[Federal Register: January 12, 2006 (Volume 71, Number 8)]
[Rules and Regulations]
[Page 1921-1926]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ja06-3]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 982
[Docket No. FV06-982-1 IFR]
Hazelnuts Grown in Oregon and Washington; Establishment of Final
Free and Restricted Percentages for the 2005-2006 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Interim final rule with request for comments.
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SUMMARY: This rule establishes final free and restricted percentages
for domestic inshell hazelnuts for the 2005-2006 marketing year under
the Federal marketing order for hazelnuts grown in Oregon and
Washington. The final free and restricted percentages are 11.4388 and
88.5612 percent, respectively. The percentages allocate the quantity of
domestically produced hazelnuts which may be marketed in the domestic
inshell market (free) and the quantity of domestically produced
hazelnuts that must be disposed of in outlets approved by the Board
(restricted). Volume regulation is intended to stabilize the supply of
domestic inshell hazelnuts to meet the limited domestic demand for such
hazelnuts with the goal of providing producers with reasonable returns.
This rule was recommended unanimously by the Hazelnut Marketing Board
(Board), which is the agency responsible for local administration of
the marketing order.
DATES: Effective Date: January 13, 2006. This interim final rule
applies to all 2005-2006 marketing year restricted hazelnuts until they
are properly disposed of in accordance with
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marketing order requirements. Comments received by March 13, 2006 will
be considered prior to issuance of a final rule.
ADDRESSES: Interested persons are invited to submit written comments
concerning this rule. Comments must be sent to the Docket Clerk,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC
20250-0237; Fax: (202) 720-8938, E-mail: moab.docketclerk@usda.gov, or
Internet: http://www.regulations.gov. All comments should reference the
docket number and the date and page number of this issue of the Federal
Register and will be available for public inspection in the Office of
the Docket Clerk during regular business hours, or can viewed at:
http://www.ams.usda.gov/fv/moab.html.
FOR FURTHER INFORMATION CONTACT: Barry Broadbent, Northwest Marketing
Field Office, Marketing Order Administration Branch, Fruit and
Vegetable Programs, AMS, USDA, 1220 SW. Third Avenue, Suite 385,
Portland, OR 97204; Telephone: (503) 326-2724, Fax: (503) 326-7440; or
George J. Kelhart, Technical Advisor, Marketing Order Administration
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence
Avenue SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-
2491, Fax: (202) 720-8938.
Small businesses may request information on complying with this
regulation by contacting Jay Guerber, Marketing Order Administration
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence SW.,
STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491, Fax:
(202) 720-8938, or E-mail: Jay.Guerber@usda.gov.
SUPPLEMENTARY INFORMATION: This rule is issued under Marketing
Agreement No. 115 and Marketing Order No. 982, both as amended (7 CFR
part 982), regulating the handling of hazelnuts grown in Oregon and
Washington, hereinafter referred to as the ``order.'' The order is
effective under the Agricultural Marketing Agreement Act of 1937, as
amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.''
The Department of Agriculture (USDA) is issuing this rule in
conformance with Executive Order 12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. It is intended that this action apply to all
merchantable hazelnuts handled during the 2005-2006 marketing year
(July 1, 2005, through June 30, 2006). This rule will not preempt any
State or local laws, regulations, or policies, unless they present an
irreconcilable conflict with this rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with USDA a petition
stating that the order, any provision of the order, or any obligation
imposed in connection with the order is not in accordance with law and
request a modification of the order or to be exempted therefrom. A
handler is afforded the opportunity for a hearing on the petition.
After the hearing, USDA would rule on the petition. The Act provides
that the district court of the United States in any district in which
the handler is an inhabitant, or has his or her principal place of
business, has jurisdiction to review USDA's ruling on the petition,
provided an action is filed not later than 20 days after the date of
the entry of the ruling.
This rule establishes free and restricted percentages which
allocate the quantity of domestically produced hazelnuts which may be
marketed in domestic inshell markets (free) and hazelnuts which must be
exported, shelled, or otherwise disposed of by handlers (restricted).
