California Raisin Marketing Order; Section 610 Review, 4805-4808 [06-821]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 71, Number 19 (Monday, January 30, 2006)]
[Rules and Regulations]
[Pages 4805-4808]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-821]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV05-989-610 REVIEW]


California Raisin Marketing Order; Section 610 Review

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Confirmation of regulations.

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SUMMARY: This action summarizes the results under the criteria 
contained in section 610 of the Regulatory Flexibility Act (RFA), of an 
Agricultural Marketing Service (AMS) review of Marketing Order No. 989, 
regulating the handling of raisins produced from grapes grown in 
California.

ADDRESSES: Interested persons may obtain a copy of the review. Requests 
for copies should be sent to the Docket Clerk, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 
Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; Fax: 
(202) 720-8938; or E-mail: moab.docketclerk@usda.gov.

FOR FURTHER INFORMATION CONTACT: Kurt Kimmel or Maureen Pello, 
California Marketing Field Office, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, Fresno, California; 
Telephone: (559) 487-5901; Fax: (559) 487-5906; E-mail: 
Kurt.Kimmel@usda.gov or Maureen.Pello@usda.gov; 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; Fax: (202) 720-
8938; E-mail: George.Kelhart@usda.gov.

SUPPLEMENTARY INFORMATION: Marketing Order No. 989, as amended (7 CFR 
part 989), regulates the handling of raisins produced from grapes grown 
in California (order). The marketing order is effective under the 
Agricultural Marketing Agreement Act of 1937 (Act), as amended (7 
U.S.C. 601-674).
    AMS published in the Federal Register (64 FR 8014; February 18, 
1999), its plan to review certain regulations, including Marketing 
Order No. 989, under criteria contained in section 610 of the RFA (5 
U.S.C. 601-612). An updated plan was published in the Federal Register 
on January 4, 2002 (67 FR 525) and on August 14, 2003 (68 FR 48574). 
Accordingly, AMS published a notice of review and request for written 
comments on the California raisin marketing order in the May 25, 2004, 
issue of the Federal Register (69 FR 29672). The deadline for comments 
ended July 23, 2004.
    The review was undertaken to determine whether the California 
raisin marketing order should be continued without change, amended, or 
rescinded to minimize the impacts on small entities. In conducting this 
review, AMS considered the following factors: (1) The continued need 
for the marketing order; (2) the nature of complaints or comments 
received from the public concerning the marketing order; (3) the 
complexity of the marketing order; (4) the extent to which the 
marketing order overlaps, duplicates, or conflicts with other Federal 
rules, and, to the extent feasible, with State and local governmental 
rules; and (5) the length of time since the marketing order has been 
evaluated or the degree to which technology, economic conditions, or 
other factors have changed in the area affected by the marketing order.
    The order was initially promulgated in 1949. It has been amended 
twelve times to meet the changing needs of the industry. The most 
recent amendments occurred in 1989.
    The order establishes the Raisin Administrative Committee 
(Committee or RAC) as the administrative body charged with overseeing 
program operations. Staff is hired to conduct the daily administration 
of the program. The Committee consists of 47 members

[[Page 4806]]

and 47 alternate members. Thirty-five members represent producers, ten 
represent handlers, one represents the cooperative bargaining 
association, and one represents the public. Membership is further 
allocated among producers representing the cooperative marketing 
association, the cooperative bargaining association, and those not 
affiliated with either cooperative (independents). The cooperative 
marketing association and the cooperative bargaining association 
nominate their representatives, while independent member 
representatives are nominated at meetings and elected through a mail 
balloting process.
    The Committee recommends the implementation of regulatory actions 
and activities under the marketing order and changes to the marketing 
order when needed to further marketing order and industry objectives. 
AMS approves these recommendations undertaken by the Committee before 
they can be implemented.
    These activities include volume control to help stabilize raisin 
supplies and prices, and strengthen market conditions; various export 
programs to help packers remain price competitive with foreign 
producers and to maintain and expand these markets; quality control 
with mandatory incoming and outgoing inspection to assure the condition 
and quality of raisins delivered by producers to packers and sold by 
packers into commercial channels; imported raisin quality also is 
assured under a section 8e of the Act import regulation; research and 
promotion activities to maintain and expand exports financed with 
reserve pool proceeds; and reporting requirements used by the RAC to 
obtain production, shipment, and other marketing information used by 
the industry in making sound marketing decisions and in furthering 
marketing order goals. Funds to administer the marketing order are 
obtained from handler assessments and proceeds obtained from the sale 
of reserve pool raisins.
    Currently, there are approximately 4,500 producers and 20 handlers 
of California raisins. The majority of these producers and seven 
handlers may be classified as small entities. The regulations 
implemented under the order are applied uniformly to small and large 
entities, and are designed to benefit all industry entities regardless 
of size.

