Cranberries Grown in States of Massachusetts, et al.; Free and Restricted Percentages for the 2017-18 Crop Year for Cranberries, 14350-14357 [2018-06875]
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Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Rules and Regulations
reduce information requirements and
duplication by industry and public
sector agencies. USDA has not
identified any relevant Federal rules
that duplicate, overlap or conflict with
this rule.
Further, the Committee’s meetings
were widely publicized throughout the
Florida citrus industry and all interested
persons were invited to attend the
meeting and participate in Committee
deliberations. Like all Committee
meetings, the June 29, 2017, and
September 28, 2017, meetings were
public meetings and all entities, both
large and small, were able to express
their views on this issue.
Comments on the interim rule were
required to be received on or before
January 16, 2018. Four comments were
received during the comment period in
response to the proposal. The
commenters included three in favor and
one raising concerns not applicable to
the interim rule.
The three commenters in support of
the interim rule indicated relaxing the
minimum size requirement for domestic
shipments from 28⁄16 inches to 24⁄16
inches in diameter would maximize
shipments and reduce the financial
burden on industry and consumers. In
addition, they stated the reduction in
size would mitigate the impact on
consumers by allowing more inventory
to enter the market.
Two commenters mentioned that
Florida citrus growers face a financial
burden due to decreases in production.
One commenter noted that there has
been a constant decline in production.
Another commenter noted that
Hurricane Irma resulted in nearly $760
million in damages to the citrus
industry and that growers have reported
as high as 70 percent crop loss.
Accordingly, no changes will be made
to the interim rule based on the
comments received.
To view the interim rule, go to:
https://www.regulations.gov/
document?D=AMS-SC-17-0064-0001.
This action also affirms information
contained in the interim rule concerning
Executive Orders 12866, 12988, 13175,
13563, and 13771; the Paperwork
Reduction Act (44 U.S.C. Chapter 35);
and the E-Gov Act (44 U.S.C. 101).
After consideration of all relevant
material presented, it is found that
finalizing the interim rule, without
change, as published in the Federal
Register (82 FR 53397, November, 16,
2017) will tend to effectuate the
declared policy of the Act.
List of Subjects in 7 CFR Part 905
Grapefruit, Marketing agreements,
Oranges, Pummelos, Reporting and
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recordkeeping requirements,
Tangerines.
PART 905—ORANGES, GRAPEFRUIT,
TANGERINES, AND PUMMELOS
GROWN IN FLORIDA
Accordingly, the interim rule that
amended 7 CFR part 905, which was
published at 82 FR 53399 on November
16, 2017, is adopted as final, without
change.
Dated: March 30, 2018.
Bruce Summers,
Acting Administrator, Agricultural Marketing
Service.
[FR Doc. 2018–06874 Filed 4–3–18; 8:45 am]
BILLING CODE 3410–02–P
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 929
[Doc. No. AMS–SC–17–0061; SC17–929–2
FR]
Cranberries Grown in States of
Massachusetts, et al.; Free and
Restricted Percentages for the 2017–18
Crop Year for Cranberries
Agricultural Marketing Service,
USDA.
ACTION: Final rule.
AGENCY:
This rule implements a
recommendation to establish free and
restricted percentages for the 2017–18
crop year under the marketing order for
cranberries grown in the production
area (Order). This action establishes the
proportion of cranberries from the
2017–18 crop which may be handled
and allows for the disposal of 2017–18
processed cranberry products. It also
establishes a minimum quantity
exemption and an exemption for
handlers with no carryover inventory,
exempts organically grown cranberries,
and defines outlets for restricted fruit.
This action adjusts supply to more
closely meet market demand, improves
grower and handler returns and reduces
inventory. This final rule also contains
formatting changes to subpart references
to bring the language into conformance
with the Office of the Federal Register
requirements.
DATES: Effective May 4, 2018.
FOR FURTHER INFORMATION CONTACT:
Doris Jamieson, Marketing Specialist, or
Christian D. Nissen, Regional Director,
Southeast Marketing Field Office,
Marketing Order and Agreement
Division, Specialty Crops Program,
AMS, USDA; Telephone: (863) 324–
3375, Fax: (863) 291–8614, or Email:
SUMMARY:
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Doris.Jamieson@ams.usda.gov or
Christian.Nissen@ams.usda.gov.
Small businesses may request
information on complying with this
regulation by contacting Richard Lower,
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:
Richard.Lower@ams.usda.gov.
SUPPLEMENTARY INFORMATION: This final
rule, pursuant to 5 U.S.C. 553, amends
regulations issued to carry out a
marketing order as defined in 7 CFR
900.2(j). This final rule is issued under
Marketing Agreement and Order No.
929, as amended (7 CFR part 929),
regulating the handling of cranberries
grown in the States of Massachusetts,
Rhode Island, Connecticut, New Jersey,
Wisconsin, Michigan, Minnesota,
Oregon, Washington, and Long Island in
the State of New York. Part 929 (referred
to as 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
Cranberry Marketing Committee
(Committee) locally administers the
Order and is comprised of growers and
handlers of cranberries operating within
the production area, and a public
member.
The Department of Agriculture
(USDA) is issuing this rule in
conformance with Executive Orders
13563 and 13175. This action falls
within a category of regulatory actions
that the Office of Management and
Budget (OMB) exempted from Executive
Order 12866 review. Additionally,
because this rule does not meet the
definition of a significant regulatory
action it does not trigger the
requirements contained in Executive
Order 13771. See OMB’s Memorandum
titled ‘‘Interim Guidance Implementing
Section 2 of the Executive Order of
January 30, 2017 titled ‘Reducing
Regulation and Controlling Regulatory
Costs’ ’’ (February 2, 2017).
This rule has been reviewed under
Executive Order 12988, Civil Justice
Reform. Order provisions provide that
the Committee may recommend and
implement, subject to USDA approval,
volume control regulation that would
decrease the available supply of
cranberries, whenever the Secretary
finds that ‘‘such regulation will tend to
effectuate the declared policy of the
Act.’’ Accordingly, this rule establishes
free and restricted percentages for
cranberries for the 2017–18 crop year,
beginning September 1, 2017, through
August 31, 2018.
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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.
This final rule establishes free and
restricted percentages for the 2017–18
crop year. This rule establishes the
proportion of cranberries from the
2017–18 crop that may be handled at 85
percent free and 15 percent restricted.
This action also allows for the disposal
of 2017–18 processed cranberry
products to meet up to 50 percent of a
handler’s restriction. It also establishes
a minimum quantity exemption,
exempts handlers with no carryout
inventory, exempts organically grown
cranberries, and defines outlets for
restricted fruit. This action adjusts
supply to more closely meet market
demand, improves grower returns, and
helps reduce inventory.
The Committee met on August 4,
2017, and August 31, 2017, and
recommended establishing these free
and restricted percentages for the 2017–
18 season, providing handlers with the
option to divert processed cranberry
products to meet up to 50 percent of
their restricted percentage, and
designating outlets for restricted fruit.
The Committee also recommended
establishing a minimum exemption of
125,000 barrels for each handler. After
much consideration, USDA determined
the minimum exemption portion of the
recommendation should be revised.
Consequently, this rule only exempts
small handlers who process less than
125,000 barrels or handlers who will not
have carryover inventory at the end of
the 2017–18 fiscal year from the
restriction. The 125,000 barrel
exemption does not apply to handlers
who do not meet these criteria. The
Committee met again on January 17,
2018, to discuss the proposed rule
following its publication in the Federal
Register. The Committee recommended
that USDA consider reducing the
restricted percentage from 15 percent to
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5 percent. After considering the
recommendation and the data available,
USDA determined the restricted
percentage should remain at 15 percent.
Sections 929.52 and 929.54 authorize
the Secretary of Agriculture (Secretary)
to control volume by designating free
and restricted percentages for
cranberries acquired by handlers in a
given crop year. Section 929.52 provides
that the Secretary shall control the
handling of cranberries whenever the
Secretary finds, from the
recommendations and information
submitted by the Committee, or from
other such information, that such
volume control will tend to effectuate
the declared policy of the Act. Free
percentage volume may be shipped to
any market, while restricted percentage
volume must be diverted or used for
noncompetitive purposes as prescribed
in § 929.57. Section 929.51 requires the
Committee to consider certain
conditions, including supply and
demand, prior to recommending a
handler withholding program, and that
any recommendation to do so be made
by August 31.
Section 929.58(a) provides the
authority to exempt from any or all
requirements the handling of
cranberries in such minimum quantities
as the Committee, with the approval of
the Secretary, may prescribe. Section
929.58(b) provides, in part, the authority
to exempt from any or all requirements
the handling of cranberries of such
forms or types, including organic
cranberries, as the Committee, with the
approval of the Secretary, may
prescribe.
Domestic cranberry production has
been increasing over the past few years,
up from 8.0 million barrels in 2012 to
9.6 million barrels in 2016. During the
last few years, demand has remained
relatively flat, and has not kept pace
with the increases in supply. This has
led to increasing levels of inventories.
Ending inventory levels have increased
from 5.8 million barrels in 2012 to 9.7
million barrels in 2016.
Demand for cranberries is inelastic,
meaning changes in consumer price
have a minimal effect on total sales
volume. However, grower prices are
very sensitive to changes in supply. As
such, higher inventory levels place
downward pressure on grower prices for
cranberries and reduce grower returns.
Data reviewed by the Committee
indicates that the price per barrel
received by some growers has fallen
from $30 a barrel in 2011 to $10 a barrel
in 2016. With the cost of production
estimated at approximately $35 a barrel,
for many growers returns have fallen
below the cost of production.
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On August 4, 2017, and again on
August 31, 2017, the Committee met to
discuss the levels of supply and demand
and how market conditions were
impacting the industry. The Committee
discussed the approximate levels of
production for the 2017–18 season,
forecasting production at approximately
9.1 million barrels. Carry-in inventory
was estimated at approximately 9.9
million barrels and foreign acquired
cranberries are expected to provide an
additional 2.1 million barrels, for a total
available supply of approximately 21.1
million barrels for the year. After
accounting for shrinkage, the Committee
agreed on an adjusted supply of 20.4
million barrels for the 2017–18 season.
The Committee also reviewed
anticipated sales for the upcoming
season. Sales for fresh fruit were
estimated at 333,000 barrels and
processed fruit sales were estimated at
9.2 million barrels. Based on these
expectations, inventory at the end of the
2017–18 crop year was anticipated to be
roughly 10.9 million barrels, a 10
percent increase from the previous year.
Using these numbers, end of year
inventories would be approximately 115
percent of average annual sales.
