Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 2007-2008 Marketing Year, 2639-2644 [E7-764]
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2639
Proposed Rules
Federal Register
Vol. 71, No. 13
Monday, January 22, 2007
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Docket Nos. AMS–FV–06–0188; FV07–985–
1 PR]
Marketing Order Regulating the
Handling of Spearmint Oil Produced in
the Far West; Salable Quantities and
Allotment Percentages for the 2007–
2008 Marketing Year
Agricultural Marketing Service,
USDA.
ACTION: Proposed rule.
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AGENCY:
SUMMARY: This rule would establish the
quantity of spearmint oil produced in
the Far West, by class that handlers may
purchase from, or handle for, producers
during the 2007–2008 marketing year,
which begins on June 1, 2007. This rule
invites comments on the establishment
of salable quantities and allotment
percentages for Class 1 (Scotch)
spearmint oil of 886,667 pounds and 45
percent, respectively, and for Class 3
(Native) spearmint oil of 1,062,336
pounds and 48 percent, respectively.
The Spearmint Oil Administrative
Committee (Committee), the agency
responsible for local administration of
the marketing order for spearmint oil
produced in the Far West,
recommended these limitations for the
purpose of avoiding extreme
fluctuations in supplies and prices to
help maintain stability in the spearmint
oil market.
DATES: Comments must be received by
February 21, 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; E-mail:
moab.docketclerk@usda.gov; or Internet:
https://www.regulations.gov. All
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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.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
Susan M. Hiller, Marketing Specialist
and Gary D. Olson, Regional Manager,
Northwest Marketing Field Office,
Marketing Order Administration
Branch, Fruit and Vegetable Programs,
AMS, USDA; Telephone: (503) 326–
2724; Fax: (503) 326–7440; or E-mail:
Susan.Hiller@usda.gov or
GaryD.Olson@usda.gov.
Small businesses may request
information on complying with this
regulation 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 rule
is issued under Marketing Order No.
985 (7 CFR part 985), as amended,
regulating the handling of spearmint oil
produced in the Far West (Washington,
Idaho, Oregon, and designated parts of
Nevada and Utah), hereinafter referred
to as the ‘‘order.’’ This order is effective
under the Agricultural Marketing
Agreement Act of 1937, as amended (7
U.S.C. 601–674), hereinafter referred to
as the ‘‘Act.’’
The Department of Agriculture
(USDA) is issuing this rule in
conformance with Executive Order
12866.
This rule has been reviewed under
Executive Order 12988, Civil Justice
Reform. Under the marketing order now
in effect, salable quantities and
allotment percentages may be
established for classes of spearmint oil
produced in the Far West. This
proposed rule would establish the
quantity of spearmint oil produced in
the Far West, by class, which may be
purchased from or handled for
producers by handlers during the 2007–
2008 marketing year, which begins on
June 1, 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
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parties may file suit in court. Under
section 608c(15)(A) of the Act, any
handler subject to an order may file
with USDA 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 exempted therefrom. A handler
is afforded the opportunity for a hearing
on the petition. After the hearing USDA
would rule on the petition. The Act
provides that the district court of the
United States in any district in which
the handler is an inhabitant, or has his
or her principal place of business, has
jurisdiction to review USDA’s ruling on
the petition, provided an action is filed
not later than 20 days after the date of
the entry of the ruling.
Pursuant to authority in §§ 985.50,
985.51, and 985.52 of the order, the
Committee, with all eight members
present, met on October 4, 2006, and
recommended salable quantities and
allotment percentages for both classes of
oil for the 2007–2008 marketing year.
The Committee unanimously
recommended the establishment of a
salable quantity and allotment
percentage for Scotch spearmint oil of
886,667 pounds and 45 percent,
respectively. For Native spearmint oil,
the Committee unanimously
recommended the establishment of a
salable quantity and allotment
percentage of 1,062,336 pounds and 48
percent, respectively.
This rule would limit the amount of
spearmint oil that handlers may
purchase from, or handle for, producers
during the 2007–2008 marketing year,
which begins on June 1, 2007. Salable
quantities and allotment percentages
have been placed into effect each season
since the order’s inception in 1980.
The U.S. production of Scotch
spearmint oil is concentrated in the Far
West, which includes Washington,
Idaho, and Oregon and a portion of
Nevada and Utah. Scotch spearmint oil
is also produced in the Midwest states
of Indiana, Michigan, and Wisconsin, as
well as in the States of Montana, South
Dakota, North Dakota, and Minnesota.
The production area covered by the
marketing order currently accounts for
approximately 71 percent of the annual
U.S. sales of Scotch spearmint oil.
When the order became effective in
1980, the Far West had 72 percent of the
world’s sales of Scotch spearmint oil.
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While the Far West is still the leading
producer of Scotch spearmint oil, its
share of world sales is now estimated to
be about 43 percent. This loss in world
sales for the Far West region is directly
attributed to the increase in global
production. Other factors that have
played a significant role include the
overall quality of the imported oil and
technological advances that allow for
more blending of lower quality oils.
Such factors have provided the
Committee with challenges in
accurately predicting trade demand for
Scotch oil. This, in turn, has made it
difficult to balance available supplies
with demand and to achieve the
Committee’s overall goal of stabilizing
producer and market prices.
The marketing order has continued to
contribute to price and general market
stabilization for Far West producers.
The Committee, as well as spearmint oil
producers and handlers attending the
October 4, 2006, meeting, estimated that
the 2006–2007 producer price of Scotch
oil would be $13.00 to $14.00 per
pound. However, there is very little
forward contracting being done at the
present time. This producer price is
approaching the cost of production for
most producers as indicated in a study
from the Washington State University
Cooperative Extension Service (WSU),
which estimates production costs to be
between $13.50 and $15.00 per pound.
However, this study was completed in
2001 and fuel costs alone have doubled
in price.
This low level of producer returns has
caused an overall reduction in acreage.
When the order became effective in
1980, the Far West region had 9,702
acres of Scotch spearmint. The
Committee estimates that the 2005–2006
acreage of Scotch spearmint was about
6,132 acres. Based on the reduced
Scotch spearmint acreage, the
Committee estimates that production for
the 2005–2006 marketing season will be
about 764,420 pounds.
The Committee recommended the
2007–2008 Scotch spearmint oil salable
quantity (886,667 pounds) and
allotment percentage (45 percent)
utilizing sales estimates for 2007–2008
Scotch spearmint oil as provided by
several of the industry’s handlers, as
well as historical and current Scotch
spearmint oil sales levels. The
Committee is estimating that about
875,000 pounds of Scotch spearmint oil,
on average, may be sold during the
2007–2008 marketing year. When
considered in conjunction with the
estimated carry-in of 18,029 pounds of
oil on June 1, 2007, the recommended
salable quantity of 886,667 pounds
results in a total available supply of
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Scotch spearmint oil next year of about
904,696 pounds.
The recommendation for the 2007–
2008 Scotch spearmint oil volume
regulation is consistent with the
Committee’s stated intent of keeping
adequate supplies available at all times,
while attempting to stabilize prices at a
level adequate to sustain the producers.
Furthermore, the recommendation takes
into consideration the industry’s desire
to compete with less expensive oil
produced outside the regulated area.
Although Native spearmint oil
producers are facing market conditions
similar to those affecting the Scotch
spearmint oil market, the market share
is quite different. Over 90 percent of the
U.S. production of Native spearmint is
produced within the Far West
production area. Also, most of the
world’s supply of Native spearmint is
produced in the United States.
The supply and demand
characteristics of the current Native
spearmint oil market, combined with
the stabilizing impact of the marketing
order, have kept the price relatively
steady. The average price for the five
year period ending in 2005 is $9.38,
which is $0.34 lower than the average
price for the ten year period (1996–
2005) of $9.72. The Committee
considers these levels too low for the
majority of producers to maintain
viability. The WSU study referenced
earlier indicates that the cost of
producing Native spearmint oil ranges
from $10.26 to $10.92 per pound.
