[Federal Register: September 25, 2007 (Volume 72, Number 185)]
[Rules and Regulations]
[Page 54343-54347]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25se07-2]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 989
[Docket No. AMS-FV-07-0071; FV07-989-2 FR]
Raisins Produced From Grapes Grown in California; Use of
Estimated Trade Demand To Compute Volume Regulation Percentages
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This rule provides for use of an estimated trade demand figure
to compute volume regulation percentages for 2007-08 crop Natural (sun-
dried) Seedless (NS) raisins covered under the Federal marketing order
for California raisins (order). The order regulates the handling of
raisins produced from grapes grown in California and is administered
locally by the Raisin Administrative Committee (Committee). This rule
provides parameters for implementing volume regulation for 2007-08 crop
NS raisins, if supplies are short, for the purposes of maintaining a
portion of the industry's export markets and stabilizing the domestic
market.
EFFECTIVE DATE: September 26, 2007.
FOR FURTHER INFORMATION CONTACT: Rose M. Aguayo, Marketing Specialist,
or Kurt J. Kimmel, Regional Manager, California Marketing Field Office,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA; Telephone: (559) 487-5901, Fax: (559) 487-5906, or E-mail:
Rose.Aguayo@usda.gov or Kurt.Kimmel@usda.gov.
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 final rule is issued under Marketing
Agreement and Order No. 989 (7 CFR part 989), both as amended,
regulating the handling of raisins produced from grapes grown in
California, 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 final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule is applicable to the 2007-08 crop year,
which began on August 1, 2007, and runs through July 31, 2008. This
final 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 final rule provides for use of an estimated trade demand
figure to compute volume regulation percentages for 2007-08 crop NS
raisins covered under the order. This rule provides parameters for
implementing volume regulation for 2007-08 crop NS raisins, if supplies
are short, for the purposes of maintaining a portion of the industry's
export markets and stabilizing the domestic market. This action was
unanimously recommended by the Committee at a meeting on April 12,
2007.
Volume Regulation Authority
The order provides authority for volume regulation designed to
promote orderly marketing conditions, stabilize prices and supplies,
and improve producer returns. When volume regulation is in effect, a
certain percentage of the California raisin crop may be sold by
handlers to any market (free tonnage), while the remaining percentage
must be held by handlers in a reserve pool (reserve) for the account of
the Committee. Reserve raisins are disposed of through certain programs
authorized under the order. For instance, reserve raisins may be sold
by the Committee to handlers for free use or to replace part of the
free tonnage raisins they exported; used in diversion programs; carried
over as a hedge against a short crop the following year; or disposed of
in other outlets not competitive with those for free tonnage raisins,
such as government purchase, distilleries, or animal feed. Net proceeds
from sales of reserve raisins are distributed to the reserve pool's
equity holders, primarily producers.
Section 989.54 of the order prescribes procedures and time frames
to be followed in establishing volume regulation for each crop year,
which runs from August 1 through July 31. The Committee must meet by
August 15 to review data regarding raisin supplies. At that time, the
Committee computes a trade demand for each varietal type of raisins for
which a free tonnage percentage might be recommended.
[[Page 54344]]
Trade demand is equal to 90 percent of the prior year's domestic and
export shipments, adjusted by subtracting carryin inventory from the
prior year and adding a desirable carryout inventory for the end of the
current year.
By October 5, the Committee must announce preliminary crop
estimates and determine whether volume regulation is warranted for the
varietal types for which it computed trade demands. Preliminary volume
regulation percentages are then computed to release 85 percent of the
computed trade demand if a field price has been established or 65
percent of the trade demand if no field price has been established.
Field price is the price that handlers pay for raisins from producers.
By February 15, the Committee must recommend final free and reserve
percentages that will tend to release the full trade demand.
The order also requires that, when volume regulation is in effect,
two offers of reserve raisins must be made available to handlers for
free use. These offers are known as the ``10 plus 10'' offers. Each
offer consists of a quantity of reserve raisins equal to 10 percent of
the prior year's shipments. The order also specifies that ``10 plus
10'' raisins must be sold to handlers at the current field price plus a
3 percent surcharge and Committee costs.
Development of Export Markets
With the exception of 11 crop years, volume regulation has been
utilized for NS raisins since the order's inception in 1949. The
procedures for determining volume regulation percentages have been
modified over the years to address the industry's needs. In the past,
volume regulation has been utilized primarily to help the industry
manage an oversupply of raisins. Through the use of various marketing
programs operated through reserve pools and other promotional
activities, the industry has also developed its export markets.