After calculating the anticipated level
of surplus for the 2017–18 season, the
Committee agreed the industry is faced
with a large inventory that continues to
build. In its discussions of how to
address this issue, the Committee
considered several options. During the
discussion of regulating the volume for
the 2017–18 season, some members
preferred establishing a producer
allotment for the 2018–19 season over
implementing a handler withholding for
the current season. However, other
members stated that if no action was
taken to control supply for the 2017–18
season, another million barrels of
cranberries would be added to the
surplus inventory. In addition, not
regulating the 2017–18 crop would
require greater levels of restriction on
the 2018–19 crop, and grower returns
may decline further.
The Committee discussed various
levels of restriction, being sensitive to
the impact volume control could have
on small handlers. Some small handlers
are able to sell all their production each
year and do not maintain an inventory.
Several Committee members stated a
large restriction would place a hardship
on these small handlers.
The Committee also recognized a
small restriction would not immediately
balance supply with demand. However,
even a small restriction would remove
a portion of the volume from the market
and help prevent an additional increase
in inventory. Therefore, based on these
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discussions, the Committee
recommended establishing free and
restricted percentages at 85 percent free
and 15 percent restricted.
The Committee also recommended an
allowance for the diversion of 2017–18
processed cranberry products to meet
up to 50 percent of a handler’s
restriction. The Committee made this
recommendation recognizing that
processing fresh fruit to produce one of
its top-selling items, sweetened dried
cranberries (SDC), results in juice
concentrate as a by-product. A
significant amount of current carryover
inventory is in the form of juice
concentrate. By allowing for the
diversion of processed cranberry
products, such as juice concentrate, to
meet a portion of a handler’s restriction,
the Committee believes this will help
prevent additional build-up of carryover
inventory. The ability to use cranberry
processed products in addition to fresh
berries to meet diversion requirements
may also help handlers who find they
need to divert additional volume late in
the year when the availability of fresh
berries may be limited.
To ensure the disposal of processed
products in lieu of fresh berries is
correctly accounted for under the
restriction, the Committee also
recommended including a conversion
table, Table 1, in the regulations. The
table recognizes different conversion
equivalencies of berries to processed
product based on the volume of Brix
concentrate.
Brix is the method for measuring the
amount of sugar contained in the
cranberry products, and the industry
average is 50 Brix per concentrate. The
Committee acknowledged that the Brix
level can vary depending on the
growing region and farming practices.
This table assists in ensuring that the
disposal of processed product in lieu of
fresh berries is applied equitably among
all handlers.
TABLE 1—CONVERSION TABLE
Region
Brix average
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Oregon ................................................................................................................
Washington .........................................................................................................
New Jersey .........................................................................................................
Wisconsin ...........................................................................................................
Massachusetts ....................................................................................................
All others ............................................................................................................
For example, using the conversion
table above, handlers could determine
the amount of cranberry concentrate
they would need to divert, in lieu of
fresh berries, to cover any restricted
percentage. Juice concentrate should
comprise the vast majority of processed
product used for diversion. Should
requests be made to use other processed
products for diversion, conversion rates
for those products will be provided by
the Committee based on information
provided by the requesting handler. The
means for approving and appealing
those conversion rates will be provided
in a separate rulemaking action.
For example, a handler covered under
the restriction whose acquired volume
is 1,000,000 barrels would have
1,000,000 barrels in regulated volume
with 850,000 barrels of free use
cranberries (1,000,000 × .85) and
150,000 barrels of restricted use
cranberries (1,000,000 × .15) for the
2017–18 season. Under this rule, the
handler could divert fresh fruit to
outlets for restricted cranberries as
prescribed in the Order, or divert up to
50 percent of the restriction, or a 75,000
barrel equivalent (150,000 barrels ÷ 2) in
processed products from the 2017–18
harvest, with the remaining amount
fulfilled using fresh berries. For
cranberries produced in Wisconsin, this
would equate to 127,500 gallons of
concentrate (75,000 barrels × 1.7
gallons) that would need to be diverted
to outlets for restricted cranberries.
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9.8
9.3
8.8
8.7
8.4
8.7
Section 929.57 states that cranberries
withheld from handling may only be
diverted through such outlets as the
Committee, with the approval of the
Secretary, finds are noncompetitive to
outlets for unrestricted (free percentage)
cranberries. The Committee discussed
various outlets and recommended the
following: Foreign countries, except
Canada; charitable institutions; any
nonhuman food use; and, research and
development projects approved by the
Committee dealing with the
development of foreign and domestic
markets, including, but not limited to
dehydration, radiation, freeze drying, or
freezing of cranberries as outlets for
withheld cranberries. They further
recommended that cranberries may not
be converted into canned, frozen, or
dehydrated cranberries or other
cranberry products by any commercial
process prior to diversion to foreign
countries. These outlets for restricted
cranberries will be added to the rules
and regulations under the Order by
creating a new § 929.108.
The Committee also recommended
organically grown cranberries be exempt
from this regulation as they serve a
niche market and represent a very small
portion of the total crop. All other
cranberry production, including fresh
cranberries, is subject to regulation
under the handler withhold volume
regulation.
To address the burden the volume
regulation would have on small
handlers, the Committee also
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Concentrate yield for one barrel of cranberries
1.91
1.81
1.72
1.70
1.64
1.70
gallons
gallons
gallons
gallons
gallons
gallons
50
50
50
50
50
50
Brix
Brix
Brix
Brix
Brix
Brix
concentrate.
concentrate.
concentrate.
concentrate.
concentrate.
concentrate.
recommended providing a minimum
quantity exemption of 125,000 barrels.
Under the Committee’s
recommendation, the exemption would
be given to handlers of record for the
2016–17 (previous) crop year and the
125,000 barrels would be subtracted
from the handler’s 2017–18 acquired
volume before the restricted percentage
would be applied. Small handlers
whose acquired volume is 125,000
barrels or less would be exempt from
the volume regulation, and handlers
with slightly larger volumes would face
minimal restrictions.
After much consideration, USDA
determined the minimum exemption
recommendation should be revised
under this rule. Rather than provide an
exemption of 125,000 barrels for each
handler, this action exempts small
handlers who process less than 125,000
barrels from the 15 percent restriction.
Further, only handlers who have
carryover inventory that is not sold or
under contract at the end of the 2017–
18 fiscal year are subject to the 15
percent restriction. These changes
reflect the Committee’s goal of reducing
the burden on small handlers, and allow
handlers that have matched their
production with market demand to
continue to serve their customer base
and protect their market share. Handlers
subject to the restriction should be able
to meet any market shortfalls by
utilizing cranberries or cranberry
products they have in inventory.
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With this change, only those handlers
carrying inventory will be subject to the
restriction. In reviewing the
Committee’s recommendation and other
available industry information, it is the
existing inventories in excess of 9
million barrels that are putting the most
downward pressure on returns to both
growers and handlers. Consequently,
this change will put more focus on
reducing the volume in inventory.
The Committee met again on January
17, 2018, to discuss the proposed rule
on this action as published in the
Federal Register on January 2, 2018 (83
FR 72). At the meeting, members
discussed current market conditions.
When the Committee had recommended
the 15 percent restriction in August
2017, domestic production had been
estimated at 9.14 million barrels. Since
that time, Committee members stated
that weather conditions had impacted
production and that domestic
production would actually be closer to
8 million barrels. Based on the reduced
crop estimate, in a vote of 12 in favor,
one against, and one abstention, the
Committee voted to recommend
reducing the restricted percentage from
15 percent to 5 percent. Members stated
that the reduction in the crop, in
combination with the reduced
restriction, would still combine to
remove a similar amount of fruit from
the market as was originally projected
under the 15 percent restriction.
USDA reviewed the recommendation
made by the Committee to reduce the
restricted percentage from 15 percent to
5 percent. Based on a revised 2017
domestic production of 8.085 million
barrels, down from an estimated 9.14
million barrels, revising the restricted
percentage to 5 percent, and considering
exempt production, would remove
approximately 366,000 barrels of
cranberries from the market, leaving
inventory as a percentage of sales at
approximately 90.5 percent. Keeping the
restricted percentage at 15 percent
would remove approximately 1.1
million barrels of cranberries from the
market, resulting in inventory as a
percentage of sales of 82.9 percent. In
addition, as some handlers may be
exempt from the regulation as they are
not carrying cranberries in inventory,
the actual volume of cranberries
removed from the market may be less.
Given that the purpose of the volume
regulation is to help reduce the existing
levels of inventory, USDA has
determined that the restricted
percentage should remain at 15 percent.
Accordingly, this rule establishes free
and restricted percentages of 85 percent
and 15 percent, respectively, for the
2017–18 season, provides handlers with
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the option to divert processed cranberry
products to meet up to 50 percent of
their restricted percentage, and defines
outlets for restricted fruit. This rule also
exempts small handlers who process
less than 125,000 barrels from the
restriction, as well as handlers with no
carryover inventory.
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 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 approximately 1,100
cranberry growers in the regulated area
and approximately 65 cranberry
handlers subject to regulation under the
Order. Small agricultural producers are
defined by the Small Business
Administration (SBA) as those having
annual receipts of less than $750,000,
and small agricultural service firms are
defined as those whose annual receipts
are less than $7,500,000 (13 CFR
121.201).
According to industry and Committee
data, the average grower price for
cranberries during the 2016–17 season
was $23.50 per barrel and total sales
were approximately 9.5 million barrels.
The value for cranberries that year
totaled $223,250,000 ($23.50 per barrel
multiplied by 9.5 million barrels).
Taking the total value of production for
cranberries and dividing it by the total
number of cranberry growers provides
an average return per grower of
$202,955. Using the average price and
utilization information, and assuming a
normal distribution, the majority of
cranberry growers receive less than
$750,000 annually.
According to USDA’s Market News
report, the average free on board (f.o.b.)
price for cranberries was approximately
$30.00 per barrel. Multiplying the f.o.b.
price by total utilization of 9.5 million
barrels results in an estimated handlerlevel cranberry value of $285 million.
Dividing this figure by the number of
handlers (65) yields an estimated
average annual handler receipt of $4.3
million, which is below the SBA
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threshold for small agricultural service
firms. Therefore, the majority of
producers and handlers of cranberries
may be classified as small entities.
While cranberry production has
continued to rise, demand has failed to
keep pace, and inventories have been
increasing. In an industry such as
cranberries, product can be stored in
inventory for long periods of time. Large
inventories are costly to maintain,
difficult to market, and have a pricedepressing effect. When supply
outpaces demand resulting in high
levels of inventories, grower and
handler returns can be negatively
impacted.
