Tart Cherries Grown in the States of Michigan, et al.; Final Free and Restricted Percentages for the 2010-2011 Crop Year for Tart Cherries, 10471-10476 [2011-4269]
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10471
Rules and Regulations
Federal Register
Vol. 76, No. 38
Friday, February 25, 2011
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Doc. No. AMS–FV–10–0081; FV10–930–4
FR]
Tart Cherries Grown in the States of
Michigan, et al.; Final Free and
Restricted Percentages for the 2010–
2011 Crop Year for Tart Cherries
Agricultural Marketing Service,
USDA.
ACTION: Final rule.
AGENCY:
This rule establishes final free
and restricted percentages under the tart
cherry marketing order for the 2010–
2011 crop year. The percentages are 58
percent free and 42 percent restricted
and will establish the proportion of
cherries from the 2010 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: Effective Date: February 26,
2011.
SUMMARY:
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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) 734–5245, Fax:
(301) 734–5275; E-mail:
Kenneth.Johnson@ams.usda.gov.
Small businesses may request
information on complying with this
regulation by contacting Antoinette
Carter, Marketing Order Administration
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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 rule
establishes final free and restricted
percentages for tart cherries for the
2010–2011 crop year, beginning July 1,
2010, through June 30, 2011.
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
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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 the 2010–2011
crop year are: District two-Central
Michigan; District three-Southern
Michigan; District four-New York;
District seven-Utah; District eightWashington; and District nineWisconsin. Districts one, five, and six
(Northern Michigan, Oregon, and
Pennsylvania, respectively) are not
regulated for the 2010–2011 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 and
Pennsylvania, handlers in those districts
are not subject to volume regulation
during the 2010–2011 crop year. Section
930.52 of the order also provides that
any district producing a crop which is
less than 50 percent of the average
annual processed production in that
district in the previous five years is
exempt from volume regulation. Thus,
Northern Michigan is also not subject to
volume regulation for the 2010–2011
crop year because its 2010 crop
production was less than 50 percent of
its 5-year average production due to
weather related crop damage.
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
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
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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 is 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 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 tonnage. The restricted
tonnage is then divided by the sum of
the crop estimates for the regulated
districts to obtain a preliminary
restricted percentage for the regulated
districts. The preliminary free
percentage is the difference between the
restricted percentage and 100 percent. 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 17, 2010, and
computed, for the 2010–2011 crop year,
an optimum supply of 170 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 195 million
pounds; a 51 million pound carryin
(based on Board estimates) was
subtracted from the optimum supply of
170 million pounds which resulted in
the 2010–2011 poundage requirements
(adjusted optimum supply) of 119
million pounds. The carryin figure
reflects the amount of cherries that
handlers actually have in inventory at
the beginning of the 2010–2011 crop
year. Subtracting the adjusted optimum
supply of 119 million pounds from the
USDA crop estimate, (195 million
pounds) resulted in a surplus of 76
million pounds of tart cherries. The
surplus was divided by the production
in the regulated districts (191 million
pounds) and resulted in a restricted
percentage of 40 percent for the 2010–
2011 crop year. The free percentage was
60 percent (100 percent minus 40
percent). The Board established these
percentages and announced them to the
industry as required by the order.
The preliminary percentages were
based on the USDA production estimate
and the following supply and demand
information available at the June
meeting for the 2010–2011 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 at the June meeting .............................................................................................
Preliminary Percentages:
(4) USDA crop estimate ...............................................................................................................................................................
(5) Carryin held by handlers as of July 1, 2009 ..........................................................................................................................
(6) Adjusted optimum supply for current crop year .....................................................................................................................
(7) Surplus ....................................................................................................................................................................................
(8) USDA crop estimate for regulated districts ............................................................................................................................
170
0
170
195
51
119
76
191
Percentages
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.
