Tart Cherries Grown in the States of Michigan, et al.; Final Free and Restricted Percentages for the 2005-2006 Crop Year for Tart Cherries, 67375-67380 [05-22115]
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Proposed Rules
Federal Register
Vol. 70, No. 214
Monday, November 7, 2005
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
DEPARTMENT OF AGRICULTURE
Animal and Plant Health Inspection
Service
7 CFR Part 319
[Docket No. 05–003–2]
Importation of Peppers From Certain
Central American Countries;
Correction
Animal and Plant Health
Inspection Service, USDA.
ACTION: Proposed rule; correction
AGENCY:
SUMMARY: We are correcting two errors
in a proposed rule that would amend
the fruits and vegetables regulations to
allow certain types of peppers grown in
approved registered production sites in
Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua to be imported
into the United States without
treatment. The proposed rule was
published in the Federal Register on
October 12, 2005 (70 FR 59283–59290,
Docket No. 05–003–1).
FOR FURTHER INFORMATION CONTACT: Ms.
Donna L. West, Senior Import
Specialist, Commodity Import Analysis
and Operations, PPQ, APHIS, 4700
River Road Unit 133, Riverdale, MD
20737–1228; (301) 734–8758.
SUPPLEMENTARY INFORMATION: On
October 12, 2005, we published in the
Federal Register (70 FR 59283–59290,
Docket No. 05–003–1) a proposed rule
that would amend the fruits and
vegetables regulations in 7 CFR part 319
to allow certain types of peppers grown
in approved registered production sites
in Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua to be imported
into the United States without
treatment.
In the SUPPLEMENTARY INFORMATION
section of the proposed rule, we stated
that Guatemala and Honduras contained
areas that had been determined to be
free of the Mediterranean fruit fly
(Medfly) in accordance with § 319.56–
2(f). This information was incorrect. The
Department of Peten in Guatemala is
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currently the only Medfly-free area in
the five Central American countries
covered by the proposed rule.
Also in the supplementary
information of the proposed rule, under
the heading ‘‘Paperwork Reduction
Act,’’ we stated that the estimated total
annual burden on respondents was
2,299 hours. This number was incorrect.
It should have read 2,999 hours. This
document corrects these errors.
Correction
In FR Doc. 05–20388, published on
October 12, 2005 70 FR 59283–59290,
make the following corrections: On page
59285, second column, fourth
paragraph, in the second sentence,
correct ‘‘Honduras and Guatemala are
the only Central American countries
covered by this proposal that contain
such areas.’’ to read ‘‘Guatemala is the
only Central American country covered
by this proposal that contains such
areas.’’ On page 59288, second column,
eighth paragraph, in the first sentence,
correct ‘‘2,299’’ to read ‘‘2,999’.
Done in Washington, DC, this 1st day of
November 2005.
Elizabeth E. Gaston,
Acting Administrator, Animal and Plant
Health Inspection Service.
[FR Doc. 05–22176 Filed 11–4–05; 8:45 am]
BILLING CODE 3410–34–P
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Docket No. FV05–930–1 PR]
Tart Cherries Grown in the States of
Michigan, et al.; Final Free and
Restricted Percentages for the 2005–
2006 Crop Year for Tart Cherries
Agricultural Marketing Service,
USDA.
ACTION: Proposed rule.
AGENCY:
SUMMARY: This rule invites comments
on the establishment of final free and
restricted percentages for the 2005–2006
crop year. The percentages are 58
percent free and 42 percent restricted
and will establish the proportion of
cherries from the 2005 crop which may
be handled in commercial outlets. The
percentages are intended to stabilize
supplies and prices, and strengthen
market conditions. The percentages
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were recommended by the Cherry
Industry Administrative Board (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, Pennsylvania, Oregon, Utah,
Washington, and Wisconsin.
DATES: Comments must be received by
December 7, 2005.
ADDRESSES: Interested persons are
invited to submit written comments
concerning this rule. Comments must be
sent to the Docket Clerk, Marketing
Order Administration Branch, Fruit and
Vegetable Programs, AMS, USDA, 1400
Independence Avenue, SW., Stop 0237,
Washington, DC 20250–0237; Fax: (202)
720–5698, or e-mail:
moabdocket.clerk@usda.gov. Comments
should reference the docket number and
the date and page number of this issue
of the Federal Register and will be
available for public inspection in the
Office of the Docket Clerk during regular
business hours or can be viewed at:
https://www.ams.usda.gov/fv/moab.html.
