Tart Cherries Grown in the States of Michigan, et al.; Final Free and Restricted Percentages for the 2009-2010 Crop Year, 29647-29652 [2010-12770]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 75, Number 102 (Thursday, May 27, 2010)]
[Rules and Regulations]
[Pages 29647-29652]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-12770]



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Federal Register / Vol. 75, No. 102 / Thursday, May 27, 2010 / Rules 
and Regulations

[[Page 29647]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Doc. No. AMS-FV-09-0069; FV09-930-2 FR]


Tart Cherries Grown in the States of Michigan, et al.; Final Free 
and Restricted Percentages for the 2009-2010 Crop Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This rule establishes final free and restricted percentages 
for the 2009-2010 crop year under the Federal marketing order 
regulating tart cherries grown in seven States (order). The percentages 
are 32 percent free and 68 percent restricted and 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 order. The order regulates the 
handling of tart cherries grown in the States of Michigan, New York, 
Pennsylvania, Oregon, Utah, Washington, and Wisconsin.

DATES: Effective Date: May 28, 2010.

FOR FURTHER INFORMATION CONTACT: 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, or E-mail: 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 final 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 final rule 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 final rule 
will 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 are not 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 tends to be relatively stable from year to year. 
The supply of tart cherries, by contrast, varies greatly from crop year 
to crop year. The magnitude of annual fluctuations in tart cherry 
supplies is one of the most pronounced for any agricultural commodity 
in the United States. In addition, 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

[[Page 29648]]

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 either 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 forecast for the regulated 
districts to obtain preliminary 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 had in inventory at the beginning of 
the 2009-2010 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 June           183
     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 divided by       51           49
     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 make 
available the tart cherries necessary to achieve the optimum supply 
figure calculated by the Board. The difference between any final free 
percentage designated by the Secretary and 100 percent is the final 
restricted percentage.
    The Board met on September 10, 2009, and recommended 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 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

[[Page 29649]]

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:

------------------------------------------------------------------------
                                                               Million
                                                                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 divided by item        32           68
     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 available to handlers 
for free use. 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 in proportion to each 
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.

Final 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 final 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 600 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 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

[[Page 29650]]

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.
    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 approxiamately 10,251 poounds 
per acre. At this level of yield the cost of production is estimated to 
be $0.25 per pound (costs were estimated by represenataives 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 received an initial payment of ten cents per 
pound. Additional payments by processors will be based on the volume of 
packed 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

[[Page 29651]]

