[Federal Register: January 12, 2005 (Volume 70, Number 8)]
[Proposed Rules]
[Page 2027-2032]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ja05-13]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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[[Page 2027]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Docket No. FV05-985-1 PR]
Marketing Order Regulating the Handling of Spearmint Oil Produced
in the Far West; Salable Quantities and Allotment Percentages for the
2005-2006 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This rule would establish the quantity of spearmint oil
produced in the Far West, by class, that handlers may purchase from, or
handle for, producers during the 2005-2006 marketing year, which begins
on June 1, 2005. This rule invites comments on the establishment of
salable quantities and allotment percentages for Class 1 (Scotch)
spearmint oil of 677,409 pounds and 35 percent, respectively, and for
Class 3 (Native) spearmint oil of 867,958 pounds and 40 percent,
respectively. The Spearmint Oil Administrative Committee (Committee),
the agency responsible for local administration of the marketing order
for spearmint oil produced in the Far West, recommended this rule for
the purpose of avoiding extreme fluctuations in supplies and prices to
help maintain stability in the spearmint oil market.
DATES: Comments must be received by February 11, 2005.
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. Comments should reference the
docket number and the date and page number of this issue of the Federal
Register and will be available for public inspection in the Office of
the Docket Clerk during regular business hours, or can be viewed at:
http://www.ams.usda.gov/fv/moab.html.
FOR FURTHER INFORMATION CONTACT: Susan M. Hiller, Northwest Marketing
Field Office, Fruit and Vegetable Programs, AMS, USDA, 1220 SW. Third
Avenue, suite 385, Portland, Oregon 97204; Telephone: (503) 326-2724;
Fax: (503) 326-7440; 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 Order
No. 985 (7 CFR part 985), as amended, regulating the handling of
spearmint oil produced in the Far West (Washington, Idaho, Oregon, and
designated parts of Nevada and Utah), hereinafter referred to as the
``order.'' This order is effective under the Agricultural Marketing
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter
referred to as the ``Act.''
The Department of Agriculture (USDA) is issuing this rule in
conformance with Executive Order 12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. Under the marketing order now in effect, salable
quantities and allotment percentages may be established for classes of
spearmint oil produced in the Far West. This proposed rule would
establish the quantity of spearmint oil produced in the Far West, by
class, which may be purchased from or handled for producers by handlers
during the 2005-2006 marketing year, which begins on June 1, 2005. This
rule will not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with USDA a petition
stating that the order, any provision of the order, or any obligation
imposed in connection with the order is not in accordance with law and
request a modification of the order or to be exempted therefrom. Such
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.
Pursuant to authority in Sec. Sec. 985.50, 985.51, and 985.52 of
the order, the Committee, with seven of its eight members present, met
on October 6, 2004, and recommended salable quantities and allotment
percentages for both classes of oil for the 2005-2006 marketing year.
The Committee unanimously recommended the establishment of a salable
quantity and allotment percentage for Scotch spearmint oil of 677,409
pounds and 35 percent, respectively. For Native spearmint oil, the
Committee unanimously recommended the establishment of a salable
quantity and allotment percentage of 867,958 pounds and 40 percent,
respectively.
This rule would limit the amount of spearmint oil that handlers may
purchase from, or handle for, producers during the 2005-2006 marketing
year, which begins on June 1, 2005. Salable quantities and allotment
percentages have been placed into effect each season since the order's
inception in 1980.
The U.S. production of Scotch spearmint oil is concentrated in the
Far West, which includes Washington, Idaho, and Oregon and a portion of
Nevada and Utah. Scotch spearmint oil is also produced in the Midwest
states of Indiana, Michigan, and Wisconsin, as well as in the States of
Montana, South Dakota, North Dakota, and Minnesota. The production area
covered by the marketing order currently accounts for
[[Page 2028]]
approximately 68 percent of the annual U.S. sales of Scotch spearmint
oil.
When the order became effective in 1980, the Far West had 72
percent of the world's sales of Scotch spearmint oil. While the Far
West is still the leading producer of Scotch spearmint oil, its share
of world sales is now estimated to be about 36 percent. This loss in
world sales for the Far West region is directly attributed to the
increase in global production. Other factors that have played a
significant role include the overall quality of the imported oil and
technological advances that allow for more blending of lower quality
oils. Such factors have provided the Committee with challenges in
accurately predicting trade demand for Scotch oil. This, in turn, has
made it difficult to balance available supplies with demand and to
achieve the Committee's overall goal of stabilizing producer and market
prices.
