Tart Cherries Grown in the States of Michigan, et al.; Free and Restricted Percentages for the 2019-20 Crop Year, 16273-16278 [2020-05825]

Download as PDF 16273 Proposed Rules Federal Register Vol. 85, No. 56 Monday, March 23, 2020 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 Food and Nutrition Service 7 CFR Parts 210, 215, 220, 226, and 235 [FNS–2019–0007] RIN 0584–AE67 Simplifying Meal Service and Monitoring Requirements in the National School Lunch and School Breakfast Programs; Extension of Comment Period Food and Nutrition Service (FNS), USDA. ACTION: Proposed rule; extension of comment period. AGENCY: This rulemaking proposes changes to simplify meal pattern and monitoring requirements in the National School Lunch and School Breakfast Programs. The proposed changes, including optional flexibilities, are customer-focused and intended to help State and local Program operators overcome operational challenges that limit their ability to manage these Programs efficiently. The original comment period for this rule ends on March 23, 2020. FNS is extending the comment period through April 22, 2020. DATES: The comment period for the proposed rule published on January 23, 2020 (85 FR 4094) has been extended through April 22, 2020. To be assured of consideration, comments must be received on or before April 22, 2020. ADDRESSES: The Food and Nutrition Service, USDA, invites interested persons to submit written comments on this proposed rule. Comments may be submitted in writing by one of the following methods: • Preferred Method: Federal eRulemaking Portal: Go to http:// www.regulations.gov. Follow the online instructions for submitting comments. • Mail: Send comments to School Programs Branch, Policy and Program Development Division, Food and Nutrition Service, 1320 Braddock Place, 4th Floor, Alexandria, Virginia 22314. jbell on DSKJLSW7X2PROD with PROPOSALS SUMMARY: VerDate Sep<11>2014 16:52 Mar 20, 2020 Jkt 250001 All written comments submitted in response to this proposed rule will be included in the record and will be made available to the public. Please be advised that the substance of the comments and the identity of the individuals or entities submitting the comments will be subject to public disclosure. FNS will make the written comments publicly available on the internet via http://www.regulations.gov. FOR FURTHER INFORMATION CONTACT: Tina Namian, Chief, School Programs Branch, Policy and Program Development Division, Food and Nutrition Service, 703–305–2590. SUPPLEMENTARY INFORMATION: The Food and Nutrition Service (FNS) is reopening the public comment period for this proposed rule, which was published on January 23, 2020. The Coronavirus Disease 2019 (COVID–19) outbreaks have had a strong impact on schools, state agencies, stakeholders and others who are working tirelessly to ensure children receive meals in light of school closures. USDA wants to give these parties, and the public at large, additional time to provide feedback on these proposed reforms. Dated: March 16, 2020. Pamilyn Miller, Administrator, Food and Nutrition Service. [FR Doc. 2020–05979 Filed 3–20–20; 8:45 am] BILLING CODE 3410–30–P DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 7 CFR Part 930 [Doc. No. AMS–SC–19–100; SC–20–930–1 PR] Tart Cherries Grown in the States of Michigan, et al.; Free and Restricted Percentages for the 2019–20 Crop Year 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 2019–20 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 SUMMARY: PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 would establish the proportion of tart cherries from the 2019–20 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. Also, a correction would be made to this section to reflect the correct desirable carry-out inventory not to exceed a maximum of 100 million pounds. Comments must be received by April 22, 2020. 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: http://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: http:// 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: Jennie.Varela@usda.gov or Christian.Nissen@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@usda.gov. SUPPLEMENTARY INFORMATION: This action, pursuant to 5 U.S.C. 553, proposes an amendment to regulations DATES: E:\FR\FM\23MRP1.SGM 23MRP1 jbell on DSKJLSW7X2PROD with PROPOSALS 16274 Federal Register / Vol. 85, No. 56 / Monday, March 23, 2020 / Proposed Rules 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’ ’’ (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 2019–20 crop year, beginning July 1, 2019, through June 30, 2020. 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. VerDate Sep<11>2014 16:52 Mar 20, 2020 Jkt 250001 This proposed rule invites comments on the establishment of free and restricted percentages for the 2019–20 crop year. This proposal would establish the proportion of tart cherries from the 2019–20 crop which may be handled in commercial outlets at 67 percent free and 33 percent restricted. The Secretary of Agriculture (Secretary) has determined that designating free and restricted percentages of tart cherries for the 2019–20 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. A correction would also be made to § 930.151 to reflect the correct desirable carry-out inventory not to exceed a maximum of 100 million pounds (81 FR 63676). These recommendations were made by the Board at meetings on June 27, 2019, and September 12, 2019. 