.
Handlers can fill their allotment with size 56, size 48, or a
combination of the two sizes such that the total of these shipments is
within the established limits. The Committee staff performs the
specified calculations and provides them to each handler. The
regulatory period begins the third Monday in September, September 19,
2005. Each regulation week begins Monday at 12 a.m. and ends at 11:59
p.m. the following Sunday.
Section 905.153(d) provides allowances for overshipments, loans,
and transfers of allotment. These tolerances allow handlers the
opportunity to supply their markets while limiting the impact of small
sizes.
The Committee can also act on behalf of handlers wanting to arrange
allotment loans or participate in the transfer of allotment. Repayment
of an allotment loan is at the discretion of the handlers party to the
loan. The Committee will inform each handler of the quantity of sizes
48 and 56 red seedless grapefruit they can handle during a particular
week, making the necessary adjustments for overshipments and loan
repayments.
Section 8e of the Act requires that whenever grade, size, quality,
or maturity requirements are in effect for certain commodities under a
domestic marketing order, including grapefruit, imports of that
commodity must meet the same or comparable requirements. This rule does
not change the minimum grade and size requirements under the order,
only the percentages of sizes 48 and 56 red grapefruit that may be
handled. Therefore, no change is necessary in the grapefruit import
regulations as a result of this action.
Initial Regulatory Flexibility Analysis
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities. Accordingly, AMS has
prepared this initial regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and the rules issued thereunder, are unique in
that they are brought about through group action of essentially small
entities acting on their own behalf. Thus, both statutes have small
entity orientation and compatibility.
There are approximately 75 handlers of Florida grapefruit who are
subject to regulation under the marketing order
[[Page 54240]]
and approximately 11,000 growers of citrus in the regulated area. Small
agricultural service firms, including handlers, are defined by the
Small Business Administration (SBA) as those having annual receipts of
less than $6,000,000, and small agricultural producers are defined as
those having annual receipts of less than $750,000 (13 CFR 121.201).
Based on industry and Committee data, the average annual f.o.b.
price for fresh Florida red seedless grapefruit during the 2003-04
season was approximately $7.58 per \4/5\-bushel carton, and total fresh
shipments for the 2003-04 season are estimated at 24.7 million cartons
of red grapefruit. Approximately 25 percent of all handlers handled 75
percent of Florida's grapefruit shipments. Using the average f.o.b.
price, at least 80 percent of the grapefruit handlers could be
considered small businesses under the SBA definition. Therefore, the
majority of Florida grapefruit handlers may be classified as small
entities. The majority of Florida grapefruit producers may also be
classified as small entities.
This rule changes the procedures used to limit the volume of sizes
48 and 56 red seedless grapefruit entering the fresh market by
modifying the way a handler's average week is determined. The changes
provide that if crop conditions limit shipments from any of the
immediately preceding three seasons, a prior season or seasons can be
used for the three-season average. This rule also limits the volume of
small sizes entering the fresh market for the first 22 weeks of the
2005-2006 season beginning September 19, 2005. This action makes the
regulation more responsive to industry needs and provides adequate
supplies of small red seedless grapefruit without saturating all
markets. This is intended to help stabilize supplies and improve grower
returns. This rule revises the provisions of Sec. 905.153 and utilizes
these provisions to establish the percentage size regulation. Authority
for this action is provided in Sec. 905.52 of the order. The Committee
unanimously recommended these changes at a meeting held on May 10,
2005.
The first action in this rule revises the procedures in Sec.
905.153 used in implementing percentage size regulations for small red
seedless grapefruit under the order. These procedures will be applied
uniformly for all handlers regardless of size. This action is not
expected to decrease the overall consumption of red seedless grapefruit
or result in any additional costs for the industry.
Prior to this change, a handler's average week, which is used as a
base during percentage of size regulation, was calculated using the
immediately preceding three seasons. This change provides that should
shipments from any or all of the three prior seasons be limited because
of crop conditions, the Committee could use a prior season or seasons
when determining the three-season average for the purpose of
calculating a handler's average week. This change provides the
Committee with some additional flexibility to account for adverse crop
conditions and assists in providing an average reflective of a
handler's normal shipments.
