Tart Cherries Grown in the States of Michigan, et al.; Free and Restricted Percentages for the 2017-18 Crop Year for Tart Cherries, 21941-21946 [2018-10083]
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Proposed Rules
Federal Register
Vol. 83, No. 92
Friday, May 11, 2018
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Doc. No. AMS–SC–17–0071; SC18–930–1
PR]
Tart Cherries Grown in the States of
Michigan, et al.; Free and Restricted
Percentages for the 2017–18 Crop Year
for Tart Cherries
Agricultural Marketing Service,
USDA.
ACTION: Proposed rule.
AGENCY:
This proposed rule would
implement a recommendation from the
Cherry Industry Administrative Board
(Board) to establish free and restricted
percentages for the 2017–18 crop year
under the Marketing Order for tart
cherries grown in the states of Michigan,
New York, Pennsylvania, Oregon, Utah,
Washington, and Wisconsin. This action
would establish the proportion of tart
cherries from the 2017 crop which may
be handled in commercial outlets. This
action should stabilize marketing
conditions by adjusting supply to meet
market demand and help improve
grower returns.
DATES: Comments must be received by
June 11, 2018.
ADDRESSES: Interested persons are
invited to submit written comments
concerning this proposal. 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
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SUMMARY:
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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:
Jennie M. Varela, 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:
Jennie.Varela@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,
proposes an amendment to regulations
issued to carry out a marketing order as
defined in 7 CFR 900.2(j). This proposed
rule is issued under Marketing
Agreement and Order No. 930, both as
amended (7 CFR part 930), regulating
the handling of tart cherries produced in
the states of Michigan, New York,
Pennsylvania, Oregon, Utah,
Washington and Wisconsin. Part 930
(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 Board locally
administers the Order and is comprised
of producers and handlers of tart
cherries 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 proposed rule
falls within a category of regulatory
action 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
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Order of January 30, 2017, titled
‘Reducing Regulation and Controlling
Regulatory Costs’ ’’ (February 2, 2017).
This proposed rule has been reviewed
under Executive Order 12988, Civil
Justice Reform. Under the Order
provisions now in effect, free and
restricted percentages may be
established for tart cherries handled
during the crop year. This proposed rule
would establish free and restricted
percentages for tart cherries for the
2017–18 crop year, beginning July 1,
2017, through June 30, 2018.
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 free and
restricted percentages for the 2017–18
crop year. This proposal would
establish the proportion of tart cherries
from the 2017 crop which may be
handled in commercial outlets at 69
percent free and 31 percent restricted.
The Secretary has determined that
designating free and restricted
percentages of tart cherries for the 2017
crop year would effectuate the declared
policy of the Act to stabilize marketing
conditions by adjusting supply to meet
market demand and help improve
grower returns. The final percentages
were recommended by the Board at a
meeting on September 14, 2017, and
have been designated by the Secretary of
Agriculture (Secretary).
Section 930.51(a) provides the
Secretary authority to regulate volume
by designating free and restricted
percentages for any tart cherries
acquired by handlers in a given crop
year. Section 930.50 prescribes
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procedures for computing an optimum
supply based on sales history and for
calculating these free and restricted
percentages. Free percentage volume
may be shipped to any market, while
restricted percentage volume must be
held by handlers in a primary or
secondary reserve, or be diverted or
used for exempt purposes as prescribed
in §§ 930.159 and 930.162. Exempt
purposes include, in part, the
development of new products, sales into
new markets, the development of export
markets, and charitable contributions.
Sections 930.55 through 930.57
prescribe procedures for inventory
reserve. For cherries held in reserve,
handlers would be responsible for
storage and would retain title of the tart
cherries.
Under § 930.52, only districts with an
annual average production over the
prior three years of at least six million
pounds are subject to regulation, and
any district producing a crop that is less
than 50 percent of its annual average of
the previous five years is exempt. The
regulated districts for the 2017–2018
crop year would be: District 1—
Northern Michigan; District 2—Central
Michigan; District 3—Southern
Michigan; District 4—New York; District
7—Utah; District 8—Washington; and
District 9—Wisconsin. Districts 5 and 6
(Oregon and Pennsylvania, respectively)
would not be regulated for the 2017–18
season.
Demand for tart cherries and tart
cherry products tends to be relatively
stable from year to year. Conversely,
annual tart cherry production can vary
greatly. In addition, tart cherries are
processed and can be stored and carried
over from crop year to crop year, further
impacting supply. As a result, supply
and demand for tart cherries are rarely
in balance.
Because demand for tart cherries is
inelastic, total sales volume is not very
responsive to changes in price.
However, prices are very sensitive to
changes in supply. As such, an
oversupply of cherries would have a
sharp negative effect on prices, driving
down grower returns. Aware of this
economic relationship, the Board
focuses on using the volume control
provisions in the Order to balance
supply and demand to stabilize industry
returns.
Pursuant to § 930.50, the Board meets
on or about July 1 to review sales data,
inventory data, current crop forecasts,
and market conditions for the upcoming
season and, if necessary, to recommend
preliminary free and restricted
percentages if anticipated supply would
exceed demand. After harvest is
complete, but no later than September
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15, the Board meets again to update its
calculations using actual production
data, consider any necessary
adjustments to the preliminary
percentages, and determine if final free
and restricted percentages should be
recommended to the Secretary.
The Board uses sales history,
inventory, and production data to
determine whether there is a surplus
and, if so, how much volume should be
restricted to maintain optimum supply.
The optimum supply represents the
desirable volume of tart cherries that
should be available for sale in the
coming crop year. Optimum supply is
defined as the average free sales of the
prior three years plus desirable carryout inventory. Desirable carry-out is the
amount of fruit needed by the industry
to be carried into the succeeding crop
year to meet market demand until the
new crop is available. Desirable carryout is set by the Board after considering
market circumstances and needs.
Section 930.151(b) specifies that
desirable carry-out can range from zero
to a maximum of 100 million pounds.
In addition, USDA’s ‘‘Guidelines for
Fruit, Vegetable, and Specialty Crop
Marketing Orders’’ (https://
www.ams.usda.gov/publications/
content/1982-guidelines-fruit-vegetablemarketing-orders) specify that 110
percent of recent years’ sales should be
made available to primary markets each
season before recommendations for
volume regulation are approved. This
requirement is codified in § 930.50(g),
which specifies that in years when
restricted percentages are established,
the Board shall make available tonnage
equivalent to an additional 10 percent of
the average sales of the prior three years
for market expansion (market growth
factor).
After the Board determines optimum
supply, desirable carry-out, and market
growth factor, it must examine the
current year’s available volume to
determine whether there is an
oversupply situation. Available volume
includes carry-in inventory (any
inventory available at the beginning of
the season) along with that season’s
production. If production is greater than
the optimum supply minus carry-in, the
difference is considered surplus. This
surplus tonnage is divided by the sum
of production in the regulated districts
to reach a restricted percentage. This
percentage must be held in reserve or
used for approved diversion activities,
such as exports.
