Tart Cherries Grown in the States of Michigan, et al.; Final Free and Restricted Percentages for the 2006-2007 Crop Year for Tart Cherries, 1681-1685 [E7-423]

Download as PDF Federal Register / Vol. 72, No. 9 / Tuesday, January 16, 2007 / Proposed Rules Dated: January 10, 2007. Lloyd C. Day, Administrator, Agricultural Marketing Service. [FR Doc. E7–428 Filed 1–12–07; 8:45 am] BILLING CODE 3410–02–P DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 930 [Docket No. AMS–FV–06–00187; FV07–930– 1 PR] Tart Cherries Grown in the States of Michigan, et al.; Final Free and Restricted Percentages for the 2006– 2007 Crop Year for Tart Cherries AGENCY: Agricultural Marketing Service, USDA. ycherry on PROD1PC64 with PROPOSALS ACTION: Proposed rule. SUMMARY: This rule invites comments on the establishment of final free and restricted percentages for the 2006–2007 crop year. The percentages are 55 percent free and 45 percent restricted and will establish the proportion of cherries from the 2006 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 February 15, 2007. 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) 720–8938, or E-mail: moabdocket.clerk@usda.gov; or Internet: https://www.regulations.gov. Comments should reference the docket number and the date and page number of this issue of the Federal Register and will be available for public inspection in the Office of the Docket Clerk during regular business hours or can be viewed at: https://www.ams.usda.gov/fv/moab.html. FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G. Johnson, Marketing Order Administration Branch, Fruit and VerDate Aug<31>2005 14:19 Jan 12, 2007 Jkt 211001 Vegetable Programs, AMS, USDA, Unit 155, 4700 River Road, Riverdale, MD 20737; Telephone: (301) 734–5243, or Fax: (301) 734–5275, or E-mail at Patricia.Petrella@usda.gov or Kenneth.Johnson@usda.gov. 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 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 (Department) 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 2006–2007 crop year, beginning July 1, 2006, through June 30, 2007. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with the Secretary a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempt therefrom. Such handler is afforded the opportunity for a hearing on the petition. After the hearing, the 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 SUPPLEMENTARY INFORMATION: PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 1681 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 four—New York; District seven—Utah; and District eight—Washington. Districts five, six and nine (Oregon, Pennsylvania, and Wisconsin, respectively) will not be regulated for the 2006–2007 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, Pennsylvania, and Wisconsin, handlers in those districts would not be subject to volume regulation during the 2006–2007 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 tends 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. E:\FR\FM\16JAP1.SGM 16JAP1 1682 Federal Register / Vol. 72, No. 9 / Tuesday, January 16, 2007 / Proposed Rules 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 § 930.50. The Board met on June 22, 2006, and computed, for the 2006–2007 crop year, an optimum supply of 182 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 calculated preliminary free and restricted percentages as follows: The USDA estimate of the crop for the entire production area was 256 million pounds; a 25 million pound carryin (based on Board estimates) was subtracted from the optimum supply of 182 million pounds which resulted in 2006–2007 tonnage requirements (adjusted optimum supply) of 157 million pounds. The carryin figure reflects the amount of cherries that handlers actually had in inventory at the beginning of the 2006–2007 crop year. Subtracting the adjusted optimum supply of 157 million pounds from the USDA crop estimate (256 million pounds) results in a surplus of 99 million pounds of tart cherries. The surplus was divided by the production in the regulated districts (249 million pounds) and resulted in a restricted percentage of 40 percent for the 2006– 2007 crop year. The free percentage was 60 percent (100 percent minus 40 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 2006–2007 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, 2006 .......................................................................................................................... (6) Adjusted optimum supply for current crop year (Item 3 minus Item 5) ................................................................................. (7) Surplus (Item 4 minus Item 6) ................................................................................................................................................ (8) USDA crop estimate for regulated districts ............................................................................................................................ Free ycherry on PROD1PC64 with PROPOSALS (9) Preliminary percentages (item 7 divided by item 8 × 100 equals restricted percentage; 100 minus restricted percentage equals free percentage) ................................................................................................ Between July 1 and September 15 of each crop year, the Board may modify the preliminary free and restricted percentages by announcing interim free and restricted percentages to adjust to the actual pack occurring in the industry. USDA establishes final free and restricted percentages through the informal rulemaking process. These percentages would 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 VerDate Aug<31>2005 14:19 Jan 12, 2007 Jkt 211001 USDA and 100 percent is the final restricted percentage. The Board met on September 9, 2006, to recommend final free and restricted percentages. The actual production reported by the Board was 263 million pounds, which is a 7 million pound increase from the USDA crop estimate of 256 million pounds. A 31 million pound carryin (based on handler