Tart Cherries Grown in the States of Michigan, et al.; Final Free and Restricted Percentages for the 2009-2010 Crop Year for Tart Cherries, 12702-12707 [2010-5772]
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12702
Proposed Rules
Federal Register
Vol. 75, No. 51
Wednesday, March 17, 2010
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 930
[Doc. No. AMS–FV–0069; FV09–930–2 PR]
Tart Cherries Grown in the States of
Michigan, et al.; Final Free and
Restricted Percentages for the 2009–
2010 Crop Year for Tart Cherries
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AGENCY: Agricultural Marketing Service,
USDA.
ACTION: Proposed rule.
SUMMARY: This rule invites comments
on the establishment of final free and
restricted percentages for the 2009–2010
crop year. The percentages are 32
percent free and 68 percent restricted
and will establish the proportion of
cherries from the 2009 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
April 1, 2010.
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 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. All
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comments submitted in response to this
rule will be included in the record and
will be made available to the public.
Please be advised that the identity of the
individuals or entities submitting the
comments will be made public on the
Internet at the address provided above.
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, Fax:
(301) 734–5275; E-mail
Patricia.Petrella@ams.usda.gov or
Kenneth.Johnson@ams.usda.gov.
Small businesses may request
information on complying with this
regulation by contacting Antoinette
Carter, 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:
Antoinette.Carter@ams.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
proposed rule would establish final free
and restricted percentages for tart
cherries for the 2009–2010 crop year,
beginning July 1, 2009, through June 30,
2010.
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
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any obligation imposed in connection
with the order is not in accordance with
law and request a modification of the
order or to be exempt therefrom. Such
handler is afforded the opportunity for
a hearing on the petition. After the
hearing, the Secretary would rule on the
petition. The Act provides that the
district court of the United States in any
district in which the handler is an
inhabitant, or has his or her principal
place of business, has jurisdiction in
equity to review the Secretary’s ruling
on the petition, provided an action is
filed not later than 20 days after the date
of the entry of the ruling.
The order prescribes procedures for
computing an optimum supply and
preliminary and final percentages that
establish the amount of tart cherries that
can be marketed throughout the season.
The regulations apply to all handlers of
tart cherries that are in the regulated
districts. Tart cherries in the free
percentage category may be shipped
immediately to any market, while
restricted percentage tart cherries must
be held by handlers in a primary or
secondary reserve, or be diverted in
accordance with § 930.59 of the order
and § 930.159 of the regulations, or used
for exempt purposes (to obtain diversion
credit) under § 930.62 of the order and
§ 930.162 of the regulations. The
regulated Districts for this season are:
District one—Northern Michigan;
District two—Central Michigan; District
three—Southern 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 2009–2010 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 2009–2010 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
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tend to be relatively stable from year to
year. The supply of tart cherries, by
contrast, varies greatly from crop year to
crop year. The magnitude of annual
fluctuations in tart cherry supplies is
one of the most pronounced for any
agricultural commodity in the United
States. In addition, since tart cherries
are processed either into cans or frozen,
they can be stored and carried over from
crop year to crop year. This creates
substantial coordination and marketing
problems. The supply and demand for
tart cherries is rarely balanced. The
primary purpose of setting free and
restricted percentages is to balance
supply with demand and reduce large
surpluses that may occur.
Section 930.50(a) of the order
prescribes procedures for computing an
optimum supply for each crop year. The
Board must meet on or about July 1 of
each crop year, to review sales data,
inventory data, current crop forecasts
and market conditions. The optimum
supply volume shall be calculated as
100 percent of the average sales of the
prior three years to which is added a
desirable carryout inventory not to
exceed 20 million pounds or such other
amount as may be established with the
approval of the Secretary. The optimum
supply represents the desirable volume
of tart cherries that should be available
for sale in the coming crop year.
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 or from an average of such
other crop estimates the Board votes to
use. If the resulting number is positive,
this represents the estimated overproduction, which would be the
restricted percentage tonnage. The
restricted percentage tonnage is then
divided by the sum of the 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 18, 2009, and
computed, for the 2009–2010 crop year,
an optimum supply of 183 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.