Similar to Scotch, the low level of
producer returns has also caused an
overall reduction in Native spearmint
acreage. When the order became
effective in 1980, the Far West region
had 12,153 acres of Native spearmint.
The Committee estimates that the 2005–
2006 acreage of Native spearmint was
about 7,528 acres. Based on the reduced
Native spearmint acreage, the
Committee estimates that production for
the 2005–2006 marketing season will be
about 1,004,900 pounds.
The Committee recommended the
2007–2008 Native spearmint oil salable
quantity (1,062,336 pounds) and
allotment percentage (48 percent)
utilizing sales estimates for 2007–2008
Native oil as provided by several of the
industry’s handlers, as well as historical
and current Native spearmint oil sales
levels. The Committee is estimating that
about 1,141,667 pounds of Native
spearmint oil, on average, may be sold
during the 2007–2008 marketing year.
When considered in conjunction with
the estimated carry-in of 119,057
pounds of oil on June 1, 2007, the
recommended salable quantity of
1,062,336 pounds results in a total
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available supply of Native spearmint oil
next year of about 1,181,393 pounds.
The Committee’s method of
calculating the Native spearmint oil
salable quantity and allotment
percentage continues to primarily
utilize information on price and
available supply as they are affected by
the estimated trade demand. The
Committee’s stated intent is to make
adequate supplies available to meet
market needs and improve producer
prices.
The Committee believes that the order
has contributed extensively to the
stabilization of producer prices, which
prior to 1980 experienced wide
fluctuations from year to year.
According to the National Agricultural
Statistics Service, for example, the
average price paid for both classes of
spearmint oil ranged from $4.00 per
pound to $11.10 per pound during the
period between 1968 and 1980. Prices
since the order’s inception, the period
from 1980 to 2005, have generally
stabilized at an average price of $9.84
per pound for Native spearmint oil and
$12.72 per pound for Scotch spearmint
oil.
The Committee based its
recommendation for the proposed
salable quantity and allotment
percentage for each class of spearmint
oil for the 2007–2008 marketing year on
the information discussed above, as well
as the data outlined below.
(1) Class 1 (Scotch) Spearmint Oil
(A) Estimated carry-in on June 1,
2007—18,029 pounds. This figure is the
difference between the revised 2006–
2007 marketing year total available
supply of 818,029 pounds and the
estimated 2006–2007 marketing year
trade demand of 800,000 pounds.
(B) Estimated trade demand for the
2007–2008 marketing year—875,000
pounds. This figure is based on input
from producers at five Scotch spearmint
oil production area meetings held in
September 2006, as well as estimates
provided by handlers and other meeting
participants at the October 4, 2006,
meeting. The average estimated trade
demand provided at the five production
area meetings was 880,000 pounds,
whereas the estimated handler trade
demand ranged from 850,000 to 900,000
pounds. The average of sales over the
last five years was 754,269 pounds.
(C) Salable quantity required from the
2007–2008 marketing year production—
856,971 pounds. This figure is the
difference between the estimated 2007–
2008 marketing year trade demand
(875,000 pounds) and the estimated
carry-in on June 1, 2007 (18,029
pounds).
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(D) Total estimated allotment base for
the 2007–2008 marketing year—
1,970,370 pounds. This figure
represents a one percent increase over
the revised 2006–2007 total allotment
base. This figure is generally revised
each year on June 1 due to producer
base being lost due to the bona fide
effort production provisions of
§ 985.53(e). The revision is usually
minimal.
(E) Computed allotment percentage—
43.5 percent. This percentage is
computed by dividing the required
salable quantity by the total estimated
allotment base.
(F) Recommended allotment
percentage—45 percent. This
recommendation is based on the
Committee’s determination that the
computed 43.5 percent would not
adequately supply the potential 2007–
2008 market.
(G) The Committee’s recommended
salable quantity—886,667 pounds. This
figure is the product of the
recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the
2007–2008 marketing year—904,696
pounds. This figure is the sum of the
2007–2008 recommended salable
quantity (886,667 pounds) and the
estimated carry-in on June 1, 2007
(18,029 pounds).
(2) Class 3 (Native) Spearmint Oil
(A) Estimated carry-in on June 1,
2007—119,057 pounds. The
Committee’s estimated carry-in reflects
anticipated increases to the salable
quantity and allotment percentage that
may be needed to meet demand in
2006–2007.
(B) Estimated trade demand for the
2007–2008 marketing year—1,141,667
pounds. This figure is based on input
from producers at the six Native
spearmint oil production area meetings
held in September 2006, as well as
estimates provided by handlers and
other meeting participants at the
October 4, 2006, meeting. The average
estimated trade demand provided at the
six production area meetings was
1,141,667 pounds, whereas the average
handler estimate was 1,183,000 pounds.
(C) Salable quantity required from the
2007–2008 marketing year production—
1,022,610 pounds. This figure is the
difference between the estimated 2007–
2008 marketing year trade demand
(1,141,667 pounds) and the estimated
carry-in on June 1, 2007 (119,057
pounds).
(D) Total estimated allotment base for
the 2007–2008 marketing year—
2,213,200 pounds. This figure
represents a one percent increase over
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the revised 2006–2007 total allotment
base. This figure is generally revised
each year on June 1 due to producer
base being lost due to the bona fide
effort production provisions of
§ 985.53(e). The revision is usually
minimal.
(E) Computed allotment percentage—
46.2 percent. This percentage is
computed by dividing the required
salable quantity by the total estimated
allotment base.
(F) Recommended allotment
percentage—48 percent. This is the
Committee’s recommendation based on
the computed allotment percentage, the
average of the computed allotment
percentage figures from the six
production area meetings (46.4 percent),
and input from producers and handlers
at the October 4, 2006, meeting.
(G) The Committee’s recommended
salable quantity—1,062,336 pounds.
This figure is the product of the
recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the
2007–2008 marketing year—1,181,393
pounds. This figure is the sum of the
2007–2008 recommended salable
quantity (1,062,336 pounds) and the
estimated carry-in on June 1, 2007
(119,057 pounds).
The salable quantity is the total
quantity of each class of spearmint oil,
which handlers may purchase from, or
handle on behalf of producers during a
marketing year. Each producer is
allotted a share of the salable quantity
by applying the allotment percentage to
the producer’s allotment base for the
applicable class of spearmint oil.
The Committee’s recommended
Scotch and Native spearmint oil salable
quantities and allotment percentages of
886,667 pounds and 45 percent, and
1,062,336 pounds and 48 percent,
respectively, are based on the
Committee’s goal of maintaining market
stability by avoiding extreme
fluctuations in supplies and prices, and
the anticipated supply and trade
demand during the 2007–2008
marketing year. The proposed salable
quantities are not expected to cause a
shortage of spearmint oil supplies. Any
unanticipated or additional market
demand for spearmint oil, which may
develop during the marketing year, can
be satisfied by an increase in the salable
quantities. Both Scotch and Native
spearmint oil producers who produce
more than their annual allotments
during the 2007–2008 marketing year
may transfer such excess spearmint oil
to a producer with spearmint oil
production less than his or her annual
allotment or put it into the reserve pool
until November 1, 2007.
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This proposed regulation, if adopted,
would be similar to regulations issued
in prior seasons. Costs to producers and
handlers resulting from this rule are
expected to be offset by the benefits
derived from a stable market and
improved returns. In conjunction with
the issuance of this proposed rule,
USDA has reviewed the Committee’s
marketing policy statement for the
2007–2008 marketing year. The
Committee’s marketing policy
statement, a requirement whenever the
Committee recommends volume
regulations, fully meets the intent of
§ 985.50 of the order. During its
discussion of potential 2007–2008
salable quantities and allotment
percentages, the Committee considered:
(1) The estimated quantity of salable oil
of each class held by producers and
handlers; (2) the estimated demand for
each class of oil; (3) the prospective
production of each class of oil; (4) the
total of allotment bases of each class of
oil for the current marketing year and
the estimated total of allotment bases of
each class for the ensuing marketing
year; (5) the quantity of reserve oil, by
class, in storage; (6) producer prices of
oil, including prices for each class of oil;
and (7) general market conditions for
each class of oil, including whether the
estimated season average price to
producers is likely to exceed parity.
