Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 2016-2017 Marketing Year, 38885-38892 [2016-14163]
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all entities, both large and small, were
able to express views on this issue.
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C.
Chapter 35), the order’s information
collection requirements have been
previously approved by the Office of
Management and Budget (OMB) and
assigned OMB No. 0581–0189 (Generic
Fruit Crops). No changes in those
requirements as a result of this action
are necessary. Should any changes
become necessary, they would be
submitted to OMB for approval.
This rule imposes no additional
reporting or recordkeeping requirements
on either small or large Florida avocado
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. As noted in the initial
regulatory flexibility analysis, USDA
has not identified any relevant Federal
rules that duplicate, overlap, or conflict
with this final rule.
AMS is committed to complying with
the E-Government Act, to promote the
use of the Internet and other
information technologies to provide
increased opportunities for citizen
access to Government information and
services, and for other purposes.
A proposed rule concerning this
action was published in the Federal
Register on March 16, 2016 (81 FR
14019). Copies of the proposed rule
were also mailed or sent via facsimile to
all Florida avocado handlers. Finally,
the proposal was made available
through the Internet by USDA and the
Office of the Federal Register. A 30-day
comment period ending April 15, 2016,
was provided for interested persons to
respond to the proposal. One comment
was received in support of the proposal.
Accordingly, no changes will be made
to the rule as proposed, based on the
comment 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/
rules-regulations/moa/small-businesses.
Any questions about the compliance
guide should be sent to Antoinette
Carter at the previously-mentioned
address in the FOR FURTHER INFORMATION
CONTACT section.
After consideration of all relevant
material 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.
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Pursuant to 5 U.S.C. 553, it is also
found and determined that good cause
exists for not postponing the effective
date of this rule until 30 days after
publication in the Federal Register
because handlers are already receiving
2016–17 crop avocados from growers,
and the fiscal period began on April 1,
2016, and the assessment rate applies to
all Florida avocados received during the
2016–17 and subsequent seasons.
Further, handlers are aware of this rule
which was recommended at a public
meeting. Also, a 30-day comment period
was provided for in the proposed rule.
List of Subjects in 7 CFR Part 915
Avocados, Marketing agreements,
Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, 7 CFR part 915 is amended as
follows:
PART 915—AVOCADOS GROWN IN
SOUTH FLORIDA
1. The authority citation for 7 CFR
part 915 continues to read as follows:
■
Authority: 7 U.S.C. 601–674.
2. Section 915.235 is revised to read
as follows:
■
§ 915.235
Assessment rate.
On and after April 1, 2016, an
assessment rate of $0.35 per 55-pound
container or equivalent is established
for avocados grown in South Florida.
Dated: June 10, 2016.
Elanor Starmer,
Administrator, Agricultural Marketing
Service.
[FR Doc. 2016–14149 Filed 6–14–16; 8:45 am]
BILLING CODE P
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Doc. No. AMS–FV–15–0074; FV16–985–1
FR]
Marketing Order Regulating the
Handling of Spearmint Oil Produced in
the Far West; Salable Quantities and
Allotment Percentages for the 2016–
2017 Marketing Year
Agricultural Marketing Service,
USDA.
ACTION: Final rule.
AGENCY:
This rule implements a
recommendation from the Far West
Spearmint Oil Administrative
Committee (Committee) to establish the
SUMMARY:
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quantity of spearmint oil produced in
the Far West, by class, that handlers
may purchase from, or handle on behalf
of, producers during the 2016–2017
marketing year, which begins on June 1,
2016. The Far West production area
includes the states of Washington,
Idaho, and Oregon, and designated parts
of Nevada and Utah. This rule
establishes salable quantities and
allotment percentages for Class 1
(Scotch) spearmint oil of 958,711
pounds and 45 percent, respectively,
and for Class 3 (Native) spearmint oil of
1,209,546 pounds and 50 percent,
respectively. The Committee locally
administers the marketing order for
spearmint oil produced in the Far West
and recommended these salable
quantities and allotment percentages to
help maintain stability in the spearmint
oil market.
DATES: June 16, 2016.
FOR FURTHER INFORMATION CONTACT: Dale
Novotny, Marketing Specialist, or Gary
Olson, Regional Director, Northwest
Marketing Field Office, Marketing Order
and Agreement Division, Specialty
Crops Program, AMS, USDA;
Telephone: (503) 326–2724, Fax: (503)
326–7440, or Email: DaleJ.Novotny@
ams.usda.gov or GaryD.Olson@
ams.usda.gov.
Small businesses may request
information on complying with this
regulation by contacting Antoinette
Carter, Marketing Order and Agreement
Division, Specialty Crops Program,
AMS, USDA, 1400 Independence
Avenue SW., STOP 0237, Washington,
DC 20250–0237; Telephone: (202) 720–
2491, Fax: (202) 720–8938, or Email:
Antoinette.Carter@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,
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 final rule in
conformance with Executive Orders
12866, 13563, and 13175.
This final rule has been reviewed
under Executive Order 12988, Civil
Justice Reform. This final rule is not
intended to have retroactive effect.
Under the 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 will establish the
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quantity of spearmint oil produced in
the Far West, by class, which handlers
may purchase from, or handle on behalf
of, producers during the 2016–2017
marketing year, which begins on June 1,
2016.
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. Input from spearmint oil
handlers and producers regarding
prospective marketing conditions for the
upcoming year is considered as well.
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 to
USDA the establishment of a salable
quantity and allotment percentage for
such class or classes of oil in the
forthcoming marketing year.
Recommendations for volume control
are intended to ensure that market
requirements for Far West spearmint oil
are satisfied and orderly marketing
conditions are maintained.
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. The allotment
percentage is the percentage used to
calculate each producer’s prorated share
of the salable quantity. It is derived by
dividing the salable quantity for each
class of spearmint oil by the total of all
producers’ allotment bases for the same
class of oil. Each producer’s annual
allotment of salable spearmint oil is
calculated by multiplying their
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respective total allotment base by the
allotment percentage for each class of
spearmint oil. A producer’s allotment
base is their quantified share of the
spearmint oil market based on a
statistical representation of past
spearmint oil production, with
accommodation for reasonable, normal
adjustments to such base as prescribed
by the Committee and approved by
USDA.
Salable quantities and allotment
percentages are established at levels
intended to fulfill market requirements
and to maintain orderly marketing
conditions. Committee
recommendations for volume control
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 21, 2015, and recommended
salable quantities and allotment
percentages for both classes of oil for the
2016–2017 marketing year. By a vote of
6–1, the Committee recommended the
establishment of a salable quantity and
allotment percentage for Scotch
spearmint oil of 958,711 pounds and 45
percent, respectively. With a unanimous
vote, the Committee recommended the
establishment of a salable quantity and
allotment percentage for Native
spearmint oil of 1,209,546 pounds and
50 percent, respectively. One Committee
member did not vote in either motion.
This final rule establishes the amount
of Scotch and Native spearmint oil that
handlers may purchase from, or handle
on behalf of, producers during the
2016–2017 marketing year, which
begins on June 1, 2016. Salable
quantities and allotment percentages
have been placed into effect each season
since the order’s inception in 1980.
Class 1 (Scotch) Spearmint Oil
As noted above, the Committee
recommended a salable quantity of
Scotch spearmint oil of 958,711 pounds
and an allotment percentage of 45
percent for the upcoming 2016–2017
marketing year. Motions for allotments
of 41, 43, 46, 47, and 48 percent were
made by members during the meeting
but were ultimately not carried due to
insufficient votes or a lack of seconding
by other Committee members. To arrive
at these recommendations, the
Committee utilized 2016–2017 sales
estimates for Scotch spearmint oil, as
provided by several of the industry’s
handlers, historical and current Scotch
spearmint oil production, inventory
statistics, and international market data
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obtained from consultants for the
spearmint oil industry.
Trade demand for Far West Scotch
spearmint oil is expected to decrease
from the 1,000,000 pounds anticipated
in the 2015–2016 marketing year to
900,000 pounds in 2016–2017. Industry
reports indicate that the decreased trade
demand estimate is the result of
decreased consumer demand for
spearmint flavored products, especially
chewing gum in China and India, as
fruit flavors are gaining consumer
preference. Strong, recovering
production of spearmint oil in
competing markets, most notably
Canada, has also factored into the
Committee’s assessment of the market.
Production of Far West Scotch
spearmint oil increased from 1,093,740
pounds in 2014 to an estimated
1,229,258 pounds for 2015. This
increase in production, along with a
simultaneous decrease in the demand
estimate for the forthcoming 2016–2017
marketing year, is consistent with the
Committee’s desire to bolster the Scotch
spearmint oil salable reserve inventory
to ensure that the market is fully
supplied. With the reserve pool of
Scotch spearmint oil nearly exhausted,
salable carry-in would be the only
cushion to any unanticipated supply
shocks that may affect the industry.
The Committee estimates that there
will be 233,752 pounds of salable carryin of Scotch spearmint oil on June 1,
2016. This figure, which is the primary
measure of excess supply, would be up
dramatically from the 4,494 pounds
carried-in the previous year on June 1,
2015. The Committee further estimates
that salable carry-in will grow to
292,463 pounds at the beginning of the
2017–2018 marketing year, if current
market conditions and projections are
maintained. This anticipated level of
carry-in would be above the quantity
that the Committee considers favorable
(generally 150,000 pounds). However,
without any Scotch spearmint oil in the
reserve pool, the Committee believes
that this higher salable carry-in is
manageable.