Using shipment figures from a season where adverse crop conditions
reduced the amount of fruit shipped would distort the accuracy of a
handler's average shipments. In 2004, the major grapefruit growing
regions in Florida suffered significant damage and fruit loss from
multiple hurricanes, reducing the official USDA crop estimate by 69
percent from the previous season. Most handlers' shipments reflected a
significant decline in volume, with some handlers shipping no volume at
all due to the damage sustained by their packinghouses.
With the handler's average week based on a three-season average,
including a season such as last season could significantly lower the
handler's average week, decreasing a handler's allotment of small size.
Including the 2004-05 season in base calculations for the 2005-06
season would reduce the total industry base available by more than 20
percent, with the possible reduction for individual handlers being as
much as a third.
Consequently, this change provides additional allotment in seasons
following years where the crop was reduced by adverse weather
conditions. It allows the Committee to exclude those seasons, thus,
providing an average week that more closely reflects a handler's
shipments and makes additional allotment available.
In terms of the second action implemented by this rule, while the
establishment of volume regulation may necessitate additional spot
picking, which could entail slightly higher harvesting costs, in most
cases this is already a standard industry practice. The Barber study
indicates that spot picking only fractionally increases harvesting
costs on just a small segment of the boxes picked. In addition, with
spot picking, the persons harvesting the fruit are more selective and
pick only the desired sizes and qualities. This reduces the amount of
time and effort needed in sorting fruit because undersized fruit is not
harvested. This may result in a cost savings through reduced processing
and packing costs. In addition, because this regulation is only in
effect for part of the season, the overall effect on costs is minimal.
Consequently, this action is not expected to appreciably increase costs
to producers.
If a 25 percent restriction on small sizes had been applied during
the 22-week period for the three seasons prior to the 1997-98 season,
an estimated average of 3.1 percent of overall shipments during that
period would have been constrained by regulation. A large percentage of
this volume most likely could have been replaced by larger sizes for
which there are no volume restrictions. Under regulation, larger sizes
have been substituted for smaller sizes with a nominal effect on
overall shipments.
Handlers can also transfer, borrow or loan allotment based on their
needs in a given week. Handlers also have the option of over shipping
their allotment by 10 percent in a week, provided the over shipment is
deducted from the following week's shipments (over shipments are not
allowed during the last regulated week). Approximately 315 loans and
transfers were used during the 2003-04 season. Statistics for 2003-04
show the total available allotment was used in only 3 weeks of the
regulated period. Therefore, the overall impact of this regulation on
total shipments should be minimal.
The Committee believes establishing percentage of size regulation
during the 2005-06 season will have benefits similar to those realized
under past regulations. Handlers and producers have received higher
returns under percentage of size regulation than without regulation. In
the three seasons prior to the first percentage of size regulation in
1997-98, prices of red seedless grapefruit fell from a weighted average
f.o.b. price of $7.80 per carton in October to a weighted average
f.o.b. price of $5.50 per carton in December. In the seven seasons
utilizing percentage of size regulation, red seedless grapefruit
maintained higher prices throughout the season with a weighted average
f.o.b. price of $8.26 per carton in October, to an average f.o.b. price
of $7.12 per carton in December, and remained at around $7.09 in April.
Average prices for the season have also been higher during seasons with
percentage of size regulation. The average season price for red
seedless grapefruit was $7.10 for the seven seasons utilizing
percentage of size regulation compared to $5.83 for the three seasons
prior to using
[[Page 54241]]
regulation. The Barber study estimates that prices for the seasons
1997-98 to 2002-03 would have been from around $0.72 to $1.00 lower per
carton without regulation.
On-tree earnings per box for fresh red seedless grapefruit have
also improved under regulation, providing better returns to growers.