Conformity with the USDA’s
‘‘Guidelines for Fruit, Vegetable, and
Specialty Crop Marketing Orders’’ has
also been reviewed and confirmed.
The establishment of these salable
quantities and allotment percentages
would allow for anticipated market
needs. In determining anticipated
market needs, consideration by the
Committee was given to historical sales,
as well as changes and trends in
production and demand. This rule also
provides producers with information on
the amount of spearmint oil that should
be produced for the 2007–2008 season
in order to meet anticipated market
demand.
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 rule 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 the rules issued thereunder, are
unique in that they are brought about
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through group action of essentially
small entities acting on their own
behalf. Thus, both statutes have small
entity orientation and compatibility.
There are eight spearmint oil handlers
subject to regulation under the order,
and approximately 58 producers of
Scotch spearmint oil and approximately
90 producers of Native spearmint oil in
the regulated production area. Small
agricultural service firms are defined by
the Small Business Administration
(SBA) (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.
Based on the SBA’s definition of
small entities, the Committee estimates
that 2 of the 8 handlers regulated by the
order could be considered small
entities. Most of the handlers are large
corporations involved in the
international trading of essential oils
and the products of essential oils. In
addition, the Committee estimates that
19 of the 58 Scotch spearmint oil
producers and 21 of the 90 Native
spearmint oil producers could be
classified as small entities under the
SBA definition. Thus, a majority of
handlers and producers of Far West
spearmint oil may not be classified as
small entities.
The Far West spearmint oil industry
is characterized by producers whose
farming operations generally involve
more than one commodity, and whose
income from farming operations is not
exclusively dependent on the
production of spearmint oil. A typical
spearmint oil-producing operation has
enough acreage for rotation such that
the total acreage required to produce the
crop is about one-third spearmint and
two-thirds rotational crops. Thus, the
typical spearmint oil producer has to
have considerably more acreage than is
planted to spearmint during any given
season. Crop rotation is an essential
cultural practice in the production of
spearmint oil for weed, insect, and
disease control. To remain economically
viable with the added costs associated
with spearmint oil production, most
spearmint oil-producing farms fall into
the SBA category of large businesses.
Small spearmint oil producers
generally are not as extensively
diversified as larger ones and as such
are more at risk from market
fluctuations. Such small producers
generally need to market their entire
annual allotment and do not have the
luxury of having other crops to cushion
seasons with poor spearmint oil returns.
Conversely, large diversified producers
have the potential to endure one or
more seasons of poor spearmint oil
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markets because income from alternate
crops could support the operation for a
period of time. Being reasonably assured
of a stable price and market provides
small producing entities with the ability
to maintain proper cash flow and to
meet annual expenses. Thus, the market
and price stability provided by the order
potentially benefit the small producer
more than such provisions benefit large
producers. Even though a majority of
handlers and producers of spearmint oil
may not be classified as small entities,
the volume control feature of this order
has small entity orientation.
This proposed rule would establish
the quantity of spearmint oil produced
in the Far West, by class, that handlers
may purchase from, or handle for,
producers during the 2007–2008
marketing year. The Committee
recommended this rule to help maintain
stability in the spearmint oil market by
avoiding extreme fluctuations in
supplies and prices. Establishing
quantities to be purchased or handled
during the marketing year through
volume regulations allows producers to
plan their spearmint planting and
harvesting to meet expected market
needs. The provisions of §§ 985.50,
985.51, and 985.52 of the order
authorize this rule.
Instability in the spearmint oil subsector of the mint industry is much
more likely to originate on the supply
side than the demand side. Fluctuations
in yield and acreage planted from
season-to-season tend to be larger than
fluctuations in the amount purchased by
buyers. Demand for spearmint oil tends
to be relatively stable from year-to-year.
The demand for spearmint oil is
expected to grow slowly for the
foreseeable future because the demand
for consumer products that use
spearmint oil will likely expand slowly,
in line with population growth.
Demand for spearmint oil at the farm
level is derived from retail demand for
spearmint-flavored products such as
chewing gum, toothpaste, and
mouthwash. The manufacturers of these
products are by far the largest users of
mint oil. However, spearmint flavoring
is generally a very minor component of
the products in which it is used, so
changes in the raw product price have
no impact on retail prices for those
goods.
Spearmint oil production tends to be
cyclical. Years of large production, with
demand remaining reasonably stable,
have led to periods in which large
producer stocks of unsold spearmint oil
have depressed producer prices for a
number of years. Shortages and high
prices may follow in subsequent years,
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as producers respond to price signals by
cutting back production.
The significant variability is
illustrated by the fact that the coefficient
of variation (a standard measure of
variability; ‘‘CV’’) of Far West spearmint
oil production from 1980 through 2003
was about 0.24. The CV for spearmint
oil grower prices was about 0.14, well
below the CV for production. This
provides an indication of the price
stabilizing impact of the marketing
order.
Production in the shortest marketing
year was about 49 percent of the 26-year
average (1.842 million pounds from
1980 through 2005) and the largest crop
was approximately 167 percent of the
26-year average. A key consequence is
that in years of oversupply and low
prices the season average producer price
of spearmint oil is below the average
cost of production (as measured by the
Washington State University
Cooperative Extension Service.)
The wide fluctuations in supply and
prices that result from this cycle, which
was even more pronounced before the
creation of the marketing order, can
create liquidity problems for some
producers. The marketing order was
designed to reduce the price impacts of
the cyclical swings in production.
However, producers have been less able
to weather these cycles in recent years
because of the decline in prices of many
of the alternative crops they grow. As
noted earlier, almost all spearmint oil
producers diversify by growing other
crops.
In an effort to stabilize prices, the
spearmint oil industry uses the volume
control mechanisms authorized under
the order. This authority allows the
Committee to recommend a salable
quantity and allotment percentage for
each class of oil for the upcoming
marketing year. The salable quantity for
each class of oil is the total volume of
oil that producers may sell during the
marketing year. The allotment
percentage for each class of spearmint
oil is derived by dividing the salable
quantity by the total allotment base.
Each producer is then issued an
annual allotment certificate, in pounds,
for the applicable class of oil, which is
calculated by multiplying the
producer’s allotment base by the
applicable allotment percentage. This is
the amount of oil for the applicable
class that the producer can sell.
By November 1 of each year, the
Committee identifies any oil that
individual producers have produced
above the volume specified on their
annual allotment certificates. This
excess oil is placed in a reserve pool
administered by the Committee.
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Federal Register / Vol. 71, No. 13 / Monday, January 22, 2007 / Proposed Rules
There is a reserve pool for each class
of oil that may not be sold during the
current marketing year unless USDA
approves a Committee recommendation
to make a portion of the pool available.
However, limited quantities of reserve
oil are typically sold to fill deficiencies.
A deficiency occurs when on-farm
production is less than a producer’s
allotment. In that case, a producer’s own
reserve oil can be sold to fill that
deficiency. Excess production (higher
than the producer’s allotment) can be
sold to fill other producers’ deficiencies.
All of this needs to take place by
November 1.
In any given year, the total available
supply of spearmint oil is composed of
current production plus carry-over
stocks from the previous crop. The
Committee seeks to maintain market
stability by balancing supply and
demand, and to close the marketing year
with an appropriate level of carryout. If
the industry has production in excess of
the salable quantity, then the reserve
pool absorbs the surplus quantity of
spearmint oil, which goes unsold during
that year, unless the oil is needed for
unanticipated sales.
Under its provisions, the order may
attempt to stabilize prices by (1)
Limiting supply and establishing
reserves in high production years, thus
minimizing the price-depressing effect
that excess producer stocks have on
unsold spearmint oil, and (2) ensuring
that stocks are available in short supply
years when prices would otherwise
increase dramatically. The reserve pool
stocks grown in large production years
are drawn down in short crop years.
