Tart Cherries Grown in the States of Michigan, et al.; Final Free and Restricted Percentages for the 2004-2005 Crop Year, 7645-7650 [05-2879]
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Federal Register / Vol. 70, No. 30 / Tuesday, February 15, 2005 / Rules and Regulations
and cranberry products which were
held by them on such date as the
committee may designate.
(c) Receipts. Each handler shall, upon
request of the committee, file promptly
with the committee a certified report as
to each quantity of cranberries acquired
during such period as may be specified,
and the place of production.
(d) Handling reports. Each handler
shall, upon request of the committee,
file promptly with the committee a
certified report as to the quantity of
cranberries handled during any
designated period or periods.
(e) Withheld and excess cranberries.
Each handler shall, upon request of the
committee, file promptly with the
committee a certified report showing,
for such period as the committee may
specify, the total quantity of cranberries
withheld from handling or held in
excess, in accordance with §§ 929.49
and 929.54, the portion of such
withheld or excess cranberries on hand,
and the quantity and manner of
disposition of any such withheld or
excess cranberries disposed of.
(f) Other reports. Upon the request of
the committee, with the approval of the
Secretary, each handler shall furnish to
the committee such other information
with respect to the cranberries and
cranberry products acquired and
disposed of by such person as may be
necessary to enable the committee to
exercise its powers and perform its
duties under this part.
(g) The committee may establish, with
the approval of the Secretary, rules and
regulations for the implementation and
operation of this section.
I
17. Revise § 929.64 to read as follows:
§ 929.64 Verification of reports and
records.
The committee, through its duly
authorized agents, during reasonable
business hours, shall have access to any
handler’s premises where applicable
records are maintained for the purpose
of assuring compliance and checking
and verifying records and reports filed
by such handler.
Dated: February 8, 2005.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing
Service.
[FR Doc. 05–2878 Filed 2–14–05; 8:45 am]
BILLING CODE 3410–02–P
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Docket No. FV04–930–2 FR]
Tart Cherries Grown in the States of
Michigan, et al.; Final Free and
Restricted Percentages for the 2004–
2005 Crop Year
Agricultural Marketing Service,
USDA.
ACTION: Final rule.
AGENCY:
SUMMARY: This rule establishes final free
and restricted percentages for the 2004–
2005 crop year. The percentages are 72
percent free and 28 percent restricted
and would establish the proportion of
tart cherries from the 2004 crop which
may be handled in commercial outlets.
The percentages are intended to
stabilize supplies and prices, and
strengthen market conditions. The
percentages were recommended by the
Cherry Industry Administrative Board,
the body that locally administers the
marketing order. The marketing order
regulates the handling of tart cherries
grown in the States of Michigan, New
York, Oregon, Utah, Washington, and
Wisconsin.
Effective Date: February 16,
2005. This final rule applies to all 2004–
2005 crop year restricted cherries until
they are properly disposed of in
accordance with marketing order
requirements.
DATES:
FOR FURTHER INFORMATION CONTACT:
Patricia A. Petrella or Kenneth G.
Johnson, Marketing Order
Administration Branch, Fruit and
Vegetable Programs, AMS, USDA, Suite
6C02, Unit 155, 4700 River Road,
Riverdale, MD 20737; Telephone: (301)
734–5243 or Fax: (301) 734–5275; 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 or Fax: (202) 720–8938.
Small businesses may request
information on complying with this
regulation, or obtain a guide on
complying with fruit, vegetable, and
specialty crop marketing agreements
and orders 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.
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7645
This final
rule is issued under Marketing
Agreement and Order No. 930 (7 CFR
part 930), regulating the handling of tart
cherries produced in the States of
Michigan, New York, Pennsylvania,
Oregon, Utah, Washington, and
Wisconsin, 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. Under the marketing
order provisions now in effect, final free
and restricted percentages may be
established for tart cherries handled by
handlers during the crop year. This rule
will establish final free and restricted
percentages for tart cherries for the
2004–2005 crop year, beginning July 1,
2004, through June 30, 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 the Secretary 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 exempt therefrom. Such
handler is afforded the opportunity for
a hearing on the petition. After the
hearing, the 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 in equity to
review the 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.
The order prescribes procedures for
computing an optimum supply and
preliminary and final percentages that
establish the amount of tart cherries that
can be marketed throughout the season.
Handlers handling tart cherries
produced in the regulated districts are
subject to these regulations. Tart
cherries in the free percentage category
may be shipped immediately to any
market, while restricted percentage tart
cherries must be held by handlers in a
primary or secondary reserve, or be
diverted in accordance with § 930.59 of
SUPPLEMENTARY INFORMATION:
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the order and § 930.159 of the
regulations, or used for exempt
purposes (and obtaining diversion
credit) under § 930.62 of the order and
§ 930.162 of the regulations. The
regulated districts for this season are:
District one—Northern Michigan;
District two—Central Michigan; District
three—Southwest Michigan; District
four—New York; District seven—Utah;
District eight—Washington, and District
nine—Wisconsin. Tart cherries
produced in Districts five and six
(Oregon and Pennsylvania, respectively)
will not be regulated for the 2004–2005
season.
The order prescribes under § 930.52
that those districts to be regulated shall
be those districts in which the average
annual production of cherries over the
prior three years has exceeded six
million pounds. A district not meeting
the six million-pound requirement shall
not be regulated in such crop year.
Because this requirement was not met in
the Districts of Oregon and
Pennsylvania, the tart cherries produced
in those districts and handled by
handlers will not be subject to volume
regulation during the 2004–2005 crop
year.
Demand for tart cherries at the farm
level is derived from the demand for tart
cherry products at retail. Demand for
tart cherries and tart cherry products
tend to be relatively stable from year to
year. The supply of tart cherries, by
contrast, varies greatly from crop year to
crop year. The magnitude of annual
fluctuations in tart cherry supplies is
one of the most pronounced for any
agricultural commodity in the United
States. In addition, since tart cherries
are processed into cans or frozen, they
can be stored and carried over from crop
year to crop year. This creates
substantial coordination and marketing
problems. The supply and demand for
tart cherries is rarely balanced. The
primary purpose of setting free and
restricted percentages is to balance
supply with demand and reduce large
surpluses that may occur.
Section 930.50(a) of the order
prescribes procedures for computing an
optimum supply for each crop year. The
Board must meet on or about July 1 of
each crop year, to review sales data,
inventory data, current crop forecasts
and market conditions. The optimum
supply volume shall be calculated as
100 percent of the average sales of the
prior three years (taking into account
sales of exempt and restricted
percentage cherries qualifying for
diversion credit) to which is added a
desirable carryout inventory not to
exceed 20 million pounds or such other
amount as may be established with the
approval of USDA. The optimum supply
represents the desirable volume of tart
cherries that should be available for sale
in the coming crop year.