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 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 2019–20 crop year would be: District 1—Northern Michigan; District 2—Central Michigan; District 3—Southern Michigan; District 7—Utah; District 8—Washington; and District 9—Wisconsin. Districts 4, 5, and 6 (New York, Oregon and Pennsylvania, respectively) would not be regulated for the 2019–20 season. Demand for tart cherries and tart cherry products tends to be relatively stable from year to year. Conversely, PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 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 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. In June 2015, after considering market circumstances and needs; the Board recommended a desirable carry-out inventory not to exceed a maximum of up to 100 million pounds beginning with the 2016 crop year. That action was subsequently approved by the Secretary (81 FR 63676). Therefore, a correction would be made to § 930.151 to reflect the correct desirable carry-out inventory not to exceed a maximum of 100 million pounds. In addition, USDA’s ‘‘Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders’’ (http:// www.ams.usda.gov/publications/ content/1982-guidelines-fruit-vegetable- E:\FR\FM\23MRP1.SGM 23MRP1 jbell on DSKJLSW7X2PROD with PROPOSALS Federal Register / Vol. 85, No. 56 / Monday, March 23, 2020 / Proposed Rules 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 § 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 27, 2019, and computed an optimum supply of 313 million pounds for the 2019–20 crop year using the average of free sales for the three previous seasons and desirable carry-out. To determine the carry-out figure, the Board discussed and considered a range of alternatives. One member suggested a carry-out value of 20 million pounds, noting high carryout puts downward pressure on grower prices. Another member agreed, noting the actual carry-out is often twice what the Board has estimated as desirable. Some members favored a carry-out of 50 million pounds. Other members were concerned that too low of a carry-out may push the restricted percentage too high for the industry to implement and suggested repeating the carry-out of 80 million pounds from the previous season. The Board’s executive director noted average sales are about 21 million pounds a month. Using that average, it would take 84 million pounds to supply the industry for four months. After considering the alternatives, the Board determined a carry-out of 85 million pounds would be enough to supply the industry’s needs at the beginning of the next season. The Board subtracted the estimated carry-in of 174 million pounds from the optimum supply to calculate the production quantity needed from the 2019–20 crop to meet optimum supply. This number, 139 million pounds, was subtracted from the Board’s estimated VerDate Sep<11>2014 16:52 Mar 20, 2020 Jkt 250001 2019–20 total production (from regulated and unregulated districts) of 248.2 million pounds to calculate a surplus of 109.2 million pounds of tart cherries. The Board also complied with the market growth factor requirement by removing 22.8 million pounds (average sales for prior three years of 228 million times 10 percent) from the surplus. The adjusted surplus of 86.4 million pounds was then divided by the expected production in the regulated districts (240 million pounds) to reach a preliminary restricted percentage of 36 percent for the 2019–20 crop year. The Board then discussed whether this calculation would supply enough cherries to grow sales and fulfil orders that have not yet shipped. Some members reported there had been excessive rainfall, especially in Michigan, during the growing season. This could lead to poor fruit quality and handlers would need additional available tonnage to meet sales needs. As a result, the Board recommended an additional economic adjustment of 20 million pounds, which is subtracted from the surplus. The Board also anticipated orchard diversion would be about 50 million pounds, which is subtracted from the expected production. With these modifications, the preliminary restricted percentage was calculated at 35 percent. The Board met again on September 12, 2019, to consider final volume regulation percentages for the 2019–20 season. The final percentages are based on the Board’s reported production figures and the supply and demand information available in September. The total production for the 2019–20 season was 257.2 million pounds, 9 million pounds above the Board’s June estimate. In addition, growers diverted 18.3 million pounds in the orchard, about a third of what had been anticipated. As a result 238.9 million pounds would be available to market, 230.2 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 174 million pounds, from the optimum supply of 313 million pounds to determine 139 million pounds of 2019–20 production would be necessary to reach optimum supply. The Board