Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 2011-2012 Marketing Year, 11971-11978 [2011-4810]
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11971
Proposed Rules
Federal Register
Vol. 76, No. 43
Friday, March 4, 2011
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Doc. No. AMS–FV–10–0094; FV11–985–1
PR]
Marketing Order Regulating the
Handling of Spearmint Oil Produced in
the Far West; Salable Quantities and
Allotment Percentages for the 2011–
2012 Marketing Year
Agricultural Marketing Service,
USDA.
ACTION: Proposed rule.
AGENCY:
This rule would establish the
quantity of spearmint oil produced in
the Far West, by class, that handlers
may purchase from, or handle on behalf
of, producers during the 2011–2012
marketing year, which begins on June 1,
2011. This rule invites comments on the
establishment of salable quantities and
allotment percentages for Class 1
(Scotch) spearmint oil of 694,774
pounds and 34 percent, respectively,
and for Class 3 (Native) spearmint oil of
1,012,983 pounds and 44 percent,
respectively. The Spearmint Oil
Administrative Committee (Committee),
the agency responsible for local
administration of the marketing order
for spearmint oil produced in the Far
West, recommended these limitations
for the purpose of avoiding extreme
fluctuations in supplies and prices to
help maintain stability in the spearmint
oil market.
DATES: Comments must be received by
April 4, 2011.
ADDRESSES: Interested persons are
invited to submit written comments
concerning this proposal. Comments
must be sent to the Docket Clerk,
Marketing Order Administration
Branch, Fruit and Vegetable Programs,
AMS, USDA, 1400 Independence
Avenue, SW., STOP 0237, Washington,
DC 20250–0237; Fax: (202) 720–8938; or
Internet: https://www.regulations.gov. All
comments should reference the
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SUMMARY:
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document number and the date and
page number of this issue of the Federal
Register and will be made available for
public inspection in the Office of the
Docket Clerk during regular business
hours, or can be viewed at: https://
www.regulations.gov. All comments
submitted in response to this rule will
be included in the record and will be
made available to the public. Please be
advised that the identity of the
individuals or entities submitting the
comments will be made public on the
Internet at the address provided above.
FOR FURTHER INFORMATION CONTACT:
Barry Broadbent, Marketing Specialist
or Gary Olson, Regional Manager,
Northwest Marketing Field Office,
Marketing Order Administration
Branch, Fruit and Vegetable Programs,
AMS, USDA; Telephone: (503) 326–
2724, Fax: (503) 326–7440, or E-mail:
Barry.Broadbent@ams.usda.gov or
GaryD.Olson@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 rule
is issued under Marketing Order No.
985 (7 CFR part 985), as amended,
regulating the handling of spearmint oil
produced in the Far West (Washington,
Idaho, Oregon, and designated parts of
Nevada and Utah), hereinafter referred
to as the ‘‘order.’’ 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
(USDA) is issuing this rule in
conformance with Executive Order
12866.
This rule has been reviewed under
Executive Order 12988, Civil Justice
Reform. Under the marketing order now
in effect, salable quantities and
allotment percentages may be
established for classes of spearmint oil
produced in the Far West. This
proposed rule would establish the
quantity of spearmint oil produced in
the Far West, by class, which handlers
may purchase from, or handle on behalf
of, producers during the 2011–2012
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marketing year, which begins on June 1,
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 USDA a petition stating that the
order, any provision of the order, or any
obligation imposed in connection with
the order is not in accordance with law
and request a modification of the order
or to be exempted therefrom. A handler
is afforded the opportunity for a hearing
on the petition. After the hearing, USDA
would rule on the petition. The Act
provides that the district court of the
United States in any district in which
the handler is an inhabitant, or has his
or her principal place of business, has
jurisdiction to review USDA’s ruling on
the petition, provided an action is filed
not later than 20 days after the date of
the entry of the ruling.
The Committee meets annually in the
fall to adopt a marketing policy for the
ensuing marketing year or years. In
determining such marketing policy, the
Committee considers a number of
factors, including, but not limited to, the
current and projected supply, estimated
future demand, production costs, and
producer prices for all classes of
spearmint oil, as well as input from
spearmint oil handlers and producers
regarding prospective marketing
conditions. During the meeting, the
Committee recommends to USDA any
volume regulations deemed necessary to
meet market requirements and to
establish orderly marketing conditions
for Far West spearmint oil. If the
Committee’s marketing policy
considerations indicate a need for
limiting the quantity of any or all
classes of spearmint oil marketed, the
Committee subsequently recommends
the establishment of a salable quantity
and allotment percentage for such class
or classes of oil for the forthcoming
marketing year.
The salable quantity represents the
total amount of each class of spearmint
oil that handlers may purchase from, or
handle on behalf of, producers during
the marketing year. Each producer is
allotted a prorated share of the salable
quantity by applying the allotment
percentage to that producer’s allotment
base for each applicable class of
spearmint oil. The producer allotment
base is each producer’s quantified share
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of the spearmint oil market based on a
statistical representation of past
spearmint oil production and the
accommodation for reasonable and
normal adjustments to such base as
prescribed by the Committee and
approved by USDA. Salable quantities
are established at levels intended to
meet market requirements and to
establish orderly marketing conditions.
Committee recommendations for
volume controls are made well in
advance of the period in which the
regulations are to be effective, thereby
allowing producers the chance to adjust
their production decisions accordingly.
Pursuant to authority in §§ 985.50,
985.51, and 985.52 of the order, the full
eight-member Committee met on
October 13, 2010, and recommended
salable quantities and allotment
percentages for both classes of oil for the
2011–2012 marketing year. The
Committee, in a vote of six members in
favor and two members opposed,
recommended the establishment of a
salable quantity and allotment
percentage for Scotch spearmint oil of
694,774 pounds and 34 percent,
respectively. The two members
opposing the action favored an
undetermined greater salable quantity
and allotment percentage for Scotch
spearmint oil. For Native spearmint oil,
the Committee unanimously
recommended the establishment of a
salable quantity and allotment
percentage of 1,012,983 pounds and 44
percent, respectively.
This rule would limit the amount of
spearmint oil that handlers may
purchase from, or handle on behalf of,
producers during the 2011–2012
marketing year, which begins on June 1,
2011. Salable quantities and allotment
percentages have been placed into effect
each season since the order’s inception
in 1980.
Class 1 (Scotch) Spearmint Oil
The U.S. production of Scotch
spearmint oil is concentrated in the Far
West, which includes Washington,
Idaho, Oregon, and a portion of Nevada
and Utah. Scotch type oil is also
produced in seven other States: Indiana,
Michigan, Minnesota, Montana, North
Dakota, South Dakota, and Wisconsin.
Additionally, Scotch spearmint oil is
produced outside of the U.S., with
China and India being the largest global
competitors of domestic Scotch
spearmint oil production.
The Far West’s share of total global
Scotch spearmint oil sales has varied
considerably over the past several
decades, from 72 percent in 1980 to 27
percent in 2002. Recently, sales of Far
West Scotch spearmint oil have risen to
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over 48 percent of world sales, and are
expected to hold steady, or go even
higher, in the coming years.
In spite of the Far West’s growing
share of the world market for Scotch
spearmint oil, the industry has faced
some stressful marketing conditions
during the most recent marketing years.
Spearmint oil producers experienced
relatively good economic conditions in
the years from 2004 through 2007,
which led to overproduction and an
environment of excess supply in the
market beginning in 2008 and
continuing through 2010. The Far West
region, which produced 635,508 pounds
of Scotch spearmint oil in 2004,
produced 1,050,700 pounds just five
years later in 2009, a 65 percent
increase.
To compound matters, in addition to
increasing overproduction concerns, the
demand for Far West Scotch spearmint
oil began to actually decline over this
period. Sales peaked in 2005 at
1,002,779 pounds, declining to 627,868
pounds in 2009. With production rising
and sales dropping, excess inventory of
uncommitted Scotch spearmint oil
began to accumulate. Scotch spearmint
oil carry-in (unsold salable quantity
from prior years that is available for sale
at the beginning of a new marketing
year), which serves as a measure of
oversupply in the market, grew from
23,141 pounds in 2007 to 431,028
pounds in 2010.
The Committee’s response to the
deteriorating marketing environment
since 2008 has been to recommend the
tightening of volume control
regulations. The Committee, which
recommended a 2008–2009 marketing
year Scotch spearmint oil salable
quantity of 993,067 pounds, dropped
the recommendation to 802,067 pounds
for the 2009–2010 marketing year, and
to only 566,962 pounds for the 2010–
2011 marketing year. Similarly, the
recommended allotment percentage was
reduced from 50 percent for the 2008–
2009 period to 40 percent for 2009–
2010, and down to just 28 percent for
2010–2011.
When the Committee met in October
2010 to consider volume regulation for
the 2011–2012 marketing year, many of
the previously mentioned negative
marketing conditions still persisted.
Even while showing some signs of
incremental improvement, the current
inventories, expected production, and
projected demand of Scotch spearmint
oil were all at levels considered
unhealthy for the industry.
The Committee estimates that the
carry-in of Scotch spearmint oil on June
1, 2011, the primary measure of excess
supply, will be approximately 197,551
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pounds. That quantity, while down
from the previous year’s high of 431,028
pounds, would still be above what the
Committee considers to be optimum.
Overproduction of Scotch spearmint
oil, while improving, also continues to
be an area of concern for the Committee.
Production of Far West Scotch
spearmint oil has declined, from a high
of 1,050,700 pounds in 2009, to 868,487
pounds in 2010, and the Committee
expects it to drop even further during
the 2011 season. The recent declining
trend in Scotch spearmint oil
production is viewed by the Committee
as a positive development and is
expected to contribute some relief to the
industry’s oversupply situation.
In addition, spearmint oil handlers
indicated that demand for Scotch
spearmint oil might be gaining strength.
Handlers that had projected that the
trade demand for Far West Scotch oil
would range from a low of 750,000
pounds to a high of 850,000 pounds for
the 2010–2011 marketing year, expect
the trade demand to be within a range
of 800,000 pounds to 900,000 pounds
for the 2011–2012 period.
However, this increase in projected
Scotch demand, generally thought of as
a positive indicator for the industry, is
viewed cautiously by some industry
participants. Consumer demand for
mint flavored products is reportedly
steady, providing optimism for long
term increases in the demand for Far
West spearmint oil. Some handlers,
though, believe that the manufacturers
of such products are currently
increasing spearmint oil purchases just
to rebuild inventories that were
depleted during the worst of the recent
U.S. economic recession. As such, those
handlers feel that at least some of the
recent increase in Scotch spearmint oil
sales may not represent an actual
increase in sustained demand, but a
temporary response to fluctuations in
the strategic inventories of the
manufacturers.
Still, given the moderately improving
economic indicators for the Far West
Scotch spearmint oil industry outlined
above, the Committee took a cautiously
optimistic perspective into the
discussion of establishing appropriate
salable quantities and allotment
percentages for the upcoming season.