The Board met on June 22, 2017, and
computed an optimum supply of 282.4
million pounds for the 2017–18 crop
year using the average of free sales for
the three previous seasons. Regarding
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the carry-out value, the Board discussed
and considered a range of alternatives.
One member suggested a carry-out value
of 20 million pounds, approximately
one tenth of three years’ average annual
sales. Last year’s carry-out was set at 57
million pounds to cover the threemonth gap between calculation of carryout at the end of one season and the
availability of fruit for the next season.
One member, advocating for 60 million
pounds, noted that a carry-out to supply
only three months’ worth of cherries
makes it difficult for processors to serve
their customers. Some Board members
stated that in the past two seasons, the
recommended carry-out was equivalent
to approximately three months’ sales
but the industry ended up with a higher
carry-out than anticipated, which puts
downward pressure on prices. After the
consideration of the alternatives, the
Board determined a carry-out of 45
million pounds would be slightly less
than the three-month estimate of 60
million pounds and would supply the
industry’s needs at the beginning of the
next season.
The Board subtracted the estimated
carry-in of 110.5 million pounds from
the optimum supply to calculate the
production quantity needed from the
2017–18 crop to meet optimum supply.
This number, 171.9 million pounds, was
subtracted from the Board’s estimated
2017–18 total production (from
regulated and unregulated districts) of
259 million pounds to calculate a
surplus of 87.1 million pounds of tart
cherries. The Board also complied with
the market growth factor requirement by
removing 23.7 million pounds (average
sales for prior three years of 237.4
million times 10 percent) from the
surplus. The adjusted surplus of 63.1
million pounds was then divided by the
expected production in the regulated
districts (252 million pounds) minus
anticipated orchard diversion (12
million pounds) to reach a preliminary
restricted percentage of 26 percent for
the 2017–18 crop year.
The Board then discussed whether
this calculation would provide
sufficient supply to grow sales and fulfil
orders that have not yet shipped,
including filling remaining orders from
USDA purchases. A motion to make an
economic adjustment of five million
pounds to adjust for USDA sales failed
to receive Board support. After the
discussion, the Board’s preliminary
restricted percentage remained at 26
percent (63 million pounds divided by
240 million pounds).
The Board met again on September
14, 2017, to consider final volume
regulation percentages for the 2017–18
season. The final percentages are based
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on the Board’s reported production
figures and the supply and demand
information available in September. In
September and going forward, the Board
revised the formula for calculating free
sales. When the three-year sales average
was recalculated in September, the
revision lowered the sales average to
205 million pounds, which resulted in
a revised optimum supply of 250
million pounds.
The total production for the 2017–18
season was 270.4 million pounds, 11.4
million pounds above the Board’s June
estimate. In addition, growers diverted
11.7 million pounds in the orchard,
leaving 258.7 million pounds available
to market, 251.1 million pounds of
which are in the restricted districts.
Using the actual production numbers,
and accounting for the recommended
desirable carry-out and economic
adjustment, as well as the market
growth factor, the restricted percentage
was recalculated.
The Board subtracted the carry-in
figure used in June of 110.5 million
pounds from the optimum supply of 250
million pounds to determine 139.5
million pounds of 2017–18 production
would be necessary to reach optimum
supply. The Board subtracted the 139.5
million pounds from the actual
production of 270.4 million pounds,
resulting in a surplus of 130.9 million
pounds of tart cherries. The Board also
recommended an economic adjustment
to adjust the supply in anticipation of
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increased sales from market expansion,
new markets, and growth from the short
crop this season in Europe. The surplus
was then reduced by subtracting the
economic adjustment of 33 million
pounds and the market growth factor of
20.5 million pounds, resulting in an
adjusted surplus of 77.4 million pounds.
The Board then divided this final
surplus by the available production of
251.1 million pounds in the regulated
districts (262.8 million pounds minus
11.7 million pounds of in-orchard
diversion) to calculate a restricted
percentage of 31 percent with a
corresponding free percentage of 69
percent for the 2017–18 crop year, as
outlined in the following table:
Millions of
pounds
Final Calculations:
(1) Average sales of the prior three years ...................................................................................................................................
(2) Plus desirable carry-out ..........................................................................................................................................................
(3) Optimum supply calculated by the Board ...............................................................................................................................
(4) Carry-in as of July 1, 2017 .....................................................................................................................................................
(5) Adjusted optimum supply (item 3 minus item 4) ....................................................................................................................
(6) Board reported production ......................................................................................................................................................
(7) Surplus (item 6 minus item 5) ................................................................................................................................................
(8) Total economic adjustments ...................................................................................................................................................
(9) Market growth factor ...............................................................................................................................................................
(10) Adjusted Surplus (item 7 minus items 8 and 9) ...................................................................................................................
(11) Supply in regulated districts ..................................................................................................................................................
(12) In-orchard diversion ..............................................................................................................................................................
205.0
45.0
250.0
110.5
139.5
270.4
130.9
33.0
20.5
77.4
262.8
11.7
(13) Regulated production minus in-orchard diversion ................................................................................................................
251.1
Percent
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Final Percentages:
Restricted (item 10 divided by item 13 × 100) .............................................................................................................................
Free (100 minus restricted percentage) .......................................................................................................................................
The primary purpose of setting
restricted percentages is an attempt to
bring supply and demand into balance.
If the primary market is oversupplied
with cherries, grower prices decline
substantially. Restricted percentages
have benefited grower returns and
helped stabilize the market as compared
to those seasons prior to the
implementation of the Order. The Board
believes the available information
indicates that a restricted percentage
should be established for the 2017–18
crop year to avoid oversupplying the
market with tart cherries. Consequently,
based on its discussion of this issue and
the result of the above calculations, the
Board recommended final percentages
of 69 percent free and 31 percent
restricted by a vote of 18 in favor and
1 opposed.
The initial restriction percentage of 26
percent was lower than the final
restriction of 31 percent. One factor
affecting this change was the final
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production numbers that came in above
the Board’s June estimate. Additionally,
in September the Board revised the
formula for calculating the three-year
sales average, which will be used going
forward. The revision in the calculation
of the free sales average lowered the
sales calculation from the preliminary
237.4 million pounds to the final
average of 205 million pounds. The
desired carry-out remained the same at
45 million pounds, resulting in a
revised optimum supply of 250 million
pounds, down from the June calculation
of 282.4 million pounds.
At the Board meeting on September
14, an economic adjustment of 33
million pounds was recommended in
the Optimum Supply Formula (OSF).
Several members indicated the factors
in the marketplace prompted the need
to make this economic adjustment to
maintain market growth. These factors
include serving new and expanded
markets, a year over year increase in
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31
69
sales, and the expectation of increased
sales as a result of a smaller than normal
tart cherry crop in Europe this season.