The Secretary establishes final free
and restricted percentages through the
informal rulemaking process. These
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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,
2010, to recommend final free and
restricted percentages. The actual
production reported by the Board was
189 million pounds, which is a 6
million pound decrease from the USDA
crop estimate of 195 million pounds.
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60
40
The Board also recommended an
economic adjustment of 20 million
pounds to be subtracted from the
surplus to adjust the supply for the poor
quality and yields due to adverse
harvest conditions in various parts of
the production area. Handlers stated
that processing yields from the 2010 tart
cherry harvest were significantly lower
this year than in previous years. The
lower yields resulted in processors
using more raw tart cherries than usual
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to produce a given amount of finished
product.
A 51 million pound carryin (based on
handler reports) was subtracted from the
optimum supply of 170 million pounds
which resulted in the 2010–2011
poundage requirements (adjusted
optimum supply) of 119 million
pounds. Subtracting the adjusted
optimum supply of 119 million pounds
from the actual production of 189
million pounds results in a surplus of
70 million pounds of tart cherries. An
economic adjustment of 20 million
pounds was subtracted from the
surplus, resulting in an adjusted surplus
of 50 million pounds of tart cherries.
The adjusted surplus of 50 million
pounds was divided by the production
in the regulated districts (120 million
pounds) and resulted in a restricted
percentage of 42 percent for the 2010–
2011 crop year. The free percentage was
58 percent (100 percent minus 42
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 2010–2011 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) Carryin held by handlers as of July 1, 2010 ..........................................................................................................................
(6) Adjusted optimum supply ........................................................................................................................................................
(7) Surplus (item 4 minus item 6) ................................................................................................................................................
(8) Economic adjustment ..............................................................................................................................................................
(9) Adjusted surplus (item 7 minus item 8) ..................................................................................................................................
(10) Production in regulated districts ...........................................................................................................................................
170
0
170
189
51
119
70
20
50
120
Percentages
Free
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(11) Final Percentages (item 9 divided by item 10 × 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 final 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, 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 for
free use by such handler.
Approximately 17 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 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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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
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58
42
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 85 percent of the U.S.
tart cherry crop, or 222.7 million
pounds, was processed annually. Of the
222.7 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 35,550 acres in 2009/10. This
represents a 29 percent decrease in total
bearing acres. Michigan leads the nation
in tart cherry acreage with 73 percent of
the total and produces about 75 percent
of the U.S. tart cherry crop each year.
The 2010/11 crop is 189 million
pounds. This production level is 6
million pounds less than the 195.3
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
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ranged from a low of 7.3 cents in 1987
to a high of 46.4 cents in 1991. These
problems of wide supply and price
fluctuations in the tart cherry industry
are national in scope and impact.
Growers testified during the order
promulgation process that the prices
they received often did not come close
to covering the costs of production.
The industry demonstrated a need for
an order during the promulgation
process of the marketing order because
large variations in annual tart cherry
supplies tend to lead to fluctuations in
prices and disorderly marketing. As a
result of these fluctuations in supply
and price, growers realize less income.
The industry chose a volume control
marketing order to even out these wide
variations in supply and improve
returns to growers. During the
promulgation process, proponents
testified that small growers and
processors would have the most to gain
from implementation of a marketing
order because many such growers and
handlers had been going out of business
due to low tart cherry prices. They also
testified that, since an order would help
increase grower returns, this should
increase the buffer between business
success and failure because small
growers and handlers tend to be less
capitalized than larger growers and
handlers.
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
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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 supplies 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
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to see what impacts volume control may
have on grower prices. The two districts
in Michigan, along with the districts in
Utah, New York, Washington, and
Wisconsin are the restricted areas for
this crop year and their combined total
production is 120 million pounds. A 42
percent restriction means 70 million
pounds is available to be shipped to
primary markets from these five states.