Therefore, at the October 13, 2010,
meeting, the Committee recommended
the 2011–2012 Scotch spearmint oil
salable quantity of 694,774 pounds and
allotment percentage of 34 percent. The
Committee utilized sales estimates for
2011–2012 Scotch spearmint oil, as
provided by several of the industry’s
handlers, as well as historical and
current Scotch spearmint oil production
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and inventory statistics, to arrive at
those recommendations. The volume
control levels recommended by the
Committee represent a 127,812 pound
and 6 percentage point increase over the
previous year’s salable quantity and
allotment percentage, reflecting a more
positive assessment of the industry’s
economic conditions.
The Committee estimates that about
800,000 pounds of Scotch spearmint oil
may be sold during the 2011–2012
marketing year. When considered in
conjunction with the estimated carry-in
of 197,551 pounds of Scotch spearmint
oil on June 1, 2011, the recommended
salable quantity of 694,774 pounds
results in a total available supply of
approximately 892,325 pounds of
Scotch spearmint oil during the 2011–
2012 marketing year. The Committee
estimates that carry-in of Scotch
spearmint oil into the 2012–2013
marketing year, which begins June 1,
2012, would be 92,325 pounds, a
decrease of 105,226 pounds from the
beginning of the 2011–2012 marketing
year.
The Committee’s stated intent in the
use of marketing order volume control
regulations for Scotch spearmint oil is to
keep adequate supplies available to
meet market needs and establish orderly
marketing conditions. With that in
mind, the Committee developed its
recommendation for the proposed
Scotch spearmint oil salable quantity
and allotment percentage for the 2011–
2012 marketing year based on the
information discussed above, as well as
the data outlined below.
(A) Estimated carry-in on June 1,
2011—197,551 pounds. This figure is
the difference between the revised
2010–2011 marketing year total
available supply of 997,551 pounds and
the estimated 2010–2011 marketing year
trade demand of 800,000 pounds.
(B) Estimated trade demand for the
2011–2012 marketing year—800,000
pounds. This figure is based on input
from producers at six Scotch spearmint
oil production area meetings held in late
September and early October 2010, as
well as estimates provided by handlers
and other meeting participants at the
October 13, 2010, meeting. The average
estimated trade demand provided at the
six production area meetings is 800,000
pounds, which is 33,333 pounds less
than the average of the trade demand
estimates submitted by handlers. The
average of Far West Scotch spearmint
oil sales over the last five years is
789,243 pounds.
(C) Salable quantity required from the
2011–2012 marketing year production—
602,449 pounds. This figure is the
difference between the estimated 2011–
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2012 marketing year trade demand
(800,000 pounds) and the estimated
carry-in on June 1, 2011 (197,551
pounds). This figure represents the
minimum salable quantity that may be
needed to satisfy estimated demand for
the coming year with no carryover.
(D) Total estimated allotment base for
the 2011–2012 marketing year—
2,043,453 pounds. This figure
represents a one percent increase over
the revised 2010–2011 total allotment
base. This figure is generally revised
each year on June 1 due to producer
base being lost because of the bona fide
effort production provisions of
§ 985.53(e). The revision is usually
minimal.
(E) Computed allotment percentage—
29.5 percent. This percentage is
computed by dividing the minimum
required salable quantity by the total
estimated allotment base.
(F) Recommended allotment
percentage—34 percent. This is the
Committee’s recommendation and is
based on the computed allotment
percentage (29.5 percent), the average of
the computed allotment percentage
figures from the six production area
meetings (31 percent), and input from
producers and handlers at the October
13, 2010, meeting. The actual
recommendation of 34 percent is based
on the Committee’s determination that
the computed percentage (29.5 percent)
may not adequately supply the potential
2011–2012 Scotch spearmint oil market.
(G) The Committee’s recommended
salable quantity—694,774 pounds. This
figure is the product of the
recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the
2011–2012 marketing year—892,325
pounds. This figure is the sum of the
2011–2012 recommended salable
quantity (694,774 pounds) and the
estimated carry-in on June 1, 2011
(197,551 pounds).
Class 3 (Native) Spearmint Oil
The Native spearmint oil industry is
facing market conditions that are very
similar to those affecting the Scotch
spearmint oil market, although not
nearly as severe. Over 90 percent of U.S.
production of Native spearmint oil is
produced within the Far West
production area, thus domestic
production outside this area is not a
major factor in the marketing of Far
West Native spearmint oil. This has
been an attribute of U.S. production
since the order’s inception. A minor
amount of domestic Native spearmint
oil is produced outside of the Far West
region in the States of Indiana,
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Michigan, Minnesota, Montana, North
Dakota, South Dakota, and Wisconsin.
According to the Committee, very
little true Native spearmint oil is
produced outside of the United States.
However, India produces an increasing
quantity of spearmint oil with qualities
very similar to Native spearmint oil.
Committee records show that in 1996
the Far West accounted for nearly 93
percent of the global sales of Native or
Native quality spearmint oil. By 2008
that share had shrunk to a low of 48
percent. Since that point, however, the
percentage has rebounded and is now
estimated to be over 57 percent for 2010.
In spite of the fact that Far West
Native spearmint oil has been gaining
world market share, the industry has
endured challenging marketing
conditions over the past several
marketing years. Overproduction,
coupled with a decrease in demand,
created a similar oversupply situation
for Native spearmint oil as was
previously discussed for Scotch
spearmint oil. Production of Native
spearmint oil in the Far West region was
701,372 pounds in 2004, but increased
to 1,453,896 pounds just five years later
in 2009, a 107 percent increase. In
addition, over that same timeframe,
demand for Native oil was moving in
the opposite direction. Sales of Far West
Native oil peaked in 2004 at 1,249,507
pounds. From that cyclical high, sales
steadily declined over the next five
years, dropping to just 976,888 pounds
by 2009. As production rose and sales
dropped, excess inventory of
uncommitted Native spearmint oil
began to accumulate. Carry-in of Native
oil measured at the beginning of each
marketing year, which serves as a
measure of oversupply in the market,
grew from 83,417 pounds at the
beginning of the 2007–2008 marketing
year to 343,517 pounds at the beginning
of the 2010–2011 marketing year.
The Committee’s response to the
difficult marketing environment for
Native spearmint oil over the 2008
through 2010 period was similar to the
response to the situation with Scotch
spearmint oil over that time, to
recommend the moderate tightening of
volume control regulations. The
Committee, which recommended a
2008–2009 Native spearmint oil salable
quantity of 1,178,946 pounds,
maintained a similar recommendation
for the 2009–2010 marketing year and
then dropped its recommendation to
953,405 pounds for the 2010–2011
marketing year. Similarly, the
recommended allotment percentage,
which was 53 percent for the 2008–2009
and 2009–2010 periods, was
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recommended to be reduced to just 43
percent for 2010–2011.
Although improving, many of the
negative marketing conditions present
leading up to the the 2010–2011
marketing year were still evident when
the Committee met to consider volume
regulation for the upcoming 2011–2012
marketing year. The June 1, 2011, carryin of Native spearmint oil on June 1,
2011, is estimated to be 216,737 pounds,
down from the previous year’s high of
343,517 pounds, but still at a level
above what the Committee believes to
be optimum.
Also, production of Native spearmint
oil, while showing some signs of
improvement, still remains an area of
concern for the Committee. Production
of Far West Native spearmint oil, which
declined from a high of 1,453,896
pounds in 2009 to 1,244,361 pounds in
2010, is still considered by the
Committee to be high relative to the
current level of demand and the excess
inventory of Native spearmint oil.
However, the Committee believes that
the declining trend in Native spearmint
oil production may continue into the
2011 season and that much of the
pressure on the industry’s current
oversupply situation may be relieved
moving forward.
In addition to an improved supply
situation, demand for Far West Native
spearmint oil appears to have halted its
downward movement and is expected to
improve in the coming year. Spearmint
oil handlers, who projected that the
2010–2011 trade demand for Far West
Native spearmint oil would range from
a low of 1,050,000 pounds to a high of
1,200,000 pounds, have increased their
projections modestly for the 2011–2012
period to a range of 1,100,000 pounds to
1,200,000 pounds.
However, similar to Scotch spearmint
oil, the small increase in projected
Native spearmint oil demand, generally
thought of as a positive indicator for the
industry, is viewed by some handlers
with caution. As mentioned previously,
consumer demand for mint flavored
products is expected to be steady or
increase slightly moving forward, which
provides optimism for long term
improvement in the demand for Far
West spearmint oil. Some handlers,
though, have reported that the
manufacturers of such products may
just be temporarily increasing purchases
of spearmint oil to rebuild inventories
that were depleted during the worst of
the current U.S. economic recession. As
such, the handlers believe that at least
some of the recent increase in purchases
do not represent an actual increase in
sustained demand but, rather, a short
term response to fluctuations in the
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strategic inventories of the
manufacturers.
Given the moderately improving
economic indicators for the Far West
Native spearmint oil industry outlined
above, the Committee took a cautiously
optimistic perspective into the
discussion of establishing appropriate
salable quantities and allotment
percentages for the upcoming season.
As such, at the October 13, 2010,
meeting, the Committee recommended a
2011–2012 Native spearmint oil salable
quantity of 1,012,983 pounds and an
allotment percentage of 44 percent. The
Committee utilized sales estimates for
2011–2012 Native spearmint oil, as
provided by several of the industry’s
handlers, as well as historical and
current Native spearmint oil market
statistics to establish these thresholds.
The recommended volume control
levels represent a 32,763 pound and a
1 percentage point increase over the
previous year’s salable quantity and
allotment percentage. Even with these
increases in the salable quantity and
allotment percentages, the carry-in at
the beginning of the 2012–2013
marketing year is projected to drop by
117,018 pounds.
The Committee estimates that
approximately 1,130,000 pounds of
Native spearmint oil may be sold during
the 2011–2012 marketing year. When
considered in conjunction with the
estimated carry-in of 216,737 pounds of
Native spearmint oil on June 1, 2011,
the recommended salable quantity of
1,012,983 pounds results in a total
available supply of about 1,229,719
pounds of Native spearmint oil during
the 2011–2012 marketing year. The
Committee estimates that carry-in of
Native spearmint oil at the beginning of
the 2012–2103 marketing year to be
99,719 pounds, a significant reduction
from the previous year’s level of 216,737
pounds.
The Committee’s stated intent in the
use of marketing order volume control
regulations for Native spearmint oil is to
keep adequate supplies available to
meet market needs and establish orderly
marketing conditions. With that in
mind, the Committee developed its
recommendation for the proposed
Native spearmint oil salable quantity
and allotment percentage for the 2011–
2012 marketing year based on the
information discussed above, as well as
the data outlined below.
(A) Estimated carry-in on June 1,
2011—216,737 pounds. This figure is
the difference between the revised
2010–2011 marketing year total
available supply of 1,323,737 pounds
and the estimated 2010–2011 marketing
year trade demand of 1,107,000 pounds.