The order also provides that on or
about July 1 of each crop year, the Board
is required to establish preliminary free
and restricted percentages. These
percentages are computed by deducting
the actual carryin inventory from the
optimum supply figure (adjusted to raw
product equivalent—the actual weight
of cherries handled to process into
cherry products) and subtracting that
figure (referred to as the current crop
year requirement) from the current
year’s USDA crop forecast or by an
average of such other crop estimates the
Board votes to use. If the resulting
number is positive, this represents the
estimated over-production, which
would be the restricted percentage
tonnage. The restricted percentage
tonnage is then divided by the sum of
the crop forecast(s) for the regulated
districts to obtain a preliminary
restricted percentage, rounded to the
nearest whole number, for the regulated
districts. If subtracting the current crop
year requirement, from the current crop
forecast, results in a negative number,
the Board is required to establish a
preliminary free tonnage percentage of
100 percent with a preliminary
restricted percentage of zero. The Board
is required to announce the preliminary
percentages in accordance with
paragraph (h) of § 930.50.
The Board met on June 24, 2004, and
computed, for the 2004–2005 crop year,
an optimum supply volume of 177
million pounds. The Board
recommended that the desirable
carryout figure be zero pounds.
Desirable carryout is the amount of fruit
required to be carried into the
succeeding crop year and is set by the
Board after considering market
circumstances and needs. This figure
can range from zero to a maximum of 20
million pounds. The Board calculated
preliminary free and restricted
percentages as follows: The USDA
estimate of the crop for the entire
production area was 215 million
pounds; a 24 million pound carryin
(based on Board estimates) was
subtracted from the optimum supply of
177 million pounds which resulted in
2004–2005 tonnage requirements
(adjusted optimum supply) of 153
million pounds. The carryin figure
reflects the amount of cherries that
handlers actually had in inventory at
the beginning of the crop year.
Subtracting the adjusted optimum
supply of 153 million pounds from the
215 million pound USDA crop estimate
(for the entire production area) results
in a surplus of 62 million pounds of tart
cherries. The surplus was then divided
by the production in the regulated
districts (207 million pounds) and this
resulted in a restricted percentage of 30
percent for the 2004–2005 crop year.
The free percentage was 70 percent (100
percent minus 30 percent). The Board
established these percentages and
announced them to the industry as
required by the order.
The table below summarizes the
preliminary percentage computations
made by the Board at its June meeting
for the 2004–2005 year:
Millions
of pounds
Optimum Supply Formula:
(1) Average sales of the prior three crop years .................................................................................................................................
(2) Plus desirable carryout .................................................................................................................................................................
(3) Optimum supply calculated by the Board at the June meeting ...................................................................................................
Preliminary Percentages:
(4) USDA crop estimate .....................................................................................................................................................................
(5) Carryin held by handlers as of July 1, 2004 ................................................................................................................................
(6) Adjusted optimum supply for current crop year (Item 3 minus Item 5) .......................................................................................
(7) Surplus (restricted tonnage) (Item 4 minus Item 6) .....................................................................................................................
(8) USDA crop estimate for regulated districts ..................................................................................................................................
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177
0
177
215
24
153
62
207
Federal Register / Vol. 70, No. 30 / Tuesday, February 15, 2005 / Rules and Regulations
7647
Percentages
Free
(9) Preliminary percentages (Item 7 divided by Item 8 × 100 equals restricted percentage; 100 minus restricted
percentage equals free percentage) .........................................................................................................................
Between July 1 and September 15 of
each crop year, the Board may modify
the preliminary free and restricted
percentages by announcing interim free
and restricted percentages to adjust to
the actual pack occurring in the
industry. No interim adjustments were
made.
USDA establishes final free and
restricted percentages through the
informal rulemaking process. These
percentages make available the tart
cherries necessary to achieve the
optimum supply figure calculated by
the Board. The difference between 100
percent and any final restricted
percentage designated by USDA is the
final free percentage. The Board met on
September 10, 2004, to recommend final
free and restricted percentages.
The actual production reported by the
Board for the entire production area was
209 million pounds, which is a 6
million pound decrease from the USDA
crop estimate of 215 million pounds.
A 25 million pound carryin (based on
handler reports) was subtracted from the
Board’s optimum supply of 177 million
pounds, yielding an adjusted optimum
supply for the current crop year of 152
million pounds. The adjusted optimum
supply of 152 million pounds was
Restricted
70
30
subtracted from the actual production of
209 million pounds, which resulted in
a 57 million pound surplus. The total
surplus of 57 million pounds was then
divided by the 202 million-pound
volume of tart cherries produced in the
regulated districts. This results in a 28
percent restricted percentage and a
corresponding 72 percent free
percentage for the regulated districts.
The final percentages are based on the
Board’s reported production figures and
the following supply and demand
information available in September for
the 2004–2005 crop year:
Millions of
pounds
Optimum Supply Formula:
(1) Average sales of the prior three years .........................................................................................................................................
(2) Plus desirable carryout .................................................................................................................................................................
(3) Optimum supply calculated by the Board at the June meeting ...................................................................................................
Final Percentages:
(4) Board reported production ............................................................................................................................................................
(5) Carryin held by handlers as of July 1, 2004. ...............................................................................................................................
(6) Adjusted optimum supply (Item 3 minus Item 5) ..........................................................................................................................
(7) Surplus (restricted tonnage) (Item 4 minus Item 6) .....................................................................................................................
(8) Production in regulated districts ...................................................................................................................................................
177
0
177
209
25
152
57
202
Percentages
Free
(9) Final Percentages (Item 7 divided by Item 8 × 100 equals restricted percentage; 100 minus restricted percentage equals free percentage) .....................................................................................................................................
The Department’s ‘‘Guidelines for
Fruit, Vegetable, and Specialty Crop
Marketing Orders’’ specify that 110
percent of recent years’ sales should be
made available to primary markets each
season before recommendations for
volume regulation are approved. This
goal would be met by the establishment
of final percentages which release 100
percent of the optimum supply volume
and the additional release of tart
cherries provided under § 930.50(g). A
release of tonnage, equal to 10 percent
of the average sales of the prior three
years sales, is made available to
handlers each season.
The Board recommended that this
release be made available to handlers
the first week of December and the first
week of May. Handlers can decide how
much of the 10 percent release they
would like to receive on the December
and May release dates. Once released,
such cherries are available for free use
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and can be shipped to any market the
handler desires.
Approximately 18 million pounds
will be made available to handlers this
season in accordance with Department
Guidelines. These cherries would be
made available to every handler and
released in proportion to the handler’s
percentage of the total regulated crop
handled. If a handler does not take his/
her proportionate amount, such amount
remains in the inventory reserve.
The Regulatory Flexibility Act and
Effects on Small Businesses
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
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Restricted
72
28
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. Thus, both statutes have small
entity orientation and compatibility.
There are approximately 40 handlers
of tart cherries who are subject to
regulation under the tart cherry
marketing order and approximately 900
producers of tart cherries in the
regulated area. Small agricultural
service firms, which includes handlers,
have been defined by the Small
Business Administration (13 CFR
121.201) as those having annual receipts
of less than $5,000,000, and small
agricultural producers are defined as
those having annual receipts of less than
$750,000. A majority of the producers
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and handlers are considered small
entities under SBA’s standards.
