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[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Proposed Rules]
[Pages 11971-11978]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-4810]

========================================================================
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. 76, No. 43 / Friday, March 4, 2011 / Proposed 
Rules

[[Page 11971]]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Doc. No. AMS-FV-10-0094; FV11-985-1 PR]

Marketing Order Regulating the Handling of Spearmint Oil Produced 
in the Far West; Salable Quantities and Allotment Percentages for the 
2011-2012 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This 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 2011-2012 marketing year, 
which begins on June 1, 2011. This rule invites comments on the 
establishment of salable quantities and allotment percentages for Class 
1 (Scotch) spearmint oil of 694,774 pounds and 34 percent, 
respectively, and for Class 3 (Native) spearmint oil of 1,012,983 
pounds and 44 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 4, 2011.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
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 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 Manager, Northwest Marketing Field Office, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or E-mail: 
Barry.Broadbent@ams.usda.gov or GaryD.Olson@ams.usda.gov.
    Small businesses may request information on complying with this 
regulation by contacting Antoinette Carter, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 
Independence Avenue, SW., STOP 0237, Washington, DC 20250-0237; 
Telephone: (202) 720-2491, Fax: (202) 720-8938, or E-mail: 
Antoinette.Carter@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This 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 rule in 
conformance with Executive Order 12866.
    This 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 2011-2012 marketing year, which begins on June 1, 
2011.
    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, as well as input from spearmint oil handlers 
and producers regarding prospective marketing conditions. 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 base is each producer's 
quantified share

[[Page 11972]]

of the spearmint oil market based on a statistical representation of 
past spearmint oil production and the 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 13, 2010, and 
recommended salable quantities and allotment percentages for both 
classes of oil for the 2011-2012 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 694,774 pounds and 34 percent, respectively. The two 
members opposing the action favored an undetermined greater salable 
quantity and allotment percentage for Scotch spearmint oil. For Native 
spearmint oil, the Committee unanimously recommended the establishment 
of a salable quantity and allotment percentage of 1,012,983 pounds and 
44 percent, respectively.
    This rule would limit the amount of spearmint oil that handlers may 
purchase from, or handle on behalf of, producers during the 2011-2012 
marketing year, which begins on June 1, 2011. 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 72 percent in 
1980 to 27 percent in 2002. Recently, sales of Far West Scotch 
spearmint oil have risen to over 48 percent of world sales, and are 
expected to hold steady, or go even higher, in the coming years.
    In spite of the Far West's growing share of the world market for 
Scotch spearmint oil, the industry has faced some stressful marketing 
conditions during the most recent marketing years. Spearmint oil 
producers experienced relatively good economic conditions in the years 
from 2004 through 2007, which led to overproduction and an environment 
of excess supply in the market beginning in 2008 and continuing through 
2010. The Far West region, which produced 635,508 pounds of Scotch 
spearmint oil in 2004, produced 1,050,700 pounds just five years later 
in 2009, a 65 percent increase.
    To compound matters, in addition to increasing overproduction 
concerns, the demand for Far West Scotch spearmint oil began to 
actually decline over this period. Sales peaked in 2005 at 1,002,779 
pounds, declining to 627,868 pounds in 2009. With production rising and 
sales dropping, excess inventory of uncommitted Scotch spearmint oil 
began to accumulate. Scotch spearmint oil carry-in (unsold salable 
quantity from prior years that is available for sale at the beginning 
of a new marketing year), which serves as a measure of oversupply in 
the market, grew from 23,141 pounds in 2007 to 431,028 pounds in 2010.
    The Committee's response to the deteriorating marketing environment 
since 2008 has been to recommend the tightening of volume control 
regulations. The Committee, which recommended a 2008-2009 marketing 
year Scotch spearmint oil salable quantity of 993,067 pounds, dropped 
the recommendation to 802,067 pounds for the 2009-2010 marketing year, 
and to only 566,962 pounds for the 2010-2011 marketing year. Similarly, 
the recommended allotment percentage was reduced from 50 percent for 
the 2008-2009 period to 40 percent for 2009-2010, and down to just 28 
percent for 2010-2011.
    When the Committee met in October 2010 to consider volume 
regulation for the 2011-2012 marketing year, many of the previously 
mentioned negative marketing conditions still persisted. Even while 
showing some signs of incremental improvement, the current inventories, 
expected production, and projected demand of Scotch spearmint oil were 
all at levels considered unhealthy for the industry.
    The Committee estimates that the carry-in of Scotch spearmint oil 
on June 1, 2011, the primary measure of excess supply, will be 
approximately 197,551 pounds. That quantity, while down from the 
previous year's high of 431,028 pounds, would still be above what the 
Committee considers to be optimum.
    Overproduction of Scotch spearmint oil, while improving, also 
continues to be an area of concern for the Committee. Production of Far 
West Scotch spearmint oil has declined, from a high of 1,050,700 pounds 
in 2009, to 868,487 pounds in 2010, and the Committee expects it to 
drop even further during the 2011 season. The recent declining trend in 
Scotch spearmint oil production is viewed by the Committee as a 
positive development and is expected to contribute some relief to the 
industry's oversupply situation.
    In addition, spearmint oil handlers indicated that demand for 
Scotch spearmint oil might be gaining strength. Handlers that had 
projected that the trade demand for Far West Scotch oil would range 
from a low of 750,000 pounds to a high of 850,000 pounds for the 2010-
2011 marketing year, expect the trade demand to be within a range of 
800,000 pounds to 900,000 pounds for the 2011-2012 period.
    However, this increase in projected Scotch demand, generally 
thought of as a positive indicator for the industry, is viewed 
cautiously by some industry participants. Consumer demand for mint 
flavored products is reportedly steady, providing optimism for long 
term increases in the demand for Far West spearmint oil. Some handlers, 
though, believe that the manufacturers of such products are currently 
increasing spearmint oil purchases just to rebuild inventories that 
were depleted during the worst of the recent U.S. economic recession. 
As such, those handlers feel that at least some of the recent increase 
in Scotch spearmint oil sales may not represent an actual increase in 
sustained demand, but a temporary response to fluctuations in the 
strategic inventories of the manufacturers.
    Still, given the moderately improving economic indicators for the 
Far West Scotch spearmint oil industry outlined above, the Committee 
took a cautiously optimistic perspective into the discussion of 
establishing appropriate salable quantities and allotment percentages 
for the upcoming season.
    Therefore, at the October 13, 2010, meeting, the Committee 
recommended the 2011-2012 Scotch spearmint oil salable quantity of 
694,774 pounds and allotment percentage of 34 percent. The Committee 
utilized sales estimates for 2011-2012 Scotch spearmint oil, as 
provided by several of the industry's handlers, as well as historical 
and current Scotch spearmint oil production