FOR FURTHER INFORMATION CONTACT:
Patricia A. Petrella or Kenneth G.
Johnson, Marketing Order
Administration Branch, Fruit and
Vegetable Programs, AMS, USDA, 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.
This
proposed 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
SUPPLEMENTARY INFORMATION:
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Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules
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 proposal 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
establishes final free and restricted
percentages for tart cherries for the
2005–2006 crop year, beginning July 1,
2005, through June 30, 2006. This rule
will not preempt any State or local laws,
regulations, or policies, unless they
present an irreconcilable conflict with
this rule.
The Act provides that administrative
proceedings must be exhausted before
parties may file suit in court. Under
§ 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
Secretary 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 Secretary’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.
The regulations apply to all handlers of
tart cherries that are in the regulated
districts. 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 the order
and § 930.159 of the regulations, or used
for exempt purposes (to obtain 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
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four—New York; District seven—Utah;
District eight—Washington, and District
nine—Wisconsin. Districts five and six
(Oregon and Pennsylvania, respectively)
will not be regulated for the 2005–2006
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, handlers in those districts
will not be subject to volume regulation
during the 2005–2006 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, because tart cherries
are processed either 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 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 the Secretary. The optimum
supply represents the desirable volume
of tart cherries that should be available
for sale in the coming crop year before
new crop supplies are available for
marketing.
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
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cherry products) and subtracting that
figure from the current year’s USDA
crop forecast. 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 USDA crop
forecast or by an average of such other
crop estimates for the regulated districts
to obtain percentages for the regulated
districts. The Board is required to
establish a preliminary restricted
percentage equal to the quotient,
rounded to the nearest whole number,
with the complement being the
preliminary free tonnage percentage. If
the tonnage requirements for the year
are more than the USDA crop forecast,
the Board is required to establish a
preliminary free tonnage percentage of
100 percent and 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 23, 2005, and
computed, for the 2005–2006 crop year,
an optimum supply of 169 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, or such other amount,
as the Board with the approval of the
Secretary, may establish.
The Board also recommended an
economic adjustment of 16 million
pounds to be subtracted from the
surplus to recognize the decrease in the
optimum supply formula which
includes total production amounts from
the 2002 crop disaster year. The Board
calculated preliminary free and
restricted percentages as follows: The
USDA estimate of the crop for the entire
production area was 244 million
pounds; a 28 million pound carryin
(based on Board estimates) was
subtracted from the optimum supply of
169 million pounds which resulted in
2005–2006 tonnage requirements
(adjusted optimum supply) of 141
million pounds. The carryin figure
reflects the amount of cherries that
handlers actually had in inventory at
the beginning of the 2005–2006 crop
year. Subtracting the adjusted optimum
supply of 141 million pounds from the
USDA crop estimate (244 million
pounds) results in a surplus of 103
million pounds of tart cherries. An
economic adjustment of 16 million
pounds is subtracted from the 103
million pound surplus that leaves a total
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Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules
surplus of 87 million pounds. The
surplus was divided by the production
in the regulated districts (241 million
pounds) and resulted in a restricted
percentage of 36 percent for the 2005–
2006 crop year. The free percentage was
64 percent (100 percent minus 36
percent). The Board established these
percentages and announced them to the
industry as required by the order.
The preliminary percentages were
based on the USDA production estimate
and the following supply and demand
information available at the June
meeting for the 2005–2006 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 .................................................................................................
Preliminary Percentages:
(4) USDA crop estimate ...................................................................................................................................................................
(5) Carryin held by handlers as of July 1, 2005 ..............................................................................................................................
(6) Adjusted optimum supply for current crop year (Item 3 minus Item 5) .....................................................................................
(7) Surplus (restricted tonnage) (Item 4 minus Item 6) ...................................................................................................................
(8) Economic adjustment ..................................................................................................................................................................
(9) Surplus (Item 7 minus Item 8) ....................................................................................................................................................
(10) USDA crop estimate for regulated districts ..............................................................................................................................
