Cranberries Grown in States of Massachusetts, et al.; Establishment of 2018-19 Seasonal Volume Regulation, 18462-18468 [2018-08528]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 83, Number 82 (Friday, April 27, 2018)]
[Proposed Rules]
[Pages 18462-18468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08528]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 929

[Doc. No. AMS-SC-18-0012; SC18-929-2 PR]


Cranberries Grown in States of Massachusetts, et al.; 
Establishment of 2018-19 Seasonal Volume Regulation

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule invites comments on a recommendation to 
establish a grower allotment percentage for the 2018-19 crop year under 
the marketing order for cranberries grown in the production area 
(Order). This proposed action would limit the quantity of cranberries 
from the 2018-19 crop a handler may purchase from, or handle on behalf 
of, growers, and would allow for the diversion of processed products 
from that year. This proposed action would also specify handlers 
subject to the regulation, revise the definition of outlets for excess 
fruit, revise dates by which certain actions are due, and establish 
exemptions to the proposed action.

DATES: Comments must be received by May 29, 2018.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule. Comments must be sent to the Docket 
Clerk, Marketing Order and Agreement Division, Specialty Crops Program, 
AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938; or internet: https://www.regulations.gov. All comments should reference the document number 
and the date and page number of this issue of the Federal Register and 
will be made available for public inspection in the Office of the 
Docket Clerk during regular business hours, or can be viewed at: https://www.regulations.gov. All comments submitted in response to this 
proposal will be included in the record and will be made available to 
the public. Please be advised that the identity of the individuals or 
entities submitting the comments will be made public on the internet at 
the address provided above.

FOR FURTHER INFORMATION CONTACT: 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 action, pursuant to 5 U.S.C. 553, 
proposes amendments to regulations issued to carry out a marketing 
order as defined in 7 CFR 900.2(j). This proposal

[[Page 18463]]

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 of cranberries operating within the 
production area, and a public member.
    The Department of Agriculture (USDA) is issuing this proposed 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 proposed 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'[thinsp]'' (February 2, 2017).
    This proposed 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 which would decrease the available supply of cranberries 
whenever the Secretary of Agriculture (Secretary) finds that ``such 
regulation will tend to effectuate the declared policy of the Act.'' 
Accordingly, this proposed rule would establish a marketable quantity 
and grower allotment percentage for cranberries produced during the 
2018-19 crop year, beginning September 1, 2018, and ending August 31, 
2019.
    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 proposed rule invites comments on the establishment of a 
marketable quantity and grower allotment percentage for the 2018-19 
crop year. This proposal is the result of the Committee's 
recommendations made during its August 4, and August 31, 2017, 
meetings, and a February 18, 2018, email vote. The proposal would 
establish a marketable quantity of 7.275 million barrels and a grower 
allotment percentage of 75 percent. This proposed action would also 
allow handlers to process up to 50 percent of the excess cranberries 
they receive above their growers' allotment, provided they divert an 
equivalent amount of 2018-19 cranberry processed products. It would 
also establish an exemption for organically grown cranberries, specify 
handlers subject to the regulation, revise the definition of outlets 
for excess fruit, and revise dates by which certain actions are due.
    The Committee also recommended an exemption for organically grown 
cranberries, and an exemption of 2,500 barrels for each grower. After 
much consideration, USDA determined the recommended grower exemption of 
2,500 barrels should be revised. Consequently, this proposal does not 
include the exemption of 2,500 barrels for each grower and instead 
proposes to exempt handlers that processed less than 125,000 barrels 
during the 2017-18 fiscal year, or handlers that did not have carryover 
inventory at the end of the 2017-18 fiscal year. Accordingly, growers 
delivering their fruit to exempt handlers would not be subject to the 
allotment.
    In addition, in a February 18, 2018 vote by email, the Committee 
voted unanimously to adjust reporting dates associated with the 
proposed allotment regulation. These changes were previously discussed 
and supported by the Committee at a meeting on April 22, 2014 as part 
of the consideration of another volume regulation for which a rule was 
not issued.
    The recommendations included in this proposed rule would adjust 
supply to more closely meet market demand, improve grower and handler 
returns, and help reduce inventory.
    Sections 929.49 and 929.52 provide, in part, authority to establish 
a marketable quantity and grower allotment percentage. Section 929.14 
defines marketable quantity as the volume of cranberries needed to meet 
market demand and provide for an adequate carryover into the next 
season. The allotment percentage is derived by dividing the marketable 
quantity by the total of all growers' sales histories. Section 929.48 
outlines procedures for computing a grower's sales history.
    Section 929.49 also prescribes how the grower allotment percentage 
is calculated and distributed to growers and handlers. Each grower's 
allotment volume is calculated by multiplying the individual's sales 
history by the allotment percentage. A grower's allotment is the total 
volume a handler may purchase from, or handle on behalf of, that grower 
during a year of volume regulation. Cranberries received by a handler 
that exceed the sum of their growers' allotments can be used to fill 
unused allotment. Any remaining cranberries are defined as excess 
cranberries as defined in Sec.  929.59, which also outlines the 
procedures and dates by which excess cranberries are to be diverted. 
Section 929.61 prescribes outlets for excess cranberries, which are 
further defined in Sec.  929.104.
    In addition, Sec.  929.50 provides authority for the transfer of 
sales history and annual allotment. Section 929.51 requires the 
Committee to consider market conditions, including supply and demand, 
prior to recommending an allotment percentage, and that any 
recommendation be made by March 1. 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 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. However, grower prices are 
very sensitive to changes in supply. Consequently, higher inventory 
levels place downward pressure on grower prices for cranberries and 
reduce grower returns. Data reviewed by the

