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[Federal Register Volume 78, Number 72 (Monday, April 15, 2013)]
[Proposed Rules]
[Pages 22202-22209]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08681]

========================================================================
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. 78, No. 72 / Monday, April 15, 2013 / 
Proposed Rules

[[Page 22202]]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Doc. No. AMS-FV-12-0064; FV13-985-1 PR]

Marketing Order Regulating the Handling of Spearmint Oil Produced 
in the Far West; Salable Quantities and Allotment Percentages for the 
2013-2014 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would establish the quantity of spearmint 
oil produced in the Far West, by class, that handlers may purchase 
from, or handle on behalf of, producers during the 2013-2014 marketing 
year, which begins on June 1, 2013. This proposal invites comments on 
the establishment of salable quantities and allotment percentages for 
Class 1 (Scotch) spearmint oil of 1,344,858 pounds and 65 percent, 
respectively, and for Class 3 (Native) spearmint oil of 1,432,189 
pounds and 61 percent, respectively. The Spearmint Oil Administrative 
Committee (Committee), the agency responsible for local administration 
of the marketing order for spearmint oil produced in the Far West, 
recommended these limitations for the purpose of avoiding extreme 
fluctuations in supplies and prices to help maintain stability in the 
spearmint oil market.

DATES: Comments must be received by April 30, 2013.

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, Fruit and Vegetable 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 
proposed rule 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: Barry Broadbent, Marketing Specialist, 
or Gary Olson, Regional Director, Northwest Marketing Field Office, 
Marketing Order and Agreement Division, Fruit and Vegetable Program, 
AMS, USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or Email: 
Barry.Broadbent@ams.usda.gov or GaryD.Olson@ams.usda.gov.
    Small businesses may request information on complying with this 
regulation by contacting Jeffrey Smutny, Marketing Order and Agreement 
Division, Fruit and Vegetable Program, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-
2491, Fax: (202) 720-8938, or Email: Jeffrey.Smutny@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This proposed rule is issued under Marketing 
Order No. 985 (7 CFR Part 985), as amended, regulating the handling of 
spearmint oil produced in the Far West (Washington, Idaho, Oregon, and 
designated parts of Nevada and Utah), hereinafter referred to as the 
``order.'' 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 Department of Agriculture (USDA) is issuing this proposed rule 
in conformance with Executive Order 12866.
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Under the marketing order now in effect, salable 
quantities and allotment percentages may be established for classes of 
spearmint oil produced in the Far West. This proposed rule would 
establish the quantity of spearmint oil produced in the Far West, by 
class, which handlers may purchase from, or handle on behalf of, 
producers during the 2013-2014 marketing year, which begins on June 1, 
2013.
    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.
    The Committee meets annually in the fall to adopt a marketing 
policy for the ensuing marketing year or years. In determining such 
marketing policy, the Committee considers a number of factors, 
including, but not limited to, the current and projected supply, 
estimated future demand, production costs, and producer prices for all 
classes of spearmint oil. Input from spearmint oil handlers and 
producers regarding prospective marketing conditions is considered as 
well. During the meeting, the Committee recommends to USDA any volume 
regulations deemed necessary to meet market requirements and to 
establish orderly marketing conditions for Far West spearmint oil. If 
the Committee's marketing policy considerations indicate a need for 
limiting the quantity of any or all classes of spearmint oil marketed, 
the Committee subsequently recommends the establishment of a salable 
quantity and allotment percentage for such class or classes of oil for 
the forthcoming marketing year.
    The salable quantity represents the total amount of each class of 
spearmint oil that handlers may purchase from, or handle on behalf of, 
producers during the marketing year. Each producer is allotted a 
prorated share of the salable quantity by applying the allotment 
percentage to that producer's allotment base for each applicable class 
of spearmint oil. The producer allotment

[[Page 22203]]

base is each producer's quantified share of the spearmint oil market 
based on a statistical representation of past spearmint oil production, 
with accommodation for reasonable and normal adjustments to such base 
as prescribed by the Committee and approved by USDA. Salable quantities 
are established at levels intended to meet market requirements and to 
establish orderly marketing conditions. Committee recommendations for 
volume controls are made well in advance of the period in which the 
regulations are to be effective, thereby allowing producers the chance 
to adjust their production decisions accordingly.
    Pursuant to authority in Sec. Sec.  985.50, 985.51, and 985.52 of 
the order, the full eight-member Committee met on October 17, 2012, and 
recommended salable quantities and allotment percentages for both 
classes of oil for the 2013-2014 marketing year. The Committee, in a 
vote of six members in favor and two members opposed, recommended the 
establishment of a salable quantity and allotment percentage for Scotch 
spearmint oil of 1,344,858 pounds and 65 percent, respectively. The two 
members opposing the action felt that the proposed levels were too high 
and favored establishing a smaller salable quantity and allotment 
percentage for Scotch spearmint oil. For Native spearmint oil, the 
Committee, in a vote of six members in favor and two members opposed, 
recommended the establishment of a salable quantity and allotment 
percentage of 1,432,189 pounds and 61 percent, respectively. Once 
again, the two members opposing the action supported volume regulation 
but favored an undetermined lower salable quantity and allotment 
percentage for Native spearmint oil than what was proposed.
    This action would limit the amount of spearmint oil that handlers 
may purchase from, or handle on behalf of, producers during the 2013-
2014 marketing year, which begins on June 1, 2013. Salable quantities 
and allotment percentages have been placed into effect each season 
since the order's inception in 1980.