subtracted the 139 million pounds from the actual production of 257.2 million pounds, resulting in a surplus of 118.2 million pounds of tart cherries. PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 16275 The recalculated surplus was reduced by subtracting the revised economic adjustment of 20 million pounds and the market growth factor of 22.8 million pounds, resulting in an adjusted surplus of 75.4 million pounds. The Board then divided this final surplus by the available production of 230.2 million pounds in the regulated districts (248.5 million pounds minus 18.3 million pounds of in-orchard diversion) to calculate a restricted percentage of 33 percent with a corresponding free percentage of 67 percent for the 2019– 20 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, 2019 .. (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) Production in regulated districts ......................................... (12) In-Orchard Diversion .......... (13) Production minus in orchard diversion ........................ Final Percentages: Restricted (item 10 divided by item 13 × 100) ............ Free (100 minus restricted percentage) ...................... 228 85 313 174 139 257.2 118.2 20 22.8 75.4 248.5 18.3 230.2 Percent 33 67 The final restriction of 33 percent is lower than the preliminary restriction percentage of 35 percent. The change is due to the increase in production from the June estimate and lower in-orchard diversion volume. The desired carry-out remained the same at 85 million pounds. In discussing the calculation, members indicated the quality concerns that led to the adjustment were accurate. Members did not propose any changes to the adjustment following harvest. During the preliminary and final discussions, attendees raised concerns about the age of free inventory and the impact of imported tart cherry products. The Board voted to form a committee to develop a proposal for collecting additional data regarding inventory. Regarding the impact of imports, the Board approved a research proposal to gather additional data. The Board anticipates these actions would help E:\FR\FM\23MRP1.SGM 23MRP1 16276 Federal Register / Vol. 85, No. 56 / Monday, March 23, 2020 / Proposed Rules jbell on DSKJLSW7X2PROD with PROPOSALS provide additional data for future volume regulation discussions. Establishing free and 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, based on its discussion of this issue and the result of the above calculations, believes the available information indicates a restricted percentage should be established for the 2019–20 crop year to avoid oversupplying the market with tart cherries. Consequently, the Board recommended final percentages of 67 percent free and 33 percent restricted by a vote of 15 in favor, and 3 opposed. 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 67 percent free and 33 percent restricted would 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 400 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 $1,000,000, and small agricultural service firms have been defined as those whose annual receipts are less than $30,000,000 (13 CFR 121.201). VerDate Sep<11>2014 16:52 Mar 20, 2020 Jkt 250001 According to the National Agricultural Statistics Service (NASS) and Board data, the average annual grower price for tart cherries utilized for processing during the 2018–19 season was approximately $0.196 per pound. With total utilization at 288.8 million pounds for the 2018–19 season, the total 2018–19 value of the crop utilized for processing is estimated at $56.6 million. Dividing the crop value by the estimated number of producers (400) yields an estimated average receipt per producer of $141,500. This is well below the SBA threshold for small producers. A free on board (FOB) price of $0.80 per pound for frozen tart cherries was reported by the Food Institute during the 2018–19 season. Based on utilization, this price represents a good estimate of the price for processed cherries. Multiplying this FOB price by total utilization of 288.8 million pounds results in an estimated handler-level tart cherry value of $231 million. Dividing this figure by the number of handlers (40) yields estimated average annual handler receipts of $5.8 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 utilized tart cherry production for the years 2014 through 2018 were 301 million, 251 million, 319 million, 254 million, and 289 million, respectively. Because of these fluctuations, supply and demand for tart cherries are rarely in balance. 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 when a weather event substantially reduced supply. 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 PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 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 67 percent free and 33 percent restricted for the 2019–20 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, Utah, Washington, and Wisconsin. The authority for this proposed action is provided in §§ 930.50, 930.51(a), and 930.52. The Board recommended this action at a meeting on September 12, 2019. 