The principal demand for tart cherries
is in the form of processed products.
Tart cherries are dried, frozen, canned,
juiced, and pureed. During the period
1998/99 through 2003/04,
approximately 92 percent of the U.S.
tart cherry crop, or 252.8 million
pounds, was processed annually. Of the
252.8 million pounds of tart cherries
processed, 59 percent was frozen, 29
percent was canned, and 12 percent was
utilized for juice and other products.
Based on National Agricultural
Statistics Service data, acreage in the
United States devoted to tart cherry
production has been trending
downward. Bearing acreage has
declined from a high of 50,050 acres in
1987/88 to 37,000 acres in 2003/04. This
represents a 26 percent decrease in total
bearing acres. Michigan leads the nation
in tart cherry acreage with 73 percent of
the total and produces about 75 percent
of the U.S. tart cherry crop each year.
The 2004/05 crop is moderate in size
at 209 million pounds. The largest crop
occurred in 1995 with production in the
regulated districts reaching a record
395.6 million pounds. The price per
pound received by tart cherry growers
ranged from a low of 7.3 cents in 1987
to a high of 46.4 cents in 1991. The
problems of wide supply and price
fluctuations in the tart cherry industry
are national in scope and impact.
Growers testified during the order
promulgation process that the prices
they received often did not come close
to covering the costs of production.
The industry demonstrated a need for
an order during the promulgation
process of the marketing order because
large variations in annual tart cherry
supplies tend to lead to fluctuations in
prices and disorderly marketing. As a
result of these fluctuations in supply
and price, growers realize less income.
The industry chose a volume control
marketing order to even out these wide
variations in supply and improve
returns to growers. During the
promulgation process, proponents
testified that small growers and
processors would have the most to gain
from implementation of a marketing
order because many such growers and
handlers had been going out of business
due to low tart cherry prices. They also
testified that, since an order would help
increase grower returns, this should
increase the buffer between business
success and failure because small
growers and handlers tend to be less
capitalized than larger growers and
handlers.
Aggregate demand for tart cherries
and tart cherry products tends to be
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relatively stable from year-to-year.
Similarly, prices at the retail level show
minimal variation. Consumer prices in
grocery stores, and particularly in food
service markets, largely do not reflect
fluctuations in cherry supplies. Retail
demand is assumed to be highly
inelastic which indicates that price
reductions do not result in large
increases in the quantity demanded.
Most tart cherries are sold to food
service outlets and to consumers as pie
filling; frozen cherries are sold as an
ingredient to manufacturers of pies and
cherry desserts. Juice and dried cherries
are expanding market outlets for tart
cherries.
Demand for tart cherries at the farm
level is derived from the demand for tart
cherry products at retail. In general, the
farm-level demand for a commodity
consists of the demand at retail or food
service outlets minus per-unit
processing and distribution costs
incurred in transforming the raw farm
commodity into a product available to
consumers. These costs comprise what
is known as the ‘‘marketing margin.’’
The supply of tart cherries, by
contrast, varies greatly. The magnitude
of annual fluctuations in tart cherry
supplies is one of the most pronounced
for any agricultural commodity in the
United States. In addition, since tart
cherries are processed either into cans
or frozen, they can be stored and carried
over from year-to-year. This creates
substantial coordination and marketing
problems. The supply and demand for
tart cherries is rarely in equilibrium. As
a result, grower prices fluctuate widely,
reflecting the large swings in annual
supplies.
In an effort to stabilize prices, the tart
cherry industry uses the volume control
mechanisms under the authority of the
Federal marketing order. This authority
allows the industry to set free and
restricted percentages. These
percentages are only applied to states or
districts with a 3-year average of
production greater than six million
pounds, and to states or districts in
which the production is 50 percent or
more of the previous 5-year processed
production average.
The primary purpose of setting
restricted percentages is an attempt to
bring supply and demand into balance.
If the primary market is over-supplied
with cherries, grower prices decline
substantially.
The tart cherry sector uses an
industry-wide storage program as a
supplemental coordinating mechanism
under the Federal marketing order. The
primary purpose of the storage program
is to warehouse supplies in large crop
years in order to supplement supplies in
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short crop years. The storage approach
is feasible because the increase in
price—when moving from a large crop
to a short crop year—more than offsets
the costs for storage, interest, and
handling of the stored cherries.
The price that growers’ receive for
their crop is largely determined by the
total production volume and carryin
inventories. The Federal marketing
order permits the industry to exercise
supply control provisions, which allow
for the establishment of free and
restricted percentages for the primary
market, and a storage program. The
establishment of restricted percentages
impacts the production to be marketed
in the primary market, while the storage
program has an impact on the volume
of unsold inventories.
The volume control mechanism used
by the cherry industry results in
decreased shipments to primary
markets. Without volume control the
primary markets (domestic) would
likely be over-supplied, resulting in
lower grower prices.
To assess the impact that volume
control has on the prices growers
receive for their product, an
econometric model has been developed.
The econometric model provides a way
to see what impacts volume control may
have on grower prices. The three
districts in Michigan, along with the
districts in Utah, New York,
Washington, and Wisconsin are the
restricted areas for this crop year and
their combined total production is 202
million pounds. A 28 percent restriction
means 145 million pounds is available
to be shipped to primary markets from
these five states. Production levels of 3.9
million pounds for Oregon, and 2.8
million pounds for Pennsylvania (the
unregulated areas in 2004–2005), result
in an additional 6.7 million pounds
available for primary market shipments.
In addition, USDA requires a 10
percent release from reserves as a
market growth factor. This will result in
an additional 18 million pounds being
available for the primary market. The
145 million pounds from Michigan,
New York, Utah, Washington, and
Wisconsin, the approximately 7 million
pounds from the other producing states,
the 18 million pound release, and the 25
million pound carryin inventory gives a
total of 195 million pounds being
available for the primary markets.
The econometric model is used to
estimate the difference between grower
prices with and without restrictions.
With volume controls, grower prices are
estimated to be approximately $0.08
higher than without volume controls.
The use of volume controls is
estimated to have a positive impact on
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growers’ total revenues. With
restriction, revenues are estimated to be
$10.7 million higher than without
restrictions. The without restrictions
scenario assumes that all tart cherries
produced would be delivered to
processors for payments. This scenario
is likely since the total available supply
in this crop year is very similar to last
year’s when there was a full release of
the reserve pool, and handlers appear to
be encouraging growers to deliver their
entire crop this year. Although carryout
inventories are 25 million pounds, only
1 million pounds is in the reserve while
24 million pounds are held in free
inventories held by packers.
It is concluded that the 28 percent
volume control would not unduly
burden producers and handlers,
particularly smaller growers and
handlers. The 28 percent restriction
would be applied in Michigan, New
York, Utah, Washington, and
Wisconsin. The growers and handlers in
the other two states covered under the
marketing order will benefit from the
market stability anticipated to result
from this restriction.