reports) was subtracted from the Board’s optimum supply of 182 million pounds, yielding an adjusted optimum supply for the current crop year of 151 million pounds. The adjusted optimum PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 182 0 182 256 25 157 99 249 Restricted 60 40 supply of 151 million pounds was subtracted from the actual production of 263 million pounds, which resulted in a 112 million pound surplus. The total surplus of 112 million pounds is divided by the 251 million-pound volume of tart cherries produced in the regulated districts. This results in a 45 percent restricted percentage and a corresponding 55 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 E:\FR\FM\16JAP1.SGM 16JAP1 1683 Federal Register / Vol. 72, No. 9 / Tuesday, January 16, 2007 / Proposed Rules information available in September for the 2006–2007 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) Plus carryin held by handlers as of July 1, 2006 ................................................................................................................... (6) Adjusted optimum supply (Item 3 minus Item 5) available for current crop year .................................................................. (7) Surplus (Item 4 minus Item 6) ................................................................................................................................................ (8) Production in regulated districts ............................................................................................................................................. 182 0 182 263 31 151 112 251 Percentages Free (9) Final Percentages (item 7 divided by item 8 × 100 equals restricted percentage; 100 minus restricted percentage equals free percentage) ............................................................................................................. ycherry on PROD1PC64 with PROPOSALS 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 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 18 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. Initial Regulatory Flexibility Analysis Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this 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 VerDate Aug<31>2005 14:19 Jan 12, 2007 Jkt 211001 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 $6,500,000, 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 2001/2002 through 2005/2006, approximately 93.8 percent of the U.S. tart cherry crop, or 214.3 million pounds, was processed annually. Of the 214.3 million pounds of tart cherries processed, 62 percent was frozen, 26 percent was canned, and 12 percent was utilized for juice and other products. Based on National Agricultural Statistics Service data, acreage in the United States devoted to tart cherry production has been trending downward. Bearing acreage has declined from a high of 50,050 acres in 1987/88 to 37,050 acres in 2005/2006. This represents a 26 percent decrease in total bearing acres. Michigan leads the PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 Restricted 55 45 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 2006/2007 crop is moderate in size at 263 million pounds. The largest crop occurred in 1995 with production in the regulated districts reaching a record 395.6 million pounds. The price per pound received by tart cherry growers ranged from a low of 7.3 cents in 1987 to a high of 46.4 cents in 1991. 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. E:\FR\FM\16JAP1.SGM 16JAP1 ycherry on PROD1PC64 with PROPOSALS 1684 Federal Register / Vol. 72, No. 9 / Tuesday, January 16, 2007 / Proposed Rules 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, because 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 an attempt to bring supply and demand into balance. If the primary market is over-supplied with cherries, grower prices decline substantially. The tart cherry sector uses an industry-wide storage program as a supplemental coordinating mechanism under the Federal marketing order. The primary purpose of the storage program VerDate Aug<31>2005 14:19 Jan 12, 2007 Jkt 211001 is to warehouse supplies in large crop years in order to supplement supplies in short crop years. The storage approach is feasible because the increase in price—when moving from a large crop to a short crop year—more than offsets the costs for storage, interest, and handling of the stored cherries. The price that growers receive for their crop is largely determined by the total production and carryin inventories. The Federal marketing order permits the industry to exercise supply control provisions, which allow for the establishment of free and restricted percentages for the primary market, and a storage program. The establishment of restricted percentages impacts the production to be marketed in the primary market, while the storage program has an impact on the volume of unsold inventories. The volume control mechanism used by the cherry industry results in decreased shipments to primary markets. Without volume control the primary markets (domestic) would likely be over-supplied, resulting in lower grower prices. To assess the impact that volume control has on the prices growers receive for their product, an econometric model has been developed. The econometric model provides a way to see what impacts volume control may have on grower prices. The three districts in Michigan, along with the districts in Utah, New York, and Washington are the restricted areas for this crop year and their combined total production is 251 million pounds. A free percentage of 55 percent results in 138 million pounds is available to be shipped to primary markets from these four states. Production levels of 3.4 million pounds for Oregon, 4.5 million pounds for Pennsylvania, and 4.3 million pounds for Wisconsin (the unregulated areas in 2006–2007), result in an additional 12.2 million pounds available for primary market shipments. In addition, USDA requires a 10 percent release from reserves as a market growth factor. This results