The 2016–2017 Scotch spearmint oil
salable quantity of 958,711 pounds
recommended by the Committee
represents a decrease of 306,914 pounds
from the salable quantity established the
previous marketing year (1,265,625
pounds). Of the total salable quantity
established for the 2015–2016 marketing
year, the Committee believes that 36,367
pounds of annual allotment will go
unfilled as a result of producers who
did not produce their entire annual
allotment and who do not have any
Scotch spearmint oil in the reserve pool
to fill the deficiency. Therefore, the
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Committee estimates the total available
supply for the 2015–2016 marketing
year to be just 1,233,752 pounds (4,494
pounds of carry-in plus 1,265,625
pounds of salable quantity less the
36,367 pounds of anticipated unused
annual allotment).
The Committee estimates the 2016–
2017 marketing year trade demand for
Scotch spearmint oil at 1,000,000
pounds. When considered in
conjunction with the 2015–2016
marketing year total available supply,
the Committee expects that there will be
233,752 pounds of available carry-in of
Scotch spearmint oil on June 1, 2016.
That carry-in, when combined with the
recommended 2016–2017 marketing
year salable quantity of 958,711 pounds,
will result in a total supply of 1,192,463
pounds of Scotch spearmint oil for the
2016–2017 marketing year. This
quantity is expected to fully satisfy
estimated market demand of 900,000
pounds.
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 maintain orderly
marketing conditions. The
recommended salable quantity of Scotch
spearmint oil for the upcoming
marketing year is less than the 1,265,853
pound salable quantity established for
the previous year. Even so, the
Committee expects that the market will
be fully supplied for the 2016–2017
marketing year. In addition, the
Committee expects that Scotch
spearmint oil inventories will be
replenished after being completely
exhausted during the 2013–2014
marketing year.
The Committee believes that the
recommended salable quantity will
adequately meet demand, as well as
result in a larger carry-in for the
following year. The Committee
developed its recommendation for
Scotch spearmint oil salable quantity
and allotment percentage for the 2016–
2017 marketing year based on the
information discussed above, as well as
the computational data outlined below.
(A) Estimated carry-in of Scotch
spearmint oil on June 1, 2016: 233,752
pounds. This figure is the difference
between the revised 2015–2016
marketing year total available supply of
1,233,752 pounds and the estimated
2015–2016 marketing year trade
demand of 1,000,000 pounds.
(B) Estimated trade demand of Scotch
spearmint oil for the 2016–2017
marketing year: 900,000 pounds. This
estimate was established by the
Committee and is based on input from
producers at six Scotch spearmint oil
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production area meetings held in midOctober 2015, as well as estimates
provided by handlers and other meeting
participants at the main meeting held
October 21, 2015. The average estimated
trade demand derived from the six
production area producer meetings was
1,027,666 pounds, which is 6,084
pounds less than the average of trade
demand estimates submitted by
handlers. Far West Scotch spearmint oil
sales have averaged 1,023,729 pounds
per year over the last three years, and
954,578 pounds over the last five years.
Given the anticipated market conditions
for the coming year, the Committee
decided it was prudent to anticipate the
lower trade demand at 900,000 pounds.
Should the initially established volume
control levels prove insufficient to
adequately supply the market, the
Committee has the authority to
recommend intra-seasonal increases, as
were undertaken in the 2014–2015
marketing year, and several other
previous marketing years.
(C) Salable quantity of Scotch
spearmint oil required from the 2016–
2017 marketing year production:
666,248 pounds. This figure is the
difference between the estimated 2016–
2017 marketing year trade demand
(900,000 pounds) and the estimated
carry-in on June 1, 2016 (233,752
pounds). This salable quantity
represents the minimum amount of
Scotch spearmint oil that may be
needed to satisfy estimated demand for
the coming year.
(D) Total estimated allotment base of
Scotch spearmint oil for the 2016–2017
marketing year: 2,130,469 pounds. This
figure represents a one-percent increase
over the revised 2015–2016 total
allotment base of 2,109,375 pounds as
prescribed by the order under
§ 985.53(d)(1). The one-percent increase
equals 21,094 pounds of Scotch
spearmint oil. This total estimated
allotment base 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 adjustment is usually minimal.
(E) Computed Scotch spearmint oil
allotment percentage for the 2016–2017
marketing year: 31.3 percent. This
percentage is computed by dividing the
minimum required salable quantity
(666,248 pounds) by the total estimated
allotment base (2,130,469 pounds).
(F) Recommended Scotch spearmint
oil allotment percentage for the 2016–
2017 marketing year: 45 percent. This is
the Committee’s recommendation and is
based on the computed allotment
percentage (31.3 percent), and input
from producers and handlers at the
October 21, 2015 meeting. The
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recommended 45 percent allotment
percentage reflects the Committee’s
belief that the computed percentage
(31.3 percent) may not adequately
supply the potential 2016–2017 Scotch
spearmint oil market demand.
(G) Recommended Scotch spearmint
oil salable quantity for the 2016–2017
marketing year: 958,711 pounds. This
figure is the product of the
recommended salable allotment
percentage (45 percent) and the total
estimated allotment base (2,130,469
pounds) for the 2016–2017 marketing
year.
(H) Estimated total available supply
of Scotch spearmint oil for the 2016–
2017 marketing year: 1,192,463 pounds.
This figure is the sum of the 2016–2017
recommended salable quantity (958,711
pounds) and the estimated carry-in on
June 1, 2016 (233,752 pounds).
Class 3 (Native) Spearmint Oil
The Committee also recommended a
2016–2017 Native spearmint oil salable
quantity of 1,209,546 pounds and an
allotment percentage of 50 percent at
the October 21, 2015, meeting. These
figures represent a decrease of 131,723
pounds and 5 percent, respectively,
from the previous marketing year. To
formulate this recommendation, the
Committee utilized Native spearmint oil
sales estimates for the 2016–2017
marketing year, as provided by several
of the industry’s handlers, as well as
historical and current Native spearmint
oil market statistics.
The Committee estimates that there
will be 609,603 pounds of Native
spearmint oil in the reserve pool on
June 1, 2016. This figure, which is the
excess Native spearmint oil production
held in reserve by producers, is up from
the previous industry peak of 606,942
pounds on June 1, 2011. The 2016–2017
estimate is 163,765 pounds higher than
the previous year’s reserve pool level.
Reserve pool levels of Native spearmint
oil had been slowly moving toward the
level that the Committee believes is
optimal for the industry prior to the
spike that is expected for the 2015–2016
marketing year. The increase in Native
spearmint oil held in reserve is the
direct result of greatly increased
production and only moderately
increased industry trade demand.
Far West Native spearmint oil
production was 1,274,926 pounds in
2014, but jumped to 1,510,936 pounds
in 2015, an 18.5 percent increase in just
one year. In contrast, sales of Native
spearmint oil have only been growing at
around a 3 percent rate over the past
five years. The Committee hopes that
Native spearmint oil reserve pool
inventory will reverse its current trend
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over the course of the 2016–2017
marketing year and begin to decrease to
levels that are deemed optimal for the
industry as producers curtail excess
production and utilize their reserve pool
stock to fill some of their annual
allotments.
As mentioned previously, Committee
statistics indicate that demand for Far
West Native spearmint oil has been
slightly increasing in recent years,
peaking at 1,390,984 pounds for the full
2014–2015 marketing year; the most
recent full marketing year recorded. In
addition, recorded sales for June
through October of 2015 are running
ahead of the same period last year. This
trend is expected to continue even as
imports of spearmint oil are also rising.
Canada has more than doubled
shipments of spearmint oil into the U.S.
market from 2014 to 2015, and Chinese
shipments are up 14 percent over the
same period.
The one exception in imports, India,
has reduced shipments during the last
year. Recent reports used by the
Committee indicate that spearmint oil
produced in India is improving in
quality, yet decreasing in acreage.
Indian spearmint oil is increasingly
regarded as an alternative to high
quality, Far West Native spearmint oil,
but production problems have limited
importation into the U.S. market. As a
result, imports from India, while still in
demand, decreased in the past year.
However, spearmint oil from India may
return as a major threat to the Far West
Native spearmint oil industry’s
domestic market share in the future.
During a recent tour of U.S. end-user
companies, the chairperson and
Committee staff received input that
indicated sales of mint products both
domestically and abroad have slowed
down. This is largely the result of
slowing economies in Europe and Asia.
End-users also felt the inventories of
Native spearmint oil that they currently
have on hand are adequate for the time
being. The end-users did indicate that
they intend to continue to rely on Far
West production as their main source of
high quality Native spearmint oil, but
such demand may be at lower quantities
moving forward in response to current
market factors.
As such, spearmint oil handlers, who
regularly help predict trade demand for
Far West Native spearmint oil, estimate
demand to range between 1,000,000 and
1,400,000 pounds (with a weighted
average of 1,350,000 pounds) for the
upcoming 2016–2017 marketing year.
The Committee used the handlers’ input
when it established the estimated 2016–
2017 marketing year Native spearmint
oil trade demand of 1,275,000 pounds.
