[Federal Register Volume 62, Number 145 (Tuesday, July 29, 1997)]
[Proposed Rules]
[Pages 40482-40487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20034]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV97-905-1 PR]


Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida; 
Limiting the Volume of Small Florida Red Seedless Grapefruit

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule invites comments on limiting the volume of 
small red seedless grapefruit entering the fresh market under the 
marketing order covering oranges, grapefruit, tangerines, and tangelos 
grown in Florida. The marketing order is administered locally by the 
Citrus Administrative Committee (committee). This rule would limit the 
volume of size 48 and/or size 56 red seedless grapefruit handlers could 
ship during the first 11 weeks of the 1997-1998 season that begins in 
September. This proposal would provide a sufficient supply of small 
sized red seedless grapefruit to meet market demand, without saturating 
all markets with these small sizes. The committee believes this rule is 
necessary to help stabilize the market and improve grower returns.

DATES: Comments must be received by August 13, 1997.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments must be sent in triplicate to the 
Docket Clerk, Fruit and Vegetable Division, AMS, USDA, room 2525-S, 
P.O. Box 96456, Washington, DC 20090-6456; Fax: (202) 720-5698. All 
comments should reference the docket 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.

FOR FURTHER INFORMATION CONTACT: William G. Pimental, Southeast 
Marketing Field Office, AMS, USDA, P.O. Box 2276, Winter Haven, Florida 
33883-2276; telephone: (941) 299-4770, Fax: (941) 299-5169; or Anne 
Dec, Marketing Order Administration Branch, F&V, AMS, USDA, room 2522-
S, P.O. Box 96456, Washington, DC 20090-6456; telephone: (202) 720-
5053, Fax: (202) 720-5698. Small businesses may request information on 
compliance with this regulation by contacting Jay Guerber, Marketing 
Order Administration Branch, Fruit and Vegetable Division, AMS, USDA, 
room 2525-S, P.O. Box 96456, Washington, DC 20090-6456; telephone (202) 
720-2491, Fax: (202) 720-5698.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing 
Agreement No. 84 and Marketing Order No. 905, both as amended (7 CFR 
part 905), regulating the handling of oranges, grapefruit, tangerines, 
and tangelos grown in Florida, hereinafter referred to as the 
``order.'' The marketing agreement and order are 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 (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This proposal has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This proposal will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    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 the Secretary 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 the Secretary 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 the Secretary's 
ruling on the petition, provided an action is filed not later than 20 
days after date of the entry of the ruling.
    The order provides for the establishment of grade and size 
requirements for Florida citrus, with the concurrence of the Secretary. 
These grade and size requirements are designed to provide fresh markets 
with citrus fruit of acceptable quality and size. This helps create 
buyer confidence and contributes to stable marketing conditions. This 
is in the interest of growers, handlers, and consumers, and is designed 
to increase returns to Florida citrus growers. The current minimum 
grade standard for red seedless grapefruit is U.S. No. 1, and the 
minimum size requirement is size 56 (at least 3\5/16\ inches in 
diameter).

[[Page 40483]]