Production levels of 65.3 million
pounds for Northwest Michigan, 1.2
million pounds for Oregon, and 2.2
million pounds for Pennsylvania (the
unregulated areas in 2010/11), result in
an additional 69 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 17 million pounds being
available for the primary market. The 70
million pounds from the two Michigan
districts, Utah, Washington, Wisconsin,
and New York, the 69 million pounds
from the other producing states, the 17
million pound release, and the 51
million pound carryin inventory gives a
total of 207 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 is estimated to be $23 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 42 percent
volume control would not unduly
burden producers, particularly smaller
growers. The 42 percent restriction
would be applied to the growers in two
districts in Michigan, New York, Utah,
Washington, and Wisconsin. The
growers in the other unregulated areas
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 $0.372
in 2008–09 and $0.194 per pound in
2009–10. 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
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crop). The grower price for 2010–11 will
likely be less than $0.25 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 2010–
2011 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 2010 of the
free and restricted percentages proposed
to be established by this rule (58 percent
free and 42 percent restricted).
One alternative to this action would
be not to have volume regulation this
season. Board members believed that no
volume regulation would be detrimental
to the tart cherry industry.
As mentioned earlier, the
Department’s ‘‘Guidelines for Fruit,
Vegetable, and Specialty Crop
Marketing Orders’’ specify that 110
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percent of recent years’ sales should be
made available to primary markets each
season before recommendations for
volume regulation are approved. The
quantity available under this rule is 110
percent of the quantity shipped in the
prior three years.
The free and restricted percentages
established by this rule release the
optimum supply and apply uniformly to
all regulated handlers in the industry,
regardless of size. There are no known
additional costs incurred by small
handlers that are not incurred by large
handlers. The stabilizing effects of the
percentages impact all handlers
positively by helping them maintain
and expand markets, despite seasonal
supply fluctuations. Likewise, price
stability positively impacts all
producers by allowing them to better
anticipate the revenues their tart
cherries will generate.
While the benefits resulting from this
rulemaking are difficult to quantify, the
stabilizing effects of the volume
regulations impact both small and large
handlers positively by helping them
maintain markets even though tart
cherry supplies fluctuate widely from
season to season.
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.
As noted in the initial regulatory
flexibility analysis, 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,
2010, meeting was a public meeting and
PO 00000
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Fmt 4700
Sfmt 4700
10475
all entities, both large and small, were
able to express views on this issue.
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 proposed rule concerning this
action was published in the Federal
Register on December 13, 2010 (75 FR
77564). 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 30-day comment
period ending January 12, 2011, was
provided to allow interested persons to
respond to the proposal. No comments
were 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 the
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 2010–
2011 crop. Further, handlers are aware
of this rule, which was recommended at
a public meeting. Also a 30-day
comment period was provided for in the
proposed rule. No comments were
received.
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 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.
E:\FR\FM\25FER1.SGM
25FER1
10476
Federal Register / Vol. 76, No. 38 / Friday, February 25, 2011 / Rules and Regulations
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 2010–2011 crop year.
The final percentages for tart cherries
handled by handlers during the crop
year beginning on July 1, 2010, which
shall be free and restricted, respectively,
are designated as follows: Free
percentage, 58 percent and restricted
percentage, 42 percent.
Dated: February 18, 2011.
Rayne Pegg,
Administrator, Agricultural Marketing
Service.
[FR Doc. 2011–4269 Filed 2–24–11; 8:45 am]
BILLING CODE 3410–02–P
DEPARTMENT OF ENERGY
10 CFR Part 1023
48 CFR Parts 901, 902, 903, 904, 906,
907, 908, 909, 911, 914, 915, 916, 917,
and 952
RIN 1991–AB81
(General Provisions) Contract Appeals
and the Acquisition Regulation:
General, Acquisition Planning, and
Contracting Methods and Contract
Types
Correction
In rule document 2011–1320
appearing on pages 7685–7694 in the
issue of Friday, February 11, 2011, make
the following correction:
915.404
[Table Corrected]
On page 7693, in the table, in the last
row, in the column labeled ‘‘Add’’,
‘‘ ‘‘DOE to’’ ’’ should read ‘‘ ‘‘DOE to—’’ ’’.