An econometric model was used to
assess the impact that volume control
has on the prices producers receive for
their commodity. Without volume
control, spearmint oil markets would
likely be over-supplied, resulting in low
producer prices and a large volume of
oil stored and carried over to the next
crop year. The model estimates how
much lower producer prices would
likely be in the absence of volume
controls.
The Committee estimated the trade
demand for the 2007–2008 marketing
year for both classes of oil at 2,016,667
pounds, and that the expected
combined carry-in will be 137,086
pounds. This results in a combined
salable quantity needed of 1,879,581
pounds. Therefore, with volume control,
sales by producers for the 2007–2008
marketing year would be limited to
1,949,003 pounds (the recommended
salable quantity for both classes of
spearmint oil).
The recommended salable
percentages, upon which 2007–2008
VerDate Aug<31>2005
15:11 Jan 19, 2007
Jkt 211001
producer allotments are based, are 45
percent for Scotch and 48 percent for
Native. Without volume controls,
producers would not be limited to these
allotment levels, and could produce and
sell additional spearmint. The
econometric model estimated a $1.40
decline in the season average producer
price per pound (from both classes of
spearmint oil) resulting from the higher
quantities that would be produced and
marketed without volume control. The
Far West producer price for both classes
of spearmint oil was $10.20 for 2005,
which is below the average of $10.83 for
the period of 1980 through 2005, based
on National Agricultural Statistics
Service data. The surplus situation for
the spearmint oil market that would
exist without volume controls in 2007–
2008 also would likely dampen
prospects for improved producer prices
in future years because of the buildup
in stocks.
The use of volume controls allows the
industry to fully supply spearmint oil
markets while avoiding the negative
consequences of over-supplying these
markets. The use of volume controls is
believed to have little or no effect on
consumer prices of products containing
spearmint oil and will not result in
fewer retail sales of such products.
The Committee discussed alternatives
to the recommendations contained in
this rule for both classes of spearmint
oil. The Committee discussed and
rejected the idea of recommending that
there not be any volume regulation for
both classes of spearmint oil because of
the severe price-depressing effects that
would occur without volume control.
The Committee considered various
alternative levels of volume control for
Scotch spearmint oil, including
increasing the percentage to a less
restrictive level, or decreasing the
percentage. After considerable
discussion the Committee unanimously
determined that 886,667 pounds and 45
percent would be the most effective
salable quantity and allotment
percentage, respectively, for the 2007–
2008 marketing year.
The Committee also considered
various alternative levels of volume
control for Native spearmint oil. After
considerable discussion the Committee
unanimously determined that 1,062,336
pounds and 48 percent would be the
most effective salable quantity and
allotment percentage, respectively, for
the 2007–2008 marketing year.
As noted earlier, the Committee’s
recommendation to establish salable
quantities and allotment percentages for
both classes of spearmint oil was made
after careful consideration of all
available information, including: (1) The
PO 00000
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Fmt 4702
Sfmt 4702
2643
estimated quantity of salable oil of each
class held by producers and handlers;
(2) the estimated demand for each class
of oil; (3) the prospective production of
each class of oil; (4) the total of
allotment bases of each class of oil for
the current marketing year and the
estimated total of allotment bases of
each class for the ensuing marketing
year; (5) the quantity of reserve oil, by
class, in storage; (6) producer prices of
oil, including prices for each class of oil;
and (7) general market conditions for
each class of oil, including whether the
estimated season average price to
producers is likely to exceed parity.
Based on its review, the Committee
believes that the salable quantity and
allotment percentage levels
recommended would achieve the
objectives sought.
Without any regulations in effect, the
Committee believes the industry would
return to the pronounced cyclical price
patterns that occurred prior to the order,
and that prices in 2007–2008 would
decline substantially below current
levels.
As stated earlier, the Committee
believes that the order has contributed
extensively to the stabilization of
producer prices, which prior to 1980
experienced wide fluctuations from
year-to-year. National Agricultural
Statistics Service records show that the
average price paid for both classes of
spearmint oil ranged from $4.00 per
pound to $11.10 per pound during the
period between 1968 and 1980. Prices
have been consistently more stable since
the marketing order’s inception in 1980,
with an average price for the period
from 1980 to 2005 of $12.72 per pound
for Scotch spearmint oil and $9.84 per
pound for Native spearmint oil.
During the period of 1998 through
2005, however, large production and
carry-in inventories have contributed to
prices below the 26-year average,
despite the Committee’s efforts to
balance available supplies with
demand. Prices have ranged from $8.00
to $11.00 per pound for Scotch
spearmint oil and between $9.10 and
$10.00 per pound for Native spearmint
oil. The 2005 Native price exceeded the
26-year average by $0.16. Producers
stated, however, that fuel cost increases
more than offset the price increase.
According to the Committee, the
recommended salable quantities and
allotment percentages are expected to
achieve the goals of market and price
stability.
As previously stated, annual salable
quantities and allotment percentages
have been issued for both classes of
spearmint oil since the order’s
inception. Reporting and recordkeeping
E:\FR\FM\22JAP1.SGM
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Federal Register / Vol. 71, No. 13 / Monday, January 22, 2007 / Proposed Rules
requirements have remained the same
for each year of regulation. These
requirements have been approved by the
Office of Management and Budget under
OMB Control No. 0581–0065.
Accordingly, this rule would not impose
any additional reporting or
recordkeeping requirements on either
small or large spearmint oil producers
and handlers. As with all Federal
marketing order programs, reports and
forms are periodically reviewed to
reduce information requirements and
duplication by industry and public
sector agencies.
The AMS is committed to complying
with the 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.
USDA has not identified any relevant
Federal rules that duplicate, overlap, or
conflict with this rule.
In addition, the Committee’s meeting
was widely publicized throughout the
spearmint oil industry and all interested
persons were invited to attend the
meeting and participate in Committee
deliberations on all issues. Like all
Committee meetings, the October 4,
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.
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 the
opportunity to respond to this proposal.
This comment period is deemed
appropriate so that a final determination
can be made prior to June 1, 2007, the
beginning of the 2007–2008 marketing
year. All written comments timely
received will be considered before a
final determination is made on this
matter.
rmajette on PROD1PC67 with PROPOSALS
List of Subjects in 7 CFR Part 985
Marketing agreements, Oils and fats,
Reporting and recordkeeping
requirements, Spearmint oil.
For the reasons set forth in the
preamble, 7 CFR Part 985 is proposed to
be amended as follows:
VerDate Aug<31>2005
16:35 Jan 19, 2007
Jkt 211001
PART 985—MARKETING ORDER
REGULATING THE HANDLING OF
SPEARMINT OIL PRODUCED IN THE
FAR WEST
1. The authority citation for 7 CFR
part 985 continues to read as follows:
Authority: 7 U.S.C. 601–674.
2. A new § 985.226 is added to read
as follows:
[Note: This section will not appear in the
Code of Federal Regulations.]
§ 985.226 Salable quantities and allotment
percentages—2007–2008 marketing year.
The salable quantity and allotment
percentage for each class of spearmint
oil during the marketing year beginning
on June 1, 2007, shall be as follows:
(a) Class 1 (Scotch) oil—a salable
quantity of 886,667 pounds and an
allotment percentage of 45 percent.
(b) Class 3 (Native) oil—a salable
quantity of 1,062,336 pounds and an
allotment percentage of 48 percent.
Dated: January 16, 2007.
Lloyd C. Day,
Administrator, Agricultural Marketing
Service.
[FR Doc. E7–764 Filed 1–19–07; 8:45 am]
BILLING CODE 3410–02–P
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
48 CFR Parts 239 and 252
RIN 0750–AF52
Defense Federal Acquisition
Regulation Supplement; Information
Assurance Contractor Training and
Certification (DFARS Case 2006–D023)
Defense Acquisition
Regulations System, Department of
Defense (DoD).
ACTION: Proposed rule with request for
comments.