Notice of 610 Review for California Raisins

    A notice of review and request for comments regarding the 
California raisin marketing order was published in the Federal Register 
on May 25, 2004. During the comment period that ended on July 23, 2004, 
five written comments were received. One comment was submitted by the 
then Committee President, and four were submitted by raisin growers and 
handlers. Two comments address the five factors under consideration by 
AMS. No comments from non-industry representatives were received. All 
comments were evaluated during the conduct of this review and are 
discussed, where appropriate, later in this document.

The Continued Need for the Marketing Order

    The marketing order has been used over the years in the areas of 
volume control, quality control, research and promotion activities, and 
the collection and dissemination of statistical information.
    Volume control has helped stabilize supplies and prices, and 
strengthen marketing conditions. Under the marketing order's volume 
control provisions, packer raisin acquisitions are segregated into free 
tonnage and reserve tonnage. Free tonnage raisins may be shipped to any 
market. Reserve raisins are production in excess of free tonnage needs 
(domestic markets) and must be pooled by handlers in a pool for later 
sale by the Committee to authorized outlets. The RAC generally needs 
several years to dispose of reserve pool raisins. Currently, the 2002-
03 and 2003-04 reserve pools are still open. The entire crop in 2004-05 
was free tonnage so a reserve pool was not established for that crop 
year.
    Basically, there are two markets for California raisins, domestic 
and export. The marketing order has helped the industry expand domestic 
markets over the years. Moreover, it has promoted a dramatic expansion 
of raisin exports. When the marketing order was implemented in 1949, 
export markets were not viable outlets. Under the marketing order, the 
industry has been able to develop and maintain export markets, in spite 
of foreign competition. Export shipments have been an important source 
of growth for the industry and the marketing order has provided a 
foundation for this expansion. The Committee believes that it needs to 
maintain export shipments to foster stable marketing conditions and 
reasonable producer prices. The Committee further believes that the 
marketing order will continue to be an important tool in achieving 
these goals.
    In the mid-1990s, domestic and export shipments began to drop. 
Total shipments have increased in the past two years and currently are 
in excess of 300,000 tons. The increase in shipments is mainly due to 
an increase in domestic shipments. In 2004-05, domestic shipments were 
in excess of 205,000 tons. This is the highest level of domestic 
shipments since 1993. These shipment levels are reminiscent of levels 
achieved during the early- and mid-1990's. Maintaining and continuing 
this level of domestic shipments together with exports near the 100,000 
tons per crop year level will be important to the future welfare of the 
industry. The Committee believes that the marketing order can continue 
to be used to maintain and increase these shipment levels.
    Since 1949, total grower returns per ton have increased five-fold, 
from less than $200 per ton to well over $1,000 per ton. Grower returns 
have fluctuated in response to supply and demand conditions, but in 
most seasons grower returns have been reasonable.
    The field price for free tonnage reached a high of $1,425 per ton 
for the 1999-2000 crop year. Average producer raisin prices as reported 
by the National Agricultural Statistics Service during the 2000-01 
through 2003-04 crop years were below cost of production levels due to 
record high production. A 1998 cost of production study by the 
University of California Cooperative Extension for a 120 acre raisin 
vineyard using traditional growing and harvesting systems shows total 
costs per ton with a yield of 2.3 tons at about $872 per ton. Lower 
bearing acres and yields have resulted in a lower production of raisin 
variety grapes and raisins, and producer prices began to improve in 
2004-05.
    In 2004-05, the free tonnage field price was set at $1,210 per ton. 
This was the first time since 1999-2000, that the field price has been 
above $1,000 per ton. For the 2005-06 crop year, a sliding scale for 
the field price has been set at a minimum price of $1,210 per ton that 
can rise as the quantity of raisins produced drops by 20,000 ton 
increments below 400,000 tons. In addition, a similar sliding price for 
the 2006-07 and 2007-08 crop years recently has been announced where 
prices will range from $960 to $1,560 per ton. This future price 
commitment is expected to help the financial position of producers, 
help packers make marketing decisions and help the industry continue 
the positive shipment results experienced in 2004-05 under the 
marketing order.
    With the marketing order as a support mechanism for the industry, 
the situation in the raisin industry has improved since 2002. Producer 
prices and revenues have increased, production and inventories have