[FR Doc. C1–2011–1320 Filed 2–24–11; 8:45 am]
BILLING CODE 1505–01–D
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 25
srobinson on DSKHWCL6B1PROD with RULES
[Docket No. NM412 Special Conditions No.
25–419–SC]
Special Conditions: Boeing Model
787–8 Airplane; Overhead Crew-Rest
Compartment
Federal Aviation
Administration (FAA), DOT.
ACTION: Final special conditions.
AGENCY:
VerDate Mar<15>2010
19:50 Feb 24, 2011
Jkt 223001
These special conditions are
issued for the Boeing Model 787–8
airplane. This airplane will have novel
or unusual design features associated
with installation of an overhead crewrest (OCR) compartment. The applicable
airworthiness regulations do not contain
adequate or appropriate safety standards
for this design feature. These special
conditions contain the additional safety
standards that the Administrator
considers necessary to establish a level
of safety equivalent to that established
by the existing airworthiness standards.
Additional special conditions will be
issued for other novel or unusual design
features of the Boeing Model 787–8
airplanes.
DATES: Effective Date: March 28, 2011.
FOR FURTHER INFORMATION CONTACT: Jeff
Gardlin, FAA, Airframe/Cabin Safety
Branch, ANM–115, Transport Standards
Staff, Transport Airplane Directorate,
Aircraft Certification Service, 1601 Lind
Avenue, SW., Renton, Washington
98055–4056; telephone (425) 227–2136;
facsimile (425) 227–1320.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
On March 28, 2003, The Boeing
Commercial Airplane Group (hereafter
referred to as ‘‘Boeing’’) applied for an
FAA type certificate for its new Boeing
Model 787–8 passenger airplane. The
company applied for an extension of
time for the type certificate on March 9,
2009, and was granted that extension on
March 13, 2009. The Boeing Model
787–8 airplane will be an all-new, twoengine, jet transport airplane with a
two-aisle cabin. The maximum takeoff
weight will be 476,000 pounds, with a
maximum passenger capacity of 381.
Type Certification Basis
Under provisions of Title 14 Code of
Federal Regulations (14 CFR) 21.17,
Boeing must show that the Boeing
Model 787–8 airplane (hereafter referred
to as ‘‘the 787’’) meets the applicable
provisions of 14 CFR part 25, as
amended by Amendments 25–1 through
25–117, 25–120, 25–124, 25–125 and
25–128, except that § 25.1309 remains at
Amendment 25–117 for cargo-fire
protection systems. If the Administrator
finds that the applicable airworthiness
regulations (i.e., 14 CFR part 25) do not
contain adequate or appropriate safety
standards for the 787 because of a novel
or unusual design feature, special
conditions are prescribed under the
provisions of § 21.16.
In addition to complying with the
applicable airworthiness regulations
and special conditions, the 787 must
comply with the fuel-vent and exhaust-
PO 00000
Frm 00006
Fmt 4700
Sfmt 4700
emission requirements of 14 CFR part
34, and the noise-certification
requirements of 14 CFR part 36. In
addition, the FAA must issue a finding
of regulatory adequacy pursuant to
section 611 of Public Law 92–574, the
‘‘Noise Control Act of 1972.’’
The FAA issues special conditions, as
defined in 14 CFR 11.19, in accordance
with § 11.38, and they become part of
the type certification basis under
§ 21.17(a)(2).
Special conditions are initially
applicable to the model for which they
are issued. Should the type certificate
for that model be amended later to
include any other model that
incorporates the same novel or unusual
design features, the special conditions
would also apply to the other model
under provisions of § 21.101.