Between 1980 and 1985, exports of California NS raisins averaged
about 26 percent (53,700 packed tons, or raisins which have been
processed) of the industry's total NS raisin shipments (207,600 packed
tons, excluding government purchases) per year. During the last nine
years (1997-2005) these exports averaged about 37 percent (105,000
packed tons) of the industry's total NS raisin shipments (282,000
packed tons, excluding government purchases) per year.
Export Replacement Offer
One market development program operated through reserve pools, the
Export Replacement Offer (ERO), has helped U.S. raisins to be price
competitive in export markets. Prices in export markets are generally
lower than the domestic market. The ERO began in the early 1980s as a
``raisin-back'' program whereby handlers who exported California
raisins could purchase, at a reduced price, reserve raisins for free
use. This effectively blended down the cost of the raisins that were
exported. The NS raisin ERO was changed to a ``cash-back'' program in
1996 whereby handlers could receive cash from the reserve pool for
export shipments.
The NS ERO operated as a ``cash back'' program in all years since
then, except for 2000, 2001, and a portion of 2002. During 2002 both
``cash back'' and ``raisin back'' programs were implemented. Financing
for the cash-back ERO program has been primarily from the Committee's
``10 plus 10'' sales of reserve raisins. Under the 2002, 2003, 2004,
and 2005 cash-back ERO programs an average of $39.7 million of reserve
pool funds per year were utilized to support the export of about
103,000 packed tons of NS raisins annually.
Current Industry Situation--Declining Production
Raisin deliveries reached an all time high in 2000-01 at 432,616
natural condition tons. Deliveries for the subsequent two years (2001-
02 and 2002-03) remained high at 377,328 and 388,010 natural conditions
tons, respectively. Producer prices dropped dramatically during these
years of high production. In the years to follow, grape production
declined because of poor grower returns in the wine and raisin segments
of the industry. Raisin deliveries for the 2003-04 through the 2005-06
crop year averaged 293,750 natural condition tons. Deliveries for the
recently completed 2006-07 crop year fell to 282,999 natural condition
tons. Since 2000, about 40,000 producing acres of grape vines have been
removed in favor of other crops, which have provided higher returns.
The Committee is concerned that the 2007-08 crop may be short
because of grape vine removals over the last several years and an April
frost. As a result, volume regulation may not be warranted based on the
order's computed trade demand formula. If no 2007-08 reserve were
established, the industry would not be able to continue the ERO program
and support its export sales. The Committee is concerned that the
industry could lose a significant portion, perhaps 50 percent, of its
export markets. Further, handlers who could not sell their raisins in
export may sell their raisins domestically. Annual domestic shipments
of NS raisins for the past 9 years have averaged about 177,000 packed
tons. The Committee is concerned that additional raisins sold into the
domestic market could create instability.
Thus, the Committee formed a working group to review this issue and
consider options to continue to support its export sales while
maintaining stability in the domestic market. After its meeting on
February 1, 2007, the working group presented its recommendation to the
subcommittee, and then, in turn, to the Committee. At a meeting on
April 12, 2007, the Committee unanimously recommended using an
estimated trade demand rather than a computed trade demand to calculate
the 2007-08 NS raisin crop volume regulation percentages, if the crop
size falls within certain parameters. Section 989.154(b) of the order's
administrative rules and regulations is revised accordingly by
replacing ``1999-2000'' with ``2007-08'' and ``235,000'' with
``215,000.''
Implementing Volume Regulation If Supplies Are Short To Maintain the
ERO
Section 989.54(e) contains a list of factors that the Committee
must consider when computing volume regulation percentages. Factor (4)
states that the Committee must consider, if different than the computed
trade demand, the estimated trade demand for raisins in free tonnage
outlets. The Committee recommended using an estimated trade demand
figure for 2007-08 crop NS raisins, which is a figure different than
the computed trade demand, to compute volume regulation percentages to
create a reserve if supplies are short. This will allow the Committee
to continue its ERO program, thereby maintaining a portion of its
export sales and stabilizing the domestic market.
Specifically, the Committee recommended that an estimated trade
demand be utilized to compute preliminary, interim, and final free and
reserve percentages for 2007-08 crop NS raisins if the crop estimate is
equal to, less than, or no more than 10 percent greater than the trade
demand as computed according to the formula specified in Sec.
989.54(a) of the order. If an estimated trade demand figure is
utilized, the final reserve percentage will be no more than 10 percent.