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(B) Estimated trade demand for the
2011–2012 marketing year—1,130,000
pounds. This estimate is established by
the Committee and is based on input
from producers at the seven Native
spearmint oil production area meetings
held in late September and early
October 2010, as well as estimates
provided by handlers and other meeting
participants at the October 13, 2010,
meeting. The average estimated trade
demand provided at the seven
production area meetings was 1,130,238
pounds, whereas the handler estimate
ranged from 1,100,000 pounds to
1,200,000 pounds.
(C) Salable quantity required from the
2011–2012 marketing year production—
913,263 pounds. This figure is the
difference between the estimated 2011–
2012 marketing year trade demand
(1,130,000 pounds) and the estimated
carry-in on June 1, 2011 (216,737
pounds). This is the minimum amount
that the Committee believes would be
required to meet the anticipated 2011–
2012 Native spearmint oil trade
demand.
(D) Total estimated allotment base for
the 2011–2012 marketing year—
2,302,233 pounds. This figure
represents a one percent increase over
the revised 2010–2011 total allotment
base. This figure is generally revised
each year on June 1 due to producer
base being lost due to the bona fide
effort production provisions of
§ 985.53(e). The revision is usually
minimal.
(E) Computed allotment percentage—
39.7 percent. This percentage is
computed by dividing the required
salable quantity (913,263 pounds) by the
total estimated allotment base
(2,302,233 pounds).
(F) Recommended allotment
percentage—44 percent. This is the
Committee’s recommendation based on
the computed allotment percentage
(39.7 percent), the average of the
computed allotment percentage figures
from the seven production area
meetings (39.7 percent), and input from
producers and handlers at the October
13, 2010, meeting. The actual
recommendation of 44 percent is based
on the Committee’s determination that
the computed percentage (39.7 percent)
may not adequately supply the potential
2011–2012 Native spearmint oil market.
(G) The Committee’s recommended
salable quantity—1,012,983 pounds.
This figure is the product of the
recommended allotment percentage (44
percent) and the total estimated
allotment base (2,302,233 pounds).
(H) Estimated available supply for the
2011–2012 marketing year—1,229,720
pounds. This figure is the sum of the
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2011–2012 recommended salable
quantity (1,012,983 pounds) and the
estimated carry-in on June 1, 2011
(216,737 pounds).
The salable quantity is the total
quantity of each class of spearmint oil
that handlers may purchase from, or
handle on behalf of, producers during a
marketing year. Each producer is
allotted a share of the salable quantity
by applying the allotment percentage to
the producer’s allotment base for the
applicable class of spearmint oil.
The Committee’s recommended
Scotch and Native spearmint oil salable
quantities and allotment percentages of
694,774 pounds and 34 percent, and
1,012,983 pounds and 44 percent,
respectively, are based on the goal of
establishing and maintaining market
stability. The Committee anticipates that
this goal would be achieved by
matching the available supply of each
class of Spearmint oil to the estimated
demand of such, thus avoiding extreme
fluctuations in inventories and prices.
The proposed salable quantities are
not expected to cause a shortage of
spearmint oil supplies. Any
unanticipated or additional market
demand for spearmint oil which might
develop during the marketing year
could be satisfied by an intra-seasonal
increase in the salable quantity. The
order makes this provision for an intraseasonal increase to allow the
Committee the flexibility to respond
quickly to changing market conditions.
In addition, producers who produce
more than their annual allotments
during the 2011–2012 marketing year
may transfer such excess spearmint oil
to producers with production less than
their annual allotment, or, up until
November 1, 2011, place it into the
reserve pool to be released in the future
in accordance with market needs.
This proposed regulation, if adopted,
would be similar to regulations issued
in prior seasons. The average allotment
percentage for the five most recent
marketing years for Scotch spearmint oil
is 42 percent, while the average
allotment percentage for the same fiveyear period for Native spearmint oil is
51 percent. Costs to producers and
handlers resulting from this rule are
expected to be offset by the benefits
derived from a stable market and
improved returns. In conjunction with
the issuance of this proposed rule,
USDA has reviewed the Committee’s
marketing policy statement for the
2011–2012 marketing year. The
Committee’s marketing policy
statement, a requirement whenever the
Committee recommends volume
regulation, fully meets the intent of
§ 985.50 of the order.
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During its discussion of potential
2011–2012 salable quantities and
allotment percentages, the Committee
considered: (1) The estimated quantity
of salable oil of each class held by
producers and handlers; (2) the
estimated demand for each class of oil;
(3) the prospective production of each
class of oil; (4) the total of allotment
bases of each class of oil for the current
marketing year and the estimated total
of allotment bases of each class for the
ensuing marketing year; (5) the quantity
of reserve oil, by class, in storage; (6)
producer prices of oil, including prices
for each class of oil; and (7) general
market conditions for each class of oil,
including whether the estimated season
average price to producers is likely to
exceed parity. Conformity with the
USDA’s ‘‘Guidelines for Fruit, Vegetable,
and Specialty Crop Marketing Orders’’
has also been reviewed and confirmed.
The establishment of these salable
quantities and allotment percentages
would allow for anticipated market
needs. In determining anticipated
market needs, consideration by the
Committee was given to historical sales,
as well as changes and trends in
production and demand. This rule also
provides producers with information on
the amount of spearmint oil that should
be produced for the 2011–2012 season
in order to meet anticipated market
demand.
Initial Regulatory Flexibility Analysis
Pursuant to requirements set forth in
the Regulatory Flexibility Act (RFA), the
Agricultural Marketing Service (AMS)
has considered the economic impact of
this action on small entities.
Accordingly, AMS has prepared this
initial regulatory flexibility analysis.
The purpose of the RFA is to fit
regulatory actions to the scale of
business subject to such actions in order
that small businesses will not be unduly
or disproportionately burdened.
Marketing orders issued pursuant to the
Act, and the rules issued thereunder, are
unique in that they are brought about
through group action of essentially
small entities acting on their own
behalf.
There are eight spearmint oil handlers
subject to regulation under the order,
and approximately 38 producers of
Scotch spearmint oil and approximately
84 producers of Native spearmint oil in
the regulated production area. Small
agricultural service firms are defined by
the Small Business Administration
(SBA) (13 CFR 121.201) as those having
annual receipts of less than $7,000,000,
and small agricultural producers are
defined as those having annual receipts
of less than $750,000.
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Based on the SBA’s definition of
small entities, the Committee estimates
that 2 of the 8 handlers regulated by the
order could be considered small
entities. Most of the handlers are large
corporations involved in the
international trading of essential oils
and the products of essential oils. In
addition, the Committee estimates that
19 of the 38 Scotch spearmint oil
producers and 29 of the 84 Native
spearmint oil producers could be
classified as small entities under the
SBA definition. Thus, a majority of
handlers and producers of Far West
spearmint oil may not be classified as
small entities.
The Far West spearmint oil industry
is characterized by producers whose
farming operations generally involve
more than one commodity, and whose
income from farming operations is not
exclusively dependent on the
production of spearmint oil. A typical
spearmint oil-producing operation has
enough acreage for rotation such that
the total acreage required to produce the
crop is about one-third spearmint and
two-thirds rotational crops. Thus, the
typical spearmint oil producer has to
have considerably more acreage than is
planted to spearmint during any given
season. Crop rotation is an essential
cultural practice in the production of
spearmint oil for weed, insect, and
disease control. To remain economically
viable with the added costs associated
with spearmint oil production, a
majority of spearmint oil-producing
farms fall into the SBA category of large
businesses.
Small spearmint oil producers
generally are not as extensively
diversified as larger ones and as such
are more at risk from market
fluctuations. Such small producers
generally need to market their entire
annual allotment and do not have the
luxury of having other crops to cushion
seasons with poor spearmint oil returns.
Conversely, large diversified producers
have the potential to endure one or
more seasons of poor spearmint oil
markets because income from alternate
crops could support the operation for a
period of time. Being reasonably assured
of a stable price and market provides
small producing entities with the ability
to maintain proper cash flow and to
meet annual expenses. Thus, the market
and price stability provided by the order
potentially benefit the small producer
more than such provisions benefit large
producers. Even though a majority of
handlers and producers of spearmint oil
may not be classified as small entities,
the volume control feature of this order
has small entity orientation.
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Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Proposed Rules
This proposed rule would establish
the quantity of spearmint oil produced
in the Far West, by class that handlers
may purchase from, or handle on behalf
of, producers during the 2011–2012
marketing year. The Committee
recommended this rule to help maintain
stability in the spearmint oil market by
matching supply to estimated demand
thereby avoiding extreme fluctuations in
supplies and prices. Establishing
quantities to be purchased or handled
during the marketing year through
volume regulations allows producers to
plan their spearmint planting and
harvesting to meet expected market
needs. The provisions of §§ 985.50,
985.51, and 985.52 of the order
authorize this rule.
Instability in the spearmint oil subsector of the mint industry is much
more likely to originate on the supply
side than the demand side. Fluctuations
in yield and acreage planted from
season-to-season tend to be larger than
fluctuations in the amount purchased by
handlers. Demand for spearmint oil
tends to be relatively stable from yearto-year. The demand for spearmint oil is
expected to grow slowly for the
foreseeable future because the demand
for consumer products that use
spearmint oil will likely expand slowly,
in line with population growth.
Demand for spearmint oil at the farm
level is derived from retail demand for
spearmint-flavored products such as
chewing gum, toothpaste, and
mouthwash. The manufacturers of these
products are by far the largest users of
mint oil. However, spearmint flavoring
is generally a very minor component of
the products in which it is used, so
changes in the raw product price have
virtually no impact on retail prices for
those goods.
Spearmint oil production tends to be
cyclical. Years of relatively high
production, with demand remaining
reasonably stable, have led to periods in
which large producer stocks of unsold
spearmint oil have depressed producer
prices for a number of years. Shortages
and high prices may follow in
subsequent years, as producers respond
to price signals by cutting back
production.
The significant variability of the
spearmint oil market is illustrated by
the fact that the coefficient of variation
(a standard measure of variability; ‘‘CV’’)
of Far West spearmint oil production
from 1980 through 2009 was about 0.23.
The CV for spearmint oil grower prices
was about 0.16 for that period, well
below the CV for production. This
provides an indication of the price
stabilizing impact of the marketing
order.
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Production in the shortest marketing
year was about 48 percent of the 30-year
average (1.89 million pounds from 1980
through 2009) and the largest crop was
approximately 163 percent of the 30year average. A key consequence is that
in years of oversupply and low prices
the season average producer price of
spearmint oil is below the average cost
of production (as measured by the
Washington State University
Cooperative Extension Service.)
The wide fluctuations in supply and
prices that result from this cycle, which
was even more pronounced before the
creation of the marketing order, can
create liquidity problems for some
producers. The marketing order was
designed to reduce the price impacts of
the cyclical swings in production.