Demand for cranberries is inelastic,
meaning changes in consumer price
have a minimal effect on total sales.
However, grower prices are very
sensitive to changes in supply. With an
inelastic demand, even a small shift in
supply can affect grower prices. Setting
free and restricted percentages will
more closely align supply with demand.
Free percentage cranberries can be
marketed by handlers to any outlet,
while restricted percentage volume can
only be used for noncompetitive
purposes. Establishing free and
restricted percentages results in a
decrease in supply, as handlers can only
deliver a certain portion of their
cranberries into the competitive
marketplace. Therefore, using volume
regulation to reduce supply should
increase grower and handler prices and
revenues.
This final rule controls the supply of
cranberries by establishing free and
restricted percentages at 85 percent free
and 15 percent restricted for the 2017–
18 crop year. It also allows for the
diversion of 2017–18 processed
cranberry products to meet up to 50
percent of a handler’s restriction. In
addition, this rule establishes a
minimum quantity exemption, exempts
handlers with no carryout inventory,
exempts organically grown cranberries,
and defines outlets for restricted fruit.
These actions are designed to help
stabilize market conditions, reduce
burdensome inventories, and improve
grower and handler returns. This rule
establishes new §§ 929.107, 929.108 and
929.252. The authority for these actions
is provided for in §§ 929.51, 929.52,
929.54, 929.57, and 929.58. These
changes are based on Committee
recommendations from meetings on
August 4 and August 31, 2017.
While these actions could result in
some additional costs to the industry,
the benefits are expected to outweigh
them. The purpose of establishing free
and restricted percentages is to address
oversupply conditions and to stabilize
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grower prices. The industry has a
significant volume in inventory, and
this has had a negative impact on
grower and handler returns. Without
volume control, inventories would
likely continue to increase, further
lowering returns.
Inventories have more than doubled
since 2011. In 2011, existing inventories
were around 4.6 million barrels. By the
end of the 2016–17 season, inventories
are anticipated to be approximately 9.9
million barrels. Inventories as a
percentage of total sales have also been
increasing from approximately 50
percent in 2010 to approximately 103
percent in 2016, and will reach an
anticipated 115 percent after the 2017–
18 season if volume control is not
implemented. These inventories have
had a depressing effect on grower
prices, which for many has fallen below
their cost of production.
Retail demand for cranberries is
highly inelastic, which indicates
changes in consumer price do not result
in significant changes in the quantity
demanded. Consumer prices largely do
not reflect small changes in cranberry
supplies. Therefore, this action should
have little or no effect on consumer
prices and should not result in a
reduction in retail sales. However, even
a small shift in supply can increase
grower and handler returns. The use of
free and restricted percentages will
likely have a positive impact on grower
and handler returns for this crop year.
This final rule will result in some
fruit being taken off the market.
However, a sufficient amount of fruit
will still be available to supply all
aspects of the market. In addition,
allowing handlers the option to divert
2017–18 processed cranberry products
to meet up to 50 percent of their
restriction provides handlers some
additional flexibility and may help
reduce inventories of juice concentrate,
one of the largest segments of existing
inventory.
This action also exempts small
handlers who process less than 125,000
barrels from the restriction.
Consequently, small handlers whose
acquired volume is 125,000 barrels or
less are exempt from the volume
restriction. This reduces the burden the
volume restriction has on small
handlers and their growers.
In addition, only handlers who have
carryover inventory that is not sold or
under contract at the end of the 2017–
18 fiscal year are subject to the 15
percent restriction. This allows handlers
that have matched their production with
market demand to continue to serve
their customer base and protect their
market share. Handlers subject to the
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restriction should be able to meet any
shortfalls by utilizing cranberries or
cranberry products they have in
inventory.
There are also secondary uses
available for restricted fruit, including
foreign markets except Canada,
charitable institutions, nonhuman food
use, and research and development
projects. While these alternatives may
provide different levels of return than
sales to primary markets, they play an
important role for the industry. In
addition, if demand is greater than
anticipated, there are significant
amounts of fruit in inventory that could
be utilized to meet demand.
As the restriction represents a
percentage of a handler’s volume, the
costs, when applicable, are
proportionate and should not place an
extra burden on small entities as
compared to large entities. Likewise,
growers and handlers, regardless of size,
benefit from the stabilizing effects of
this restriction.
One alternative considered was not to
impose volume restrictions during the
2017–18 crop year. However, Committee
members believed that inventory levels
were such that some form of volume
control was necessary to help stabilize
marketing conditions.
The Committee also considered other
levels of free and restricted percentages.
However, some members were
concerned that setting a restriction that
was too high could negatively impact
small handlers. The Committee also
considered not recommending a
provision to allow the disposal of 2017–
18 processed cranberry products to meet
up to 50-percent of a handler’s
restriction. However, the Committee
determined allowing the diversion of
cranberry products to meet up to 50
percent of the restriction allows large
handlers to reduce inventory and not
add additional volumes of juice
concentrate to the existing inventory
levels. Therefore, for the reasons
mentioned above, these alternatives
were rejected by the Committee.
However, the Committee later
recommended an alternative to USDA.
After its January 17, 2018 meeting, the
Committee recommended reducing its
previously requested 15 percent
restriction to 5 percent. USDA
determined that lowering the restricted
percentage by this amount would not
sufficiently reduce carryover inventory,
and thus would not relieve the
downward pressure on grower prices.
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 OMB and
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assigned OMB No. 0581–0189, Generic
Fruit Crops.
This final rule establishes free and
restricted percentages and handler
diversion options under the Order. On
February 15, 2018, USDA published a
proposed rule in the Federal Register
(83 FR 6800) seeking comment on new
information requirements and
Committee forms to support diversion
procedures when volume regulation is
established. The impact of the new
requirements will be addressed in that
rulemaking. 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.
In addition, the Committee’s meetings
were widely publicized throughout the
cranberry industry and all interested
persons were invited to attend the
meetings and participate in Committee
deliberations on all issues. Like all
Committee meetings, the August 4 and
August 31, 2017, and January 17, 2018,
meetings were public meetings and all
entities, both large and small, were able
to express views on these issues.
A proposed rule concerning this
action was published in the Federal
Register on January 2, 2018 (83 FR 72).
Copies of the proposed rule were sent
via email to Committee members and
cranberry handlers. Finally, the
proposed rule was made available
through the internet by USDA and the
Office of the Federal Register. A 30-day
comment period ending February 1,
2018, was provided to allow interested
persons to respond to the proposal.
During the comment period, 174
comments were received in response to
the proposal. Of the comments received,
13 were in support of the proposed
regulation, 123 comments supported
regulation with some changes to the
proposal (101 of these comments were
from growers affiliated with the major
industry cooperative), 37 were opposed
to the proposed regulation, and 1 took
no position.
Four of the comments in support of
the rule stated USDA should maintain
the restricted percentage at 15 percent
even with the reduction in the size of
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the 2017–18 crop. Three commenters
stated a five percent restriction would
do little to support the industry,
especially as the decrease in the 2017–
18 crop could be offset by an increase
in the 2018–19 crop. One commenter
stated that maintaining the higher
percentage, along with the reduction in
the 2017–18 crop, would have an even
greater impact on inventories. Another
commenter stated that keeping the
restricted percentage at 15 percent sends
a message that the oversupply will be
dealt with. One commenter stated full
support for the proposed regulation as a
way to keep the industry healthy and
profitable. Another commenter
recognized that the industry has enough
cranberries in inventory to supply the
next 12 months. One commenter also
indicated they thought the percentage of
restricted cranberries could have been
even higher. Support of the exemption
for organic cranberries was voiced by
one commenter, who stated that a
restriction on this sector would inhibit
future market growth.
In the comments that supported
volume regulation, but with changes
from what was included in the proposed
rule, 107 commenters stated that they
supported volume regulation as a way to
reduce the volume of cranberries
available in the marketplace and help
increase returns. Of these, 106
commenters indicated that oversupply
conditions had reached such levels that
some action needed to be taken, and 104
commenters also referenced the positive
impact of previous volume regulations
established for the 2000 and 2001
seasons. Three commenters also
indicated that the decrease in the 2017–
18 crop size has already had a positive
impact on price, and that the proposed
regulation has also had a positive effect.
Three other commenters requesting
adjustments to the proposal stated their
support for maintaining the restricted
percentage at 15 percent. One of those
commenters stated that dropping the
restriction to five percent would be too
low to effectively impact the
oversupply. Another commenter stated
that a timely reduction in supply is
essential. Another comment stated that
the industry should hold the restriction
at 15 percent and take advantage of the
short crop as a bonus.
Of those commenters requesting a
change to the proposed rule, 119
commenters supported reducing the
restricted percentage from 15 percent to
5 percent. Of these, 112 referenced the
decrease in the volume of the 2017–18
crop as rationale for reducing the
restricted percentage.
As stated above, USDA reviewed the
Committee’s recommendation to reduce
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the restricted percentage from 15
percent to five percent based on an
approximate 10 percent reduction in the
2017–18 crop. The industry began the
year with approximately 9.7 million
barrels in inventory, an amount greater
than estimated total sales for the 2017–
18 season. Using the revised 2017–18
domestic production estimate of 8.085
million barrels, revising the restricted
percentage to five percent would
remove approximately 366,000 barrels
of cranberries from the market, leaving
inventory as a percentage of sales at
around 90.5 percent.
Maintaining the restricted percentage
at 15 percent would remove
approximately 1.1 million barrels of
cranberries from the market, resulting in
inventory as a percentage of sales of
82.9 percent. Further, since handlers
with no carryover inventory are exempt
from the regulation, the actual volume
of cranberries removed from the market
may be less than calculated with either
a 15 or 5 percentage restriction. In
addition, handlers have already been
establishing plans to comply with a 15
percent restriction. Given that the
purpose of the volume regulation is to
help reduce supply and inventory,
USDA has determined that the restricted
percentage should remain at 15 percent.
Another 103 commenters requested
that the final rule clarify that processed
products may be used for charitable
purposes as an outlet for restricted
cranberries. This final rule adds
§ 929.108, which specifies the outlets
for restricted cranberries. As stated
above, the Committee recommended
that cranberries may not be converted
into canned, frozen, or dehydrated
cranberries or other cranberry products
by any commercial process prior to
diversion to foreign countries. The
limitation is written specifically into
§ 929.108(a). However, this restriction of
whole fruit only does not apply to
diversion to charitable institutions, any
nonhuman food use, or research and
development projects approved by the
Committee dealing with the
development of foreign and domestic
markets, including as processed fruit.