in an additional 18 million pounds being available for the primary market. The 138 million pounds from Michigan, Utah, Washington, and New York, the 12.2 million pounds from the other producing states, the 18 million pound release, and the 31 million pound carryin inventory gives a total of 199.2 million pounds being available for the primary markets. The econometric model is used to estimate the difference between grower prices with and without restrictions. With volume controls, grower prices are estimated to be approximately $0.025 PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 per pound higher than without volume controls. The use of volume controls is estimated to have a positive impact on grower’s total revenues. With restrictions, revenues are estimated to be $6.0 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 45 percent volume control would not unduly burden producers, particularly smaller growers. The 45 percent restriction would be applied to the growers in Michigan, New York, Utah, and Washington. The growers in the other three States covered under the marketing order will benefit from this restriction. Recent grower prices have been as high as $0.44 per pound in 2002–03 when there was a crop failure. Prices in the last two crop years have been $0.33 in 2004 and $0.24 per pound in 2005. At current production levels, yield is estimated at approximately 7,112 pounds per acre. At this level of yield, the cost of production is estimated to be $0.31 per pound (Cost of Production Tart Cherries in Northwestern Michigan, Nugent, Kole, Thornton, Bardenhagen). Thus, this year’s grower price even with regulation is estimated to be below the cost of production. The use of volume controls is believed to have little or no effect on consumer prices and will not result in fewer retail sales or sales to food service outlets. Without the use of volume controls, the industry could be expected to start to build large amounts of unwanted inventories. These inventories 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 $0.0039 per pound occurs. The use of volume controls allows the industry to supply the primary markets while avoiding the disastrous results of oversupplying 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 2006– 2007 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; E:\FR\FM\16JAP1.SGM 16JAP1 ycherry on PROD1PC64 with PROPOSALS Federal Register / Vol. 72, No. 9 / Tuesday, January 16, 2007 / Proposed Rules (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 2006 of the free and restricted percentages proposed to be established by this rule (55 percent free and 45 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 2006–2007 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. 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. USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this regulation. VerDate Aug<31>2005 14:19 Jan 12, 2007 Jkt 211001 In addition, the Board’s meeting was widely publicized throughout the tart cherry industry and all interested persons were invited to attend the meeting and participate in Board deliberations on all issues. Like all Board meetings, the September 9, 2006, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. Finally, interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses. In compliance with Office of Management and Budget (OMB) regulations (5 CFR part 1320) which implement the Paperwork Reduction Act of 1995 (Pub. L. 104–13), the information collection and recordkeeping requirements under the tart cherry marketing order have been previously approved by OMB and assigned OMB Number 0581–0177. Reporting and recordkeeping burdens are necessary for compliance purposes and for developing statistical data for maintenance of the program. The forms require information which is readily available from handler records and which can be provided without data processing equipment or trained statistical staff. As with other, similar marketing order programs, reports and forms are periodically studied to reduce or eliminate duplicate information collection burdens by industry and public sector agencies. This rule does not change those requirements. AMS is committed to complying with E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services and for other purposes. A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/ fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section. 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 2006–2007 crop. All written comments timely received will be considered before a final determination is made on this matter. PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 1685 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 930.255 is added to read as follows: Note: This section will not appear in the annual Code of Federal Regulations. § 930.255 Final free and restricted percentages for the 2006–2007 crop year. The final percentages for tart cherries handled by handlers during the crop year beginning on July 1, 2006, which shall be free and restricted, respectively, are designated as follows: Free percentage, 55 percent and restricted percentage, 45 percent. Dated: January 9, 2007. Lloyd C. Day, Administrator, Agricultural Marketing Service. [FR Doc. E7–423 Filed 1–12–07; 8:45 am] BILLING CODE 3410–02–P DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 946 [Docket No. AMS–FV–06–0177; FV06–946– 1 PR] Irish Potatoes Grown in Washington; Modification of Administrative Rules Governing Committee Representation Agricultural Marketing Service, USDA. ACTION: Proposed rule. AGENCY: SUMMARY: This rule invites comments on modifications to the administrative rules governing committee representation under the Washington potato marketing order. The marketing order regulates the handling of Irish potatoes grown in Washington, and is administered locally by the State of Washington Potato Committee (Committee). This rule would reestablish districts within the production area, reestablish the Committee with fewer members, and E:\FR\FM\16JAP1.SGM 16JAP1