The Board met and, after determining that volume regulation would tend
to effectuate the declared policy of the Act, developed a marketing
policy to be employed for the duration of the 2005-2006 marketing year.
Using statistical compilations and a well defined procedure, the Board
estimated inshell trade demand and total available supply for the
coming marketing year and subsequently used those estimates as the
basis for computing and announcing the free and restricted marketing
percentages for the year. The Board determined that, for the 2005-2006
marketing year, projected inshell trade demand is 3,095 tons and
projected total available new supply is 27,057 tons. Using those
estimates, the Board voted unanimously at their November 15, 2005,
meeting to recommend to USDA that the final free and restricted
percentages for the 2005-2006 marketing year be established at 11.4388
and 88.5612 percent, respectively.
The Board's authority to recommend volume regulation and use
computations to determine the allocation of hazelnuts to individual
markets is specified in Sec. 982.40 of the order. Under the order's
provisions, free and restricted market allocations of hazelnuts are
expressed as percentages of the total supply subject to regulation and
are derived by dividing the computed inshell trade demand by the
Board's estimate of the total domestically produced supply of hazelnuts
that will be available over the course of the marketing year.
Inshell trade demand, the key component of the marketing policy, is
the quantity of inshell hazelnuts necessary to adequately supply the
needs of the domestic market for the duration of the marketing year.
The Board determines the inshell trade demand for each year and uses
that estimate as the basis for setting the percentage of the available
hazelnuts that handlers may ship to the domestic inshell market
throughout the marketing season. The order specifies that the inshell
trade demand be computed by averaging the preceding three years' trade
acquisitions of inshell hazelnuts, allowing adjustments for abnormal
crop or marketing conditions. The Board may increase the computed
inshell trade demand by up to 25 percent, if market conditions warrant
an increase.
Prior to September 20 of each marketing year, the Board follows a
procedure, specified by the order, to compute and announce preliminary
free and restricted percentages. The preliminary free percentage
releases 80 percent of the adjusted inshell trade demand to the
domestic market. The purpose of releasing only 80 percent of the
inshell trade demand under the preliminary percentage is to guard
against any potential underestimate of crop size. The preliminary free
percentage is expressed as a percentage of the total supply subject to
regulation where total supply is the sum of the estimated crop
production less the three-year average disappearance plus the
undeclared carry-in from the previous marketing year.
On or before November 15 of each marketing year, the Board must
meet again to recommend interim final and final free and restricted
percentages and to authorize permitted outlets for restricted
percentages. Interim final percentages release 100 percent of the
inshell trade demand (effectively releasing the 20 percent held back
during the preliminary stage). Final percentages may release an
additional 15 percent for desirable carryout and are effective 30 days
prior to the end of the marketing year, or earlier as recommended by
the Board.
On August 23, 2005, the National Agricultural Statistics Service
(NASS) released an estimate of 2005 hazelnut production for the Oregon
and Washington area at 28,000 dry orchard-
[[Page 1923]]
run tons. NASS uses an objective yield survey method to estimate
hazelnut production which has historically been very accurate.
On August 25, 2005, the Board met and estimated total available
supply for the 2005 crop year at 27,057 tons. The Board arrived at this
estimate by using the crop estimate compiled by NASS (28,000 tons) and
then adjusting that estimate to account for disappearance and carry-in.
The order requires the Board to reduce the estimate by the average
disappearance over the preceding three years (1,075 tons) and to
increase it by the amount of undeclared carry-in from previous years'
production (132 tons.)
Disappearance is the difference between the estimated orchard-run
production and the actual supply of merchantable product available for
sale by handlers. Disappearance can consist of (1) unharvested
hazelnuts; (2) culled product (nuts that are delivered to handlers but
later discarded); (3) product used on the farm, sold locally, or
otherwise disposed of by producers; and (4) statistical error in the
orchard-run production estimate.