However, producers have been less able
to weather these cycles in recent years
because of the increase in production
costs. While prices have been relatively
steady, the cost of production has
increased to the extent that plans to
plant spearmint may be postponed or
changed indefinitely. Producers are also
enticed by the prices of alternative crops
and their lower cost of production.
In an effort to stabilize prices, the
spearmint oil industry uses the volume
control mechanisms authorized under
the order. This authority allows the
Committee to recommend a salable
quantity and allotment percentage for
each class of oil for the upcoming
marketing year. The salable quantity for
each class of oil is the total volume of
oil that producers may sell during the
marketing year. The allotment
percentage for each class of spearmint
oil is derived by dividing the salable
quantity by the total allotment base.
Each producer is then issued an
annual allotment certificate, in pounds,
for the applicable class of oil, which is
calculated by multiplying the
producer’s allotment base by the
applicable allotment percentage. This is
the amount of oil of each applicable
class that the producer can sell.
By November 1 of each year, the
Committee identifies any oil that
individual producers have produced
above the volume specified on their
annual allotment certificates. This
excess oil is placed in a reserve pool
administered by the Committee.
There is a reserve pool for each class
of oil that may not be sold during the
current marketing year unless USDA
approves a Committee recommendation
to increase the salable quantity and
allotment percentage for a class of oil
and make a portion of the pool
available. However, limited quantities of
reserve oil are typically sold by one
producer to another producer to fill
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deficiencies. A deficiency occurs when
on-farm production is less than a
producer’s allotment. In that case, a
producer’s own reserve oil can be sold
to fill that deficiency. Excess production
(higher than the producer’s allotment)
can be sold to fill other producers’
deficiencies. All of these provisions
need to be exercised prior to November
1 of each year.
In any given year, the total available
supply of spearmint oil is composed of
current production plus carry-over
stocks from the previous crop. The
Committee seeks to maintain market
stability by balancing supply and
demand, and to close the marketing year
with an appropriate level of carryout. If
the industry has production in excess of
the salable quantity, then the reserve
pool absorbs the surplus quantity of
spearmint oil, which goes unsold during
that year, unless the oil is needed for
unanticipated sales.
Under its provisions, the order may
attempt to stabilize prices by (1) limiting
supply and establishing reserves in high
production years, thus minimizing the
price-depressing effect that excess
producer stocks have on unsold
spearmint oil, and (2) ensuring that
stocks are available in short supply
years when prices would otherwise
increase dramatically. The reserve pool
stocks, which are increased in large
production years, are drawn down in
years where the crop is short.
An econometric model was used to
assess the impact that volume control
has on the prices producers receive for
their commodity. Without volume
control, spearmint oil markets would
likely be over-supplied, resulting in low
producer prices and a large volume of
oil stored and carried over to the next
crop year. The model estimates how
much lower producer prices would
likely be in the absence of volume
controls.
The Committee estimated the trade
demand for the 2011–2012 marketing
year for both classes of oil at 1,930,000
pounds, and that the expected
combined carry-in will be 414,288
pounds. This results in a combined
required salable quantity of 1,515,712
pounds. With volume control, sales by
producers for the 2011–2012 marketing
year would be limited to 1,707,757
pounds (the recommended salable
quantity for both classes of spearmint
oil).
The recommended allotment
percentages, upon which 2011–2012
producer allotments are based, are 34
percent for Scotch and 44 percent for
Native. Without volume controls,
producers would not be limited to these
allotment levels, and could produce and
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sell additional spearmint. The
econometric model estimated a $1.89
decline in the season average producer
price per pound (from both classes of
spearmint oil) resulting from the higher
quantities that would be produced and
marketed without volume control. The
surplus situation for the spearmint oil
market that would exist without volume
controls in 2011–2012 also would likely
dampen prospects for improved
producer prices in future years because
of the buildup in stocks.
The use of volume controls allows the
industry to fully supply spearmint oil
markets while avoiding the negative
consequences of over-supplying these
markets. The use of volume controls is
believed to have little or no effect on
consumer prices of products containing
spearmint oil and will not result in
fewer retail sales of such products.
The Committee discussed alternatives
to the recommendations contained in
this rule for both classes of spearmint
oil. The Committee discussed and
rejected the idea of recommending that
there not be any volume regulation for
both classes of spearmint oil because of
the severe price-depressing effects that
would occur without volume control.
After computing the initial 29.5
percent Scotch spearmint oil allotment
percentage, the Committee considered
various alternative levels of volume
control for Scotch spearmint oil.
Considered levels ranged from 30
percent to 40 percent. Given the
moderately improving marketing
conditions, there was consensus that the
allotment percentage for 2011–2012
should be more than the percentage
established for the 2010–2011 marketing
year (28 percent). After considerable
discussion, in a vote of six members in
favor and two members opposed, the
Committee determined that 694,774
pounds and 34 percent would be the
most effective salable quantity and
allotment percentage, respectively, for
the 2011–2012 marketing year. The two
dissenting members felt that the salable
quantity and allotment percentage
should be set at some unidentified
higher level.
The Committee was also able to reach
a consensus regarding the level of
volume control for Native spearmint oil.
After first determining the computed
allotment percentage at 39.7 percent, the
Committee voted unanimously to
recommend 1,012,983 pounds and 44
percent for the effective salable quantity
and allotment percentage, respectively,
for the 2011–2012 marketing year.
As noted earlier, the Committee’s
recommendation to establish salable
quantities and allotment percentages for
both classes of spearmint oil was made
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after careful consideration of all
available information, including: (1) The
estimated quantity of salable oil of each
class held by producers and handlers;
(2) the estimated demand for each class
of oil; (3) the prospective production of
each class of oil; (4) the total of
allotment bases of each class of oil for
the current marketing year and the
estimated total of allotment bases of
each class for the ensuing marketing
year; (5) the quantity of reserve oil, by
class, in storage; (6) producer prices of
oil, including prices for each class of oil;
and (7) general market conditions for
each class of oil, including whether the
estimated season average price to
producers is likely to exceed parity.
Based on its review, the Committee
believes that the salable quantity and
allotment percentage levels
recommended would achieve the
objectives sought.
Without any regulations in effect, the
Committee believes the industry would
return to the pronounced cyclical price
patterns that occurred prior to the order,
and that prices in 2011–2012 could
decline substantially below current
levels.
According to the Committee, the
recommended salable quantities and
allotment percentages are expected to
facilitate the goal of establishing orderly
marketing conditions for Far West
spearmint oil.
As previously stated, annual salable
quantities and allotment percentages
have been issued for both classes of
spearmint oil since the order’s
inception. Reporting and recordkeeping
requirements have remained the same
for each year of regulation. These
requirements have been approved by the
Office of Management and Budget under
OMB Control No. 0581–0178, Vegetable
and Specialty Crops. Accordingly, this
rule would not impose any additional
reporting or recordkeeping requirements
on either small or large spearmint oil
producers or handlers. As with all
Federal marketing order programs,
reports and forms are periodically
reviewed to reduce information
requirements and duplication by
industry and public sector agencies.
Furthermore, USDA has not identified
any relevant Federal rules that
duplicate, overlap, or conflict with this
rule.
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.
In addition, the Committee’s meeting
was widely publicized throughout the
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11977
spearmint oil industry and all interested
persons were invited to attend the
meeting and participate in Committee
deliberations on all issues. Like all
Committee meetings, the October 13,
2010, meeting was a public meeting and
all entities, both large and small, were
able to express views on this issue.
Finally, interested persons are invited to
submit comments on this proposed rule,
including the regulatory and
informational impacts of this action on
small businesses.
A small business guide on complying
with fruit, vegetable, and specialty crop
marketing agreements and orders may
be viewed at: https://www.ams.usda.gov/
MarketingOrdersSmallBusinessGuide.
Any questions about the compliance
guide should be sent to Antoinette
Carter at the previously mentioned
address in the FOR FURTHER INFORMATION
CONTACT section.
A 30-day comment period is deemed
appropriate to allow interested persons
the opportunity to respond to this
proposal, taking into account that the
marketing year begins on June 1, 2011.
All written comments timely received
will be considered before a final
determination is made on this matter.
List of Subjects in 7 CFR Part 985
Marketing agreements, Oils and fats,
Reporting and recordkeeping
requirements, Spearmint oil.
For the reasons set forth in the
preamble, 7 CFR part 985 is proposed to
be amended as follows:
PART 985—MARKETING ORDER
REGULATING THE HANDLING OF
SPEARMINT OIL PRODUCED IN THE
FAR WEST
1. The authority citation for 7 CFR
part 985 continues to read as follows:
Authority: 7 U.S.C. 601–674.
2. A new § 985.230 is added to read
as follows: [Note: This section will not
appear in the Code of Federal
Regulations.]
§ 985.230 Salable quantities and allotment
percentages—2011–2012 marketing year.
The salable quantity and allotment
percentage for each class of spearmint
oil during the marketing year beginning
on June 1, 2011, shall be as follows:
(a) Class 1 (Scotch) oil—a salable
quantity of 694,774 pounds and an
allotment percentage of 34 percent.
(b) Class 3 (Native) oil—a salable
quantity of 1,012,983 pounds and an
allotment percentage of 44 percent.
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Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Proposed Rules
Dated: February 25, 2011.
David R. Shipman,
Acting Administrator, Agricultural Marketing
Service.
[FR Doc. 2011–4810 Filed 3–3–11; 8:45 am]
BILLING CODE 3410–02–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
[Docket No. FAA–2011–0010; Airspace
Docket No. 11–AAL–1]
RIN 2120–AA66
Proposed Amendment of Federal
Airways; Alaska
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
This action proposes to revise
all Anchorage, AK, Federal airways that
are affected by the relocation of the
Anchorage VHF Omnidirectional Range
(VOR) navigation aid. This action is
necessary for the safety and
management of Instrument Flight Rules
(IFR) within the National Airspace
System.
SUMMARY:
Comments must be received on
or before April 18, 2011.
ADDRESSES: Send comments on this
proposal to the U.S. Department of
Transportation, Docket Operations,
M–30, 1200 New Jersey Avenue, SE.,
West Building Ground Floor, Room
W12–140, Washington, DC 20590–0001;
telephone: (202) 366–9826. You must
identify FAA Docket No. FAA–2011–
0010 and Airspace Docket No. 11–AAL–
1 at the beginning of your comments.
You may also submit comments through
the Internet at https://
www.regulations.gov.
DATES:
Ken
McElroy, Airspace, Regulation and ATC
Procedures Group, Office of Airspace
Services, Federal Aviation
Administration, 800 Independence
Avenue, SW., Washington, DC 20591;
telephone: (202) 267–8783.
SUPPLEMENTARY INFORMATION:
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FOR FURTHER INFORMATION CONTACT:
Comments Invited
Interested parties are invited to
participate in this proposed rulemaking
by submitting such written data, views,
or arguments as they may desire.
