Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 2011-2012 Marketing Year, 27852-27859 [2011-11716]

Download as PDF WReier-Aviles on DSKGBLS3C1PROD with RULES 27852 Federal Register / Vol. 76, No. 93 / Friday, May 13, 2011 / Rules and Regulations Number 0581–0178 and continues in effect until March 31, 2014. 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. AMS is committed to complying with the E-government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes. USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule. The Committee’s meeting was widely publicized throughout the Washington potato industry and all interested persons were invited to participate in Committee deliberations. Like all committee meetings, the January 26, 2011, meeting was a public meeting, and all entities, both large and small, were able to express views on this issue. Further, interested persons are invited to submit comments on this interim 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. This rule invites comments on modifications to the handling regulation and reporting requirement for russet potatoes under the Washington potato marketing order. The modifications revise the introductory text of both regulations by removing a sentence in § 946.143 and by removing and replacing text in § 946.336. Any comments received will be considered prior to finalization of this rule. After consideration of all relevant material presented, including the Committee’s recommendation, and other information, it is found that this interim rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act. Pursuant to 5 U.S.C. 553, it is also found and determined upon good cause that it is impracticable, unnecessary, and contrary to the public interest to give preliminary notice prior to putting this rule into effect and that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register VerDate Mar<15>2010 15:13 May 12, 2011 Jkt 223001 because: (1) Any changes resulting from this rule should be effective July 1, 2011, because the one-year suspension of the russet potato-handling regulation ends June 30, 2011; (2) the Committee discussed and unanimously recommended these changes at a public meeting and all interested parties had an opportunity to provide input; and (3) this rule provides a 60-day comment period and any comments received will be considered prior to finalization of this rule. List of Subjects in 7 CFR Part 946 Marketing agreements, Potatoes, Reporting and recordkeeping requirements. For the reasons set forth in the preamble, 7 CFR part 946 is amended as follows: PART 946—IRISH POTATOES GROWN IN WASHINGTON 1. The authority citation for 7 CFR part 946 continues to read as follows: ■ Authority: 7 U.S.C. 601–674. § 946.143 [Amended] 2. Amend the introductory text of § 946.143 by removing the words ‘‘Provided, That the first report shall include all required information from July 24, 2010 through the end of the month in which the assessment report and its collection of information is approved by the Office of Management and Budget.″ ■ § 946.336 [Amended] 3. Amend the introductory text of § 946.336 by removing the words ‘‘from July 24, 2010, through June 30, 2011″ and adding in their place the words ‘‘beginning July 1, 2011″. ■ Dated: May 9, 2011. Ellen King, Acting Administrator, Agricultural Marketing Service. [FR Doc. 2011–11713 Filed 5–12–11; 8:45 am] BILLING CODE 3410–02–P PO 00000 DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 985 [Doc. No. AMS–FV–10–0094; FV11–985–1 FR] 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: Final rule. AGENCY: This rule establishes 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 establishes 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: Effective Date: This final rule becomes effective June 1, 2011, through May 31, 2012. 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 Laurel May, 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: Laurel.May@ams.usda.gov. SUMMARY: This final 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, SUPPLEMENTARY INFORMATION: Frm 00006 Fmt 4700 Sfmt 4700 E:\FR\FM\13MYR1.SGM 13MYR1 WReier-Aviles on DSKGBLS3C1PROD with RULES Federal Register / Vol. 76, No. 93 / Friday, May 13, 2011 / Rules and Regulations 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 final rule establishes 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 VerDate Mar<15>2010 15:13 May 12, 2011 Jkt 223001 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 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 final rule limits 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 PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 27853 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. In addition to the recent oversupply concerns, the demand for Far West Scotch spearmint oil, which peaked in 2005 at 1,002,779 pounds, has experienced a steady decline to just 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. E:\FR\FM\13MYR1.SGM 13MYR1 WReier-Aviles on DSKGBLS3C1PROD with RULES 27854 Federal Register / Vol. 76, No. 93 / Friday, May 13, 2011 / Rules and Regulations 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, will still be above what the Committee considers to be optimum. The overproduction of Scotch spearmint oil 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, but still remains high relative to inventory levels and anticipated demand. The recent declining trend in Scotch spearmint oil production is viewed by the Committee as a positive development for the industry. However, production will need to drop further to find balance with the current levels of demand. 