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The estimated carry-in of 142,657
pounds of Native spearmint oil on June
1, 2016, in conjunction with the
Committee-recommended salable
quantity of 1,209,546 pounds, will
result in an estimated total available
supply of 1,352,203 pounds of Native
spearmint oil during the 2016–2017
marketing year. The Committee expects
that 77,203 pounds of salable Native
spearmint oil will be carried into the
2017–2018 marketing year, a reduction
of 65,454 pounds.
Carry-in spearmint oil is distinct from
reserve pool spearmint oil and
represents the amount of salable
spearmint oil produced, but not
marketed, in a previous year or years,
but is available for sale in the current
year under a previous year’s annual
allotment. It is the primary measure of
excess spearmint oil supply under the
order as it represents overproduction in
prior years that is currently available to
the market without restriction. Reserve
pool oil, on the other hand, represents
the amount of excess spearmint oil
production held off the market under
marketing order provisions and can only
be marketed under certain conditions.
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 while maintaining
orderly marketing conditions. With that
in mind, the Committee developed its
recommendation for Native spearmint
oil salable quantity and allotment
percentage for the 2016–2017 marketing
year based on the information discussed
above, as well as the data outlined
below.
(A) Estimated carry-in of Native
spearmint oil on June 1, 2016: 142,657
pounds. This figure is the difference
between the revised 2015–2016
marketing year total available supply of
1,465,990 pounds and the estimated
2015–2016 marketing year trade
demand of 1,323,333 pounds.
(B) Estimated trade demand of Native
spearmint oil for the 2016–2017
marketing year: 1,275,000 pounds. This
estimate was established by the
Committee and is based on input from
producers at six Native spearmint oil
production area meetings held in midOctober 2015, as well as estimates
provided by handlers and other meeting
participants at the October 21, 2015,
meeting. This figure represents a
decrease of 31,500 pounds from the
previous year’s estimate. The average
estimated trade demand for Native
spearmint oil from the six production
area meetings was 1,323,333 pounds,
whereas the handlers’ estimates ranged
from 1,000,000 to 1,400,000 pounds.
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The average of Far West Native
spearmint oil sales over the last three
years is 1,340,045 pounds. The
Committee chose to be conservative in
the establishment of its trade demand
estimate to avoid oversupplying the
market in the face of increasing
production.
(C) Salable quantity of Native
spearmint oil needed from the 2016–
2017 marketing year production:
1,132,343 pounds. This figure is the
difference between the estimated 2016–
2017 marketing year estimated trade
demand (1,275,000 pounds) and the
estimated carry-in on June 1, 2016
(142,657 pounds). This is the minimum
amount of Native spearmint oil that the
Committee believes will be required to
meet the anticipated 2016–2017
marketing year trade demand.
(D) Total estimated allotment base of
Native spearmint oil for the 2016–2017
marketing year: 2,419,091 pounds. This
figure represents a one-percent increase
over the revised 2015–2016 total
allotment base of 2,395,140 pounds as
prescribed by the order in
§ 985.53(d)(1). The one-percent increase
equals 23,951 pounds of Native
spearmint oil. This estimate 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 Native spearmint oil
allotment percentage for the 2016–2017
marketing year: 46.8 percent. This
percentage is calculated by dividing the
required salable quantity (1,132,343
pounds) by the total estimated allotment
base (2,419,091 pounds) for the 2016–
2017 marketing year.
(F) Recommended Native spearmint
oil allotment percentage for the 2016–
2017 marketing year: 50 percent. This is
the Committee’s recommendation based
on the computed allotment percentage
(46.8 percent), the average of the
computed allotment percentage figures
from the six production area meetings
(47.3 percent), and input from
producers and handlers at the October
21, 2015, main meeting. The
recommended 50 percent allotment
percentage is also based on the
Committee’s belief that the computed
percentage (46.8 percent) may not
adequately supply the potential market
for Native spearmint oil in the 2016–
2017 marketing year.
(G) Recommended Native spearmint
oil 2016–2017 marketing year salable
quantity: 1,209,546 pounds. This figure
is the product of the recommended
allotment percentage (50 percent) and
the total estimated allotment base
(2,419,091 pounds).
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(H) Estimated available supply of
Native spearmint oil for the 2016–2017
marketing year: 1,352,203 pounds. This
figure is the sum of the 2016–2017
recommended salable quantity
(1,209,546 pounds) and the estimated
carry-in on June 1, 2016 (142,657
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
958,711 pounds and 45 percent, and
1,209,546 pounds and 50 percent,
respectively, are based on the goal of
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 each, thus
avoiding extreme fluctuations in
inventories and prices.
The salable quantities presented in
this rule are not expected to cause a
shortage of spearmint oil supplies. Any
unanticipated or additional market
demand for spearmint oil which may
develop during the marketing year
could be satisfied by an intra-seasonal
increase in the salable quantity. The
order contains a provision in § 985.51
for intra-seasonal increases to allow the
Committee the flexibility to respond
quickly to changing market conditions.
Under volume regulation, producers
who produce more than their annual
allotments during the marketing year
may transfer such excess spearmint oil
to producers who have produced less
than their annual allotment. In addition,
on December 1 of each year, producers
that have not transferred their excess
spearmint oil to other producers must
place their excess spearmint oil
production into the reserve pool to be
released in the future in accordance
with market needs and under the
Committee’s direction.
This regulation is similar to
regulations issued in prior seasons. The
average initial allotment percentage for
the five most recent marketing years for
Scotch spearmint oil is 50.4 percent,
while the average initial allotment
percentage in the same five-year period
for Native spearmint oil is 51.4 percent.
Costs to producers and handlers
resulting from this rule are expected to
be offset by the benefits derived from a
more stable market and increased
returns. In conjunction with the
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issuance of this final rule, USDA has
reviewed the Committee’s marketing
policy statement for the 2016–2017
marketing year. The Committee’s
marketing policy statement, a
requirement whenever the Committee
recommends volume regulation, fully
meets the intent of §§ 985.50 and 985.51
of the order.
During its discussion of potential
2016–2017 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 USDA’s
‘‘Guidelines for Fruit, Vegetable, and
Specialty Crop Marketing Orders’’
(https://www.ams.usda.gov/publications/
content/1982-guidelines-fruit-vegetablemarketing-orders) has also been
reviewed and confirmed.
The establishment of these salable
quantities and allotment percentages
would allow for anticipated market
needs. In determining anticipated
market needs, the Committee
considered 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 2016–2017 season in
order to meet anticipated market
demand.
Final Regulatory Flexibility Analysis
Pursuant to requirements set forth in
the Regulatory Flexibility Act (RFA) (5
U.S.C. 601–612), 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
businesses 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.
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There are eight spearmint oil handlers
subject to regulation under the order,
approximately 38 producers of Scotch
spearmint oil, and approximately 92
producers of Native spearmint oil in the
regulated production area. Small
agricultural service firms are defined by
the Small Business Administration
(SBA) as those having annual receipts of
less than $7,500,000, and small
agricultural producers are defined as
those having annual receipts of less than
$750,000 (13 CFR 121.201).
Based on the SBA’s definition of
small entities, the Committee estimates
that two of the eight 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
12 of the 38 Scotch spearmint oil
producers, and 28 of the 92 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 purposes of 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 production of spearmint oil and
are not financially able to hold
spearmint oil for sale in future years. In
addition, small producers generally do
not have a large assortment of other
crops to cushion seasons with poor
spearmint oil returns.
Conversely, large, diversified
producers have the potential to endure
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one or more seasons of poor spearmint
oil markets because income from
alternate crops could support their
operation for a period of time.
Reasonable assurance of a stable price
and market provides all producing
entities with the ability to maintain
proper cash flow and to meet annual
expenses. The benefits for this rule are
expected to be equally available to all
producers and handlers regardless of
their size.
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 2016–2017
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 that may be purchased or
handled during the marketing year
through volume regulations allows
producers to coordinate their spearmint
oil production with the expected market
demand. Authority for this action is
provided in §§ 985.50, 985.51, and
985.52 of the order.
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. Historically, demand for
spearmint oil tends to change slowly
from year to year.
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
spearmint 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 little impact on the retail
prices for those goods.
In 2013, 2014, and 2015, the
Committee set salable percentages at
levels that resulted in most, if not all, of
the spearmint oil production being
made available to the market. This was
in response to the increased demand for
spearmint oil from the Far West due to
increased utilization by end-users and
the reduced supply of spearmint oil
coming from other production areas,
both domestic and foreign.
Although there is still strong demand
for spearmint oil, competing areas
(mainly Canada) have experienced
better than expected production in 2015
and will create some marketing pressure
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for spearmint oil from the Far West. In
addition, the slowing of international
markets for spearmint flavored products
has negatively impacted the demand for
domestically produced spearmint oil.
Thus, the lower salable quantities and
allotment percentages recommended by
the Committee for the 2016–2017
marketing year are intended to be
responsive to the changing environment
of the spearmint oil market.
In the late 1990’s, the Committee
recommended higher than normal
salable percentages in hopes of gaining
market share. This approach did not
work, and in the following years the
salable percentage was reduced in order
to work through the excess spearmint
oil production and resulting build-up of
inventory. In order to avoid a similar
scenario moving forward, the
Committee, relying heavily on the
information provided to it by spearmint
oil handlers during the October 21,
2015, meeting, ultimately recommended
reducing the 2016–2017 marketing year
salable percentages from the previous
year to better align the available supply
with market demand. The Committee
reported that recent producer prices for
spearmint oil are $18.00 to $20.00 per
pound.