Novel or Unusual Design Features
Crew-rest compartments have been
installed and certificated on several
Boeing airplane models in locations as
varied as the main passenger-seating
area, the overhead space above the main
passenger-cabin seating area, and below
the passenger-cabin seating area within
the cargo compartment. In each case, the
Administrator has determined that the
applicable regulations (i.e., 14 CFR part
25) did not provide all of the necessary
requirements because each installation
had unique features by virtue of its
design, location, and use on the
airplane. The special conditions contain
safety standards that the Administrator
considers necessary to establish a level
of safety equivalent to that established
by the existing airworthiness standards.
Most recently for the Boeing Model
777 series airplanes, the FAA has issued
Special Conditions No. 25–230–SC,
dated April 9, 2003, for crew-rest
compartments allowed to be occupied
by crewmembers and flight
crewmembers during flight, and Special
Conditions No. 25–260–SC, dated April
14, 2004, for crew-rest compartments
allowed to be occupied by
crewmembers and flight crewmembers
during TT&L, as well as during flight.
The OCR compartment on the 787
identified by Boeing as an overhead
flight-attendant rest is located above the
main passenger cabin, adjacent to Door
4, and will be accessed from the main
deck by stairs through a vestibule. This
OCR compartment will contain six
private berths, an emergency hatch that
opens directly into the main passengercabin area, a smoke-detection system, an
oxygen system, and various occupant
amenities. This OCR compartment will
only be occupied by trained
crewmembers in flight. It will not be
E:\FR\FM\25FER1.SGM
25FER1
]]>Agencies
[Federal Register Volume 76, Number 38 (Friday, February 25, 2011)]
[Rules and Regulations]
[Pages 10471-10476]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-4269]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 76, No. 38 / Friday, February 25, 2011 /
Rules and Regulations
[[Page 10471]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Doc. No. AMS-FV-10-0081; FV10-930-4 FR]
Tart Cherries Grown in the States of Michigan, et al.; Final Free
and Restricted Percentages for the 2010-2011 Crop Year for Tart
Cherries
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule establishes final free and restricted percentages
under the tart cherry marketing order for the 2010-2011 crop year. The
percentages are 58 percent free and 42 percent restricted and will
establish the proportion of cherries from the 2010 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: Effective Date: February 26, 2011.
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) 734-5245,
Fax: (301) 734-5275; 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 rule
establishes final free and restricted percentages for tart cherries for
the 2010-2011 crop year, beginning July 1, 2010, through June 30, 2011.
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 the 2010-2011 crop year are:
District two-Central Michigan; District three-Southern Michigan;
District four-New York; District seven-Utah; District eight-Washington;
and District nine-Wisconsin. Districts one, five, and six (Northern
Michigan, Oregon, and Pennsylvania, respectively) are not regulated for
the 2010-2011 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 and Pennsylvania,
handlers in those districts are not subject to volume regulation during
the 2010-2011 crop year. Section 930.52 of the order also provides that
any district producing a crop which is less than 50 percent of the
average annual processed production in that district in the previous
five years is exempt from volume regulation. Thus, Northern Michigan is
also not subject to volume regulation for the 2010-2011 crop year
because its 2010 crop production was less than 50 percent of its 5-year
average production due to weather related crop damage.
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 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
[[Page 10472]]
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 is
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 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
tonnage. The restricted tonnage is then divided by the sum of the crop
estimates for the regulated districts to obtain a preliminary
restricted percentage for the regulated districts. The preliminary free
percentage is the difference between the restricted percentage and 100
percent. 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 17, 2010, and computed, for the 2010-2011
crop year, an optimum supply of 170 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 195 million pounds; a 51 million pound carryin (based on Board
estimates) was subtracted from the optimum supply of 170 million pounds
which resulted in the 2010-2011 poundage requirements (adjusted optimum
supply) of 119 million pounds. The carryin figure reflects the amount
of cherries that handlers actually have in inventory at the beginning
of the 2010-2011 crop year. Subtracting the adjusted optimum supply of
119 million pounds from the USDA crop estimate, (195 million pounds)
resulted in a surplus of 76 million pounds of tart cherries. The
surplus was divided by the production in the regulated districts (191
million pounds) and resulted in a restricted percentage of 40 percent
for the 2010-2011 crop year. The free percentage was 60 percent (100
percent minus 40 percent). The Board established these percentages and
announced them to the industry as required by the order.