One member opposed to the proposed
restriction expressed opposition to the
definition of sales used in the OSF. In
particular, the member expressed
concern that the definition of sales is
misrepresented by not including
imported cherries in the sales average,
thus not capturing overall supply and
demand. Another member agreed with
this concern but did not oppose the
proposed OSF calculation.
A motion was made to re-open the
discussion about the OSF and consider
an adjustment for imports. However, the
motion failed to gain enough support for
further discussion. One member
indicated that the issue of imports
continues to be a top priority for
discussion and will be revisited moving
forward into the winter season.
After reviewing the available data and
considering the concerns expressed, the
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Board determined that a 31 percent
restriction would meet sales needs and
establish some reserves without
oversupplying the market. Thus, the
Board recommended establishing final
percentages of 69 percent free and 31
percent restricted. The Board could
meet and recommend the release of
additional volume during the crop year
if conditions so warranted. The
Secretary finds, from the
recommendation and supporting
information supplied by the Board, that
designating final percentages of 69
percent free and 31 percent restricted
will tend to effectuate the declared
policy of the Act, and so designates
these percentages.
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
proposed rule on small entities.
Accordingly, AMS has prepared this
initial regulatory flexibility analysis.
The purpose of the RFA is to fit
regulatory actions to the scale of
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 600
producers of tart cherries in the
regulated area and approximately 40
handlers of tart cherries who are 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 have been
defined as those whose annual receipts
are less than $7,500,000 (13 CFR
121.201).
According to the National
Agricultural Statistics Service (NASS)
and Board data, the average annual
grower price for tart cherries utilized for
processing during the 2016–17 season
was approximately $0.273 per pound.
With total utilization at approximately
323.1 million pounds for the 2016–17
season, the total 2016–17 value of the
crop utilized for processing is estimated
at $88.2 million. Dividing the crop value
by the estimated number of producers
(600) yields an estimated average receipt
per producer of $147,000. This is well
below the SBA threshold for small
producers. A free on board (f.o.b.) price
of $0.83 per pound for frozen tart
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cherries, which make up the majority of
processed tart cherries, is a good
estimate to represent the range of prices
reported by the Food Institute during
the 2017–2018 season. Multiplying the
f.o.b price by total utilization of 323.1
million pounds results in an estimated
handler-level tart cherry value of $268
million. Dividing this figure by the
number of handlers (40) yields an
estimated average annual handler
receipts of $6.7 million, which is below
the SBA threshold for small agricultural
service firms. Assuming a normal
distribution, the majority of producers
and handlers of tart cherries may be
classified as small entities.
The tart cherry industry in the United
States is characterized by wide annual
fluctuations in production. According to
NASS, the pounds of tart cherry
production utilized for processing for
the years 2014 through 2016 were 304
million, 253 million, and 329 million,
respectively. Because of these
fluctuations, supply and demand for tart
cherries are rarely equal.
Demand for tart cherries is inelastic,
meaning changes in price have a
minimal effect on total sales volume.
However, prices are very sensitive to
changes in supply, and grower prices
vary widely in response to the large
swings in annual supply. Grower prices
per pound for processed utilization have
ranged from a low of $0.073 in 1987 to
a high of $0.588 per pound in 2012.
Because of this relationship between
supply and price, oversupplying the
market with tart cherries would have a
sharp negative effect on prices, driving
down grower returns. Aware of this
economic relationship, the Board
focuses on using the volume control
authority in the Order to align supply
with demand and stabilize industry
returns. This authority allows the
industry to set free and restricted
percentages as a way to bring supply
and demand into balance. Free
percentage cherries can be marketed by
handlers to any outlet, while restricted
percentage volume must be held by
handlers in reserve, diverted, or used for
exempted purposes.
This proposal would control the
supply of tart cherries by establishing
percentages of 69 percent free and 31
percent restricted for the 2017–18 crop
year. These percentages should stabilize
marketing conditions by adjusting
supply to meet market demand and help
improve grower returns. The proposal
would regulate tart cherries handled in
Michigan, New York, Utah, Washington,
and Wisconsin. The authority for this
proposal is provided in §§ 930.50,
930.51(a), and 930.52. The Board
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recommended this action at a meeting
on September 14, 2017.
This proposal would result in some
fruit being diverted from the primary
domestic markets. However, as
mentioned earlier, the USDA’s
‘‘Guidelines for Fruit, Vegetable, and
Specialty Crop Marketing Orders’’
(https://www.ams.usda.gov/publications/
content/1982-guidelines-fruit-vegetablemarketing-orders) specify that 110
percent of recent years’ sales should be
made available to primary markets each
season before recommendations for
volume regulation are approved. The
quantity that would be available under
this proposal is greater than 110 percent
of the average quantity shipped in the
prior three years.
In addition, there are secondary uses
available for restricted fruit, including
the development of new products, sales
into new markets, the development of
export markets, and being placed in
reserve. While these alternatives may
provide different levels of return than
the sales to primary markets, they play
an important role for the industry. The
areas of new products, new markets,
and the development of export markets
utilize restricted fruit to develop and
expand the markets for tart cherries. In
2016–17, these activities accounted for
over 37 million pounds in sales, 15.6
million of which were exports.
Placing tart cherries into reserves is
also a key part of balancing supply and
demand. Although handlers bear the
handling and storage costs for fruit in
reserve, reserves stored in large crop
years are used to supplement supplies
in short crop years. The reserves allow
the industry to mitigate the impact of
oversupply in large crop years, while
allowing the industry to maintain
supply to markets in years when
production falls below demand. Further,
storage and handling costs are more
than offset by the increase in price when
moving from a large crop to a short crop
year.
In addition, the Board recommended
a carry-out of 45 million pounds and
made a demand adjustment of 33
million pounds in order to make the
regulation less restrictive. The domestic
market would have an ample supply of
tart cherries, even with the
recommended restriction. There are
110.5 million pounds of carry-in, 7.7
million pounds of production in the
unregulated districts, and there would
be 173.7 million pounds of free tonnage
from the regulated districts, leaving
291.8 million pounds of fruit available
to the domestic market. Consequently, it
is not anticipated that this proposal
would unduly burden growers or
handlers.
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While this proposal could result in
some additional costs to the industry,
these costs are more than outweighed by
the benefits. The purpose of setting
restricted percentages is to attempt to
bring supply and demand into balance.
If the primary market (domestic) is
oversupplied with cherries, grower
prices decline substantially. Without
volume control, the primary market
would likely be oversupplied, resulting
in lower grower prices.
The three districts in Michigan, along
with the districts in New York, Utah,
Washington, and Wisconsin, are the
restricted areas for this crop year, and
have a combined total production of
262.8 million pounds. A 31 percent
restriction, after removing the 11.7
million pounds for in-orchard diversion,
means 173.3 million pounds would be
available to be shipped to primary
markets from these five states. The 173.3
million pounds from the restricted
districts, 7.7 million pounds from the
unrestricted districts (Oregon and
Pennsylvania), and the 110.5 million
pound carry-in inventory would make a
total of 291.5 million pounds available
as free tonnage for the primary markets.