In addition, these same commenters
also asked that processed products sent
to outlets for restricted cranberries,
specifically for charity, not count
toward the diversion of 2017–18
processed cranberry products to meet
up to 50 percent of a handler’s
restriction. When free and restricted
percentages are established, restricted
percentage volume must be diverted or
used in noncompetitive outlets. The
restricted percentage is applied to each
individual handler’s volume to establish
the volume of cranberries that need to
PO 00000
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14355
be diverted. Under the final rule, 50
percent of this amount can be met using
2017–18 processed cranberry products.
Consequently, regardless of how the
handler is diverting processed products
into noncompetitive outlets, 2017–18
processed products can only be used to
meet 50 percent of the handler’s
restriction. Restriction aside, handlers
are always able, and encouraged, to
donate as much whole fruit or processed
products to charity as they can.
Thirteen commenters indicated the
exemption added by USDA for handlers
that have no inventory after August 31,
2018, is problematic and should be
changed. Two of these commenters
indicated that inventory is not clearly
defined for the purposes of this
exemption, and that some handlers need
inventory beyond that date in order to
operate. Two comments also expressed
concern about how the Committee
would be able to track compliance with
this change. One commenter said this
provision should be removed.
Another 11 commenters also
expressed concerns regarding the
change USDA made to the 125,000
barrel exemption recommended by the
Committee. Five commenters stated this
would adversely affect midsize
handlers. Three commenters indicated
the exemption for the first 125,000
barrels for each handler as
recommended by the Committee was
fair, but with this change it is no longer
equitable. One commenter stated this
change would cost growers money in
extra charges from the handlers.
In reviewing the Committee’s
recommendation and other available
industry information, USDA has
determined that the existing inventories
in excess of 9 million barrels are putting
the most downward pressure on returns
to both growers and handlers. Rather
than provide an exemption of 125,000
barrels for each handler, this action
exempts small handlers who process
less than 125,000 barrels from the 15
percent restriction. Small handlers
processing less than 125,000 barrels
make up nearly 88 percent of all
handlers, yet combined only account for
less than 10 percent of the total volume.
Further, only handlers who have
carryover inventory at the end of the
2017–18 fiscal year are subject to the 15
percent restriction. These changes
further reduce the burden on small
handlers and provide an exemption to
handlers that have matched their
production with market demand
allowing them to continue to serve their
customer base and protect their market
share. With this change, only those
handlers carrying inventory would be
subject to the restriction.
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As stated above, inventory is product
that is not sold or under contract at the
end of the 2017–18 fiscal year. If a
handler is carrying inventory from the
2017–18 season, and/or previous
seasons, at the end of the 2017–18 fiscal
year (August 31, 2018) the handler will
be subject to the restriction. In regards
to compliance, the Committee has hired
additional support to assist with this
volume regulation. Further, handlers
maintain information on inventory and
should be able to supply the paperwork
necessary to demonstrate if they qualify
for the inventory exemption.
Three commenters stated that the rule
should be changed to allow handlers to
meet 100 percent of their restriction
using processed product. Four others
stated handlers should not be allowed to
substitute byproduct concentrate to
meet 50 percent of the restriction. While
a significant portion of existing
inventory is concentrate, not all
handlers produce concentrate or
concentrate as a byproduct of SDC
production. Allowing the use of 50
percent of 2017–18 cranberry products
to meet the required restriction
represents a compromise that recognizes
the need to reduce the inventory volume
of cranberry concentrate, while also
acknowledging the overall oversupply
facing the industry.
Some of the comments from those in
opposition to the proposed rule echo the
comments made by those requesting
changes to the proposal. Twelve
commenters in opposition to the
proposed rule stated the weather had
taken care of the problem of oversupply
for the current season, negating the need
for establishing the restriction. Five
commenters referenced the change to
the 125,000 barrel exemption, and
another four commenters referenced the
exemption for handlers with no
inventory at the end of the 2017–18
fiscal year as reasons for opposing the
regulation. Comments similar to these
are addressed above.
Seven commenters opposed the
proposal, citing the oversupply of
concentrate as the cause of the
industry’s problems. Two additional
commenters opposed the proposed
regulation because handlers could
divert 50 percent of 2017–18 products to
meet their restriction. While concentrate
does represent a large portion of the
existing inventory, the level of frozen
berries is even higher. Industry data
shows that at the end of the 2016–17
fiscal year, of the estimated 9.7 million
barrels in inventory, approximately 4.2
million barrels were frozen berries,
while approximately 3.7 million barrels
were from concentrate. Consequently,
the rule provides for the diversion of
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product to meet 50 percent of the
restriction as a way to reduce the
inventory of concentrate. However,
reducing overall supply, including
whole fruit, is also important in
addressing the current level of
inventory.
Twelve comments stated that the
proposed regulation would negatively
impact growers by reducing their
returns. Seven commenters stated the
proposed regulation originated from the
major cooperative. Another six
commenters stated that if finalized this
regulation would adversely affect
midsize handlers. While these actions
could result in some additional costs to
the industry, the benefits are expected
to outweigh them. The purpose of
establishing free and restricted
percentages is to address oversupply
conditions and to stabilize grower
prices. The industry has a significant
volume in inventory, and this has had
a negative impact on grower and
handler returns. Growers and handlers,
both large and small, should benefit
from this regulation. It is estimated that
approximately 1.1 million barrels of
cranberries will be removed from
inventories are a result of this rule.
Lowering inventory levels is expected to
result in positive returns for the entire
industry.
Four commenters opposed the
regulation because the restriction does
not apply to Canada or other foreign
production. These commenters stated
that without it being restricted, foreign
product could be used to offset the
domestic product being restricted.
USDA has not made any revisions as a
result of these comments because, as an
initial matter, the Order cannot regulate
imported volume. Moreover, for this
argument to be relevant, the 15 percent
restriction would need to cause a market
shortfall in the production area.
However, given that the production area
market entered the 2017–18 season with
more cranberries and product in
inventory than anticipated sales, and on
top of that had an additional 8.1 million
barrels of production, USDA has
determined there is ample domestic
supply to meet sales requirements and
there is no risk of an impending market
shortfall.
Four comments in opposition to the
proposal also stated that it would be
implemented too late to have benefit, as
growers have already incurred the cost
of producing their full crop. In
discussing this issue, the Committee
recognized that utilizing a producer
allotment allowed growers to make
adjustments to reduce their costs, they
determined that the situation with the
oversupply was such that something
PO 00000
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Sfmt 4700
needed to be done for the 2017–18
season. Committee members were
concerned that delaying action would
only result in higher inventories for the
2018–19 season and the need for an
even larger volume regulation in the
future. Despite the timing, the
Committee anticipates that use of
handler free and restricted percentages
will likely have a positive impact on
grower and handler returns for the
current crop year.
Finally, three commenters stated that
nothing should be done and that the
market be allowed to dictate what
happens with industry. Under the
Order, the Committee has the authority
to recommend volume regulation to the
Secretary to help manage supply and
demand. The Committee chose to utilize
this authority to address the current
oversupply situation and to help
industry returns.
Additional comments were received
that addressed issues outside the scope
of the proposed rule.
For the reasons discussed above, no
changes will be made to the rule as
proposed, based on the comments
received.
A small business guide on complying
with fruit, vegetable, and specialty crop
marketing agreements and orders may
be viewed at: https://www.ams.usda.gov/
rules-regulations/moa/small-businesses.
Any questions about the compliance
guide should be sent to Richard Lower
at the previously-mentioned address in
the FOR FURTHER INFORMATION CONTACT
section.
After consideration of all relevant
matter presented, including the
information and recommendation of the
Committee and other available
information, it is hereby found that this
rule, as hereinafter set forth, will tend
to effectuate the declared policy of the
Act.
List of Subjects in 7 CFR Part 929
Cranberries, Marketing agreements,
Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, 7 CFR part 929 is amended as
follows:
PART 929—CRANBERRIES GROWN IN
STATES OF MASSACHUSETTS,
RHODE ISLAND, CONNECTICUT, NEW
JERSEY, WISCONSIN, MICHIGAN,
MINNESOTA, OREGON,
WASHINGTON, AND LONG ISLAND IN
THE STATE OF NEW YORK
1. The authority citation for part 929
continues to read as follows:
■
Authority: 7 U.S.C. 601–674.
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Federal Register / Vol. 83, No. 65 / Wednesday, April 4, 2018 / Rules and Regulations
[Subpart Redesignated as Subpart A]
Subpart B—Administrative
Requirements
2. Redesignate ‘‘Subpart—Order
Regulating Handling’’ as ‘‘Subpart A—
Order Regulating Handling’’.
■
■
4. Add § 929.107 to read as follows:
§ 929.107
[Subpart Redesignated as Subpart B
and Amended]
3. Redesignate ‘‘Subpart—Rules and
Regulations’’ as subpart B and revise the
heading to read as follows:
■
Conversion.
During a year of volume regulation,
cranberry concentrate and other
processed products made from excess or
restricted cranberries harvested in that
year may be diverted according to the
provisions of this part. Any handler
disposing of concentrate or other
processed products must report the
14357
whole-berry equivalent to the
Committee so that all excess or
restricted cranberries are accounted for
and reported per rules and regulations
in effect. Table 1-Conversion Table
provides a conversion rate for
concentrate to barrels of whole berries
based on Brix average by production
region. Should requests be made to use
other processed products for diversion,
conversion rates for those products
would be provided by the Committee
based on information provided by the
requesting handler.
TABLE 1 TO § 929.107—CONVERSION TABLE
Region
Brix average
Oregon ................................................................................................................
Washington .........................................................................................................
New Jersey .........................................................................................................
Wisconsin ...........................................................................................................
Massachusetts ....................................................................................................
All others ............................................................................................................
■
5. Add § 929.108 to read as follows:
§ 929.108 Outlets for restricted
cranberries.
In accordance with § 929.57,
restricted cranberries may be diverted
only to the following noncommercial or
noncompetitive outlets:
(a) Foreign countries, except Canada,
provided that restricted cranberries
diverted under this provision may not
be converted into canned, frozen, or
dehydrated cranberries or other
cranberry products by any commercial
process, prior to diversion;
(b) Charitable institutions;
(c) Any nonhuman food use, or;
(d) Research and development
projects approved by the Committee
dealing with the development of foreign
and domestic markets, including, but
not limited to dehydration radiation,
freeze drying, or freezing of cranberries.
[Subpart Redesignated as Subpart C]
9.8
9.3
8.8
8.7
8.4
8.7
processed products as provided in
§ 929.107 to account for up to 50
percent of their restriction.
(c) Organically grown fruit shall be
exempt from the volume regulation
requirements of this section. Small
handlers who process less than 125,000
barrels during the 2017–18 fiscal year
are exempt from the restriction. Any
handlers who do not have carryover
inventory at the end of the 2017–18
fiscal year are also exempt.