Class 1 (Scotch) Spearmint Oil

    The U.S. production of Scotch spearmint oil is concentrated in the 
Far West, which includes Washington, Idaho, Oregon, and a portion of 
Nevada and Utah. Scotch type oil is also produced in seven other 
States: Indiana, Michigan, Minnesota, Montana, North Dakota, South 
Dakota, and Wisconsin. Additionally, Scotch spearmint oil is produced 
outside of the U.S., with China and India being the largest global 
competitors of domestic Scotch spearmint oil production.
    The Far West's share of total global Scotch spearmint oil sales has 
varied considerably over the past several decades, from as high as 72 
percent in 1988, and as low as 27 percent in 2002. More recently, sales 
of Far West Scotch spearmint oil have been approximately 50 percent of 
world sales, and are expected to hold steady, or increase slightly, in 
upcoming years. In addition, imports of foreign produced spearmint oil 
into the U.S. have recently been trending down, while exports of 
domestic spearmint oil have been trending up. Consequently, competition 
in the domestic market from foreign produced spearmint oil has 
decreased and the demand for Far West spearmint oil, both domestically 
and abroad, has been very strong.
    The Scotch spearmint industry is emerging from the very difficult 
market environment that has existed in the past few years. Many of the 
negative market components that were present from 2008 through 2011 in 
the spearmint oil industry have corrected. During that period, 
increased production and weakened market demand for Scotch spearmint 
oil combined to create large stocks of excess oil held in reserve. 
However, most recently, production of Scotch spearmint oil has 
moderated, trade demand for Scotch spearmint oil has increased, and 
excess inventory levels have dropped dramatically. In fact, production 
of Scotch spearmint oil will need to increase during the 2013 season to 
meet the anticipated market demand.
    Although the spearmint oil industry continues to have some concerns 
over the strength of the U.S. economy, marketing conditions for Scotch 
spearmint oil have improved significantly. Lower inventories, steady to 
increasing production, and strong projected demand are all positive 
indicators of improving marketing conditions for Scotch spearmint oil. 
Inventories, production, and market demand are now at levels that are 
considered healthy for the industry.
    Certain factors may be contributing to the recent increase in 
demand for Far West Scotch spearmint oil. First, although China and 
India have been significant suppliers of spearmint oil for the past 15 
years, they have started to replace some spearmint acreage with other 
mint varieties, such as Mentha arvensis (wild mint), and other non-mint 
competing crops. In addition, both countries are utilizing more of 
their domestically produced spearmint oil, removing oil that might 
otherwise have been exported. Also, the Midwest region of the U.S. is 
experiencing a significant reduction in Scotch spearmint oil 
production. This decrease in regional production is partly due to 
unexpected disease and weather related factors and partly the result of 
competition from other alternate crops, such as corn and soybeans, 
which are currently experiencing higher than average returns. Lastly, 
improving global economic conditions have led to increased consumption 
of spearmint flavored products.
    The Committee estimates that the carry-in of Scotch spearmint oil 
on June 1, 2013, the primary measure of excess supply, will be 
approximately 16,570 pounds. This amount is down from the previous 
year's estimate of 149,740 pounds and is lower than the minimum carry-
in quantity that the Committee would consider to be favorable.
    Production of Scotch spearmint oil has decreased in recent years in 
response to high Scotch spearmint oil inventory levels and below 
average market demand. Production dropped from a high of 1,050,700 
pounds in 2009 to an estimated 621,480 pounds in 2012. Total industry 
production of Scotch spearmint oil is now below the level that the 
Committee views as optimum. The Committee expects production will 
increase during the 2013 season in response to the strong market demand 
currently observed in the industry and the low inventory levels of 
Scotch spearmint oil available to the market. The Committee considers 
the current trends in supply and demand to be favorable, as it signals 
an end to the continuing oversupply situation in Scotch spearmint oil 
and the initiation of a period when supply and demand are in harmony.
    Handlers indicate that increasing consumer demand for mint flavored 
products provide a positive expectation for long-term increases in the 
demand for Far West Scotch spearmint oil. Spearmint oil handlers have 
indicated that demand for Scotch spearmint oil has been gaining 
strength. Handlers who had projected the 2012-2013 trade demand for Far 
West Scotch Spearmint oil to be in the range of 825,000 pounds to 
1,100,000 pounds now expect it to increase to between 900,000 pounds to 
1,200,000 pounds during the 2013-2014 marketing year.
    Given the improving economic indicators for the Far West Scotch 
spearmint oil industry outlined above, the Committee took a very 
positive perspective into the discussion of establishing appropriate 
salable quantities and allotment percentages for the upcoming season. 
At the October 17,

[[Page 22204]]