169
0
169
244
28
141
103
16
87
241
Percentages
Free
(11) Preliminary percentages (Item 9 divided by Item 10 × 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 modifications were made
for this crop year.
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 any
final free percentage designated by
USDA and 100 percent is the final
restricted percentage. The Board met on
September 9, 2005, to recommend final
free and restricted percentages.
The actual production reported by the
Board was 267 million pounds, which is
a 23 million pound increase from the
USDA crop estimate of 244 million
pounds.
A 29 million pound carryin (based on
handler reports) was subtracted from the
Board’s optimum supply of 169 million
pounds, yielding an adjusted optimum
supply for the current crop year of 140
million pounds. The adjusted optimum
supply of 140 million pounds was
subtracted from the actual production of
267 million pounds, which resulted in
Restricted
64
36
a 127 million pound surplus. An
economic adjustment of 16 million
pounds was subtracted from the surplus
for a total of 111 million pounds of
surplus tart cherries. The total surplus
of 111 million pounds is divided by the
264 million-pound volume of tart
cherries produced in the regulated
districts. This results in a 42 percent
restricted percentage and a
corresponding 58 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 2005–2006 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 ...................................................................................................................................
Final Percentages:
(4) Board reported production ..........................................................................................................................................................
(5) Carryin held by handlers as of July 1, 2005 ..............................................................................................................................
(6) Adjusted optimum supply (Item 3 minus Item 5) ........................................................................................................................
(7) Surplus (restricted tonnage) (Item 4 minus Item 6) ...................................................................................................................
(8) Economic adjustment ..................................................................................................................................................................
(9) Total Surplus (Item 7 minus Item 8) ...........................................................................................................................................
(10) Production in regulated districts ...............................................................................................................................................
169
0
169
267
29
140
127
16
111
264
Percentages
Free
(11) Final Percentages (Item 9 divided by Item 10 x 100 equals restricted percentage; 100 minus restricted
percentage equals free percentage) .....................................................................................................................
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58
42
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Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules
USDA’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 this action which
releases 100 percent of the optimum
supply and the additional release of tart
cherries provided under § 930.50(g).
This release of additional 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 such release should
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 released for free use by such
handler. Approximately 17 million
pounds would be made available to
handlers this season in accordance with
USDA Guidelines. This release would
be made available to every handler and
released to such handler 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
initial regulatory flexibility analysis.
The purpose of the RFA is to fit
regulatory actions to the scale of
business subject to such actions in order
that small businesses will not be unduly
or disproportionately burdened.
Marketing orders issued pursuant to the
Act, and 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 $6,000,000, and small
agricultural producers are defined as
those having annual receipts of less than
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$750,000. A majority of the producers
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
2000/2001 through 2004/2005,
approximately 93.4 percent of the U.S.
tart cherry crop, or 216.8 million
pounds, was processed annually. Of the
216.8 million pounds of tart cherries
processed, 59 percent was frozen, 28
percent was canned, and 13 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
1987/1988 to 36,950 acres in 2004/2005.
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
70 percent of the U.S. tart cherry crop
each year.
The 2005/2006 crop is relatively large
in size at 266.7 million pounds. This is
the highest level of production since the
2001/2002 crop. The largest crop
occurred in 1995/1996 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.
These 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
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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 restricted
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 to bring supply
and demand into balance. If the primary
market is over-supplied with cherries,
grower prices decline substantially.
The tart cherry industry uses an
industry-wide storage program as a
supplemental coordinating mechanism
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under the Federal marketing order. The
primary purpose of the storage program
is to warehouse supplies in large crop
years 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 storing, interest, and handling
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 would likely be oversupplied, 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 264
million pounds. A 42 percent restriction
means that 185 million pounds are
available to be shipped to primary
markets.
In addition, USDA requires a 10
percent release from reserves as a
market growth factor. This results in an
additional 17 million pounds being
available for the primary market. A total
of 202 million pounds are available for
the primary market sales.
The econometric model is used to
estimate grower prices with and without
regulation. 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
grower’s total revenues. With
restriction, revenues are estimated to be
$3.9 million higher than without
restrictions. The without restrictions
scenario assumes that all tart cherries
produced would be delivered to
processors for payments.