Dated: March 30, 2018.
Erin Morris,
Associate Administrator, Agricultural
Marketing Service.
[FR Doc. 2018–06875 Filed 4–3–18; 8:45 am]
BILLING CODE 3410–02–P
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
6. Redesignate ‘‘Subpart—Assessment
Rate’’ as ‘‘Subpart C—Assessment Rate’’.
■ 7. Add § 929.252 to read as follows:
7 CFR Part 966
§ 929.252 Free and restricted percentages
for the 2017–18 crop year.
Tomatoes Grown in Florida; Decreased
Assessment Rate
amozie on DSK30RV082PROD with RULES
■
(a) The percentages for cranberries
handled by handlers during the crop
year beginning on September 1, 2017,
which shall be free and restricted,
respectively are designated as follows:
Free percentage, 85 percent and
restricted percentage, 15 percent.
(b) Handlers have the option to
process restricted cranberries into
dehydrated cranberries or other
processed products. Handlers also have
the option to divert concentrate or other
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[Doc. No. AMS–SC–17–0051; SC17–966–1
FR]
Agricultural Marketing Service,
USDA.
ACTION: Final rule.
AGENCY:
This rule implements a
recommendation from the Florida
Tomato Committee (Committee) for a
decrease of the assessment rate
established for the 2017–18 and
subsequent fiscal periods for tomatoes
grown in Florida, handled under the
SUMMARY:
PO 00000
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Sfmt 4700
Concentrate yield for one barrel of cranberries
1.91
1.81
1.72
1.70
1.64
1.70
gallons
gallons
gallons
gallons
gallons
gallons
50
50
50
50
50
50
Brix
Brix
Brix
Brix
Brix
Brix
concentrate.
concentrate.
concentrate.
concentrate.
concentrate.
concentrate.
Marketing Order. The assessment rate
will remain in effect indefinitely unless
modified, suspended, or terminated.
This rule also makes administrative
revisions to the subpart headings to
bring the language into conformance
with the Office of Federal Register
requirements.
DATES:
Effective May 4, 2018.
FOR FURTHER INFORMATION CONTACT:
Steven W. Kauffman, Marketing
Specialist or Christian D. Nissen,
Regional Director, Southeast Marketing
Field Office, Marketing Order and
Agreement Division, Specialty Crops
Program, AMS, USDA; Telephone: (863)
324–3375, Fax: (863) 291–8614, or
Email: Steven.Kauffman@ams.usda.gov
or Christian.Nissen@ams.usda.gov.
Small businesses may request
information on complying with this
regulation by contacting Richard Lower,
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:
Richard.Lower@ams.usda.gov.
SUPPLEMENTARY INFORMATION: This
action, pursuant to 5 U.S.C. 553,
amends regulations issued to carry out
a marketing order as defined in 7 CFR
900.2(j). This rule is issued under
Marketing Agreement No. 125 and
Order No. 966, as amended (7 CFR part
966), regulating the handling of
tomatoes grown in Florida. Part 966,
(referred to as the ‘‘Order’’), is effective
under the Agricultural Marketing
Agreement Act of 1937, as amended (7
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]]>Agencies
[Federal Register Volume 83, Number 65 (Wednesday, April 4, 2018)]
[Rules and Regulations]
[Pages 14350-14357]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06875]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 929
[Doc. No. AMS-SC-17-0061; SC17-929-2 FR]
Cranberries Grown in States of Massachusetts, et al.; Free and
Restricted Percentages for the 2017-18 Crop Year for Cranberries
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule implements a recommendation to establish free and
restricted percentages for the 2017-18 crop year under the marketing
order for cranberries grown in the production area (Order). This action
establishes the proportion of cranberries from the 2017-18 crop which
may be handled and allows for the disposal of 2017-18 processed
cranberry products. It also establishes a minimum quantity exemption
and an exemption for handlers with no carryover inventory, exempts
organically grown cranberries, and defines outlets for restricted
fruit. This action adjusts supply to more closely meet market demand,
improves grower and handler returns and reduces inventory. This final
rule also contains formatting changes to subpart references to bring
the language into conformance with the Office of the Federal Register
requirements.
DATES: Effective May 4, 2018.
FOR FURTHER INFORMATION CONTACT: Doris Jamieson, Marketing Specialist,
or Christian D. Nissen, Regional Director, Southeast Marketing Field
Office, Marketing Order and Agreement Division, Specialty Crops
Program, AMS, USDA; Telephone: (863) 324-3375, Fax: (863) 291-8614, or
Email: [email protected] or [email protected].
Small businesses may request information on complying with this
regulation by contacting Richard Lower, 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: [email protected].
SUPPLEMENTARY INFORMATION: This final rule, pursuant to 5 U.S.C. 553,
amends regulations issued to carry out a marketing order as defined in
7 CFR 900.2(j). This final rule is issued under Marketing Agreement and
Order No. 929, as amended (7 CFR part 929), regulating the handling of
cranberries grown in the States of Massachusetts, Rhode Island,
Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon,
Washington, and Long Island in the State of New York. Part 929
(referred to as 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 Cranberry Marketing
Committee (Committee) locally administers the Order and is comprised of
growers and handlers of cranberries operating within the production
area, and a public member.
The Department of Agriculture (USDA) is issuing this rule in
conformance with Executive Orders 13563 and 13175. This action falls
within a category of regulatory actions that the Office of Management
and Budget (OMB) exempted from Executive Order 12866 review.
Additionally, because this rule does not meet the definition of a
significant regulatory action it does not trigger the requirements
contained in Executive Order 13771. See OMB's Memorandum titled
``Interim Guidance Implementing Section 2 of the Executive Order of
January 30, 2017 titled `Reducing Regulation and Controlling Regulatory
Costs' '' (February 2, 2017).
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. Order provisions provide that the Committee may
recommend and implement, subject to USDA approval, volume control
regulation that would decrease the available supply of cranberries,
whenever the Secretary finds that ``such regulation will tend to
effectuate the declared policy of the Act.'' Accordingly, this rule
establishes free and restricted percentages for cranberries for the
2017-18 crop year, beginning September 1, 2017, through August 31,
2018.
[[Page 14351]]
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.
This final rule establishes free and restricted percentages for the
2017-18 crop year. This rule establishes the proportion of cranberries
from the 2017-18 crop that may be handled at 85 percent free and 15
percent restricted. This action also allows for the disposal of 2017-18
processed cranberry products to meet up to 50 percent of a handler's
restriction. It also establishes a minimum quantity exemption, exempts
handlers with no carryout inventory, exempts organically grown
cranberries, and defines outlets for restricted fruit. This action
adjusts supply to more closely meet market demand, improves grower
returns, and helps reduce inventory.
The Committee met on August 4, 2017, and August 31, 2017, and
recommended establishing these free and restricted percentages for the
2017-18 season, providing handlers with the option to divert processed
cranberry products to meet up to 50 percent of their restricted
percentage, and designating outlets for restricted fruit. The Committee
also recommended establishing a minimum exemption of 125,000 barrels
for each handler. After much consideration, USDA determined the minimum
exemption portion of the recommendation should be revised.
Consequently, this rule only exempts small handlers who process less
than 125,000 barrels or handlers who will not have carryover inventory
at the end of the 2017-18 fiscal year from the restriction. The 125,000
barrel exemption does not apply to handlers who do not meet these
criteria. The Committee met again on January 17, 2018, to discuss the
proposed rule following its publication in the Federal Register. The
Committee recommended that USDA consider reducing the restricted
percentage from 15 percent to 5 percent. After considering the
recommendation and the data available, USDA determined the restricted
percentage should remain at 15 percent.
Sections 929.52 and 929.54 authorize the Secretary of Agriculture
(Secretary) to control volume by designating free and restricted
percentages for cranberries acquired by handlers in a given crop year.
Section 929.52 provides that the Secretary shall control the handling
of cranberries whenever the Secretary finds, from the recommendations
and information submitted by the Committee, or from other such
information, that such volume control will tend to effectuate the
declared policy of the Act. Free percentage volume may be shipped to
any market, while restricted percentage volume must be diverted or used
for noncompetitive purposes as prescribed in Sec. 929.57. Section
929.51 requires the Committee to consider certain conditions, including
supply and demand, prior to recommending a handler withholding program,
and that any recommendation to do so be made by August 31.
Section 929.58(a) provides the authority to exempt from any or all
requirements the handling of cranberries in such minimum quantities as
the Committee, with the approval of the Secretary, may prescribe.
Section 929.58(b) provides, in part, the authority to exempt from any
or all requirements the handling of cranberries of such forms or types,
including organic cranberries, as the Committee, with the approval of
the Secretary, may prescribe.
Domestic cranberry production has been increasing over the past few
years, up from 8.0 million barrels in 2012 to 9.6 million barrels in
2016. During the last few years, demand has remained relatively flat,
and has not kept pace with the increases in supply. This has led to
increasing levels of inventories. Ending inventory levels have
increased from 5.8 million barrels in 2012 to 9.7 million barrels in
2016.
Demand for cranberries is inelastic, meaning changes in consumer
price have a minimal effect on total sales volume. However, grower
prices are very sensitive to changes in supply. As such, higher
inventory levels place downward pressure on grower prices for
cranberries and reduce grower returns. Data reviewed by the Committee
indicates that the price per barrel received by some growers has fallen
from $30 a barrel in 2011 to $10 a barrel in 2016. With the cost of
production estimated at approximately $35 a barrel, for many growers
returns have fallen below the cost of production.
On August 4, 2017, and again on August 31, 2017, the Committee met
to discuss the levels of supply and demand and how market conditions
were impacting the industry. The Committee discussed the approximate
levels of production for the 2017-18 season, forecasting production at
approximately 9.1 million barrels. Carry-in inventory was estimated at
approximately 9.9 million barrels and foreign acquired cranberries are
expected to provide an additional 2.1 million barrels, for a total
available supply of approximately 21.1 million barrels for the year.
After accounting for shrinkage, the Committee agreed on an adjusted
supply of 20.4 million barrels for the 2017-18 season.
The Committee also reviewed anticipated sales for the upcoming
season. Sales for fresh fruit were estimated at 333,000 barrels and
processed fruit sales were estimated at 9.2 million barrels. Based on
these expectations, inventory at the end of the 2017-18 crop year was
anticipated to be roughly 10.9 million barrels, a 10 percent increase
from the previous year. Using these numbers, end of year inventories
would be approximately 115 percent of average annual sales.