2012, meeting, the Committee recommended the 2013-2014 Scotch spearmint 
oil salable quantity of 1,344,858 pounds and an allotment percentage of 
65 percent. The Committee utilized sales estimates for 2013-2014 Scotch 
spearmint oil, as provided by several of the industry's handlers, as 
well as historical and current Scotch spearmint oil production and 
inventory statistics, to arrive at these recommendations. The volume 
control levels recommended by the Committee represent an increase of 
566,418 pounds and 27 percentage points over the previous year's 
initial salable quantity and allotment percentage, reflecting a much 
more positive assessment of the industry's current economic conditions.
    The Committee estimates that about 1,200,000 pounds of Scotch 
spearmint oil may be sold during the 2013-2014 marketing year. When 
considered in conjunction with the estimated carry-in of 16,570 pounds 
of Scotch spearmint oil on June 1, 2013, the recommended salable 
quantity of 1,344,858 pounds results in a total available supply of 
approximately 1,361,428 pounds of Scotch spearmint oil during the 2013-
2014 marketing year. The Committee estimates that carry-in of Scotch 
spearmint oil into the 2014-2015 marketing year, which begins June 1, 
2014, would be 161,428 pounds, an increase of 144,858 pounds from the 
beginning of the 2013-2014 marketing year.
    The Committee's stated intent in the use of marketing order volume 
control regulations for Scotch spearmint oil is to keep adequate 
supplies available to meet market needs and establish orderly marketing 
conditions. With that in mind, the Committee developed its 
recommendation for the proposed Scotch spearmint oil salable quantity 
and allotment percentage for the 2013-2014 marketing year based on the 
information discussed above, as well as the data outlined below.
    (A) Estimated carry-in of Scotch spearmint oil on June 1, 2013--
16,570 pounds. This figure is the difference between the revised 2012-
2013 marketing year total available supply of 986,570 pounds and the 
estimated 2012-2013 marketing year trade demand of 970,000 pounds.
    (B) Estimated trade demand of Scotch spearmint oil for the 2013-
2014 marketing year--1,200,000 pounds. This figure is based on input 
from producers at five Scotch spearmint oil production area meetings 
held in late September and early October 2012, as well as estimates 
provided by handlers and other meeting participants at the October 17, 
2012, meeting. The average estimated trade demand provided at the five 
production area meetings is 1,120,000 pounds, which is 35,000 pounds 
less than the average of trade demand estimates submitted by handlers. 
The average of Far West Scotch spearmint oil sales over the last five 
years is 772,543 pounds.
    (C) Salable quantity of Scotch spearmint oil required from the 
2013-2014 marketing year production--1,183,430 pounds. This figure is 
the difference between the estimated 2013-2014 marketing year trade 
demand (1,200,000 pounds) and the estimated carry-in on June 1, 2013 
(16,570 pounds). This figure represents the minimum salable quantity 
that may be needed to satisfy estimated demand for the coming year with 
no carryover.
    (D) Total estimated allotment base of Scotch spearmint oil for the 
2013-2014 marketing year--2,069,012 pounds. This figure represents a 
one percent increase over the revised 2012-2013 total allotment base. 
This figure is generally revised each year on June 1 due to producer 
base being lost because of the bona fide effort production provisions 
of Sec.  985.53(e). The revision is usually minimal.
    (E) Computed Scotch spearmint oil 2013-2014 marketing year 
allotment percentage--57.2 percent. This percentage is computed by 
dividing the minimum required salable quantity (1,183,430 pounds) by 
the total estimated allotment base (2,069,012 pounds).
    (F) Recommended Scotch spearmint oil 2013-2014 marketing year 
allotment percentage--65 percent. This is the Committee's 
recommendation and is based on the computed allotment percentage (57.2 
percent), the average of the computed allotment percentage figures from 
the five production area meetings (55.8 percent), and input from 
producers and handlers at the October 17, 2012, meeting. The 
recommended 65 percent allotment percentage is also based on the 
Committee's determination that the computed percentage (57.2 percent) 
may not adequately supply the potential 2013-2014 Scotch spearmint oil 
market.
    (G) Recommended Scotch spearmint oil 2013-2014 marketing year 
salable quantity--1,344,858 pounds. This figure is the product of the 
recommended allotment percentage (65 percent) and the total estimated 
allotment base (2,069,012 pounds).
    (H) Estimated total available supply of Scotch spearmint oil for 
the 2013-2014 marketing year--1,361,428 pounds. This figure is the sum 
of the 2013-2014 recommended salable quantity (1,344,858 pounds) and 
the estimated carry-in on June 1, 2013 (16,570 pounds).