[[Page 18464]]

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.
    The Committee met on August 4, 2017, and again on August 31, 2017, 
and discussed the estimated 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. Carryover inventory 
was estimated at approximately 9.9 million barrels and foreign acquired 
cranberries were 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 crop year.
    Using these numbers, with estimated sales of 9.5 million barrels 
for 2017-18, the Committee calculated a potential carryover for the 
2018-19 season of 10.9 million barrels. This is an approximately one 
million barrel increase from the carryover inventory for the 2017-18 
crop year. Based on these numbers, carryover inventory for the 2018-19 
crop year would be approximately 115 percent of annual sales.
    In discussing market conditions, the Committee recognized that 
sales have been relatively flat. The Committee also noted supply has 
been exceeding demand by about one million barrels a year. Using crop 
and sales estimates similar to 2017-18, and the estimated carryover 
from the 2017-18 season of 10.9 million barrels, the potential 
carryover supply at the end of the 2018-19 crop year could increase by 
another one million barrels to 11.9 million if no action is taken to 
regulate supply.
    In reviewing these numbers, the Committee agreed the industry is 
faced with a large inventory that continues to build. To address the 
problems associated with oversupply and to try to stabilize grower 
returns, the Committee discussed the need to establish volume 
regulation. The Committee considered several options, including 
establishing free and restricted percentages under a handler 
withholding for the 2017-18 crop year, establishing a grower allotment 
for the 2018-19 season, or recommending both regulations.
    Considering the levels of inventory and low grower returns, the 
Committee voted to recommend a handler withholding, setting the free 
and restricted percentages of 85 percent and 15 percent, respectively, 
for the 2017-18 season. The proposed rule to establish these 
percentages was published in the Federal Register on January 2, 2018 
(83 FR 72). The Committee estimated that the 15 percent restriction 
would remove approximately one million barrels from inventory, helping 
to maintain inventories at current levels. While the Committee 
recognized a small restriction would not immediately balance supply 
with demand, even a small restriction would remove a portion of the 
volume from the market and help prevent an additional increase in 
inventory.
    With the proposed handler withholding removing an estimated one 
million barrels from the market, the industry would still have 
approximately 10 million barrels remaining in inventory. Given the 
static demand and anticipated market conditions for the 2018-19 fiscal 
year, the Committee also recommended establishing a grower allotment 
percentage for the 2018-19 fiscal year.
    The Committee discussed various levels of restriction, being 
sensitive to the impact volume control could have on small growers and 
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. However, the Committee also recognized that volume control 
measures could help increase grower returns by helping to align supply 
with demand.
    In addition, establishing an allotment regulation can help growers 
reduce production costs. Growers could choose to take bogs out of 
production, or reduce inputs such as fertilizer and pesticides in order 
to reduce their production volume to match their allotment. These and 
other steps could help growers reduce their costs of production for the 
2018-19 crop.
    Based on the information available, the Committee recommended 
establishing a marketable quantity of 7.275 million barrels and an 
allotment percentage of 75 percent for the 2018-19 crop year. With 
volume regulation, returns are expected to be higher than without 
volume regulation. This increase is beneficial to all growers and 
handlers regardless of size, and enhances total revenues in comparison 
to no volume regulation. Establishing an allotment percentage allows 
the industry to help stabilize supplies. This proposal could remove a 
potential 2 million barrels from supply, reduce industry inventory, and 
increase industry returns. This proposed rule would add a new Sec.  
929.253 to establish the marketable quantity and grower allotment.
    The Committee also recommended that handlers have the option to 
receive cranberries over their grower allotment and process up to 50 
percent of the excess cranberries received rather than divert them in 
fresh form, as currently required. Handlers that do so would need to 
divert an amount of 2018-19 cranberry processed products equivalent to 
the volume of excess cranberries processed.
    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 inventory is in the form of juice 
concentrate. By allowing handlers to process a portion of the excess 
cranberries they receive, more fresh cranberries would be available to 
produce products requiring whole cranberries, such as SDC, and the 
diversion of concentrate would help prevent additional build-up of 
inventory. Handlers would still have the option to divert fresh berries 
as excess supply.
    To allow for the diversion of processed products, Sec.  929.104(b), 
which currently prohibits the handling of excess fruit, would be 
removed. To ensure the diversion of processed products in lieu of fresh 
cranberries is correctly accounted for, the final rule for volume 
regulation for the 2017-18 season (83 FR 14350) adds guidance under 
Sec.  929.107 along with a conversion table. The table recognizes 
different conversion equivalencies of cranberries 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 for concentrate is 50 
Brix. The Committee acknowledged that the Brix level can vary depending 
on the growing region and farming practices. The proposed table would 
help ensure that the diversion of processed product in lieu of fresh 
berries is applied equitably among all handlers.
    Using the proposed conversion table, handlers could determine the 
amount of cranberry concentrate they would need to divert, in lieu of 
fresh berries, to cover the fresh cranberry equivalent of any excess 
cranberries processed. Juice concentrate should comprise the vast 
majority of processed product used for diversion. Should requests be 
made to use other processed products for

[[Page 18465]]