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It is concluded that the 42 percent
restricted percentage would not unduly
burden producers, particularly smaller
growers. The 42 percent restriction
would be applied to the growers 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 proposed action.
Grower prices were reported by NASS
at $0.323 per pound for the 2004–2005
crop year and $0.353 for the 2003–2004
crop year. While grower prices have not
been established in the 2005–2006 crop
year, some processors have reported that
growers have received an initial
payment somewhere in the low 20 cent
per pound range for free production.
There will likely not be any additional
payments by processors because of the
larger than anticipated crop and the
amount of surplus. The final grower
price will likely be less than $0.20 per
pound for combined free and restricted
production. This estimated price is less
than the cost of production which is
calculated to be $0.31 per pound at a
yield of 7,200 pounds per acre. These
cost estimates are based on a 2003 cost
of production study by the Michigan
State University Extension Service.
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 2005–
2006 crop year, the Board considered
the following factors contained in the
marketing policy: (1) The estimated total
production of tart 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
PO 00000
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Fmt 4702
Sfmt 4702
67379
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 2005 of the
free and restricted percentages proposed
to be established by this rule (58 percent
free and 42 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 2005–2006 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, USDA’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
E:\FR\FM\07NOP1.SGM
07NOP1
67380
Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules
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 does
not change those requirements.
AMS is committed to compliance
with the Government Paperwork
Elimination Act (GPEA), which requires
Government agencies in general to
provide the public the option of
submitting information or transacting
business electronically to the maximum
extent possible.
A 30-day comment period is provided
to allow interested persons to respond
to this proposal. Thirty days is deemed
appropriate because this rule would
need to be in place as soon as possible
since handlers are already shipping tart
cherries from the 2005–2006 crop. All
written comments timely received will
be considered before a final
determination is made on this matter.
List of Subjects in 7 CFR Part 930
Marketing agreements, Reporting and
recordkeeping requirements, Tart
cherries.
For the reasons set forth in the
preamble, 7 CFR part 930 is proposed to
be 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:
Authority: 7 U.S.C. 601–674.
2. Section 930.254 is added to read as
follows:
Note: This section will not appear in the
annual Code of Federal Regulations.
§ 930.254 Final free and restricted
percentages for the 2005–2006 crop year.
The final percentages for tart cherries
handled by handlers during the crop
year beginning on July 1, 2005, which
shall be free and restricted, respectively,
are designated as follows: Free
percentage, 58 percent and restricted
percentage, 42 percent.
VerDate Aug<31>2005
16:03 Nov 04, 2005
Jkt 208001
Dated: November 2, 2005.
Lloyd C. Day,
Administrator, Agricultural Marketing
Service.
[FR Doc. 05–22115 Filed 11–4–05; 8:45 am]
BILLING CODE 3410–02–P
NUCLEAR REGULATORY
COMMISSION
10 CFR Part 73
RIN 3150–AH60
Design Basis Threat
Nuclear Regulatory
Commission.
ACTION: Proposed rule.
AGENCY:
SUMMARY: The Nuclear Regulatory
Commission (NRC) is proposing to
amend its regulations that govern the
requirements pertaining to design basis
threat (DBT). The proposed rule would
amend the Commission’s regulations to,
among other things, make generically
applicable the security requirements
previously imposed by the
Commission’s April 29, 2003 DBT
orders, which applied to existing
licensees, and redefine the level of
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ensure that the public health and safety
and common defense and security are
adequately protected. The proposed rule
would revise the DBT requirements for
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facilities), and theft or diversion of NRClicensed Strategic Special Nuclear
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sabotage and theft and diversion. These
draft RGs have limited distribution
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threat consistent with the requirements
imposed in the April 29, 2003, DBT
orders. Additionally, a Petition for
Rulemaking (PRM–73–12), filed by the
Committee to Bridge the Gap, was
considered as part of this proposed
rulemaking; the NRC’s disposition of
this petition is contained in this
document.
Submit comments by January 23,
2006. Comments received after this date
DATES:
PO 00000
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will be considered if it is practical to do
so, but the Commission is able to ensure
consideration only for comments
received on or before this date.