This is less than the 306 million pounds
of free tonnage made available last year.
However, this would be enough to cover
260 million pounds of Board reported
sales in 2016–2017, while providing
substantial carry-out. Further, the Board
could meet and recommend the release
of additional volume during the crop
year if conditions so warranted.
Prior to the implementation of the
Order, grower prices often did not cover
the cost of production. The most recent
costs of production determined by
representatives of Michigan State
University are an estimated $0.33 per
pound. To assess the impact that
volume control has on the prices
growers receive for their product, an
econometric model has been developed.
Based on the model, the use of volume
control would have a positive impact on
grower returns for this crop year. With
volume control, grower prices are
estimated to be approximately $0.05 per
pound higher than without restrictions.
In addition, absent volume control, the
industry could start to build large
amounts of unwanted inventories.
These inventories would have a
depressing effect on grower prices.
Retail demand is assumed to be
highly inelastic, which indicates that
changes in price do not result in
significant changes in the quantity
demanded. Consumer prices largely do
not reflect fluctuations in cherry
supplies. Therefore, this proposal
should have little or no effect on
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17:56 May 10, 2018
Jkt 244001
consumer prices and should not result
in a reduction in retail sales.
The free and restricted percentages
established by this proposal would
provide the market with optimum
supply and apply uniformly to all
regulated handlers in the industry,
regardless of size. 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.
The stabilizing effects of this proposal
would benefit all handlers by helping
them maintain and expand markets,
despite seasonal supply fluctuations.
Likewise, price stability positively
impacts all growers and handlers by
allowing them to better anticipate the
revenues their tart cherries would
generate. Growers and handlers,
regardless of size, would benefit from
the stabilizing effects of this restriction.
In addition, the increased carry-out
should provide processors enough
supply to meet market needs going into
the next season.
The Board considered alternatives in
its preliminary restriction discussions
that affected this recommended action.
The Board had extensive discussions on
carry-out inventory alternatives. The
alternatives included four motions that
failed to pass, ranging from 20 million
pounds to 55 million pounds. The
Board determined that if the carry-out
number was too large, it could have a
negative impact on grower returns.
Some members were concerned that
processors would not have enough fruit
to maintain sales before the new crop
was available. After consideration of the
alternatives, the Board recommended a
carry-out of 45 million pounds.
Regarding demand, the Board began
in June with a sales average of 237.4
million pounds. However, in September
the Board revised the formula for
calculating the sales average going
forward. This modification will provide
a more accurate calculation of free sales
each year. This revision lowered the
three-year sales average for the final
calculation made at the September
meeting to 205 million pounds.
Additionally, at the September
meeting, Board members discussed an
expectation of increased sales over the
coming year. This anticipated increase
is from serving new and expanded
markets and to adjust for a smaller than
normal tart cherry crop in Europe this
season. In order to avoid
undersupplying the market, the Board
determined that the calculation of the
optimum supply should include an
additional adjustment to account for the
growth in new markets, market
PO 00000
Frm 00005
Fmt 4702
Sfmt 4702
21945
expansion, and the crop shortage in
Europe. The Board could accept the
calculated surplus without any change.
After discussion, an adjustment of an
additional 33 million pounds was made
to the 2017–18 available supply of tart
cherries as it was determined that this
amount would best meet the industry’s
sales needs. A motion to re-open the
discussion and consider a further
adjustment for imports was made, but
the motion failed to receive support.
Thus, the alternatives were rejected.
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. 0581–0177, Tart
Cherries Grown in the States of
Michigan, New York, Pennsylvania,
Oregon, Utah, Washington, and
Wisconsin. No changes are necessary in
those requirements as a result of this
action. Should any changes become
necessary, they would be submitted to
OMB for approval.
This proposal would not impose any
additional reporting or recordkeeping
requirements on either small or large
tart cherry 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.
AMS is committed to complying with
the E-Government Act, to promote the
use of the internet and other
information technologies to provide
increased opportunities for citizen
access to Government information and
services, and for other purposes.
USDA has not identified any relevant
Federal rules that duplicate, overlap or
conflict with this proposed rule.
In addition, the Board’s meetings
were widely publicized throughout the
tart cherry industry, and all interested
persons were invited to attend the
meeting and participate in Board
deliberations on all issues. Like all
Board meetings, the June 22, 2017, and
September 14, 2017, meetings were
public meetings, and all entities, both
large and small, were able to express
views on this issue. Finally, interested
persons are invited to submit comments
on this proposed rule, including the
regulatory and information collection
impacts of this proposal 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
E:\FR\FM\11MYP1.SGM
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21946
Federal Register / Vol. 83, No. 92 / Friday, May 11, 2018 / Proposed Rules
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 930
Marketing agreements, Reporting and
recordkeeping requirements, Tart
cherries.
For the reasons set forth in the
preamble, 7 CFR part 930 is proposed to
be amended as follows:
PART 930—TART CHERRIES GROWN
IN THE STATES OF MICHIGAN, NEW
YORK, PENNSYLVANIA, OREGON,
UTAH, WASHINGTON, AND
WISCONSIN
1. The authority citation for 7 CFR
part 930 continues to read as follows:
■
Authority: 7 U.S.C. 601–674.
2. Revise § 930.256 and its heading
title to read as follows:
■
§ 930.256 Free and restricted percentages
for the 2017–18 crop year.
The percentages for tart cherries
handled by handlers during the crop
year beginning on July 1, 2017, which
shall be free and restricted, respectively,
are designated as follows: Free
percentage, 69 percent and restricted
percentage, 31 percent.
Dated: May 8, 2018.
Bruce Summers,
Acting Administrator, Agricultural Marketing
Service.
[FR Doc. 2018–10083 Filed 5–10–18; 8:45 am]
BILLING CODE 3410–02–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
–200C, –300, –400, and –500 series
airplanes. This proposed AD was
prompted by a report indicating that
cracks were found on the fuselage frame
webs at stations forward and aft of the
overwing emergency exits between
stringers S–7 and S–8. This proposed
AD would require repetitive high
frequency eddy current (HFEC)
inspections for cracking of the fuselage
frame webs at certain stations between
stringers S–7 and S–8 and applicable
on-condition actions. We are proposing
this AD to address the unsafe condition
on these products.
DATES: We must receive comments on
this proposed AD by June 25, 2018.
ADDRESSES: You may send comments,
using the procedures found in 14 CFR
11.43 and 11.45, by any of the following
methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
instructions for submitting comments.
• Fax: 202–493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
• Hand Delivery: Deliver to Mail
address above between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
For service information identified in
this NPRM, contact Boeing Commercial
Airplanes, Attention: Contractual & Data
Services (C&DS), 2600 Westminster
Blvd., MC 110–SK57, Seal Beach, CA
90740–5600; telephone 562–797–1717;
internet https://
www.myboeingfleet.com. You may view
this referenced service information at
the FAA, Transport Standards Branch,
2200 South 216th St., Des Moines, WA.
For information on the availability of
this material at the FAA, call 206–231–
3195. It is also available on the internet
at https://www.regulations.gov by
searching for and locating Docket No.