AGENCY:
SUMMARY: DoD is proposing to amend
the Defense Federal Acquisition
Regulation Supplement (DFARS) to
address training requirements that apply
to contractor personnel who perform
information assurance functions for
DoD. The rule provides that contractor
personnel accessing information
systems must meet applicable training
and certification requirements.
DATES: Comments on the proposed rule
should be submitted in writing to the
address shown below on or before
March 23, 2007, to be considered in the
formation of the final rule.
PO 00000
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Fmt 4702
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You may submit comments,
identified by DFARS Case 2006–D023,
using any of the following methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail: dfars@osd.mil. Include
DFARS Case 2006–D023 in the subject
line of the message.
• Fax: (703) 602–0350.
• Mail: Defense Acquisition
Regulations System, Attn: Ms. Felisha
Hitt, OUSD(AT&L)DPAP(DARS), IMD
3C132, 3062 Defense Pentagon,
Washington, DC 20301–3062.
• Hand Delivery/Courier: Defense
Acquisition Regulations System, Crystal
Square 4, Suite 200A, 241 18th Street,
Arlington, VA 22202–3402.
Comments received generally will be
posted without change to https://
www.regulations.gov, including any
personal information provided.
FOR FURTHER INFORMATION CONTACT: Ms.
Felisha Hitt, (703) 602–0310.
SUPPLEMENTARY INFORMATION:
ADDRESSES:
A. Background
This proposed rule implements
requirements of the Federal Information
Security Management Act of 2002 (44
U.S.C. 3541); DoD Directive 8570.1,
Information Assurance Training,
Certification, and Workforce
Management; and DoD Manual 8570.01–
M, Information Assurance Workforce
Improvement Program. The rule
contains a clause for use in contracts
involving contractor performance of
information assurance functions. The
clause requires the contractor to ensure
that personnel accessing information
systems are properly trained and
certified.
This rule was not subject to Office of
Management and Budget review under
Executive Order 12866, dated
September 30, 1993.
B. Regulatory Flexibility Act
DoD has prepared an initial regulatory
flexibility analysis consistent with 5
U.S.C. 603. The analysis is summarized
as follows:
DoD is proposing amendments to the
DFARS to implement DoD Directive
8570.1, Information Assurance Training,
Certification, and Workforce
Management, and DoD Manual 8570.01–
M, Information Assurance Workforce
Improvement Program, with regard to
DoD contractor personnel. The DoD
directive and manual are based on the
provisions of the Federal Information
Security Management Act of 2002,
which requires proper training and
oversight of personnel with information
security responsibilities. The objective
E:\FR\FM\22JAP1.SGM
22JAP1
]]>Agencies
[Federal Register Volume 72, Number 13 (Monday, January 22, 2007)]
[Proposed Rules]
[Pages 2639-2644]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-764]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 71, No. 13 / Monday, January 22, 2007 /
Proposed Rules
[[Page 2639]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Docket Nos. AMS-FV-06-0188; FV07-985-1 PR]
Marketing Order Regulating the Handling of Spearmint Oil Produced
in the Far West; Salable Quantities and Allotment Percentages for the
2007-2008 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This rule would establish the quantity of spearmint oil
produced in the Far West, by class that handlers may purchase from, or
handle for, producers during the 2007-2008 marketing year, which begins
on June 1, 2007. This rule invites comments on the establishment of
salable quantities and allotment percentages for Class 1 (Scotch)
spearmint oil of 886,667 pounds and 45 percent, respectively, and for
Class 3 (Native) spearmint oil of 1,062,336 pounds and 48 percent,
respectively. The Spearmint Oil Administrative Committee (Committee),
the agency responsible for local administration of the marketing order
for spearmint oil produced in the Far West, recommended these
limitations for the purpose of avoiding extreme fluctuations in
supplies and prices to help maintain stability in the spearmint oil
market.
DATES: Comments must be received by February 21, 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; E-mail: moab.docketclerk@usda.gov; or
Internet: https://www.regulations.gov. All 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.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Susan M. Hiller, Marketing Specialist
and Gary D. Olson, Regional Manager, Northwest Marketing Field Office,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA; Telephone: (503) 326-2724; Fax: (503) 326-7440; or E-mail:
Susan.Hiller@usda.gov or GaryD.Olson@usda.gov.
Small businesses may request information on complying with this
regulation 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 rule is issued under Marketing Order
No. 985 (7 CFR part 985), as amended, regulating the handling of
spearmint oil produced in the Far West (Washington, Idaho, Oregon, and
designated parts of Nevada and Utah), hereinafter referred to as the
``order.'' This order is effective under the Agricultural Marketing
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter
referred to as the ``Act.''
The Department of Agriculture (USDA) is issuing this rule in
conformance with Executive Order 12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. Under the marketing order now in effect, salable
quantities and allotment percentages may be established for classes of
spearmint oil produced in the Far West. This proposed rule would
establish the quantity of spearmint oil produced in the Far West, by
class, which may be purchased from or handled for producers by handlers
during the 2007-2008 marketing year, which begins on June 1, 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 USDA 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 exempted therefrom. A
handler is afforded the opportunity for a hearing on the petition.
After the hearing USDA would rule on the petition. The Act provides
that the district court of the United States in any district in which
the handler is an inhabitant, or has his or her principal place of
business, has jurisdiction to review USDA's ruling on the petition,
provided an action is filed not later than 20 days after the date of
the entry of the ruling.
Pursuant to authority in Sec. Sec. 985.50, 985.51, and 985.52 of
the order, the Committee, with all eight members present, met on
October 4, 2006, and recommended salable quantities and allotment
percentages for both classes of oil for the 2007-2008 marketing year.
The Committee unanimously recommended the establishment of a salable
quantity and allotment percentage for Scotch spearmint oil of 886,667
pounds and 45 percent, respectively. For Native spearmint oil, the
Committee unanimously recommended the establishment of a salable
quantity and allotment percentage of 1,062,336 pounds and 48 percent,
respectively.
This rule would limit the amount of spearmint oil that handlers may
purchase from, or handle for, producers during the 2007-2008 marketing
year, which begins on June 1, 2007. Salable quantities and allotment
percentages have been placed into effect each season since the order's
inception in 1980.
The U.S. production of Scotch spearmint oil is concentrated in the
Far West, which includes Washington, Idaho, and Oregon and a portion of
Nevada and Utah. Scotch spearmint oil is also produced in the Midwest
states of Indiana, Michigan, and Wisconsin, as well as in the States of
Montana, South Dakota, North Dakota, and Minnesota. The production area
covered by the marketing order currently accounts for approximately 71
percent of the annual U.S. sales of Scotch spearmint oil.
When the order became effective in 1980, the Far West had 72
percent of the world's sales of Scotch spearmint oil.
[[Page 2640]]
While the Far West is still the leading producer of Scotch spearmint
oil, its share of world sales is now estimated to be about 43 percent.
This loss in world sales for the Far West region is directly attributed
to the increase in global production. Other factors that have played a
significant role include the overall quality of the imported oil and
technological advances that allow for more blending of lower quality
oils. Such factors have provided the Committee with challenges in
accurately predicting trade demand for Scotch oil. This, in turn, has
made it difficult to balance available supplies with demand and to
achieve the Committee's overall goal of stabilizing producer and market
prices.
The marketing order has continued to contribute to price and
general market stabilization for Far West producers. The Committee, as
well as spearmint oil producers and handlers attending the October 4,
2006, meeting, estimated that the 2006-2007 producer price of Scotch
oil would be $13.00 to $14.00 per pound. However, there is very little
forward contracting being done at the present time. This producer price
is approaching the cost of production for most producers as indicated
in a study from the Washington State University Cooperative Extension
Service (WSU), which estimates production costs to be between $13.50
and $15.00 per pound. However, this study was completed in 2001 and
fuel costs alone have doubled in price.
This low level of producer returns has caused an overall reduction
in acreage. When the order became effective in 1980, the Far West
region had 9,702 acres of Scotch spearmint. The Committee estimates
that the 2005-2006 acreage of Scotch spearmint was about 6,132 acres.