    Section 905.52 of the order provides authority to limit shipments 
of any grade or size, or both, of any variety of Florida citrus. Such 
limitations may restrict the shipment of a portion of a specified grade 
or size of a variety. Under such a limitation, the quantity of such 
grade or size that may be shipped by a handler during a particular week 
would be established as a percentage of the total shipments of such 
variety by such handler in a prior period, established by the committee 
and approved by the Secretary, in which the handler shipped such 
variety.
    Section 905.153 of the order provides procedures for limiting the 
volume of small red seedless grapefruit entering the fresh market. The 
procedures specify that the committee may recommend that only a certain 
percentage of sizes 48 and/or 56 red seedless grapefruit be made 
available for shipment into fresh market channels for any week or weeks 
during the regulatory period. The 11 week period begins the third 
Monday in September. Under such a limitation, the quantity of sizes 48 
and/or 56 red seedless grapefruit that may be shipped by a handler 
during a regulated week is calculated using the recommended percentage. 
By taking the recommended weekly percentage times the average weekly 
volume of red grapefruit handled by such handler in the previous five 
seasons, handlers can calculate the volume of sizes 48 and/or 56 they 
may ship in a regulated week.
    This proposed rule would limit the volume of small red seedless 
grapefruit entering the fresh market for each week of the 11 week 
period beginning the week of September 15. The proposal would limit the 
volume of sizes 48 and/or 56 red seedless grapefruit by establishing 
the weekly percentage for each of the 11 weeks at 25 percent. This 
action was recommended by the committee at its meeting on May 28, 1997, 
by a vote of 10 in favor to 7 opposed.
    For the past few seasons, returns on red seedless grapefruit have 
been at all time lows, often not returning the cost of production. On 
tree prices for red seedless grapefruit have declined steadily from 
$9.60 per carton (3/5 bushel) during the 1989-90 season, to $3.45 per 
carton during the 1994-95 season, to a low of $1.41 per carton during 
the 1996-97 season. The committee believes that to stabilize the market 
and improve returns to growers, demand for fresh red seedless 
grapefruit must be stabilized and increased.
    One problem contributing to the current state of the market is the 
excessive number of small sized grapefruit shipped early in the 
marketing season. During the past three seasons, sizes 48 and 56 
accounted for 34 percent of total shipments during the 11 week 
regulatory period, with the average weekly percentage exceeding 40 
percent of shipments. This contrasts with sizes 48 and 56 representing 
only 26 percent of total shipments for the remainder of the season. 
While there is a market for early grapefruit, the shipment of large 
quantities of small red seedless grapefruit in a short period 
oversupplies the fresh market for these sizes and negatively impacts 
the market for all sizes.
    For the majority of the season, larger sizes return better prices 
than smaller sizes. However, there is a push early in the season to get 
fruit into the market to take advantage of the higher prices available 
at the beginning of the season. The early season crop tends to have a 
greater percentage of small sizes. This creates a glut of smaller, 
lower priced fruit on the market that drives down the price for all 
sizes. Early in the season, larger sized fruit commands a premium 
price. In some cases, the f.o.b. is $4 to $6 a carton more than for the 
smaller sizes. In early October, the f.o.b. for a size 27 averages 
around $10.00 per carton. This compares to an average f.o.b. of $5.50 
per carton for size 56. By the end of the 11 week period outlined in 