Finally, volume regulation will not be implemented if the 2007-08 crop
estimate is below 215,000 natural condition tons.
[[Page 54345]]
Crop Estimate Below 215,000 Tons--No Regulation
To illustrate how this would work, the Committee met on August 14,
2007, and computed a trade demand for 2007-08 NS raisins of 232,822
natural condition tons. The Committee must meet by October 5 to
announce a NS crop estimate and determine whether volume regulation is
warranted. If the 2007-08 crop estimate is under 215,000 natural
condition tons, volume regulation will not be recommended. With a crop
of 215,000 natural condition tons, and 105,430 natural condition tons
of NS raisins carried forward from the 2006-07 crop year, a supply of
about 320,430 natural condition tons of raisins would be available for
the 2007-08 crop year. As previously mentioned, annual NS raisin
shipments average about 282,000 packed tons (about 300,000 natural
condition tons), excluding government purchases.
With an available supply of only 320,430 natural condition tons of
NS raisins, the Committee believes that the industry's first priority
would be to satisfy the needs of the domestic market, which absorbs
annually an average of about 177,000 packed tons (188,000 natural
condition tons). Assuming that 188,000 natural condition tons were
shipped domestically, the Committee estimates that, with no ERO program
to help U.S. raisins be price competitive in export markets, the
industry would export about half of its usual tonnage, or about 56,000
natural condition tons. The remaining 76,430 natural condition tons
would likely be held in inventory for the following 2008-09 crop year.
Annual carryout inventory for NS raisins for the past 9 years has
averaged about 108,000 natural condition tons.
Crop Estimate Between 215,000 Tons and 10 Percent Above the Computed
Trade Demand--Volume Regulation
If the 2007-08 crop estimate for NS raisins falls between 215,000
natural condition tons and 10 percent above the computed trade demand,
the Committee will use an estimated trade demand figure to compute
preliminary free and reserve percentages for the 2007-08 crop. Thus,
using the 232,822 natural condition ton computed trade demand figure,
an estimated trade demand would be used to compute volume regulation
percentages if the crop estimate falls between 215,000 and 256,104.2
natural condition tons.
The order specifies that preliminary percentages compute to release
85 percent of the computed trade demand as free tonnage once a field
price is established. Producers are paid the field price for their free
tonnage. Normally, when preliminary percentages are computed, producers
receive an initial payment from handlers for 85 percent of the computed
trade demand (or 65 percent of the trade demand if no field price has
been established). Using the 232,822 natural condition ton computed
trade demand figure, this equates to 197,899 natural condition tons.
However, if an estimated trade demand figure were utilized to compute
preliminary percentages, for example--215,000 tons, producers would
receive an initial payment from handlers for only 182,750 natural
condition tons, or 78.5 percent of the computed trade demand.
The Committee is concerned with the preliminary percentage
computation using an estimated trade demand and its impact on producer
returns. The Committee wants to ensure that the producers receive the
field price for as much of their crop as possible while still
establishing a small pool of reserve raisins to maintain the ERO. The
Committee must meet by February 15 to compute final free and reserve
percentages. The Committee recommended that if an estimated trade
demand figure is used to compute percentages, the final reserve
percentage compute to equal no more than 10 percent of the estimated
crop. Producers will ultimately be paid the field price for 90 percent
of their crop, or their free tonnage.
The remaining 10 percent of the crop would be held in reserve and
offered for sale to handlers in the ``10 plus 10'' offers. As
previously described, the ``10 plus 10'' offers are two offers of
reserve raisins that are made available to handlers for free use. The
order specifies that each offer consists of a quantity of reserve
raisins equal to 10 percent of the prior year's shipments. This
requirement would not be met if volume regulation were implemented when
raisin supplies were short. However, all of the raisins held in reserve
would be made available to handlers for free use. Handlers would pay
the Committee for the ``10 plus 10'' raisins and that money would be
utilized to fund a 2007-08 ERO program. Any unused 2007-08 reserve pool
funds could be used to initiate a 2008-09 ERO program or to make a
grower payment to the 2007-08 reserve pool growers.
Crop Estimate More Than 10 Percent Above the Computed Trade Demand
Finally, the Committee recommended that, if the 2007-08 crop
estimate is more than 10 percent greater than the computed trade demand
(or above 256,104.2 natural condition tons), the computed trade demand
of 232,822 natural condition tons will be utilized to compute volume
regulation percentages. Under this scenario, enough raisins (over
23,000 natural condition tons) would be available in reserve to
continue the ERO program.