Comments that provide the factual basis
supporting the views and suggestions
presented are particularly helpful in
developing reasoned regulatory
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decisions on the proposal. Comments
are specifically invited on the overall
regulatory, aeronautical, economic,
environmental, and energy-related
aspects of the proposal.
Communications should identify both
docket numbers (FAA Docket No. FAA–
2011–0010 and Airspace Docket No. 11–
AAL–1) and be submitted in triplicate to
the Docket Management Facility (see
ADDRESSES section for address and
phone number). You may also submit
comments through the Internet at
https://www.regulations.gov.
Commenters wishing the FAA to
acknowledge receipt of their comments
on this action must submit with those
comments a self-addressed, stamped
postcard on which the following
statement is made: ‘‘Comments to FAA
Docket No. FAA–2011–0010 and
Airspace Docket No. 11–AAL–1.’’ The
postcard will be date/time stamped and
returned to the commenter.
All communications received on or
before the specified closing date for
comments will be considered before
taking action on the proposed rule. The
proposal contained in this action may
be changed in light of comments
received. All comments submitted will
be available for examination in the
public docket both before and after the
closing date for comments. A report
summarizing each substantive public
contact with FAA personnel concerned
with this rulemaking will be filed in the
docket.
Availability of NPRMs
An electronic copy of this document
may be downloaded through the
Internet at https://www.regulations.gov.
Recently published rulemaking
documents can also be accessed through
the FAA’s web page at https://www.faa.
gov/air_traffic/publications/airspace_
amendments/.
You may review the public docket
containing the proposal, any comments
received and any final disposition in
person in the Dockets Office (see
ADDRESSES section for address and
phone number) between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays. An informal docket
may also be examined during normal
business hours at the office of the
Alaskan Service Center, Operations
Support Group, Federal Aviation
Administration, 222 West 7th Avenue,
Box 14, Anchorage, AK 99513.
Persons interested in being placed on
a mailing list for future NPRMs should
contact the FAA’s Office of Rulemaking,
(202) 267–9677, for a copy of Advisory
Circular No. 11–2A, Notice of Proposed
Rulemaking Distribution System, which
describes the application procedure.
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Background
The Anchorage VOR, located on Fire
Island, is one of the navigation aids
used to form points along numerous
Federal airways in Alaska. Due to
construction of wind turbines on Fire
Island, AK, the Anchorage VOR is being
relocated to Ted Stevens Anchorage
International Airport and renamed. In
addition, the equipment is being
upgraded to a DOPPLER VOR/distance
measuring equipment (VOR/DME)
facility that would improve coverage
and reliability. Due to the relocation, the
published radials from the old
Anchorage VOR/DME, as used in each
route description, will change by several
degrees.
The Proposal
The FAA is proposing an amendment
to Title 14 Code of Federal Regulations
(14 CFR) part 71 to amend Federal
airways that currently use the
Anchorage (ANC) VOR located on Fire
Island, AK. The ANC VOR is being
upgraded to a Doppler VOR and
redesignated as the Anchorage (TED)
VOR. The Doppler VOR will be located
on the Ted Stevens Anchorage
International Airport property. This
action would affect 15 Low Altitude
Federal airways (Victor Airways and
T–Routes), and 14 High Altitude Federal
airways (Jet Routes and Q–Routes). In
addition to these airways using the TED
VOR as the new reference point, the
descriptions would be adjusted, where
necessary, to show new radials to
describe airway intersections.
VOR Federal airways, United States
Area Navigation Routes (low), Jet
Routes, Alaska Area Navigation Routes,
and United States Area Navigation
Routes (high), are published in
paragraphs 6010, 6011, 2004, 2005, and
2006, respectively, of FAA Order
7400.9U, dated August 18, 2010 and
effective September 15, 2010, which is
incorporated by reference in 14 CFR
71.1. The Federal Airways listed in this
document will be published
subsequently in the Order.
The FAA has determined that this
proposed regulation only involves an
established body of technical
regulations for which frequent and
routine amendments are necessary to
keep them operationally current.
Therefore, this proposed regulation:
(1) Is not a ‘‘significant regulatory
action’’ under Executive Order 12866;
(2) is not a ‘‘significant rule’’ under
Department of Transportation (DOT)
Regulatory Policies and Procedures (44
FR 11034; February 26, 1979); and (3)
does not warrant preparation of a
regulatory evaluation as the anticipated
E:\FR\FM\04MRP1.SGM
04MRP1
]]>Agencies
[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Proposed Rules]
[Pages 11971-11978]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-4810]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Proposed
Rules
[[Page 11971]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Doc. No. AMS-FV-10-0094; FV11-985-1 PR]
Marketing Order Regulating the Handling of Spearmint Oil Produced
in the Far West; Salable Quantities and Allotment Percentages for the
2011-2012 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This rule would establish the quantity of spearmint oil
produced in the Far West, by class, that handlers may purchase from, or
handle on behalf of, producers during the 2011-2012 marketing year,
which begins on June 1, 2011. This rule invites comments on the
establishment of salable quantities and allotment percentages for Class
1 (Scotch) spearmint oil of 694,774 pounds and 34 percent,
respectively, and for Class 3 (Native) spearmint oil of 1,012,983
pounds and 44 percent, respectively. The Spearmint Oil Administrative
Committee (Committee), the agency responsible for local administration
of the marketing order for spearmint oil produced in the Far West,
recommended these limitations for the purpose of avoiding extreme
fluctuations in supplies and prices to help maintain stability in the
spearmint oil market.
DATES: Comments must be received by April 4, 2011.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposal. Comments must be sent to the Docket Clerk,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC
20250-0237; Fax: (202) 720-8938; or Internet: https://www.regulations.gov. All comments should reference the document number
and the date and page number of this issue of the Federal Register and
will be made available for public inspection in the Office of the
Docket Clerk during regular business hours, or can be viewed at: https://www.regulations.gov. All comments submitted in response to this rule
will be included in the record and will be made available to the
public. Please be advised that the identity of the individuals or
entities submitting the comments will be made public on the Internet at
the address provided above.
FOR FURTHER INFORMATION CONTACT: Barry Broadbent, Marketing Specialist
or Gary Olson, Regional Manager, Northwest Marketing Field Office,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or E-mail:
Barry.Broadbent@ams.usda.gov or GaryD.Olson@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 rule is issued under Marketing Order
No. 985 (7 CFR part 985), as amended, regulating the handling of
spearmint oil produced in the Far West (Washington, Idaho, Oregon, and
designated parts of Nevada and Utah), hereinafter referred to as the
``order.'' 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 (USDA) is issuing this rule in
conformance with Executive Order 12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. Under the marketing order now in effect, salable
quantities and allotment percentages may be established for classes of
spearmint oil produced in the Far West. This proposed rule would
establish the quantity of spearmint oil produced in the Far West, by
class, which handlers may purchase from, or handle on behalf of,
producers during the 2011-2012 marketing year, which begins on June 1,
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 USDA a petition
stating that the order, any provision of the order, or any obligation
imposed in connection with the order is not in accordance with law and
request a modification of the order or to be exempted therefrom. A
handler is afforded the opportunity for a hearing on the petition.
After the hearing, USDA would rule on the petition. The Act provides
that the district court of the United States in any district in which
the handler is an inhabitant, or has his or her principal place of
business, has jurisdiction to review USDA's ruling on the petition,
provided an action is filed not later than 20 days after the date of
the entry of the ruling.
The Committee meets annually in the fall to adopt a marketing
policy for the ensuing marketing year or years. In determining such
marketing policy, the Committee considers a number of factors,
including, but not limited to, the current and projected supply,
estimated future demand, production costs, and producer prices for all
classes of spearmint oil, as well as input from spearmint oil handlers
and producers regarding prospective marketing conditions. During the
meeting, the Committee recommends to USDA any volume regulations deemed
necessary to meet market requirements and to establish orderly
marketing conditions for Far West spearmint oil. If the Committee's
marketing policy considerations indicate a need for limiting the
quantity of any or all classes of spearmint oil marketed, the Committee
subsequently recommends the establishment of a salable quantity and
allotment percentage for such class or classes of oil for the
forthcoming marketing year.
The salable quantity represents the total amount of each class of
spearmint oil that handlers may purchase from, or handle on behalf of,
producers during the marketing year. Each producer is allotted a
prorated share of the salable quantity by applying the allotment
percentage to that producer's allotment base for each applicable class
of spearmint oil. The producer allotment base is each producer's
quantified share
[[Page 11972]]
of the spearmint oil market based on a statistical representation of
past spearmint oil production and the accommodation for reasonable and
normal adjustments to such base as prescribed by the Committee and
approved by USDA. Salable quantities are established at levels intended
to meet market requirements and to establish orderly marketing
conditions. Committee recommendations for volume controls are made well
in advance of the period in which the regulations are to be effective,
thereby allowing producers the chance to adjust their production
decisions accordingly.
Pursuant to authority in Sec. Sec. 985.50, 985.51, and 985.52 of
the order, the full eight-member Committee met on October 13, 2010, and
recommended salable quantities and allotment percentages for both
classes of oil for the 2011-2012 marketing year. The Committee, in a
vote of six members in favor and two members opposed, recommended the
establishment of a salable quantity and allotment percentage for Scotch
spearmint oil of 694,774 pounds and 34 percent, respectively. The two
members opposing the action favored an undetermined greater salable
quantity and allotment percentage for Scotch spearmint oil. For Native
spearmint oil, the Committee unanimously recommended the establishment
of a salable quantity and allotment percentage of 1,012,983 pounds and
44 percent, respectively.
This rule would limit the amount of spearmint oil that handlers may
purchase from, or handle on behalf of, producers during the 2011-2012
marketing year, which begins on June 1, 2011. Salable quantities and
allotment percentages have been placed into effect each season since
the order's inception in 1980.
Class 1 (Scotch) Spearmint Oil
The U.S. production of Scotch spearmint oil is concentrated in the
Far West, which includes Washington, Idaho, Oregon, and a portion of
Nevada and Utah. Scotch type oil is also produced in seven other
States: Indiana, Michigan, Minnesota, Montana, North Dakota, South
Dakota, and Wisconsin. Additionally, Scotch spearmint oil is produced
outside of the U.S., with China and India being the largest global
competitors of domestic Scotch spearmint oil production.
The Far West's share of total global Scotch spearmint oil sales has
varied considerably over the past several decades, from 72 percent in
1980 to 27 percent in 2002. Recently, sales of Far West Scotch
spearmint oil have risen to over 48 percent of world sales, and are
expected to hold steady, or go even higher, in the coming years.
In spite of the Far West's growing share of the world market for
Scotch spearmint oil, the industry has faced some stressful marketing
conditions during the most recent marketing years. Spearmint oil
producers experienced relatively good economic conditions in the years
from 2004 through 2007, which led to overproduction and an environment
of excess supply in the market beginning in 2008 and continuing through
2010. The Far West region, which produced 635,508 pounds of Scotch
spearmint oil in 2004, produced 1,050,700 pounds just five years later
in 2009, a 65 percent increase.