this rule, the f.o.b. for large sizes has dropped to within two dollars 
of the f.o.b. for small sizes.
    In the past three seasons, during the period covered by this rule, 
prices of red seedless grapefruit have fallen from a weighted average 
f.o.b. of $7.80 per carton to an average f.o.b. of $5.50 per carton. 
Even though later in the season the crop has sized to naturally limit 
the amount of smaller sizes available for shipment, the price structure 
in the market has already been negatively affected. In the past three 
years, the market has not recovered, and the f.o.b. for all sizes fell 
to around $5.00 to $6.00 per carton for most of the rest of the season.
    The committee discussed this issue at length at several meetings. 
The committee believes that the overshipment of smaller sized red 
seedless grapefruit early in the season has contributed to below 
production cost returns for growers and lower on tree values. An 
economic study done by the University of Florida--Institute of Food and 
Agricultural Sciences (UF-IFAS) in May 1997, found that on tree prices 
have fallen from a high near $7.00 in 1991-92 to around $1.50 for this 
past season. The study projects that if the industry elects to make no 
changes, the on tree price will remain around $1.50. The study also 
indicates that increasing minimum size restrictions could help to raise 
returns.
    The committee examined shipment data covering the 11 week 
regulatory period for the last four seasons. The information contained 
the amounts and percentages of sizes 48 and 56 shipped during each 
week. They compared this information with tables outlining weekly 
f.o.b. figures for each size. Based on this statistical information 
from past seasons, the committee members believe there is an indication 
that once shipments of sizes 48 and 56 reach levels above 250,000 
cartons a week, prices decline on those and most other sizes of red 
seedless grapefruit. Without volume regulation, the industry has been 
unable to limit the shipments of small sizes. The committee believes 
that if shipments of small sizes could be maintained at around 250,000 
cartons a week, prices should stabilize and demand for larger, more 
profitable sizes should increase.
    The committee discussed at what level to establish the weekly 
percentages. They wanted to recommend a weekly percentage that would 
provide a sufficient volume of small sizes without adversely impacting 
the markets for larger sizes. The committee recommended that the 
percentage for each of the 11 weeks be established at the 25 percent 
level. This percentage, when combined with the average weekly shipments 
for the total industry, would provide a total industry allotment of 
244,195 cartons of sizes 48 and/or 56 red seedless grapefruit per 
regulated week. This percentage would allow the total shipments of 
small red seedless grapefruit to approach the 250,000 carton mark 
during regulated weeks without exceeding it.
    In its deliberations, the committee also recognized that if crop 
and market conditions should change, the committee could recommend that 
the percentage be increased or eliminated to provide for the shipment 
of more small sizes in any one, or all of the 11 weeks. While the 
official crop estimate will not be available until October, information 
in the UF-IFAS study and committee discussions indicate that the 1997-
98 season production will be near or greater than the 1996-97 estimate 
of 30.8 million boxes (1\3/5\ bushel) of red seedless grapefruit. 
Committee members also stated that the crop is sizing well and should 
produce a greater number of larger sizes than the past season. Using 
this information on the 1997-98 crop, the committee members thought 
that establishing a weekly percentage of 25 percent would provide 
enough small sizes to supply those markets without disrupting the 
markets for larger sizes.