Recent grower prices have been as
high as $0.44 per pound in the 2002–
2003 crop year. At current production
and yield levels, the cost of production
is reported to be $0.43 per pound. Thus,
the estimated $0.43 per pound received
by growers under the regulation
scenario just covers the cost of
production. Under the no regulation
scenario, estimated grower prices would
not cover the total cost of production.
Lower yields and production result in
higher costs of production. Overhead or
fixed costs are spread over lower levels
of production which results in higher
costs of production per acre. Even in
years when no production is harvested,
growers face fixed costs of production
and additional costs associated with
maintaining the orchard for future years
of production. The use of volume
controls is believed to have little or no
effect on consumer prices and will not
result in fewer retail sales or sales to
food service outlets.
Without the use of volume controls,
the industry could be expected to start
to build large amounts of unwanted
inventories. These inventories would
have a depressing effect on grower
prices. The econometric model shows
for every 1 million-pound increase in
carryin inventories, a decrease in grower
prices of $0.0033 per pound occurs. The
use of volume controls allows the
industry to supply the primary markets
while avoiding the disastrous results of
over-supplying these markets. In
addition, through volume control, the
industry has an additional supply of
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cherries that can be used to develop
secondary markets such as exports and
the development of new products. The
use of reserve cherries in the production
shortened 2002–2003 crop year proved
to be very useful and beneficial to
growers and packers.
In discussing the possibility of
marketing percentages for the 2004–
2005 crop year, the Board considered
the following factors contained in the
marketing policy: (1) The estimated total
production of cherries; (2) the estimated
size of the crop to be handled; (3) the
expected general quality of such cherry
production; (4) the expected carryover
as of July 1 of canned and frozen
cherries and other cherry products; (5)
the expected demand conditions for
cherries in different market segments;
(6) supplies of competing commodities;
(7) an analysis of economic factors
having a bearing on the marketing of
cherries; (8) the estimated tonnage held
by handlers in primary or secondary
inventory reserves; and (9) any
estimated release of primary or
secondary inventory reserve cherries
during the crop year.
The Board’s review of the factors
resulted in the computation and
announcement in September 2004 of the
free and restricted percentages
established by this rule (72 percent free
and 28 percent restricted).
One alternative to this action would
be not to have volume regulation this
season. Board members stated that no
volume regulation would be detrimental
to the tart cherry industry due to the
size of the 2004–2005 crop. Returns to
growers would not cover their costs of
production for this season which might
cause some to go out of business.
As mentioned earlier, the
Department’s ‘‘Guidelines for Fruit,
Vegetable, and Specialty Crop
Marketing Orders’’ specify that 110
percent of recent years’ sales should be
made available to primary markets each
season before recommendations for
volume regulation are approved. The
quantity available under this rule is 110
percent of the quantity shipped in the
prior three years.
The free and restricted percentages
established by this rule release the
optimum supply and apply uniformly to
all regulated handlers in the industry,
regardless of size. There are no known
additional costs incurred by small
handlers that are not incurred by large
handlers. The stabilizing effects of the
percentages impact all handlers
positively by helping them maintain
and expand markets, despite seasonal
supply fluctuations. Likewise, price
stability positively impacts all
producers by allowing them to better
PO 00000
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Fmt 4700
Sfmt 4700
7649
anticipate the revenues their tart
cherries will generate.
USDA has not identified any relevant
Federal rules that duplicate, overlap, or
conflict with this regulation.
While the benefits resulting from this
rulemaking are difficult to quantify, the
stabilizing effects of the volume
regulations impact both small and large
handlers positively by helping them
maintain markets even though tart
cherry supplies fluctuate widely from
season to season.
In compliance with Office of
Management and Budget (OMB)
regulations (5 CFR part 1320) which
implement the Paperwork Reduction
Act of 1995 (Pub. L. 104–13), the
information collection and
recordkeeping requirements under the
tart cherry marketing order have been
previously approved by OMB and
assigned OMB Number 0581–0177.
Reporting and recordkeeping burdens
are necessary for compliance purposes
and for developing statistical data for
maintenance of the program. 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 other, similar
marketing order programs, reports and
forms are periodically studied to reduce
or eliminate duplicate information
collection burdens by industry and
public sector agencies. This rule will
not change those requirements.
A proposed rule concerning this
action was published in the Federal
Register on December 10, 2004, (69 FR
71744). Copies of the rule were mailed
or sent via facsimile to all Board
members and handlers. Finally, the rule
was made available through the Internet
by the Office of the Federal Register and
USDA. A 30-day comment period
ending January 10, 2005, was provided
to allow interested persons to respond
to the proposal.
One comment was received during
the comment period in response to the
proposal. The commenter stated that the
percentages were too restrictive. The
commenter was of the view that the
percentages were outdated, restricted
trade, and should be removed. The
commenter also believed that the Board
should be terminated.
The marketing order program
including this rule is authorized under
the authority of the Agricultural
Marketing Agreement Act of 1937. The
Board recommended the percentages
based on its review of sales data,
inventory data, current crop forecasts,
and market conditions. It calculated an
optimum supply which represents the
desirable volume of tart cherries needed
E:\FR\FM\15FER1.SGM
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Federal Register / Vol. 70, No. 30 / Tuesday, February 15, 2005 / Rules and Regulations
to meet primary market needs. Further,
the Board, at a later date, can
recommend a release of the reserve to
provide more tart cherries to satisfy
market needs as may be necessary.
Accordingly, no changes will be made
to the rule as proposed, based on the
comment received.
A small business guide on complying
with fruit, vegetable, and specialty crop
marketing agreements and orders may
be viewed at: https://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
matter presented, including the
information and recommendation
submitted by the Board, 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.
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 handlers are already
shipping cherries from the 2004–2005
crop. Further, handlers are aware of this
rule, which was recommended at a
public meeting. Also, a thirty-day
comment period was provided for in the
proposed rule, and the comment
received has been addressed herein.
List of Subjects in 7 CFR Part 930
Marketing agreements, Reporting and
recordkeeping requirements, Tart
cherries.
I For the reasons set forth in the
preamble, 7 CFR part 930 is amended as
follows:
PART 930—TART CHERRIES GROWN
IN THE STATES OF MICHIGAN, NEW
YORK, PENNSYLVANIA, OREGON,
UTAH, WASHINGTON, AND
WISCONSIN
1. The authority citation for 7 CFR part
930 continues to read as follows:
I
Authority: 7 U.S.C. 601–674.
2. Section 930.254 is added to read as
follows:
I
Note: This section will not appear in the
annual Code of Federal Regulations.
§ 930.254 Final free and restricted
percentages for the 2004–2005 crop year.
The final percentages for tart cherries
handled by handlers during the crop
year beginning on July 1, 2004, which
shall be free and restricted, respectively,
are designated as follows: Free
VerDate jul<14>2003
14:53 Feb 14, 2005
Jkt 205001
percentage, 72 percent and restricted
percentage, 28 percent.
Dated: February 8, 2005.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing
Service.