After calculating the anticipated level of surplus for the 2017-18
season, the Committee agreed the industry is faced with a large
inventory that continues to build. In its discussions of how to address
this issue, the Committee considered several options. During the
discussion of regulating the volume for the 2017-18 season, some
members preferred establishing a producer allotment for the 2018-19
season over implementing a handler withholding for the current season.
However, other members stated that if no action was taken to control
supply for the 2017-18 season, another million barrels of cranberries
would be added to the surplus inventory. In addition, not regulating
the 2017-18 crop would require greater levels of restriction on the
2018-19 crop, and grower returns may decline further.
The Committee discussed various levels of restriction, being
sensitive to the impact volume control could have on small handlers.
Some small handlers are able to sell all their production each year and
do not maintain an inventory. Several Committee members stated a large
restriction would place a hardship on these small handlers.
The Committee also recognized a small restriction would not
immediately balance supply with demand. However, even a small
restriction would remove a portion of the volume from the market and
help prevent an additional increase in inventory. Therefore, based on
these
[[Page 14352]]
discussions, the Committee recommended establishing free and restricted
percentages at 85 percent free and 15 percent restricted.
The Committee also recommended an allowance for the diversion of
2017-18 processed cranberry products to meet up to 50 percent of a
handler's restriction. The Committee made this recommendation
recognizing that processing fresh fruit to produce one of its top-
selling items, sweetened dried cranberries (SDC), results in juice
concentrate as a by-product. A significant amount of current carryover
inventory is in the form of juice concentrate. By allowing for the
diversion of processed cranberry products, such as juice concentrate,
to meet a portion of a handler's restriction, the Committee believes
this will help prevent additional build-up of carryover inventory. The
ability to use cranberry processed products in addition to fresh
berries to meet diversion requirements may also help handlers who find
they need to divert additional volume late in the year when the
availability of fresh berries may be limited.
To ensure the disposal of processed products in lieu of fresh
berries is correctly accounted for under the restriction, the Committee
also recommended including a conversion table, Table 1, in the
regulations. The table recognizes different conversion equivalencies of
berries to processed product based on the volume of Brix concentrate.
Brix is the method for measuring the amount of sugar contained in
the cranberry products, and the industry average is 50 Brix per
concentrate. The Committee acknowledged that the Brix level can vary
depending on the growing region and farming practices. This table
assists in ensuring that the disposal of processed product in lieu of
fresh berries is applied equitably among all handlers.
Table 1--Conversion Table
----------------------------------------------------------------------------------------------------------------
Region Brix average Concentrate yield for one barrel of cranberries
----------------------------------------------------------------------------------------------------------------
Oregon........................... 9.8 1.91 gallons 50 Brix concentrate.
Washington....................... 9.3 1.81 gallons 50 Brix concentrate.
New Jersey....................... 8.8 1.72 gallons 50 Brix concentrate.
Wisconsin........................ 8.7 1.70 gallons 50 Brix concentrate.
Massachusetts.................... 8.4 1.64 gallons 50 Brix concentrate.
All others....................... 8.7 1.70 gallons 50 Brix concentrate.
----------------------------------------------------------------------------------------------------------------
For example, using the conversion table above, handlers could
determine the amount of cranberry concentrate they would need to
divert, in lieu of fresh berries, to cover any restricted percentage.
Juice concentrate should comprise the vast majority of processed
product used for diversion. Should requests be made to use other
processed products for diversion, conversion rates for those products
will be provided by the Committee based on information provided by the
requesting handler. The means for approving and appealing those
conversion rates will be provided in a separate rulemaking action.
For example, a handler covered under the restriction whose acquired
volume is 1,000,000 barrels would have 1,000,000 barrels in regulated
volume with 850,000 barrels of free use cranberries (1,000,000 x .85)
and 150,000 barrels of restricted use cranberries (1,000,000 x .15) for
the 2017-18 season. Under this rule, the handler could divert fresh
fruit to outlets for restricted cranberries as prescribed in the Order,
or divert up to 50 percent of the restriction, or a 75,000 barrel
equivalent (150,000 barrels / 2) in processed products from the 2017-18
harvest, with the remaining amount fulfilled using fresh berries. For
cranberries produced in Wisconsin, this would equate to 127,500 gallons
of concentrate (75,000 barrels x 1.7 gallons) that would need to be
diverted to outlets for restricted cranberries.
Section 929.57 states that cranberries withheld from handling may
only be diverted through such outlets as the Committee, with the
approval of the Secretary, finds are noncompetitive to outlets for
unrestricted (free percentage) cranberries. The Committee discussed
various outlets and recommended the following: Foreign countries,
except Canada; charitable institutions; any nonhuman food use; and,
research and development projects approved by the Committee dealing
with the development of foreign and domestic markets, including, but
not limited to dehydration, radiation, freeze drying, or freezing of
cranberries as outlets for withheld cranberries. They further
recommended that cranberries may not be converted into canned, frozen,
or dehydrated cranberries or other cranberry products by any commercial
process prior to diversion to foreign countries. These outlets for
restricted cranberries will be added to the rules and regulations under
the Order by creating a new Sec. 929.108.
The Committee also recommended organically grown cranberries be
exempt from this regulation as they serve a niche market and represent
a very small portion of the total crop. All other cranberry production,
including fresh cranberries, is subject to regulation under the handler
withhold volume regulation.
To address the burden the volume regulation would have on small
handlers, the Committee also recommended providing a minimum quantity
exemption of 125,000 barrels. Under the Committee's recommendation, the
exemption would be given to handlers of record for the 2016-17
(previous) crop year and the 125,000 barrels would be subtracted from
the handler's 2017-18 acquired volume before the restricted percentage
would be applied. Small handlers whose acquired volume is 125,000
barrels or less would be exempt from the volume regulation, and
handlers with slightly larger volumes would face minimal restrictions.
After much consideration, USDA determined the minimum exemption
recommendation should be revised under this rule. Rather than provide
an exemption of 125,000 barrels for each handler, this action exempts
small handlers who process less than 125,000 barrels from the 15
percent restriction. Further, only handlers who have carryover
inventory that is not sold or under contract at the end of the 2017-18
fiscal year are subject to the 15 percent restriction. These changes
reflect the Committee's goal of reducing the burden on small handlers,
and allow handlers that have matched their production with market
demand to continue to serve their customer base and protect their
market share. Handlers subject to the restriction should be able to
meet any market shortfalls by utilizing cranberries or cranberry
products they have in inventory.
[[Page 14353]]
With this change, only those handlers carrying inventory will be
subject to the restriction. In reviewing the Committee's recommendation
and other available industry information, it is the existing
inventories in excess of 9 million barrels that are putting the most
downward pressure on returns to both growers and handlers.
Consequently, this change will put more focus on reducing the volume in
inventory.
The Committee met again on January 17, 2018, to discuss the
proposed rule on this action as published in the Federal Register on
January 2, 2018 (83 FR 72). At the meeting, members discussed current
market conditions. When the Committee had recommended the 15 percent
restriction in August 2017, domestic production had been estimated at
9.14 million barrels. Since that time, Committee members stated that
weather conditions had impacted production and that domestic production
would actually be closer to 8 million barrels. Based on the reduced
crop estimate, in a vote of 12 in favor, one against, and one
abstention, the Committee voted to recommend reducing the restricted
percentage from 15 percent to 5 percent. Members stated that the
reduction in the crop, in combination with the reduced restriction,
would still combine to remove a similar amount of fruit from the market
as was originally projected under the 15 percent restriction.
USDA reviewed the recommendation made by the Committee to reduce
the restricted percentage from 15 percent to 5 percent. Based on a
revised 2017 domestic production of 8.085 million barrels, down from an
estimated 9.14 million barrels, revising the restricted percentage to 5
percent, and considering exempt production, would remove approximately
366,000 barrels of cranberries from the market, leaving inventory as a
percentage of sales at approximately 90.5 percent. Keeping the
restricted percentage at 15 percent would remove approximately 1.1
million barrels of cranberries from the market, resulting in inventory
as a percentage of sales of 82.9 percent. In addition, as some handlers
may be exempt from the regulation as they are not carrying cranberries
in inventory, the actual volume of cranberries removed from the market
may be less. Given that the purpose of the volume regulation is to help
reduce the existing levels of inventory, USDA has determined that the
restricted percentage should remain at 15 percent.
Accordingly, this rule establishes free and restricted percentages
of 85 percent and 15 percent, respectively, for the 2017-18 season,
provides handlers with the option to divert processed cranberry
products to meet up to 50 percent of their restricted percentage, and
defines outlets for restricted fruit. This rule also exempts small
handlers who process less than 125,000 barrels from the restriction, as
well as handlers with no carryover inventory.
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 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 approximately 1,100 cranberry growers in the regulated
area and approximately 65 cranberry handlers subject to regulation
under the Order. Small agricultural producers are defined by the Small
Business Administration (SBA) as those having annual receipts of less
than $750,000, and small agricultural service firms are defined as
those whose annual receipts are less than $7,500,000 (13 CFR 121.201).
According to industry and Committee data, the average grower price
for cranberries during the 2016-17 season was $23.50 per barrel and
total sales were approximately 9.5 million barrels. The value for
cranberries that year totaled $223,250,000 ($23.50 per barrel
multiplied by 9.5 million barrels). Taking the total value of
production for cranberries and dividing it by the total number of
cranberry growers provides an average return per grower of $202,955.
Using the average price and utilization information, and assuming a
normal distribution, the majority of cranberry growers receive less
than $750,000 annually.
According to USDA's Market News report, the average free on board
(f.o.b.) price for cranberries was approximately $30.00 per barrel.
Multiplying the f.o.b. price by total utilization of 9.5 million
barrels results in an estimated handler-level cranberry value of $285
million. Dividing this figure by the number of handlers (65) yields an
estimated average annual handler receipt of $4.3 million, which is
below the SBA threshold for small agricultural service firms.
Therefore, the majority of producers and handlers of cranberries may be
classified as small entities.
While cranberry production has continued to rise, demand has failed
to keep pace, and inventories have been increasing. In an industry such
as cranberries, product can be stored in inventory for long periods of
time. Large inventories are costly to maintain, difficult to market,
and have a price-depressing effect. When supply outpaces demand
resulting in high levels of inventories, grower and handler returns can
be negatively impacted.
Demand for cranberries is inelastic, meaning changes in consumer
price have a minimal effect on total sales. However, grower prices are
very sensitive to changes in supply. With an inelastic demand, even a
small shift in supply can affect grower prices. Setting free and
restricted percentages will more closely align supply with demand. Free
percentage cranberries can be marketed by handlers to any outlet, while
restricted percentage volume can only be used for noncompetitive
purposes. Establishing free and restricted percentages results in a
decrease in supply, as handlers can only deliver a certain portion of
their cranberries into the competitive marketplace. Therefore, using
volume regulation to reduce supply should increase grower and handler
prices and revenues.