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’’ (http://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. Under this proposal, the available quantity (337.5 million pounds) would be 148 percent of the average sales for the last three years (228 million pounds). 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 2018–19, these activities accounted for over 88 million pounds in sales, a 6million-pound increase from the previous season. 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 help the industry to mitigate the impact of oversupply in large crop years, while allowing the industry to supply 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. E:\FR\FM\23MRP1.SGM 23MRP1 jbell on DSKJLSW7X2PROD with PROPOSALS Federal Register / Vol. 85, No. 56 / Monday, March 23, 2020 / Proposed Rules The Board recommended a carry-out of 85 million pounds and made a demand adjustment of 20 million pounds in order to make the regulation less restrictive to account for fruit quality concerns. With 174 million pounds of carry-in, 8.7 million pounds of production in the unregulated districts, and 154.8 million pounds of free tonnage from the regulated districts, 337.5 million pounds of fruit would be available for the domestic market. This amount is comparable to the 336.9 million pounds made available in the previous season. Even with the recommended restriction, the domestic market would have an ample supply of tart cherries. Further, should marketing conditions change, and market demand exceed existing supplies, the Board could meet and recommend the release of an additional volume of cherries. Consequently, it is not anticipated that this proposal would unduly burden growers or handlers. While this proposal could result in some additional costs to the industry, these costs are 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. An econometric model has been developed to assess the impact volume control has on the price growers receive for their product. 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 $0.04 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 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 would apply uniformly to all regulated handlers in the industry, regardless of size. As the restriction represents a percentage of a handler’s VerDate Sep<11>2014 16:52 Mar 20, 2020 Jkt 250001 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 the volume restriction. As noted earlier, the Board had extensive discussions on carry-out inventory alternatives. The alternatives ranged from 20 million pounds to 100 million pounds. Some expressed a concern that the relatively low reserves compared to high carry-in signaled that not enough fruit had been put in reserve in previous seasons. Some attendees indicated excess carry-in over the past few seasons has had a negative effect on returns and growers are seeking relief. The Board noted if the carry-out number was too large, it could have a negative impact on grower returns, but enough fruit was needed to supply processors before the new harvest. After consideration of the alternatives, the Board recommended a carry-out of 85 million pounds. The Board also weighed alternatives when discussing the economic adjustment. Some member suggested making no adjustment to the formula. However, at its June meeting, the Board recommended a 20-million-pound adjustment to account for fruit quality concerns. When fruit is too large or too small, it does not move as efficiently through the pitting process. The Board was concerned excessive rainfall would result in large, soft, fruit that would not process as well as average-sized fruit. As a result, more fruit would be necessary to get the needed final product. Following harvest, Board members confirmed weather had indeed affected the size of fruit, and that the recommended adjustment was accurate and should not be changed. In discussing the preliminary recommendation, the Board heard a report from a committee that examined import issues. During the discussion there was a suggestion that the Board might consider using the previous year’s import numbers to estimate imported volume in the coming year. However, there was no motion to make an adjustment for imports. To better address these issues, the Board did allocated funds to a research project to provide additional information on the PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 16277 volume and impact of imported cherry products. Given the concerns with regulation expressed by Board members and industry members in attendance, the Board also considered recommending no volume regulation. However, the data indicated a high carryover from previous seasons has created a substantial surplus. During this discussion, attendees questioned the age of the products in inventory. While all types of products can be stored for multiple years, their value does diminish over time. Reserve inventory must be under two years old, but there are no restrictions on free inventory. Industry members expressed concern that not all inventory is of equal value and suggested the Board should collect information on the age and quality of free inventory. A vote to recommend no volume regulation failed, but the Board did agree to form a committee to investigate potential reporting requirements to provide the industry better data regarding the available inventory. 