This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

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REGISTER issue of each week.

Rules and Regulations Federal Register

47913

Vol. 62, No. 177

Friday, September 12, 1997

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV97–905–1 IFR]

Oranges, Grapefruit, Tangerines, and

Tangelos Grown in Florida; Limiting

the Volume of Small Florida Red

Seedless Grapefruit

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Interim final rule with request

for comments.

SUMMARY: This interim final rule limits

the volume of small red seedless

grapefruit entering the fresh market

under the Florida citrus marketing

order. The marketing order regulates the

handling of oranges, grapefruit,

tangerines, and tangelos grown in

Florida and is administered locally by

the Citrus Administrative Committee

(committee). This rule limits the volume

of size 48 and/or size 56 red seedless

grapefruit handlers can ship during the

first 11 weeks of the 1997–1998 season

that begins in September. This

limitation provides a sufficient supply

of small sized red seedless grapefruit to

meet market demand, without saturating

all markets with these small sizes. This

rule is necessary to help stabilize the

market and improve grower returns.

DATES: Effective September 15, 1997,

through November 30, 1997. Comments

received by September 22, 1997 will be

considered prior to issuance of a final

rule.

ADDRESSES: Interested persons are

invited to submit written comments

concerning this rule. 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:

Christian D. Nissen, Southeast

Marketing Field Office, Marketing Order

Administration Branch, F&V, AMS,

USDA, P.O. Box 2276, Winter Haven,

Florida 33883; 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, F&V, AMS,

USDA, room 2525–S, P.O. Box 96456,

Washington, DC 20090–6456; telephone

(202) 720–2491, Fax: (202) 720–5698.

SUPPLEMENTARY INFORMATION: This

interim final rule 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 interim final rule has been

reviewed under Executive Order 12988,

Civil Justice Reform. This rule is not

intended to have retroactive effect. This

rule 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 35⁄16 inches in diameter).

Section 905.52 of the citrus marketing

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 is 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 size 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
47914 Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations

the previous five seasons, handlers can

calculate the volume of sizes 48 and/or

56 they may ship in a regulated week.

This rule limits the volume of small

red seedless grapefruit entering the fresh

market for each week of an 11 week

period beginning the week of September

15. The rule limits the volume of sizes

48 and/or 56 red seedless grapefruit by

establishing a weekly percentage for

each of the 11 weeks. This rule

establishes the weekly percentage for

the first three weeks (September 15

through October 5) at 50 percent, for the

next three weeks (October 6 through

October 26) at 35 percent, and at 30

percent for the remainder of the 11

weeks. This is a change in the

percentage originally recommended by

the committee. The committee had

voted to establish a weekly percentage

of 25 percent for each of the 11 weeks

in a vote of 10 in favor to 7 opposed at

its meeting on May 28, 1997. The

committee recommended adjusting the

percentages at its meeting August 26,

1997, in a vote of 14 in favor to 3

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 box (13⁄5 bushel)

during the 1989–90 season, to $3.11 per

box during the 1992–93 season, to $1.82

per box during the 1994–95 season, to

$1.55 per box 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 (4⁄5 bushel) 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 over

shipment 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 can be

maintained at around 250,000 cartons a

week, prices should stabilize and

demand for larger, more profitable sizes

should increase.

The committee has had considerable

discussion regarding at what level to

establish the weekly percentages. They

wanted to recommend weekly

percentages that would provide a

sufficient volume of small sizes without

adversely impacting the markets for

larger sizes. At its May 28, 1997,

meeting, the committee recommended

that the percentage for each of the 11

weeks be established at the 25 percent

level. Their reasoning was that this

percentage, when combined with the

average weekly shipments for the total

industry, provided a total industry

allotment of 244,195 cartons of sizes 48

and/or 56 red seedless grapefruit per

regulated week. This percentage would

have allowed total shipments of small

red seedless grapefruit to approach the

250,000 carton mark during regulated

weeks without exceeding it.

The committee met again August 26,

1997, and revisited the weekly

percentage issue. At the meeting, the

committee recommended that the

weekly percentages be changed from 25

percent for each of the 11 regulated

weeks to 50 percent for the first three

weeks (September 15 through October

5), 35 percent for the next three weeks

(October 6 through October 26), and 30

percent for the remainder of the 11

weeks.

In its discussion of this change, the

committee reviewed the initial

percentages recommended and the

current state of the crop. The committee

also reexamined shipping information

from past seasons, looking particularly

at volume across the 11 weeks. Based on

shipments from the past four seasons,

available allotment under a 25 percent

restriction would have exceeded actual

shipments for each of the first three

weeks that are regulated under this rule.