Spearmint oil production tends to be
cyclical. Prior to the inception of the
marketing order in 1980, extreme
variability in producer prices was
common. For example, the season
average producer price for Washington
Native spearmint oil in 1971 was $3.00
per pound. By 1975, the producer price
had risen to $11.00 per pound, an
increase of over 260 percent in just four
years. Such fluctuations were not
unusual in the spearmint oil industry in
the years leading up to the promulgation
of the order. For most producers, this
was an untenable situation. Years of
relatively high spearmint oil
production, with demand remaining
relatively stable, led to periods in which
large producer stocks of unsold
spearmint oil depressed producer
prices. Shortages and high prices
followed in subsequent years, as
producers responded to price signals by
cutting back production.
After establishment of the order, the
supply and price variability in the
spearmint oil market moderated. During
the 20-year period from 1987 to 2006,
the season average producer price for
Native spearmint oil ranged from a high
of $11.10 to a low $9.10 per pound, or
a difference of 22 percent. No change in
producer price from one year to the next
during this period was more than $1.00
per pound. This is a remarkable record
of price stability. From 2006 to 2008,
prices jumped by $3.80 per pound as
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contracts tied to input costs were
prevalent in the industry. During this
time period, prices for fuel, fertilizer,
and labor increased dramatically,
resulting in higher contracted producer
prices, and a resulting concurrent
increase in the overall season average
producer price for the industry.
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
producer prices for the period 1980–
2014 (since the marketing order has
been in effect) is 0.23, compared to 0.36
for the decade prior to the promulgation
of the order (1970–79) and 0.49 for the
prior 20-year period (1960–79). The
coefficient of variation, as presented
herein, was calculated by USDA from
information provided by the Committee
and the National Agricultural Statistics
Service. This analysis provides an
indication of the price stabilizing
impact of the marketing order as higher
CV values correspond to greater
variability.
According to information compiled by
the Committee, production in the
shortest marketing year since the
establishment of the order was about 47
percent of the 34-year average (1.92
million pounds from 1980 through
2014) and the largest crop was
approximately 160 percent of the 34year 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 the cyclical
nature of the spearmint oil industry,
which were 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 increases to production costs.
While prices for spearmint oil have been
relatively steady, the cost of production
has increased to the extent that plans to
plant spearmint may be postponed or
vacated indefinitely. Producers may also
be 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
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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. This 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 market.
By December 1 of each year, the
Committee identifies any oil that
individual producers have produced
above the volume specified on their
annual allotment certificates. Prior to
December 1, such excess oil can be
transferred to another producer to fill a
deficiency in that producer’s annual
allotment as provided for in
§ 985.156(a).
The order allows limited quantities of
excess oil to be sold by one producer to
another producer to fill production
deficiencies during a marketing year. A
deficiency occurs when on-farm
production is less than a producer’s
annual allotment. When a producer has
a deficiency, the producer’s own reserve
oil can be utilized to fill that deficiency,
or excess production (production of
spearmint oil in excess of the producer’s
annual allotment) from another
producer may also be secured to fill the
deficiency. As mentioned previously, all
of these provisions need to be exercised
prior to December 1 of each year.
Excess spearmint oil not transferred to
another producer to fill a deficiency is
held in storage and, on December 1, is
added to the reserve pool administered
by the Committee pursuant to § 985.157.
The Committee maintains the reserve
pool for each class of spearmint oil.
Once spearmint oil is placed in the
reserve pool, such spearmint oil cannot
enter the market during that marketing
year unless USDA approves a
Committee recommendation to increase
the salable quantity and allotment
percentage for a certain class of oil,
subsequently making a portion of the
reserve pool of that class of spearmint
oil available to the market. Without an
increase in the salable quantity and
allotment percentage, spearmint oil
placed in the reserve pool cannot be
removed from the reserve pool and
marketed in the marketing year in
which it is initially placed in the reserve
pool. However, producers may dispose
of reserve spearmint oil from their own
production, and held in their own
account, under certain provisions in
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subsequent marketing years under the
supervision of the Committee.
While the Committee administers the
reserve pool of spearmint oil, ownership
and physical possession of spearmint oil
held in reserve does not transfer to the
Committee. The Committee accounts
for, and controls the release of, reserve
spearmint oil, but does not take title to,
or dispose of, any such oil of its own
accord. Producers, at their sole
discretion, make the decisions regarding
the disposition of oil held in the reserve
pool under any one of three possible
mechanisms. First, producers may
utilize reserve oil from their own
production to fill intra-seasonal
increases in the allotment percentage
and salable quantity. Second, producers
may fill an ensuing year’s annual
allotment from spearmint oil held in the
reserve pool. Lastly, producers may
exchange salable oil of the same class
and quantity of reserve oil from their
own production to rotate stock, so long
as the Committee is properly notified
and the oil is properly identified.
In any given year, the total available
supply of spearmint oil is composed of
current production plus salable
carryover 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 salable
spearmint oil to carry over into the
subsequent marketing year. If the
industry has production in excess of the
salable quantity, the reserve pool
absorbs the surplus quantity of
spearmint oil, thereby withholding it
from the market, unless such oil is
needed to fill unanticipated intraseasonal increases in demand. In this
way, excess spearmint oil is not allowed
to oversupply the market and create
price instability. Likewise, if production
is insufficient in any given year to fully
supply the market with spearmint oil,
the reserve pool oil can be released to
satisfy the market demand until
production can be increased.
Therefore, 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. Reserve pool
stocks, which increase in high
production years, are drawn down in
years where the crop is short.
An econometric model generated by
USDA was used to assess the impact
that volume control has on the prices
producers receive for their commodity.
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Without volume control, spearmint oil
markets would likely be over-supplied.
This could result 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 trade
demand for the 2016–2017 marketing
year for both classes of oil at 2,175,000
pounds, and that the expected
combined salable carry-in will be
376,409 pounds. This results in a
combined required salable quantity of
1,798,591 pounds (2,175,000 pounds of
trade demand less 376,409 pounds of
carry-in). Under volume control, total
sales of spearmint oil by producers for
the 2016–2017 marketing year will be
limited to 2,544,666 pounds (the
recommended salable quantity for both
classes of spearmint oil of 2,168,257
pounds plus 376,409 of carry-in). This
total available supply of 2,544,666
pounds should be more than adequate
to supply the 2,175,000 pounds of
anticipated trade demand for spearmint
oil.
The recommended allotment
percentages, upon which 2016–2017
producer allotments are based, are 45
percent for Scotch spearmint oil and 50
percent for Native spearmint oil.
Without volume controls, producers
would not be limited to these allotment
levels, and could produce and sell an
unrestricted quantity of spearmint oil.
The USDA econometric model
estimated that the season average
producer price per pound (from both
classes of spearmint oil) would decline
about $1.45 per pound as a result of the
higher quantities of spearmint oil that
would be produced and marketed
without volume control. The surplus
situation for the spearmint oil market
that would exist without volume
controls in 2016–2017 also would likely
dampen prospects for improved
producer prices in future years because
of the buildup in stocks.
The use of volume control allows the
industry to fully supply spearmint oil
markets while avoiding the negative
consequences of over-supplying these
markets. The use of volume control is
believed to have little or no effect on
consumer prices of products containing
spearmint oil and should not result in
fewer retail sales of such products.
The Committee discussed alternatives
to the recommendations submitted for
approval for both classes of spearmint
oil. The Committee discussed and
rejected the idea of not regulating any
volume for both classes of spearmint oil
because of the severe price-depressing
effects that would likely occur without
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volume control. The alternative to
establish salable quantities and
allotment percentages at the 2015–2016
marketing year’s levels was discussed,
but not put to any motion, for both
classes of oil. The Committee also
considered salable quantities and
allotment percentages that were above
and below the levels that were
ultimately recommended for Scotch
spearmint oil. Ultimately, the action
taken by the Committee was to decrease
the salable quantities and allotment
percentages for both Class 1 and Class
3 spearmint oil from the 2015–2016
marketing year levels.
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 quantities and
allotment percentages will achieve the
objectives sought. The Committee also
believes that if there is no volume
regulation in effect for the upcoming
marketing year, the Far West spearmint
oil industry would return to the
pronounced cyclical price patterns that
occurred prior to the promulgation of
the order. As previously stated, annual
salable quantities and allotment
percentages have been issued for both
classes of spearmint oil since the order’s
inception. The salable quantities and
allotment percentages established
herein are expected to facilitate the goal
of maintaining orderly marketing
conditions for Far West spearmint oil
for 2016–2017 and future marketing
years.
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C.
Chapter 35), the order’s information
collection requirements have been
previously approved by the Office of
Management and Budget (OMB) and
assigned OMB No. 0581–0178,
Vegetable and Specialty Crops. No
changes in those requirements as a
result of this action are necessary.
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Should any changes become necessary,
they would be submitted to OMB for
approval.
This rule establishes the salable
quantities and allotment percentages for
Class 1 (Scotch) spearmint oil and Class
3 (Native) spearmint oil produced in the
Far West during the 2016–2017
marketing year. 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.