The average on-tree price for fresh red seedless grapefruit was $5.28
for the seasons 1998-99 through 2003-04 with percentage of size
regulation, compared to $3.08 for the three seasons prior to
regulation. Small growers have struggled the last nine seasons to
receive returns near the cost of production. For many, the higher
returns provided by percentage of size regulation meant the difference
between profit and loss.
Shipments during the 22 weeks covered by this regulation account
for nearly 60 percent of the total volume of red seedless grapefruit
shipped to the fresh market. Considering this volume and the very
limited returns from grapefruit for processing, it is imperative that
returns from the fresh market be maximized during this period.
The Barber study estimates that prices rose anywhere from 12.9
percent or $.72 to 17.5 percent or $1.00 per \4/5\-bushel carton during
percentage of size regulation. Even if this action were only successful
in raising returns by $.10 per carton, this increase in combination
with the substantial number of shipments generally made during this 22-
week period, would represent an increased return of nearly $1.4
million. Consequently, any increased returns generated by this action
should more than offset any additional costs associated with this
regulation.
The purpose of this rule is to help stabilize the market and
improve grower returns. Percentage of size regulation is intended to
reduce the volume of the least valuable fruit in the market, and shift
it to those markets that prefer small sizes. This regulation helps the
industry address marketing problems by keeping small sizes (sizes 48
and 56) more in balance with market demand without glutting the fresh
market with these sizes.
This rule provides a supply of small-sized red seedless grapefruit
sufficient to meet market demand, without saturating all markets with
these small sizes. This action is not expected to decrease the
consumption of red seedless grapefruit. The benefits of this action are
expected to be available to all red seedless grapefruit growers and
handlers regardless of their size of operation. This action will likely
help small, under-capitalized growers who need additional weekly
revenues to meet operating costs.
The Committee considered several alternatives when discussing these
actions. One alternative was maintaining the way a handler's average
week is calculated using the immediately preceding three seasons. The
Committee believes that including numbers from the 2004-05 season would
result in averages unreflective of a handler's shipments. Therefore,
this alternative was rejected. The Committee also considered not
recommending percentage of size regulation for the 2005-06 season.
However, because more information regarding the season would be
available in October, the Committee agreed percentage of size
regulation should be established at the levels recommended. Following
the announcement of the official crop estimate on October 11, 2005, the
question of whether to adjust the levels recommended or to remove
regulation entirely will be revisited. Therefore, this alternative was
also rejected.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Chapter 35), the information collection requirements contained in this
rule have been previously approved by the Office of Management and
Budget (OMB) and assigned OMB No. 0581-0189. As with all Federal
marketing order programs, reports and forms are periodically reviewed
to reduce information requirements and duplication by industry and
public sectors.
AMS is committed to compliance with the Government Paperwork
Elimination Act (GPEA), which requires Government agencies in general
to provide the public the option of submitting information or
transacting business electronically to the maximum extent possible.
In addition, USDA has not identified any relevant Federal rules
that duplicate, overlap or conflict with this rule. However, red
seedless grapefruit must meet the requirements as specified in the U.S.
Standards for Grades of Florida Grapefruit (7 CFR 51.760 through
51.784) issued under the Agricultural Marketing Act of 1946 (7 U.S.C.
1621 through 1627).
Further, the Committee's meeting was widely publicized throughout
the citrus industry and all interested persons were invited to attend
the meeting and participate in Committee deliberations. Like all
Committee meetings, the May 10, 2005, meeting was a public meeting and
all entities, both large and small, were able to express their views on
this issue. Finally, interested persons are invited to submit
information on the regulatory and informational impacts of this action
on small businesses.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html.
Any questions about the compliance
guide should be sent to Jay Guerber at the previously mentioned address
in the FOR FURTHER INFORMATION CONTACT section.
This rule invites comments on revising the procedures used to limit
the volume of sizes 48 and 56 red seedless grapefruit entering the
fresh market under the order and on limiting the volume of small red
seedless grapefruit entering the fresh market during the first 22 weeks
of the 2005-06 season. Any comments received will be considered prior
to finalization of this rule.