Agencies

[Federal Register Volume 72, Number 9 (Tuesday, January 16, 2007)]
[Proposed Rules]
[Pages 1681-1685]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-423]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Docket No. AMS-FV-06-00187; FV07-930-1 PR]


Tart Cherries Grown in the States of Michigan, et al.; Final Free 
and Restricted Percentages for the 2006-2007 Crop Year for Tart 
Cherries

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule invites comments on the establishment of final free 
and restricted percentages for the 2006-2007 crop year. The percentages 
are 55 percent free and 45 percent restricted and will establish the 
proportion of cherries from the 2006 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 February 15, 2007.

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) 720-8938, or E-mail: moabdocket.clerk@usda.gov; 
or Internet: https://www.regulations.gov. Comments should reference the 
docket number and the date and page number of this issue of the Federal 
Register and will be available for public inspection in the Office of 
the Docket Clerk during regular business hours or can be viewed at: 
https://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G. 
Johnson, Marketing Order Administration Branch, Fruit and Vegetable 
Programs, AMS, USDA, Unit 155, 4700 River Road, Riverdale, MD 20737; 
Telephone: (301) 734-5243, or Fax: (301) 734-5275, or E-mail at 
Patricia.Petrella@usda.gov or Kenneth.Johnson@usda.gov.
    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 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 (Department) 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 2006-2007 crop year, beginning July 1, 2006, through June 30, 2007. 
This rule will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary a 
petition stating that the order, any provision of the order, or any 
obligation imposed in connection with the order is not in accordance 
with law and request a modification of the order or to be exempt 
therefrom. Such handler is afforded the opportunity for a hearing on 
the petition. After the hearing, the 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; and District eight--Washington. Districts five, six and nine 
(Oregon, Pennsylvania, and Wisconsin, respectively) will not be 
regulated for the 2006-2007 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, Pennsylvania, and 
Wisconsin, handlers in those districts would not be subject to volume 
regulation during the 2006-2007 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 tends 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.

[[Page 1682]]

    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 22, 2006, and computed, for the 2006-2007 
crop year, an optimum supply of 182 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 calculated preliminary free and restricted percentages as 
follows: The USDA estimate of the crop for the entire production area 
was 256 million pounds; a 25 million pound carryin (based on Board 
estimates) was subtracted from the optimum supply of 182 million pounds 
which resulted in 2006-2007 tonnage requirements (adjusted optimum 
supply) of 157 million pounds. The carryin figure reflects the amount 
of cherries that handlers actually had in inventory at the beginning of 
the 2006-2007 crop year. Subtracting the adjusted optimum supply of 157 
million pounds from the USDA crop estimate (256 million pounds) results 
in a surplus of 99 million pounds of tart cherries. The surplus was 
divided by the production in the regulated districts (249 million 
pounds) and resulted in a restricted percentage of 40 percent for the 
2006-2007 crop year. The free percentage was 60 percent (100 percent 
minus 40 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 2006-2007 year:

------------------------------------------------------------------------
                                                            Millions of
                                                              pounds
------------------------------------------------------------------------
Optimum Supply Formula:
    (1) Average sales of the prior three years..........             182
    (2) Plus desirable carryout.........................               0
    (3) Optimum supply calculated by the Board at the                182
     June meeting.......................................
Preliminary Percentages:
    (4) USDA crop estimate..............................             256
    (5) Carryin held by handlers as of July 1, 2006.....              25
    (6) Adjusted optimum supply for current crop year                157
     (Item 3 minus Item 5)..............................
    (7) Surplus (Item 4 minus Item 6)...................              99
    (8) USDA crop estimate for regulated districts......             249
------------------------------------------------------------------------


 
                                               Free         Restricted
------------------------------------------------------------------------
    (9) Preliminary percentages (item 7               60              40
     divided by item 8 x 100 equals
     restricted percentage; 100 minus
     restricted percentage equals free
     percentage)........................
------------------------------------------------------------------------