diversion, conversion rates for those products would be provided by the 
Committee based on information provided by the requesting handler.
    For example, a grower with a sales history of 1,000 barrels would 
have an allotment of 750 barrels (1,000 x .75). If the grower delivered 
all 1,000 barrels to the handler, the handler would have 250 barrels of 
excess fruit. Under this proposed rule, the handler could divert 250 
barrels of fresh fruit to approved outlets or divert half (125 barrels 
of fresh fruit) and process half, diverting a 125 barrel equivalent in 
2018-19 processed product.
    The Committee also recommended changes to date requirements 
currently specified in the Order. Section 929.59(b) currently states 
that ``{p{time} rior to January 1, or such other date as recommended by 
the committee and approved by the Secretary, handlers holding excess 
cranberries shall submit to the committee a written plan outlining 
procedures for the systematic disposal of such cranberries in the 
outlets prescribed in Sec.  929.61.'' The Committee agreed the date for 
submitting disposal plans should be extended in order to give handlers 
more time to consider how to divert their excess cranberries. 
Therefore, the Committee recommended changing the deadline prescribed 
in Sec.  929.59(b) from January 1 to March 1 of the regulated season.
    Section 929.59(c) states that ``{p{time} rior to March 1, or such 
other date as recommended by the committee and approved by the 
Secretary, all excess cranberries shall be disposed of pursuant to 
Sec.  929.61.'' Given the change in the due date for the diversion 
plans, the Committee agreed that this date should also be changed to 
provide handlers with enough time to comply with this requirement. 
Therefore, the Committee recommended changing the date by which 
diversion is to be completed from March 1 to August 31. This proposed 
rule would add a new Sec.  929.159 to make these date changes.
    Section 929.62(a) requires each grower to file a report with the 
Committee by January 15 of each year providing the following 
information: Total acreage harvested and whether owned or leased; total 
commercial cranberry sales in barrels from such acreage; the amount of 
acres either in production but not harvested, or taken out of 
production, and the reason(s) why; the amount of new or replanted 
acreage coming into production; the name of the handler(s) to whom 
commercial cranberry sales were made; and such other information as may 
be needed for implementation and operation of this section. Growers 
might not have all necessary information to complete the report by the 
current deadline. Therefore, the Committee recommended changing the 
grower reporting date from January 15 to March 1.
    The Committee also recommended organically grown cranberries be 
exempt from this proposed regulation as they serve a niche market and 
represent a very small portion of the total crop. All other cranberry 
production, including fresh cranberries, would be subject to regulation 
under the grower allotment volume regulation.
    To address the burden the volume regulation would have on small 
growers and handlers, the Committee also recommended providing an 
exemption of 2,500 barrels for all growers. Under the Committee's 
recommendation, the exemption would be applied following the 
calculation of a grower's allotment. However, after much consideration, 
USDA determined the exemption recommendation should be revised. Rather 
than provide an exemption of 2,500 barrels for each grower, this 
proposed action would exempt small handlers who processed less than 