This final rule controls the supply of cranberries by establishing
free and restricted percentages at 85 percent free and 15 percent
restricted for the 2017-18 crop year. It also allows for the diversion
of 2017-18 processed cranberry products to meet up to 50 percent of a
handler's restriction. In addition, this rule establishes a minimum
quantity exemption, exempts handlers with no carryout inventory,
exempts organically grown cranberries, and defines outlets for
restricted fruit. These actions are designed to help stabilize market
conditions, reduce burdensome inventories, and improve grower and
handler returns. This rule establishes new Sec. Sec. 929.107, 929.108
and 929.252. The authority for these actions is provided for in
Sec. Sec. 929.51, 929.52, 929.54, 929.57, and 929.58. These changes
are based on Committee recommendations from meetings on August 4 and
August 31, 2017.
While these actions could result in some additional costs to the
industry, the benefits are expected to outweigh them. The purpose of
establishing free and restricted percentages is to address oversupply
conditions and to stabilize
[[Page 14354]]
grower prices. The industry has a significant volume in inventory, and
this has had a negative impact on grower and handler returns. Without
volume control, inventories would likely continue to increase, further
lowering returns.
Inventories have more than doubled since 2011. In 2011, existing
inventories were around 4.6 million barrels. By the end of the 2016-17
season, inventories are anticipated to be approximately 9.9 million
barrels. Inventories as a percentage of total sales have also been
increasing from approximately 50 percent in 2010 to approximately 103
percent in 2016, and will reach an anticipated 115 percent after the
2017-18 season if volume control is not implemented. These inventories
have had a depressing effect on grower prices, which for many has
fallen below their cost of production.
Retail demand for cranberries is highly inelastic, which indicates
changes in consumer price do not result in significant changes in the
quantity demanded. Consumer prices largely do not reflect small changes
in cranberry supplies. Therefore, this action should have little or no
effect on consumer prices and should not result in a reduction in
retail sales. However, even a small shift in supply can increase grower
and handler returns. The use of free and restricted percentages will
likely have a positive impact on grower and handler returns for this
crop year.
This final rule will result in some fruit being taken off the
market. However, a sufficient amount of fruit will still be available
to supply all aspects of the market. In addition, allowing handlers the
option to divert 2017-18 processed cranberry products to meet up to 50
percent of their restriction provides handlers some additional
flexibility and may help reduce inventories of juice concentrate, one
of the largest segments of existing inventory.
This action also exempts small handlers who process less than
125,000 barrels from the restriction. Consequently, small handlers
whose acquired volume is 125,000 barrels or less are exempt from the
volume restriction. This reduces the burden the volume restriction has
on small handlers and their growers.
In addition, only handlers who have carryover inventory that is not
sold or under contract at the end of the 2017-18 fiscal year are
subject to the 15 percent restriction. This allows handlers that have
matched their production with market demand to continue to serve their
customer base and protect their market share. Handlers subject to the
restriction should be able to meet any shortfalls by utilizing
cranberries or cranberry products they have in inventory.
There are also secondary uses available for restricted fruit,
including foreign markets except Canada, charitable institutions,
nonhuman food use, and research and development projects. While these
alternatives may provide different levels of return than sales to
primary markets, they play an important role for the industry. In
addition, if demand is greater than anticipated, there are significant
amounts of fruit in inventory that could be utilized to meet demand.
As the restriction represents a percentage of a handler's volume,
the costs, when applicable, are proportionate and should not place an
extra burden on small entities as compared to large entities. Likewise,
growers and handlers, regardless of size, benefit from the stabilizing
effects of this restriction.
One alternative considered was not to impose volume restrictions
during the 2017-18 crop year. However, Committee members believed that
inventory levels were such that some form of volume control was
necessary to help stabilize marketing conditions.
The Committee also considered other levels of free and restricted
percentages. However, some members were concerned that setting a
restriction that was too high could negatively impact small handlers.
The Committee also considered not recommending a provision to allow the
disposal of 2017-18 processed cranberry products to meet up to 50-
percent of a handler's restriction. However, the Committee determined
allowing the diversion of cranberry products to meet up to 50 percent
of the restriction allows large handlers to reduce inventory and not
add additional volumes of juice concentrate to the existing inventory
levels. Therefore, for the reasons mentioned above, these alternatives
were rejected by the Committee.
However, the Committee later recommended an alternative to USDA.
After its January 17, 2018 meeting, the Committee recommended reducing
its previously requested 15 percent restriction to 5 percent. USDA
determined that lowering the restricted percentage by this amount would
not sufficiently reduce carryover inventory, and thus would not relieve
the downward pressure on grower prices.
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 OMB and assigned OMB No. 0581-0189, Generic
Fruit Crops.
This final rule establishes free and restricted percentages and
handler diversion options under the Order. On February 15, 2018, USDA
published a proposed rule in the Federal Register (83 FR 6800) seeking
comment on new information requirements and Committee forms to support
diversion procedures when volume regulation is established. The impact
of the new requirements will be addressed in that rulemaking. 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.
In addition, the Committee's meetings were widely publicized
throughout the cranberry industry and all interested persons were
invited to attend the meetings and participate in Committee
deliberations on all issues. Like all Committee meetings, the August 4
and August 31, 2017, and January 17, 2018, meetings were public
meetings and all entities, both large and small, were able to express
views on these issues.
A proposed rule concerning this action was published in the Federal
Register on January 2, 2018 (83 FR 72). Copies of the proposed rule
were sent via email to Committee members and cranberry handlers.
Finally, the proposed rule was made available through the internet by
USDA and the Office of the Federal Register. A 30-day comment period
ending February 1, 2018, was provided to allow interested persons to
respond to the proposal.
During the comment period, 174 comments were received in response
to the proposal. Of the comments received, 13 were in support of the
proposed regulation, 123 comments supported regulation with some
changes to the proposal (101 of these comments were from growers
affiliated with the major industry cooperative), 37 were opposed to the
proposed regulation, and 1 took no position.
Four of the comments in support of the rule stated USDA should
maintain the restricted percentage at 15 percent even with the
reduction in the size of
[[Page 14355]]
the 2017-18 crop. Three commenters stated a five percent restriction
would do little to support the industry, especially as the decrease in
the 2017-18 crop could be offset by an increase in the 2018-19 crop.
One commenter stated that maintaining the higher percentage, along with
the reduction in the 2017-18 crop, would have an even greater impact on
inventories. Another commenter stated that keeping the restricted
percentage at 15 percent sends a message that the oversupply will be
dealt with. One commenter stated full support for the proposed
regulation as a way to keep the industry healthy and profitable.
Another commenter recognized that the industry has enough cranberries
in inventory to supply the next 12 months. One commenter also indicated
they thought the percentage of restricted cranberries could have been
even higher. Support of the exemption for organic cranberries was
voiced by one commenter, who stated that a restriction on this sector
would inhibit future market growth.
In the comments that supported volume regulation, but with changes
from what was included in the proposed rule, 107 commenters stated that
they supported volume regulation as a way to reduce the volume of
cranberries available in the marketplace and help increase returns. Of
these, 106 commenters indicated that oversupply conditions had reached
such levels that some action needed to be taken, and 104 commenters
also referenced the positive impact of previous volume regulations
established for the 2000 and 2001 seasons. Three commenters also
indicated that the decrease in the 2017-18 crop size has already had a
positive impact on price, and that the proposed regulation has also had
a positive effect.
Three other commenters requesting adjustments to the proposal
stated their support for maintaining the restricted percentage at 15
percent. One of those commenters stated that dropping the restriction
to five percent would be too low to effectively impact the oversupply.
Another commenter stated that a timely reduction in supply is
essential. Another comment stated that the industry should hold the
restriction at 15 percent and take advantage of the short crop as a
bonus.
Of those commenters requesting a change to the proposed rule, 119
commenters supported reducing the restricted percentage from 15 percent
to 5 percent. Of these, 112 referenced the decrease in the volume of
the 2017-18 crop as rationale for reducing the restricted percentage.
As stated above, USDA reviewed the Committee's recommendation to
reduce the restricted percentage from 15 percent to five percent based
on an approximate 10 percent reduction in the 2017-18 crop. The
industry began the year with approximately 9.7 million barrels in
inventory, an amount greater than estimated total sales for the 2017-18
season. Using the revised 2017-18 domestic production estimate of 8.085
million barrels, revising the restricted percentage to five percent
would remove approximately 366,000 barrels of cranberries from the
market, leaving inventory as a percentage of sales at around 90.5
percent.
Maintaining the restricted percentage at 15 percent would remove
approximately 1.1 million barrels of cranberries from the market,
resulting in inventory as a percentage of sales of 82.9 percent.
Further, since handlers with no carryover inventory are exempt from the
regulation, the actual volume of cranberries removed from the market
may be less than calculated with either a 15 or 5 percentage
restriction. In addition, handlers have already been establishing plans
to comply with a 15 percent restriction. Given that the purpose of the
volume regulation is to help reduce supply and inventory, USDA has
determined that the restricted percentage should remain at 15 percent.
Another 103 commenters requested that the final rule clarify that
processed products may be used for charitable purposes as an outlet for
restricted cranberries. This final rule adds Sec. 929.108, which
specifies the outlets for restricted cranberries. As stated above, the
Committee recommended that cranberries may not be converted into
canned, frozen, or dehydrated cranberries or other cranberry products
by any commercial process prior to diversion to foreign countries. The
limitation is written specifically into Sec. 929.108(a). However, this
restriction of whole fruit only does not apply to diversion to
charitable institutions, any nonhuman food use, or research and
development projects approved by the Committee dealing with the
development of foreign and domestic markets, including as processed
fruit.
In addition, these same commenters also asked that processed
products sent to outlets for restricted cranberries, specifically for
charity, not count toward the diversion of 2017-18 processed cranberry
products to meet up to 50 percent of a handler's restriction. When free
and restricted percentages are established, restricted percentage
volume must be diverted or used in noncompetitive outlets. The
restricted percentage is applied to each individual handler's volume to
establish the volume of cranberries that need to be diverted. Under the
final rule, 50 percent of this amount can be met using 2017-18
processed cranberry products. Consequently, regardless of how the
handler is diverting processed products into noncompetitive outlets,
2017-18 processed products can only be used to meet 50 percent of the
handler's restriction. Restriction aside, handlers are always able, and
encouraged, to donate as much whole fruit or processed products to
charity as they can.