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 VerDate Mar<15>2010 15:13 May 12, 2011 Jkt 223001 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 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, will 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 PO 00000 Frm 00008 Fmt 4700 Sfmt 4700 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 § 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 E:\FR\FM\13MYR1.SGM 13MYR1 WReier-Aviles on DSKGBLS3C1PROD with RULES Federal Register / Vol. 76, No. 93 / Friday, May 13, 2011 / Rules and Regulations 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 VerDate Mar<15>2010 15:13 May 12, 2011 Jkt 223001 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 recommended to be reduced to just 43 percent for 2010–2011. Although improving, many of the negative marketing conditions present leading up to the 2010–2011 marketing year were still evident when the Committee met to consider volume regulation for the upcoming 2011–2012 marketing year. 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 PO 00000 Frm 00009 Fmt 4700 Sfmt 4700 27855 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 2012–2013 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 E:\FR\FM\13MYR1.SGM 13MYR1 WReier-Aviles on DSKGBLS3C1PROD with RULES 27856 Federal Register / Vol. 76, No. 93 / Friday, May 13, 2011 / Rules and Regulations 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 will 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 VerDate Mar<15>2010 15:13 May 12, 2011 Jkt 223001 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 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 will 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 salable quantities established by this action are not expected to cause a shortage of spearmint oil supplies. However, 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 intra-seasonal increases 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 who produce 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 regulation is 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. The increased costs to producers and handlers as a result of this rule are PO 00000 Frm 00010 Fmt 4700 Sfmt 4700 expected to be offset by the benefits derived from a stable market and improved returns. In conjunction with the issuance of this final 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. 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 salable quantities and allotment percentages established in this final rule allow for the anticipated needs of the market. 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. Final Regulatory Flexibility Analysis Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis. The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and 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, E:\FR\FM\13MYR1.SGM 13MYR1 WReier-Aviles on DSKGBLS3C1PROD with RULES Federal Register / Vol. 76, No. 93 / Friday, May 13, 2011 / Rules and Regulations 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 VerDate Mar<15>2010 15:13 May 12, 2011 Jkt 223001 to maintain proper cash flow and to meet annual expenses. Thus, the market and price stability provided by the order potentially benefit the small producer more than such provisions benefit large producers. Even though a majority of handlers and producers of spearmint oil may not be classified as small entities, the volume control feature of this order has small entity orientation. This final rule establishes 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 volume regulation. 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 PO 00000 Frm 00011 Fmt 4700 Sfmt 4700 27857 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 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 order, can create liquidity problems for some producers. The 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. E:\FR\FM\13MYR1.SGM 13MYR1 WReier-Aviles on DSKGBLS3C1PROD with RULES 27858 Federal Register / Vol. 76, No. 93 / Friday, May 13, 2011 / Rules and Regulations 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 will be limited to 1,707,757 pounds VerDate Mar<15>2010 15:13 May 12, 2011 Jkt 223001 (the salable quantity for both classes of spearmint oil). The 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 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 in 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 for spearmint oil, there was consensus that the allotment percentage for Scotch spearmint oil for 2011–2012 marketing year should be more than the percentage established for 2010–2011 (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 is 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 PO 00000 Frm 00012 Fmt 4700 Sfmt 4700 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 will achieve the objectives sought. If there were no regulations in effect for the coming marketing year, the Committee believes that the industry would return to the pronounced cyclical price patterns that occurred prior to the order, and that prices in 2011–2012 would decline substantially below current levels. According to the Committee, the established 