Class 3 (Native) Spearmint Oil

    The Native spearmint oil industry is experiencing market conditions 
similar to those observed in the Scotch spearmint oil market. 
Approximately 90 percent of U.S. production of Native spearmint oil is 
produced within the Far West production area, thus domestic production 
outside this area is not a major factor in the marketing of Far West 
Native spearmint oil. This has been an attribute of U.S. production 
since the order's inception. A minor amount of domestic Native 
spearmint oil is produced outside of the Far West region in the States 
of Indiana, Michigan, Minnesota, Montana, North Dakota, South Dakota, 
and Wisconsin.
    According to the Committee, very little true Native spearmint oil 
is produced outside of the United States. However, India has been 
producing an increasing quantity of spearmint oil with qualities very 
similar to Native spearmint oil. Committee records show that in 1996 
the Far West accounted for nearly 93 percent of the global sales of 
Native or Native quality spearmint oil. By 2008, that share had 
declined to only 48 percent. Since then, the percentage has been 
increasing and Far West Native spearmint oil is estimated to be over 70 
percent of global sales in 2012.
    Despite the fact that Far West Native spearmint oil has been 
gaining world market share, the industry has endured challenging 
marketing conditions over the past five years. Overproduction, coupled 
with a decrease in demand during the global economic recession, created 
an excess inventory situation for Native spearmint oil that negatively 
impacted the industry. However, most recently, production of Native 
spearmint oil has moderated, trade demand for Native spearmint oil has 
increased, and excess inventory levels have dropped to levels 
considered optimal by the Committee.
    When the Committee met on October 17, 2012, to consider volume 
regulations for the upcoming 2013-2014 marketing year, the general 
consensus within the Native spearmint oil industry was that marketing 
conditions had improved over recent years and are expected to keep 
improving into the future. The production of Far West Native spearmint 
oil, which declined from a high of 1,453,896 pounds in 2009 to 
approximately 1,210,260 pounds in 2012, is anticipated to remain steady 
during the 2013 season. The Committee further expects that production 
will be more in line with the projected demand

[[Page 22205]]

of Native spearmint oil in upcoming years.
    Excess Native spearmint oil inventory, as measured by oil held in 
reserve by producers and reported by the Committee, is estimated to be 
379,006 pounds at the end of the 2012-2013 marketing year, down from a 
recent high of 606,942 pounds in 2011. Reserve Native spearmint oil is 
approaching the level that the Committee believes is optimum for the 
industry.
    In addition to an improved supply situation, demand for Far West 
Native spearmint oil has been improving. Spearmint oil handlers, who 
previously projected the 2012-2013 trade demand for Far West Native 
spearmint oil in the range of 1,275,000 pounds to 1,450,000 pounds, 
with an average of 1,350,000 pounds, have projected trade demand for 
the 2013-2014 marketing period to be in the range of 1,200,000 pounds 
to 1,500,000 pounds, with an average of 1,400,000.
    Given the economic indicators for the Far West Native spearmint oil 
industry outlined above, the Committee took an optimistic perspective 
into the discussion of establishing appropriate salable quantities and 
allotment percentages for the upcoming season.
    As such, at the October 17, 2012, meeting, the Committee 
recommended a 2013-2014 Native spearmint oil salable quantity of 
1,432,189 pounds and an allotment percentage of 61 percent. The 
Committee utilized Native spearmint oil sales estimates for 2013-2014, 
as provided by several of the industry's handlers, as well as 
historical and current Native spearmint oil market statistics to 
establish these thresholds. These recommended volume control levels 
represent an increase of 268,887 pounds and 11 percentage points over 
the previous year's initially established salable quantity and 
allotment percentage. Should these levels prove insufficient to 
adequately supply the market, the Committee has the authority to 
recommend an intra-seasonal increase, as it has done in the past two 
marketing periods, if demand rises beyond expectations.
    The Committee estimates that approximately 1,425,000 pounds of 
Native spearmint oil may be sold during the 2013-2014 marketing year. 
When considered in conjunction with the estimated carry-in of 43,411 
pounds of Native spearmint oil on June 1, 2013, the recommended salable 
quantity of 1,432,189 pounds results in an estimated total available 
supply of 1,475,600 pounds of Native spearmint oil during the 2013-2014 
marketing year. The Committee also estimates that carry-in of Native 