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 meetings and participate in Board deliberations on all issues. Like all Board meetings, the June 27, 2019, and E:\FR\FM\23MRP1.SGM 23MRP1 16278 Federal Register / Vol. 85, No. 56 / Monday, March 23, 2020 / Proposed Rules September 12, 2019, 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: http://www.ams.usda.gov/ rules-regulations/moa/small-businesses. Any questions about the compliance guide should be sent to Richard Lower at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section. A 30-day comment period is provided to allow interested persons to respond to this proposal. All written comments timely received will be considered before a final determination is made on this matter. List of Subjects in 7 CFR Part 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 § 930.151 to read as follows: § 930.151 Desirable Carry-out inventory. jbell on DSKJLSW7X2PROD with PROPOSALS Beginning with the crop year starting July 1, 2016, for the purposes of determining an optimum supply volume, the Board may recommend a desirable carry-out inventory not to exceed 100 million pounds. ■ 3. Revise § 930.256 and the heading to read as follows: § 930.256 Free and restricted percentages for the 2019–20 crop year. The percentages for tart cherries handled by handlers during the crop year beginning on July 1, 2019, which shall be free and restricted, respectively, are designated as follows: Free VerDate Sep<11>2014 16:52 Mar 20, 2020 Jkt 250001 percentage, 67 percent and restricted percentage, 33 percent. Bruce Summers, Administrator, Agricultural Marketing Service. [FR Doc. 2020–05825 Filed 3–20–20; 8:45 am] BILLING CODE 3410–02–P I. Obtaining Information and Submitting Comments NUCLEAR REGULATORY COMMISSION 10 CFR Chapter I [NRC–2018–0142] Backfitting, Forward Fitting, and Issue Finality Guidance Nuclear Regulatory Commission. ACTION: Draft NUREG; request for comment. AGENCY: The U.S. Nuclear Regulatory Commission (NRC) is issuing for public comment draft NUREG–1409, ‘‘Backfitting Guidelines,’’ Revision 1. This draft NUREG provides guidance on the implementation of the backfitting and issue finality provisions of the NRC’s regulations and the NRC’s forward fitting policy in accordance with Management Directive and Handbook 8.4, ‘‘Management of Backfitting, Forward Fitting, Issue Finality, and Information Requests.’’ DATES: Submit comments by May 22, 2020. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received before this date. ADDRESSES: You may submit comments by any of the following methods: • Federal Rulemaking website: Go to https://www.regulations.gov and search for Docket ID NRC–2018–0142. Address questions about NRC docket IDs in Regulations.gov to Jennifer Borges; telephone: 301–287–9127; email: Jennifer.Borges@nrc.gov. For technical questions, contact the individuals listed in the FOR FURTHER INFORMATION CONTACT section of this document. • Mail comments to: Office of Administration, Mail Stop: TWFN–7– A60M, U.S. Nuclear Regulatory Commission, Washington, DC 20555– 0001, ATTN: Program Management, Announcements and Editing Staff. For additional direction on obtaining information and submitting comments, see ‘‘Obtaining Information and Submitting Comments’’ in the SUPPLEMENTARY INFORMATION section of this document. FOR FURTHER INFORMATION CONTACT: Tim Reed, telephone: 301–415–1462, email: SUMMARY: PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 Timothy.Reed@nrc.gov; or Audrey Klett, telephone: 301–415–0489, email: Audrey.Klett@nrc.gov. Both are staff of the Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington DC 20555– 0001. SUPPLEMENTARY INFORMATION: A. Obtaining Information Please refer to Docket ID NRC–2018– 0142 when contacting the NRC about the availability of information for this action. You may obtain publiclyavailable information related to this action by any of the following methods: • Federal Rulemaking website: Go to https://www.regulations.gov and search for Docket ID NRC–2018–0142. • NRC’s Agencywide Documents Access and Management System (ADAMS): You may obtain publiclyavailable documents online in the ADAMS Public Documents collection at https://www.nrc.gov/reading-rm/ adams.html. To begin the search, select ‘‘Begin Web-based ADAMS Search.’’ For problems with ADAMS, please contact the NRC’s Public Document Room (PDR) reference staff at 1–800–397–4209, 301– 415–4737, or by email to pdr.resource@ nrc.gov. The ADAMS accession number for each document referenced (if it is available in ADAMS) is provided the first time that it is mentioned in this document. • NRC’s PDR: You may examine and purchase copies of public documents at the NRC’s PDR, Room O1–F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852. B. Submitting Comments Please include Docket ID NRC–2018– 0142 in your comment submission. The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at https:// www.regulations.gov as well as enter the comment submissions into ADAMS. The NRC does not routinely edit comment submissions to remove identifying or contact information. If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information E:\FR\FM\23MRP1.SGM 23MRP1