Undeclared carry-in is hazelnuts that were produced in a previous
marketing year but were not subject to regulation because they were not
shipped during that marketing year. Undeclared carry-in is subject to
regulation during the current marketing year and is accounted for as
such by the Board.
As provided by the order, the Board computed inshell trade demand
to be 3,095 tons by taking the average of the past three years' sales
(2,775 tons), increasing the three year average by 15 percent to
encourage increased sales (416 tons), and then reducing that quantity
by the declared carry-in from last year's crop (96 tons). Declared
carry-in is product regulated under the order during a preceding
marketing year but not shipped during that year. This inventory must be
accounted for when estimating the quantity of product to make available
to adequately supply the market.
The Board computed and announced preliminary free and restricted
percentages of 9.1511 percent and 90.8489 percent, respectively, at its
August 25, 2005, meeting. The Board computed the preliminary free
percentage by multiplying the adjusted trade demand by 80 percent and
dividing the result by the total available supply subject to regulation
(3,095 tons x 80 percent/27,057 tons = 9.1511 percent). The preliminary
free percentage initially released 2,476 tons of hazelnuts from the
2005-2006 supply for domestic inshell use, and the preliminary
restricted percentage withheld 24,581 tons for the export and kernel
markets.
Under the order, the Board must meet again on or before November 15
to recommend interim final and final percentages. The Board uses
current crop estimates to calculate interim final and final
percentages. The interim final percentages are calculated in the same
way as the preliminary percentages and release the remaining 20 percent
(to total 100 percent of the inshell trade demand) previously computed
by the Board. Final free and restricted percentages may release up to
an additional 15 percent of the average of the preceding three years'
trade acquisitions to provide an adequate carryover into the following
season (i.e., desirable carryout). The order requires that the final
free and restricted percentages shall be effective 30 days prior to the
end of the marketing year, or earlier, if recommended by the Board and
approved by USDA. Revisions in the marketing policy can be made until
February 15 of each marketing year, but the inshell trade demand can
only be revised upward, consistent with Sec. 982.40(e).
The Board met on November 15, 2005, and reviewed and approved an
amended marketing policy and recommended the establishment of final
free and restricted percentages. The Board decided that market
conditions were such that it would not be necessary to release
additional domestic inshell hazelnuts to ensure adequate carryout.
Accordingly, no interim final free and restricted percentages were
recommended. The Board recommended final free and restricted
percentages of 11.4388 and 88.5612 percent, respectively, and that
those percentages be effective immediately. The final free percentage
releases approximately 3,095 tons of inshell hazelnuts from the 2005-
2006 supply for domestic use.
The final marketing percentages are based on the Board's final
production estimate and the following supply and demand information for
the 2005-2006 marketing year:
------------------------------------------------------------------------
Tons
------------------------------------------------------------------------
Total Available Supply:
(1) Production forecast (crop estimate)............. 28,000
(2) Less disappearance (three year average; 3.84 1,075
percent of Item 1).................................
(3) Merchantable production (Item 1 minus Item 2)... 26,925
(4) Plus undeclared carry-in as of July 1, 2005 132
(subject to regulation)............................
(5) Available supply subject to regulation (Item 3 27,057
plus Item 4).......................................
Inshell Trade Demand:
(6) Average trade acquisitions of inshell hazelnuts 2,775
(three prior years domestic sales).................
(7) Add: Increase to encourage increased sales (15% 416
of average trade acquisitions).....................
(8) Less: Declared carry-in as of July 1, 2005 (not 96
subject to 2005-2006 regulation)...................
(9) Adjusted inshell trade demand (Item 6 plus Item 3,095
7 minus Item 8)....................................
------------------------------------------------------------------------
Percentages
-------------------------------
Free Restricted
------------------------------------------------------------------------
(10) Final percentages (Item 9 11.4388 88.5612
divided by Item 5) x 100...........
(11) Final free tonnage (Item 9).... 3,095 ..............