[[Page 40484]]

    Under the procedures in section 905.153, the quantity of sizes 48 
and/or 56 red seedless grapefruit that may be shipped by a handler 
during a regulated week would be calculated using the recommended 
percentage of 25 percent. By taking the 25 percent weekly percentage 
times the average weekly volume of red grapefruit handled by such 
handler in the previous five seasons, handlers can calculate the volume 
of sizes 48 and/or 56 they may ship in a regulated week.
    An average week has been calculated by the committee for each 
handler using the following formula. The total red seedless grapefruit 
shipments by a handler during the 33 week period beginning the third 
Monday in September and ending the first Sunday in May during the 
previous five seasons are added and divided by five to establish an 
average season. This average season was then divided by the 33 weeks in 
a season to derive the average week. This average week would be the 
base for each handler for each of the 11 weeks contained in the 
regulation period. The weekly percentage, in this case, 25 percent, is 
multiplied by a handler's average week. The total is that handler's 
allotment of sizes 48 and/or 56 red seedless grapefruit for the given 
week.
    Under this proposed rule, the calculated allotment is the amount of 
small sized red seedless grapefruit a handler could ship. If the 
minimum size established under section 905.52 remains at size 56, 
handlers could fill their allotment with size 56, size 48, or a 
combination of the two sizes such that the total of these shipments are 
within the established limits. If the minimum size under the order is 
48, handlers could fill their allotment with size 48 fruit such that 
the total of these shipments are within the established limits. The 
committee staff would perform the specified calculations and provide 
them to each handler.
    To illustrate, suppose Handler A shipped a total of 50,000 cartons, 
64,600 cartons, 45,000 cartons, 79,500 cartons, and 24,900 cartons of 
red seedless grapefruit in the last five seasons, respectively. Adding 
these season totals and dividing by five yields an average season of 
52,800 cartons. The average season would then be divided by 33 weeks to 
yield an average week, in this case, 1,600 cartons. This would be 
Handler A's base. The weekly percentage of 25 percent would then be 
applied to this amount. This would provide this handler with a weekly 
allotment of 400 cartons (1,600  x  .25) of size 48 and/or 56.
    The average week for handlers with less than five previous seasons 
of shipments would be calculated by the committee by averaging the 
total shipments for the seasons they did ship red seedless grapefruit 
during the immediately preceding five years and dividing that average 
by 33. New handlers with no record of shipments would have no prior 
period on which to base their average week. Therefore, under this 
proposal, a new handler could ship small sizes equal to 25 percent of 
their total volume of shipments during their first shipping week. Once 
a new handler has established shipments, their average week will be 
calculated as an average of the weeks they have shipped during the 
current season.
    This proposed rule would establish a weekly percentage of 25 
percent for each of the 11 weeks to be regulated. The regulatory period 
runs from the third Monday in September (September 15, 1997) through 
the last Sunday in November (November 30, 1997). Each regulation week 
would begin Monday at 12:00 a.m. and end at 11:59 p.m. the following 
Sunday, since most handlers keep records based on Monday being the 
beginning of the work week. If necessary, the committee could meet and 
recommend a percentage above 25 percent to the Secretary at any time 
during the regulatory period.
    The rules and regulations contain a variety of provisions designed 
to provide handlers with some marketing flexibility. When regulation is 
established by the Secretary for a given week, the committee calculates 
the quantity of small red seedless grapefruit which may be handled by 
each handler. Section 905.153(d) provides allowances for overshipments, 
loans, and transfers of allotment. These allowances should allow 
handlers the opportunity to supply their markets while limiting the 
impact of small sizes on a weekly basis.
    During any week for which the Secretary has fixed the percentage of 
sizes 48 and/or 56 red seedless grapefruit, any handler could handle an 
amount of sizes 48 and/or 56 red seedless grapefruit not to exceed 110 
percent of their allotment for that week. The quantity of overshipments 
(the amount shipped in excess of a handler's weekly allotment) would be 
deducted from the handler's allotment for the following week. 
Overshipments would not be allowed during week 11 because there would 
be no allotments the following week from which to deduct the 
overshipments.
    If handlers fail to use their entire allotments in a given week, 
the amounts undershipped would not be carried forward to the following 
week. However, a handler to whom an allotment has been issued could 
lend or transfer all or part of such allotment (excluding the 
overshipment allowance) to another handler. In the event of a loan, 
each party would, prior to the completion of the loan agreement, notify 
the committee of the proposed loan and date of repayment. If a transfer 
of allotment is desired, each party would promptly notify the committee 
so that proper adjustments of the records could be made. In each case, 
the committee would confirm in writing all such transactions prior to 
the following week. The committee could also act on behalf of handlers 
wanting to arrange allotment loans or participate in the transfer of 
allotment. Repayment of an allotment loan would be at the discretion of 
the handlers party to the loan.
    The committee would compute each handler's allotment by multiplying 
the handler's average week by the percentage established by regulation 
for that week. The committee would notify each handler prior to that 
particular week of the quantity of sizes 48 and 56 red seedless 
grapefruit such handler could handle during a particular week, making 
the necessary adjustments for overshipments and loan repayments.
    This rule does not affect the provision that handlers may ship up 
to 15 standard packed cartons (12 bushels) of fruit per day exempt from 
regulatory requirements. Fruit shipped in gift packages that are 
individually addressed and not for resale, and fruit shipped for animal 
feed are also exempt from handling requirements under specific 
conditions. Also, fruit shipped to commercial processors for conversion 
into canned or frozen products or into a beverage base are not subject 
to the handling requirements under the order.
    During committee deliberations, several concerns were raised 
regarding this proposed regulation. One area of concern was the 
possible impact this regulation may have on exports. Several members 
stated that there is a strong demand in some export markets for small 
sizes. Other members responded that the percentage set should allow 
handlers enough volume of small sizes to meet the demand in these 
markets. It was also stated that any shortfall an individual handler 
might have could be filled by loan or transfer. There was also some 
discussion that markets that normally demand small sizes have shown a 
willingness to purchase larger sizes. In addition, committee data 
indicate that the majority of export shipments occur after the 11 week

[[Page 40485]]