FAA–2018–0392.
14 CFR Part 39
Examining the AD Docket
[Docket No. FAA–2018–0392; Product
Identifier 2018–NM–044–AD]
You may examine the AD docket on
the internet at https://
www.regulations.gov by searching for
and locating Docket No. FAA–2018–
0392; or in person at Docket Operations
between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
The AD docket contains this NPRM, the
regulatory evaluation, any comments
received, and other information. The
street address for Docket Operations
(phone: 800–647–5527) is in the
ADDRESSES section. Comments will be
available in the AD docket shortly after
receipt.
sradovich on DSK3GMQ082PROD with PROPOSALS
RIN 2120–AA64
Airworthiness Directives; The Boeing
Company Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
We propose to adopt a new
airworthiness directive (AD) for all The
Boeing Company Model 737–100, –200,
SUMMARY:
VerDate Sep<11>2014
17:56 May 10, 2018
Jkt 244001
PO 00000
Frm 00006
Fmt 4702
Sfmt 4702
FOR FURTHER INFORMATION CONTACT:
David Truong, Aerospace Engineer,
Airframe Section, FAA, Los Angeles
ACO Branch, 3960 Paramount
Boulevard, Lakewood, CA 90712–4137;
phone: 562–627–5224; fax: 562–627–
5210; email: david.truong@faa.gov.
SUPPLEMENTARY INFORMATION:
Comments Invited
We invite you to send any written
relevant data, views, or arguments about
this proposal. Send your comments to
an address listed under the ADDRESSES
section. Include ‘‘Docket No. FAA–
2018–0392; Product Identifier 2018–
NM–044–AD’’ at the beginning of your
comments. We specifically invite
comments on the overall regulatory,
economic, environmental, and energy
aspects of this NPRM. We will consider
all comments received by the closing
date and may amend this NPRM
because of those comments.
We will post all comments we
receive, without change, to https://
www.regulations.gov, including any
personal information you provide. We
will also post a report summarizing each
substantive verbal contact we receive
about this proposed AD.
Discussion
We have received a report indicating
that cracks were found on the fuselage
frame webs at stations forward and aft
of the overwing emergency exits
between stringers S–7 and S–8. Cracks
were found at multiple stations and
ranged in length from 2.4 inches to 2.55
inches. The cracks started at the end
fastener common to the uppermost
shear tie above the emergency exit
doors, where there is high load transfer
due to high shear flows around the
emergency exit doors. The cracks are the
result of fatigue loading caused by
cyclic pressurization of the fuselage.
This condition, if not addressed, could
result in fuselage frame web cracking,
which may lead to subsequent failure of
the surrounding structure, and
ultimately result in rapid
decompression and loss of structural
integrity of the airplane.
Related Service Information Under 1
CFR Part 51
We reviewed Boeing Alert
Requirements Bulletin 737–53A1371
RB, dated January 19, 2018. The service
information describes procedures for
repetitive HFEC inspections for cracking
of the fuselage frame webs at certain
stations between stringers S–7 and S–8
and applicable on-condition actions.
The on-condition action is repair. This
service information is reasonably
available because the interested parties
E:\FR\FM\11MYP1.SGM
11MYP1
]]>Agencies
[Federal Register Volume 83, Number 92 (Friday, May 11, 2018)]
[Proposed Rules]
[Pages 21941-21946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10083]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 83, No. 92 / Friday, May 11, 2018 / Proposed
Rules
[[Page 21941]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Doc. No. AMS-SC-17-0071; SC18-930-1 PR]
Tart Cherries Grown in the States of Michigan, et al.; Free and
Restricted Percentages for the 2017-18 Crop Year for Tart Cherries
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule would implement a recommendation from the
Cherry Industry Administrative Board (Board) to establish free and
restricted percentages for the 2017-18 crop year under the Marketing
Order for tart cherries grown in the states of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington, and Wisconsin. This action
would establish the proportion of tart cherries from the 2017 crop
which may be handled in commercial outlets. This action should
stabilize marketing conditions by adjusting supply to meet market
demand and help improve grower returns.
DATES: Comments must be received by June 11, 2018.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposal. 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: Jennie M. Varela, 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 an amendment to regulations issued to carry out a marketing
order as defined in 7 CFR 900.2(j). This proposed rule is issued under
Marketing Agreement and Order No. 930, both as amended (7 CFR part
930), regulating the handling of tart cherries produced in the states
of Michigan, New York, Pennsylvania, Oregon, Utah, Washington and
Wisconsin. Part 930 (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 Board locally
administers the Order and is comprised of producers and handlers of
tart cherries 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 proposed
rule falls within a category of regulatory action 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. Under the Order provisions now in effect, free
and restricted percentages may be established for tart cherries handled
during the crop year. This proposed rule would establish free and
restricted percentages for tart cherries for the 2017-18 crop year,
beginning July 1, 2017, through June 30, 2018.
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 free
and restricted percentages for the 2017-18 crop year. This proposal
would establish the proportion of tart cherries from the 2017 crop
which may be handled in commercial outlets at 69 percent free and 31
percent restricted. The Secretary has determined that designating free
and restricted percentages of tart cherries for the 2017 crop year
would effectuate the declared policy of the Act to stabilize marketing
conditions by adjusting supply to meet market demand and help improve
grower returns. The final percentages were recommended by the Board at
a meeting on September 14, 2017, and have been designated by the
Secretary of Agriculture (Secretary).
Section 930.51(a) provides the Secretary authority to regulate
volume by designating free and restricted percentages for any tart
cherries acquired by handlers in a given crop year. Section 930.50
prescribes
[[Page 21942]]
procedures for computing an optimum supply based on sales history and
for calculating these free and restricted percentages. Free percentage
volume may be shipped to any market, while restricted percentage volume
must be held by handlers in a primary or secondary reserve, or be
diverted or used for exempt purposes as prescribed in Sec. Sec.
930.159 and 930.162. Exempt purposes include, in part, the development
of new products, sales into new markets, the development of export
markets, and charitable contributions. Sections 930.55 through 930.57
prescribe procedures for inventory reserve. For cherries held in
reserve, handlers would be responsible for storage and would retain
title of the tart cherries.
Under Sec. 930.52, only districts with an annual average
production over the prior three years of at least six million pounds
are subject to regulation, and any district producing a crop that is
less than 50 percent of its annual average of the previous five years
is exempt. The regulated districts for the 2017-2018 crop year would
be: District 1--Northern Michigan; District 2--Central Michigan;
District 3--Southern Michigan; District 4--New York; District 7--Utah;
District 8--Washington; and District 9--Wisconsin. Districts 5 and 6
(Oregon and Pennsylvania, respectively) would not be regulated for the
2017-18 season.