The marketing order has continued to contribute to price and
general market stabilization for Far West producers. The Committee, as
well as spearmint oil producers and handlers attending the October 6,
2004, meeting estimated that the 2004 producer price of Scotch oil
would maintain an average of $10.00 per pound. However, this producer
price is below the cost of production for most producers as indicated
in a study from the Washington State University Cooperative Extension
Service (WSU), which estimates production costs to be between $13.50
and $15.00 per pound.
This low level of producer returns has caused a reduction in
acreage. When the order became effective in 1980, the Far West region
had 9,702 acres of Scotch spearmint. The Committee estimates that the
current acreage of Scotch spearmint will be about 4,771 acres. Based on
the reduced Scotch spearmint acreage, the Committee estimates that
production for the 2004-2005 marketing season will be about 635,508
pounds.
The Committee recommended the 2005-2006 Scotch spearmint oil
salable quantity (677,409 pounds) and allotment percentage (35 percent)
utilizing sales estimates for 2005-2006 Scotch oil as provided by
several of the industry's handlers, as well as historical and current
Scotch oil sales levels. The Committee is estimating that about 650,000
pounds of Scotch spearmint oil, on average, may be sold during the
2005-2006 marketing year. When considered in conjunction with the
estimated carry in of 351,427 pounds of oil on June 1, 2005, the
recommended salable quantity of 677,409 pounds results in a total
available supply of Scotch spearmint oil next year of about 1,028,836
pounds.
The recommendation for the 2005-2006 Scotch spearmint oil volume
regulation is consistent with the Committee's stated intent of keeping
adequate supplies available at all times, while attempting to stabilize
prices at a level adequate to sustain the producers. Furthermore, the
recommendation takes into consideration the industry's desire to
compete with less expensive oil produced outside the regulated area.
Although Native spearmint oil producers are facing market
conditions similar to those affecting the Scotch spearmint oil market,
the market share is quite different. Over 90 percent of the U.S.
production of Native spearmint is produced within the Far West
production area. Also, most of the world's supply of Native spearmint
is produced in the U.S.
The supply and demand characteristics of the current Native
spearmint oil market, combined with the stabilizing impact of the
marketing order, have kept the price relatively steady, between $9.10
and $9.30 per pound over the last five years. The Committee considers
this level too low for the majority of producers to maintain viability.
The WSU study referenced earlier indicates that the cost of producing
Native spearmint oil ranges from $10.26 to $10.92 per pound.
Similar to Scotch, the low level of producer returns has also
caused a reduction in Native spearmint acreage. When the order became
effective in 1980, the Far West region had 12,153 acres of Native
spearmint. The Committee estimates that the 2004-2005 acreage of Native
spearmint is about 4,804 acres. Based on the reduced Native spearmint
acreage, the Committee estimates that production for the 2004-2005
marketing season will be about 701,372 pounds.
The Committee recommended the 2005-2006 Native spearmint oil
salable quantity (867,958 pounds) and allotment percentage (40 percent)
utilizing sales estimates for 2005-2006 Native oil as provided by
several of the industry's handlers, as well as historical and current
Native oil sales levels. The Committee is estimating that about 945,000
pounds of Native spearmint oil, on average, may be sold during the
2005-2006 marketing year. When considered in conjunction with the
estimated carry-in of 60,000 pounds of oil on June 1, 2005, the
recommended salable quantity of 867,958 pounds results in a total
available supply of Native spearmint oil next year of about 927,958
pounds.
The Committee's method of calculating the Native spearmint oil
salable quantity and allotment percentage continues to primarily
utilize information on price and available supply as they are affected
by the estimated trade demand. The Committee's stated intent is to make
adequate supplies available to meet market needs and improve producer
prices.
The Committee believes that the order has contributed extensively
to the stabilization of producer prices, which prior to 1980
experienced wide fluctuations from year to year. According to the
National Agricultural Statistics Service, for example, the average
price paid for both classes of spearmint oil ranged from $4.00 per
pound to $11.10 per pound during the period between 1968 and 1980.