period when there are no restrictions on small sizes.
    Another concern raised was the effect this proposal may have on 
packouts. It was stated that this rule could reduce the volume packed, 
resulting in higher packinghouse costs. The purpose of this rule is to 
limit the volume of small sizes marketed early in the season. Larger 
sizes could be substituted for smaller sizes with a minimum effect on 
overall shipments. This rule may require more selective picking of only 
the sizes desired, something that many growers are doing already. The 
UF-IFAS study presented indicated that it would increase returns if 
growers would harvest selectively and return to repick groves as the 
grapefruit sized. This also would allow growers to maximize returns on 
fresh grapefruit by not picking unprofitable grades and sizes of red 
grapefruit that would be sent to the less profitable processing market. 
The study also indicated that selective harvesting can reduce the 
f.o.b. cost per carton. Therefore, this action should have a positive 
impact on grower returns.
    Several members were concerned about what would happen if market 
conditions were to change. Other committee members responded that if 
industry conditions were to change (for example, if there was a freeze, 
or if the grapefruit was not sizing), the committee would meet and 
recommend that the percentage be raised to allow for more small sizes, 
or that the limits be removed all together.
    Another concern raised was that market share could be lost to 
Texas. According to the Economic Analysis Branch (EAB), of the Fruit 
and Vegetable Division, of the Agricultural Marketing Service (AMS), 
limiting shipments of small Florida grapefruit would probably not 
result in a major shift to Texas grapefruit because the Texas industry 
is much smaller and would have higher freight costs to some markets 
supplied by Florida. The UF-IFAS study made similar findings. Texas 
production is much smaller and has been susceptible to freezes that 
take it out of the market. This has lessened its impact on the overall 
grapefruit market.
    One handler expressed that they ship early in the season and this 
action could be very restrictive. Members responded that the 
availability of loans and transfers would address these concerns. There 
was also discussion of how restrictive this proposal would actually be. 
Based on shipments from the past four seasons, available allotment 
would have exceeded actual shipments for each of the first three weeks 
that would be regulated under this rule. In the three seasons prior to 
last season, if a 25 percent restriction on small sizes had been 
applied during the 11 week period, only an average of 4.2 percent of 
overall shipments during that period would have been affected. A large 
percentage of this volume most likely could have been replaced by 
larger sizes. A sufficient volume of small sized red grapefruit would 
still be allowed into all channels of trade, and allowances would be in 
place to help handlers address any market shortfall.
    After considering the concerns expressed, and the available 
information, the committee determined that this rule was needed to 
regulate shipments of small sized red seedless grapefruit.
    Section 8(e) of the Act requires that whenever grade, size, quality 
or maturity requirements are in effect for certain commodities under a 
domestic marketing order, including grapefruit, imports of that 
commodity must meet the same or comparable requirements. This rule does 
not change the minimum grade and size requirements under the order, 
only the percentages of sizes 48 and/or 56 red grapefruit that may be 
handled. Therefore, no change is necessary in the grapefruit import 
regulations as a result of this action.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), 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 rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 80 handlers subject to regulation under the 
order and approximately 11,000 growers of citrus in the regulated area. 
Small agricultural service firms, which includes handlers, have been 
defined by the Small Business Administration (SBA) (13 CFR 121.601) as 
those having annual receipts of less than $5,000,000, and small 
agricultural producers are defined as those having annual receipts of 
less than $500,000.
    Based on the Florida Agricultural Statistics Service and committee 
data for the 1995-96 season, the average annual f.o.b. price for fresh 
Florida red grapefruit during the 1995-96 season was $5.00 per 4/5 
bushel cartons for all grapefruit shipments, and the total shipments 
for the 1995-96 season were 23 million cartons of grapefruit. 
Approximately 20 percent of all handlers handled 60 percent of Florida 
grapefruit shipments. In addition, many of these handlers ship other 
citrus fruit and products which are not included in committee data but 
would contribute further to handler receipts. Using the average f.o.b. 
price, about 80 percent of grapefruit handlers could be considered 
small businesses under SBA's definition and about 20 percent of the 
handlers could be considered large businesses. The majority of Florida 
grapefruit handlers, and growers may be classified as small entities.
    The committee believes that the overshipment of smaller sized red 
seedless grapefruit early in the season has contributed to below 
production cost returns for growers and lower on tree values. For the 
past few seasons, returns on red seedless grapefruit have been at all 
time lows, often not returning the cost of production. On tree prices 
for red seedless grapefruit have declined steadily from $9.60 per 
carton (3/5 bushel) during the 1989-90 season, to $3.45 per carton 
during the 1994-95 season, to a low of $1.41 per carton during the 
1996-97 season. The committee believes that to stabilize the market and 
improve returns to growers, demand for fresh red seedless grapefruit 
must be stabilized and increased.
    Under the authority of section 905.52 of the order, this proposed 
rule would limit the volume of small red seedless grapefruit entering 
the fresh market for each week of the 11 week period beginning the week 
of September 15. The proposal would limit the volume of sizes 48 and/or 
56 red seedless grapefruit by establishing the weekly percentage for 
each of the 11 weeks at 25 percent. Under such a limitation, the 
quantity of sizes 48 and/or 56 red seedless grapefruit that may be 
shipped by a handler during a particular week is calculated using the 
recommended percentage. By taking the recommended percentage times the 
average weekly volume of red grapefruit handled by such handler in the 
previous five seasons, the committee would calculate a handler's weekly 
allotment of small sizes. This proposal would provide a supply of small 
sized red seedless grapefruit sufficient to meet market demand, without 
saturating all markets with these small sizes. The committee believes 
this rule is necessary to help stabilize the market and improve grower 
returns.
    At the meeting, there was discussion regarding the expected impact 
of this