ADDRESSES: You may submit comments
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Please include the following number
RIN 3150–AH60 in the subject line of
your comments. Comments on
rulemakings submitted in writing or in
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the NRC cautions you against including
any information in your submission that
you do not want to be publicly
disclosed.
Mail comments to: Secretary, U.S.
Nuclear Regulatory Commission,
Washington, DC 20555–0001, ATTN:
Rulemakings and Adjudications Staff.
E-mail comments to: SECY@nrc.gov. If
you do not receive a reply e-mail
confirming that we have received your
comments, contact us directly at (301)
415–1966. You may also submit
comments via the NRC’s rulemaking
Web site at https://ruleforum.llnl.gov.
Address questions about our rulemaking
Web site to Carol Gallagher (301) 415–
5905; e-mail cag@nrc.gov. Comments
can also be submitted via the Federal
eRulemaking Portal https://
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Hand deliver comments to: 11555
Rockville Pike, Rockville, Maryland
20852, between 7:30 am and 4:15 pm
Federal workdays. (Telephone (301)
415–1966).
Fax comments to: Secretary, U.S.
Nuclear Regulatory Commission at (301)
415–1101.
You may submit comments on the
information collections by the methods
indicated in the Paperwork Reduction
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Publicly available documents related
to this rulemaking may be viewed
electronically on the public computers
located at the NRC’s Public Document
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North, 11555 Rockville Pike, Rockville,
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comments, may be viewed and
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rulemaking Web site at https://
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Publicly available documents created
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adams.html. From this site, the public
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Agencywide Document Access and
E:\FR\FM\07NOP1.SGM
07NOP1
]]>Agencies
[Federal Register Volume 70, Number 214 (Monday, November 7, 2005)]
[Proposed Rules]
[Pages 67375-67380]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-22115]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Docket No. FV05-930-1 PR]
Tart Cherries Grown in the States of Michigan, et al.; Final Free
and Restricted Percentages for the 2005-2006 Crop Year for Tart
Cherries
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This rule invites comments on the establishment of final free
and restricted percentages for the 2005-2006 crop year. The percentages
are 58 percent free and 42 percent restricted and will establish the
proportion of cherries from the 2005 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 (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, Pennsylvania, Oregon, Utah, Washington, and
Wisconsin.
DATES: Comments must be received by December 7, 2005.
ADDRESSES: Interested persons are invited to submit written comments
concerning this rule. Comments must be sent to the Docket Clerk,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, 1400 Independence Avenue, SW., Stop 0237, Washington, DC
20250-0237; Fax: (202) 720-5698, or e-mail: moabdocket.clerk@usda.gov.
Comments should reference the docket number and the date and page
number of this issue of the Federal Register and will be available for
public inspection in the Office of the Docket Clerk during regular
business hours or can be viewed at: https://www.ams.usda.gov/fv/
moab.html.
FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G.
Johnson, Marketing Order Administration Branch, Fruit and Vegetable
Programs, AMS, USDA, 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 proposed 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
[[Page 67376]]
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 proposal 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
establishes final free and restricted percentages for tart cherries for
the 2005-2006 crop year, beginning July 1, 2005, through June 30, 2006.
This rule will not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under Sec. 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 Secretary 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 Secretary'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. The regulations
apply to all handlers of tart cherries that are in the regulated
districts. 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 the order and Sec. 930.159
of the regulations, or used for exempt purposes (to obtain 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.
Districts five and six (Oregon and Pennsylvania, respectively) will not
be regulated for the 2005-2006 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,
handlers in those districts will not be subject to volume regulation
during the 2005-2006 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, because tart cherries are processed
either 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 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 the Secretary. The optimum supply represents the desirable
volume of tart cherries that should be available for sale in the coming
crop year before new crop supplies are available for marketing.
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 from the current
year's USDA crop forecast. 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 USDA crop forecast or by an average of such other
crop estimates for the regulated districts to obtain percentages for
the regulated districts. The Board is required to establish a
preliminary restricted percentage equal to the quotient, rounded to the
nearest whole number, with the complement being the preliminary free
tonnage percentage. If the tonnage requirements for the year are more
than the USDA crop forecast, the Board is required to establish a
preliminary free tonnage percentage of 100 percent and 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 23, 2005, and computed, for the 2005-2006
crop year, an optimum supply of 169 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, or such other amount, as the Board with
the approval of the Secretary, may establish.