    Between July 1 and September 15 of each crop year, the Board may 
modify the preliminary free and restricted percentages by announcing 
interim free and restricted percentages to adjust to the actual pack 
occurring in the industry.
    USDA establishes final free and restricted percentages through the 
informal rulemaking process. These percentages would 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, 2006, to recommend final free and 
restricted percentages.
    The actual production reported by the Board was 263 million pounds, 
which is a 7 million pound increase from the USDA crop estimate of 256 
million pounds.
    A 31 million pound carryin (based on handler reports) was 
subtracted from the Board's optimum supply of 182 million pounds, 
yielding an adjusted optimum supply for the current crop year of 151 
million pounds. The adjusted optimum supply of 151 million pounds was 
subtracted from the actual production of 263 million pounds, which 
resulted in a 112 million pound surplus. The total surplus of 112 
million pounds is divided by the 251 million-pound volume of tart 
cherries produced in the regulated districts. This results in a 45 
percent restricted percentage and a corresponding 55 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

[[Page 1683]]

information available in September for the 2006-2007 crop year:

------------------------------------------------------------------------
                                                           Millions  of
                                                              pounds
------------------------------------------------------------------------
Optimum Supply Formula:
    (1) Average sales of the prior three years..........             182
    (2) Plus desirable carryout.........................               0
    (3) Optimum supply calculated by the Board..........             182
Final Percentages:
    (4) Board reported production.......................             263
    (5) Plus carryin held by handlers as of July 1, 2006              31
    (6) Adjusted optimum supply (Item 3 minus Item 5)                151
     available for current crop year....................
    (7) Surplus (Item 4 minus Item 6)...................             112
    (8) Production in regulated districts...............             251
------------------------------------------------------------------------


 
                                                    Percentages
                                         -------------------------------
                                               Free         Restricted
------------------------------------------------------------------------
    (9) Final Percentages (item 7                     55              45
     divided by item 8 x 100 equals
     restricted percentage; 100 minus
     restricted percentage equals free
     percentage)........................
------------------------------------------------------------------------

    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 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 18 
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.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities. Accordingly, AMS has 
prepared this 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 $6,500,000, 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 2001/2002 through 2005/2006, approximately 93.8 
percent of the U.S. tart cherry crop, or 214.3 million pounds, was 
processed annually. Of the 214.3 million pounds of tart cherries 
processed, 62 percent was frozen, 26 percent was canned, and 12 percent 
was utilized for juice and other products.
    Based on National Agricultural Statistics Service data, acreage in 
the United States devoted to tart cherry production has been trending 
downward. Bearing acreage has declined from a high of 50,050 acres in 
1987/88 to 37,050 acres in 2005/2006. 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 2006/2007 crop is moderate in size at 263 million pounds. The 
largest crop occurred in 1995 with production in the regulated 
districts reaching a record 395.6 million pounds. The price per pound 
received by tart cherry growers ranged from a low of 7.3 cents in 1987 
to a high of 46.4 cents in 1991. 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.

[[Page 1684]]