spearmint oil at the beginning of the 2014-2015 marketing year will be 
approximately 50,600 pounds.
    The Committee's stated intent in the use of marketing order volume 
control regulations for Native spearmint oil is to keep adequate 
supplies available to meet market needs and establish orderly marketing 
conditions. With that in mind, the Committee developed its 
recommendation for the proposed Native spearmint oil salable quantity 
and allotment percentage for the 2013-2014 marketing year based on the 
information discussed above, as well as the data outlined below.
    (A) Estimated carry-in of Native spearmint oil on June 1, 2013--
43,411 pounds. This figure is the difference between the revised 2012-
2013 marketing year total available supply of 1,418,411 pounds and the 
estimated 2012-2013 marketing year trade demand of 1,375,000 pounds.
    (B) Estimated trade demand of Native spearmint oil for the 2013-
2014 marketing year--1,425,000 pounds. This estimate is established by 
the Committee and is based on input from producers at the six Native 
spearmint oil production area meetings held in late September and early 
October 2012, as well as estimates provided by handlers and other 
meeting participants at the October 17, 2012, meeting. The average 
estimated trade demand provided at the six production area meetings was 
1,354,167 pounds, whereas the handler estimate ranged from 1,200,000 
pounds to 1,500,000 pounds, and averaged 1,400,000 pounds. The average 
of Far West Native spearmint oil sales over the last five years is 
1,158,520 pounds.
    (C) Salable quantity of Native spearmint oil required from the 
2013-2014 marketing year production--1,381,589 pounds. This figure is 
the difference between the estimated 2013-2014 marketing year trade 
demand (1,425,000 pounds) and the estimated carry-in on June 1, 2013 
(43,411 pounds). This is the minimum amount that the Committee believes 
would be required to meet the anticipated 2013-2014 Native spearmint 
oil trade demand.
    (D) Total estimated allotment base of Native spearmint oil for the 
2013-2014 marketing year--2,347,850 pounds. This figure represents a 
one percent increase over the revised 2012-2013 total allotment base. 
This figure is generally revised each year on June 1 due to producer 
base being lost due to the bona fide effort production provisions of 
Sec.  985.53(e). The revision is usually minimal.
    (E) Computed Native spearmint oil 2013-2014 marketing year 
allotment percentage--58.8 percent. This percentage is computed by 
dividing the required salable quantity (1,381,589 pounds) by the total 
estimated allotment base (2,347,850 pounds).
    (F) Recommended Native spearmint oil 2013-2014 marketing year 
allotment percentage--61 percent. This is the Committee's 
recommendation based on the computed allotment percentage (58.8 
percent), the average of the computed allotment percentage figures from 
the six production area meetings (56.5 percent), and input from 
producers and handlers at the October 17, 2012, meeting. The 
recommended 61 percent allotment percentage is also based on the 
Committee's determination that the computed percentage (58.8 percent) 
may not adequately supply the potential 2013-2014 Native spearmint oil 
market.
    (G) Recommended Native spearmint oil 2013-2014 marketing year 
salable quantity--1,432,189 pounds. This figure is the product of the 
recommended allotment percentage (61 percent) and the total estimated 
allotment base (2,347,850 pounds).
    (H) Estimated available supply of Native spearmint oil for the 
2013-2014 marketing year--1,475,600 pounds. This figure is the sum of 
the 2013-2014 recommended salable quantity (1,432,189 pounds) and the 
estimated carry-in on June 1, 2013 (43,411 pounds).
    The salable quantity is the total quantity of each class of 
spearmint oil that handlers may purchase from, or handle on behalf of, 
producers during a marketing year. Each producer is allotted a share of 
the salable quantity by applying the allotment percentage to the 
producer's allotment base for the applicable class of spearmint oil.
    The Committee's recommended Scotch and Native spearmint oil salable 
quantities and allotment percentages of 1,344,858 pounds and 65 
percent, and 1,432,189 pounds and 61 percent, respectively, are based 
on the goal of establishing and maintaining market stability. The 
Committee anticipates that this goal would be achieved by matching the 
available supply of each class of Spearmint oil to the estimated demand 
of such, thus avoiding extreme fluctuations in inventories and prices.
    The proposed salable quantities are not expected to cause a 
shortage of spearmint oil supplies. Any unanticipated or additional 
market demand for spearmint oil which may develop during the marketing 
year could be satisfied by an intra-seasonal increase in the salable 
quantity. The