The preliminary percentages were based on the USDA production
estimate and the following supply and demand information available at
the June meeting for the 2010-2011 crop year:
------------------------------------------------------------------------
Millions of
pounds
------------------------------------------------------------------------
Optimum Supply Formula:
(1) Average sales of the prior three years.......... 170
(2) Plus desirable carryout......................... 0
(3) Optimum supply calculated by the Board at the 170
June meeting.......................................
Preliminary Percentages:
(4) USDA crop estimate.............................. 195
(5) Carryin held by handlers as of July 1, 2009..... 51
(6) Adjusted optimum supply for current crop year... 119
(7) Surplus......................................... 76
(8) USDA crop estimate for regulated districts...... 191
------------------------------------------------------------------------
Percentages
-------------------------------
Free Restricted
------------------------------------------------------------------------
(9) Preliminary percentages (item 7 60 40
divided by item 8 x 100 equals
restricted percentage; 100 minus
restricted percentage equals free
percentage)............................
------------------------------------------------------------------------
Between July 1 and September 15 of each crop year, the Board may
modify the preliminary free and restricted percentages by announcing
interim free and restricted percentages to adjust to the actual pack
occurring in the industry. 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, 2010, to recommend final free and
restricted percentages. The actual production reported by the Board was
189 million pounds, which is a 6 million pound decrease from the USDA
crop estimate of 195 million pounds.
The Board also recommended an economic adjustment of 20 million
pounds to be subtracted from the surplus to adjust the supply for the
poor quality and yields due to adverse harvest conditions in various
parts of the production area. Handlers stated that processing yields
from the 2010 tart cherry harvest were significantly lower this year
than in previous years. The lower yields resulted in processors using
more raw tart cherries than usual
[[Page 10473]]
to produce a given amount of finished product.
A 51 million pound carryin (based on handler reports) was
subtracted from the optimum supply of 170 million pounds which resulted
in the 2010-2011 poundage requirements (adjusted optimum supply) of 119
million pounds. Subtracting the adjusted optimum supply of 119 million
pounds from the actual production of 189 million pounds results in a
surplus of 70 million pounds of tart cherries. An economic adjustment
of 20 million pounds was subtracted from the surplus, resulting in an
adjusted surplus of 50 million pounds of tart cherries. The adjusted
surplus of 50 million pounds was divided by the production in the
regulated districts (120 million pounds) and resulted in a restricted
percentage of 42 percent for the 2010-2011 crop year. The free
percentage was 58 percent (100 percent minus 42 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 2010-2011 crop year:
------------------------------------------------------------------------
Millions of
pounds
------------------------------------------------------------------------
Optimum Supply Formula:
(1) Average sales of the prior three years.......... 170
(2) Plus desirable carryout......................... 0
(3) Optimum supply calculated by the Board.......... 170
Final Percentages:
(4) Board reported production....................... 189
(5) Carryin held by handlers as of July 1, 2010..... 51
(6) Adjusted optimum supply......................... 119
(7) Surplus (item 4 minus item 6)................... 70
(8) Economic adjustment............................. 20
(9) Adjusted surplus (item 7 minus item 8).......... 50
(10) Production in regulated districts.............. 120
------------------------------------------------------------------------
Percentages
-------------------------------
Free Restricted
------------------------------------------------------------------------
(11) Final Percentages (item 9 58 42
divided by item 10 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 final 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, 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 for free use
by such handler. Approximately 17 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 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.
