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]

Download as PDF 21941 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 sradovich on DSK3GMQ082PROD with PROPOSALS SUMMARY: VerDate Sep<11>2014 17:56 May 10, 2018 Jkt 244001 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 PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 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 E:\FR\FM\11MYP1.SGM 11MYP1 sradovich on DSK3GMQ082PROD with PROPOSALS 21942 Federal Register / Vol. 83, No. 92 / Friday, May 11, 2018 / Proposed Rules 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 VerDate Sep<11>2014 17:56 May 10, 2018 Jkt 244001 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 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 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 E:\FR\FM\11MYP1.SGM 11MYP1 Federal Register / Vol. 83, No. 92 / Friday, May 11, 2018 / Proposed Rules 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 21943 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 sradovich on DSK3GMQ082PROD with PROPOSALS 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 VerDate Sep<11>2014 17:56 May 10, 2018 Jkt 244001 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 PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 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 E:\FR\FM\11MYP1.SGM 11MYP1 21944 Federal Register / Vol. 83, No. 92 / Friday, May 11, 2018 / Proposed Rules sradovich on DSK3GMQ082PROD with PROPOSALS 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 VerDate Sep<11>2014 17:56 May 10, 2018 Jkt 244001 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 PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 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. E:\FR\FM\11MYP1.SGM 11MYP1 sradovich on DSK3GMQ082PROD with PROPOSALS Federal Register / Vol. 83, No. 92 / Friday, May 11, 2018 / Proposed Rules 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 VerDate Sep<11>2014 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 11MYP1 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