[[Page 40486]]

change on handlers and growers in terms of cost. Discussion focused on 
the possibility that market share would be lost to Texas and that this 
proposed rule could increase packinghouse costs. According to EAB, 
limiting shipments of small Florida grapefruit would probably not 
result in a major shift to Texas grapefruit because the Texas industry 
is much smaller and would have higher freight costs to some markets 
supplied by Florida. The UF-IFAS study made similar findings. Texas 
production is much smaller and has been susceptible to freezes that 
take it out of the market. This has lessened its impact on the overall 
grapefruit market.
    The concern about packinghouse costs was that this proposal would 
mean lower packouts which may increase cost. However, the availability 
of loans and transfers would provide some flexibility. Also, this 
proposal would only affect small sizes and only during the 11 week 
period. By substituting larger sizes and using loans and transfers, 
packouts should approach the weekly volume of seasons prior to this 
proposal.
    The weekly percentage of 25 percent, when combined with the average 
weekly shipments for the total industry, would provide a total industry 
allotment of 244,195 cartons of sizes 48 and/or 56 red seedless 
grapefruit per regulated week. Based on shipments from the past four 
seasons, the total available weekly allotment of 244,195 cartons would 
exceed actual shipments for each of the first three weeks that would be 
regulated under this rule. In addition, if a 25 percent restriction on 
small sizes had been applied during the 11 week period in the three 
seasons prior to last season, an average of 4.2 percent of overall 
shipments during that period would have been affected. A large 
percentage of this volume most likely could have been replaced by 
larger sizes. Under this proposal a sufficient volume of small sized 
red grapefruit would still be allowed into all channels of trade, and 
allowances would be in place to help handlers address any market 
shortfall. Therefore, the overall impact on total seasonal shipments 
and on industry cost should be minimal.
    The committee also discussed the state of the market and the cost 
of doing nothing. During the past three seasons, sizes 48 and 56 
accounted for 34 percent of total shipments during the 11 week 
regulatory period, with the average weekly percentage exceeding 40 
percent of shipments. For the remainder of the season, sizes 48 and 56 
represent only 26 percent of total shipments. While there is a market 
for early grapefruit, the shipment of large quantities of small red 
seedless grapefruit in a short period oversupplies the fresh market for 
these sizes and negatively impacts the market for all sizes.
    The early season crop tends to have a greater percentage of small 
sizes. The large volume of smaller, lower priced fruit drives down the 
price for all sizes. Early in the season, larger sized fruit commands a 
premium price. In some cases, the f.o.b. is $4 to $6 a carton more than 
for the smaller sizes. In early October, the f.o.b. for a size 27 
averages around $10.00 per carton. This compares to an average f.o.b. 
of $5.50 per carton for size 56. By the end of the 11 week period 
outlined in this rule, the f.o.b. for large sizes has dropped to within 
two dollars of the price for small sizes.
    In the past three seasons, during the period covered by this rule, 
prices of red seedless grapefruit have fallen from a weighted average 
f.o.b. of $7.80 per carton to an average f.o.b. of $5.50 per carton. 
Even though later in the season the crop has sized to naturally limit 
the amount of smaller sizes available for shipment, the price structure 
in the market has already been negatively affected. This leaves the 
f.o.b. for all sizes around $5.00 to $6.00 per carton for the rest of 
the season.