Thirteen commenters indicated the exemption added by USDA for
handlers that have no inventory after August 31, 2018, is problematic
and should be changed. Two of these commenters indicated that inventory
is not clearly defined for the purposes of this exemption, and that
some handlers need inventory beyond that date in order to operate. Two
comments also expressed concern about how the Committee would be able
to track compliance with this change. One commenter said this provision
should be removed.
Another 11 commenters also expressed concerns regarding the change
USDA made to the 125,000 barrel exemption recommended by the Committee.
Five commenters stated this would adversely affect midsize handlers.
Three commenters indicated the exemption for the first 125,000 barrels
for each handler as recommended by the Committee was fair, but with
this change it is no longer equitable. One commenter stated this change
would cost growers money in extra charges from the handlers.
In reviewing the Committee's recommendation and other available
industry information, USDA has determined that the existing inventories
in excess of 9 million barrels are putting the most downward pressure
on returns to both growers and handlers. Rather than provide an
exemption of 125,000 barrels for each handler, this action exempts
small handlers who process less than 125,000 barrels from the 15
percent restriction. Small handlers processing less than 125,000
barrels make up nearly 88 percent of all handlers, yet combined only
account for less than 10 percent of the total volume.
Further, only handlers who have carryover inventory at the end of
the 2017-18 fiscal year are subject to the 15 percent restriction.
These changes further reduce the burden on small handlers and provide
an exemption to handlers that have matched their production with market
demand allowing them to continue to serve their customer base and
protect their market share. With this change, only those handlers
carrying inventory would be subject to the restriction.
[[Page 14356]]
As stated above, inventory is product that is not sold or under
contract at the end of the 2017-18 fiscal year. If a handler is
carrying inventory from the 2017-18 season, and/or previous seasons, at
the end of the 2017-18 fiscal year (August 31, 2018) the handler will
be subject to the restriction. In regards to compliance, the Committee
has hired additional support to assist with this volume regulation.
Further, handlers maintain information on inventory and should be able
to supply the paperwork necessary to demonstrate if they qualify for
the inventory exemption.
Three commenters stated that the rule should be changed to allow
handlers to meet 100 percent of their restriction using processed
product. Four others stated handlers should not be allowed to
substitute byproduct concentrate to meet 50 percent of the restriction.
While a significant portion of existing inventory is concentrate, not
all handlers produce concentrate or concentrate as a byproduct of SDC
production. Allowing the use of 50 percent of 2017-18 cranberry
products to meet the required restriction represents a compromise that
recognizes the need to reduce the inventory volume of cranberry
concentrate, while also acknowledging the overall oversupply facing the
industry.
Some of the comments from those in opposition to the proposed rule
echo the comments made by those requesting changes to the proposal.
Twelve commenters in opposition to the proposed rule stated the weather
had taken care of the problem of oversupply for the current season,
negating the need for establishing the restriction. Five commenters
referenced the change to the 125,000 barrel exemption, and another four
commenters referenced the exemption for handlers with no inventory at
the end of the 2017-18 fiscal year as reasons for opposing the
regulation. Comments similar to these are addressed above.
Seven commenters opposed the proposal, citing the oversupply of
concentrate as the cause of the industry's problems. Two additional
commenters opposed the proposed regulation because handlers could
divert 50 percent of 2017-18 products to meet their restriction. While
concentrate does represent a large portion of the existing inventory,
the level of frozen berries is even higher. Industry data shows that at
the end of the 2016-17 fiscal year, of the estimated 9.7 million
barrels in inventory, approximately 4.2 million barrels were frozen
berries, while approximately 3.7 million barrels were from concentrate.
Consequently, the rule provides for the diversion of product to meet 50
percent of the restriction as a way to reduce the inventory of
concentrate. However, reducing overall supply, including whole fruit,
is also important in addressing the current level of inventory.
Twelve comments stated that the proposed regulation would
negatively impact growers by reducing their returns. Seven commenters
stated the proposed regulation originated from the major cooperative.
Another six commenters stated that if finalized this regulation would
adversely affect midsize handlers. While these actions could result in
some additional costs to the industry, the benefits are expected to
outweigh them. The purpose of establishing free and restricted
percentages is to address oversupply conditions and to stabilize grower
prices. The industry has a significant volume in inventory, and this
has had a negative impact on grower and handler returns. Growers and
handlers, both large and small, should benefit from this regulation. It
is estimated that approximately 1.1 million barrels of cranberries will
be removed from inventories are a result of this rule. Lowering
inventory levels is expected to result in positive returns for the
entire industry.
Four commenters opposed the regulation because the restriction does
not apply to Canada or other foreign production. These commenters
stated that without it being restricted, foreign product could be used
to offset the domestic product being restricted. USDA has not made any
revisions as a result of these comments because, as an initial matter,
the Order cannot regulate imported volume. Moreover, for this argument
to be relevant, the 15 percent restriction would need to cause a market
shortfall in the production area. However, given that the production
area market entered the 2017-18 season with more cranberries and
product in inventory than anticipated sales, and on top of that had an
additional 8.1 million barrels of production, USDA has determined there
is ample domestic supply to meet sales requirements and there is no
risk of an impending market shortfall.
Four comments in opposition to the proposal also stated that it
would be implemented too late to have benefit, as growers have already
incurred the cost of producing their full crop. In discussing this
issue, the Committee recognized that utilizing a producer allotment
allowed growers to make adjustments to reduce their costs, they
determined that the situation with the oversupply was such that
something needed to be done for the 2017-18 season. Committee members
were concerned that delaying action would only result in higher
inventories for the 2018-19 season and the need for an even larger
volume regulation in the future. Despite the timing, the Committee
anticipates that use of handler free and restricted percentages will
likely have a positive impact on grower and handler returns for the
current crop year.
Finally, three commenters stated that nothing should be done and
that the market be allowed to dictate what happens with industry. Under
the Order, the Committee has the authority to recommend volume
regulation to the Secretary to help manage supply and demand. The
Committee chose to utilize this authority to address the current
oversupply situation and to help industry returns.
Additional comments were received that addressed issues outside the
scope of the proposed rule.
For the reasons discussed above, no changes will be made to the
rule as proposed, based on the comments received.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions
about the compliance guide should be sent to Richard Lower at the
previously-mentioned address in the FOR FURTHER INFORMATION CONTACT
section.
After consideration of all relevant matter presented, including the
information and recommendation of the Committee and other available
information, it is hereby found that this rule, as hereinafter set
forth, will tend to effectuate the declared policy of the Act.
List of Subjects in 7 CFR Part 929
Cranberries, Marketing agreements, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 7 CFR part 929 is
amended as follows:
PART 929--CRANBERRIES GROWN IN STATES OF MASSACHUSETTS, RHODE
ISLAND, CONNECTICUT, NEW JERSEY, WISCONSIN, MICHIGAN, MINNESOTA,
OREGON, WASHINGTON, AND LONG ISLAND IN THE STATE OF NEW YORK
0
1. The authority citation for part 929 continues to read as follows:
Authority: 7 U.S.C. 601-674.
[[Page 14357]]
[Subpart Redesignated as Subpart A]
0
2. Redesignate ``Subpart--Order Regulating Handling'' as ``Subpart A--
Order Regulating Handling''.
[Subpart Redesignated as Subpart B and Amended]
0
3. Redesignate ``Subpart--Rules and Regulations'' as subpart B and
revise the heading to read as follows:
Subpart B--Administrative Requirements
0
4. Add Sec. 929.107 to read as follows:
Sec. 929.107 Conversion.
During a year of volume regulation, cranberry concentrate and other
processed products made from excess or restricted cranberries harvested
in that year may be diverted according to the provisions of this part.
Any handler disposing of concentrate or other processed products must
report the whole-berry equivalent to the Committee so that all excess
or restricted cranberries are accounted for and reported per rules and
regulations in effect. Table 1-Conversion Table provides a conversion
rate for concentrate to barrels of whole berries based on Brix average
by production region. Should requests be made to use other processed
products for diversion, conversion rates for those products would be
provided by the Committee based on information provided by the
requesting handler.
Table 1 to Sec. 929.107--Conversion Table
----------------------------------------------------------------------------------------------------------------
Region Brix average Concentrate yield for one barrel of cranberries
----------------------------------------------------------------------------------------------------------------
Oregon........................... 9.8 1.91 gallons 50 Brix concentrate.
Washington....................... 9.3 1.81 gallons 50 Brix concentrate.
New Jersey....................... 8.8 1.72 gallons 50 Brix concentrate.
Wisconsin........................ 8.7 1.70 gallons 50 Brix concentrate.
Massachusetts.................... 8.4 1.64 gallons 50 Brix concentrate.
All others....................... 8.7 1.70 gallons 50 Brix concentrate.
----------------------------------------------------------------------------------------------------------------
0
5. Add Sec. 929.108 to read as follows:
Sec. 929.108 Outlets for restricted cranberries.
In accordance with Sec. 929.57, restricted cranberries may be
diverted only to the following noncommercial or noncompetitive outlets:
(a) Foreign countries, except Canada, provided that restricted
cranberries diverted under this provision may not be converted into
canned, frozen, or dehydrated cranberries or other cranberry products
by any commercial process, prior to diversion;
(b) Charitable institutions;
(c) Any nonhuman food use, or;
(d) Research and development projects approved by the Committee
dealing with the development of foreign and domestic markets,
including, but not limited to dehydration radiation, freeze drying, or
freezing of cranberries.
[Subpart Redesignated as Subpart C]
0
6. Redesignate ``Subpart--Assessment Rate'' as ``Subpart C--Assessment
Rate''.
0
7. Add Sec. 929.252 to read as follows:
Sec. 929.252 Free and restricted percentages for the 2017-18 crop
year.
(a) The percentages for cranberries handled by handlers during the
crop year beginning on September 1, 2017, which shall be free and
restricted, respectively are designated as follows: Free percentage, 85
percent and restricted percentage, 15 percent.
(b) Handlers have the option to process restricted cranberries into
dehydrated cranberries or other processed products. Handlers also have
the option to divert concentrate or other processed products as
provided in Sec. 929.107 to account for up to 50 percent of their
restriction.
(c) Organically grown fruit shall be exempt from the volume
regulation requirements of this section. Small handlers who process
less than 125,000 barrels during the 2017-18 fiscal year are exempt
from the restriction. Any handlers who do not have carryover inventory
at the end of the 2017-18 fiscal year are also exempt.
Dated: March 30, 2018.
Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2018-06875 Filed 4-3-18; 8:45 am]
BILLING CODE 3410-02-P