As noted in the initial regulatory
flexibility analysis, USDA has not
identified any relevant Federal rules
that duplicate, overlap or conflict with
this final rule.
AMS is committed to complying with
the E-Government Act, to promote the
use of the internet and other
information technologies to provide
increased opportunities for citizen
access to Government information and
services, and for other purposes.
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 21, 2015, meeting
was a public meeting and all entities,
both large and small, were able to
express views on the issues presented.
A proposed rule concerning this action
was published in the Federal Register
on March 23, 2016 (81 FR 15450). A
copy of the rule was provided to
Committee staff, who 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
15-day comment period ending April 7,
2016, 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/
rules-regulations/moa/small-businesses.
Any questions about the compliance
guide should be sent to Antoinette
Carter at the previously mentioned
address in the FOR FURTHER INFORMATION
CONTACT section.
After consideration of all relevant
matter presented, including the
information and recommendation
submitted by the Committee and other
available information, it is hereby found
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that this rule, as hereinafter set forth,
will tend to effectuate the declared
policy of the Act.
It is further found that good cause
exists for not postponing the effective
date of this rule until 30 days after
publication in the Federal Register (5
U.S.C. 553) because the 2016–2017
marketing year starts on June 1, 2016,
and handlers will need to begin
purchasing the spearmint oil allotted
under this rulemaking. Further,
handlers are aware of this rule, which
was recommended at a public meeting.
Finally, a 15-day comment period was
provided for in the proposed rule, and
no comments were received.
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
1. The authority citation for 7 CFR
part 985 continues to read as follows:
■
Authority: 7 U.S.C. 601–674.
2. Section 985.235 is added to read as
follows:
■
§ 985.235 Salable quantities and allotment
percentages—2016–2017 marketing year.
The salable quantity and allotment
percentage for each class of spearmint
oil during the marketing year beginning
on June 1, 2016, shall be as follows:
(a) Class 1 (Scotch) oil—a salable
quantity of 958,711 pounds and an
allotment percentage of 45 percent.
(b) Class 3 (Native) oil—a salable
quantity of 1,209,546 pounds and an
allotment percentage of 50 percent.
Dated: June 10, 2016.
Elanor Starmer,
Administrator, Agricultural Marketing
Service.
[FR Doc. 2016–14163 Filed 6–14–16; 8:45 am]
BILLING CODE P
E:\FR\FM\15JNR1.SGM
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]]>Agencies
[Federal Register Volume 81, Number 115 (Wednesday, June 15, 2016)]
[Rules and Regulations]
[Pages 38885-38892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14163]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Doc. No. AMS-FV-15-0074; FV16-985-1 FR]
Marketing Order Regulating the Handling of Spearmint Oil Produced
in the Far West; Salable Quantities and Allotment Percentages for the
2016-2017 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule implements a recommendation from the Far West
Spearmint Oil Administrative Committee (Committee) to establish the
quantity of spearmint oil produced in the Far West, by class, that
handlers may purchase from, or handle on behalf of, producers during
the 2016-2017 marketing year, which begins on June 1, 2016. The Far
West production area includes the states of Washington, Idaho, and
Oregon, and designated parts of Nevada and Utah. This rule establishes
salable quantities and allotment percentages for Class 1 (Scotch)
spearmint oil of 958,711 pounds and 45 percent, respectively, and for
Class 3 (Native) spearmint oil of 1,209,546 pounds and 50 percent,
respectively. The Committee locally administers the marketing order for
spearmint oil produced in the Far West and recommended these salable
quantities and allotment percentages to help maintain stability in the
spearmint oil market.
DATES: June 16, 2016.
FOR FURTHER INFORMATION CONTACT: Dale Novotny, Marketing Specialist, or
Gary Olson, Regional Director, Northwest Marketing Field Office,
Marketing Order and Agreement Division, Specialty Crops Program, AMS,
USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or Email:
DaleJ.Novotny@ams.usda.gov or GaryD.Olson@ams.usda.gov.
Small businesses may request information on complying with this
regulation by contacting Antoinette Carter, Marketing Order and
Agreement Division, Specialty Crops Program, AMS, USDA, 1400
Independence Avenue SW., STOP 0237, Washington, DC 20250-0237;
Telephone: (202) 720-2491, Fax: (202) 720-8938, or Email:
Antoinette.Carter@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, 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 final rule in
conformance with Executive Orders 12866, 13563, and 13175.
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This final rule is not intended to have
retroactive effect. Under the 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 will establish the
[[Page 38886]]
quantity of spearmint oil produced in the Far West, by class, which
handlers may purchase from, or handle on behalf of, producers during
the 2016-2017 marketing year, which begins on June 1, 2016.
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. Input from spearmint oil handlers and
producers regarding prospective marketing conditions for the upcoming
year is considered as well.
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 to USDA the
establishment of a salable quantity and allotment percentage for such
class or classes of oil in the forthcoming marketing year.
Recommendations for volume control are intended to ensure that market
requirements for Far West spearmint oil are satisfied and orderly
marketing conditions are maintained.
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. The allotment percentage is the
percentage used to calculate each producer's prorated share of the
salable quantity. It is derived by dividing the salable quantity for
each class of spearmint oil by the total of all producers' allotment
bases for the same class of oil. Each producer's annual allotment of
salable spearmint oil is calculated by multiplying their respective
total allotment base by the allotment percentage for each class of
spearmint oil. A producer's allotment base is their quantified share of
the spearmint oil market based on a statistical representation of past
spearmint oil production, with accommodation for reasonable, normal
adjustments to such base as prescribed by the Committee and approved by
USDA.
Salable quantities and allotment percentages are established at
levels intended to fulfill market requirements and to maintain orderly
marketing conditions. Committee recommendations for volume control 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 21, 2015, and
recommended salable quantities and allotment percentages for both
classes of oil for the 2016-2017 marketing year. By a vote of 6-1, the
Committee recommended the establishment of a salable quantity and
allotment percentage for Scotch spearmint oil of 958,711 pounds and 45
percent, respectively. With a unanimous vote, the Committee recommended
the establishment of a salable quantity and allotment percentage for
Native spearmint oil of 1,209,546 pounds and 50 percent, respectively.
One Committee member did not vote in either motion.
This final rule establishes the amount of Scotch and Native
spearmint oil that handlers may purchase from, or handle on behalf of,
producers during the 2016-2017 marketing year, which begins on June 1,
2016. Salable quantities and allotment percentages have been placed
into effect each season since the order's inception in 1980.
Class 1 (Scotch) Spearmint Oil
As noted above, the Committee recommended a salable quantity of
Scotch spearmint oil of 958,711 pounds and an allotment percentage of
45 percent for the upcoming 2016-2017 marketing year. Motions for
allotments of 41, 43, 46, 47, and 48 percent were made by members
during the meeting but were ultimately not carried due to insufficient
votes or a lack of seconding by other Committee members. To arrive at
these recommendations, the Committee utilized 2016-2017 sales estimates
for Scotch spearmint oil, as provided by several of the industry's
handlers, historical and current Scotch spearmint oil production,
inventory statistics, and international market data obtained from
consultants for the spearmint oil industry.
Trade demand for Far West Scotch spearmint oil is expected to
decrease from the 1,000,000 pounds anticipated in the 2015-2016
marketing year to 900,000 pounds in 2016-2017. Industry reports
indicate that the decreased trade demand estimate is the result of
decreased consumer demand for spearmint flavored products, especially
chewing gum in China and India, as fruit flavors are gaining consumer
preference. Strong, recovering production of spearmint oil in competing
markets, most notably Canada, has also factored into the Committee's
assessment of the market.
Production of Far West Scotch spearmint oil increased from
1,093,740 pounds in 2014 to an estimated 1,229,258 pounds for 2015.
This increase in production, along with a simultaneous decrease in the
demand estimate for the forthcoming 2016-2017 marketing year, is
consistent with the Committee's desire to bolster the Scotch spearmint
oil salable reserve inventory to ensure that the market is fully
supplied. With the reserve pool of Scotch spearmint oil nearly
exhausted, salable carry-in would be the only cushion to any
unanticipated supply shocks that may affect the industry.
The Committee estimates that there will be 233,752 pounds of
salable carry-in of Scotch spearmint oil on June 1, 2016. This figure,
which is the primary measure of excess supply, would be up dramatically
from the 4,494 pounds carried-in the previous year on June 1, 2015. The
Committee further estimates that salable carry-in will grow to 292,463
pounds at the beginning of the 2017-2018 marketing year, if current
market conditions and projections are maintained. This anticipated
level of carry-in would be above the quantity that the Committee
considers favorable (generally 150,000 pounds). However, without any
Scotch spearmint oil in the reserve pool, the Committee believes that
this higher salable carry-in is manageable.
The 2016-2017 Scotch spearmint oil salable quantity of 958,711
pounds recommended by the Committee represents a decrease of 306,914
pounds from the salable quantity established the previous marketing
year (1,265,625 pounds). Of the total salable quantity established for
the 2015-2016 marketing year, the Committee believes that 36,367 pounds
of annual allotment will go unfilled as a result of producers who did
not produce their entire annual allotment and who do not have any
Scotch spearmint oil in the reserve pool to fill the deficiency.