It is anticipated that allowing the use of an estimated trade
demand figure to compute volume regulation percentages for 2007-08 crop
NS raisins if supplies are short will assist the industry in
maintaining a portion of its export markets and stabilize the domestic
market. If the crop estimate is below 215,000 natural condition tons,
no volume regulation will be implemented. If this occurs, it is
anticipated that domestic market needs would be met, while export
markets would likely not be satisfied.
However, if the crop falls between 215,000 natural condition tons
and 256,104.2 tons, establishing a small reserve pool would allow the
industry to not only satisfy the needs of the domestic market, but also
maintain a portion of its export sales, which now account for about 37
percent of the industry's annual shipments. By maintaining an ERO
program, even at a reduced level, exporters could continue to be price
competitive and sell their raisins abroad. The domestic market would
remain stable because it would not have to absorb any additional
raisins that handlers could not afford to sell in export markets.
Final Regulatory Flexibility Analysis
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities. Accordingly, AMS has
prepared this final regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and rules issued thereunder, are unique in that
they are brought about through group action of essentially small
entities acting on their own behalf.
There are approximately 23 handlers of California raisins who are
subject to regulation under the order and approximately 4,000 raisin
producers in the regulated area. Small agricultural service firms have
been defined by the Small Business Administration (13 CFR 121.201) as
those having annual receipts of less than $6,500,000, and small
[[Page 54346]]
agricultural producers are defined as those having annual receipts of
less than $750,000. No more than 10 handlers, and a majority of
producers, of California raisins may be classified as small entities.
Thirteen of the 23 handlers subject to regulation have annual sales
estimated to be at least $6,500,000, and the remaining 10 handlers have
sales less than $6,500,000.
This rule revises Sec. 989.154(b) of the order's administrative
rules and regulations by changing the parameters for using an estimated
trade demand figure specified in Sec. 989.54(e)(4) of the order to
compute volume regulation percentages for 2007-08 crop NS raisins.
Section 989.154(b) provides guidelines for the use of volume regulation
if 2007-08 NS raisin supplies are short for the purposes of maintaining
a portion of the industry's export markets and stabilizing the domestic
market.
Regarding the impact of the action on producers and handlers, if an
estimated trade demand figure is used to compute volume regulation
percentages, the final reserve percentage would compute to no more than
10 percent. Producers would thus be paid the field price for at least
90 percent of their crop, but would not be paid the field price for
about 10 percent of their crop that would go into a reserve pool. The
field price for NS raisins for the past 5 years has averaged $1,073 per
ton. Handlers in turn would purchase 90 percent of their raisins
directly from producers at the field price, but would have to buy
remaining raisins out of the reserve pool at a higher price (field
price plus 3 percent and Committee costs). The ``10 plus 10'' price of
NS reserve raisins has averaged about $100 higher than the field price
for the past 9 years, or $1,173 per ton. Proceeds from the ``10 plus
10'' sales would be used to support export sales.
While there may be some initial costs for both producers and
handlers, the long term benefits of this action far outweigh the costs.
The Committee believes that with no reserve pool, and hence, no ERO
program, export sales would decline dramatically, perhaps up to 50
percent. Handlers would likely sell into the domestic market raisins
that they were unable to sell into lower priced export markets.
Additional NS raisins sold into the domestic market, which typically
absorbs about 177,000 packed tons, could create instability. The
industry would likely lose a substantial portion of its export markets,
which now account for about 37 percent (105,000 packed tons) of the
industry's annual shipments (282,000 packed tons), excluding government
purchases). Committee members have also commented that, once export
markets were lost, it would be difficult and costly for the industry to
recover those sales. Raisins are mostly used as an ingredient in baked
goods, cereals, and snacks. Typically, buyers want reliable suppliers
from year to year and are generally reluctant to find alternative
ingredients or sources. In turn, once buyers change sources, they may
not switch back.
Export markets for raisins are highly competitive. The U.S. and
Turkey are the world's leading producers of raisins. Turkey exports
approximately 80 percent of its total production, and represents an
alternative product source for raisin buyers.
Maintaining the industry's export markets will help the industry
maximize its 2007-08 total shipments of NS raisins and prevent handlers
from carrying forward large quantities of inventory into the 2008-09
crop year. If the industry is unable to maximize its 2007-08 shipments
of NS raisins, carryin inventory could be high, which would result in a
lower computed trade demand figure for the 2008-09 crop year. A lower
trade demand would lower the free tonnage percentage. Since NS raisin
producers are paid significantly more for their free tonnage than for
reserve tonnage, a lower free tonnage percentage could reduce returns
to producers. Projected reduced 2008-09 returns to producers, coupled
with the risks of rain and labor shortages during harvest, may
influence producers to ``go green,'' or sell their raisin-variety
grapes to the fresh-grape, wine, or juice concentrate markets.