Agencies

[Federal Register Volume 85, Number 56 (Monday, March 23, 2020)]
[Proposed Rules]
[Pages 16273-16278]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05825]


-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Doc. No. AMS-SC-19-100; SC-20-930-1 PR]


Tart Cherries Grown in the States of Michigan, et al.; Free and 
Restricted Percentages for the 2019-20 Crop Year

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 2019-20 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 2019-20 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. Also, a correction would be 
made to this section to reflect the correct desirable carry-out 
inventory not to exceed a maximum of 100 million pounds.

DATES: Comments must be received by April 22, 2020.

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: http://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: http://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

[[Page 16274]]

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' '' (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 2019-20 crop year, 
beginning July 1, 2019, through June 30, 2020.
    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 2019-20 crop year. This proposal 
would establish the proportion of tart cherries from the 2019-20 crop 
which may be handled in commercial outlets at 67 percent free and 33 
percent restricted. The Secretary of Agriculture (Secretary) has 
determined that designating free and restricted percentages of tart 
cherries for the 2019-20 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. A correction would 
also be made to Sec.  930.151 to reflect the correct desirable carry-
out inventory not to exceed a maximum of 100 million pounds (81 FR 
63676). These recommendations were made by the Board at meetings on 
June 27, 2019, and September 12, 2019.
    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 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 2019-20 crop year would be: 
District 1--Northern Michigan; District 2--Central Michigan; District 
3--Southern Michigan; District 7--Utah; District 8--Washington; and 
District 9--Wisconsin. Districts 4, 5, and 6 (New York, Oregon and 
Pennsylvania, respectively) would not be regulated for the 2019-20 
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. In June 2015, after considering market 
circumstances and needs; the Board recommended a desirable carry-out 
inventory not to exceed a maximum of up to 100 million pounds beginning 
with the 2016 crop year. That action was subsequently approved by the 
Secretary (81 FR 63676). Therefore, a correction would be made to Sec.  
930.151 to reflect the correct desirable carry-out inventory not to 
exceed a maximum of 100 million pounds.
    In addition, USDA's ``Guidelines for Fruit, Vegetable, and 
Specialty Crop Marketing Orders'' (http://www.ams.usda.gov/
publications/content/1982-guidelines-fruit-vegetable-

[[Page 16275]]

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 27, 2019, and computed an optimum supply of 
313 million pounds for the 2019-20 crop year using the average of free 
sales for the three previous seasons and desirable carry-out. To 
determine the carry-out figure, the Board discussed and considered a 
range of alternatives. One member suggested a carry-out value of 20 
million pounds, noting high carry-out puts downward pressure on grower 
prices. Another member agreed, noting the actual carry-out is often 
twice what the Board has estimated as desirable. Some members favored a 
carry-out of 50 million pounds. Other members were concerned that too 
low of a carry-out may push the restricted percentage too high for the 
industry to implement and suggested repeating the carry-out of 80 
million pounds from the previous season. The Board's executive director 
noted average sales are about 21 million pounds a month. Using that 
average, it would take 84 million pounds to supply the industry for 
four months. After considering the alternatives, the Board determined a 
carry-out of 85 million pounds would be enough to supply the industry's 
needs at the beginning of the next season.
    The Board subtracted the estimated carry-in of 174 million pounds 
from the optimum supply to calculate the production quantity needed 
from the 2019-20 crop to meet optimum supply. This number, 139 million 
pounds, was subtracted from the Board's estimated 2019-20 total 
production (from regulated and unregulated districts) of 248.2 million 
pounds to calculate a surplus of 109.2 million pounds of tart cherries. 
The Board also complied with the market growth factor requirement by 
removing 22.8 million pounds (average sales for prior three years of 
228 million times 10 percent) from the surplus. The adjusted surplus of 
86.4 million pounds was then divided by the expected production in the 
regulated districts (240 million pounds) to reach a preliminary 
restricted percentage of 36 percent for the 2019-20 crop year.
    The Board then discussed whether this calculation would supply 
enough cherries to grow sales and fulfil orders that have not yet 
shipped. Some members reported there had been excessive rainfall, 
especially in Michigan, during the growing season. This could lead to 
poor fruit quality and handlers would need additional available tonnage 
to meet sales needs. As a result, the Board recommended an additional 
economic adjustment of 20 million pounds, which is subtracted from the 
surplus. The Board also anticipated orchard diversion would be about 50 
million pounds, which is subtracted from the expected production. With 
these modifications, the preliminary restricted percentage was 
calculated at 35 percent.
    The Board met again on September 12, 2019, to consider final volume 
regulation percentages for the 2019-20 season. The final percentages 
are based on the Board's reported production figures and the supply and 
demand information available in September.
    The total production for the 2019-20 season was 257.2 million 
pounds, 9 million pounds above the Board's June estimate. In addition, 
growers diverted 18.3 million pounds in the orchard, about a third of 
what had been anticipated. As a result 238.9 million pounds would be 
available to market, 230.2 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 174 
million pounds, from the optimum supply of 313 million pounds to 
determine 139 million pounds of 2019-20 production would be necessary 
to reach optimum supply. The Board subtracted the 139 million pounds 
from the actual production of 257.2 million pounds, resulting in a 
surplus of 118.2 million pounds of tart cherries.
    The recalculated surplus was reduced by subtracting the revised 
economic adjustment of 20 million pounds and the market growth factor 
of 22.8 million pounds, resulting in an adjusted surplus of 75.4 
million pounds. The Board then divided this final surplus by the 
available production of 230.2 million pounds in the regulated districts 
(248.5 million pounds minus 18.3 million pounds of in-orchard 
diversion) to calculate a restricted percentage of 33 percent with a 
corresponding free percentage of 67 percent for the 2019-20 crop year, 
as outlined in the following table:

------------------------------------------------------------------------
                                                               Millions
                                                               of pounds
------------------------------------------------------------------------
Final Calculations:
(1) Average sales of the prior three years..................         228
(2) Plus desirable carry-out................................          85
(3) Optimum supply calculated by the Board..................         313
(4) Carry-in as of July 1, 2019.............................         174
(5) Adjusted optimum supply (item 3 minus item 4)...........         139
(6) Board reported production...............................       257.2
(7) Surplus (item 6 minus item 5)...........................       118.2
(8) Total economic adjustments..............................          20
(9) Market growth factor....................................        22.8
(10) Adjusted Surplus (item 7 minus items 8 and 9)..........        75.4
(11) Production in regulated districts......................       248.5
(12) In-Orchard Diversion...................................        18.3
(13) Production minus in orchard diversion..................       230.2
                                                             -----------
Final Percentages:                                              Percent
                                                             -----------
    Restricted (item 10 divided by item 13 x 100)...........          33
    Free (100 minus restricted percentage)..................          67
------------------------------------------------------------------------

    The final restriction of 33 percent is lower than the preliminary 
restriction percentage of 35 percent. The change is due to the increase 
in production from the June estimate and lower in-orchard diversion 
volume. The desired carry-out remained the same at 85 million pounds. 
In discussing the calculation, members indicated the quality concerns 
that led to the adjustment were accurate. Members did not propose any 
changes to the adjustment following harvest.
    During the preliminary and final discussions, attendees raised 
concerns about the age of free inventory and the impact of imported 
tart cherry products. The Board voted to form a committee to develop a 
proposal for collecting additional data regarding inventory. Regarding 
the impact of imports, the Board approved a research proposal to gather 
additional data. The Board anticipates these actions would help

[[Page 16276]]

provide additional data for future volume regulation discussions.
    Establishing free and 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, based on its discussion of this issue and the result 
of the above calculations, believes the available information indicates 
a restricted percentage should be established for the 2019-20 crop year 
to avoid oversupplying the market with tart cherries.
    Consequently, the Board recommended final percentages of 67 percent 
free and 33 percent restricted by a vote of 15 in favor, and 3 opposed. 
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 67 percent free and 33 
percent restricted would 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 400 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 $1,000,000, and small agricultural service 
firms have been defined as those whose annual receipts are less than 
$30,000,000 (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 2018-19 season was approximately 
$0.196 per pound. With total utilization at 288.8 million pounds for 
the 2018-19 season, the total 2018-19 value of the crop utilized for 
processing is estimated at $56.6 million. Dividing the crop value by 
the estimated number of producers (400) yields an estimated average 
receipt per producer of $141,500. This is well below the SBA threshold 
for small producers.
    A free on board (FOB) price of $0.80 per pound for frozen tart 
cherries was reported by the Food Institute during the 2018-19 season. 
Based on utilization, this price represents a good estimate of the 
price for processed cherries. Multiplying this FOB price by total 
utilization of 288.8 million pounds results in an estimated handler-
level tart cherry value of $231 million. Dividing this figure by the 
number of handlers (40) yields estimated average annual handler 
receipts of $5.8 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 utilized tart cherry production for the years 2014 through 2018 were 
301 million, 251 million, 319 million, 254 million, and 289 million, 
respectively. Because of these fluctuations, supply and demand for tart 
cherries are rarely in balance.
    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 when a weather event substantially 
reduced supply.
    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 67 percent free and 33 percent restricted 
for the 2019-20 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, Utah, Washington, and Wisconsin. The authority for this 
proposed action is provided in Sec. Sec.  930.50, 930.51(a), and 
930.52. The Board recommended this action at a meeting on September 12, 
2019.
    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'' (http://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. Under this 
proposal, the available quantity (337.5 million pounds) would be 148 
percent of the average sales for the last three years (228 million 
pounds).
    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 2018-19, these activities 
accounted for over 88 million pounds in sales, a 6-million-pound 
increase from the previous season.
    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 help the 
industry to mitigate the impact of oversupply in large crop years, 
while allowing the industry to supply 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.