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 action will 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 final rule. E:\FR\FM\13MYR1.SGM 13MYR1 Federal Register / Vol. 76, No. 93 / Friday, May 13, 2011 / Rules and Regulations 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. A proposed rule concerning this action was published in the Federal Register on March 4, 2011 (76 FR 11971). Copies of the rule were provided to Committee staff, which in turn made it available to all Far West spearmint oil producers, handlers, and interested persons. Finally, the rule was made available through the Internet by USDA and the Office of the Federal Register. A 30-day comment period ending April 4, 2011, was provided to allow interested persons to respond to the proposal. No comments were received. A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/ MarketingOrdersSmallBusinessGuide. Any questions about the compliance guide should be sent to Laurel May at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section. After consideration of all relevant matter presented, including the information and recommendation submitted by the Committee and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act. List of Subjects in 7 CFR Part 985 Marketing agreements, Oils and fats, Reporting and recordkeeping requirements, Spearmint oil. WReier-Aviles on DSKGBLS3C1PROD with RULES For the reasons set forth in the preamble, 7 CFR part 985 is 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. VerDate Mar<15>2010 15:13 May 12, 2011 Jkt 223001 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. Dated: May 9, 2011. Ellen King, Acting Administrator, Agricultural Marketing Service. [FR Doc. 2011–11716 Filed 5–12–11; 8:45 am] BILLING CODE 3410–02–P SMALL BUSINESS ADMINISTRATION 13 CFR Part 124 [Docket No.: SBA–2011–0013] 8(a) Business Development Program Regulation Changes; Tribal Consultation U.S. Small Business Administration. ACTION: Notice of tribal consultation meetings; request for comments. AGENCY: On February 11, 2011, the U.S. Small Business Administration (SBA or Agency) published a final rule in the Federal Register making changes to the regulations governing the section 8(a) Business Development (BD) program. SBA announces that it is holding tribal consultation meetings in Milwaukee, Wisconsin and Anchorage, Alaska to discuss the recent changes to the 8(a) BD program regulations, specifically to take comments on the mandatory reporting of community benefits provision scheduled to take effect on September 9, 2011, unless SBA further delays implementation through publication in the Federal Register. Testimony presented at these tribal consultation meetings will become part of the administrative record for SBA’s consideration when the Agency deliberates on approaches to tracking community benefits. DATES: Comments are requested on or before June 8, 2011. The Tribal Consultation meetings will be held on Wednesday, June 15, 2011, from 1 p.m. to 4 p.m. at the National Congress of American Indian Mid Year SUMMARY: PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 27859 Conference in the Hyatt Regency in Milwaukee, Wisconsin and on Thursday, June 23, 2011, from 1 p.m. to 4 p.m. at the National 8(a) Association Summer Conference in the Dena’ina Civic and Convention Center in Anchorage, Alaska 99501. The tribal consultation meeting preregistration deadline date is June 8, 2011 at 5 p.m. (Eastern Standard Time) for the Milwaukee location and June 16, 2011 at 5 p.m. (Eastern Standard Time) for the Anchorage location. ADDRESSES: You may submit comments, identified by Docket Number SBA– 2011–0013 using the following methods: Federal eRulemaking Portal: https:// www.regulations.gov. Identify comments by ‘‘Docket Number SBA– 2011–0013, 8(a) Business Development program Regulation Changes; Tribal Consultation,″ and follow the instructions for submitting comments. Mail: U.S. Small Business Administration, Office of Business Development, 490 3rd Street, SW., Washington, DC 20416. SBA will post comments on https:// www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at https://www.regulations.gov, please submit information to Ms. LaTanya Wright, Senior Advisor for Office of Business Development, 490 3rd Street, SW., Washington, DC 20416. Highlight the information that you consider to be CBI, and explain why you believe this information should be held confidential. SBA will review the information and make the final determination of whether it will publish the information or not. 1. The Milwaukee Tribal Consultation meeting address is the Hyatt Regency, 333 West Kilbourn Avenue, Milwaukee, WI 53203. 2. The Anchorage Tribal Consultation address is the Dena’ina Civic and Convention Center, 600 W. 9th Avenue, Anchorage, AK 99501. 3. Send pre-registration requests to attend and/or testify to Ms. Chequita Carter, Office of Native American Affairs, U.S. Small Business Administration, 409 Third Street, SW., Washington, DC 20416; by email; chequita.carter@sba.gov or by facsimile to (202) 205–6139. FOR FURTHER INFORMATION CONTACT: If you have questions on SBA’s Final Rule for the 8(a) BD program, call or e-mail Ms. LaTanya Wright, Senior Advisor, Office of Business Development, at (202) 205–5852, or LaTanya.Wright@sba.gov. If you have questions about registering or attending the tribal consultation, please contact Ms. Chequita Carter at E:\FR\FM\13MYR1.SGM 13MYR1