[[Page 4807]]

decreased, and shipments have increased. Moreover, world production and 
inventories have moderated. Even so, the industry has numerous 
challenges. The most important of which may be developing demand for 
younger consumers. Although domestic shipments have increased over the 
last five crop years, this increase has not been sufficient to offset 
the increase in population. The Committee believes that the marketing 
order could be a significant tool in facilitating consumer interest and 
expanding shipments in both domestic and export markets.
    Quality control is as important today as it was when these 
standards were initially established in 1955. The establishment of 
minimum incoming and outgoing quality standards over the years has 
helped improve the quality of product moving from the vineyard to 
commercial market channels. Quality control has helped ensure that only 
satisfactory product reaches the marketplace and has helped foster 
customer satisfaction. This has helped the industry increase and 
maintain demand for California raisins over the years in domestic and 
export markets. Quality control also has helped the industry remain 
competitive with foreign production in Turkey, Greece, The Republic of 
South Africa, Australia, Chile, Argentina, and Mexico.
    Research and promotion export activities also have helped the 
industry remain competitive with foreign production in export markets 
and have helped foster market stability in commercial marketing 
channels.
    In addition to the above, the Committee collects statistical 
information from handlers on a routine basis. This information is 
compiled by the Committee staff to produce statistical reports that are 
used by the industry to make planting, harvesting, and sales decisions. 
It is also used in short- and long-term planning by the Committee.
    Based on the foregoing, AMS has determined that the order should be 
continued, without change, at this time. While the industry has 
considered changes to the order to improve volume control 
implementation and overall marketing order operations to lessen the 
chances of below cost of production producer returns, it has had 
difficulty reaching a consensus on the issues. As part of AMS's 
administrative responsibilities, AMS will continue its dialogue with 
the industry on these matters in an effort to improve the marketing 
order.
    As mentioned earlier, AMS reviews industry recommendations and 
programs for consistency with the regulatory authorities provided in 
the order, the prevailing and prospective market situation, and the 
impact upon small businesses. An assessment is also made as to whether 
regulatory recommendations or programs are practical for those who 
would be regulated, and whether the recommendations are consistent with 
USDA policy.
    AMS also routinely monitors the operations of this order, as does 
the industry and Committee, to ensure that the regulations issued 
address market and industry conditions, and that the regulations and 
administrative procedures are appropriate for practices within the 
industry. As noted earlier, a dialogue with the Committee on program 
matters is continuing to help improve marketing order operations.

The Nature of Complaints or Comments From the Public Concerning the 
Marketing Order

    In its written comment, the then President of the Committee 
provided background information about the industry and the marketing 
order, as well as rationale for continuing the marketing order. The 
comment addresses the AMS 610 review criteria, the various activities 
and programs administered under the order, describes the benefits of 
these activities, and expresses the belief that there is sound support 
within the industry for continuation of the marketing order. This 
comment also mentions that some factors in the industry believe that 
the marketing order could be improved to better serve producers and 
packers. The Committee has not yet finalized possible program 
improvements. The comment also summarizes the evolution of the order 
from its inception in 1949 to the present day. Some of the marketing 
order's successes have been mentioned earlier.
    One producer comment expressed support for the marketing order, 
noting that the same fluctuations in supply exist today as when the 
order was promulgated in 1949. This commenter stated that the use of 
the order's volume control mechanism helps the industry maintain 
orderly marketing conditions. However, the comment also refers to 
compliance problems that the commenter believes have not been 
adequately addressed by the Committee and USDA under the marketing 
order. Another commenter also stated that volume control regulations 
were being circumvented by handlers. With regard to compliance 
problems, the Committee investigates and refers such matters to AMS. 
AMS then reviews and evaluates such matters and recommends appropriate 
enforcement action as soon as possible. USDA has and will continue to 
take appropriate action on such compliance matters.
    Another comment from a producer, a third-generation grower, felt 
that the high production costs in recent years and low producer prices 
in the early 2000's were attributable to the marketing order and raisin 
handlers in the industry. Another producer, who is also a handler, felt 
that the volume control provisions were inadequate to prevent the 
recent (early 2000's), unprecedented low grower prices. As stated 
earlier, the prices to growers over the next several years are expected 
to be above estimated production costs. Much of the improvement in 
industry conditions and producer prices is due to the reduced crops and 
reductions in bearing raisin grape acreage. However, although difficult 
to quantify, some of this improvement is due to the marketing order and 
the activities authorized.
    A producer of organic raisins commented that the marketing order 
has not kept pace with the technological improvements in industry 
practices, especially with regard to organic raisins. The commenter 
also maintained that U.S markets are flooded with imported raisins, and 
that the importers are not subject to as many marketing order 
obligations as the domestic handlers. Further, the comment asserted 
that RAC is controlled by packers (handlers) and that the marketing 
order does not benefit producers.
    The RAC has considered the views of the organic sector of the 
industry, and has implemented reporting requirements with USDA approval 
for the purpose of obtaining statistical information on the organic 
segment of the industry. In addition, organic handlers also have the 
opportunity to utilize an exemption from promotion assessments under 
marketing orders pursuant to 7 CFR 900.700. While the organic sector 
wants to be removed from the marketing order regulation, the 
traditional raisin sector believes that both organic and traditionally 
produced raisins compete with each other in marketing channels, and 
both types of raisins should be subject to marketing order 
requirements. This matter continues to be under discussion with the 
industry.
    Regarding the comment concerning the flood of imports on the U.S. 
market, statistics from the U.S. Customs and Border Protection indicate 
that imports make up a relatively small portion of the U.S. raisin 
market. During the period 1999/2000 through 2003/2004 (August