Based on the reduced Scotch spearmint acreage, the Committee estimates
that production for the 2005-2006 marketing season will be about
764,420 pounds.
The Committee recommended the 2007-2008 Scotch spearmint oil
salable quantity (886,667 pounds) and allotment percentage (45 percent)
utilizing sales estimates for 2007-2008 Scotch spearmint oil as
provided by several of the industry's handlers, as well as historical
and current Scotch spearmint oil sales levels. The Committee is
estimating that about 875,000 pounds of Scotch spearmint oil, on
average, may be sold during the 2007-2008 marketing year. When
considered in conjunction with the estimated carry-in of 18,029 pounds
of oil on June 1, 2007, the recommended salable quantity of 886,667
pounds results in a total available supply of Scotch spearmint oil next
year of about 904,696 pounds.
The recommendation for the 2007-2008 Scotch spearmint oil volume
regulation is consistent with the Committee's stated intent of keeping
adequate supplies available at all times, while attempting to stabilize
prices at a level adequate to sustain the producers. Furthermore, the
recommendation takes into consideration the industry's desire to
compete with less expensive oil produced outside the regulated area.
Although Native spearmint oil producers are facing market
conditions similar to those affecting the Scotch spearmint oil market,
the market share is quite different. Over 90 percent of the U.S.
production of Native spearmint is produced within the Far West
production area. Also, most of the world's supply of Native spearmint
is produced in the United States.
The supply and demand characteristics of the current Native
spearmint oil market, combined with the stabilizing impact of the
marketing order, have kept the price relatively steady. The average
price for the five year period ending in 2005 is $9.38, which is $0.34
lower than the average price for the ten year period (1996-2005) of
$9.72. The Committee considers these levels too low for the majority of
producers to maintain viability. The WSU study referenced earlier
indicates that the cost of producing Native spearmint oil ranges from
$10.26 to $10.92 per pound.
Similar to Scotch, the low level of producer returns has also
caused an overall reduction in Native spearmint acreage. When the order
became effective in 1980, the Far West region had 12,153 acres of
Native spearmint. The Committee estimates that the 2005-2006 acreage of
Native spearmint was about 7,528 acres. Based on the reduced Native
spearmint acreage, the Committee estimates that production for the
2005-2006 marketing season will be about 1,004,900 pounds.
The Committee recommended the 2007-2008 Native spearmint oil
salable quantity (1,062,336 pounds) and allotment percentage (48
percent) utilizing sales estimates for 2007-2008 Native oil as provided
by several of the industry's handlers, as well as historical and
current Native spearmint oil sales levels. The Committee is estimating
that about 1,141,667 pounds of Native spearmint oil, on average, may be
sold during the 2007-2008 marketing year. When considered in
conjunction with the estimated carry-in of 119,057 pounds of oil on
June 1, 2007, the recommended salable quantity of 1,062,336 pounds
results in a total available supply of Native spearmint oil next year
of about 1,181,393 pounds.
The Committee's method of calculating the Native spearmint oil
salable quantity and allotment percentage continues to primarily
utilize information on price and available supply as they are affected
by the estimated trade demand. The Committee's stated intent is to make
adequate supplies available to meet market needs and improve producer
prices.
The Committee believes that the order has contributed extensively
to the stabilization of producer prices, which prior to 1980
experienced wide fluctuations from year to year. According to the
National Agricultural Statistics Service, for example, the average
price paid for both classes of spearmint oil ranged from $4.00 per
pound to $11.10 per pound during the period between 1968 and 1980.
Prices since the order's inception, the period from 1980 to 2005, have
generally stabilized at an average price of $9.84 per pound for Native
spearmint oil and $12.72 per pound for Scotch spearmint oil.
The Committee based its recommendation for the proposed salable
quantity and allotment percentage for each class of spearmint oil for
the 2007-2008 marketing year on the information discussed above, as
well as the data outlined below.
(1) Class 1 (Scotch) Spearmint Oil
(A) Estimated carry-in on June 1, 2007--18,029 pounds. This figure
is the difference between the revised 2006-2007 marketing year total
available supply of 818,029 pounds and the estimated 2006-2007
marketing year trade demand of 800,000 pounds.
(B) Estimated trade demand for the 2007-2008 marketing year--
875,000 pounds. This figure is based on input from producers at five
Scotch spearmint oil production area meetings held in September 2006,
as well as estimates provided by handlers and other meeting
participants at the October 4, 2006, meeting. The average estimated
trade demand provided at the five production area meetings was 880,000
pounds, whereas the estimated handler trade demand ranged from 850,000
to 900,000 pounds. The average of sales over the last five years was
754,269 pounds.
(C) Salable quantity required from the 2007-2008 marketing year
production--856,971 pounds. This figure is the difference between the
estimated 2007-2008 marketing year trade demand (875,000 pounds) and
the estimated carry-in on June 1, 2007 (18,029 pounds).
[[Page 2641]]
(D) Total estimated allotment base for the 2007-2008 marketing
year--1,970,370 pounds. This figure represents a one percent increase
over the revised 2006-2007 total allotment base. This figure is
generally revised each year on June 1 due to producer base being lost
due to the bona fide effort production provisions of Sec. 985.53(e).
The revision is usually minimal.
(E) Computed allotment percentage--43.5 percent. This percentage is
computed by dividing the required salable quantity by the total
estimated allotment base.
(F) Recommended allotment percentage--45 percent. This
recommendation is based on the Committee's determination that the
computed 43.5 percent would not adequately supply the potential 2007-
2008 market.
(G) The Committee's recommended salable quantity--886,667 pounds.
This figure is the product of the recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the 2007-2008 marketing year--
904,696 pounds. This figure is the sum of the 2007-2008 recommended
salable quantity (886,667 pounds) and the estimated carry-in on June 1,
2007 (18,029 pounds).
(2) Class 3 (Native) Spearmint Oil
(A) Estimated carry-in on June 1, 2007--119,057 pounds. The
Committee's estimated carry-in reflects anticipated increases to the
salable quantity and allotment percentage that may be needed to meet
demand in 2006-2007.
(B) Estimated trade demand for the 2007-2008 marketing year--
1,141,667 pounds. This figure is based on input from producers at the
six Native spearmint oil production area meetings held in September
2006, as well as estimates provided by handlers and other meeting
participants at the October 4, 2006, meeting. The average estimated
trade demand provided at the six production area meetings was 1,141,667
pounds, whereas the average handler estimate was 1,183,000 pounds.
(C) Salable quantity required from the 2007-2008 marketing year
production--1,022,610 pounds. This figure is the difference between the
estimated 2007-2008 marketing year trade demand (1,141,667 pounds) and
the estimated carry-in on June 1, 2007 (119,057 pounds).
(D) Total estimated allotment base for the 2007-2008 marketing
year--2,213,200 pounds. This figure represents a one percent increase
over the revised 2006-2007 total allotment base. This figure is
generally revised each year on June 1 due to producer base being lost
due to the bona fide effort production provisions of Sec. 985.53(e).
The revision is usually minimal.
(E) Computed allotment percentage--46.2 percent. This percentage is
computed by dividing the required salable quantity by the total
estimated allotment base.
(F) Recommended allotment percentage--48 percent. This is the
Committee's recommendation based on the computed allotment percentage,
the average of the computed allotment percentage figures from the six
production area meetings (46.4 percent), and input from producers and
handlers at the October 4, 2006, meeting.
(G) The Committee's recommended salable quantity--1,062,336 pounds.
This figure is the product of the recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the 2007-2008 marketing year--
1,181,393 pounds. This figure is the sum of the 2007-2008 recommended
salable quantity (1,062,336 pounds) and the estimated carry-in on June
1, 2007 (119,057 pounds).
The salable quantity is the total quantity of each class of
spearmint oil, which handlers may purchase from, or handle on behalf of
producers during a marketing year. Each producer is allotted a share of
the salable quantity by applying the allotment percentage to the
producer's allotment base for the applicable class of spearmint oil.