[[Page 11973]]

and inventory statistics, to arrive at those recommendations. The 
volume control levels recommended by the Committee represent a 127,812 
pound and 6 percentage point increase over the previous year's salable 
quantity and allotment percentage, reflecting a more positive 
assessment of the industry's economic conditions.
    The Committee estimates that about 800,000 pounds of Scotch 
spearmint oil may be sold during the 2011-2012 marketing year. When 
considered in conjunction with the estimated carry-in of 197,551 pounds 
of Scotch spearmint oil on June 1, 2011, the recommended salable 
quantity of 694,774 pounds results in a total available supply of 
approximately 892,325 pounds of Scotch spearmint oil during the 2011-
2012 marketing year. The Committee estimates that carry-in of Scotch 
spearmint oil into the 2012-2013 marketing year, which begins June 1, 
2012, would be 92,325 pounds, a decrease of 105,226 pounds from the 
beginning of the 2011-2012 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 2011-2012 marketing year based on the 
information discussed above, as well as the data outlined below.
    (A) Estimated carry-in on June 1, 2011--197,551 pounds. This figure 
is the difference between the revised 2010-2011 marketing year total 
available supply of 997,551 pounds and the estimated 2010-2011 
marketing year trade demand of 800,000 pounds.
    (B) Estimated trade demand for the 2011-2012 marketing year--
800,000 pounds. This figure is based on input from producers at six 
Scotch spearmint oil production area meetings held in late September 
and early October 2010, as well as estimates provided by handlers and 
other meeting participants at the October 13, 2010, meeting. The 
average estimated trade demand provided at the six production area 
meetings is 800,000 pounds, which is 33,333 pounds less than the 
average of the trade demand estimates submitted by handlers. The 
average of Far West Scotch spearmint oil sales over the last five years 
is 789,243 pounds.
    (C) Salable quantity required from the 2011-2012 marketing year 
production--602,449 pounds. This figure is the difference between the 
estimated 2011-2012 marketing year trade demand (800,000 pounds) and 
the estimated carry-in on June 1, 2011 (197,551 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 for the 2011-2012 marketing 
year--2,043,453 pounds. This figure represents a one percent increase 
over the revised 2010-2011 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 allotment percentage--29.5 percent. This percentage is 
computed by dividing the minimum required salable quantity by the total 
estimated allotment base.
    (F) Recommended allotment percentage--34 percent. This is the 
Committee's recommendation and is based on the computed allotment 
percentage (29.5 percent), the average of the computed allotment 
percentage figures from the six production area meetings (31 percent), 
and input from producers and handlers at the October 13, 2010, meeting. 
The actual recommendation of 34 percent is based on the Committee's 
determination that the computed percentage (29.5 percent) may not 
adequately supply the potential 2011-2012 Scotch spearmint oil market.
    (G) The Committee's recommended salable quantity--694,774 pounds. 
This figure is the product of the recommended allotment percentage and 
the total estimated allotment base.
    (H) Estimated available supply for the 2011-2012 marketing year--
892,325 pounds. This figure is the sum of the 2011-2012 recommended 
salable quantity (694,774 pounds) and the estimated carry-in on June 1, 
2011 (197,551 pounds).