Prices since the order's inception have generally stabilized at about
$9.85 per pound for Native spearmint oil and at about $12.93 per pound
for Scotch spearmint oil. However, the current prices for both classes
of oil are below the average due to several factors, including the
general uncertainty being experienced through the U.S. economy and the
continuing overall weak farm situation, as well as an abundant global
supply of spearmint oil. As noted earlier--although lower than what
producers believe to be viable--prices currently appear to be stable at
about $9.50 for both classes of oil.
The Committee based its recommendation for the proposed salable
quantity and allotment percentage for each class of spearmint oil for
the 2005-2006 marketing year on the information discussed above, as
well as the data outlined below.
1. Class 1 (Scotch) Spearmint Oil
(A) Estimated carry-in on June 1, 2005--351,427 pounds. This figure
is the difference between the estimated 2004-2005 marketing year trade
demand of 620,000 pounds and the 2004-2005 marketing year total
available supply of 971,427 pounds.
(B) Estimated trade demand for the 2005-2006 marketing year--
650,000 pounds. This figure is based on input from producers at five
Scotch spearmint oil production area meetings held in September 2004,
as well as estimates provided by handlers and other meeting
participants at the October 6, 2004, meeting. The average estimated
trade demand provided at the five production area meetings was 620,867
pounds, whereas the average handler trade demand ranged from 600,000 to
650,000 pounds. The average of sales over the last five years was
761,142 pounds.
(C) Salable quantity required from the 2005-2006 marketing year
production--298,573 pounds. This figure is the
[[Page 2029]]
difference between the estimated 2005-2006 marketing year trade demand
(650,000 pounds) and the estimated carry-in on June 1, 2005 (351,427
pounds).
(D) Total estimated allotment base for the 2005-2006 marketing
year--1,935,455 pounds. This figure represents a one-percent increase
over the revised 2004-2005 total allotment base. This figure is
generally revised each year on June 1 due to producer base being lost
due to the bona fide effort production provisions of Sec. 985.53(e).
The revision is usually minimal.
(E) Computed allotment percentage--15.4 percent. This percentage is
computed by dividing the required salable quantity by the total
estimated allotment base.
(F) Recommended allotment percentage--35 percent. This
recommendation is based on the Committee's determination that a
decrease from the current season's allotment percentage of 40 percent
to the computed 15.4 percent would not adequately supply the potential
2005-2006 market.
(G) The Committee's recommended salable quantity--677,409 pounds.
This figure is the product of the recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the 2005-2006 marketing year--
1,028,836 pounds. This figure is the sum of the 2005-2006 recommended
salable quantity (677,409 pounds) and the estimated carry-in on June 1,
2005 (351,427 pounds).
2. Class 3 (Native) Spearmint Oil
(A) Estimated carry-in on June 1, 2005--60,000 pounds. This figure
is the difference between the estimated 2004-2005 marketing year trade
demand of 1,063,438 pounds and the revised 2004-2005 marketing year
total available supply of 1,123,438 pounds.
(B) Estimated trade demand for the 2005-2006 marketing year--
945,000 pounds. This figure is based on input from producers at the
five Native spearmint oil production area meetings held in September
2004, as well as estimates provided by handlers and other meeting
participants at the October 6, 2004, meeting. The average estimated
trade demand provided at the five production area meetings was 957,000
pounds, whereas the average handler estimate was 945,000 pounds.
(C) Salable quantity required from the 2005-2006 marketing year
production--885,000 pounds. This figure is the difference between the
estimated 2005-2006 marketing year trade demand (945,000 pounds) and
the estimated carry-in on June 1, 2005 (60,000 pounds).
(D) Total estimated allotment base for the 2005-2006 marketing
year--2,169,894 pounds. This figure represents a one percent increase
over the revised 2004-2005 total allotment base. This figure is
generally revised each year on June 1 due to producer base being lost
due to the bona fide effort production provisions of Sec. 985.53(e).
The revision is usually minimal.
(E) Computed allotment percentage--40.8 percent. This percentage is
computed by dividing the required salable quantity by the total
estimated allotment base.