Demand for tart cherries and tart cherry products tends to be
relatively stable from year to year. Conversely, annual tart cherry
production can vary greatly. In addition, tart cherries are processed
and can be stored and carried over from crop year to crop year, further
impacting supply. As a result, supply and demand for tart cherries are
rarely in balance.
Because demand for tart cherries is inelastic, total sales volume
is not very responsive to changes in price. However, prices are very
sensitive to changes in supply. As such, an oversupply of cherries
would have a sharp negative effect on prices, driving down grower
returns. Aware of this economic relationship, the Board focuses on
using the volume control provisions in the Order to balance supply and
demand to stabilize industry returns.
Pursuant to Sec. 930.50, the Board meets on or about July 1 to
review sales data, inventory data, current crop forecasts, and market
conditions for the upcoming season and, if necessary, to recommend
preliminary free and restricted percentages if anticipated supply would
exceed demand. After harvest is complete, but no later than September
15, the Board meets again to update its calculations using actual
production data, consider any necessary adjustments to the preliminary
percentages, and determine if final free and restricted percentages
should be recommended to the Secretary.
The Board uses sales history, inventory, and production data to
determine whether there is a surplus and, if so, how much volume should
be restricted to maintain optimum supply. The optimum supply represents
the desirable volume of tart cherries that should be available for sale
in the coming crop year. Optimum supply is defined as the average free
sales of the prior three years plus desirable carry-out inventory.
Desirable carry-out is the amount of fruit needed by the industry to be
carried into the succeeding crop year to meet market demand until the
new crop is available. Desirable carry-out is set by the Board after
considering market circumstances and needs. Section 930.151(b)
specifies that desirable carry-out can range from zero to a maximum of
100 million pounds.
In addition, USDA's ``Guidelines for Fruit, Vegetable, and
Specialty Crop Marketing Orders'' (https://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-marketing-orders)
specify that 110 percent of recent years' sales should be made
available to primary markets each season before recommendations for
volume regulation are approved. This requirement is codified in Sec.
930.50(g), which specifies that in years when restricted percentages
are established, the Board shall make available tonnage equivalent to
an additional 10 percent of the average sales of the prior three years
for market expansion (market growth factor).
After the Board determines optimum supply, desirable carry-out, and
market growth factor, it must examine the current year's available
volume to determine whether there is an oversupply situation. Available
volume includes carry-in inventory (any inventory available at the
beginning of the season) along with that season's production. If
production is greater than the optimum supply minus carry-in, the
difference is considered surplus. This surplus tonnage is divided by
the sum of production in the regulated districts to reach a restricted
percentage. This percentage must be held in reserve or used for
approved diversion activities, such as exports.
The Board met on June 22, 2017, and computed an optimum supply of
282.4 million pounds for the 2017-18 crop year using the average of
free sales for the three previous seasons. Regarding the carry-out
value, the Board discussed and considered a range of alternatives. One
member suggested a carry-out value of 20 million pounds, approximately
one tenth of three years' average annual sales. Last year's carry-out
was set at 57 million pounds to cover the three-month gap between
calculation of carry-out at the end of one season and the availability
of fruit for the next season. One member, advocating for 60 million
pounds, noted that a carry-out to supply only three months' worth of
cherries makes it difficult for processors to serve their customers.
Some Board members stated that in the past two seasons, the recommended
carry-out was equivalent to approximately three months' sales but the
industry ended up with a higher carry-out than anticipated, which puts
downward pressure on prices. After the consideration of the
alternatives, the Board determined a carry-out of 45 million pounds
would be slightly less than the three-month estimate of 60 million
pounds and would supply the industry's needs at the beginning of the
next season.
The Board subtracted the estimated carry-in of 110.5 million pounds
from the optimum supply to calculate the production quantity needed
from the 2017-18 crop to meet optimum supply. This number, 171.9
million pounds, was subtracted from the Board's estimated 2017-18 total
production (from regulated and unregulated districts) of 259 million
pounds to calculate a surplus of 87.1 million pounds of tart cherries.
The Board also complied with the market growth factor requirement by
removing 23.7 million pounds (average sales for prior three years of
237.4 million times 10 percent) from the surplus. The adjusted surplus
of 63.1 million pounds was then divided by the expected production in
the regulated districts (252 million pounds) minus anticipated orchard
diversion (12 million pounds) to reach a preliminary restricted
percentage of 26 percent for the 2017-18 crop year.
The Board then discussed whether this calculation would provide
sufficient supply to grow sales and fulfil orders that have not yet
shipped, including filling remaining orders from USDA purchases. A
motion to make an economic adjustment of five million pounds to adjust
for USDA sales failed to receive Board support. After the discussion,
the Board's preliminary restricted percentage remained at 26 percent
(63 million pounds divided by 240 million pounds).
The Board met again on September 14, 2017, to consider final volume
regulation percentages for the 2017-18 season. The final percentages
are based
[[Page 21943]]
on the Board's reported production figures and the supply and demand
information available in September. In September and going forward, the
Board revised the formula for calculating free sales. When the three-
year sales average was recalculated in September, the revision lowered
the sales average to 205 million pounds, which resulted in a revised
optimum supply of 250 million pounds.
The total production for the 2017-18 season was 270.4 million
pounds, 11.4 million pounds above the Board's June estimate. In
addition, growers diverted 11.7 million pounds in the orchard, leaving
258.7 million pounds available to market, 251.1 million pounds of which
are in the restricted districts. Using the actual production numbers,
and accounting for the recommended desirable carry-out and economic
adjustment, as well as the market growth factor, the restricted
percentage was recalculated.
The Board subtracted the carry-in figure used in June of 110.5
million pounds from the optimum supply of 250 million pounds to
determine 139.5 million pounds of 2017-18 production would be necessary
to reach optimum supply. The Board subtracted the 139.5 million pounds
from the actual production of 270.4 million pounds, resulting in a
surplus of 130.9 million pounds of tart cherries. The Board also
recommended an economic adjustment to adjust the supply in anticipation
of increased sales from market expansion, new markets, and growth from
the short crop this season in Europe. The surplus was then reduced by
subtracting the economic adjustment of 33 million pounds and the market
growth factor of 20.5 million pounds, resulting in an adjusted surplus
of 77.4 million pounds. The Board then divided this final surplus by
the available production of 251.1 million pounds in the regulated
districts (262.8 million pounds minus 11.7 million pounds of in-orchard
diversion) to calculate a restricted percentage of 31 percent with a
corresponding free percentage of 69 percent for the 2017-18 crop year,
as outlined in the following table:
------------------------------------------------------------------------
Millions of
pounds
------------------------------------------------------------------------
Final Calculations:
(1) Average sales of the prior three years.......... 205.0
(2) Plus desirable carry-out........................ 45.0
(3) Optimum supply calculated by the Board.......... 250.0
(4) Carry-in as of July 1, 2017..................... 110.5
(5) Adjusted optimum supply (item 3 minus item 4)... 139.5
(6) Board reported production....................... 270.4
(7) Surplus (item 6 minus item 5)................... 130.9
(8) Total economic adjustments...................... 33.0
(9) Market growth factor............................ 20.5
(10) Adjusted Surplus (item 7 minus items 8 and 9).. 77.4
(11) Supply in regulated districts.................. 262.8
(12) In-orchard diversion........................... 11.7
---------------
(13) Regulated production minus in-orchard diversion 251.1
------------------------------------------------------------------------
Percent
------------------------------------------------------------------------
Final Percentages:
Restricted (item 10 divided by item 13 x 100)....... 31
Free (100 minus restricted percentage).............. 69
------------------------------------------------------------------------
The primary purpose of setting restricted percentages is an attempt
to bring supply and demand into balance. If the primary market is
oversupplied with cherries, grower prices decline substantially.