[FR Doc. 05–2879 Filed 2–14–05; 8:45 am]
BILLING CODE 3410–02–P
DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Part 1944
Housing Application Packaging Grants
Rural Housing Service, USDA.
Final rule.
AGENCY:
ACTION:
SUMMARY: The Agency is revising its
internal Housing Application Packaging
Grants regulation in order to correct an
erroneous reference to the debarment
and suspension regulation. This action
is necessary since the existing
regulation does not accurately reflect
the current information. The intended
effect is to remove the incorrect
reference to the regulation.
DATES: Effective Date: This rule is
effective February 15, 2005.
FOR FURTHER INFORMATION CONTACT:
Thomas P. Dickson, Program Analyst,
Program Support Staff, Rural
Development, Room 6900 South
Building, Stop 0761, 1400
Independence Ave., SW., Washington,
DC 20250–1570. Telephone: (202) 690–
4492, FAX: (202) 690–4335, e-mail:
thomas.dickson@usda.gov.
SUPPLEMENTARY INFORMATION:
Classification
This action is not subject to the
provisions of Executive Order 12866
since it involves only internal Agency
management. This action is not
published for prior notice and comment
under the Administrative Procedure Act
since it involves only internal Agency
management and publication for
comment is unnecessary and contrary to
the public interest.
Program Affected
The program affected is listed in
catalog of Federal Domestic Assistance
under 10.442—Housing Application
Packaging Grants.
Intergovernmental Consultation
Programs with Catalog of Federal
Domestic Assistance the number 10.442
are not subject to the provisions of
Executive Order 12372.
PO 00000
Frm 00018
Fmt 4700
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Civil Justice Reform
This final rule has been reviewed
under Executive Order 12988, Civil
Justice Reform. In accordance with this
rule: (1) Unless otherwise specifically
provided, all State and local laws and
regulations that are in conflict with this
rule will be preempted; (2) no
retroactive effect will be given to this
rule except as specifically prescribed in
the rule; and (3) administrative Division
(7 CFR part 11) must be exhausted
before litigation against the Department
is instituted.
Paperwork Reduction Act
The information collection
requirements contained in this rule have
been approved by the Office of
Management and Budget (OMB) under
the provisions of 44 U.S.C. chapter 35
and were assigned OMB control number
0575–0157 in accordance with the
Paperwork Reduction Act of 1995. No
person is required to respond to a
collection of information unless it
displays a valid OMB control number.
This rule does not impose any new
information collection requirements
from those approved by OMB.
Regulatory Flexibility Act
The Administrator of the Rural
Housing Service has determined that
this rule will not have a significant
economic impact on a substantial
number of small entities as defined in
the Regulatory Flexibility Act (5 U.S.C.
601 et seq.). New provisions included in
this rule will not impact a substantial
number of small entities to a greater
extent than large entities. Therefore, a
regulatory flexibility analysis was not
performed.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates
Reform Act of 1995 (UMRA), Public
Law 104–4, establishes requirements for
Federal agencies to assess the effects of
their regulatory actions on State, local,
and tribal governments and the private
sector. Under section 202 of the UMRA,
the Agencies generally must prepare a
written statement, including a cost
benefit analysis, for proposed and final
rules with ‘‘Federal mandates’’ that may
result in expenditures to State, local, or
tribal governments, in the aggregate, or
to the private sector, of $100 million or
more in any one year. When such a
statement is needed for a rule, section
205 of the UMRA generally requires the
agencies to identify and consider a
reasonable number of regulatory
alternatives and adopt the least costly,
more cost-effective, or least burdensome
alternative that achieves the objectives
of the rule. This rule contains no
E:\FR\FM\15FER1.SGM
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]]>Agencies
[Federal Register Volume 70, Number 30 (Tuesday, February 15, 2005)]
[Rules and Regulations]
[Pages 7645-7650]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-2879]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Docket No. FV04-930-2 FR]
Tart Cherries Grown in the States of Michigan, et al.; Final Free
and Restricted Percentages for the 2004-2005 Crop Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule establishes final free and restricted percentages
for the 2004-2005 crop year. The percentages are 72 percent free and 28
percent restricted and would establish the proportion of tart cherries
from the 2004 crop which may be handled in commercial outlets. The
percentages are intended to stabilize supplies and prices, and
strengthen market conditions. The percentages were recommended by the
Cherry Industry Administrative Board, the body that locally administers
the marketing order. The marketing order regulates the handling of tart
cherries grown in the States of Michigan, New York, Oregon, Utah,
Washington, and Wisconsin.
DATES: Effective Date: February 16, 2005. This final rule applies to
all 2004-2005 crop year restricted cherries until they are properly
disposed of in accordance with marketing order requirements.
FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G.
Johnson, Marketing Order Administration Branch, Fruit and Vegetable
Programs, AMS, USDA, Suite 6C02, Unit 155, 4700 River Road, Riverdale,
MD 20737; Telephone: (301) 734-5243 or Fax: (301) 734-5275; 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 or Fax:
(202) 720-8938.
Small businesses may request information on complying with this
regulation, or obtain a guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders 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. 930 (7 CFR part 930), regulating the handling
of tart cherries produced in the States of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington, and Wisconsin, 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. Under the marketing order provisions now in
effect, final free and restricted percentages may be established for
tart cherries handled by handlers during the crop year. This rule will
establish final free and restricted percentages for tart cherries for
the 2004-2005 crop year, beginning July 1, 2004, through June 30, 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 the Secretary 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 exempt
therefrom. Such handler is afforded the opportunity for a hearing on
the petition. After the hearing, the 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 in equity to review the
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.
The order prescribes procedures for computing an optimum supply and
preliminary and final percentages that establish the amount of tart
cherries that can be marketed throughout the season. Handlers handling
tart cherries produced in the regulated districts are subject to these
regulations. Tart cherries in the free percentage category may be
shipped immediately to any market, while restricted percentage tart
cherries must be held by handlers in a primary or secondary reserve, or
be diverted in accordance with Sec. 930.59 of
[[Page 7646]]
the order and Sec. 930.159 of the regulations, or used for exempt
purposes (and obtaining diversion credit) under Sec. 930.62 of the
order and Sec. 930.162 of the regulations. The regulated districts for
this season are: District one--Northern Michigan; District two--Central
Michigan; District three--Southwest Michigan; District four--New York;
District seven--Utah; District eight--Washington, and District nine--
Wisconsin. Tart cherries produced in Districts five and six (Oregon and
Pennsylvania, respectively) will not be regulated for the 2004-2005
season.
The order prescribes under Sec. 930.52 that those districts to be
regulated shall be those districts in which the average annual
production of cherries over the prior three years has exceeded six
million pounds. A district not meeting the six million-pound
requirement shall not be regulated in such crop year. Because this
requirement was not met in the Districts of Oregon and Pennsylvania,
the tart cherries produced in those districts and handled by handlers
will not be subject to volume regulation during the 2004-2005 crop
year.
Demand for tart cherries at the farm level is derived from the
demand for tart cherry products at retail. Demand for tart cherries and
tart cherry products tend to be relatively stable from year to year.