(F) Recommended allotment percentage--40 percent. This is the
Committee's recommendation based on the computed allotment percentage,
the average of the computed allotment percentage figures from the five
production area meetings (40.6 percent), and input from producers and
handlers at the October 6, 2004, meeting.
(G) The Committee's recommended salable quantity--867,958 pounds.
This figure is the product of the recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the 2005-2006 marketing year--
927,958 pounds. This figure is the sum of the 2005-2006 recommended
salable quantity (867,958 pounds) and the estimated carry-in on June 1,
2005 (60,000 pounds).
The salable quantity is the total quantity of each class of
spearmint oil, which handlers may purchase from, or handle on behalf of
producers during a marketing year. Each producer is allotted a share of
the salable quantity by applying the allotment percentage to the
producer's allotment base for the applicable class of spearmint oil.
The Committee's recommended Scotch and Native spearmint oil salable
quantities and allotment percentages of 677,409 pounds and 35 percent
and 867,958 and 40 percent, respectively, are based on the Committee's
goal of maintaining market stability by avoiding extreme fluctuations
in supplies and prices and the anticipated supply and trade demand
during the 2005-2006 marketing year. The proposed salable quantities
are not expected to cause a shortage of spearmint oil supplies. Any
unanticipated or additional market demand for spearmint oil, which may
develop during the marketing year, can be satisfied by an increase in
the salable quantities. Both Scotch and Native spearmint oil producers
who produce more than their annual allotments during the 2005-2006
marketing year may transfer such excess spearmint oil to a producer
with spearmint oil production less than his or her annual allotment or
put it into the reserve pool until November 1, 2005.
This proposed regulation, if adopted, would be similar to
regulations issued in prior seasons. Costs to producers and handlers
resulting from this rule are expected to be offset by the benefits
derived from a stable market and improved returns. In conjunction with
the issuance of this proposed rule, USDA has reviewed the Committee's
marketing policy statement for the 2005-2006 marketing year. The
Committee's marketing policy statement, a requirement whenever the
Committee recommends volume regulations, fully meets the intent of
Sec. 985.50 of the order. During its discussion of potential 2005-2006
salable quantities and allotment percentages, the Committee considered:
(1) The estimated quantity of salable oil of each class held by
producers and handlers; (2) the estimated demand for each class of oil;
(3) prospective production of each class of oil; (4) total of allotment
bases of each class of oil for the current marketing year and the
estimated total of allotment bases of each class for the ensuing
marketing year; (5) the quantity of reserve oil, by class, in storage;
(6) producer prices of oil, including prices for each class of oil; and
(7) general market conditions for each class of oil, including whether
the estimated season average price to producers is likely to exceed
parity. Conformity with the USDA's ``Guidelines for Fruit, Vegetable,
and Specialty Crop Marketing Orders'' has also been reviewed and
confirmed.
The establishment of these salable quantities and allotment
percentages would allow for anticipated market needs. In determining
anticipated market needs, consideration by the Committee was given to
historical sales, as well as changes and trends in production and
demand. This rule also provides producers with information on the
amount of spearmint oil that should be produced for the 2005-2006
season in order to meet anticipated market demand.
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 rule 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
[[Page 2030]]
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 eight spearmint oil handlers subject to regulation under
the order, and approximately 59 producers of Class 1 (Scotch) spearmint
oil and approximately 91 producers of Class 3 (Native) spearmint oil in
the regulated production area. Small agricultural service firms are
defined by the Small Business Administration (SBA) (13 CFR 121.201) as
those having annual receipts of less than $5,000,000, and small
agricultural producers are defined as those whose annual receipts are
less than $750,000.
Based on the SBA's definition of small entities, the Committee
estimates that 2 of the 8 handlers regulated by the order could be
considered small entities. Most of the handlers are large corporations
involved in the international trading of essential oils and the
products of essential oils. In addition, the Committee estimates that
19 of the 59 Scotch spearmint oil producers and 21 of the 91 Native
spearmint oil producers could be classified as small entities under the
SBA definition. Thus, a majority of handlers and producers of Far West
spearmint oil may not be classified as small entities.