The Board calculated preliminary free
and restricted percentages as follows:
The USDA estimate of the crop for the
entire production area was 284 million
pounds; a 31 million pound carryin
(based on Board estimates) was
subtracted from the optimum supply of
183 million pounds which resulted in
the 2009–2010 poundage requirements
(adjusted optimum supply) of 152
million pounds. The carryin figure
reflects the amount of cherries that
handlers actually have in inventory at
the beginning of the 2008–2009 crop
year. Subtracting the adjusted optimum
supply of 152 million pounds from the
USDA crop estimate, (284 million
pounds) results in a surplus of 131
million pounds of tart cherries. The
surplus was divided by the production
in the regulated districts (269 million
pounds) and resulted in a restricted
percentage of 49 percent for the 2009–
2010 crop year. The free percentage was
51 percent (100 percent minus 49
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 2009–2010 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, 2008 ..........................................................................................................................
(6) Adjusted optimum supply for current crop year .....................................................................................................................
(7) Surplus ....................................................................................................................................................................................
(8) USDA crop estimate for regulated districts ............................................................................................................................
Free
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(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. No later than September 15,
the Board must recommend final free
and restricted percentages to the
Secretary.
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The Secretary 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 and 100 percent is
the final restricted percentage. The
Board met on September 10, 2009, to
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183
0
183
284
31
152
131
269
Restricted
51
49
recommend final free and restricted
percentages.
The actual production reported by the
Board was 355 million pounds, which is
a 71 million pound increase from the
USDA crop estimate of 284 million
pounds. The Board adjusted the
optimum supply figure from 183 million
pounds calculated for preliminary
percentages to 176 million pounds
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when calculating the final percentages.
This adjustment was made because the
sales figure for June 2009, which is used
to compute three-year average sales, was
estimated for preliminary percentages,
but was based on actual numbers for
final percentages.
A 52 million pound carryin (based on
handler reports) was subtracted from the
optimum supply of 176 million pounds
which resulted in the 2009–2010
poundage requirements (adjusted
optimum supply) of 124 million
pounds. Subtracting the adjusted
optimum supply of 124 million pounds
from the USDA crop estimate (355
million pounds), results in a surplus of
231 million pounds of tart cherries. The
surplus was divided by the production
in the regulated districts (338 million
pounds) and resulted in a restricted
percentage of 68 percent for the 2009–
2010 crop year. The free percentage was
32 percent (100 percent minus 68
percent).
The final percentages are based on the
Board’s reported production figures and
the following supply and demand
information available in September for
the 2009–2010 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, 2009 ...................................................................................................................
(6) Tonnage available for current crop year ................................................................................................................................
(7) Surplus (item 6 minus item 3) ................................................................................................................................................
(8) Production in regulated districts .............................................................................................................................................
176
0
176
355
52
407
231
338
Percentages
Free
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(9) Final Percentages (item 7 divided by item 8 × 100 equals restricted percentage; 100 minus restricted
percentage equals free percentage) .............................................................................................................
The 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 the establishment
of a preliminary percentage 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
Department 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.
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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 (SBA) (13 CFR
121.201) as those having annual receipts
of less than $7,000,000, and small
agricultural producers are defined as
those having annual receipts of less than
$750,000. A majority of the producers
and handlers are considered small
entities under SBA’s standards.
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32
68
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
1997/98 through 2008/09,
approximately 96 percent of the U.S.
tart cherry crop, or 244.4 million
pounds, was processed annually. Of the
244.4 million pounds of tart cherries
processed, 61 percent was frozen, 27
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 34,650 acres in 2008/09. This
represents a 31 percent decrease in total
bearing acres. Michigan leads the nation
in tart cherry acreage with 70 percent of
the total and produces about 75 percent
of the U.S. tart cherry crop each year.
The 2009/10 crop is large in size at
355 million pounds. This production
level is 71.5 million pounds greater than
the 283.6 million pounds estimated by
the National Agricultural Statistics
Service (NASS) in June. 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
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are national in scope and impact.
Growers testified during the order
promulgation process that the prices
they received often did not come close
to covering the costs of production.
The industry demonstrated a need for
an order during the promulgation
process of the marketing order because
large variations in annual tart cherry
supplies tend to lead to fluctuations in
prices and disorderly marketing. As a
result of these fluctuations in supply
and price, growers realize less income.
The industry chose a volume control
marketing order to even out these wide
variations in supply and improve
returns to growers. During the
promulgation process, proponents
testified that small growers and
processors would have the most to gain
from implementation of a marketing
order because many such growers and
handlers had been going out of business
due to low tart cherry prices. They also
testified that, since an order would help
increase grower returns, this should
increase the buffer between business
success and failure because small
growers and handlers tend to be less
capitalized than larger growers and
handlers.
