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]

Download as PDF 67375 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 VerDate Aug<31>2005 16:03 Nov 04, 2005 Jkt 208001 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 PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 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: http://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: E:\FR\FM\07NOP1.SGM 07NOP1 67376 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 VerDate Aug<31>2005 16:03 Nov 04, 2005 Jkt 208001 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 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 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 E:\FR\FM\07NOP1.SGM 07NOP1 67377 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) ..................................................................................................................... VerDate Aug<31>2005 16:03 Nov 04, 2005 Jkt 208001 PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 E:\FR\FM\07NOP1.SGM 07NOP1 Restricted 58 42 67378 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 VerDate Aug<31>2005 16:03 Nov 04, 2005 Jkt 208001 $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 PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 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 E:\FR\FM\07NOP1.SGM 07NOP1 Federal Register / Vol. 70, No. 214 / Monday, November 7, 2005 / Proposed Rules 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. VerDate Aug<31>2005 16:03 Nov 04, 2005 Jkt 208001 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 Frm 00005 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 security requirements necessary to ensure that the public health and safety and common defense and security are adequately protected. The proposed rule would revise the DBT requirements for radiological sabotage (applied to power reactors and Category I fuel cycle facilities), and theft or diversion of NRClicensed Strategic Special Nuclear Material (SSNM) (applied to Category I fuel cycle facilities). The NRC has developed draft Regulatory Guides (RGs) that provide guidance to licensees concerning the DBT for radiological sabotage and theft and diversion. These draft RGs have limited distribution because they contain either safeguards or classified information. The specific details related to the threat, which contain both safeguards information (SGI) and classified information, are contained in adversary characteristics documents (ACDs) that are not publicly available. These documents include specific details of the attributes of the 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 Frm 00006 Fmt 4702 Sfmt 4702 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. 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[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: http://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

[[Page 67380]]

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