Therefore, the
[[Page 38887]]
Committee estimates the total available supply for the 2015-2016
marketing year to be just 1,233,752 pounds (4,494 pounds of carry-in
plus 1,265,625 pounds of salable quantity less the 36,367 pounds of
anticipated unused annual allotment).
The Committee estimates the 2016-2017 marketing year trade demand
for Scotch spearmint oil at 1,000,000 pounds. When considered in
conjunction with the 2015-2016 marketing year total available supply,
the Committee expects that there will be 233,752 pounds of available
carry-in of Scotch spearmint oil on June 1, 2016. That carry-in, when
combined with the recommended 2016-2017 marketing year salable quantity
of 958,711 pounds, will result in a total supply of 1,192,463 pounds of
Scotch spearmint oil for the 2016-2017 marketing year. This quantity is
expected to fully satisfy estimated market demand of 900,000 pounds.
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 maintain orderly marketing
conditions. The recommended salable quantity of Scotch spearmint oil
for the upcoming marketing year is less than the 1,265,853 pound
salable quantity established for the previous year. Even so, the
Committee expects that the market will be fully supplied for the 2016-
2017 marketing year. In addition, the Committee expects that Scotch
spearmint oil inventories will be replenished after being completely
exhausted during the 2013-2014 marketing year.
The Committee believes that the recommended salable quantity will
adequately meet demand, as well as result in a larger carry-in for the
following year. The Committee developed its recommendation for Scotch
spearmint oil salable quantity and allotment percentage for the 2016-
2017 marketing year based on the information discussed above, as well
as the computational data outlined below.
(A) Estimated carry-in of Scotch spearmint oil on June 1, 2016:
233,752 pounds. This figure is the difference between the revised 2015-
2016 marketing year total available supply of 1,233,752 pounds and the
estimated 2015-2016 marketing year trade demand of 1,000,000 pounds.
(B) Estimated trade demand of Scotch spearmint oil for the 2016-
2017 marketing year: 900,000 pounds. This estimate was established by
the Committee and is based on input from producers at six Scotch
spearmint oil production area meetings held in mid-October 2015, as
well as estimates provided by handlers and other meeting participants
at the main meeting held October 21, 2015. The average estimated trade
demand derived from the six production area producer meetings was
1,027,666 pounds, which is 6,084 pounds less than the average of trade
demand estimates submitted by handlers. Far West Scotch spearmint oil
sales have averaged 1,023,729 pounds per year over the last three
years, and 954,578 pounds over the last five years. Given the
anticipated market conditions for the coming year, the Committee
decided it was prudent to anticipate the lower trade demand at 900,000
pounds. Should the initially established volume control levels prove
insufficient to adequately supply the market, the Committee has the
authority to recommend intra-seasonal increases, as were undertaken in
the 2014-2015 marketing year, and several other previous marketing
years.
(C) Salable quantity of Scotch spearmint oil required from the
2016-2017 marketing year production: 666,248 pounds. This figure is the
difference between the estimated 2016-2017 marketing year trade demand
(900,000 pounds) and the estimated carry-in on June 1, 2016 (233,752
pounds). This salable quantity represents the minimum amount of Scotch
spearmint oil that may be needed to satisfy estimated demand for the
coming year.
(D) Total estimated allotment base of Scotch spearmint oil for the
2016-2017 marketing year: 2,130,469 pounds. This figure represents a
one-percent increase over the revised 2015-2016 total allotment base of
2,109,375 pounds as prescribed by the order under Sec. 985.53(d)(1).
The one-percent increase equals 21,094 pounds of Scotch spearmint oil.
This total estimated allotment base 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 adjustment is usually
minimal.
(E) Computed Scotch spearmint oil allotment percentage for the
2016-2017 marketing year: 31.3 percent. This percentage is computed by
dividing the minimum required salable quantity (666,248 pounds) by the
total estimated allotment base (2,130,469 pounds).
(F) Recommended Scotch spearmint oil allotment percentage for the
2016-2017 marketing year: 45 percent. This is the Committee's
recommendation and is based on the computed allotment percentage (31.3
percent), and input from producers and handlers at the October 21, 2015
meeting. The recommended 45 percent allotment percentage reflects the
Committee's belief that the computed percentage (31.3 percent) may not
adequately supply the potential 2016-2017 Scotch spearmint oil market
demand.
(G) Recommended Scotch spearmint oil salable quantity for the 2016-
2017 marketing year: 958,711 pounds. This figure is the product of the
recommended salable allotment percentage (45 percent) and the total
estimated allotment base (2,130,469 pounds) for the 2016-2017 marketing
year.
(H) Estimated total available supply of Scotch spearmint oil for
the 2016-2017 marketing year: 1,192,463 pounds. This figure is the sum
of the 2016-2017 recommended salable quantity (958,711 pounds) and the
estimated carry-in on June 1, 2016 (233,752 pounds).
Class 3 (Native) Spearmint Oil
The Committee also recommended a 2016-2017 Native spearmint oil
salable quantity of 1,209,546 pounds and an allotment percentage of 50
percent at the October 21, 2015, meeting. These figures represent a
decrease of 131,723 pounds and 5 percent, respectively, from the
previous marketing year. To formulate this recommendation, the
Committee utilized Native spearmint oil sales estimates for the 2016-
2017 marketing year, as provided by several of the industry's handlers,
as well as historical and current Native spearmint oil market
statistics.
The Committee estimates that there will be 609,603 pounds of Native
spearmint oil in the reserve pool on June 1, 2016. This figure, which
is the excess Native spearmint oil production held in reserve by
producers, is up from the previous industry peak of 606,942 pounds on
June 1, 2011. The 2016-2017 estimate is 163,765 pounds higher than the
previous year's reserve pool level. Reserve pool levels of Native
spearmint oil had been slowly moving toward the level that the
Committee believes is optimal for the industry prior to the spike that
is expected for the 2015-2016 marketing year. The increase in Native
spearmint oil held in reserve is the direct result of greatly increased
production and only moderately increased industry trade demand.
Far West Native spearmint oil production was 1,274,926 pounds in
2014, but jumped to 1,510,936 pounds in 2015, an 18.5 percent increase
in just one year. In contrast, sales of Native spearmint oil have only
been growing at around a 3 percent rate over the past five years. The
Committee hopes that Native spearmint oil reserve pool inventory will
reverse its current trend
[[Page 38888]]
over the course of the 2016-2017 marketing year and begin to decrease
to levels that are deemed optimal for the industry as producers curtail
excess production and utilize their reserve pool stock to fill some of
their annual allotments.
As mentioned previously, Committee statistics indicate that demand
for Far West Native spearmint oil has been slightly increasing in
recent years, peaking at 1,390,984 pounds for the full 2014-2015
marketing year; the most recent full marketing year recorded. In
addition, recorded sales for June through October of 2015 are running
ahead of the same period last year. This trend is expected to continue
even as imports of spearmint oil are also rising. Canada has more than
doubled shipments of spearmint oil into the U.S. market from 2014 to
2015, and Chinese shipments are up 14 percent over the same period.
The one exception in imports, India, has reduced shipments during
the last year. Recent reports used by the Committee indicate that
spearmint oil produced in India is improving in quality, yet decreasing
in acreage. Indian spearmint oil is increasingly regarded as an
alternative to high quality, Far West Native spearmint oil, but
production problems have limited importation into the U.S. market. As a
result, imports from India, while still in demand, decreased in the
past year. However, spearmint oil from India may return as a major
threat to the Far West Native spearmint oil industry's domestic market
share in the future.
During a recent tour of U.S. end-user companies, the chairperson
and Committee staff received input that indicated sales of mint
products both domestically and abroad have slowed down. This is largely
the result of slowing economies in Europe and Asia. End-users also felt
the inventories of Native spearmint oil that they currently have on
hand are adequate for the time being. The end-users did indicate that
they intend to continue to rely on Far West production as their main
source of high quality Native spearmint oil, but such demand may be at
lower quantities moving forward in response to current market factors.
As such, spearmint oil handlers, who regularly help predict trade
demand for Far West Native spearmint oil, estimate demand to range
between 1,000,000 and 1,400,000 pounds (with a weighted average of
1,350,000 pounds) for the upcoming 2016-2017 marketing year. The
Committee used the handlers' input when it established the estimated
2016-2017 marketing year Native spearmint oil trade demand of 1,275,000
pounds. The estimated carry-in of 142,657 pounds of Native spearmint
oil on June 1, 2016, in conjunction with the Committee-recommended
salable quantity of 1,209,546 pounds, will result in an estimated total
available supply of 1,352,203 pounds of Native spearmint oil during the
2016-2017 marketing year. The Committee expects that 77,203 pounds of
salable Native spearmint oil will be carried into the 2017-2018
marketing year, a reduction of 65,454 pounds.
Carry-in spearmint oil is distinct from reserve pool spearmint oil
and represents the amount of salable spearmint oil produced, but not
marketed, in a previous year or years, but is available for sale in the
current year under a previous year's annual allotment. It is the
primary measure of excess spearmint oil supply under the order as it
represents overproduction in prior years that is currently available to
the market without restriction. Reserve pool oil, on the other hand,
represents the amount of excess spearmint oil production held off the
market under marketing order provisions and can only be marketed under
certain conditions.
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 while maintaining orderly
marketing conditions. With that in mind, the Committee developed its
recommendation for Native spearmint oil salable quantity and allotment
percentage for the 2016-2017 marketing year based on the information
discussed above, as well as the data outlined below.