The Committee's recommended Scotch and Native spearmint oil salable
quantities and allotment percentages of 886,667 pounds and 45 percent,
and 1,062,336 pounds and 48 percent, respectively, are based on the
Committee's goal of maintaining market stability by avoiding extreme
fluctuations in supplies and prices, and the anticipated supply and
trade demand during the 2007-2008 marketing year. The proposed salable
quantities are not expected to cause a shortage of spearmint oil
supplies. Any unanticipated or additional market demand for spearmint
oil, which may develop during the marketing year, can be satisfied by
an increase in the salable quantities. Both Scotch and Native spearmint
oil producers who produce more than their annual allotments during the
2007-2008 marketing year may transfer such excess spearmint oil to a
producer with spearmint oil production less than his or her annual
allotment or put it into the reserve pool until November 1, 2007.
This proposed regulation, if adopted, would be similar to
regulations issued in prior seasons. Costs to producers and handlers
resulting from this rule are expected to be offset by the benefits
derived from a stable market and improved returns. In conjunction with
the issuance of this proposed rule, USDA has reviewed the Committee's
marketing policy statement for the 2007-2008 marketing year. The
Committee's marketing policy statement, a requirement whenever the
Committee recommends volume regulations, fully meets the intent of
Sec. 985.50 of the order. During its discussion of potential 2007-2008
salable quantities and allotment percentages, the Committee considered:
(1) The estimated quantity of salable oil of each class held by
producers and handlers; (2) the estimated demand for each class of oil;
(3) the prospective production of each class of oil; (4) the total of
allotment bases of each class of oil for the current marketing year and
the estimated total of allotment bases of each class for the ensuing
marketing year; (5) the quantity of reserve oil, by class, in storage;
(6) producer prices of oil, including prices for each class of oil; and
(7) general market conditions for each class of oil, including whether
the estimated season average price to producers is likely to exceed
parity. Conformity with the USDA's ``Guidelines for Fruit, Vegetable,
and Specialty Crop Marketing Orders'' has also been reviewed and
confirmed.
The establishment of these salable quantities and allotment
percentages would allow for anticipated market needs. In determining
anticipated market needs, consideration by the Committee was given to
historical sales, as well as changes and trends in production and
demand. This rule also provides producers with information on the
amount of spearmint oil that should be produced for the 2007-2008
season in order to meet anticipated market demand.
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 rule 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 the rules issued thereunder, are unique in
that they are brought about
[[Page 2642]]
through group action of essentially small entities acting on their own
behalf. Thus, both statutes have small entity orientation and
compatibility.
There are eight spearmint oil handlers subject to regulation under
the order, and approximately 58 producers of Scotch spearmint oil and
approximately 90 producers of Native spearmint oil in the regulated
production area. Small agricultural service firms are defined by the
Small Business Administration (SBA) (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.
Based on the SBA's definition of small entities, the Committee
estimates that 2 of the 8 handlers regulated by the order could be
considered small entities. Most of the handlers are large corporations
involved in the international trading of essential oils and the
products of essential oils. In addition, the Committee estimates that
19 of the 58 Scotch spearmint oil producers and 21 of the 90 Native
spearmint oil producers could be classified as small entities under the
SBA definition. Thus, a majority of handlers and producers of Far West
spearmint oil may not be classified as small entities.
The Far West spearmint oil industry is characterized by producers
whose farming operations generally involve more than one commodity, and
whose income from farming operations is not exclusively dependent on
the production of spearmint oil. A typical spearmint oil-producing
operation has enough acreage for rotation such that the total acreage
required to produce the crop is about one-third spearmint and two-
thirds rotational crops. Thus, the typical spearmint oil producer has
to have considerably more acreage than is planted to spearmint during
any given season. Crop rotation is an essential cultural practice in
the production of spearmint oil for weed, insect, and disease control.
To remain economically viable with the added costs associated with
spearmint oil production, most spearmint oil-producing farms fall into
the SBA category of large businesses.
Small spearmint oil producers generally are not as extensively
diversified as larger ones and as such are more at risk from market
fluctuations. Such small producers generally need to market their
entire annual allotment and do not have the luxury of having other
crops to cushion seasons with poor spearmint oil returns. Conversely,
large diversified producers have the potential to endure one or more
seasons of poor spearmint oil markets because income from alternate
crops could support the operation for a period of time. Being
reasonably assured of a stable price and market provides small
producing entities with the ability to maintain proper cash flow and to
meet annual expenses. Thus, the market and price stability provided by
the order potentially benefit the small producer more than such
provisions benefit large producers. Even though a majority of handlers
and producers of spearmint oil may not be classified as small entities,
the volume control feature of this order has small entity orientation.
This proposed rule would establish the quantity of spearmint oil
produced in the Far West, by class, that handlers may purchase from, or
handle for, producers during the 2007-2008 marketing year. The
Committee recommended this rule to help maintain stability in the
spearmint oil market by avoiding extreme fluctuations in supplies and
prices. Establishing quantities to be purchased or handled during the
marketing year through volume regulations allows producers to plan
their spearmint planting and harvesting to meet expected market needs.
The provisions of Sec. Sec. 985.50, 985.51, and 985.52 of the order
authorize this rule.
Instability in the spearmint oil sub-sector of the mint industry is
much more likely to originate on the supply side than the demand side.
Fluctuations in yield and acreage planted from season-to-season tend to
be larger than fluctuations in the amount purchased by buyers. Demand
for spearmint oil tends to be relatively stable from year-to-year. The
demand for spearmint oil is expected to grow slowly for the foreseeable
future because the demand for consumer products that use spearmint oil
will likely expand slowly, in line with population growth.
Demand for spearmint oil at the farm level is derived from retail
demand for spearmint-flavored products such as chewing gum, toothpaste,
and mouthwash. The manufacturers of these products are by far the
largest users of mint oil. However, spearmint flavoring is generally a
very minor component of the products in which it is used, so changes in
the raw product price have no impact on retail prices for those goods.
Spearmint oil production tends to be cyclical. Years of large
production, with demand remaining reasonably stable, have led to
periods in which large producer stocks of unsold spearmint oil have
depressed producer prices for a number of years. Shortages and high
prices may follow in subsequent years, as producers respond to price
signals by cutting back production.
The significant variability is illustrated by the fact that the
coefficient of variation (a standard measure of variability; ``CV'') of
Far West spearmint oil production from 1980 through 2003 was about
0.24. The CV for spearmint oil grower prices was about 0.14, well below
the CV for production. This provides an indication of the price
stabilizing impact of the marketing order.
Production in the shortest marketing year was about 49 percent of
the 26-year average (1.842 million pounds from 1980 through 2005) and
the largest crop was approximately 167 percent of the 26-year average.
A key consequence is that in years of oversupply and low prices the
season average producer price of spearmint oil is below the average
cost of production (as measured by the Washington State University
Cooperative Extension Service.)
The wide fluctuations in supply and prices that result from this
cycle, which was even more pronounced before the creation of the
marketing order, can create liquidity problems for some producers. The
marketing order was designed to reduce the price impacts of the
cyclical swings in production. However, producers have been less able
to weather these cycles in recent years because of the decline in
prices of many of the alternative crops they grow. As noted earlier,
almost all spearmint oil producers diversify by growing other crops.
In an effort to stabilize prices, the spearmint oil industry uses
the volume control mechanisms authorized under the order. This
authority allows the Committee to recommend a salable quantity and
allotment percentage for each class of oil for the upcoming marketing
year. The salable quantity for each class of oil is the total volume of
oil that producers may sell during the marketing year. The allotment
percentage for each class of spearmint oil is derived by dividing the
salable quantity by the total allotment base.
Each producer is then issued an annual allotment certificate, in
pounds, for the applicable class of oil, which is calculated by
multiplying the producer's allotment base by the applicable allotment
percentage. This is the amount of oil for the applicable class that the
producer can sell.