[[Page 22206]]

order makes the provision for intra-seasonal increases to allow the 
Committee the flexibility to respond quickly to changing market 
conditions. In addition, producers who produce more than their annual 
allotments during the 2013-2014 marketing year may transfer such excess 
spearmint oil to producers who have produced less than their annual 
allotment, or, up until November 1, 2013, place it into the reserve 
pool to be released in the future in accordance with market needs.
    This proposed regulation, if adopted, would be similar to 
regulations issued in prior seasons. The average allotment percentage 
for the five most recent marketing years for Scotch spearmint oil is 
38.8 percent, while the average allotment percentage for the same five-
year period for Native spearmint oil is 52.2 percent. Costs to 
producers and handlers resulting from this proposed rule are expected 
to be offset by the benefits derived from a stable market and improved 
returns. In conjunction with the issuance of this proposed rule, USDA 
has reviewed the Committee's marketing policy statement for the 2013-
2014 marketing year. The Committee's marketing policy statement, a 
requirement whenever the Committee recommends volume regulation, fully 
meets the intent of Sec.  985.50 of the order.
    During its discussion of potential 2013-2014 salable quantities and 
allotment percentages, the Committee considered: (1) The estimated 
quantity of salable oil of each class held by producers and handlers; 
(2) the estimated demand for each class of oil; (3) the prospective 
production of each class of oil; (4) the total of allotment bases of 
each class of oil for the current marketing year and the estimated 
total of allotment bases of each class for the ensuing marketing year; 
(5) the quantity of reserve oil, by class, in storage; (6) producer 
prices of oil, including prices for each class of oil; and (7) general 
market conditions for each class of oil, including whether the 
estimated season average price to producers is likely to exceed parity. 
Conformity with USDA's ``Guidelines for Fruit, Vegetable, and Specialty 
Crop Marketing Orders'' has also been reviewed and confirmed.
    The establishment of these salable quantities and allotment 
percentages would allow for anticipated market needs. In determining 
anticipated market needs, the Committee considered historical sales, as 
well as changes and trends in production and demand. This proposed rule 
also provides producers with information on the amount of spearmint oil 
that should be produced for the 2013-2014 season in order to meet 
anticipated market demand.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this action on small entities. 
Accordingly, AMS has prepared this initial regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and the 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 eight spearmint oil handlers subject to regulation under 
the order, and approximately 36 producers of Scotch spearmint oil and 
approximately 91 producers of Native spearmint oil in the production 
area. Small agricultural service firms are defined by the Small 
Business Administration (SBA) (13 CFR 121.201) as those having annual 
receipts of less than $7,000,000, and small agricultural producers are 
defined as those having annual receipts of less than $750,000.
    Based on the SBA's definition of small entities, the Committee 
estimates that two of the eight handlers regulated by the order could 
be considered small entities. Most of the handlers are large 
corporations involved in the international trading of essential oils 
and the products of essential oils. In addition, the Committee 
estimates that 19 of the 36 Scotch spearmint oil producers and 29 of 
the 91 Native spearmint oil producers could be classified as small 
entities under the SBA definition. Thus, a majority of handlers and 
producers of Far West spearmint oil may not be classified as small 
entities.
    The Far West spearmint oil industry is characterized by producers 
whose farming operations generally involve more than one commodity, and 
whose income from farming operations is not exclusively dependent on 
the production of spearmint oil. A typical spearmint oil-producing 
operation has enough acreage for rotation such that the total acreage 
required to produce the crop is about one-third spearmint and two-
thirds rotational crops. Thus, the typical spearmint oil producer has 
to have considerably more acreage than is planted to spearmint during 
any given season. Crop rotation is an essential cultural practice in 
the production of spearmint oil for purposes of weed, insect, and 
disease control. To remain economically viable with the added costs 
associated with spearmint oil production, a majority of spearmint oil-
producing farms fall into the SBA category of large businesses.
    Small spearmint oil producers generally are not as extensively 
diversified as larger ones and as such are more at risk from market 
fluctuations. Such small producers generally need to market their 
entire annual allotment and do not have income from other crops to 
cushion seasons with poor spearmint oil returns. Conversely, large 
diversified producers have the potential to endure one or more seasons 
of poor spearmint oil markets because income from alternate crops could 
support the operation for a period of time. Being reasonably assured of 
a stable price and market provides small producing entities with the 
ability to maintain proper cash flow and to meet annual expenses. Thus, 
the market and price stability provided by the order potentially 
benefit small producers more than such provisions benefit large 
producers. Even though a majority of handlers and producers of 
spearmint oil may not be classified as small entities, the volume 
control feature of this order has small entity orientation.
    This proposed rule would establish the quantity of spearmint oil 
produced in the Far West, by class, that handlers may purchase from, or 
handle on behalf of, producers during the 2013-2014 marketing year. The 
Committee recommended this action to help maintain stability in the 
spearmint oil market by matching supply to estimated demand, thereby 
avoiding extreme fluctuations in supplies and prices. Establishing 
quantities that may be purchased or handled during the marketing year 
through volume regulations allows producers to plan their spearmint 
planting and harvesting to meet expected market needs. The provisions 
of Sec. Sec.  985.50, 985.51, and 985.52 of the order authorize this 
proposed rule.
    Instability in the spearmint oil sub-sector of the mint industry is 
much more likely to originate on the supply side than the demand side. 
Fluctuations in yield and acreage planted from season-to-season tend to 
be larger than fluctuations in the amount purchased by handlers. 
Notwithstanding the recent global recession and the overall negative 
impact on demand for consumer goods that utilize spearmint oil, demand 
for spearmint oil tends to change slowly from year to year.

[[Page 22207]]