After consideration of all relevant material presented, including
the Committee's recommendation, and other information, it is found that
this interim final rule, as hereinafter set forth, will tend to
effectuate the declared policy of the Act.
Pursuant to 5 U.S.C. 553, it is also found and determined upon good
cause that it is impracticable, unnecessary, and contrary to the public
interest to give preliminary notice prior to putting this rule into
effect and that good cause exists for not postponing the effective date
of this rule until 30 days after publication in the Federal Register
because: (1) This rule needs to be in place when the regulatory period
begins September 19, 2005, and handlers need to consider their
allotment and how best to service their customers; (2) the industry has
been discussing this issue for some time, and the Committee has kept
the industry well informed; (3) this action has been widely discussed
at various industry and association meetings, and interested persons
have had time to determine and express their positions; (4) this action
is similar to those recommended in previous seasons; and (5) this rule
provides a 30-day comment period and any comments received will be
considered prior to finalization of this rule. A comment period of 30
days is appropriate because it will allow for any needed intra-seasonal
changes to be made in a timely manner.
List of Subjects in 7 CFR Part 905
Grapefruit, Marketing agreements, Oranges, Reporting and
recordkeeping requirements, Tangelos, Tangerines.
0
For the reasons set forth in the preamble, 7 CFR part 905 is amended as
follows:
[[Page 54242]]
PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN
FLORIDA
0
1. The authority citation for 7 CFR part 905 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
Sec. 905.153 [Amended]
0
2. In Sec. 905.153, paragraph (a), a new sentence is added following
the third sentence to read as follows: ``If crop conditions limit
shipments from any or all of the immediately preceding three season(s),
the committee may use a prior season or seasons for the purposes of
calculating an average week.''
0
3. Section 905.350 is added to read as follows:
Sec. 905.350 Red seedless grapefruit regulation.
This section establishes the weekly percentages to be used to
calculate each handler's weekly allotment of small sizes. Handlers can
fill their allotment with size 56, size 48, or a combination of the two
sizes such that the total of these shipments are within the established
weekly limits. The weekly percentages for size 48 (3\9/16\ inches
minimum diameter) and size 56 (3\5/16\ inches minimum diameter) red
seedless grapefruit grown in Florida, which may be handled during the
specified weeks, are as follows:
------------------------------------------------------------------------
Weekly
Week percentage
------------------------------------------------------------------------
(a) 9/19/05 through 9/25/05................................ 35
(b) 9/26/05 through 10/2/05................................ 35
(c) 10/3/05 through 10/9/05................................ 35
(d) 10/10/05 through 10/16/05.............................. 35
(e) 10/17/05 through 10/23/05.............................. 35
(f) 10/24/05 through 10/30/05.............................. 35
(g) 10/31/05 through 11/6/05............................... 25
(h) 11/7/05 through 11/13/05............................... 25
(i) 11/14/05 through 11/20/05.............................. 25
(j) 11/21/05 through 11/27/05.............................. 25
(k) 11/28/05 through 12/4/05............................... 25
(l) 12/5/05 through 12/11/05............................... 25
(m) 12/12/05 through 12/18/05.............................. 25
(n) 12/19/05 through 12/25/05.............................. 25
(o) 12/26/05 through 1/1/06................................ 25
(p) 1/2/06 through 1/8/06.................................. 25
(q) 1/9/06 through 1/15/06................................. 25
(r) 1/16/06 through 1/22/06................................ 25
(s) 1/23/06 through 1/29/06................................ 25
(t) 1/30/06 through 2/5/06................................. 25
(u) 2/6/06 through 2/12/06................................. 25
(v) 2/13/06 through 2/19/06................................ 25
------------------------------------------------------------------------
Dated: September 9, 2005.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 05-18279 Filed 9-13-05; 8:45 am]
BILLING CODE 3410-02-P