125,000 barrels from the allotment requirement. Further, handlers who 
did not have carryover inventory at the end of the 2017-18 fiscal year 
would also be exempt from the allotment requirement. Accordingly, 
growers delivering their fruit to exempt handlers would not be subject 
to the allotment.
    These changes would allow handlers who have matched their 
production with market demand to continue to serve their customer base 
and maintain their market share. Small growers would also have the 
option of delivering their fruit to handlers who are not subject to the 
regulation. Handlers subject to the allotment percentage should be able 
to meet any market shortfalls by utilizing cranberries or cranberry 
products available in inventory. The provision allowing handlers to 
process a portion of their excess cranberries should also help provide 
some flexibility.
    With this proposed action, only those handlers carrying inventory 
would be subject to meeting the allotment requirement. In reviewing the 
Committee's recommendation and other available industry information, 
USDA has determined that existing inventories in excess of 9 million 
barrels are putting the most downward pressure on returns to both 
growers and handlers. Consequently, this proposal would put more focus 
on reducing the volume in inventory.
    Section 929.125 provides authority for a grower to request a review 
by an appeals subcommittee if the grower is dissatisfied with his or 
her sales history calculation provided by the Committee. The grower 
must request the review within 30 days after receipt of the Committee's 
determination of sales history and must submit documentation showing 
why he or she believes the calculation is inaccurate. Within 15 days 
after notification of the appeals subcommittee's decision, if the 
grower is not satisfied with the decision, the grower may further 
appeal to the Secretary.
    A grower may transfer all or part of their allotment to another 
grower, provided that the transferred allotment remains assigned to the 
same handler. Transfers of allotment between growers having different 
handlers may occur with the consent of both handlers. All such 
transfers would have to be reported to the Committee. After all 
allotment transfers have occurred, any unused allotment would be 
transferred to the Committee. The Committee would then redistribute any 
unused allotment to handlers having excess cranberries in an amount 
proportionate to each handler's total allotment. These provisions help 
ensure that excess supply is utilized, to the extent possible, through 
unfilled allotment.
    The Committee considered the estimated level of production and 
anticipated demand, and determined that without some action on the part 
of the Committee, inventory levels would continue to increase 
throughout the 2018-19 season. The Committee believes using the volume 
control authorities in the Order would help stabilize marketing 
conditions for cranberries by helping to adjust supply to meet market 
demand and improve grower returns.
    Accordingly, this proposal would establish a grower allotment at 75 
percent for the 2018-19 season. It would also give handlers the option 
to process up to 50 percent of the excess cranberries they receive 
above their growers' allotment, provided they divert an equivalent 
amount of 2018-19 cranberry processed products. This proposed rule 
would also exempt organically grown cranberries, specify handlers 
subject to the regulation, revise the definition of outlets for excess 
fruit, and revise dates by which certain actions are due.