    Demand for spearmint oil at the farm level is derived from retail 
demand for spearmint-flavored products such as chewing gum, toothpaste, 
and mouthwash. The manufacturers of these products are by far the 
largest users of spearmint oil. However, spearmint flavoring is 
generally a very minor component of the products in which it is used, 
so changes in the raw product price have virtually no impact on retail 
prices for those goods.
    Spearmint oil production tends to be cyclical. Years of relatively 
high production, with demand remaining reasonably stable, have led to 
periods in which large producer stocks of unsold spearmint oil have 
depressed producer prices for a number of years. Shortages and high 
prices may follow in subsequent years, as producers respond to price 
signals by cutting back production.
    The significant variability of the spearmint oil market is 
illustrated by the fact that the coefficient of variation (a standard 
measure of variability; ``CV'') of Far West spearmint oil grower prices 
for the period 1980-2011 (when the marketing order was in effect) is 
0.19 compared to 0.34 for the decade prior to the promulgation of the 
order (1970-79) and 0.48 for the prior 20-year period (1960-79). This 
provides an indication of the price stabilizing impact of the marketing 
order.
    Production in the shortest marketing year was about 48 percent of 
the 32-year average (1.897 million pounds from 1980 through 2011) and 
the largest crop was approximately 162 percent of the 32-year average. 
A key consequence is that, in years of oversupply and low prices, the 
season average producer price of spearmint oil is below the average 
cost of production (as measured by the Washington State University 
Cooperative Extension Service.)
    The wide fluctuations in supply and prices that result from this 
cycle, which were even more pronounced before the creation of the 
order, can create liquidity problems for some producers. The order was 
designed to reduce the price impacts of the cyclical swings in 
production. However, producers have been less able to weather these 
cycles in recent years because of the increase in production costs. 
While prices have been relatively steady, the cost of production has 
increased to the extent that plans to plant spearmint may be postponed 
or changed indefinitely. Producers are also enticed by the prices of 
alternative crops and their lower cost of production.
    In an effort to stabilize prices, the spearmint oil industry uses 
the volume control mechanisms authorized under the order. This 
authority allows the Committee to recommend a salable quantity and 
allotment percentage for each class of oil for the upcoming marketing 
year. The salable quantity for each class of oil is the total volume of 
oil that producers may sell during the marketing year. The allotment 
percentage for each class of spearmint oil is derived by dividing the 
salable quantity by the total allotment base.
    Each producer is then issued an annual allotment certificate, in 
pounds, for the applicable class of oil, which is calculated by 
multiplying the producer's allotment base by the applicable allotment 
percentage. This is the amount of oil of each applicable class that the 
producer can sell.
    By November 1 of each year, the Committee identifies any oil that 
individual producers have produced above the volume specified on their 
annual allotment certificates. This excess oil is placed in a reserve 
pool administered by the Committee.
    There is a reserve pool for each class of oil that may not be sold 
during the current marketing year unless USDA approves a Committee 
recommendation to increase the salable quantity and allotment 
percentage for a class of oil and make a portion of the pool available. 
However, limited quantities of reserve oil are typically sold by one 
producer to another producer to fill deficiencies. A deficiency occurs 
when on-farm production is less than a producer's allotment. In that 
case, a producer's own reserve oil can be sold to fill that deficiency. 
Excess production (higher than the producer's allotment) can be sold to 
fill other producers' deficiencies. All of these provisions need to be 
exercised prior to November 1 of each year.
    In any given year, the total available supply of spearmint oil is 
composed of current production plus carryover stocks from the previous 
crop. The Committee seeks to maintain market stability by balancing 
supply and demand, and to close the marketing year with an appropriate 
level of carryout. If the industry has production in excess of the 
salable quantity, then the reserve pool absorbs the surplus quantity of 
spearmint oil, which goes unsold during that year, unless the oil is 
needed for unanticipated sales.
    Under its provisions, the order may attempt to stabilize prices by 
(1) limiting supply and establishing reserves in high production years, 
thus minimizing the price-depressing effect that excess producer stocks 
have on unsold spearmint oil, and (2) ensuring that stocks are 
available in short supply years when prices would otherwise increase 
dramatically. The reserve pool stocks, which are increased in large 
production years, are drawn down in years where the crop is short.
    An econometric model was used to assess the impact that volume 
control has on the prices producers receive for their commodity. 
Without volume control, spearmint oil markets would likely be over-
supplied. This could result in low producer prices and a large volume 
of oil stored and carried over to the next crop year. The model 
estimates how much lower producer prices would likely be in the absence 
of volume controls.
    The Committee estimated trade demand for the 2013-2014 marketing 
year for both classes of oil at 2,625,000 pounds, and that the expected 
combined salable carry-in will be 59,981 pounds. This results in a 
combined required salable quantity of 2,565,019 pounds. With volume 
control, sales by producers for the 2013-2014 marketing year would be 
limited to 2,777,047 pounds (the recommended salable quantity for both 
classes of spearmint oil).
    The recommended allotment percentages, upon which 2013-2014 
producer allotments are based, are 65 percent for Scotch and 61 percent 
for Native. Without volume controls, producers would not be limited to 
these allotment levels, and could produce and sell additional 
spearmint. The econometric model estimated a $1.35 decline in the 
season average producer price per pound (from both classes of spearmint 
oil) resulting from the higher quantities that would be produced and 
marketed without volume control. The surplus situation for the 
spearmint oil market that would exist without volume controls in 2013-
2014 also would likely dampen prospects for improved producer prices in 
future years because of the buildup in stocks.
    The use of volume controls allows the industry to fully supply 
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume controls is believed to have 
little or no effect on consumer prices of products containing spearmint 
oil and will not result in fewer retail sales of such products.
    The Committee discussed alternatives to the recommendations 
contained in this proposed rule for both classes of spearmint oil. The 
Committee discussed and rejected the idea of recommending that there 
not be any volume regulation for both classes of spearmint oil because 
of the severe price-depressing effects that would occur without volume 
control.