    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, because 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 an attempt 
to bring supply and demand into balance. If the primary market is over-
supplied with cherries, grower prices decline substantially.
    The tart cherry sector uses an industry-wide storage program as a 
supplemental coordinating mechanism under the Federal marketing order. 
The primary purpose of the storage program is to warehouse supplies in 
large crop years in order to supplement supplies in short crop years. 
The storage approach is feasible because the increase in price--when 
moving from a large crop to a short crop year--more than offsets the 
costs for storage, interest, and handling of the stored cherries.
    The price that growers receive for their crop is largely determined 
by the total production and carryin inventories. The Federal marketing 
order permits the industry to exercise supply control provisions, which 
allow for the establishment of free and restricted percentages for the 
primary market, and a storage program. The establishment of restricted 
percentages impacts the production to be marketed in the primary 
market, while the storage program has an impact on the volume of unsold 
inventories.
    The volume control mechanism used by the cherry industry results in 
decreased shipments to primary markets. Without volume control the 
primary markets (domestic) would likely be over-supplied, resulting in 
lower grower prices.
    To assess the impact that volume control has on the prices growers 
receive for their product, an econometric model has been developed. The 
econometric model provides a way to see what impacts volume control may 
have on grower prices. The three districts in Michigan, along with the 
districts in Utah, New York, and Washington are the restricted areas 
for this crop year and their combined total production is 251 million 
pounds. A free percentage of 55 percent results in 138 million pounds 
is available to be shipped to primary markets from these four states. 
Production levels of 3.4 million pounds for Oregon, 4.5 million pounds 
for Pennsylvania, and 4.3 million pounds for Wisconsin (the unregulated 
areas in 2006-2007), result in an additional 12.2 million pounds 
available for primary market shipments.
    In addition, USDA requires a 10 percent release from reserves as a 
market growth factor. This results in an additional 18 million pounds 
being available for the primary market. The 138 million pounds from 
Michigan, Utah, Washington, and New York, the 12.2 million pounds from 
the other producing states, the 18 million pound release, and the 31 
million pound carryin inventory gives a total of 199.2 million pounds 
being available for the primary markets.
    The econometric model is used to estimate the difference between 
grower prices with and without restrictions. With volume controls, 
grower prices are estimated to be approximately $0.025 per pound higher 
than without volume controls.
    The use of volume controls is estimated to have a positive impact 
on grower's total revenues. With restrictions, revenues are estimated 
to be $6.0 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 45 percent volume control would not unduly 
burden producers, particularly smaller growers. The 45 percent 
restriction would be applied to the growers in Michigan, New York, 
Utah, and Washington. The growers in the other three States covered 
under the marketing order will benefit from this restriction.
    Recent grower prices have been as high as $0.44 per pound in 2002-
03 when there was a crop failure. Prices in the last two crop years 
have been $0.33 in 2004 and $0.24 per pound in 2005. At current 
production levels, yield is estimated at approximately 7,112 pounds per 
acre. At this level of yield, the cost of production is estimated to be 
$0.31 per pound (Cost of Production Tart Cherries in Northwestern 
Michigan, Nugent, Kole, Thornton, Bardenhagen). Thus, this year's 
grower price even with regulation is estimated to be below the cost of 
production. The use of volume controls is believed to have little or no 
effect on consumer prices and will not result in fewer retail sales or 
sales to food service outlets.
    Without the use of volume controls, the industry could be expected 
to start to build large amounts of unwanted inventories. These 
inventories 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 $0.0039 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 
2006-2007 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;

[[Page 1685]]

(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 2006 of the free and restricted percentages 
proposed to be established by this rule (55 percent free and 45 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 
2006-2007 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.
    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.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this regulation.
    In addition, the Board's meeting was widely publicized throughout 
the tart cherry industry and all interested persons were invited to 
attend the meeting and participate in Board deliberations on all 
issues. Like all Board meetings, the September 9, 2006, meeting was a 
public meeting and all entities, both large and small, were able to 
express views on this issue. Finally, interested persons are invited to 
submit information on the regulatory and informational impacts of this 
action on small businesses.
    In compliance with Office of Management and Budget (OMB) 
regulations (5 CFR part 1320) which implement the Paperwork Reduction 
Act of 1995 (Pub. L. 104-13), the information collection and 
recordkeeping requirements under the tart cherry marketing order have 
been previously approved by OMB and assigned OMB Number 0581-0177.
    Reporting and recordkeeping burdens are necessary for compliance 
purposes and for developing statistical data for maintenance of the 
program. The forms require information which is readily available from 
handler records and which can be provided without data processing 
equipment or trained statistical staff. As with other, similar 
marketing order programs, reports and forms are periodically studied to 
reduce or eliminate duplicate information collection burdens by 
industry and public sector agencies. This rule does not change those 
requirements.
    AMS is committed to complying with E-Government Act, to promote the 
use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services and for other purposes.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http:/
/www.ams.usda.gov/fv/moab.html. Any questions about the compliance 
guide should be sent to Jay Guerber at the previously mentioned address 
in the FOR FURTHER INFORMATION CONTACT section.
    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 2006-2007 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 930.255 is added to read as follows:

    Note: This section will not appear in the annual Code of Federal 
Regulations.

Sec.  930.255  Final free and restricted percentages for the 2006-2007 
crop year.

    The final percentages for tart cherries handled by handlers during 
the crop year beginning on July 1, 2006, which shall be free and 
restricted, respectively, are designated as follows: Free percentage, 
55 percent and restricted percentage, 45 percent.

    Dated: January 9, 2007.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
 [FR Doc. E7-423 Filed 1-12-07; 8:45 am]
BILLING CODE 3410-02-P