Agencies

[Federal Register Volume 76, Number 93 (Friday, May 13, 2011)]
[Rules and Regulations]
[Pages 27852-27859]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11716]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Doc. No. AMS-FV-10-0094; FV11-985-1 FR]

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: Final rule.

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

SUMMARY: This rule establishes 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 establishes 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: Effective Date: This final rule becomes effective June 1, 2011,
through May 31, 2012.

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 Laurel May, 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: Laurel.May@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This final 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,

[[Page 27853]]

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 final rule establishes 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 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 final rule limits 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.
In addition to the recent oversupply concerns, the demand for Far
West Scotch spearmint oil, which peaked in 2005 at 1,002,779 pounds,
has experienced a steady decline to just 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.

[[Page 27854]]

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, will still be above what the
Committee considers to be optimum.
The overproduction of Scotch spearmint oil 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, but still remains high relative to inventory
levels and anticipated demand. The recent declining trend in Scotch
spearmint oil production is viewed by the Committee as a positive
development for the industry. However, production will need to drop
further to find balance with the current levels of demand.
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 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, will 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

[[Page 27855]]

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 recommended to be reduced to just 43
percent for 2010-2011.
Although improving, many of the negative marketing conditions
present leading up to the 2010-2011 marketing year were still evident
when the Committee met to consider volume regulation for the upcoming
2011-2012 marketing year. 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 2012-2013 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

[[Page 27856]]

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 will 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 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 will 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 salable quantities established by this action are not expected
to cause a shortage of spearmint oil supplies. However, 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 intra-seasonal increases 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 who produce 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 regulation is 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. The increased costs to producers and handlers as a
result of 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 final 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 salable quantities and allotment percentages established in
this final rule allow for the anticipated needs of the market. 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.

Final Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities. Accordingly, AMS has
prepared this final regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and 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,

[[Page 27857]]

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.
This final rule establishes 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
volume regulation.
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 order,
can create liquidity problems for some producers. The 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.

[[Page 27858]]

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 will be
limited to 1,707,757 pounds (the salable quantity for both classes of
spearmint oil).
The 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 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 in 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 for spearmint oil, there was consensus that the
allotment percentage for Scotch spearmint oil for 2011-2012 marketing
year should be more than the percentage established for 2010-2011 (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 is 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
will achieve the objectives sought.
If there were no regulations in effect for the coming marketing
year, the Committee believes that the industry would return to the
pronounced cyclical price patterns that occurred prior to the order,
and that prices in 2011-2012 would decline substantially below current
levels.
According to the Committee, the established 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 action
will 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 final rule.

[[Page 27859]]

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.
A proposed rule concerning this action was published in the Federal
Register on March 4, 2011 (76 FR 11971). Copies of the rule were
provided to Committee staff, which in turn made it available to all Far
West spearmint oil producers, handlers, and interested persons.
Finally, the rule was made available through the Internet by USDA and
the Office of the Federal Register. A 30-day comment period ending
April 4, 2011, was provided to allow interested persons to respond to
the proposal. No comments were received.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions
about the compliance guide should be sent to Laurel May at the
previously mentioned address in the FOR FURTHER INFORMATION CONTACT
section.
After consideration of all relevant matter presented, including the
information and recommendation submitted by the Committee and other
available information, it is hereby found that this rule, as
hereinafter set forth, will tend to effectuate the declared policy of
the Act.

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
amended as follows:

PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL
PRODUCED IN THE FAR WEST

0
1. The authority citation for 7 CFR part 985 continues to read as
follows:

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

0
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.

Dated: May 9, 2011.
Ellen King,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2011-11716 Filed 5-12-11; 8:45 am]
BILLING CODE 3410-02-P

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