Additional supplies to those outlets could potentially reduce ``green''
returns as well.
An alternative to the proposed action was considered by the
industry. As previously mentioned, the Committee formed a working group
to address its concerns. The working group considered utilizing the
computed trade demand formula in the order and utilizing about $7.5
million of available funds of the 2005-06 reserve pool and about 20,000
tons of natural condition raisins remaining in the 2006-07 reserve pool
in April 2007 to fund the ERO. However, the Committee decided that
sufficient assets would not be available to fund the 2007-08 crop NS
raisin ERO. The Committee's assets are not sufficient because there was
no 2004-05 reserve, and funds from the 2005-06 and 2006-07 pools will
ultimately fund the 2007-08 ERO program only until about March 2008.
Thus, after much discussion, the working group ultimately
recommended to the Committee using an estimated trade demand to compute
volume regulation percentages if 2007-08 crop NS raisin supplies are
short.
This action will not impose any additional reporting or
recordkeeping requirements on either small or large raisin handlers. 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.
AMS is committed to complying with the E-Government Act, to promote
the use of the Internet and other information technologies to provide
increased opportunities for citizen access to Government information
and services, and for other purposes.
As noted in the initial regulatory flexibility analysis, USDA has
not identified any relevant Federal rules that duplicate, overlap or
conflict with this final rule.
In addition, the Committee's working group meeting held on February
1, 2007, and the subcommittee and Committee meetings on April 12, 2007,
were widely publicized throughout the raisin industry and all
interested persons were invited to attend the meetings and participate
in Committee deliberations on all issues. Like all Committee meetings,
the February 1 and April 12, 2007, meetings were public meetings and
all entities, both large and small, were able to express views on this
issue.
A proposed rule concerning this action was published in the Federal
Register on August 1, 2007 (72 FR 41948). Copies of the rule were
mailed or sent via facsimile to all Committee members and raisin
handlers. Finally, the rule was made available through the Internet by
USDA and the Office of the Federal Register. A 15-day comment period
ending August 16, 2007, was provided to allow interested persons to
respond to the proposal. No comments were received.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: http:/
/www.ams.usda.gov/fv/moab/html. Any questions about the compliance
guide should be sent to Jay Guerber at the previously mentioned address
in the FOR FURTHER INFORMATION CONTACT section.
After consideration of all relevant matters presented, including
the information and recommendation submitted by the Committee and other
available information, it is hereby found that this rule, as
hereinafter set forth, will tend to effectuate the declared policy of
the Act.
[[Page 54347]]
It is further found that good cause exists for not postponing the
effective date of this rule until 30 days after publication in the
Federal Register (5 U.S.C. 553) because the 2007-08 crop year began on
August 1, 2007, and this action must be in place by the time the
Committee meets to consider whether volume regulation is warranted for
2007-08 NS raisins (on or before October 5, 2007). Further, handlers
are aware of this rule, which was unanimously recommended at a public
meeting. Also, a 15-day comment period was provided for in the proposed
rule and no comments were received.
List of Subjects in 7 CFR Part 989
Grapes, Marketing agreements, Raisins, Reporting and recordkeeping
requirements.
0
For the reasons set forth in the preamble, 7 CFR part 989 is amended as
follows:
PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA
0
1. The authority citation for 7 CFR part 989 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
0
2. Section 989.154, paragraph (b) is revised to read as follows:
Sec. 989.154 Marketing policy computations.
* * * * *
(b) Estimated trade demand. Pursuant to Sec. 989.54 (e)(4),
estimated trade demand is a figure different than the trade demand
computed according to the formula in Sec. 989.54(a). The Committee
shall use an estimated trade demand to compute preliminary and interim
free and reserve percentages, or determine such final percentages for
recommendation to the Secretary for 2007-08 crop Natural (sun-dried)
Seedless (NS) raisins if the crop estimate is equal to, less than, or
no more than 10 percent greater than the computed trade demand:
Provided, That the final reserve percentage computed using such
estimated trade demand shall be no more than 10 percent, and no reserve
shall be established if the final 2007-08 NS raisin crop estimate is
less than 215,000 natural condition tons.
Dated: September 20, 2007.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 07-4722 Filed 9-20-07; 1:38 pm]
BILLING CODE 3410-02-P