Aggregate demand for tart cherries
and tart cherry products tends to be
relatively stable from year-to-year.
Similarly, prices at the retail level show
minimal variation. Consumer prices in
grocery stores, and particularly in food
service markets, largely do not reflect
fluctuations in cherry supplies. Retail
demand is assumed to be highly
inelastic which indicates that price
reductions do not result in large
increases in the quantity demanded.
Most tart cherries are sold to food
service outlets and to consumers as pie
filling; frozen cherries are sold as an
ingredient to manufacturers of pies and
cherry desserts. Juice and dried cherries
are expanding market outlets for tart
cherries.
Demand for tart cherries at the farm
level is derived from the demand for tart
cherry products at retail. In general, the
farm-level demand for a commodity
consists of the demand at retail or food
service outlets minus per-unit
processing and distribution costs
incurred in transforming the raw farm
commodity into a product available to
consumers. These costs comprise what
is known as the ‘‘marketing margin.’’
The supply of tart cherries, by
contrast, varies greatly. The magnitude
of annual fluctuations in tart cherry
supplies is one of the most pronounced
for any agricultural commodity in the
United States. In addition, since tart
cherries are processed either into cans
or frozen, they can be stored and carried
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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 volume and carryin
inventories. The Federal marketing
order permits the industry to exercise
supply control provisions, which allow
for the establishment of free and
restricted percentages for the primary
market, and a storage program. The
establishment of restricted percentages
impacts the production to be marketed
in the primary market, while the storage
program has an impact on the volume
of unsold inventories.
The volume control mechanism used
by the cherry industry results in
decreased shipments to primary
markets. Without volume control the
primary markets (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
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12705
Washington are the restricted areas for
this crop year and their combined total
production is 338 million pounds. A 68
percent restriction means 108 million
pounds is available to be shipped to
primary markets from these four states.
Production levels of 10.7 million
pounds for Wisconsin, 2.7 million
pounds for Oregon, and 3.8 million
pounds for Pennsylvania (the
unregulated areas in 2009/10), result in
an additional 17.2 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
108 million pounds from Michigan,
Utah, Washington, and New York, the
17.2 million pounds from the other
producing states, the 18 million pound
release, and the 52 million pound
carryin inventory gives a total of 195.2
million pounds being available for the
primary markets.
The econometric model is used to
estimate the impact of establishing a
reserve pool for this year’s crop. With
the volume controls, grower prices are
estimated to be approximately $0.12 per
pound higher than without volume
controls.
The use of volume controls is
estimated to have a positive impact on
growers’ total revenues. With regulation,
growers’ total revenue from processed
cherries are estimated to be $17.3
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 68 percent
volume control would not unduly
burden producers, particularly smaller
growers. The 68 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 $0.268
in 2007–08 and $0.372 per pound in
2008–09. At current production levels,
yield is estimated at approximately
10,251 pounds per acre. At this level of
yield the cost of production is estimated
to be $0.25 per pound (costs were
estimated by representatives of
Michigan State University with input
provided by growers for the current
crop). While grower prices have not
been established in the 2009–10 crop
year, some processors have reported that
growers have received an initial
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payment of ten cents per pound.
Additional payments by processors will
be based on the volume of packed crop
that can be marketed. These low prices
are the result of the large crop for the
2009–10 marketing year. The final
grower price will likely be around $0.15
per pound for the combined free and
restricted production. 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 $0.0036 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 2002/03 crop year proved to
be very useful and beneficial to growers
and packers.
In discussing the possibility of
marketing percentages for the 2009–
2010 crop year, the Board considered
the following factors contained in the
marketing policy: (1) The estimated total
production of tart cherries; (2) the
estimated size of the crop to be handled;
(3) the expected general quality of such
cherry production; (4) the expected
carryover as of July 1 of canned and
frozen cherries and other cherry
products; (5) the expected demand
conditions for cherries in different
market segments; (6) supplies of
competing commodities; (7) an analysis
of economic factors having a bearing on
the marketing of cherries; (8) the
estimated tonnage held by handlers in
primary or secondary inventory
reserves; and (9) any estimated release
of primary or secondary inventory
reserve cherries during the crop year.
The Board’s review of the factors
resulted in the computation and
announcement in September 2009 of the
free and restricted percentages proposed
to be established by this rule (32 percent
free and 68 percent restricted).