[[Page 16277]]

    The Board recommended a carry-out of 85 million pounds and made a 
demand adjustment of 20 million pounds in order to make the regulation 
less restrictive to account for fruit quality concerns. With 174 
million pounds of carry-in, 8.7 million pounds of production in the 
unregulated districts, and 154.8 million pounds of free tonnage from 
the regulated districts, 337.5 million pounds of fruit would be 
available for the domestic market. This amount is comparable to the 
336.9 million pounds made available in the previous season. Even with 
the recommended restriction, the domestic market would have an ample 
supply of tart cherries. Further, should marketing conditions change, 
and market demand exceed existing supplies, the Board could meet and 
recommend the release of an additional volume of cherries. 
Consequently, it is not anticipated that this proposal would unduly 
burden growers or handlers.
    While this proposal could result in some additional costs to the 
industry, these costs are 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.
    An econometric model has been developed to assess the impact volume 
control has on the price growers receive for their product. 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 $0.04 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 
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 would 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 the volume restriction.
    As noted earlier, the Board had extensive discussions on carry-out 
inventory alternatives. The alternatives ranged from 20 million pounds 
to 100 million pounds. Some expressed a concern that the relatively low 
reserves compared to high carry-in signaled that not enough fruit had 
been put in reserve in previous seasons. Some attendees indicated 
excess carry-in over the past few seasons has had a negative effect on 
returns and growers are seeking relief. The Board noted if the carry-
out number was too large, it could have a negative impact on grower 
returns, but enough fruit was needed to supply processors before the 
new harvest. After consideration of the alternatives, the Board 
recommended a carry-out of 85 million pounds.
    The Board also weighed alternatives when discussing the economic 
adjustment. Some member suggested making no adjustment to the formula. 
However, at its June meeting, the Board recommended a 20-million-pound 
adjustment to account for fruit quality concerns. When fruit is too 
large or too small, it does not move as efficiently through the pitting 
process. The Board was concerned excessive rainfall would result in 
large, soft, fruit that would not process as well as average-sized 
fruit. As a result, more fruit would be necessary to get the needed 
final product. Following harvest, Board members confirmed weather had 
indeed affected the size of fruit, and that the recommended adjustment 
was accurate and should not be changed.
    In discussing the preliminary recommendation, the Board heard a 
report from a committee that examined import issues. During the 
discussion there was a suggestion that the Board might consider using 
the previous year's import numbers to estimate imported volume in the 
coming year. However, there was no motion to make an adjustment for 
imports. To better address these issues, the Board did allocated funds 
to a research project to provide additional information on the volume 
and impact of imported cherry products.
    Given the concerns with regulation expressed by Board members and 
industry members in attendance, the Board also considered recommending 
no volume regulation. However, the data indicated a high carryover from 
previous seasons has created a substantial surplus. During this 
discussion, attendees questioned the age of the products in inventory. 
While all types of products can be stored for multiple years, their 
value does diminish over time. Reserve inventory must be under two 
years old, but there are no restrictions on free inventory. Industry 
members expressed concern that not all inventory is of equal value and 
suggested the Board should collect information on the age and quality 
of free inventory. A vote to recommend no volume regulation failed, but 
the Board did agree to form a committee to investigate potential 
reporting requirements to provide the industry better data regarding 
the available inventory. 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 meetings and participate in Board deliberations on all 
issues. Like all Board meetings, the June 27, 2019, and

[[Page 16278]]

September 12, 2019, 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: http://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions 
about the compliance guide should be sent to Richard Lower at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. All written comments timely received will be 
considered before a final determination is made on this matter.

List of Subjects in 7 CFR Part 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.  930.151 to read as follows:


Sec.  930.151  Desirable Carry-out inventory.

    Beginning with the crop year starting July 1, 2016, for the 
purposes of determining an optimum supply volume, the Board may 
recommend a desirable carry-out inventory not to exceed 100 million 
pounds.
0
3. Revise Sec.  930.256 and the heading to read as follows:


Sec.  930.256  Free and restricted percentages for the 2019-20 crop 
year.

    The percentages for tart cherries handled by handlers during the 
crop year beginning on July 1, 2019, which shall be free and 
restricted, respectively, are designated as follows: Free percentage, 
67 percent and restricted percentage, 33 percent.

Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2020-05825 Filed 3-20-20; 8:45 am]
 BILLING CODE 3410-02-P