    As previously stated, the on tree price of red seedless grapefruit 
has also been falling. On tree prices for fresh red seedless grapefruit 
have declined steadily from $9.60 per carton during the 1989-90 season, 
to $3.45 per carton during the 1994-95 season, to a low of $1.41 per 
carton during the 1996-97 season. In many cases, prices during the past 
two seasons have provided returns less than production costs. This 
price reduction could force many small growers out of business. If no 
action is taken, the UF-IFAS study indicates that on tree returns would 
remain at levels around $1.50.
    This proposal would provide a supply of small sized red seedless 
grapefruit to meet market demand, without saturating all markets with 
these small sizes. The committee believes that if the supply of small 
sizes were limited early in the season, prices could be stabilized at a 
higher level. This would provide increased returns for growers. In 
addition, if more small grapefruit were allowed to remain on the tree 
to increase in size and maturity, it could provide greater returns to 
growers.
    The committee surveyed shipment data covering the 11 week 
regulatory period for the last four seasons and examined tables 
outlining weekly f.o.b. figures for each size. The committee believes 
that if shipments of small sizes could be maintained at around 250,000 
cartons a week, prices should stabilize and demand for larger, more 
profitable sizes should increase. The weekly percentage of 25 percent, 
when combined with the average weekly shipments for the total industry, 
would provide a total industry allotment of 244,195 cartons of sizes 48 
and/or 56 red seedless grapefruit per regulated week. A stabilized 
price that returns a fair market value would be beneficial to both 
small and large growers and handlers.
    This rule may require more selective picking of only the sizes 
desired, something that many growers are doing already. The UF-IFAS 
study indicated that returns could increase if growers would harvest 
selectively and return to repick groves as the grapefruit sized. This 
also would allow growers to maximize returns on fresh grapefruit by not 
picking unprofitable grades and sizes of red grapefruit that would be 
sent to the less profitable processing market. The study indicated that 
selective harvesting can reduce the f.o.b. cost per carton. The study 
also indicates that increasing minimum size restrictions could help to 
raise returns.
    Fifty-nine percent of red seedless grapefruit is shipped to fresh 
market channels. There is a processing outlet for grapefruit not sold 
into the fresh market. However, the vast majority of processing is 
squeezing the grapefruit for juice. Because of the properties of the 
juice of red seedless grapefruit, including problems with color, the 
processing outlet is limited, and not currently profitable. Therefore, 
it is essential that the market for fresh red grapefruit be fostered 
and maintained. Any costs associated with this action would only be for 
the 11 week regulatory period. However, benefits from this action could 
stretch throughout the entire 33 week season. Even if this action was 
successful only in raising returns a few pennies a carton, when applied 
to 34 million cartons of red seedless grapefruit shipped to the fresh 
market, the benefits should more than outweigh the costs.
    The limits that would be established under this action would be 
based on percentages applied to a handler's average week. This process 
was established by the committee because it was the most equitable. 
Also, all handlers would have access to loans and transfers. All 
handlers and growers would benefit from increased returns. The costs or 
benefits of this rule are not expected to be disproportionately more or 
less for small handlers or growers than for larger entities.

[[Page 40487]]