(A) Estimated carry-in of Native spearmint oil on June 1, 2016:
142,657 pounds. This figure is the difference between the revised 2015-
2016 marketing year total available supply of 1,465,990 pounds and the
estimated 2015-2016 marketing year trade demand of 1,323,333 pounds.
(B) Estimated trade demand of Native spearmint oil for the 2016-
2017 marketing year: 1,275,000 pounds. This estimate was established by
the Committee and is based on input from producers at six Native
spearmint oil production area meetings held in mid-October 2015, as
well as estimates provided by handlers and other meeting participants
at the October 21, 2015, meeting. This figure represents a decrease of
31,500 pounds from the previous year's estimate. The average estimated
trade demand for Native spearmint oil from the six production area
meetings was 1,323,333 pounds, whereas the handlers' estimates ranged
from 1,000,000 to 1,400,000 pounds. The average of Far West Native
spearmint oil sales over the last three years is 1,340,045 pounds. The
Committee chose to be conservative in the establishment of its trade
demand estimate to avoid oversupplying the market in the face of
increasing production.
(C) Salable quantity of Native spearmint oil needed from the 2016-
2017 marketing year production: 1,132,343 pounds. This figure is the
difference between the estimated 2016-2017 marketing year estimated
trade demand (1,275,000 pounds) and the estimated carry-in on June 1,
2016 (142,657 pounds). This is the minimum amount of Native spearmint
oil that the Committee believes will be required to meet the
anticipated 2016-2017 marketing year trade demand.
(D) Total estimated allotment base of Native spearmint oil for the
2016-2017 marketing year: 2,419,091 pounds. This figure represents a
one-percent increase over the revised 2015-2016 total allotment base of
2,395,140 pounds as prescribed by the order in Sec. 985.53(d)(1). The
one-percent increase equals 23,951 pounds of Native spearmint oil. This
estimate 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 Native spearmint oil allotment percentage for the
2016-2017 marketing year: 46.8 percent. This percentage is calculated
by dividing the required salable quantity (1,132,343 pounds) by the
total estimated allotment base (2,419,091 pounds) for the 2016-2017
marketing year.
(F) Recommended Native spearmint oil allotment percentage for the
2016-2017 marketing year: 50 percent. This is the Committee's
recommendation based on the computed allotment percentage (46.8
percent), the average of the computed allotment percentage figures from
the six production area meetings (47.3 percent), and input from
producers and handlers at the October 21, 2015, main meeting. The
recommended 50 percent allotment percentage is also based on the
Committee's belief that the computed percentage (46.8 percent) may not
adequately supply the potential market for Native spearmint oil in the
2016-2017 marketing year.
(G) Recommended Native spearmint oil 2016-2017 marketing year
salable quantity: 1,209,546 pounds. This figure is the product of the
recommended allotment percentage (50 percent) and the total estimated
allotment base (2,419,091 pounds).
[[Page 38889]]
(H) Estimated available supply of Native spearmint oil for the
2016-2017 marketing year: 1,352,203 pounds. This figure is the sum of
the 2016-2017 recommended salable quantity (1,209,546 pounds) and the
estimated carry-in on June 1, 2016 (142,657 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 958,711 pounds and 45 percent,
and 1,209,546 pounds and 50 percent, respectively, are based on the
goal of 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 each, thus avoiding
extreme fluctuations in inventories and prices.
The salable quantities presented in this rule are not expected to
cause a shortage of spearmint oil supplies. Any unanticipated or
additional market demand for spearmint oil which may develop during the
marketing year could be satisfied by an intra-seasonal increase in the
salable quantity. The order contains a provision in Sec. 985.51 for
intra-seasonal increases to allow the Committee the flexibility to
respond quickly to changing market conditions.
Under volume regulation, producers who produce more than their
annual allotments during the marketing year may transfer such excess
spearmint oil to producers who have produced less than their annual
allotment. In addition, on December 1 of each year, producers that have
not transferred their excess spearmint oil to other producers must
place their excess spearmint oil production into the reserve pool to be
released in the future in accordance with market needs and under the
Committee's direction.
This regulation is similar to regulations issued in prior seasons.
The average initial allotment percentage for the five most recent
marketing years for Scotch spearmint oil is 50.4 percent, while the
average initial allotment percentage in the same five-year period for
Native spearmint oil is 51.4 percent.
Costs to producers and handlers resulting from this rule are
expected to be offset by the benefits derived from a more stable market
and increased returns. In conjunction with the issuance of this final
rule, USDA has reviewed the Committee's marketing policy statement for
the 2016-2017 marketing year. The Committee's marketing policy
statement, a requirement whenever the Committee recommends volume
regulation, fully meets the intent of Sec. Sec. 985.50 and 985.51 of
the order.
During its discussion of potential 2016-2017 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 USDA's ``Guidelines for Fruit, Vegetable, and Specialty
Crop Marketing Orders'' (https://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-marketing-orders) has also been
reviewed and confirmed.
The establishment of these salable quantities and allotment
percentages would allow for anticipated market needs. In determining
anticipated market needs, the Committee considered 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 2016-2017 season in order to meet
anticipated market demand.
Final Regulatory Flexibility Analysis
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601-612), 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
businesses 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, approximately 38 producers of Scotch spearmint oil, and
approximately 92 producers of Native spearmint oil in the regulated
production area. Small agricultural service firms are defined by the
Small Business Administration (SBA) as those having annual receipts of
less than $7,500,000, and small agricultural producers are defined as
those having annual receipts of less than $750,000 (13 CFR 121.201).
Based on the SBA's definition of small entities, the Committee
estimates that two of the eight 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 12 of the 38 Scotch spearmint oil producers, and 28 of
the 92 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 purposes of 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 production of spearmint oil and are not financially able
to hold spearmint oil for sale in future years. In addition, small
producers generally do not have a large assortment of other crops to
cushion seasons with poor spearmint oil returns.
Conversely, large, diversified producers have the potential to
endure
[[Page 38890]]
one or more seasons of poor spearmint oil markets because income from
alternate crops could support their operation for a period of time.
Reasonable assurance of a stable price and market provides all
producing entities with the ability to maintain proper cash flow and to
meet annual expenses. The benefits for this rule are expected to be
equally available to all producers and handlers regardless of their
size.
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 2016-2017 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 that may be purchased or handled during the marketing year
through volume regulations allows producers to coordinate their
spearmint oil production with the expected market demand. Authority for
this action is provided in Sec. Sec. 985.50, 985.51, and 985.52 of the
order.
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.
Historically, demand for spearmint oil tends to change slowly from year
to year.
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 spearmint 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 little impact on the retail
prices for those goods.
In 2013, 2014, and 2015, the Committee set salable percentages at
levels that resulted in most, if not all, of the spearmint oil
production being made available to the market. This was in response to
the increased demand for spearmint oil from the Far West due to
increased utilization by end-users and the reduced supply of spearmint
oil coming from other production areas, both domestic and foreign.
Although there is still strong demand for spearmint oil, competing
areas (mainly Canada) have experienced better than expected production
in 2015 and will create some marketing pressure for spearmint oil from
the Far West. In addition, the slowing of international markets for
spearmint flavored products has negatively impacted the demand for
domestically produced spearmint oil. Thus, the lower salable quantities
and allotment percentages recommended by the Committee for the 2016-
2017 marketing year are intended to be responsive to the changing
environment of the spearmint oil market.
In the late 1990's, the Committee recommended higher than normal
salable percentages in hopes of gaining market share. This approach did
not work, and in the following years the salable percentage was reduced
in order to work through the excess spearmint oil production and
resulting build-up of inventory. In order to avoid a similar scenario
moving forward, the Committee, relying heavily on the information
provided to it by spearmint oil handlers during the October 21, 2015,
meeting, ultimately recommended reducing the 2016-2017 marketing year
salable percentages from the previous year to better align the
available supply with market demand. The Committee reported that recent
producer prices for spearmint oil are $18.00 to $20.00 per pound.
Spearmint oil production tends to be cyclical. Prior to the
inception of the marketing order in 1980, extreme variability in
producer prices was common. For example, the season average producer
price for Washington Native spearmint oil in 1971 was $3.00 per pound.
By 1975, the producer price had risen to $11.00 per pound, an increase
of over 260 percent in just four years. Such fluctuations were not
unusual in the spearmint oil industry in the years leading up to the
promulgation of the order. For most producers, this was an untenable
situation. Years of relatively high spearmint oil production, with
demand remaining relatively stable, led to periods in which large
producer stocks of unsold spearmint oil depressed producer prices.
Shortages and high prices followed in subsequent years, as producers
responded to price signals by cutting back production.
After establishment of the order, the supply and price variability
in the spearmint oil market moderated. During the 20-year period from
1987 to 2006, the season average producer price for Native spearmint
oil ranged from a high of $11.10 to a low $9.10 per pound, or a
difference of 22 percent. No change in producer price from one year to
the next during this period was more than $1.00 per pound. This is a
remarkable record of price stability. From 2006 to 2008, prices jumped
by $3.80 per pound as contracts tied to input costs were prevalent in
the industry. During this time period, prices for fuel, fertilizer, and
labor increased dramatically, resulting in higher contracted producer
prices, and a resulting concurrent increase in the overall season
average producer price for the industry.