(12) Final restricted tonnage (Item .............. 23,962
5 minus Item 11)...................
------------------------------------------------------------------------
In addition to complying with the provisions of the order, the
Board also considered USDA's 1982 ``Guidelines for Fruit, Vegetable,
and Specialty Crop Marketing Orders'' (Guidelines) when making its
computations in the marketing policy. This volume control regulation
provides a method to collectively limit the supply of inshell hazelnuts
available for sale in domestic markets. The Guidelines provide that the
domestic inshell market has
[[Page 1924]]
available a quantity equal to 110 percent of prior years' shipments
before allocating supplies for the export inshell, export kernel, and
domestic kernel markets. This provides for plentiful supplies for
consumers and for market expansion, while retaining the mechanism for
dealing with oversupply situations. The established final percentages
will make available approximately 416 additional tons to encourage
increased sales. The total free supply for the 2005-2006 marketing year
is estimated to be 3,095 tons of hazelnuts. That amount would be 112
percent of prior years' sales and would exceed the goal of the
Guidelines.
Initial Regulatory Flexibility Analysis
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities. Accordingly, AMS has
prepared this initial regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and the rules issued thereunder, are unique in
that they are brought about through group action of essentially small
entities acting on their own behalf. Thus, both statutes have small
entity orientation and compatibility.
Small agricultural producers are defined by the Small Business
Administration (13 CFR 121.201) as those having annual receipts of less
than $750,000, and small agricultural service firms are defined as
those having annual receipts of less than $6,000,000. There are
approximately 703 producers of hazelnuts in the production area and
approximately 18 handlers subject to regulation under the order.
Average annual hazelnut revenue per producer is approximately $64,000.
This is computed by dividing NASS figures for the average value of
production for 2003 and 2004 ($44,863,000) by the number of producers.
The level of sales of other crops by hazelnut producers is not known.
In addition, based on Board records, about 83 percent of the handlers
ship under $6,000,000 worth of hazelnuts on an annual basis. In view of
the foregoing, it can be concluded that the majority of hazelnut
producers and handlers may be classified as small entities.
Board meetings are widely publicized in advance of the meetings and
are held in a location central to the production area. The meetings are
open to all industry members and other interested persons who are
encouraged to participate in the deliberations and voice their opinions
on topics under discussion. Thus, Board recommendations can be
considered to represent the interests of small business entities in the
industry.
Currently, U.S. hazelnut production is allocated among three main
market outlets: domestic inshell, export inshell, and kernel markets.
Handlers and growers receive the highest return for sales in the
domestic inshell market. They receive less for product going to export
inshell, and the least for kernels. Based on Board records of average
shipments for 1995-2004, the percentage going to each of these markets
was 11 percent (domestic inshell), 49 percent (export inshell), and 38
percent (kernels). Other minor market outlets make up the remaining 2
percent.
The inshell hazelnut market can be characterized as having limited
and inelastic demand with a very short primary marketing period. On
average, 76 percent of domestic inshell hazelnut shipments occur
between October 1 and November 30, primarily to supply holiday nut
demand. The inshell market is, therefore, prone to oversupply and
correspondingly low grower prices in the absence of supply
restrictions. This volume control regulation provides a method for the
U.S. hazelnut industry to limit the supply of domestic inshell
hazelnuts available for sale in the continental U.S. and thereby
mitigate market oversupply conditions.
Many years of marketing experience led to the development of the
current volume control procedures. These procedures have helped the
industry solve its marketing problems by keeping inshell supplies in
balance with domestic needs. Volume controls ensure that the domestic
inshell market is fully supplied while protecting the market from the
negative effects of oversupply.
Although the domestic inshell market is a relatively small portion
of total hazelnut sales (11 percent of total shipments), it remains a
profitable market segment. The volume control provisions of the
marketing order are designed to avoid oversupplying this particular
market segment, because that would likely lead to substantially lower
grower prices. The other market segments, export inshell and kernels,
are expected to continue to provide good outlets for U.S. hazelnut
production. Adverse climatic conditions have negatively impacted
production in the other hazelnut producing regions of the world,
creating lower than normal world supplies. As a result, it is expected
that demand and producer price for U.S. hazelnuts will remain above
average for some time.