One alternative to this action would
be not to have volume regulation this
season. Board members stated that no
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volume regulation would be detrimental
to the tart cherry industry due to the
size of the 2009–2010 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, the
Department’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.
The Department 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 10,
2009, 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.
While the benefits resulting from this
rulemaking are difficult to quantify, the
stabilizing effects of the volume
regulations impact both small and large
handlers positively by helping them
maintain markets even though tart
cherry supplies fluctuate widely from
season to season.
In compliance with Office of
Management and Budget (OMB)
regulations (5 CFR part 1320) which
implement the Paperwork Reduction
Act of 1995 (Pub. L. 104–13), the
information collection and
recordkeeping requirements under the
tart cherry marketing order have been
previously approved by OMB and
assigned OMB Number 0581–0177.
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Frm 00005
Fmt 4702
Sfmt 4702
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
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.
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
Antoinette Carter at the previously
mentioned address in the FOR FURTHER
INFORMATION CONTACT section.
A 15-day comment period is provided
to allow interested persons to respond
to this proposal. Fifteen 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 2009–2010 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 930.256 is added to read as
follows:
Note: This section will not appear in the
annual Code of Federal Regulations.
§ 930.256 Final free and restricted
percentages for the 2009–2010 crop year.
The final percentages for tart cherries
handled by handlers during the crop
E:\FR\FM\17MRP1.SGM
17MRP1
Federal Register / Vol. 75, No. 51 / Wednesday, March 17, 2010 / Proposed Rules
year beginning on July 1, 2009, which
shall be free and restricted, respectively,
are designated as follows: Free
percentage, 32 percent and restricted
percentage, 68 percent.
Dated: March 11, 2010.
David R. Shipman,
Acting Administrator, Agricultural Marketing
Service.
[FR Doc. 2010–5772 Filed 3–16–10; 8:45 am]
BILLING CODE 3410–02–P
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 1218
[Document Number AMS–FV–09–0022; FV–
09–705]
Blueberry Promotion, Research, and
Information Order; Increase
Membership
wwoods2 on DSK1DXX6B1PROD with PROPOSALS_PART 1
AGENCY: Agricultural Marketing Service,
USDA.
ACTION: Proposed rule.
SUMMARY: This rule proposes to add two
importer members and their alternates
to the U.S. Highbush Blueberry Council
(Council) to reflect changes in the
quantity of highbush blueberry imports
in the past three years. The change was
proposed by the Council in accordance
with the provisions of the Blueberry
Promotion, Research, and Information
Order (Order) which is authorized by
the Commodity Promotion, Research,
and Information Act of 1996 (Act). The
Order requires that the Council review
the geographical distribution of the
United States production and the
quantity of imports of highbush
blueberries at least every five years. As
a result of these changes, the total
Council membership would increase
from 14 to 16 members and their
alternates. In addition, this rule
proposes to increase the quorum
minimum from seven to nine members.
DATES: Comments must be received by
April 6, 2010.
ADDRESSES: Interested persons are
invited to submit written comments on
the Internet at: https://
www.regulations.gov or to the Research
and Promotion Branch, Fruit and
Vegetable Programs, Agricultural
Marketing Service (AMS), U.S.
Department of Agriculture,
(Department) Room 0632–S, Stop 0244,
1400 Independence Avenue, SW.,
Washington, DC 20250–0244; facsimile:
(202) 205–2800. All comments should
reference the docket number and the
date and page number of this issue of
VerDate Nov<24>2008
14:48 Mar 16, 2010
Jkt 220001
the Federal Register and will be made
available for public inspection in the
above office during regular business
hours or it can be viewed at https://
www.regulations.gov. All comments
received will be posted without change,
including any personal information
provided.
FOR FURTHER INFORMATION CONTACT:
Jeanette Palmer, Marketing Specialist,
Research and Promotion Branch, Fruit
and Vegetable Programs, AMS, U.S.
Department of Agriculture, Stop 0244,
1400 Independence Avenue, SW., Room
0632–S, Washington, DC 20250–0244;
telephone: (888) 720–9917; facsimile:
(202) 205–2800; or electronic mail:
Jeanette.Palmer@ams.usda.gov.
This rule
is issued under the Blueberry
Promotion, Research, and Information
Order [7 CFR part 1218]. The Order is
authorized under the Commodity
Promotion, Research, and Information
Act of 1996 (Act) [7 U.S.C. 7411–7425].