Restricted percentages have benefited grower returns and helped
stabilize the market as compared to those seasons prior to the
implementation of the Order. The Board believes the available
information indicates that a restricted percentage should be
established for the 2017-18 crop year to avoid oversupplying the market
with tart cherries. Consequently, based on its discussion of this issue
and the result of the above calculations, the Board recommended final
percentages of 69 percent free and 31 percent restricted by a vote of
18 in favor and 1 opposed.
The initial restriction percentage of 26 percent was lower than the
final restriction of 31 percent. One factor affecting this change was
the final production numbers that came in above the Board's June
estimate. Additionally, in September the Board revised the formula for
calculating the three-year sales average, which will be used going
forward. The revision in the calculation of the free sales average
lowered the sales calculation from the preliminary 237.4 million pounds
to the final average of 205 million pounds. The desired carry-out
remained the same at 45 million pounds, resulting in a revised optimum
supply of 250 million pounds, down from the June calculation of 282.4
million pounds.
At the Board meeting on September 14, an economic adjustment of 33
million pounds was recommended in the Optimum Supply Formula (OSF).
Several members indicated the factors in the marketplace prompted the
need to make this economic adjustment to maintain market growth. These
factors include serving new and expanded markets, a year over year
increase in sales, and the expectation of increased sales as a result
of a smaller than normal tart cherry crop in Europe this season.
One member opposed to the proposed restriction expressed opposition
to the definition of sales used in the OSF. In particular, the member
expressed concern that the definition of sales is misrepresented by not
including imported cherries in the sales average, thus not capturing
overall supply and demand. Another member agreed with this concern but
did not oppose the proposed OSF calculation.
A motion was made to re-open the discussion about the OSF and
consider an adjustment for imports. However, the motion failed to gain
enough support for further discussion. One member indicated that the
issue of imports continues to be a top priority for discussion and will
be revisited moving forward into the winter season.
After reviewing the available data and considering the concerns
expressed, the
[[Page 21944]]
Board determined that a 31 percent restriction would meet sales needs
and establish some reserves without oversupplying the market. Thus, the
Board recommended establishing final percentages of 69 percent free and
31 percent restricted. The Board could meet and recommend the release
of additional volume during the crop year if conditions so warranted.
The Secretary finds, from the recommendation and supporting information
supplied by the Board, that designating final percentages of 69 percent
free and 31 percent restricted will tend to effectuate the declared
policy of the Act, and so designates these percentages.
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 proposed rule on small
entities. Accordingly, AMS has prepared this initial regulatory
flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
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 600 producers of tart cherries in the
regulated area and approximately 40 handlers of tart cherries who are
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 have been defined as those whose annual receipts are less than
$7,500,000 (13 CFR 121.201).
According to the National Agricultural Statistics Service (NASS)
and Board data, the average annual grower price for tart cherries
utilized for processing during the 2016-17 season was approximately
$0.273 per pound. With total utilization at approximately 323.1 million
pounds for the 2016-17 season, the total 2016-17 value of the crop
utilized for processing is estimated at $88.2 million. Dividing the
crop value by the estimated number of producers (600) yields an
estimated average receipt per producer of $147,000. This is well below
the SBA threshold for small producers. A free on board (f.o.b.) price
of $0.83 per pound for frozen tart cherries, which make up the majority
of processed tart cherries, is a good estimate to represent the range
of prices reported by the Food Institute during the 2017-2018 season.
Multiplying the f.o.b price by total utilization of 323.1 million
pounds results in an estimated handler-level tart cherry value of $268
million. Dividing this figure by the number of handlers (40) yields an
estimated average annual handler receipts of $6.7 million, which is
below the SBA threshold for small agricultural service firms. Assuming
a normal distribution, the majority of producers and handlers of tart
cherries may be classified as small entities.
The tart cherry industry in the United States is characterized by
wide annual fluctuations in production. According to NASS, the pounds
of tart cherry production utilized for processing for the years 2014
through 2016 were 304 million, 253 million, and 329 million,
respectively. Because of these fluctuations, supply and demand for tart
cherries are rarely equal.
Demand for tart cherries is inelastic, meaning changes in price
have a minimal effect on total sales volume. However, prices are very
sensitive to changes in supply, and grower prices vary widely in
response to the large swings in annual supply. Grower prices per pound
for processed utilization have ranged from a low of $0.073 in 1987 to a
high of $0.588 per pound in 2012.
Because of this relationship between supply and price,
oversupplying the market with tart cherries would have a sharp negative
effect on prices, driving down grower returns. Aware of this economic
relationship, the Board focuses on using the volume control authority
in the Order to align supply with demand and stabilize industry
returns. This authority allows the industry to set free and restricted
percentages as a way to bring supply and demand into balance. Free
percentage cherries can be marketed by handlers to any outlet, while
restricted percentage volume must be held by handlers in reserve,
diverted, or used for exempted purposes.
This proposal would control the supply of tart cherries by
establishing percentages of 69 percent free and 31 percent restricted
for the 2017-18 crop year. These percentages should stabilize marketing
conditions by adjusting supply to meet market demand and help improve
grower returns. The proposal would regulate tart cherries handled in
Michigan, New York, Utah, Washington, and Wisconsin. The authority for
this proposal is provided in Sec. Sec. 930.50, 930.51(a), and 930.52.
The Board recommended this action at a meeting on September 14, 2017.
This proposal would result in some fruit being diverted from the
primary domestic markets. However, as mentioned earlier, the USDA's
``Guidelines for Fruit, Vegetable, and Specialty Crop Marketing
Orders'' (https://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-marketing-orders) specify that 110 percent of recent
years' sales should be made available to primary markets each season
before recommendations for volume regulation are approved. The quantity
that would be available under this proposal is greater than 110 percent
of the average quantity shipped in the prior three years.
In addition, there are secondary uses available for restricted
fruit, including the development of new products, sales into new
markets, the development of export markets, and being placed in
reserve. While these alternatives may provide different levels of
return than the sales to primary markets, they play an important role
for the industry. The areas of new products, new markets, and the
development of export markets utilize restricted fruit to develop and
expand the markets for tart cherries. In 2016-17, these activities
accounted for over 37 million pounds in sales, 15.6 million of which
were exports.