To compound matters, in addition to increasing overproduction
concerns, the demand for Far West Scotch spearmint oil began to
actually decline over this period. Sales peaked in 2005 at 1,002,779
pounds, declining to 627,868 pounds in 2009. With production rising and
sales dropping, excess inventory of uncommitted Scotch spearmint oil
began to accumulate. Scotch spearmint oil carry-in (unsold salable
quantity from prior years that is available for sale at the beginning
of a new marketing year), which serves as a measure of oversupply in
the market, grew from 23,141 pounds in 2007 to 431,028 pounds in 2010.
The Committee's response to the deteriorating marketing environment
since 2008 has been to recommend the tightening of volume control
regulations. The Committee, which recommended a 2008-2009 marketing
year Scotch spearmint oil salable quantity of 993,067 pounds, dropped
the recommendation to 802,067 pounds for the 2009-2010 marketing year,
and to only 566,962 pounds for the 2010-2011 marketing year. Similarly,
the recommended allotment percentage was reduced from 50 percent for
the 2008-2009 period to 40 percent for 2009-2010, and down to just 28
percent for 2010-2011.
When the Committee met in October 2010 to consider volume
regulation for the 2011-2012 marketing year, many of the previously
mentioned negative marketing conditions still persisted. Even while
showing some signs of incremental improvement, the current inventories,
expected production, and projected demand of Scotch spearmint oil were
all at levels considered unhealthy for the industry.
The Committee estimates that the carry-in of Scotch spearmint oil
on June 1, 2011, the primary measure of excess supply, will be
approximately 197,551 pounds. That quantity, while down from the
previous year's high of 431,028 pounds, would still be above what the
Committee considers to be optimum.
Overproduction of Scotch spearmint oil, while improving, also
continues to be an area of concern for the Committee. Production of Far
West Scotch spearmint oil has declined, from a high of 1,050,700 pounds
in 2009, to 868,487 pounds in 2010, and the Committee expects it to
drop even further during the 2011 season. The recent declining trend in
Scotch spearmint oil production is viewed by the Committee as a
positive development and is expected to contribute some relief to the
industry's oversupply situation.
In addition, spearmint oil handlers indicated that demand for
Scotch spearmint oil might be gaining strength. Handlers that had
projected that the trade demand for Far West Scotch oil would range
from a low of 750,000 pounds to a high of 850,000 pounds for the 2010-
2011 marketing year, expect the trade demand to be within a range of
800,000 pounds to 900,000 pounds for the 2011-2012 period.
However, this increase in projected Scotch demand, generally
thought of as a positive indicator for the industry, is viewed
cautiously by some industry participants. Consumer demand for mint
flavored products is reportedly steady, providing optimism for long
term increases in the demand for Far West spearmint oil. Some handlers,
though, believe that the manufacturers of such products are currently
increasing spearmint oil purchases just to rebuild inventories that
were depleted during the worst of the recent U.S. economic recession.
As such, those handlers feel that at least some of the recent increase
in Scotch spearmint oil sales may not represent an actual increase in
sustained demand, but a temporary response to fluctuations in the
strategic inventories of the manufacturers.
Still, given the moderately improving economic indicators for the
Far West Scotch spearmint oil industry outlined above, the Committee
took a cautiously optimistic perspective into the discussion of
establishing appropriate salable quantities and allotment percentages
for the upcoming season.
Therefore, at the October 13, 2010, meeting, the Committee
recommended the 2011-2012 Scotch spearmint oil salable quantity of
694,774 pounds and allotment percentage of 34 percent. The Committee
utilized sales estimates for 2011-2012 Scotch spearmint oil, as
provided by several of the industry's handlers, as well as historical
and current Scotch spearmint oil production
[[Page 11973]]
and inventory statistics, to arrive at those recommendations. The
volume control levels recommended by the Committee represent a 127,812
pound and 6 percentage point increase over the previous year's salable
quantity and allotment percentage, reflecting a more positive
assessment of the industry's economic conditions.
The Committee estimates that about 800,000 pounds of Scotch
spearmint oil may be sold during the 2011-2012 marketing year. When
considered in conjunction with the estimated carry-in of 197,551 pounds
of Scotch spearmint oil on June 1, 2011, the recommended salable
quantity of 694,774 pounds results in a total available supply of
approximately 892,325 pounds of Scotch spearmint oil during the 2011-
2012 marketing year. The Committee estimates that carry-in of Scotch
spearmint oil into the 2012-2013 marketing year, which begins June 1,
2012, would be 92,325 pounds, a decrease of 105,226 pounds from the
beginning of the 2011-2012 marketing year.
The Committee's stated intent in the use of marketing order volume
control regulations for Scotch spearmint oil is to keep adequate
supplies available to meet market needs and establish orderly marketing
conditions. With that in mind, the Committee developed its
recommendation for the proposed Scotch spearmint oil salable quantity
and allotment percentage for the 2011-2012 marketing year based on the
information discussed above, as well as the data outlined below.
(A) Estimated carry-in on June 1, 2011--197,551 pounds. This figure
is the difference between the revised 2010-2011 marketing year total
available supply of 997,551 pounds and the estimated 2010-2011
marketing year trade demand of 800,000 pounds.
(B) Estimated trade demand for the 2011-2012 marketing year--
800,000 pounds. This figure is based on input from producers at six
Scotch spearmint oil production area meetings held in late September
and early October 2010, as well as estimates provided by handlers and
other meeting participants at the October 13, 2010, meeting. The
average estimated trade demand provided at the six production area
meetings is 800,000 pounds, which is 33,333 pounds less than the
average of the trade demand estimates submitted by handlers. The
average of Far West Scotch spearmint oil sales over the last five years
is 789,243 pounds.
(C) Salable quantity required from the 2011-2012 marketing year
production--602,449 pounds. This figure is the difference between the
estimated 2011-2012 marketing year trade demand (800,000 pounds) and
the estimated carry-in on June 1, 2011 (197,551 pounds). This figure
represents the minimum salable quantity that may be needed to satisfy
estimated demand for the coming year with no carryover.
(D) Total estimated allotment base for the 2011-2012 marketing
year--2,043,453 pounds. This figure represents a one percent increase
over the revised 2010-2011 total allotment base. This figure is
generally revised each year on June 1 due to producer base being lost
because of the bona fide effort production provisions of Sec.
985.53(e). The revision is usually minimal.
(E) Computed allotment percentage--29.5 percent. This percentage is
computed by dividing the minimum required salable quantity by the total
estimated allotment base.
(F) Recommended allotment percentage--34 percent. This is the
Committee's recommendation and is based on the computed allotment
percentage (29.5 percent), the average of the computed allotment
percentage figures from the six production area meetings (31 percent),
and input from producers and handlers at the October 13, 2010, meeting.
The actual recommendation of 34 percent is based on the Committee's
determination that the computed percentage (29.5 percent) may not
adequately supply the potential 2011-2012 Scotch spearmint oil market.
(G) The Committee's recommended salable quantity--694,774 pounds.
This figure is the product of the recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the 2011-2012 marketing year--
892,325 pounds. This figure is the sum of the 2011-2012 recommended
salable quantity (694,774 pounds) and the estimated carry-in on June 1,
2011 (197,551 pounds).
Class 3 (Native) Spearmint Oil
The Native spearmint oil industry is facing market conditions that
are very similar to those affecting the Scotch spearmint oil market,
although not nearly as severe. Over 90 percent of U.S. production of
Native spearmint oil is produced within the Far West production area,
thus domestic production outside this area is not a major factor in the
marketing of Far West Native spearmint oil. This has been an attribute
of U.S. production since the order's inception. A minor amount of
domestic Native spearmint oil is produced outside of the Far West
region in the States of Indiana, Michigan, Minnesota, Montana, North
Dakota, South Dakota, and Wisconsin.
According to the Committee, very little true Native spearmint oil
is produced outside of the United States. However, India produces an
increasing quantity of spearmint oil with qualities very similar to
Native spearmint oil. Committee records show that in 1996 the Far West
accounted for nearly 93 percent of the global sales of Native or Native
quality spearmint oil. By 2008 that share had shrunk to a low of 48
percent. Since that point, however, the percentage has rebounded and is
now estimated to be over 57 percent for 2010.
In spite of the fact that Far West Native spearmint oil has been
gaining world market share, the industry has endured challenging
marketing conditions over the past several marketing years.
Overproduction, coupled with a decrease in demand, created a similar
oversupply situation for Native spearmint oil as was previously
discussed for Scotch spearmint oil. Production of Native spearmint oil
in the Far West region was 701,372 pounds in 2004, but increased to
1,453,896 pounds just five years later in 2009, a 107 percent increase.
In addition, over that same timeframe, demand for Native oil was moving
in the opposite direction. Sales of Far West Native oil peaked in 2004
at 1,249,507 pounds. From that cyclical high, sales steadily declined
over the next five years, dropping to just 976,888 pounds by 2009. As
production rose and sales dropped, excess inventory of uncommitted
Native spearmint oil began to accumulate. Carry-in of Native oil
measured at the beginning of each marketing year, which serves as a
measure of oversupply in the market, grew from 83,417 pounds at the
beginning of the 2007-2008 marketing year to 343,517 pounds at the
beginning of the 2010-2011 marketing year.
The Committee's response to the difficult marketing environment for
Native spearmint oil over the 2008 through 2010 period was similar to
the response to the situation with Scotch spearmint oil over that time,
to recommend the moderate tightening of volume control regulations. The
Committee, which recommended a 2008-2009 Native spearmint oil salable
quantity of 1,178,946 pounds, maintained a similar recommendation for
the 2009-2010 marketing year and then dropped its recommendation to
953,405 pounds for the 2010-2011 marketing year. Similarly, the
recommended allotment percentage, which was 53 percent for the 2008-
2009 and 2009-2010 periods, was
[[Page 11974]]
recommended to be reduced to just 43 percent for 2010-2011.
Although improving, many of the negative marketing conditions
present leading up to the the 2010-2011 marketing year were still
evident when the Committee met to consider volume regulation for the
upcoming 2011-2012 marketing year. The June 1, 2011, carry-in of Native
spearmint oil on June 1, 2011, is estimated to be 216,737 pounds, down
from the previous year's high of 343,517 pounds, but still at a level
above what the Committee believes to be optimum.
Also, production of Native spearmint oil, while showing some signs
of improvement, still remains an area of concern for the Committee.
Production of Far West Native spearmint oil, which declined from a high
of 1,453,896 pounds in 2009 to 1,244,361 pounds in 2010, is still
considered by the Committee to be high relative to the current level of
demand and the excess inventory of Native spearmint oil. However, the
Committee believes that the declining trend in Native spearmint oil
production may continue into the 2011 season and that much of the
pressure on the industry's current oversupply situation may be relieved
moving forward.