The Board also recommended an economic adjustment of 16 million
pounds to be subtracted from the surplus to recognize the decrease in
the optimum supply formula which includes total production amounts from
the 2002 crop disaster year. The Board calculated preliminary free and
restricted percentages as follows: The USDA estimate of the crop for
the entire production area was 244 million pounds; a 28 million pound
carryin (based on Board estimates) was subtracted from the optimum
supply of 169 million pounds which resulted in 2005-2006 tonnage
requirements (adjusted optimum supply) of 141 million pounds. The
carryin figure reflects the amount of cherries that handlers actually
had in inventory at the beginning of the 2005-2006 crop year.
Subtracting the adjusted optimum supply of 141 million pounds from the
USDA crop estimate (244 million pounds) results in a surplus of 103
million pounds of tart cherries. An economic adjustment of 16 million
pounds is subtracted from the 103 million pound surplus that leaves a
total
[[Page 67377]]
surplus of 87 million pounds. The surplus was divided by the production
in the regulated districts (241 million pounds) and resulted in a
restricted percentage of 36 percent for the 2005-2006 crop year. The
free percentage was 64 percent (100 percent minus 36 percent). The
Board established these percentages and announced them to the industry
as required by the order.
The preliminary percentages were based on the USDA production
estimate and the following supply and demand information available at
the June meeting for the 2005-2006 crop year:
------------------------------------------------------------------------
Millions
of pounds
------------------------------------------------------------------------
Optimum Supply Formula:
(1) Average sales of the prior three years............. 169
(2) Plus desirable carryout............................ 0
(3) Optimum supply calculated by the Board at the June 169
meeting...............................................
Preliminary Percentages:
(4) USDA crop estimate................................. 244
(5) Carryin held by handlers as of July 1, 2005........ 28
(6) Adjusted optimum supply for current crop year (Item 141
3 minus Item 5).......................................
(7) Surplus (restricted tonnage) (Item 4 minus Item 6). 103
(8) Economic adjustment................................ 16
(9) Surplus (Item 7 minus Item 8)...................... 87
(10) USDA crop estimate for regulated districts........ 241
------------------------------------------------------------------------
Percentages
-------------------------
Free Restricted
------------------------------------------------------------------------
(11) Preliminary percentages (Item 9 64 36
divided by Item 10 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 modifications were made for this crop
year.
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 any final free percentage designated
by USDA and 100 percent is the final restricted percentage. The Board
met on September 9, 2005, to recommend final free and restricted
percentages.
The actual production reported by the Board was 267 million pounds,
which is a 23 million pound increase from the USDA crop estimate of 244
million pounds.
A 29 million pound carryin (based on handler reports) was
subtracted from the Board's optimum supply of 169 million pounds,
yielding an adjusted optimum supply for the current crop year of 140
million pounds. The adjusted optimum supply of 140 million pounds was
subtracted from the actual production of 267 million pounds, which
resulted in a 127 million pound surplus. An economic adjustment of 16
million pounds was subtracted from the surplus for a total of 111
million pounds of surplus tart cherries. The total surplus of 111
million pounds is divided by the 264 million-pound volume of tart
cherries produced in the regulated districts. This results in a 42
percent restricted percentage and a corresponding 58 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 2005-2006 crop year:
------------------------------------------------------------------------
Millions
of pounds
------------------------------------------------------------------------
Optimum Supply Formula:
(1) Average sales of the prior three years............. 169
(2) Plus desirable carryout............................ 0
(3) Optimum supply calculated by the Board............. 169
Final Percentages:
(4) Board reported production.......................... 267
(5) Carryin held by handlers as of July 1, 2005........ 29
(6) Adjusted optimum supply (Item 3 minus Item 5)...... 140
(7) Surplus (restricted tonnage) (Item 4 minus Item 6). 127
(8) Economic adjustment................................ 16
(9) Total Surplus (Item 7 minus Item 8)................ 111
(10) Production in regulated districts................. 264
------------------------------------------------------------------------
Percentages
-------------------------
Free Restricted
------------------------------------------------------------------------
(11) Final Percentages (Item 9 divided by 58 42
Item 10 x 100 equals restricted
percentage; 100 minus restricted
percentage equals free percentage).......