[[Page 4808]]

1-July 31), U.S. imports averaged about 4 percent of U.S. production.
    Finally, in response to the comments regarding the marketing order 
benefiting handlers rather than producers, the goal of the program is 
to improve the marketing conditions for both producers and handlers. 
The marketing order is intended to allow the industry to solve 
marketing and other problems that producers and handlers could not 
handle individually. It helps the industry as a whole. The marketing 
order is not geared toward meeting the needs of individual producers 
and handlers.

The Complexity of the Marketing Order

    The raisin marketing order is somewhat complex, reflecting the 
complexity of the industry itself. AMS has attempted to ensure that the 
regulations are no more complex than necessary to achieve desired 
objectives consistent with industry operations. Implementing rules and 
regulations under the order also reflect the marketing order 
provisions. The Committee and its various subcommittees review the 
regulations periodically and make recommendations for change. The 
recommendations reflect and address the concerns of the raisin industry 
and its complex nature. AMS has a continuing dialogue with the industry 
and reviews Committee recommendations taking into account marketing 
order complexity. Finally, Committee staff provides materials to 
handlers explaining the programs and regulations, and makes every 
effort to assist handlers when necessary.

The Extent to Which the Marketing Order Overlaps, Duplicates, or 
Conflicts With Other Federal Rules, and to the Extent Feasible, With 
State and Local Regulations

    USDA has not identified any relevant Federal rules, or State and 
local regulations that duplicate, overlap, or conflict with this 
order's requirements. There is a companion State program that regulates 
the raisin industry, but it does not duplicate, overlap, or conflict 
with the Federal program. The State program, the California Raisin 
Marketing Board, engages in marketing and promotion activities not 
undertaken under the Federal order. Both programs work in concert to 
assist the California raisin industry.

The Length of Time Since the Marketing Order Has Been Evaluated or the 
Degree to Which Technology, Economic Conditions, or Other Factors Have 
Changed in the Area Affected By the Marketing Order

    AMS and the California raisin industry monitor the production and 
marketing of raisins on a continuing basis. Changes in regulations are 
implemented to reflect industry operating practices, and to solve 
marketing problems. The goal of these evaluations is to ensure that the 
order and the regulations issued under it fit the needs of the 
industry, while remaining consistent with the Act and USDA policies.
    Since its inception in 1949, the order has gone through numerous 
changes. These changes were made, in part, because of changing economic 
conditions affecting the production and handling of raisins. As noted 
in the Committee's comment, it meets often each year and discussions 
about the order and the various activities and regulations issued 
thereunder are frequent and sometimes extensive. The Committee or its 
subcommittees deliberate whether changes would improve the activities, 
order, and regulations to reflect current industry operating practices, 
and resolve current industry problems to the extent possible. In 
addition to reviewing its regulations, the Committee reviews and 
evaluates its programs on a continuing basis.
    The numerous formal order amendments, the many changes to the rules 
and regulations over the years, and the Committee's and AMS's 
continuing review and adjustments to its programs, show that the order 
is a dynamic, not static, program.
    AMS will continue to work with and maintain a dialogue with the 
California raisin industry in improving the program and in addressing 
the concerns expressed by the industry.

    Dated: January 23, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 06-821 Filed 1-27-06; 8:45 am]
BILLING CODE 3410-02-P