In addition to an improved supply situation, demand for Far West
Native spearmint oil appears to have halted its downward movement and
is expected to improve in the coming year. Spearmint oil handlers, who
projected that the 2010-2011 trade demand for Far West Native spearmint
oil would range from a low of 1,050,000 pounds to a high of 1,200,000
pounds, have increased their projections modestly for the 2011-2012
period to a range of 1,100,000 pounds to 1,200,000 pounds.
However, similar to Scotch spearmint oil, the small increase in
projected Native spearmint oil demand, generally thought of as a
positive indicator for the industry, is viewed by some handlers with
caution. As mentioned previously, consumer demand for mint flavored
products is expected to be steady or increase slightly moving forward,
which provides optimism for long term improvement in the demand for Far
West spearmint oil. Some handlers, though, have reported that the
manufacturers of such products may just be temporarily increasing
purchases of spearmint oil to rebuild inventories that were depleted
during the worst of the current U.S. economic recession. As such, the
handlers believe that at least some of the recent increase in purchases
do not represent an actual increase in sustained demand but, rather, a
short term response to fluctuations in the strategic inventories of the
manufacturers.
Given the moderately improving economic indicators for the Far West
Native spearmint oil industry outlined above, the Committee took a
cautiously optimistic perspective into the discussion of establishing
appropriate salable quantities and allotment percentages for the
upcoming season.
As such, at the October 13, 2010, meeting, the Committee
recommended a 2011-2012 Native spearmint oil salable quantity of
1,012,983 pounds and an allotment percentage of 44 percent. The
Committee utilized sales estimates for 2011-2012 Native spearmint oil,
as provided by several of the industry's handlers, as well as
historical and current Native spearmint oil market statistics to
establish these thresholds. The recommended volume control levels
represent a 32,763 pound and a 1 percentage point increase over the
previous year's salable quantity and allotment percentage. Even with
these increases in the salable quantity and allotment percentages, the
carry-in at the beginning of the 2012-2013 marketing year is projected
to drop by 117,018 pounds.
The Committee estimates that approximately 1,130,000 pounds of
Native spearmint oil may be sold during the 2011-2012 marketing year.
When considered in conjunction with the estimated carry-in of 216,737
pounds of Native spearmint oil on June 1, 2011, the recommended salable
quantity of 1,012,983 pounds results in a total available supply of
about 1,229,719 pounds of Native spearmint oil during the 2011-2012
marketing year. The Committee estimates that carry-in of Native
spearmint oil at the beginning of the 2012-2103 marketing year to be
99,719 pounds, a significant reduction from the previous year's level
of 216,737 pounds.
The Committee's stated intent in the use of marketing order volume
control regulations for Native spearmint oil is to keep adequate
supplies available to meet market needs and establish orderly marketing
conditions. With that in mind, the Committee developed its
recommendation for the proposed Native spearmint oil salable quantity
and allotment percentage for the 2011-2012 marketing year based on the
information discussed above, as well as the data outlined below.
(A) Estimated carry-in on June 1, 2011--216,737 pounds. This figure
is the difference between the revised 2010-2011 marketing year total
available supply of 1,323,737 pounds and the estimated 2010-2011
marketing year trade demand of 1,107,000 pounds.
(B) Estimated trade demand for the 2011-2012 marketing year--
1,130,000 pounds. This estimate is established by the Committee and is
based on input from producers at the seven Native spearmint oil
production area meetings held in late September and early October 2010,
as well as estimates provided by handlers and other meeting
participants at the October 13, 2010, meeting. The average estimated
trade demand provided at the seven production area meetings was
1,130,238 pounds, whereas the handler estimate ranged from 1,100,000
pounds to 1,200,000 pounds.
(C) Salable quantity required from the 2011-2012 marketing year
production--913,263 pounds. This figure is the difference between the
estimated 2011-2012 marketing year trade demand (1,130,000 pounds) and
the estimated carry-in on June 1, 2011 (216,737 pounds). This is the
minimum amount that the Committee believes would be required to meet
the anticipated 2011-2012 Native spearmint oil trade demand.
(D) Total estimated allotment base for the 2011-2012 marketing
year--2,302,233 pounds. This figure represents a one percent increase
over the revised 2010-2011 total allotment base. This figure is
generally revised each year on June 1 due to producer base being lost
due to the bona fide effort production provisions of Sec. 985.53(e).
The revision is usually minimal.
(E) Computed allotment percentage--39.7 percent. This percentage is
computed by dividing the required salable quantity (913,263 pounds) by
the total estimated allotment base (2,302,233 pounds).
(F) Recommended allotment percentage--44 percent. This is the
Committee's recommendation based on the computed allotment percentage
(39.7 percent), the average of the computed allotment percentage
figures from the seven production area meetings (39.7 percent), and
input from producers and handlers at the October 13, 2010, meeting. The
actual recommendation of 44 percent is based on the Committee's
determination that the computed percentage (39.7 percent) may not
adequately supply the potential 2011-2012 Native spearmint oil market.
(G) The Committee's recommended salable quantity--1,012,983 pounds.
This figure is the product of the recommended allotment percentage (44
percent) and the total estimated allotment base (2,302,233 pounds).
(H) Estimated available supply for the 2011-2012 marketing year--
1,229,720 pounds. This figure is the sum of the
[[Page 11975]]
2011-2012 recommended salable quantity (1,012,983 pounds) and the
estimated carry-in on June 1, 2011 (216,737 pounds).
The salable quantity is the total quantity of each class of
spearmint oil that handlers may purchase from, or handle on behalf of,
producers during a marketing year. Each producer is allotted a share of
the salable quantity by applying the allotment percentage to the
producer's allotment base for the applicable class of spearmint oil.
The Committee's recommended Scotch and Native spearmint oil salable
quantities and allotment percentages of 694,774 pounds and 34 percent,
and 1,012,983 pounds and 44 percent, respectively, are based on the
goal of establishing and maintaining market stability. The Committee
anticipates that this goal would be achieved by matching the available
supply of each class of Spearmint oil to the estimated demand of such,
thus avoiding extreme fluctuations in inventories and prices.
The proposed salable quantities are not expected to cause a
shortage of spearmint oil supplies. Any unanticipated or additional
market demand for spearmint oil which might develop during the
marketing year could be satisfied by an intra-seasonal increase in the
salable quantity. The order makes this provision for an intra-seasonal
increase to allow the Committee the flexibility to respond quickly to
changing market conditions. In addition, producers who produce more
than their annual allotments during the 2011-2012 marketing year may
transfer such excess spearmint oil to producers with production less
than their annual allotment, or, up until November 1, 2011, place it
into the reserve pool to be released in the future in accordance with
market needs.
This proposed regulation, if adopted, would be similar to
regulations issued in prior seasons. The average allotment percentage
for the five most recent marketing years for Scotch spearmint oil is 42
percent, while the average allotment percentage for the same five-year
period for Native spearmint oil is 51 percent. Costs to producers and
handlers resulting from this rule are expected to be offset by the
benefits derived from a stable market and improved returns. In
conjunction with the issuance of this proposed rule, USDA has reviewed
the Committee's marketing policy statement for the 2011-2012 marketing
year. The Committee's marketing policy statement, a requirement
whenever the Committee recommends volume regulation, fully meets the
intent of Sec. 985.50 of the order.
During its discussion of potential 2011-2012 salable quantities and
allotment percentages, the Committee considered: (1) The estimated
quantity of salable oil of each class held by producers and handlers;
(2) the estimated demand for each class of oil; (3) the prospective
production of each class of oil; (4) the total of allotment bases of
each class of oil for the current marketing year and the estimated
total of allotment bases of each class for the ensuing marketing year;
(5) the quantity of reserve oil, by class, in storage; (6) producer
prices of oil, including prices for each class of oil; and (7) general
market conditions for each class of oil, including whether the
estimated season average price to producers is likely to exceed parity.
Conformity with the USDA's ``Guidelines for Fruit, Vegetable, and
Specialty Crop Marketing Orders'' has also been reviewed and confirmed.
The establishment of these salable quantities and allotment
percentages would allow for anticipated market needs. In determining
anticipated market needs, consideration by the Committee was given to
historical sales, as well as changes and trends in production and
demand. This rule also provides producers with information on the
amount of spearmint oil that should be produced for the 2011-2012
season in order to meet anticipated market demand.
Initial Regulatory Flexibility Analysis
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities. Accordingly, AMS has
prepared this initial regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and the rules issued thereunder, are unique in
that they are brought about through group action of essentially small
entities acting on their own behalf.
There are eight spearmint oil handlers subject to regulation under
the order, and approximately 38 producers of Scotch spearmint oil and
approximately 84 producers of Native spearmint oil in the regulated
production area. Small agricultural service firms are defined by the
Small Business Administration (SBA) (13 CFR 121.201) as those having
annual receipts of less than $7,000,000, and small agricultural
producers are defined as those having annual receipts of less than
$750,000.
Based on the SBA's definition of small entities, the Committee
estimates that 2 of the 8 handlers regulated by the order could be
considered small entities. Most of the handlers are large corporations
involved in the international trading of essential oils and the
products of essential oils. In addition, the Committee estimates that
19 of the 38 Scotch spearmint oil producers and 29 of the 84 Native
spearmint oil producers could be classified as small entities under the
SBA definition. Thus, a majority of handlers and producers of Far West
spearmint oil may not be classified as small entities.
The Far West spearmint oil industry is characterized by producers
whose farming operations generally involve more than one commodity, and
whose income from farming operations is not exclusively dependent on
the production of spearmint oil. A typical spearmint oil-producing
operation has enough acreage for rotation such that the total acreage
required to produce the crop is about one-third spearmint and two-
thirds rotational crops. Thus, the typical spearmint oil producer has
to have considerably more acreage than is planted to spearmint during
any given season. Crop rotation is an essential cultural practice in
the production of spearmint oil for weed, insect, and disease control.
To remain economically viable with the added costs associated with
spearmint oil production, a majority of spearmint oil-producing farms
fall into the SBA category of large businesses.
Small spearmint oil producers generally are not as extensively
diversified as larger ones and as such are more at risk from market
fluctuations. Such small producers generally need to market their
entire annual allotment and do not have the luxury of having other
crops to cushion seasons with poor spearmint oil returns. Conversely,
large diversified producers have the potential to endure one or more
seasons of poor spearmint oil markets because income from alternate
crops could support the operation for a period of time. Being
reasonably assured of a stable price and market provides small
producing entities with the ability to maintain proper cash flow and to
meet annual expenses. Thus, the market and price stability provided by
the order potentially benefit the small producer more than such
provisions benefit large producers. Even though a majority of handlers
and producers of spearmint oil may not be classified as small entities,
the volume control feature of this order has small entity orientation.