The Far West spearmint oil industry is characterized by producers
whose farming operations generally involve more than one commodity, and
whose income from farming operations is not exclusively dependent on
the production of spearmint oil. A typical spearmint oil-producing
operation has enough acreage for rotation such that the total acreage
required to produce the crop is about one-third spearmint and two-
thirds rotational crops. Thus, the typical spearmint oil producer has
to have considerably more acreage than is planted to spearmint during
any given season. Crop rotation is an essential cultural practice in
the production of spearmint oil for weed, insect, and disease control.
To remain economically viable with the added costs associated with
spearmint oil production, most spearmint oil-producing farms fall into
the SBA category of large businesses.
Small spearmint oil producers generally are not as extensively
diversified as larger ones and as such are more at risk from market
fluctuations. Such small producers generally need to market their
entire annual crop and do not have the luxury of having other crops to
cushion seasons with poor spearmint oil returns. Conversely, large
diversified producers have the potential to endure one or more seasons
of poor spearmint oil markets because income from alternate crops could
support the operation for a period of time. Being reasonably assured of
a stable price and market provides small producing entities with the
ability to maintain proper cash flow and to meet annual expenses. Thus,
the market and price stability provided by the order potentially
benefit the small producer more than such provisions benefit large
producers. Even though a majority of handlers and producers of
spearmint oil may not be classified as small entities, the volume
control feature of this order has small entity orientation.
This proposed rule would establish the quantity of spearmint oil
produced in the Far West, by class, that handlers may purchase from, or
handle for, producers during the 2005-2006 marketing year. The
Committee recommended this rule to help maintain stability in the
spearmint oil market by avoiding extreme fluctuations in supplies and
prices. Establishing quantities to be purchased or handled during the
marketing year through volume regulations allows producers to plan
their mint planting and harvesting to meet expected market needs. The
provisions of Sec. Sec. 985.50, 985.51, and 985.52 of the order
authorize this rule.
Instability in the spearmint oil sub-sector of the mint industry is
much more likely to originate on the supply side than the demand side.
Fluctuations in yield and acreage planted from season-to-season tend to
be larger than fluctuations in the amount purchased by buyers. Demand
for spearmint oil tends to be relatively stable from year-to-year. The
demand for spearmint oil is expected to grow slowly for the foreseeable
future because the demand for consumer products that use spearmint oil
will likely expand slowly, in line with population growth.
Demand for spearmint oil at the farm level is derived from retail
demand for spearmint-flavored products such as chewing gum, toothpaste,
and mouthwash. The manufacturers of these products are by far the
largest users of mint oil. However, spearmint flavoring is generally a
very minor component of the products in which it is used, so changes in
the raw product price have no impact on retail prices for those goods.
Spearmint oil production tends to be cyclical. Years of large
production, with demand remaining reasonably stable, have led to
periods in which large producer stocks of unsold spearmint oil have
depressed producer prices for a number of years. Shortages and high
prices may follow in subsequent years, as producers respond to price
signals by cutting back production.
The significant variability is illustrated by the fact that the
coefficient of variation (a standard measure of variability; ``CV'') of
Far West spearmint oil production from 1980 through 2003 was about
0.24. The CV for spearmint oil grower prices was about 0.14, well below
the CV for production. This provides an indication of the price
stabilizing impact of the marketing order.
Production in the shortest marketing years was about 49 percent of
the 24-year average (1.875 million pounds from 1980 through 2003) and
the largest crop was approximately 166 percent of the 24-year average.
A key consequence is that in years of oversupply and low prices the
season average producer price of spearmint oil is below the average
cost of production (as measured by the Washington State University
Cooperative Extension Service.)
The wide fluctuations in supply and prices that result from this
cycle, which was even more pronounced before the creation of the
marketing order, can create liquidity problems for some producers. The
marketing order was designed to reduce the price impacts of the
cyclical swings in production. However, producers have been less able
to weather these cycles in recent years because of the decline in
prices of many of the alternative crops they grow. As noted earlier,
almost all spearmint oil producers diversify by growing other crops.
In an effort to stabilize prices, the spearmint oil industry uses
the volume control mechanisms authorized under the order. This
authority allows the Committee to recommend a salable quantity and
allotment percentage for each class of oil for the upcoming marketing
year. The salable quantity for each class of oil is the total volume of
oil that producers may sell during the marketing year. The allotment
percentage for each class of spearmint oil is derived by dividing the
salable quantity by the total allotment base.