SUPPLEMENTARY INFORMATION:
Executive Order 12866
The Office of Management and Budget
(OMB) has waived the review process
required by Executive Order 12866 for
this action.
Executive Order 12988
This rule has been reviewed under
Executive Order 12988, Civil Justice
Reform. The rule is not intended to have
retroactive effect. Section 524 of the Act
provides that the Act shall not affect or
preempt any other State or Federal law
authorizing promotion or research
relating to an agricultural commodity.
The Act provides that any person
subject to an order may file a written
petition with the Department if they
believe that the order, any provision of
the order, or any obligation imposed in
connection with the order, is not
established in accordance with law. In
any petition, the person may request a
modification of the order or an
exemption from the order. The
petitioner is afforded the opportunity
for a hearing on the petition. After a
hearing, the Department would rule on
the petition. The Act provides that the
district court of the United States in any
district in which the petitioner resides
or conducts business shall have the
jurisdiction to review the Department’s
ruling on the petition, provided a
complaint is filed not later than 20 days
after the date of the entry of the ruling.
Initial Regulatory Flexibility Analysis
and Paperwork Reduction Act
In accordance with the Regulatory
Flexibility Act (RFA) [5 U.S.C. 601–
612], AMS has considered the economic
PO 00000
Frm 00006
Fmt 4702
Sfmt 4702
12707
impact of this action on the small
producers, first handlers, importers, and
exporters that would be affected by this
rule. The purpose of the RFA is to fit
regulatory action to scale on businesses
subject to such action so that small
businesses will not be
disproportionately burdened.
The Small Business Administration
defines, in 13 CFR part 121, small
agricultural producers as those having
annual receipts of no more than
$750,000 and small agricultural service
firms as those having annual receipts of
no more than $7 million. There are
approximately 2,000 producers, 200 first
handlers, 50 importers, and 4 exporters
of highbush blueberries subject to the
program. Most of the producers would
be classified as small businesses under
the criteria established by the Small
Business Administration. Most
importers, first handlers, and exporters
would not be classified as small
businesses. Producers who produce less
than 2,000 pounds of highbush
blueberries annually are exempt from
this program. Importers who import less
than 2,000 pounds of fresh and frozen
highbush blueberries annually are also
exempt from this program.
The Department’s National
Agricultural Statistics Service (NASS)
data for the 2008 crop year shows that
about 5,790 pounds of highbush
blueberries were produced per acre. The
2008 average grower price for highbush
blueberries published by NASS was
$1.54 per pound. Thus, the value of
highbush blueberry production per acre
in 2008 averaged about $8,917 (5,790
pounds multiplied by $1.54). At that
average value, a producer would have to
farm over 84 acres to receive an annual
income from highbush blueberries of
$750,000 ($750,000 divided by $8,916
per acre equals 84). Accordingly, as
previously noted, a majority of the
producers of highbush blueberries
would be classified as small businesses.
According to the Council, assessments
received in 2008 reached $2.4 million.
Of the total, the Council received
$830,222 from import assessment
collections which is approximately 35
percent of the Council’s total budget.
The Council has projected import
assessment collections at $850,000 for
the 2009 budget year.
According to the Council’s World
Blueberry Acreage and Production
Report, highbush blueberry acreage in
North America increased from 71,075
acres in 2005 to an estimated 95,607
acres in 2008, a 35 percent increase in
just three years. The United States’
share of this total increased from 56,665
acres in 2005 to 74,992 acres in 2008,
a 32 percent increase. Most of this
E:\FR\FM\17MRP1.SGM
17MRP1
]]>Agencies
[Federal Register Volume 75, Number 51 (Wednesday, March 17, 2010)]
[Proposed Rules]
[Pages 12702-12707]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-5772]
========================================================================
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. 75, No. 51 / Wednesday, March 17, 2010 /
Proposed Rules
[[Page 12702]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Doc. No. AMS-FV-0069; FV09-930-2 PR]
Tart Cherries Grown in the States of Michigan, et al.; Final Free
and Restricted Percentages for the 2009-2010 Crop Year for Tart
Cherries
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This rule invites comments on the establishment of final free
and restricted percentages for the 2009-2010 crop year. The percentages
are 32 percent free and 68 percent restricted and will establish the
proportion of cherries from the 2009 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 April 1, 2010.
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 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. All comments submitted in response to this rule
will be included in the record and will be made available to the
public. Please be advised that the identity of the individuals or
entities submitting the comments will be made public on the Internet at
the address provided above.