[[Page 11976]]
This proposed rule would establish the quantity of spearmint oil
produced in the Far West, by class that handlers may purchase from, or
handle on behalf of, producers during the 2011-2012 marketing year. The
Committee recommended this rule to help maintain stability in the
spearmint oil market by matching supply to estimated demand thereby
avoiding extreme fluctuations in supplies and prices. Establishing
quantities to be purchased or handled during the marketing year through
volume regulations allows producers to plan their spearmint planting
and harvesting to meet expected market needs. The provisions of
Sec. Sec. 985.50, 985.51, and 985.52 of the order authorize this rule.
Instability in the spearmint oil sub-sector of the mint industry is
much more likely to originate on the supply side than the demand side.
Fluctuations in yield and acreage planted from season-to-season tend to
be larger than fluctuations in the amount purchased by handlers. Demand
for spearmint oil tends to be relatively stable from year-to-year. The
demand for spearmint oil is expected to grow slowly for the foreseeable
future because the demand for consumer products that use spearmint oil
will likely expand slowly, in line with population growth.
Demand for spearmint oil at the farm level is derived from retail
demand for spearmint-flavored products such as chewing gum, toothpaste,
and mouthwash. The manufacturers of these products are by far the
largest users of mint oil. However, spearmint flavoring is generally a
very minor component of the products in which it is used, so changes in
the raw product price have virtually no impact on retail prices for
those goods.
Spearmint oil production tends to be cyclical. Years of relatively
high production, with demand remaining reasonably stable, have led to
periods in which large producer stocks of unsold spearmint oil have
depressed producer prices for a number of years. Shortages and high
prices may follow in subsequent years, as producers respond to price
signals by cutting back production.
The significant variability of the spearmint oil market is
illustrated by the fact that the coefficient of variation (a standard
measure of variability; ``CV'') of Far West spearmint oil production
from 1980 through 2009 was about 0.23. The CV for spearmint oil grower
prices was about 0.16 for that period, well below the CV for
production. This provides an indication of the price stabilizing impact
of the marketing order.
Production in the shortest marketing year was about 48 percent of
the 30-year average (1.89 million pounds from 1980 through 2009) and
the largest crop was approximately 163 percent of the 30-year average.
A key consequence is that in years of oversupply and low prices the
season average producer price of spearmint oil is below the average
cost of production (as measured by the Washington State University
Cooperative Extension Service.)
The wide fluctuations in supply and prices that result from this
cycle, which was even more pronounced before the creation of the
marketing order, can create liquidity problems for some producers. The
marketing order was designed to reduce the price impacts of the
cyclical swings in production. However, producers have been less able
to weather these cycles in recent years because of the increase in
production costs. While prices have been relatively steady, the cost of
production has increased to the extent that plans to plant spearmint
may be postponed or changed indefinitely. Producers are also enticed by
the prices of alternative crops and their lower cost of production.
In an effort to stabilize prices, the spearmint oil industry uses
the volume control mechanisms authorized under the order. This
authority allows the Committee to recommend a salable quantity and
allotment percentage for each class of oil for the upcoming marketing
year. The salable quantity for each class of oil is the total volume of
oil that producers may sell during the marketing year. The allotment
percentage for each class of spearmint oil is derived by dividing the
salable quantity by the total allotment base.
Each producer is then issued an annual allotment certificate, in
pounds, for the applicable class of oil, which is calculated by
multiplying the producer's allotment base by the applicable allotment
percentage. This is the amount of oil of each applicable class that the
producer can sell.
By November 1 of each year, the Committee identifies any oil that
individual producers have produced above the volume specified on their
annual allotment certificates. This excess oil is placed in a reserve
pool administered by the Committee.
There is a reserve pool for each class of oil that may not be sold
during the current marketing year unless USDA approves a Committee
recommendation to increase the salable quantity and allotment
percentage for a class of oil and make a portion of the pool available.
However, limited quantities of reserve oil are typically sold by one
producer to another producer to fill deficiencies. A deficiency occurs
when on-farm production is less than a producer's allotment. In that
case, a producer's own reserve oil can be sold to fill that deficiency.
Excess production (higher than the producer's allotment) can be sold to
fill other producers' deficiencies. All of these provisions need to be
exercised prior to November 1 of each year.
In any given year, the total available supply of spearmint oil is
composed of current production plus carry-over stocks from the previous
crop. The Committee seeks to maintain market stability by balancing
supply and demand, and to close the marketing year with an appropriate
level of carryout. If the industry has production in excess of the
salable quantity, then the reserve pool absorbs the surplus quantity of
spearmint oil, which goes unsold during that year, unless the oil is
needed for unanticipated sales.
Under its provisions, the order may attempt to stabilize prices by
(1) limiting supply and establishing reserves in high production years,
thus minimizing the price-depressing effect that excess producer stocks
have on unsold spearmint oil, and (2) ensuring that stocks are
available in short supply years when prices would otherwise increase
dramatically. The reserve pool stocks, which are increased in large
production years, are drawn down in years where the crop is short.
An econometric model was used to assess the impact that volume
control has on the prices producers receive for their commodity.
Without volume control, spearmint oil markets would likely be over-
supplied, resulting in low producer prices and a large volume of oil
stored and carried over to the next crop year. The model estimates how
much lower producer prices would likely be in the absence of volume
controls.
The Committee estimated the trade demand for the 2011-2012
marketing year for both classes of oil at 1,930,000 pounds, and that
the expected combined carry-in will be 414,288 pounds. This results in
a combined required salable quantity of 1,515,712 pounds. With volume
control, sales by producers for the 2011-2012 marketing year would be
limited to 1,707,757 pounds (the recommended salable quantity for both
classes of spearmint oil).
The recommended allotment percentages, upon which 2011-2012
producer allotments are based, are 34 percent for Scotch and 44 percent
for Native. Without volume controls, producers would not be limited to
these allotment levels, and could produce and
[[Page 11977]]
sell additional spearmint. The econometric model estimated a $1.89
decline in the season average producer price per pound (from both
classes of spearmint oil) resulting from the higher quantities that
would be produced and marketed without volume control. The surplus
situation for the spearmint oil market that would exist without volume
controls in 2011-2012 also would likely dampen prospects for improved
producer prices in future years because of the buildup in stocks.
The use of volume controls allows the industry to fully supply
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume controls is believed to have
little or no effect on consumer prices of products containing spearmint
oil and will not result in fewer retail sales of such products.
The Committee discussed alternatives to the recommendations
contained in this rule for both classes of spearmint oil. The Committee
discussed and rejected the idea of recommending that there not be any
volume regulation for both classes of spearmint oil because of the
severe price-depressing effects that would occur without volume
control.
After computing the initial 29.5 percent Scotch spearmint oil
allotment percentage, the Committee considered various alternative
levels of volume control for Scotch spearmint oil. Considered levels
ranged from 30 percent to 40 percent. Given the moderately improving
marketing conditions, there was consensus that the allotment percentage
for 2011-2012 should be more than the percentage established for the
2010-2011 marketing year (28 percent). After considerable discussion,
in a vote of six members in favor and two members opposed, the
Committee determined that 694,774 pounds and 34 percent would be the
most effective salable quantity and allotment percentage, respectively,
for the 2011-2012 marketing year. The two dissenting members felt that
the salable quantity and allotment percentage should be set at some
unidentified higher level.
The Committee was also able to reach a consensus regarding the
level of volume control for Native spearmint oil. After first
determining the computed allotment percentage at 39.7 percent, the
Committee voted unanimously to recommend 1,012,983 pounds and 44
percent for the effective salable quantity and allotment percentage,
respectively, for the 2011-2012 marketing year.
As noted earlier, the Committee's recommendation to establish
salable quantities and allotment percentages for both classes of
spearmint oil was made after careful consideration of all available
information, including: (1) The estimated quantity of salable oil of
each class held by producers and handlers; (2) the estimated demand for
each class of oil; (3) the prospective production of each class of oil;
(4) the total of allotment bases of each class of oil for the current
marketing year and the estimated total of allotment bases of each class
for the ensuing marketing year; (5) the quantity of reserve oil, by
class, in storage; (6) producer prices of oil, including prices for
each class of oil; and (7) general market conditions for each class of
oil, including whether the estimated season average price to producers
is likely to exceed parity. Based on its review, the Committee believes
that the salable quantity and allotment percentage levels recommended
would achieve the objectives sought.
Without any regulations in effect, the Committee believes the
industry would return to the pronounced cyclical price patterns that
occurred prior to the order, and that prices in 2011-2012 could decline
substantially below current levels.
According to the Committee, the recommended salable quantities and
allotment percentages are expected to facilitate the goal of
establishing orderly marketing conditions for Far West spearmint oil.
As previously stated, annual salable quantities and allotment
percentages have been issued for both classes of spearmint oil since
the order's inception. Reporting and recordkeeping requirements have
remained the same for each year of regulation. These requirements have
been approved by the Office of Management and Budget under OMB Control
No. 0581-0178, Vegetable and Specialty Crops. Accordingly, this rule
would not impose any additional reporting or recordkeeping requirements
on either small or large spearmint oil producers or handlers. As with
all Federal marketing order programs, reports and forms are
periodically reviewed to reduce information requirements and
duplication by industry and public sector agencies. Furthermore, USDA
has not identified any relevant Federal rules that duplicate, overlap,
or conflict with this rule.
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.
In addition, the Committee's meeting was widely publicized
throughout the spearmint oil industry and all interested persons were
invited to attend the meeting and participate in Committee
deliberations on all issues. Like all Committee meetings, the October
13, 2010, meeting was a public meeting and all entities, both large and
small, were able to express views on this issue. Finally, interested
persons are invited to submit comments on this proposed rule, including
the regulatory and informational impacts of this action on small
businesses.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions
about the compliance guide should be sent to Antoinette Carter at the
previously mentioned address in the FOR FURTHER INFORMATION CONTACT
section.
A 30-day comment period is deemed appropriate to allow interested
persons the opportunity to respond to this proposal, taking into
account that the marketing year begins on June 1, 2011. All written
comments timely received will be considered before a final
determination is made on this matter.
List of Subjects in 7 CFR Part 985
Marketing agreements, Oils and fats, Reporting and recordkeeping
requirements, Spearmint oil.
For the reasons set forth in the preamble, 7 CFR part 985 is
proposed to be amended as follows:
PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL
PRODUCED IN THE FAR WEST
1. The authority citation for 7 CFR part 985 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. A new Sec. 985.230 is added to read as follows: [Note: This
section will not appear in the Code of Federal Regulations.]
Sec. 985.230 Salable quantities and allotment percentages--2011-2012
marketing year.
The salable quantity and allotment percentage for each class of
spearmint oil during the marketing year beginning on June 1, 2011,
shall be as follows:
(a) Class 1 (Scotch) oil--a salable quantity of 694,774 pounds and
an allotment percentage of 34 percent.
(b) Class 3 (Native) oil--a salable quantity of 1,012,983 pounds
and an allotment percentage of 44 percent.
[[Page 11978]]
Dated: February 25, 2011.
David R. Shipman,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2011-4810 Filed 3-3-11; 8:45 am]
BILLING CODE 3410-02-P