Class 3 (Native) Spearmint Oil

    The Native spearmint oil industry is facing market conditions that 
are very similar to those affecting the Scotch spearmint oil market, 
although not nearly as severe. Over 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 produces 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 shrunk to a low of 48 
percent. Since that point, however, the percentage has rebounded and is 
now estimated to be over 57 percent for 2010.
    In spite of the fact that Far West Native spearmint oil has been 
gaining world market share, the industry has endured challenging 
marketing conditions over the past several marketing years. 
Overproduction, coupled with a decrease in demand, created a similar 
oversupply situation for Native spearmint oil as was previously 
discussed for Scotch spearmint oil. Production of Native spearmint oil 
in the Far West region was 701,372 pounds in 2004, but increased to 
1,453,896 pounds just five years later in 2009, a 107 percent increase. 
In addition, over that same timeframe, demand for Native oil was moving 
in the opposite direction. Sales of Far West Native oil peaked in 2004 
at 1,249,507 pounds. From that cyclical high, sales steadily declined 
over the next five years, dropping to just 976,888 pounds by 2009. As 
production rose and sales dropped, excess inventory of uncommitted 
Native spearmint oil began to accumulate. Carry-in of Native oil 
measured at the beginning of each marketing year, which serves as a 
measure of oversupply in the market, grew from 83,417 pounds at the 
beginning of the 2007-2008 marketing year to 343,517 pounds at the 
beginning of the 2010-2011 marketing year.
    The Committee's response to the difficult marketing environment for 
Native spearmint oil over the 2008 through 2010 period was similar to 
the response to the situation with Scotch spearmint oil over that time, 
to recommend the moderate tightening of volume control regulations. The 
Committee, which recommended a 2008-2009 Native spearmint oil salable 
quantity of 1,178,946 pounds, maintained a similar recommendation for 
the 2009-2010 marketing year and then dropped its recommendation to 
953,405 pounds for the 2010-2011 marketing year. Similarly, the 
recommended allotment percentage, which was 53 percent for the 2008-
2009 and 2009-2010 periods, was

[[Page 11974]]