------------------------------------------------------------------------
[[Page 67378]]
USDA'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 this action which releases 100 percent of the optimum supply and
the additional release of tart cherries provided under Sec. 930.50(g).
This release of additional 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 such release should 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 released for free use by such handler. Approximately
17 million pounds would be made available to handlers this season in
accordance with USDA Guidelines. This release would be made available
to every handler and released to such handler 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 initial regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and 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 $6,000,000, and small agricultural
producers are defined as those having annual receipts of less than
$750,000. A majority of the producers 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 2000/2001 through 2004/2005, approximately 93.4
percent of the U.S. tart cherry crop, or 216.8 million pounds, was
processed annually. Of the 216.8 million pounds of tart cherries
processed, 59 percent was frozen, 28 percent was canned, and 13 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
1987/1988 to 36,950 acres in 2004/2005. 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 70
percent of the U.S. tart cherry crop each year.
The 2005/2006 crop is relatively large in size at 266.7 million
pounds. This is the highest level of production since the 2001/2002
crop. The largest crop occurred in 1995/1996 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. These 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 restricted 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 to bring
supply and demand into balance. If the primary market is over-supplied
with cherries, grower prices decline substantially.
The tart cherry industry uses an industry-wide storage program as a
supplemental coordinating mechanism
[[Page 67379]]
under the Federal marketing order. The primary purpose of the storage
program is to warehouse supplies in large crop years 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 storing, interest, and handling
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 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 264 million pounds. A 42 percent restriction means that 185 million
pounds are available to be shipped to primary markets.
In addition, USDA requires a 10 percent release from reserves as a
market growth factor. This results in an additional 17 million pounds
being available for the primary market. A total of 202 million pounds
are available for the primary market sales.
The econometric model is used to estimate grower prices with and
without regulation. 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 grower's total revenues. With restriction, revenues are estimated to
be $3.9 million higher than without restrictions. The without
restrictions scenario assumes that all tart cherries produced would be
delivered to processors for payments.
It is concluded that the 42 percent restricted percentage would not
unduly burden producers, particularly smaller growers. The 42 percent
restriction would be applied to the growers 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 proposed action.
Grower prices were reported by NASS at $0.323 per pound for the
2004-2005 crop year and $0.353 for the 2003-2004 crop year. While
grower prices have not been established in the 2005-2006 crop year,
some processors have reported that growers have received an initial
payment somewhere in the low 20 cent per pound range for free
production. There will likely not be any additional payments by
processors because of the larger than anticipated crop and the amount
of surplus. The final grower price will likely be less than $0.20 per
pound for combined free and restricted production. This estimated price
is less than the cost of production which is calculated to be $0.31 per
pound at a yield of 7,200 pounds per acre. These cost estimates are
based on a 2003 cost of production study by the Michigan State
University Extension Service.
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
2005-2006 crop year, the Board considered the following factors
contained in the marketing policy: (1) The estimated total production
of tart 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 2005 of the free and restricted percentages
proposed to be established by this rule (58 percent free and 42 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
2005-2006 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, USDA'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
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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 does not change those
requirements.
AMS is committed to compliance with the Government Paperwork
Elimination Act (GPEA), which requires Government agencies in general
to provide the public the option of submitting information or
transacting business electronically to the maximum extent possible.
A 30-day comment period is provided to allow interested persons to
respond to this proposal. Thirty days is deemed appropriate because
this rule would need to be in place as soon as possible since handlers
are already shipping tart cherries from the 2005-2006 crop. All written
comments timely received will be considered before a final
determination is made on this matter.
List of Subjects in 7 CFR Part 930
Marketing agreements, Reporting and recordkeeping requirements,
Tart cherries.
For the reasons set forth in the preamble, 7 CFR part 930 is
proposed to be 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:
Authority: 7 U.S.C. 601-674.
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 2005-2006
crop year.
The final percentages for tart cherries handled by handlers during
the crop year beginning on July 1, 2005, which shall be free and
restricted, respectively, are designated as follows: Free percentage,
58 percent and restricted percentage, 42 percent.
Dated: November 2, 2005.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 05-22115 Filed 11-4-05; 8:45 am]
BILLING CODE 3410-02-P