Initial 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,

[[Page 18466]]

AMS has prepared this initial 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 and 
results in high levels of inventories, grower and handler returns can 
be negatively impacted.
    Demand for cranberries is inelastic, meaning changes in price have 
a minimal effect on total sales volume. However, grower prices are very 
sensitive to changes in supply. A grower allotment program results in a 
decrease in supply as handlers can only purchase a portion of a 
grower's production, which is based on the grower's past sales history. 
Even a small shift in supply can have a positive effect on grower 
prices. Therefore, using a grower allotment program to reduce supply 
should increase grower prices and revenues.
    This proposed rule would establish a grower allotment of 75 percent 
for the 2018-19 crop year. It would also allow handlers to process up 
to 50 percent of the excess cranberries they receive above their 
growers' allotment, provided they divert an equivalent amount of 2018-
19 cranberry processed products. In addition, this proposal would 
exempt organically grown cranberries, specify handlers subject to the 
regulation, revise the definition of outlets for excess fruit, and 
revise dates by which certain actions are due. These actions are 
designed to help stabilize marketing conditions, reduce burdensome 
inventories, and improve grower and handler returns. This rule revises 
Sec. Sec.  929.104 and 929.105 and establishes new Sec. Sec.  929.159 
and 929.253. The authority for these actions is provided for in 
Sec. Sec.  929.48, 929.49, 929.51, 929.52, 929.58, 929.59, 929.61, and 
929.62. These changes are based on Committee recommendations from 
meetings on August 4 and August 31, 2017, and a February 18, 2018, 
email vote.
    While these actions could result in some additional costs to the 
industry, the benefits are expected to outweigh them. The purpose of 
establishing an allotment percentage 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. Without volume control, inventories would 
likely continue to increase, further lowering returns.
    Inventories have significantly increased since 2011. In 2011, 
existing inventories were around 4.6 million barrels. By the end of the 
2016-17 season, inventories were approximately 9.9 million barrels, and 
by the end of the 2017-18 season, inventories are projected to be 
approximately 10.9 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 could reach an 
anticipated 115 percent after the 2017-18 season. These inventories 
have had a depressing effect on grower prices, which for many growers 
have fallen below their cost of production.
    Retail demand for cranberries is highly inelastic, which indicates 
changes in consumer prices do not result in significant changes in the 
quantity demanded. Consumer prices are also not significantly impacted 
by minor 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 could 
increase grower and handler returns. The use of allotment percentages 
would likely have a positive impact on grower and handler returns for 
this crop year.
    This proposal would result in some fruit being taken off the 
market. However, a sufficient amount of fruit would still be available 
to supply all aspects of the market. In addition, allowing handlers the 
option to process up to 50 percent of the excess cranberries they 
receive above their growers' allotment, provided they divert an 
equivalent amount of 2018-19 cranberry processed products, would 
provide handlers some additional flexibility and may help reduce 
inventories of juice concentrate, one of the largest segments of 
existing inventory.
    There are also secondary outlets available for excess 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.
    This action would also exempt small handlers who processed less 
than 125,000 barrels in 2017-18 from the allotment percentage. 
Consequently, small handlers whose acquired volume is 125,000 barrels 
or less would be exempt from the allotment volume restriction. This 
would reduce the burden the volume restriction has on small handlers 
and their growers.
    In addition, handlers who did not have carryover inventory at the 
end of the 2017-18 fiscal year would also be exempt from the allotment 
percentage. This would allow handlers that have matched their 
production with market demand to continue to serve their customer base 
and maintain their