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, Fax: (301) 734-5275; E-mail
Patricia.Petrella@ams.usda.gov or Kenneth.Johnson@ams.usda.gov.
Small businesses may request information on complying with this
regulation by contacting Antoinette Carter, 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:
Antoinette.Carter@ams.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 proposed rule
would establish final free and restricted percentages for tart cherries
for the 2009-2010 crop year, beginning July 1, 2009, through June 30,
2010.
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--Southern 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 2009-2010 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 2009-2010 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
[[Page 12703]]
tend to be relatively stable from year to year. The supply of tart
cherries, by contrast, varies greatly from crop year to crop year. The
magnitude of annual fluctuations in tart cherry supplies is one of the
most pronounced for any agricultural commodity in the United States. In
addition, since tart cherries are processed either into cans or frozen,
they can be stored and carried over from crop year to crop year. This
creates substantial coordination and marketing problems. The supply and
demand for tart cherries is rarely balanced. The primary purpose of
setting free and restricted percentages is to balance supply with
demand and reduce large surpluses that may occur.
Section 930.50(a) of the order prescribes procedures for computing
an optimum supply for each crop year. The Board must meet on or about
July 1 of each crop year, to review sales data, inventory data, current
crop forecasts and market conditions. The optimum supply volume shall
be calculated as 100 percent of the average sales of the prior three
years to which is added a desirable carryout inventory not to exceed 20
million pounds or such other amount as may be established with the
approval of the Secretary. The optimum supply represents the desirable
volume of tart cherries that should be available for sale in the coming
crop year.
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 or from an average of such other crop
estimates the Board votes to use. 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 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 18, 2009, and computed, for the 2009-2010
crop year, an optimum supply of 183 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.
The Board calculated preliminary free and restricted percentages as
follows: The USDA estimate of the crop for the entire production area
was 284 million pounds; a 31 million pound carryin (based on Board
estimates) was subtracted from the optimum supply of 183 million pounds
which resulted in the 2009-2010 poundage requirements (adjusted optimum
supply) of 152 million pounds. The carryin figure reflects the amount
of cherries that handlers actually have in inventory at the beginning
of the 2008-2009 crop year. Subtracting the adjusted optimum supply of
152 million pounds from the USDA crop estimate, (284 million pounds)
results in a surplus of 131 million pounds of tart cherries. The
surplus was divided by the production in the regulated districts (269
million pounds) and resulted in a restricted percentage of 49 percent
for the 2009-2010 crop year. The free percentage was 51 percent (100
percent minus 49 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 2009-2010 year:
------------------------------------------------------------------------
Millions of
pounds
------------------------------------------------------------------------
Optimum Supply Formula:
(1) Average sales of the prior three years.......... 183
(2) Plus desirable carryout......................... 0
(3) Optimum supply calculated by the Board at the 183
June meeting.......................................
Preliminary Percentages:
(4) USDA crop estimate.............................. 284
(5) Carryin held by handlers as of July 1, 2008..... 31
(6) Adjusted optimum supply for current crop year... 152
(7) Surplus......................................... 131
(8) USDA crop estimate for regulated districts...... 269
------------------------------------------------------------------------
Free Restricted
------------------------------------------------------------------------
(9) Preliminary percentages (item 7 51 49
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. No later than September 15, the Board must
recommend final free and restricted percentages to the Secretary.
The Secretary 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 and 100 percent is the final restricted percentage. The
Board met on September 10, 2009, to recommend final free and restricted
percentages.
The actual production reported by the Board was 355 million pounds,
which is a 71 million pound increase from the USDA crop estimate of 284
million pounds. The Board adjusted the optimum supply figure from 183
million pounds calculated for preliminary percentages to 176 million
pounds
[[Page 12704]]
when calculating the final percentages. This adjustment was made
because the sales figure for June 2009, which is used to compute three-
year average sales, was estimated for preliminary percentages, but was
based on actual numbers for final percentages.
A 52 million pound carryin (based on handler reports) was
subtracted from the optimum supply of 176 million pounds which resulted
in the 2009-2010 poundage requirements (adjusted optimum supply) of 124
million pounds. Subtracting the adjusted optimum supply of 124 million
pounds from the USDA crop estimate (355 million pounds), results in a
surplus of 231 million pounds of tart cherries. The surplus was divided
by the production in the regulated districts (338 million pounds) and
resulted in a restricted percentage of 68 percent for the 2009-2010
crop year. The free percentage was 32 percent (100 percent minus 68
percent).