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 85 percent of
the U.S. tart cherry crop, or 222.7 million pounds, was processed
annually. Of the 222.7 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 35,550 acres in 2009/10. This represents a 29 percent
decrease in total bearing acres. Michigan leads the nation in tart
cherry acreage with 73 percent of the total and produces about 75
percent of the U.S. tart cherry crop each year.
The 2010/11 crop is 189 million pounds. This production level is 6
million pounds less than the 195.3 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
[[Page 10474]]
ranged from a low of 7.3 cents in 1987 to a high of 46.4 cents in 1991.
These problems of wide supply and price fluctuations in the tart cherry
industry are national in scope and impact. Growers testified during the
order promulgation process that the prices they received often did not
come close to covering the costs of production.
The industry demonstrated a need for an order during the
promulgation process of the marketing order because large variations in
annual tart cherry supplies tend to lead to fluctuations in prices and
disorderly marketing. As a result of these fluctuations in supply and
price, growers realize less income. The industry chose a volume control
marketing order to even out these wide variations in supply and improve
returns to growers. During the promulgation process, proponents
testified that small growers and processors would have the most to gain
from implementation of a marketing order because many such growers and
handlers had been going out of business due to low tart cherry prices.
They also testified that, since an order would help increase grower
returns, this should increase the buffer between business success and
failure because small growers and handlers tend to be less capitalized
than larger growers and handlers.
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 supplies 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 two districts in Michigan, along with the
districts in Utah, New York, Washington, and Wisconsin are the
restricted areas for this crop year and their combined total production
is 120 million pounds. A 42 percent restriction means 70 million pounds
is available to be shipped to primary markets from these five states.
Production levels of 65.3 million pounds for Northwest Michigan, 1.2
million pounds for Oregon, and 2.2 million pounds for Pennsylvania (the
unregulated areas in 2010/11), result in an additional 69 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 17 million pounds
being available for the primary market. The 70 million pounds from the
two Michigan districts, Utah, Washington, Wisconsin, and New York, the
69 million pounds from the other producing states, the 17 million pound
release, and the 51 million pound carryin inventory gives a total of
207 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 is estimated to be $23 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 42 percent volume control would not unduly
burden producers, particularly smaller growers. The 42 percent
restriction would be applied to the growers in two districts in
Michigan, New York, Utah, Washington, and Wisconsin. The growers in the
other unregulated areas 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 $0.372 in 2008-09 and $0.194 per pound in 2009-10. 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
[[Page 10475]]
crop). The grower price for 2010-11 will likely be less than $0.25 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
2010-2011 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 2010 of the free and restricted percentages
proposed to be established by this rule (58 percent free and 42 percent
restricted).
One alternative to this action would be not to have volume
regulation this season. Board members believed that no volume
regulation would be detrimental to the tart cherry industry.
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.
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.
As noted in the initial regulatory flexibility analysis, 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, 2010, meeting was a
public meeting and all entities, both large and small, were able to
express views on this issue.
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 proposed rule concerning this action was published in the Federal
Register on December 13, 2010 (75 FR 77564). 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 30-day comment period ending
January 12, 2011, was provided to allow interested persons to respond
to the proposal. No comments were 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 the
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 2010-2011 crop. Further, handlers are aware of
this rule, which was recommended at a public meeting. Also a 30-day
comment period was provided for in the proposed rule. No comments were
received.
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
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.
[[Page 10476]]
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 2010-2011
crop year.
The final percentages for tart cherries handled by handlers during
the crop year beginning on July 1, 2010, which shall be free and
restricted, respectively, are designated as follows: Free percentage,
58 percent and restricted percentage, 42 percent.
Dated: February 18, 2011.
Rayne Pegg,
Administrator, Agricultural Marketing Service.
[FR Doc. 2011-4269 Filed 2-24-11; 8:45 am]
BILLING CODE 3410-02-P