[[Page 18467]]

market share. Handlers subject to the restriction should be able to 
meet any shortfalls by utilizing cranberries or cranberry products they 
have in inventory.
    Further, making the recommendation to regulate the volume handled 
under a grower allotment program could result in some cost savings for 
growers depending upon what actions they may take to adjust supply.
    As the allotment represents a percentage of the grower's sales 
history, 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, would benefit from 
the stabilizing effects of this proposal.
    One alternative considered by the Committee was not to impose a 
volume regulation during the 2018-19 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 allotment percentage levels. 
However, some members were concerned that setting an allotment 
percentage that was too restrictive could negatively impact small 
growers. The Committee also considered not recommending a provision to 
allow a percentage of excess cranberries to be processed into cranberry 
products. The Committee determined that allowing handlers to process up 
to 50 percent of the excess cranberries they receive above their 
growers' allotment would provide additional volumes of fresh 
cranberries for processing and would provide handlers some flexibility 
while not adding additional juice concentrate to the existing inventory 
levels. Therefore, for the reasons mentioned above, these alternatives 
were rejected by the Committee.
    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. No changes in those requirements as a result of this 
action are necessary. Should any changes become necessary, they would 
be submitted to OMB for approval.
    This proposed rule would not impose any additional reporting or 
recordkeeping requirements on either small or large cranberry growers 
or handlers. As with all Federal marketing order programs, reports and 
forms are periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies. USDA has not 
identified any relevant Federal rules that duplicate, overlap, or 
conflict with this proposed 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, 
2017 and August 31, 2017 meetings were public meetings and all 
entities, both large and small, were able to express views on these 
issues. Finally, interested persons are invited to submit comments on 
this proposed rule, including the regulatory and information collection 
impacts of this action on small businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/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.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. All written comments timely received will be 
considered before a final determination is made on this matter.

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 
proposed to be 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 7 CFR part 929 continues to read as 
follows:

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

Subpart B--Administrative Requirements

0
2. In Sec.  929.104, revise paragraph (a) and remove and reserve 
paragraph (b) to read as follows:
    (a) In accordance with Sec.  929.61, excess cranberries may be 
diverted only to the following noncommercial or noncompetitive outlets:
* * * * *
0
3. In Sec.  929.105, add paragraph (c) to read as follows:
* * * * *
    (c) Beginning with crop year 2018-19, the due date for the grower 
report required under Sec.  929.62(a) is changed to March 1.
0
4. Add Sec.  929.159 to read as follows:


Sec.  929.159   Excess cranberries.

    (a) Beginning with crop year 2018-19, handlers holding excess 
cranberries shall submit to the Committee a written plan outlining 
procedures for the systematic disposal of such cranberries as specified 
in Sec.  929.59(b) by March 1.
    (b) Beginning with crop year 2018-19, all excess cranberries shall 
be diverted as specified in Sec.  929.59(c) prior to August 31.
0
5. Add Sec.  929.253 to read as follows:


Sec.  929.253  Marketable quantity and allotment percentage for the 
2018-19 crop year.

    (a) The marketable quantity for the 2018-19 crop year is set at 
7.275 million barrels and the allotment percentage is designated at 75 
percent.
    (b) Organically grown fruit shall be exempt from the volume 
regulation requirements of this section. Small handlers who processed 
less than 125,000 barrels during the 2017-18 fiscal year are exempt 
from the volume regulation requirements of this section. Any handler 
who did not have carryover inventory at the end of the 2017-18 fiscal 
year is also exempt from the volume regulation requirements of this 
section.
    (c) Handlers have the option to process up to 50 percent of the 
excess cranberries received over their growers' allotments into 
dehydrated cranberries or other processed products. Handlers utilizing 
this option shall divert an amount of 2018-19 processed products 
equivalent to the volume of excess cranberries processed as provided 
for in Sec.  929.107. The remaining volume of excess cranberries must 
be diverted as whole fruit.


[[Page 18468]]


    Dated: April 19, 2018.
Bruce Summers,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2018-08528 Filed 4-26-18; 8:45 am]
 BILLING CODE 3410-02-P