The final percentages are based on the Board's reported production
figures and the following supply and demand information available in
September for the 2009-2010 crop year:
------------------------------------------------------------------------
Millions of
pounds
------------------------------------------------------------------------
Optimum Supply Formula:
(1) Average sales of the prior three years.......... 176
(2) Plus desirable carryout......................... 0
(3) Optimum supply calculated by the Board.......... 176
Final Percentages:
(4) Board reported production....................... 355
(5) Plus carryin held by handlers as of July 1, 2009 52
(6) Tonnage available for current crop year......... 407
(7) Surplus (item 6 minus item 3)................... 231
(8) Production in regulated districts............... 338
------------------------------------------------------------------------
Percentages
-------------------------------
Free Restricted
------------------------------------------------------------------------
(9) Final Percentages (item 7 32 68
divided by item 8 x 100 equals
restricted percentage; 100 minus
restricted percentage equals free
percentage)........................
------------------------------------------------------------------------
The 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 the establishment of a preliminary percentage 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 Department
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 (SBA) (13 CFR 121.201) as
those having annual receipts of less than $7,000,000, and small
agricultural producers are defined as those having annual receipts of
less than $750,000. A majority of the producers and handlers are
considered small entities under SBA's standards.
The principal demand for tart cherries is in the form of processed
products. Tart cherries are dried, frozen, canned, juiced, and pureed.
During the period 1997/98 through 2008/09, approximately 96 percent of
the U.S. tart cherry crop, or 244.4 million pounds, was processed
annually. Of the 244.4 million pounds of tart cherries processed, 61
percent was frozen, 27 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 34,650 acres in 2008/09. This represents a 31 percent
decrease in total bearing acres. Michigan leads the nation in tart
cherry acreage with 70 percent of the total and produces about 75
percent of the U.S. tart cherry crop each year.
The 2009/10 crop is large in size at 355 million pounds. This
production level is 71.5 million pounds greater than the 283.6 million
pounds estimated by the National Agricultural Statistics Service (NASS)
in June. 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
[[Page 12705]]
are national in scope and impact. Growers testified during the order
promulgation process that the prices they received often did not come
close to covering the costs of production.
The industry demonstrated a need for an order during the
promulgation process of the marketing order because large variations in
annual tart cherry supplies tend to lead to fluctuations in prices and
disorderly marketing. As a result of these fluctuations in supply and
price, growers realize less income. The industry chose a volume control
marketing order to even out these wide variations in supply and improve
returns to growers. During the promulgation process, proponents
testified that small growers and processors would have the most to gain
from implementation of a marketing order because many such growers and
handlers had been going out of business due to low tart cherry prices.
They also testified that, since an order would help increase grower
returns, this should increase the buffer between business success and
failure because small growers and handlers tend to be less capitalized
than larger growers and handlers.
Aggregate demand for tart cherries and tart cherry products tends
to be relatively stable from year-to-year. Similarly, prices at the
retail level show minimal variation. Consumer prices in grocery stores,
and particularly in food service markets, largely do not reflect
fluctuations in cherry supplies. Retail demand is assumed to be highly
inelastic which indicates that price reductions do not result in large
increases in the quantity demanded. Most tart cherries are sold to food
service outlets and to consumers as pie filling; frozen cherries are
sold as an ingredient to manufacturers of pies and cherry desserts.
Juice and dried cherries are expanding market outlets for tart
cherries.
Demand for tart cherries at the farm level is derived from the
demand for tart cherry products at retail. In general, the farm-level
demand for a commodity consists of the demand at retail or food service
outlets minus per-unit processing and distribution costs incurred in
transforming the raw farm commodity into a product available to
consumers. These costs comprise what is known as the ``marketing
margin.''
The supply of tart cherries, by contrast, varies greatly. The
magnitude of annual fluctuations in tart cherry supplies is one of the
most pronounced for any agricultural commodity in the United States. In
addition, since tart cherries are processed either into cans or frozen,
they can be stored and carried over from year-to-year. This creates
substantial coordination and marketing problems. The supply and demand
for tart cherries is rarely in equilibrium. As a result, grower prices
fluctuate widely, reflecting the large swings in annual supplies.
In an effort to stabilize prices, the tart cherry industry uses the
volume control mechanisms under the authority of the Federal marketing
order. This authority allows the industry to set free and restricted
percentages. These restricted percentages are only applied to states or
districts with a 3-year average of production greater than six million
pounds, and to states or districts in which the production is 50
percent or more of the previous 5-year processed production average.