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.
    As noted in the initial regulatory flexibility analysis, USDA has 
not identified any relevant Federal rules that duplicate, overlap, or 
conflict with this regulation.
    While the benefits resulting from this rulemaking are difficult to 
quantify, the stabilizing effects of the volume regulations impact both 
small and large handlers positively by helping them maintain markets 
even though tart cherry supplies fluctuate widely from season to 
season.
    In compliance with Office of Management and Budget (OMB) 
regulations (5 CFR part 1320) which implement the Paperwork Reduction 
Act of 1995 (Pub. L. 104-13), the information collection and 
recordkeeping requirements under the tart cherry marketing order have 
been 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.
    The Board's meetings were 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, all entities, both large and small, were able to 
express views on this issue.
    A proposed rule concerning this action was published in the Federal 
Register on March 17, 2010 (75 FR 12702). Copies of the rule were 
mailed or sent via facsimile to all Board members and alternates. 
Finally, the rule was made available through the Internet by USDA and 
the Office of the Federal Register. A 15-day comment period ending 
April 1, 2010, was provided to allow interested persons to respond to 
the proposal.
    Two comments were received during the comment period in response to 
the proposal. The commenters, both representing processors of canned 
tart cherry products, opposed the increased volume regulation from the 
preliminary percentages to the final percentages.
    Both commenters stated that the products they produce are not in 
oversupply and the volume regulation percentages at the increased level 
are burdensome to their companies' operations.
    The first commenter stated that they utilize all of the diversion 
activities like: export activity, new products, donated products, 
grower diversion activity and putting product in the reserve. Since 
they package all of their products in steel cans at harvest the 
increase in the volume regulation forced them to purchase frozen 
products to put in the reserve to satisfy the increased reserve 
obligation. They do not market frozen cherries in any form. They also 
stated that the grower diversion certificates they had became less 
valuable because they are treated as production and the increased 
percentage is applied to those; and therefore they can only utilize 32 
percent of the orchard diverted pounds to satisfy regulation on the 
pounds processed for their sales.
    Finally, the first commenter stated that they will not support the 
renewal of the order as it is currently being implemented. The cost of 
regulation is limiting available funds to promote and increase 
utilization of their products. They believe this was not the intent of 
the marketing order.
    The second commenter stated that the frozen tart cherry handlers 
over the years have repeatedly encouraged over production by producers. 
The commenter reiterated that their products (canned cherries) are not 
in excess supply. Their company was shocked and totally unprepared for 
the increase in regulation to 68 percent. According to the commenter, 
this increased regulation will result in severe financial consequences, 
including job losses and a diminished level of investment in new 
products for the company. This commenter asked USDA to reconsider this 
level of regulation and asked for relief from this level of regulation 
even if it would only extend to the canned cherry segment of the 
industry.
    In response to the commenters, the tart cherry marketing order 
regulations do not apply to handlers according to the type of cherry 
products they pack. The order applies to the industry as a whole, 
regardless of which market segment individual handlers are involved in. 
The reserve formula under the order is designed to ensure that 
aggregate market needs can be met with

[[Page 29652]]

free percentage cherries and does not differentiate between product 
types.
    When the Board met in June 2009 and made its recommendation for 
preliminary free and reserve percentages, it utilized a crop estimate 
of 284 million pounds. It also computed a surplus of 131 million 
pounds, according to the order formula. The actual crop materialized at 
a much higher level (355 million pounds). The larger crop, combined 
with a higher carryin inventory than initially estimated and a lower 
optimum supply due to lower sales from previous years, resulted in a 
larger surplus than initially estimated. These changes resulted in a 
higher restricted percentage and a lower free percentage than initially 
recommended by the Board as preliminary percentages. However, the 
reserve formula under the order is designed to ensure that aggregate 
market needs can be met with free percentage cherries. The Board 
followed the formula prescribed in the order in making its 
recommendation concerning volume regulation.
    In addition, the marketing order does not dictate what types of 
products must be placed in the reserve or the products that can be used 
to satisfy a handler's restricted obligation. Handlers can use whatever 
form of product that is available to them to meet their restricted 
obligation. This provision takes into account that handlers process 
different types of products.
    The Board is continuing to work with USDA to solve the oversupply 
situation and most recently made a recommendation to add another 
feature to their grower diversion program to remove more cherries from 
production to bring supply more in line with demand. The industry also 
has an active domestic promotion program designed to help increase the 
demand for tart cherries.
    The Board has also made a recommendation to make grower diversion 
certificates more valuable to the handler by making them not be counted 
as production. This recommendation is under consideration by the USDA.
    Accordingly, no changes will be made to the rule as proposed, based 
on the comments received.
    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.
    After consideration of all relevant matter presented, including 
information and recommendation submitted by the Board and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because handlers are already shipping 
tart cherries from the 2009-2010 crop. Further, handlers are aware of 
this rule, which was recommended at a public meeting. Also, a fifteen 
day comment period was provided for in the proposed rule.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.

0
For the reasons set forth in the preamble, 7 CFR part 930 is amended as 
follows:

PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK, 
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN

0
1. The authority citation for 7 CFR part 930 continues to read as 
follows:

    Authority:  7 U.S.C. 601-674.


0
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 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: May 21, 2010.
David R. Shipman,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2010-12770 Filed 5-26-10; 8:45 am]
BILLING CODE P