Each producer is then issued an annual allotment certificate, in
pounds, for the applicable class of oil, which is calculated by
multiplying the producer's allotment base by the applicable allotment
percentage. This is the amount of oil for the applicable class that the
producer can sell.
By November 1 of each year, the Committee identifies any oil that
[[Page 2031]]
individual producers have produced above the volume specified on their
annual allotment certificates. This excess oil is placed in a reserve
pool administered by the Committee.
There is a reserve pool for each class of oil that may not be sold
during the current marketing year unless USDA approves a Committee
recommendation to make a portion of the pool available. However,
limited quantities of reserve oil are typically sold to fill
deficiencies. A deficiency occurs when on-farm production is less than
a producer's allotment. In that case, a producer's own reserve oil can
be sold to fill that deficiency. Excess production (higher than the
producer's allotment) can be sold to fill other producers'
deficiencies.
In any given year, the total available supply of spearmint oil is
composed of current production plus carry-over stocks from the previous
crop. The Committee seeks to maintain market stability by balancing
supply and demand, and to close the marketing year with an appropriate
level of carryout. If the industry has production in excess of the
salable quantity, then the reserve pool absorbs the surplus quantity of
spearmint oil, which goes unsold during that year, unless the oil is
needed for unanticipated sales.
Under its provisions, the order may attempt to stabilize prices by
(1) limiting supply and establishing reserves in high production years,
thus minimizing the price-depressing effect that excess producer stocks
have on unsold spearmint oil, and (2) ensuring that stocks are
available in short supply years when prices would otherwise increase
dramatically. The reserve pool stocks grown in large production years
are drawn down in short crop years.
An econometric model was used to assess the impact that volume
control has on the prices producers receive for their commodity.
Without volume control, spearmint oil markets would likely be over-
supplied, resulting in low producer prices and a large volume of oil
stored and carried over to the next crop year. The model estimates how
much lower producer prices would likely be in the absence of volume
controls.
The Committee estimated the available supply during the 2004-2005
marketing year for both classes of oil at 2,094,865 pounds, and that
the expected carry-in will be 411,427 pounds. Therefore, with volume
control, sales by producers for the 2004-2005 marketing year would be
limited to 1,545,367 pounds (the recommended salable quantity for both
classes of spearmint oil).
The recommended salable percentages, upon which 2005-2006 producer
allotments are based, are 35 percent for Scotch and 40 percent for
Native. Without volume controls, producers would not be limited to
these allotment levels, and could produce and sell additional
spearmint. The econometric model estimated a $1.74 decline in the
season average producer price per pound (from both classes of spearmint
oil) resulting from the higher quantities that would be produced and
marketed without volume control. The Far West producer price for both
classes of spearmint oil was $9.50 for 2003, which is below the average
of $11.26 for the period of 1980 through 2003, based on National
Agricultural Statistics Service data. The surplus situation for the
spearmint oil market that would exist without volume controls in 2005-
2006 also would likely dampen prospects for improved producer prices in
future years because of the buildup in stocks.
The use of volume controls allows the industry to fully supply
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume controls is believed to have
little or no effect on consumer prices of products containing spearmint
oil and will not result in fewer retail sales of such products.
The Committee discussed alternatives to the recommendations
contained in this rule for both classes of spearmint oil. The Committee
discussed and rejected the idea of recommending that there not be any
volume regulation for Scotch spearmint oil because of the severe price-
depressing effects that would occur without volume control.
The Committee also considered various alternative levels of volume
control for Scotch spearmint oil, including leaving the percentage the
same as the current season, increasing the percentage to a less
restrictive level, or decreasing the percentage. After considerable
discussion the Committee unanimously supported decreasing the
percentage to 35 percent.
The Committee discussed and rejected the idea of recommending that
there not be any volume regulation for Native spearmint oil. The
immediate result would be to put an excessive amount of Native reserve
pool oil on the market causing depressed prices at the producer level.
With the current price for Native spearmint oil lower than the 10-year
average, and sales below the 5-year average, the Committee, after
considerable discussion, determined that 867,958 pounds and 40 percent
would be the most effective salable quantity and allotment percentage,
respectively, for the 2005-2006 marketing year.