[[Page 22208]]

    After computing the initial 57.2 percent Scotch spearmint oil 
allotment percentage, the Committee considered various alternative 
levels of volume control for Scotch spearmint oil. Given the moderately 
improving marketing conditions, there was consensus that the Scotch 
spearmint oil allotment percentage for 2013-2014 should be more than 
the percentage established for the 2012-2013 marketing year (38 
percent). After considerable discussion, the eight-member committee, on 
a vote of six members in favor and two members opposed, determined that 
1,344,858 pounds and 65 percent would be the most effective Scotch 
spearmint oil salable quantity and allotment percentage, respectively, 
for the 2013-2014 marketing year. The two dissenting members felt that 
the salable quantity and allotment percentage should be set at an 
unidentified lower level.
    The Committee was also able to reach a consensus regarding the 
level of volume control for Native spearmint oil. After first 
determining the computed allotment percentage at 58.8 percent, the 
Committee, in a vote of six members in favor and two members opposed, 
recommended 1,432,189 pounds and 61 percent for the effective Native 
spearmint oil salable quantity and allotment percentage, respectively, 
for the 2013-2014 marketing year. The two dissenting members felt that 
the salable quantity and allotment percentage should be set at an 
unidentified lower level.
    As noted earlier, the Committee's recommendation to establish 
salable quantities and allotment percentages for both classes of 
spearmint oil was made after careful consideration of all available 
information, including: (1) The estimated quantity of salable oil of 
each class held by producers and handlers; (2) the estimated demand for 
each class of oil; (3) the prospective production of each class of oil; 
(4) the total of allotment bases of each class of oil for the current 
marketing year and the estimated total of allotment bases of each class 
for the ensuing marketing year; (5) the quantity of reserve oil, by 
class, in storage; (6) producer prices of oil, including prices for 
each class of oil; and (7) general market conditions for each class of 
oil, including whether the estimated season average price to producers 
is likely to exceed parity. Based on its review, the Committee believes 
that the salable quantity and allotment percentage levels recommended 
would achieve the objectives sought.
    Without any regulations in effect, the Committee believes the 
industry would return to the pronounced cyclical price patterns that 
occurred prior to the order, and that prices in 2013-2014 could decline 
substantially below current levels.
    According to the Committee, the recommended salable quantities and 
allotment percentages are expected to facilitate the goal of 
establishing orderly marketing conditions for Far West spearmint oil.
    As previously stated, annual salable quantities and allotment 
percentages have been issued for both classes of spearmint oil since 
the order's inception.
    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 the Office of Management and Budget (OMB) and 
assigned OMB No. 0581-0178, Generic Vegetable and Specialty Crops. No 
changes in those requirements as a result of this action are necessary. 
Should any changes become necessary, they would be submitted to OMB for 
approval.
    This proposed rule would establish the salable quantities and 
allotment percentages of Class 1 (Scotch) spearmint oil and Class 3 
(Native) spearmint oil produced in the Far West during the 2013-2014 
marketing year. Accordingly, this proposed rule would not impose any 
additional reporting or recordkeeping requirements on either small or 
large spearmint oil producers or handlers. As with all Federal 
marketing order programs, reports and forms are periodically reviewed 
to reduce information requirements and duplication by industry and 
public sector agencies. Furthermore, USDA has not identified any 
relevant Federal rules that duplicate, overlap, or conflict with this 
proposed rule.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    In addition, the Committee's meeting was widely publicized 
throughout the spearmint oil industry and all interested persons were 
invited to attend the meeting and participate in Committee 
deliberations on all issues. Like all Committee meetings, the October 
17, 2012, meeting was a public meeting 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 informational impacts of this action on small 
businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: 
www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions about 
the compliance guide should be sent to Jeffrey Smutney at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    A 15-day comment period is provided to allow interested persons to 
respond to this proposed rule. Fifteen days is deemed appropriate 
because: (1) The 2013-2014 fiscal period begins on June 1, 2013, and a 
final determination on the salable quantities and allotment percentages 
should be made prior to handlers purchasing from, or handling on behalf 
of, producers any oil for the ensuing marketing year; and (2) handlers 
are aware of this action, which was recommended by the Committee at a 
public meeting and is similar to other salable quantities and allotment 
percentages issued in past years.
    Pursuant to 5 U.S.C. 553, it is also found that good cause exists 
for not postponing the effective date of this action until thirty days 
after publication in the Federal Register because a final determination 
of salable quantities and allotment percentages should be in effect 
prior to the start of the 2013-14 fiscal period, which begins June 1, 
2013.

List of Subjects in 7 CFR Part 985

    Marketing agreements, Oils and fats, Reporting and recordkeeping 
requirements, Spearmint oil.

    For the reasons set forth in the preamble, 7 CFR Part 985 is 
proposed to be amended as follows:

PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL 
PRODUCED IN THE FAR WEST

0
1. The authority citation for 7 CFR Part 985 continues to read as 
follows:

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

0
2. A new Sec.  985.232 is added to read as follows:

    Note:  This section will not appear in the Code of Federal 
Regulations.

Sec.  985.232  Salable quantities and allotment percentages--2013-2014 
marketing year.

    The salable quantity and allotment percentage for each class of 
spearmint oil during the marketing year beginning on June 1, 2013, 
shall be as follows:
    (a) Class 1 (Scotch) oil--a salable quantity of 1,344,858 pounds 
and an allotment percentage of 65 percent.

[[Page 22209]]

    (b) Class 3 (Native) oil--a salable quantity of 1,432,189 pounds 
and an allotment percentage of 61 percent.

    Dated: April 9, 2013.
David R. Shipman,
Administrator, Agricultural Marketing Service.
[FR Doc. 2013-08681 Filed 4-12-13; 8:45 am]
BILLING CODE 3410-02-P
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