In Oregon and Washington, low hazelnut production years typically
follow high production years (a historically consistent pattern), and
such was the case in 2005. The 2004 crop of 37,500 tons was 15 percent
above the 10-year average (1995-2004) for hazelnut production. The 2005
crop is estimated to be 14 percent below the average. It is predicted
that the 2006 crop will follow this pattern and will be larger than the
current crop year. This cyclical trait also leads to inversely
corresponding cyclical price patterns for hazelnuts. The intrinsic
cyclical nature of the hazelnut industry lends credibility to the
volume control measures enacted by the Board under the marketing order.
Recent production and price data reflect the stabilizing effect of
volume control regulations. Industry statistics show that total
hazelnut production has varied widely over the 10-year period between
1995 and 2004, from a low of 16,500 tons in 1998 to a high of 49,500
tons in 2001. Production in the smallest crop year and the largest crop
year were 47 percent and 151 percent, respectively, of the 10-year
average of 32,685 tons. Grower price, however, has not fluctuated to
the extent of production. Prices in the lowest price year and the
highest price year were 90 percent and 150 percent, respectively, of
the 10-year average price of $959 per ton. The coefficient of variation
(a standard statistical measure of variability; ``CV'') for hazelnut
production over the 10-year period is 0.36. In contrast, the
coefficient of variation for hazelnut grower prices is 0.19, about half
of the CV for production. The lower level of variability of price
versus the variability of production provides an illustration of the
order's price-stabilizing impact.
Comparing grower revenue to cost is useful in highlighting the
impact on growers of recent product and price levels. A recent hazelnut
production cost study from Oregon State University estimated cost-of-
production per acre to be approximately $1,340 for a typical 100-acre
hazelnut enterprise. Average grower revenue per bearing acre (based on
NASS acreage and value of production data) equaled or exceeded that
typical cost level only three times from 1995 to 2004. Average grower
revenue was below typical costs in the other years. Without the
stabilizing influence of the order, growers may have lost more money.
While crop size has fluctuated, volume regulations contribute to
orderly marketing and market stability by moderating the
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variation in returns for all producers and handlers, both large and
small.
While the level of benefits of this rulemaking is difficult to
quantify, the stabilizing effects of the volume regulations impact both
small and large handlers positively by helping them maintain and expand
markets even though hazelnut supplies fluctuate widely from season to
season. This regulation provides equitable allotment of the most
profitable market, the domestic inshell market. That market is
available to all handlers, regardless of size.
As an alternative to this regulation, the Board discussed not
regulating the 2005-2006 hazelnut crop. However, without any
regulations in effect, the Board believes that the industry would tend
to oversupply the inshell domestic market. Even though the 2005-2006
hazelnut crop is much smaller than last year's crop and 16 percent
below the ten-year average, the unregulated release of 27,057 tons on
the domestic inshell market would oversupply that small, but lucrative
market. The Board believes that any oversupply would completely disrupt
the market, causing producer returns to decrease dramatically.
Section 982.40 of the order establishes a procedure and
computations for the Board to follow in recommending to USDA
establishment of preliminary, interim final, and final percentages of
hazelnuts to be released to the free and restricted markets each
marketing year. The program results in plentiful supplies for consumers
and for market expansion while retaining the mechanism for dealing with
oversupply situations.
Hazelnuts produced under the order comprise virtually all of the
hazelnuts produced in the U.S. This production represents, on average,
less than 3 percent of total U.S. production of all tree nuts, and less
than 6 percent of the world's hazelnut production.