As noted earlier, the Committee's recommendation to establish
salable quantities and allotment percentages for both classes of
spearmint oil was made after careful consideration of all available
information, including: (1) The estimated quantity of salable oil of
each class held by producers and handlers; (2) the estimated demand for
each class of oil; (3) the prospective production of each class of oil;
(4) the total of allotment bases of each class of oil for the current
marketing year and the estimated total of allotment bases of each class
for the ensuing marketing year; (5) the quantity of reserve oil, by
class, in storage; (6) producer prices of oil, including prices for
each class of oil; and (7) general market conditions for each class of
oil, including whether the estimated season average price to producers
is likely to exceed parity. Based on its review, the Committee believes
that the salable quantity and allotment percentage levels recommended
would achieve the objectives sought.
Without any regulations in effect, the Committee believes the
industry would return to the pronounced cyclical price patterns that
occurred prior to the order, and that prices in 2005-2006 would decline
substantially below current levels.
As stated earlier, the Committee believes that the order has
contributed extensively to the stabilization of producer prices, which
prior to 1980 experienced wide fluctuations from year-to-year. National
Agricultural Statistics Service records show that the average price
paid for both classes of spearmint oil ranged from $4.00 per pound to
$11.10 per pound during the period between 1968 and 1980. Prices have
been consistently more stable since the marketing order's inception in
1980, with an average price (1980-2003) of $12.93 per pound for Scotch
spearmint oil and $9.85 per pound for Native spearmint oil.
During the period of 1998 through 2003, however, large production
and carry-in inventories have contributed to prices below the 24-year
average, despite the Committee's efforts to balance available supplies
with demand. Prices have ranged from $8.00 to $11.00 per pound for
Scotch spearmint oil and between $9.10 and $10.00 per pound for Native
spearmint oil.
According to the Committee, the recommended salable quantities and
allotment percentages are expected to achieve the goals of market and
price stability.
[[Page 2032]]
As previously stated, annual salable quantities and allotment
percentages have been issued for both classes of spearmint oil since
the order's inception. Reporting and recordkeeping requirements have
remained the same for each year of regulation. These requirements have
been approved by the Office of Management and Budget under OMB Control
No. 0581-0065. Accordingly, this rule would not impose any additional
reporting or recordkeeping requirements on either small or large
spearmint oil producers and handlers. All reports and forms associated
with this program are reviewed periodically in order to avoid
unnecessary and duplicative information collection by industry and
public sector agencies. The USDA has not identified any relevant
Federal rules that duplicate, overlap, or conflict with this rule.
The Committee's meeting was widely publicized throughout the
spearmint oil industry and all interested persons were invited to
attend the meeting and participate in Committee deliberations on all
issues. Like all Committee meetings, the October 6, 2004, meeting was a
public meeting and all entities, both large and small, were able to
express 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.
A 30-day comment period is provided to allow interested persons the
opportunity to respond to the proposal, including any regulatory and
informational impacts of this action on small businesses. This comment
period is deemed appropriate so that a final determination can be made
prior to June 1, 2005, the beginning of the 2005-2006 marketing year.
All written comments received within the comment period will be
considered before a final determination is made on this matter.
List of Subjects in 7 CFR Part 985
Marketing agreements, Oils and fats, Reporting and recordkeeping
requirements, Spearmint oil.
For the reasons set forth in the preamble, 7 CFR part 985 is
proposed to be amended as follows:
PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL
PRODUCED IN THE FAR WEST
1. The authority citation for 7 CFR part 985 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. A new Sec. 985.224 is added to read as follows:
Note: This section will not appear in the Code of Federal
Regulations.
Sec. 985.224 Salable quantities and allotment percentages--2005-2006
marketing year.
The salable quantity and allotment percentage for each class of
spearmint oil during the marketing year beginning on June 1, 2005,
shall be as follows:
(a) Class 1 (Scotch) oil--a salable quantity of 677,409 pounds and
an allotment percentage of 35 percent.
(b) Class 3 (Native) oil--a salable quantity of 867,958 pounds and
an allotment percentage of 40 percent.
Dated: January 5, 2005.
Kenneth C. Clayton,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 05-581 Filed 1-11-05; 8:45 am]
BILLING CODE 3410-02-P