    The committee discussed alternatives to this action. The committee 
discussed eliminating shipments of size 56 grapefruit all together. 
Several members expressed that there is a market for size 56 
grapefruit. Members favored the percentage rule recommended because it 
would supply a sufficient quantity of small sizes should there be a 
demand for size 56. Therefore, the motion to eliminate size 56 was 
rejected. Another alternative discussed was to do nothing. However, the 
committee rejected this option, taking in account that returns would 
remain stagnant without action.
    This rule would change the requirements under the Florida citrus 
marketing order. Handlers utilizing the flexibility of the loan and 
transfer aspects of this action would be required to submit a form to 
the committee. The rule would increase the reporting burden on 
approximately 80 handlers of red seedless grapefruit who would be 
taking about 0.03 hour to complete each report regarding allotment 
loans or transfers. The information collection requirements contained 
in this section have been approved by the Office of Management and 
Budget (OMB) under the provisions of the Paperwork Reduction Act of 
1995 (Pub. L. 104-13) and assigned OMB number 0581-0094. 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.
    The Department has not identified any relevant Federal rules that 
duplicate, overlap or conflict with this proposed rule. However, red 
seedless grapefruit must meet the requirements as specified in the U.S. 
Standards for Grades of Florida Grapefruit (7 CFR 51.760 through 
51.784) issued under the Agricultural Marketing Act of 1946
(7 U.S.C. 1621 through 1627).
    In addition, the committee's meeting was widely publicized 
throughout the citrus industry and all interested persons were invited 
to attend the meeting and participate in Committee deliberations on all 
issues. Like all Committee meetings, the May 28, 1997, meeting was a 
public meeting and all entities, both large and small, were able to 
express views on this issue. Interested persons are invited to submit 
information on the regulatory and informational impacts of this action 
on small businesses.
    A 15-day comment period is provided to allow interested persons to 
respond to this proposal. Fifteen days is deemed appropriate because 
this rule would need to be in place as soon as possible since handlers 
will begin shipping grapefruit in September. In addition, because of 
the nature of this rule, handlers need time to consider their allotment 
and how best to service their customers. Also, the industry has been 
discussing this issue for some time. The committee has kept the 
industry well informed on this issue. It has also been widely discussed 
at various industry and association meetings. Interested persons have 
had time to determine and express their positions. All written comments 
timely received will be considered before a final determination is made 
on this matter.

List of Subjects in 7 CFR Part 905

    Grapefruit, Marketing agreements, Oranges, Reporting and 
recordkeeping requirements, Tangelos, Tangerines.

    For the reasons set forth in the preamble, 7 CFR part 905 is 
proposed to be amended as follows:
PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN 
FLORIDA
    1. The authority citation for 7 CFR Part 905 continues to read as 
follows:

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

    2. In Sec. 905.306, paragraphs (a) and (b), the word ``During'' is 
removed and the words ``Except as otherwise provided in section 
905.601, during'' are added in its place.
    3. A new Sec. 905.601 is added to read as follows:


Sec. 905.601  Red seedless grapefruit regulation 101.

    The schedule below establishes the weekly percentages to be used to 
calculate each handler's weekly allotment of small sizes. If the 
minimum size in effect under section 905.306 for red seedless 
grapefruit is size 56, handlers can fill their allotment with size 56, 
size 48, or a combination of the two sizes such that the total of these 
shipments are within the established weekly limits. If the minimum size 
in effect under section 905.306 for red seedless grapefruit is 48, 
handlers can fill their allotment with size 48 red seedless grapefruit 
such that the total of these shipments are within the established 
weekly limits. The weekly percentages for sizes 48 and/or 56 red 
seedless grapefruit grown in Florida, which may be handled during the 
specified weeks are as follows:

------------------------------------------------------------------------
                                                                Weekly  
                            Week                              percentage
------------------------------------------------------------------------
(a) 9/15/97 through 9/21/97.................................         25 
(b) 9/22/97 through 9/28/97.................................         25 
(c) 9/29/97 through 10/5/97.................................         25 
(d) 10/6/97 through 10/12/97................................         25 
(e) 10/13/97 through 10/19/97...............................         25 
(f) 10/20/97 through 10/26/97...............................         25 
(g) 10/27/97 through 11/2/97................................         25 
(h) 11/3/97 through 11/9/97.................................         25 
(i) 11/10/97 through 11/16/97...............................         25 
(j) 11/17/97 through 11/23/97...............................         25 
(k) 11/24/97 through 11/30/97...............................         25 
------------------------------------------------------------------------

    Dated: July 25, 1997.
Ronald L. Cioffi,
Acting Director, Fruit and Vegetable Division, Agricultural Marketing 
Service.
[FR Doc. 97-20034 Filed 7-25-97; 1:13 pm]
BILLING CODE 3410-02-U