recommended to be reduced to just 43 percent for 2010-2011.
    Although improving, many of the negative marketing conditions 
present leading up to the the 2010-2011 marketing year were still 
evident when the Committee met to consider volume regulation for the 
upcoming 2011-2012 marketing year. The June 1, 2011, carry-in of Native 
spearmint oil on June 1, 2011, is estimated to be 216,737 pounds, down 
from the previous year's high of 343,517 pounds, but still at a level 
above what the Committee believes to be optimum.
    Also, production of Native spearmint oil, while showing some signs 
of improvement, still remains an area of concern for the Committee. 
Production of Far West Native spearmint oil, which declined from a high 
of 1,453,896 pounds in 2009 to 1,244,361 pounds in 2010, is still 
considered by the Committee to be high relative to the current level of 
demand and the excess inventory of Native spearmint oil. However, the 
Committee believes that the declining trend in Native spearmint oil 
production may continue into the 2011 season and that much of the 
pressure on the industry's current oversupply situation may be relieved 
moving forward.
    In addition to an improved supply situation, demand for Far West 
Native spearmint oil appears to have halted its downward movement and 
is expected to improve in the coming year. Spearmint oil handlers, who 
projected that the 2010-2011 trade demand for Far West Native spearmint 
oil would range from a low of 1,050,000 pounds to a high of 1,200,000 
pounds, have increased their projections modestly for the 2011-2012 
period to a range of 1,100,000 pounds to 1,200,000 pounds.
    However, similar to Scotch spearmint oil, the small increase in 
projected Native spearmint oil demand, generally thought of as a 
positive indicator for the industry, is viewed by some handlers with 
caution. As mentioned previously, consumer demand for mint flavored 
products is expected to be steady or increase slightly moving forward, 
which provides optimism for long term improvement in the demand for Far 
West spearmint oil. Some handlers, though, have reported that the 
manufacturers of such products may just be temporarily increasing 
purchases of spearmint oil to rebuild inventories that were depleted 
during the worst of the current U.S. economic recession. As such, the 
handlers believe that at least some of the recent increase in purchases 
do not represent an actual increase in sustained demand but, rather, a 
short term response to fluctuations in the strategic inventories of the 
manufacturers.
    Given the moderately improving economic indicators for the Far West 
Native spearmint oil industry outlined above, the Committee took a 
cautiously optimistic perspective into the discussion of establishing 
appropriate salable quantities and allotment percentages for the 
upcoming season.
    As such, at the October 13, 2010, meeting, the Committee 
recommended a 2011-2012 Native spearmint oil salable quantity of 
1,012,983 pounds and an allotment percentage of 44 percent. The 
Committee utilized sales estimates for 2011-2012 Native spearmint oil, 
as provided by several of the industry's handlers, as well as 
historical and current Native spearmint oil market statistics to 
establish these thresholds. The recommended volume control levels 
represent a 32,763 pound and a 1 percentage point increase over the 
previous year's salable quantity and allotment percentage. Even with 
these increases in the salable quantity and allotment percentages, the 
carry-in at the beginning of the 2012-2013 marketing year is projected 
to drop by 117,018 pounds.
    The Committee estimates that approximately 1,130,000 pounds of 
Native spearmint oil may be sold during the 2011-2012 marketing year. 
When considered in conjunction with the estimated carry-in of 216,737 
pounds of Native spearmint oil on June 1, 2011, the recommended salable 
quantity of 1,012,983 pounds results in a total available supply of 
about 1,229,719 pounds of Native spearmint oil during the 2011-2012 
marketing year. The Committee estimates that carry-in of Native 
spearmint oil at the beginning of the 2012-2103 marketing year to be 
99,719 pounds, a significant reduction from the previous year's level 
of 216,737 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 2011-2012 marketing year based on the 
information discussed above, as well as the data outlined below.
    (A) Estimated carry-in on June 1, 2011--216,737 pounds. This figure 
is the difference between the revised 2010-2011 marketing year total 
available supply of 1,323,737 pounds and the estimated 2010-2011 
marketing year trade demand of 1,107,000 pounds.
    (B) Estimated trade demand for the 2011-2012 marketing year--
1,130,000 pounds. This estimate is established by the Committee and is 
based on input from producers at the seven Native spearmint oil 
production area meetings held in late September and early October 2010, 
as well as estimates provided by handlers and other meeting 
participants at the October 13, 2010, meeting. The average estimated 
trade demand provided at the seven production area meetings was 
1,130,238 pounds, whereas the handler estimate ranged from 1,100,000 
pounds to 1,200,000 pounds.
    (C) Salable quantity required from the 2011-2012 marketing year 
production--913,263 pounds. This figure is the difference between the 
estimated 2011-2012 marketing year trade demand (1,130,000 pounds) and 
the estimated carry-in on June 1, 2011 (216,737 pounds). This is the 
minimum amount that the Committee believes would be required to meet 
the anticipated 2011-2012 Native spearmint oil trade demand.
    (D) Total estimated allotment base for the 2011-2012 marketing 
year--2,302,233 pounds. This figure represents a one percent increase 
over the revised 2010-2011 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 allotment percentage--39.7 percent. This percentage is 
computed by dividing the required salable quantity (913,263 pounds) by 
the total estimated allotment base (2,302,233 pounds).
    (F) Recommended allotment percentage--44 percent. This is the 
Committee's recommendation based on the computed allotment percentage 
(39.7 percent), the average of the computed allotment percentage 
figures from the seven production area meetings (39.7 percent), and 
input from producers and handlers at the October 13, 2010, meeting. The 
actual recommendation of 44 percent is based on the Committee's 
determination that the computed percentage (39.7 percent) may not 
adequately supply the potential 2011-2012 Native spearmint oil market.
    (G) The Committee's recommended salable quantity--1,012,983 pounds. 
This figure is the product of the recommended allotment percentage (44 
percent) and the total estimated allotment base (2,302,233 pounds).
    (H) Estimated available supply for the 2011-2012 marketing year--
1,229,720 pounds. This figure is the sum of the

[[Page 11975]]