Placing tart cherries into reserves is also a key part of balancing
supply and demand. Although handlers bear the handling and storage
costs for fruit in reserve, reserves stored in large crop years are
used to supplement supplies in short crop years. The reserves allow the
industry to mitigate the impact of oversupply in large crop years,
while allowing the industry to maintain supply to markets in years when
production falls below demand. Further, storage and handling costs are
more than offset by the increase in price when moving from a large crop
to a short crop year.
In addition, the Board recommended a carry-out of 45 million pounds
and made a demand adjustment of 33 million pounds in order to make the
regulation less restrictive. The domestic market would have an ample
supply of tart cherries, even with the recommended restriction. There
are 110.5 million pounds of carry-in, 7.7 million pounds of production
in the unregulated districts, and there would be 173.7 million pounds
of free tonnage from the regulated districts, leaving 291.8 million
pounds of fruit available to the domestic market. Consequently, it is
not anticipated that this proposal would unduly burden growers or
handlers.
[[Page 21945]]
While this proposal could result in some additional costs to the
industry, these costs are more than outweighed by the benefits. The
purpose of setting restricted percentages is to attempt to bring supply
and demand into balance. If the primary market (domestic) is
oversupplied with cherries, grower prices decline substantially.
Without volume control, the primary market would likely be
oversupplied, resulting in lower grower prices.
The three districts in Michigan, along with the districts in New
York, Utah, Washington, and Wisconsin, are the restricted areas for
this crop year, and have a combined total production of 262.8 million
pounds. A 31 percent restriction, after removing the 11.7 million
pounds for in-orchard diversion, means 173.3 million pounds would be
available to be shipped to primary markets from these five states. The
173.3 million pounds from the restricted districts, 7.7 million pounds
from the unrestricted districts (Oregon and Pennsylvania), and the
110.5 million pound carry-in inventory would make a total of 291.5
million pounds available as free tonnage for the primary markets. This
is less than the 306 million pounds of free tonnage made available last
year. However, this would be enough to cover 260 million pounds of
Board reported sales in 2016-2017, while providing substantial carry-
out. Further, the Board could meet and recommend the release of
additional volume during the crop year if conditions so warranted.
Prior to the implementation of the Order, grower prices often did
not cover the cost of production. The most recent costs of production
determined by representatives of Michigan State University are an
estimated $0.33 per pound. To assess the impact that volume control has
on the prices growers receive for their product, an econometric model
has been developed. Based on the model, the use of volume control would
have a positive impact on grower returns for this crop year. With
volume control, grower prices are estimated to be approximately $0.05
per pound higher than without restrictions. In addition, absent volume
control, the industry could start to build large amounts of unwanted
inventories. These inventories would have a depressing effect on grower
prices.
Retail demand is assumed to be highly inelastic, which indicates
that changes in price do not result in significant changes in the
quantity demanded. Consumer prices largely do not reflect fluctuations
in cherry supplies. Therefore, this proposal should have little or no
effect on consumer prices and should not result in a reduction in
retail sales.
The free and restricted percentages established by this proposal
would provide the market with optimum supply and apply uniformly to all
regulated handlers in the industry, regardless of size. 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.
The stabilizing effects of this proposal would benefit all handlers
by helping them maintain and expand markets, despite seasonal supply
fluctuations. Likewise, price stability positively impacts all growers
and handlers by allowing them to better anticipate the revenues their
tart cherries would generate. Growers and handlers, regardless of size,
would benefit from the stabilizing effects of this restriction. In
addition, the increased carry-out should provide processors enough
supply to meet market needs going into the next season.
The Board considered alternatives in its preliminary restriction
discussions that affected this recommended action. The Board had
extensive discussions on carry-out inventory alternatives. The
alternatives included four motions that failed to pass, ranging from 20
million pounds to 55 million pounds. The Board determined that if the
carry-out number was too large, it could have a negative impact on
grower returns. Some members were concerned that processors would not
have enough fruit to maintain sales before the new crop was available.
After consideration of the alternatives, the Board recommended a carry-
out of 45 million pounds.
Regarding demand, the Board began in June with a sales average of
237.4 million pounds. However, in September the Board revised the
formula for calculating the sales average going forward. This
modification will provide a more accurate calculation of free sales
each year. This revision lowered the three-year sales average for the
final calculation made at the September meeting to 205 million pounds.
Additionally, at the September meeting, Board members discussed an
expectation of increased sales over the coming year. This anticipated
increase is from serving new and expanded markets and to adjust for a
smaller than normal tart cherry crop in Europe this season. In order to
avoid undersupplying the market, the Board determined that the
calculation of the optimum supply should include an additional
adjustment to account for the growth in new markets, market expansion,
and the crop shortage in Europe. The Board could accept the calculated
surplus without any change. After discussion, an adjustment of an
additional 33 million pounds was made to the 2017-18 available supply
of tart cherries as it was determined that this amount would best meet
the industry's sales needs. A motion to re-open the discussion and
consider a further adjustment for imports was made, but the motion
failed to receive support. Thus, the alternatives were rejected.
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. 0581-0177, Tart
Cherries Grown in the States of Michigan, New York, Pennsylvania,
Oregon, Utah, Washington, and Wisconsin. No changes are necessary in
those requirements as a result of this action. Should any changes
become necessary, they would be submitted to OMB for approval.
This proposal would not impose any additional reporting or
recordkeeping requirements on either small or large tart cherry
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.
AMS is committed to complying with the E-Government Act, to promote
the use of the internet and other information technologies to provide
increased opportunities for citizen access to Government information
and services, and for other purposes.
USDA has not identified any relevant Federal rules that duplicate,
overlap or conflict with this proposed rule.
In addition, the Board's meetings were widely publicized throughout
the tart cherry industry, and all interested persons were invited to
attend the meeting and participate in Board deliberations on all
issues. Like all Board meetings, the June 22, 2017, and September 14,
2017, meetings were public meetings, and all entities, both large and
small, were able to express views on this issue. Finally, interested
persons are invited to submit comments on this proposed rule, including
the regulatory and information collection impacts of this proposal 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
[[Page 21946]]
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 930
Marketing agreements, Reporting and recordkeeping requirements,
Tart cherries.
For the reasons set forth in the preamble, 7 CFR part 930 is
proposed to be amended as follows:
PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK,
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN
0
1. The authority citation for 7 CFR part 930 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
0
2. Revise Sec. 930.256 and its heading title to read as follows:
Sec. 930.256 Free and restricted percentages for the 2017-18 crop
year.
The percentages for tart cherries handled by handlers during the
crop year beginning on July 1, 2017, which shall be free and
restricted, respectively, are designated as follows: Free percentage,
69 percent and restricted percentage, 31 percent.
Dated: May 8, 2018.
Bruce Summers,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2018-10083 Filed 5-10-18; 8:45 am]
BILLING CODE 3410-02-P