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 producer
prices for the period 1980-2014 (since the marketing order has been in
effect) is 0.23, compared to 0.36 for the decade prior to the
promulgation of the order (1970-79) and 0.49 for the prior 20-year
period (1960-79). The coefficient of variation, as presented herein,
was calculated by USDA from information provided by the Committee and
the National Agricultural Statistics Service. This analysis provides an
indication of the price stabilizing impact of the marketing order as
higher CV values correspond to greater variability.
According to information compiled by the Committee, production in
the shortest marketing year since the establishment of the order was
about 47 percent of the 34-year average (1.92 million pounds from 1980
through 2014) and the largest crop was approximately 160 percent of the
34-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 the
cyclical nature of the spearmint oil industry, which were 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
increases to production costs. While prices for spearmint oil have been
relatively steady, the cost of production has increased to the extent
that plans to plant spearmint may be postponed or vacated indefinitely.
Producers may also be 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
[[Page 38891]]
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. This 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 market.
By December 1 of each year, the Committee identifies any oil that
individual producers have produced above the volume specified on their
annual allotment certificates. Prior to December 1, such excess oil can
be transferred to another producer to fill a deficiency in that
producer's annual allotment as provided for in Sec. 985.156(a).
The order allows limited quantities of excess oil to be sold by one
producer to another producer to fill production deficiencies during a
marketing year. A deficiency occurs when on-farm production is less
than a producer's annual allotment. When a producer has a deficiency,
the producer's own reserve oil can be utilized to fill that deficiency,
or excess production (production of spearmint oil in excess of the
producer's annual allotment) from another producer may also be secured
to fill the deficiency. As mentioned previously, all of these
provisions need to be exercised prior to December 1 of each year.
Excess spearmint oil not transferred to another producer to fill a
deficiency is held in storage and, on December 1, is added to the
reserve pool administered by the Committee pursuant to Sec. 985.157.
The Committee maintains the reserve pool for each class of spearmint
oil. Once spearmint oil is placed in the reserve pool, such spearmint
oil cannot enter the market during that marketing year unless USDA
approves a Committee recommendation to increase the salable quantity
and allotment percentage for a certain class of oil, subsequently
making a portion of the reserve pool of that class of spearmint oil
available to the market. Without an increase in the salable quantity
and allotment percentage, spearmint oil placed in the reserve pool
cannot be removed from the reserve pool and marketed in the marketing
year in which it is initially placed in the reserve pool. However,
producers may dispose of reserve spearmint oil from their own
production, and held in their own account, under certain provisions in
subsequent marketing years under the supervision of the Committee.
While the Committee administers the reserve pool of spearmint oil,
ownership and physical possession of spearmint oil held in reserve does
not transfer to the Committee. The Committee accounts for, and controls
the release of, reserve spearmint oil, but does not take title to, or
dispose of, any such oil of its own accord. Producers, at their sole
discretion, make the decisions regarding the disposition of oil held in
the reserve pool under any one of three possible mechanisms. First,
producers may utilize reserve oil from their own production to fill
intra-seasonal increases in the allotment percentage and salable
quantity. Second, producers may fill an ensuing year's annual allotment
from spearmint oil held in the reserve pool. Lastly, producers may
exchange salable oil of the same class and quantity of reserve oil from
their own production to rotate stock, so long as the Committee is
properly notified and the oil is properly identified.
In any given year, the total available supply of spearmint oil is
composed of current production plus salable carryover 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 salable spearmint oil to carry over into the
subsequent marketing year. If the industry has production in excess of
the salable quantity, the reserve pool absorbs the surplus quantity of
spearmint oil, thereby withholding it from the market, unless such oil
is needed to fill unanticipated intra-seasonal increases in demand. In
this way, excess spearmint oil is not allowed to oversupply the market
and create price instability. Likewise, if production is insufficient
in any given year to fully supply the market with spearmint oil, the
reserve pool oil can be released to satisfy the market demand until
production can be increased.
Therefore, 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. Reserve pool stocks, which increase in
high production years, are drawn down in years where the crop is short.
An econometric model generated by USDA 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. This could result 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 trade demand for the 2016-2017 marketing
year for both classes of oil at 2,175,000 pounds, and that the expected
combined salable carry-in will be 376,409 pounds. This results in a
combined required salable quantity of 1,798,591 pounds (2,175,000
pounds of trade demand less 376,409 pounds of carry-in). Under volume
control, total sales of spearmint oil by producers for the 2016-2017
marketing year will be limited to 2,544,666 pounds (the recommended
salable quantity for both classes of spearmint oil of 2,168,257 pounds
plus 376,409 of carry-in). This total available supply of 2,544,666
pounds should be more than adequate to supply the 2,175,000 pounds of
anticipated trade demand for spearmint oil.
The recommended allotment percentages, upon which 2016-2017
producer allotments are based, are 45 percent for Scotch spearmint oil
and 50 percent for Native spearmint oil. Without volume controls,
producers would not be limited to these allotment levels, and could
produce and sell an unrestricted quantity of spearmint oil. The USDA
econometric model estimated that the season average producer price per
pound (from both classes of spearmint oil) would decline about $1.45
per pound as a result of the higher quantities of spearmint oil that
would be produced and marketed without volume control. The surplus
situation for the spearmint oil market that would exist without volume
controls in 2016-2017 also would likely dampen prospects for improved
producer prices in future years because of the buildup in stocks.
The use of volume control allows the industry to fully supply
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume control is believed to have
little or no effect on consumer prices of products containing spearmint
oil and should not result in fewer retail sales of such products.
The Committee discussed alternatives to the recommendations
submitted for approval for both classes of spearmint oil. The Committee
discussed and rejected the idea of not regulating any volume for both
classes of spearmint oil because of the severe price-depressing effects
that would likely occur without
[[Page 38892]]
volume control. The alternative to establish salable quantities and
allotment percentages at the 2015-2016 marketing year's levels was
discussed, but not put to any motion, for both classes of oil. The
Committee also considered salable quantities and allotment percentages
that were above and below the levels that were ultimately recommended
for Scotch spearmint oil. Ultimately, the action taken by the Committee
was to decrease the salable quantities and allotment percentages for
both Class 1 and Class 3 spearmint oil from the 2015-2016 marketing
year levels.
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
quantities and allotment percentages will achieve the objectives
sought. The Committee also believes that if there is no volume
regulation in effect for the upcoming marketing year, the Far West
spearmint oil industry would return to the pronounced cyclical price
patterns that occurred prior to the promulgation of the order. As
previously stated, annual salable quantities and allotment percentages
have been issued for both classes of spearmint oil since the order's
inception. The salable quantities and allotment percentages established
herein are expected to facilitate the goal of maintaining orderly
marketing conditions for Far West spearmint oil for 2016-2017 and
future marketing years.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Chapter 35), the order's information collection requirements have been
previously approved by the Office of Management and Budget (OMB) and
assigned OMB No. 0581-0178, Vegetable and Specialty Crops. No changes
in those requirements as a result of this action are necessary. Should
any changes become necessary, they would be submitted to OMB for
approval.
This rule establishes the salable quantities and allotment
percentages for Class 1 (Scotch) spearmint oil and Class 3 (Native)
spearmint oil produced in the Far West during the 2016-2017 marketing
year. 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.
As noted in the initial regulatory flexibility analysis, USDA has
not identified any relevant Federal rules that duplicate, overlap or
conflict with this final rule.
AMS is committed to complying with the E-Government Act, to promote
the use of the internet and other information technologies to provide
increased opportunities for citizen access to Government information
and services, and for other purposes.
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 21, 2015, meeting was
a public meeting and all entities, both large and small, were able to
express views on the issues presented. A proposed rule concerning this
action was published in the Federal Register on March 23, 2016 (81 FR
15450). A copy of the rule was provided to Committee staff, who 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 15-day
comment period ending April 7, 2016, 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/rules-regulations/moa/small-businesses. Any questions
about the compliance guide should be sent to Antoinette Carter at the
previously mentioned address in the FOR FURTHER INFORMATION CONTACT
section.
After consideration of all relevant matter presented, including the
information and recommendation submitted by the 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.
It is further found that good cause exists for not postponing the
effective date of this rule until 30 days after publication in the
Federal Register (5 U.S.C. 553) because the 2016-2017 marketing year
starts on June 1, 2016, and handlers will need to begin purchasing the
spearmint oil allotted under this rulemaking. Further, handlers are
aware of this rule, which was recommended at a public meeting. Finally,
a 15-day comment period was provided for in the proposed rule, and no
comments were received.
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. Section 985.235 is added to read as follows:
Sec. 985.235 Salable quantities and allotment percentages--2016-2017
marketing year.
The salable quantity and allotment percentage for each class of
spearmint oil during the marketing year beginning on June 1, 2016,
shall be as follows:
(a) Class 1 (Scotch) oil--a salable quantity of 958,711 pounds and
an allotment percentage of 45 percent.
(b) Class 3 (Native) oil--a salable quantity of 1,209,546 pounds
and an allotment percentage of 50 percent.
Dated: June 10, 2016.
Elanor Starmer,
Administrator, Agricultural Marketing Service.
[FR Doc. 2016-14163 Filed 6-14-16; 8:45 am]
BILLING CODE P