By November 1 of each year, the Committee identifies any oil that
individual producers have produced above the volume specified on their
annual allotment certificates. This excess oil is placed in a reserve
pool administered by the Committee.
[[Page 2643]]
There is a reserve pool for each class of oil that may not be sold
during the current marketing year unless USDA approves a Committee
recommendation to make a portion of the pool available. However,
limited quantities of reserve oil are typically sold to fill
deficiencies. A deficiency occurs when on-farm production is less than
a producer's allotment. In that case, a producer's own reserve oil can
be sold to fill that deficiency. Excess production (higher than the
producer's allotment) can be sold to fill other producers'
deficiencies. All of this needs to take place by November 1.
In any given year, the total available supply of spearmint oil is
composed of current production plus carry-over stocks from the previous
crop. The Committee seeks to maintain market stability by balancing
supply and demand, and to close the marketing year with an appropriate
level of carryout. If the industry has production in excess of the
salable quantity, then the reserve pool absorbs the surplus quantity of
spearmint oil, which goes unsold during that year, unless the oil is
needed for unanticipated sales.
Under its provisions, the order may attempt to stabilize prices by
(1) Limiting supply and establishing reserves in high production years,
thus minimizing the price-depressing effect that excess producer stocks
have on unsold spearmint oil, and (2) ensuring that stocks are
available in short supply years when prices would otherwise increase
dramatically. The reserve pool stocks grown in large production years
are drawn down in short crop years.
An econometric model was used to assess the impact that volume
control has on the prices producers receive for their commodity.
Without volume control, spearmint oil markets would likely be over-
supplied, resulting in low producer prices and a large volume of oil
stored and carried over to the next crop year. The model estimates how
much lower producer prices would likely be in the absence of volume
controls.
The Committee estimated the trade demand for the 2007-2008
marketing year for both classes of oil at 2,016,667 pounds, and that
the expected combined carry-in will be 137,086 pounds. This results in
a combined salable quantity needed of 1,879,581 pounds. Therefore, with
volume control, sales by producers for the 2007-2008 marketing year
would be limited to 1,949,003 pounds (the recommended salable quantity
for both classes of spearmint oil).
The recommended salable percentages, upon which 2007-2008 producer
allotments are based, are 45 percent for Scotch and 48 percent for
Native. Without volume controls, producers would not be limited to
these allotment levels, and could produce and sell additional
spearmint. The econometric model estimated a $1.40 decline in the
season average producer price per pound (from both classes of spearmint
oil) resulting from the higher quantities that would be produced and
marketed without volume control. The Far West producer price for both
classes of spearmint oil was $10.20 for 2005, which is below the
average of $10.83 for the period of 1980 through 2005, based on
National Agricultural Statistics Service data. The surplus situation
for the spearmint oil market that would exist without volume controls
in 2007-2008 also would likely dampen prospects for improved producer
prices in future years because of the buildup in stocks.
The use of volume controls allows the industry to fully supply
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume controls is believed to have
little or no effect on consumer prices of products containing spearmint
oil and will not result in fewer retail sales of such products.
The Committee discussed alternatives to the recommendations
contained in this rule for both classes of spearmint oil. The Committee
discussed and rejected the idea of recommending that there not be any
volume regulation for both classes of spearmint oil because of the
severe price-depressing effects that would occur without volume
control.
The Committee considered various alternative levels of volume
control for Scotch spearmint oil, including increasing the percentage
to a less restrictive level, or decreasing the percentage. After
considerable discussion the Committee unanimously determined that
886,667 pounds and 45 percent would be the most effective salable
quantity and allotment percentage, respectively, for the 2007-2008
marketing year.
The Committee also considered various alternative levels of volume
control for Native spearmint oil. After considerable discussion the
Committee unanimously determined that 1,062,336 pounds and 48 percent
would be the most effective salable quantity and allotment percentage,
respectively, for the 2007-2008 marketing year.
As noted earlier, the Committee's recommendation to establish
salable quantities and allotment percentages for both classes of
spearmint oil was made after careful consideration of all available
information, including: (1) The estimated quantity of salable oil of
each class held by producers and handlers; (2) the estimated demand for
each class of oil; (3) the prospective production of each class of oil;
(4) the total of allotment bases of each class of oil for the current
marketing year and the estimated total of allotment bases of each class
for the ensuing marketing year; (5) the quantity of reserve oil, by
class, in storage; (6) producer prices of oil, including prices for
each class of oil; and (7) general market conditions for each class of
oil, including whether the estimated season average price to producers
is likely to exceed parity. Based on its review, the Committee believes
that the salable quantity and allotment percentage levels recommended
would achieve the objectives sought.
Without any regulations in effect, the Committee believes the
industry would return to the pronounced cyclical price patterns that
occurred prior to the order, and that prices in 2007-2008 would decline
substantially below current levels.
As stated earlier, the Committee believes that the order has
contributed extensively to the stabilization of producer prices, which
prior to 1980 experienced wide fluctuations from year-to-year. National
Agricultural Statistics Service records show that the average price
paid for both classes of spearmint oil ranged from $4.00 per pound to
$11.10 per pound during the period between 1968 and 1980. Prices have
been consistently more stable since the marketing order's inception in
1980, with an average price for the period from 1980 to 2005 of $12.72
per pound for Scotch spearmint oil and $9.84 per pound for Native
spearmint oil.
During the period of 1998 through 2005, however, large production
and carry-in inventories have contributed to prices below the 26-year
average, despite the Committee's efforts to balance available supplies
with demand. Prices have ranged from $8.00 to $11.00 per pound for
Scotch spearmint oil and between $9.10 and $10.00 per pound for Native
spearmint oil. The 2005 Native price exceeded the 26-year average by
$0.16. Producers stated, however, that fuel cost increases more than
offset the price increase.
According to the Committee, the recommended salable quantities and
allotment percentages are expected to achieve the goals of market and
price stability.
As previously stated, annual salable quantities and allotment
percentages have been issued for both classes of spearmint oil since
the order's inception. Reporting and recordkeeping
[[Page 2644]]
requirements have remained the same for each year of regulation. These
requirements have been approved by the Office of Management and Budget
under OMB Control No. 0581-0065. Accordingly, this rule would not
impose any additional reporting or recordkeeping requirements on either
small or large spearmint oil producers and handlers. As with all
Federal marketing order programs, reports and forms are periodically
reviewed to reduce information requirements and duplication by industry
and public sector agencies.
The AMS is committed to complying with the 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.
USDA has not identified any relevant Federal rules that duplicate,
overlap, or conflict with this rule.
In addition, the Committee's meeting was widely publicized
throughout the spearmint oil industry and all interested persons were
invited to attend the meeting and participate in Committee
deliberations on all issues. Like all Committee meetings, the October
4, 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.
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 the
opportunity to respond to this proposal. This comment period is deemed
appropriate so that a final determination can be made prior to June 1,
2007, the beginning of the 2007-2008 marketing year. All written
comments timely received will be considered before a final
determination is made on this matter.
List of Subjects in 7 CFR Part 985
Marketing agreements, Oils and fats, Reporting and recordkeeping
requirements, Spearmint oil.
For the reasons set forth in the preamble, 7 CFR Part 985 is
proposed to be amended as follows:
PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL
PRODUCED IN THE FAR WEST
1. The authority citation for 7 CFR part 985 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. A new Sec. 985.226 is added to read as follows:
[Note: This section will not appear in the Code of Federal
Regulations.]
Sec. 985.226 Salable quantities and allotment percentages--2007-2008
marketing year.
The salable quantity and allotment percentage for each class of
spearmint oil during the marketing year beginning on June 1, 2007,
shall be as follows:
(a) Class 1 (Scotch) oil--a salable quantity of 886,667 pounds and
an allotment percentage of 45 percent.
(b) Class 3 (Native) oil--a salable quantity of 1,062,336 pounds
and an allotment percentage of 48 percent.
Dated: January 16, 2007.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. E7-764 Filed 1-19-07; 8:45 am]
BILLING CODE 3410-02-P