2011-2012 recommended salable quantity (1,012,983 pounds) and the 
estimated carry-in on June 1, 2011 (216,737 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 694,774 pounds and 34 percent, 
and 1,012,983 pounds and 44 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 might develop during the 
marketing year could be satisfied by an intra-seasonal increase in the 
salable quantity. The order makes this provision for an intra-seasonal 
increase 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 2011-2012 marketing year may 
transfer such excess spearmint oil to producers with production less 
than their annual allotment, or, up until November 1, 2011, 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 42 
percent, while the average allotment percentage for the same five-year 
period for Native spearmint oil is 51 percent. Costs to producers and 
handlers resulting from this 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 2011-2012 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 2011-2012 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 the 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, consideration by the Committee was given to 
historical sales, as well as changes and trends in production and 
demand. This rule also provides producers with information on the 
amount of spearmint oil that should be produced for the 2011-2012 
season in order to meet anticipated market demand.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), 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 38 producers of Scotch spearmint oil and 
approximately 84 producers of Native spearmint oil in the regulated 
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 2 of the 8 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 38 Scotch spearmint oil producers and 29 of the 84 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 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 the luxury of having 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 the small producer 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.

[[Page 11976]]

    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 2011-2012 marketing year. The 
Committee recommended this rule 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 to 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 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. Demand 
for spearmint oil tends to be relatively stable from year-to-year. The 
demand for spearmint oil is expected to grow slowly for the foreseeable 
future because the demand for consumer products that use spearmint oil 
will likely expand slowly, in line with population growth.
    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 mint 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 production 
from 1980 through 2009 was about 0.23. The CV for spearmint oil grower 
prices was about 0.16 for that period, well below the CV for 
production. 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 30-year average (1.89 million pounds from 1980 through 2009) and 
the largest crop was approximately 163 percent of the 30-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 was even more pronounced before the creation of the 
marketing order, can create liquidity problems for some producers. The 
marketing 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 carry-over 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, resulting 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 the trade demand for the 2011-2012 
marketing year for both classes of oil at 1,930,000 pounds, and that 
the expected combined carry-in will be 414,288 pounds. This results in 
a combined required salable quantity of 1,515,712 pounds. With volume 
control, sales by producers for the 2011-2012 marketing year would be 
limited to 1,707,757 pounds (the recommended salable quantity for both 
classes of spearmint oil).
    The recommended allotment percentages, upon which 2011-2012 
producer allotments are based, are 34 percent for Scotch and 44 percent 
for Native. Without volume controls, producers would not be limited to 
these allotment levels, and could produce and

[[Page 11977]]

sell additional spearmint. The econometric model estimated a $1.89 
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 2011-2012 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 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.
    After computing the initial 29.5 percent Scotch spearmint oil 
allotment percentage, the Committee considered various alternative 
levels of volume control for Scotch spearmint oil. Considered levels 
ranged from 30 percent to 40 percent. Given the moderately improving 
marketing conditions, there was consensus that the allotment percentage 
for 2011-2012 should be more than the percentage established for the 
2010-2011 marketing year (28 percent). After considerable discussion, 
in a vote of six members in favor and two members opposed, the 
Committee determined that 694,774 pounds and 34 percent would be the 
most effective salable quantity and allotment percentage, respectively, 
for the 2011-2012 marketing year. The two dissenting members felt that 
the salable quantity and allotment percentage should be set at some 
unidentified higher 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 39.7 percent, the 
Committee voted unanimously to recommend 1,012,983 pounds and 44 
percent for the effective salable quantity and allotment percentage, 
respectively, for the 2011-2012 marketing year.
    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 2011-2012 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. Reporting and recordkeeping requirements have 
remained the same for each year of regulation. These requirements have 
been approved by the Office of Management and Budget under OMB Control 
No. 0581-0178, Vegetable and Specialty Crops. Accordingly, this 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 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 
13, 2010, 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: http://www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions 
about the compliance guide should be sent to Antoinette Carter at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    A 30-day comment period is deemed appropriate to allow interested 
persons the opportunity to respond to this proposal, taking into 
account that the marketing year begins on June 1, 2011. All written 
comments timely received will be considered before a final 
determination is made on this matter.

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

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

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

    2. A new Sec.  985.230 is added to read as follows: [Note: This 
section will not appear in the Code of Federal Regulations.]

Sec.  985.230  Salable quantities and allotment percentages--2011-2012 
marketing year.

    The salable quantity and allotment percentage for each class of 
spearmint oil during the marketing year beginning on June 1, 2011, 
shall be as follows:
    (a) Class 1 (Scotch) oil--a salable quantity of 694,774 pounds and 
an allotment percentage of 34 percent.
    (b) Class 3 (Native) oil--a salable quantity of 1,012,983 pounds 
and an allotment percentage of 44 percent.

[[Page 11978]]

    Dated: February 25, 2011.
David R. Shipman,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2011-4810 Filed 3-3-11; 8:45 am]
BILLING CODE 3410-02-P
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