The primary purpose of setting restricted percentages is 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 volume and carryin inventories. The Federal
marketing order permits the industry to exercise supply control
provisions, which allow for the establishment of free and restricted
percentages for the primary market, and a storage program. The
establishment of restricted percentages impacts the production to be
marketed in the primary market, while the storage program has an impact
on the volume of unsold inventories.
The volume control mechanism used by the cherry industry results in
decreased shipments to primary markets. Without volume control the
primary markets (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 338 million
pounds. A 68 percent restriction means 108 million pounds is available
to be shipped to primary markets from these four states. Production
levels of 10.7 million pounds for Wisconsin, 2.7 million pounds for
Oregon, and 3.8 million pounds for Pennsylvania (the unregulated areas
in 2009/10), result in an additional 17.2 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 108 million pounds from
Michigan, Utah, Washington, and New York, the 17.2 million pounds from
the other producing states, the 18 million pound release, and the 52
million pound carryin inventory gives a total of 195.2 million pounds
being available for the primary markets.
The econometric model is used to estimate the impact of
establishing a reserve pool for this year's crop. With the volume
controls, grower prices are estimated to be approximately $0.12 per
pound higher than without volume controls.
The use of volume controls is estimated to have a positive impact
on growers' total revenues. With regulation, growers' total revenue
from processed cherries are estimated to be $17.3 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 68 percent volume control would not unduly
burden producers, particularly smaller growers. The 68 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 $0.268 in 2007-08 and $0.372 per pound in 2008-09. At current
production levels, yield is estimated at approximately 10,251 pounds
per acre. At this level of yield the cost of production is estimated to
be $0.25 per pound (costs were estimated by representatives of Michigan
State University with input provided by growers for the current crop).
While grower prices have not been established in the 2009-10 crop year,
some processors have reported that growers have received an initial
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payment of ten cents per pound. Additional payments by processors will
be based on the volume of packed crop that can be marketed. These low
prices are the result of the large crop for the 2009-10 marketing year.
The final grower price will likely be around $0.15 per pound for the
combined free and restricted production. 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 $0.0036 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 2002/03 crop year proved to be
very useful and beneficial to growers and packers.
In discussing the possibility of marketing percentages for the
2009-2010 crop year, the Board considered the following factors
contained in the marketing policy: (1) The estimated total production
of tart cherries; (2) the estimated size of the crop to be handled; (3)
the expected general quality of such cherry production; (4) the
expected carryover as of July 1 of canned and frozen cherries and other
cherry products; (5) the expected demand conditions for cherries in
different market segments; (6) supplies of competing commodities; (7)
an analysis of economic factors having a bearing on the marketing of
cherries; (8) the estimated tonnage held by handlers in primary or
secondary inventory reserves; and (9) any estimated release of primary
or secondary inventory reserve cherries during the crop year.
The Board's review of the factors resulted in the computation and
announcement in September 2009 of the free and restricted percentages
proposed to be established by this rule (32 percent free and 68 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
2009-2010 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, the Department'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.
The Department 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 10, 2009, 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.
While the benefits resulting from this rulemaking are difficult to
quantify, the stabilizing effects of the volume regulations impact both
small and large handlers positively by helping them maintain markets
even though tart cherry supplies fluctuate widely from season to
season.
In compliance with Office of Management and Budget (OMB)
regulations (5 CFR part 1320) which implement the Paperwork Reduction
Act of 1995 (Pub. L. 104-13), the information collection and
recordkeeping requirements under the tart cherry marketing order have
been 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 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.
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 Antoinette Carter at the previously mentioned
address in the FOR FURTHER INFORMATION CONTACT section.
A 15-day comment period is provided to allow interested persons to
respond to this proposal. Fifteen 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 2009-2010 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 930.256 is added to read as follows:
Note: This section will not appear in the annual Code of
Federal Regulations.
Sec. 930.256 Final free and restricted percentages for the 2009-2010
crop year.
The final percentages for tart cherries handled by handlers during
the crop
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year beginning on July 1, 2009, which shall be free and restricted,
respectively, are designated as follows: Free percentage, 32 percent
and restricted percentage, 68 percent.
Dated: March 11, 2010.
David R. Shipman,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2010-5772 Filed 3-16-10; 8:45 am]
BILLING CODE 3410-02-P