The supply of tart cherries, by contrast, varies greatly from crop year
to crop year. The magnitude of annual fluctuations in tart cherry
supplies is one of the most pronounced for any agricultural commodity
in the United States. In addition, since tart cherries are processed
into cans or frozen, they can be stored and carried over from crop year
to crop year. This creates substantial coordination and marketing
problems. The supply and demand for tart cherries is rarely balanced.
The primary purpose of setting free and restricted percentages is to
balance supply with demand and reduce large surpluses that may occur.
Section 930.50(a) of the order prescribes procedures for computing
an optimum supply for each crop year. The Board must meet on or about
July 1 of each crop year, to review sales data, inventory data, current
crop forecasts and market conditions. The optimum supply volume shall
be calculated as 100 percent of the average sales of the prior three
years (taking into account sales of exempt and restricted percentage
cherries qualifying for diversion credit) to which is added a desirable
carryout inventory not to exceed 20 million pounds or such other amount
as may be established with the approval of USDA. The optimum supply
represents the desirable volume of tart cherries that should be
available for sale in the coming crop year.
The order also provides that on or about July 1 of each crop year,
the Board is required to establish preliminary free and restricted
percentages. These percentages are computed by deducting the actual
carryin inventory from the optimum supply figure (adjusted to raw
product equivalent--the actual weight of cherries handled to process
into cherry products) and subtracting that figure (referred to as the
current crop year requirement) from the current year's USDA crop
forecast or by an average of such other crop estimates the Board votes
to use. If the resulting number is positive, this represents the
estimated over-production, which would be the restricted percentage
tonnage. The restricted percentage tonnage is then divided by the sum
of the crop forecast(s) for the regulated districts to obtain a
preliminary restricted percentage, rounded to the nearest whole number,
for the regulated districts. If subtracting the current crop year
requirement, from the current crop forecast, results in a negative
number, the Board is required to establish a preliminary free tonnage
percentage of 100 percent with a preliminary restricted percentage of
zero. The Board is required to announce the preliminary percentages in
accordance with paragraph (h) of Sec. 930.50.
The Board met on June 24, 2004, and computed, for the 2004-2005
crop year, an optimum supply volume of 177 million pounds. The Board
recommended that the desirable carryout figure be zero pounds.
Desirable carryout is the amount of fruit required to be carried into
the succeeding crop year and is set by the Board after considering
market circumstances and needs. This figure can range from zero to a
maximum of 20 million pounds. The Board calculated preliminary free and
restricted percentages as follows: The USDA estimate of the crop for
the entire production area was 215 million pounds; a 24 million pound
carryin (based on Board estimates) was subtracted from the optimum
supply of 177 million pounds which resulted in 2004-2005 tonnage
requirements (adjusted optimum supply) of 153 million pounds. The
carryin figure reflects the amount of cherries that handlers actually
had in inventory at the beginning of the crop year. Subtracting the
adjusted optimum supply of 153 million pounds from the 215 million
pound USDA crop estimate (for the entire production area) results in a
surplus of 62 million pounds of tart cherries. The surplus was then
divided by the production in the regulated districts (207 million
pounds) and this resulted in a restricted percentage of 30 percent for
the 2004-2005 crop year. The free percentage was 70 percent (100
percent minus 30 percent). The Board established these percentages and
announced them to the industry as required by the order.
The table below summarizes the preliminary percentage computations
made by the Board at its June meeting for the 2004-2005 year:
------------------------------------------------------------------------
Millions
of pounds
------------------------------------------------------------------------
Optimum Supply Formula:
(1) Average sales of the prior three crop years......... 177
(2) Plus desirable carryout............................. 0
(3) Optimum supply calculated by the Board at the June 177
meeting................................................
Preliminary Percentages:
(4) USDA crop estimate.................................. 215
(5) Carryin held by handlers as of July 1, 2004......... 24
(6) Adjusted optimum supply for current crop year (Item 153
3 minus Item 5)........................................
(7) Surplus (restricted tonnage) (Item 4 minus Item 6).. 62
(8) USDA crop estimate for regulated districts.......... 207
-------------------------------------------------------------
[[Page 7647]]
Percentages
-----------------------
Free Restricted
------------------------------------------------------------------------
(9) Preliminary percentages (Item 7 divided 70 30
by Item 8 x 100 equals restricted
percentage; 100 minus restricted percentage
equals free percentage)....................
------------------------------------------------------------------------
Between July 1 and September 15 of each crop year, the Board may
modify the preliminary free and restricted percentages by announcing
interim free and restricted percentages to adjust to the actual pack
occurring in the industry. No interim adjustments were made.
USDA establishes final free and restricted percentages through the
informal rulemaking process. These percentages make available the tart
cherries necessary to achieve the optimum supply figure calculated by
the Board. The difference between 100 percent and any final restricted
percentage designated by USDA is the final free percentage. The Board
met on September 10, 2004, to recommend final free and restricted
percentages.
The actual production reported by the Board for the entire
production area was 209 million pounds, which is a 6 million pound
decrease from the USDA crop estimate of 215 million pounds.
A 25 million pound carryin (based on handler reports) was
subtracted from the Board's optimum supply of 177 million pounds,
yielding an adjusted optimum supply for the current crop year of 152
million pounds. The adjusted optimum supply of 152 million pounds was
subtracted from the actual production of 209 million pounds, which
resulted in a 57 million pound surplus. The total surplus of 57 million
pounds was then divided by the 202 million-pound volume of tart
cherries produced in the regulated districts. This results in a 28
percent restricted percentage and a corresponding 72 percent free
percentage for the regulated districts.
The final percentages are based on the Board's reported production
figures and the following supply and demand information available in
September for the 2004-2005 crop year:
------------------------------------------------------------------------
Millions
of pounds
------------------------------------------------------------------------
Optimum Supply Formula:
(1) Average sales of the prior three years.............. 177
(2) Plus desirable carryout............................. 0
(3) Optimum supply calculated by the Board at the June 177
meeting................................................
Final Percentages:
(4) Board reported production........................... 209
(5) Carryin held by handlers as of July 1, 2004......... 25
(6) Adjusted optimum supply (Item 3 minus Item 5)....... 152
(7) Surplus (restricted tonnage) (Item 4 minus Item 6).. 57
(8) Production in regulated districts................... 202
------------------------------------------------------------------------
Percentages
-----------------------
Free Restricted
------------------------------------------------------------------------
(9) Final Percentages (Item 7 divided by 72 28
Item 8 x 100 equals restricted percentage;
100 minus restricted percentage equals free
percentage)................................
------------------------------------------------------------------------
The Department's ``Guidelines for Fruit, Vegetable, and Specialty
Crop Marketing Orders'' specify that 110 percent of recent years' sales
should be made available to primary markets each season before
recommendations for volume regulation are approved. This goal would be
met by the establishment of final percentages which release 100 percent
of the optimum supply volume and the additional release of tart
cherries provided under Sec. 930.50(g). A release of tonnage, equal to
10 percent of the average sales of the prior three years sales, is made
available to handlers each season.