Last season, 68 percent of the domestically produced hazelnut
kernels were marketed in the domestic market and 32 percent were
exported. Domestically produced kernels generally command a higher
price in the domestic market than imported kernels. The industry is
continuing its efforts to develop and expand other markets with
emphasis on the domestic kernel market. Small business entities, both
producers and handlers, benefit from the expansion efforts resulting
from this program.
Inshell hazelnuts produced under the order compete well in export
markets because of quality. Based on Board statistics, Europe has
historically been the primary export market for U.S. produced inshell
hazelnuts. Recent years, though, have seen a significant shift in
export destinations. Last season, inshell shipments to Europe totaled
4,304 tons, representing just 22 percent of exports, with the largest
share going to Germany. Inshell shipments to Southwest Pacific
countries, and Hong Kong in particular, have increased dramatically in
the past few years, rising to 68 percent of total exports of 19,881
tons in 2004. The industry continues to pursue export opportunities.
There are some reporting, recordkeeping, and other compliance
requirements under the order. The reporting and recordkeeping burdens
are necessary for compliance purposes and for developing statistical
data for maintenance of the program. The information collection
requirements have been previously approved by the Office of Management
and Budget under OMB No. 0581-0178. The forms require information which
is readily available from handler records and which can be provided
without data processing equipment or trained statistical staff. As with
all Federal marketing order programs, reports and forms are
periodically reviewed to reduce information requirements and
duplication by industry and public sector agencies. This rule does not
change those requirements. In addition, USDA has not identified any
relevant Federal rules that duplicate, overlap, or conflict with this
rule.
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.
Further, the Board's meetings were widely publicized throughout the
hazelnut industry and all interested persons were invited to attend the
meetings and participate in Board deliberations. Like all Board
meetings, those held on August 25, and November 15, 2005, were public
meetings and all entities, both large and small, were able to express
their views on this issue. Finally, interested persons are invited to
submit information on the regulatory and informational impacts of this
action on small businesses.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html.
Any questions about the compliance
guide should be sent to Jay Guerber at the previously mentioned address
in the FOR FURTHER INFORMATION CONTACT section.
This rule invites comments on the establishment of final free and
restricted percentages for the 2005-2006 marketing year under the
hazelnut marketing order. Any comments received will be considered
prior to finalization of this rule.
After consideration of all relevant material presented, including
the Board's recommendation, and other information, it is found that
this interim final rule, as hereinafter set forth, will tend to
effectuate the declared policy of the Act.
Pursuant to 5 U.S.C. 553, it is also found and determined upon good
cause that it is impracticable, unnecessary, and contrary to the public
interest to give preliminary notice prior to putting this rule into
effect and that good cause exists for not postponing the effective date
of this action until 30 days after publication in the Federal Register
because: (1) The 2005-2006 marketing year began July 1, 2005, and the
percentages established herein apply to all merchantable hazelnuts
handled from the beginning of the crop year; (2) the percentages make
the full trade demand available so handlers can take advantage of
inshell marketing opportunities; (3) handlers are aware of this rule,
which was recommended at an open Board meeting, and need no additional
time to comply with this rule; and (4) interested persons are provided
a 60-day comment period in which to respond, and all comments timely
received will be considered prior to finalization of this action.
List of Subjects in 7 CFR Part 982
Filberts, Hazelnuts, Marketing agreements, Nuts, Reporting and
recordkeeping requirements.
0
For the reasons set forth in the preamble, 7 CFR part 982 is amended as
follows:
PART 982--HAZELNUTS GROWN IN OREGON AND WASHINGTON
0
1. The authority citation for 7 CFR part 982 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
0
2. A new section 982.253 is added to read as follows:
[Note: This section will not be published in the annual Code of
Federal Regulations.]
Sec. 982.253 Free and restricted percentages--2005-2006 marketing
year.
The final free and restricted percentages for merchantable
hazelnuts for the 2005-2006 marketing year shall be 11.4388 and 88.5612
percent, respectively.
[[Page 1926]]
Dated: January 6, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 06-271 Filed 1-11-06; 8:45 am]
BILLING CODE 3410-02-P