The Board recommended that this release be made available to
handlers the first week of December and the first week of May. Handlers
can decide how much of the 10 percent release they would like to
receive on the December and May release dates. Once released, such
cherries are available for free use and can be shipped to any market
the handler desires.
Approximately 18 million pounds will be made available to handlers
this season in accordance with Department Guidelines. These cherries
would be made available to every handler and released in proportion to
the handler's percentage of the total regulated crop handled. If a
handler does not take his/her proportionate amount, such amount remains
in the inventory reserve.
The Regulatory Flexibility Act and Effects on Small Businesses
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. Thus, both statutes have small
entity orientation and compatibility.
There are approximately 40 handlers of tart cherries who are
subject to regulation under the tart cherry marketing order and
approximately 900 producers of tart cherries in the regulated area.
Small agricultural service firms, which includes handlers, have been
defined by the Small Business Administration (13 CFR 121.201) as those
having annual receipts of less than $5,000,000, and small agricultural
producers are defined as those having annual receipts of less than
$750,000. A majority of the producers
[[Page 7648]]
and handlers are considered small entities under SBA's standards.
The principal demand for tart cherries is in the form of processed
products. Tart cherries are dried, frozen, canned, juiced, and pureed.
During the period 1998/99 through 2003/04, approximately 92 percent of
the U.S. tart cherry crop, or 252.8 million pounds, was processed
annually. Of the 252.8 million pounds of tart cherries processed, 59
percent was frozen, 29 percent was canned, and 12 percent was utilized
for juice and other products.
Based on National Agricultural Statistics Service data, acreage in
the United States devoted to tart cherry production has been trending
downward. Bearing acreage has declined from a high of 50,050 acres in
1987/88 to 37,000 acres in 2003/04. This represents a 26 percent
decrease in total bearing acres. Michigan leads the nation in tart
cherry acreage with 73 percent of the total and produces about 75
percent of the U.S. tart cherry crop each year.
The 2004/05 crop is moderate in size at 209 million pounds. The
largest crop occurred in 1995 with production in the regulated
districts reaching a record 395.6 million pounds. The price per pound
received by tart cherry growers ranged from a low of 7.3 cents in 1987
to a high of 46.4 cents in 1991. The problems of wide supply and price
fluctuations in the tart cherry industry are national in scope and
impact. Growers testified during the order promulgation process that
the prices they received often did not come close to covering the costs
of production.
The industry demonstrated a need for an order during the
promulgation process of the marketing order because large variations in
annual tart cherry supplies tend to lead to fluctuations in prices and
disorderly marketing. As a result of these fluctuations in supply and
price, growers realize less income. The industry chose a volume control
marketing order to even out these wide variations in supply and improve
returns to growers. During the promulgation process, proponents
testified that small growers and processors would have the most to gain
from implementation of a marketing order because many such growers and
handlers had been going out of business due to low tart cherry prices.
They also testified that, since an order would help increase grower
returns, this should increase the buffer between business success and
failure because small growers and handlers tend to be less capitalized
than larger growers and handlers.
Aggregate demand for tart cherries and tart cherry products tends
to be relatively stable from year-to-year. Similarly, prices at the
retail level show minimal variation. Consumer prices in grocery stores,
and particularly in food service markets, largely do not reflect
fluctuations in cherry supplies. Retail demand is assumed to be highly
inelastic which indicates that price reductions do not result in large
increases in the quantity demanded. Most tart cherries are sold to food
service outlets and to consumers as pie filling; frozen cherries are
sold as an ingredient to manufacturers of pies and cherry desserts.
Juice and dried cherries are expanding market outlets for tart
cherries.
Demand for tart cherries at the farm level is derived from the
demand for tart cherry products at retail. In general, the farm-level
demand for a commodity consists of the demand at retail or food service
outlets minus per-unit processing and distribution costs incurred in
transforming the raw farm commodity into a product available to
consumers. These costs comprise what is known as the ``marketing
margin.''
The supply of tart cherries, by contrast, varies greatly. The
magnitude of annual fluctuations in tart cherry supplies is one of the
most pronounced for any agricultural commodity in the United States. In
addition, since tart cherries are processed either into cans or frozen,
they can be stored and carried over from year-to-year. This creates
substantial coordination and marketing problems. The supply and demand
for tart cherries is rarely in equilibrium. As a result, grower prices
fluctuate widely, reflecting the large swings in annual supplies.
In an effort to stabilize prices, the tart cherry industry uses the
volume control mechanisms under the authority of the Federal marketing
order. This authority allows the industry to set free and restricted
percentages. These percentages are only applied to states or districts
with a 3-year average of production greater than six million pounds,
and to states or districts in which the production is 50 percent or
more of the previous 5-year processed production average.
The primary purpose of setting restricted percentages is an attempt
to bring supply and demand into balance. If the primary market is over-
supplied with cherries, grower prices decline substantially.
The tart cherry sector uses an industry-wide storage program as a
supplemental coordinating mechanism under the Federal marketing order.
The primary purpose of the storage program is to warehouse supplies in
large crop years in order to supplement supplies in short crop years.
The storage approach is feasible because the increase in price--when
moving from a large crop to a short crop year--more than offsets the
costs for storage, interest, and handling of the stored cherries.
The price that growers' receive for their crop is largely
determined by the total production volume and carryin inventories. The
Federal marketing order permits the industry to exercise supply control
provisions, which allow for the establishment of free and restricted
percentages for the primary market, and a storage program. The
establishment of restricted percentages impacts the production to be
marketed in the primary market, while the storage program has an impact
on the volume of unsold inventories.
The volume control mechanism used by the cherry industry results in
decreased shipments to primary markets. Without volume control the
primary markets (domestic) would likely be over-supplied, resulting in
lower grower prices.
To assess the impact that volume control has on the prices growers
receive for their product, an econometric model has been developed. The
econometric model provides a way to see what impacts volume control may
have on grower prices. The three districts in Michigan, along with the
districts in Utah, New York, Washington, and Wisconsin are the
restricted areas for this crop year and their combined total production
is 202 million pounds. A 28 percent restriction means 145 million
pounds is available to be shipped to primary markets from these five
states. Production levels of 3.9 million pounds for Oregon, and 2.8
million pounds for Pennsylvania (the unregulated areas in 2004-2005),
result in an additional 6.7 million pounds available for primary market
shipments.
In addition, USDA requires a 10 percent release from reserves as a
market growth factor. This will result in an additional 18 million
pounds being available for the primary market. The 145 million pounds
from Michigan, New York, Utah, Washington, and Wisconsin, the
approximately 7 million pounds from the other producing states, the 18
million pound release, and the 25 million pound carryin inventory gives
a total of 195 million pounds being available for the primary markets.
The econometric model is used to estimate the difference between
grower prices with and without restrictions. With volume controls,
grower prices are estimated to be approximately $0.08 higher than
without volume controls.
The use of volume controls is estimated to have a positive impact
on
[[Page 7649]]
growers' total revenues. With restriction, revenues are estimated to be
$10.7 million higher than without restrictions. The without
restrictions scenario assumes that all tart cherries produced would be
delivered to processors for payments. This scenario is likely since the
total available supply in this crop year is very similar to last year's
when there was a full release of the reserve pool, and handlers appear
to be encouraging growers to deliver their entire crop this year.
Although carryout inventories are 25 million pounds, only 1 million
pounds is in the reserve while 24 million pounds are held in free
inventories held by packers.
It is concluded that the 28 percent volume control would not unduly
burden producers and handlers, particularly smaller growers and
handlers. The 28 percent restriction would be applied in Michigan, New
York, Utah, Washington, and Wisconsin. The growers and handlers in the
other two states covered under the marketing order will benefit from
the market stability anticipated to result from this restriction.
Recent grower prices have been as high as $0.44 per pound in the
2002-2003 crop year. At current production and yield levels, the cost
of production is reported to be $0.43 per pound. Thus, the estimated
$0.43 per pound received by growers under the regulation scenario just
covers the cost of production. Under the no regulation scenario,
estimated grower prices would not cover the total cost of production.
Lower yields and production result in higher costs of production.
Overhead or fixed costs are spread over lower levels of production
which results in higher costs of production per acre. Even in years
when no production is harvested, growers face fixed costs of production
and additional costs associated with maintaining the orchard for future
years of production. The use of volume controls is believed to have
little or no effect on consumer prices and will not result in fewer
retail sales or sales to food service outlets.
Without the use of volume controls, the industry could be expected
to start to build large amounts of unwanted inventories. These
inventories would have a depressing effect on grower prices. The
econometric model shows for every 1 million-pound increase in carryin
inventories, a decrease in grower prices of $0.0033 per pound occurs.
The use of volume controls allows the industry to supply the primary
markets while avoiding the disastrous results of over-supplying these
markets. In addition, through volume control, the industry has an
additional supply of cherries that can be used to develop secondary
markets such as exports and the development of new products. The use of
reserve cherries in the production shortened 2002-2003 crop year proved
to be very useful and beneficial to growers and packers.
In discussing the possibility of marketing percentages for the
2004-2005 crop year, the Board considered the following factors
contained in the marketing policy: (1) The estimated total production
of cherries; (2) the estimated size of the crop to be handled; (3) the
expected general quality of such cherry production; (4) the expected
carryover as of July 1 of canned and frozen cherries and other cherry
products; (5) the expected demand conditions for cherries in different
market segments; (6) supplies of competing commodities; (7) an analysis
of economic factors having a bearing on the marketing of cherries; (8)
the estimated tonnage held by handlers in primary or secondary
inventory reserves; and (9) any estimated release of primary or
secondary inventory reserve cherries during the crop year.
The Board's review of the factors resulted in the computation and
announcement in September 2004 of the free and restricted percentages
established by this rule (72 percent free and 28 percent restricted).
One alternative to this action would be not to have volume
regulation this season. Board members stated that no volume regulation
would be detrimental to the tart cherry industry due to the size of the
2004-2005 crop. Returns to growers would not cover their costs of
production for this season which might cause some to go out of
business.
As mentioned earlier, the Department's ``Guidelines for Fruit,
Vegetable, and Specialty Crop Marketing Orders'' specify that 110
percent of recent years' sales should be made available to primary
markets each season before recommendations for volume regulation are
approved. The quantity available under this rule is 110 percent of the
quantity shipped in the prior three years.
The free and restricted percentages established by this rule
release the optimum supply and apply uniformly to all regulated
handlers in the industry, regardless of size. There are no known
additional costs incurred by small handlers that are not incurred by
large handlers. The stabilizing effects of the percentages impact all
handlers positively by helping them maintain and expand markets,
despite seasonal supply fluctuations. Likewise, price stability
positively impacts all producers by allowing them to better anticipate
the revenues their tart cherries will generate.
USDA has not identified any relevant Federal rules that duplicate,
overlap, or conflict with this regulation.
While the benefits resulting from this rulemaking are difficult to
quantify, the stabilizing effects of the volume regulations impact both
small and large handlers positively by helping them maintain markets
even though tart cherry supplies fluctuate widely from season to
season.
In compliance with Office of Management and Budget (OMB)
regulations (5 CFR part 1320) which implement the Paperwork Reduction
Act of 1995 (Pub. L. 104-13), the information collection and
recordkeeping requirements under the tart cherry marketing order have
been previously approved by OMB and assigned OMB Number 0581-0177.
Reporting and recordkeeping burdens are necessary for compliance
purposes and for developing statistical data for maintenance of the
program. 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 other, similar
marketing order programs, reports and forms are periodically studied to
reduce or eliminate duplicate information collection burdens by
industry and public sector agencies. This rule will not change those
requirements.
A proposed rule concerning this action was published in the Federal
Register on December 10, 2004, (69 FR 71744). Copies of the rule were
mailed or sent via facsimile to all Board members and handlers.
Finally, the rule was made available through the Internet by the Office
of the Federal Register and USDA. A 30-day comment period ending
January 10, 2005, was provided to allow interested persons to respond
to the proposal.
One comment was received during the comment period in response to
the proposal. The commenter stated that the percentages were too
restrictive. The commenter was of the view that the percentages were
outdated, restricted trade, and should be removed. The commenter also
believed that the Board should be terminated.
The marketing order program including this rule is authorized under
the authority of the Agricultural Marketing Agreement Act of 1937. The
Board recommended the percentages based on its review of sales data,
inventory data, current crop forecasts, and market conditions. It
calculated an optimum supply which represents the desirable volume of
tart cherries needed
[[Page 7650]]
to meet primary market needs. Further, the Board, at a later date, can
recommend a release of the reserve to provide more tart cherries to
satisfy market needs as may be necessary.
Accordingly, no changes will be made to the rule as proposed, based
on the comment 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 matter presented, including the
information and recommendation submitted by the Board, 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.
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 handlers are already shipping
cherries from the 2004-2005 crop. Further, handlers are aware of this
rule, which was recommended at a public meeting. Also, a thirty-day
comment period was provided for in the proposed rule, and the comment
received has been addressed herein.
List of Subjects in 7 CFR Part 930
Marketing agreements, Reporting and recordkeeping requirements,
Tart cherries.
0
For the reasons set forth in the preamble, 7 CFR part 930 is amended as
follows:
PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK,
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN
0
1. The authority citation for 7 CFR part 930 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
0
2. Section 930.254 is added to read as follows:
Note: This section will not appear in the annual Code of Federal
Regulations.
Sec. 930.254 Final free and restricted percentages for the 2004-2005
crop year.
The final percentages for tart cherries handled by handlers during
the crop year beginning on July 1, 2004, which shall be free and
restricted, respectively, are designated as follows: Free percentage,
72 percent and restricted percentage, 28 percent.
Dated: February 8, 2005.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 05-2879 Filed 2-14-05; 8:45 am]
BILLING CODE 3410-02-P