The committee recognized that in

terms of available allotment,

establishing a weekly percentage of 25

percent for the first three regulated

weeks would not be restrictive.

However, they said that this was based

on total available allotment, not on data

for each individual handler. The

committee determined that if available

allotment would exceed shipments for

the first three weeks even when

establishing a percentage of 25 percent,

it would give individual handlers

greater flexibility during these three

weeks to establish the percentage at 50

percent. They argued that this would

provide each handler with additional

allotment during these three weeks,

reducing the number of loans and

transfers needed to utilize the available
Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations 47915

allotment, yet having little or no affect

on the volume of small sizes. The

committee also agreed that setting the

percentage at 50 percent rather than 100

percent would still provide some

restriction should shipments for

September 15 through October 5 for this

season exceed past quantities.

For the remainder of the 11 weeks, the

committee believed that the weekly

percentage needed to be less than 50

percent (which would have resulted in

virtually no limitation on shipments of

small sizes) but greater than 25 percent.

The committee held that it is important

to control small sizes, but it is also

important to be able to service the

markets that demand small sizes. The

issue was raised regarding the possible

market impact when small sizes exceed

250,000 cartons in a week. The

committee recognized that ideally,

244,195 cartons of red seedless

grapefruit would be available to the

industry for each of the 11 weeks if the

percentage was set at 25 percent.

However, the committee was concerned

that the true amount available would be

lower.

Several members stated that setting a

weekly percentage at 25 percent to

approximate the 250,000 cartons was

based on total utilization of allotment,

and that assumption was unreasonable.

The committee agreed that loans and

transfers are beneficial, but that even

with their availability a percentage of

allotment would most likely not be

used.

Several other members raised

concerns about focusing too much on

total allotment available, rather than on

allotment available to individual

handlers. The committee stated that the

way a handler’s base is calculated using

an average week is probably the most

equitable way to do so. However, they

acknowledged that it did present some

problems. Members concurred that the

season for red seedless grapefruit is

approximately 33 weeks. However, the

members agreed that this did not mean

that every handler was shipping during

all 33 weeks. They discussed how a

handler’s average weekly shipments are

calculated by averaging their shipments

from the past five seasons, and then

dividing this number by the 33 weeks to

establish an average week. Members

stated that the calculated average week

was often lower than their actual weekly

shipments during the periods they were

shipping because they were not

shipping during all 33 weeks. They also

stated that applying a weekly percentage

of 25 percent to their average week

would have resulted in limiting their

shipments to a level closer to 15 percent

of their actual shipments during this

period.

Based on this discussion, the

committee thought a weekly percentage

of 25 percent would be overly

restrictive. The committee believed that

since total available allotment most

probably will not be fully utilized, and

how individual handlers are affected,

establishing a weekly percentage of 35

percent for the regulation weeks October

6 through October 26 would be more

appropriate. They believe this level will

provide a sufficient supply of small

sizes without exceeding amounts that

would negatively affect other markets.

The committee further recommended

that the weekly percentage for the

remainder of the 11 weeks be

established at 30 percent. The

committee resolved that a lower

percentage was desirable moving into

the last five weeks of regulation. The

committee believed that as industry

moves into the season and shipments

increase, that a weekly percentage of 30

percent will provide the best balance

between supply and demand for small

sized red seedless grapefruit.

The committee again included in its

deliberations that if crop and market

conditions should change, the

committee could recommend that the

percentages 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 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 believe that

establishing the weekly percentages as

recommended will provide enough

small sizes to supply those markets

without disrupting the markets for

larger sizes.

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 is calculated using the

recommended percentage for that week.

By taking the established 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 is then divided by the 33

weeks in a season to derive the average

week. This average week is the base for

each handler for each of the 11 weeks

contained in the regulation period. The

applicable weekly percentage is then

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 interim final rule, the

calculated allotment is the amount of

small sized red seedless grapefruit a

handler can ship. If the minimum size

established under section 905.52

remains at 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 limits. If the minimum

size under the order is 48, handlers can

fill their allotment with size 48 fruit

such that the total of these shipments

are within the established limits. The

committee staff will 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 is then divided by 33 weeks to

yield an average week, in this case,

1,600 cartons. This is handler A’s base.

Assuming the weekly percentage is 50

percent, this percentage is then applied

to the handler’s base. This provides this

handler with a weekly allotment of 800

cartons (1,600 × .50) of size 48 and/or

56.

The average week for handlers with

less than five previous seasons of

shipments is 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

have no prior period on which to base

their average week. Therefore, a new

handler can ship small sizes up to the

established weekly percentage as a

percentage of their total volume of

shipments during their first shipping

week. Once a new handler has

established shipments, their average
47916 Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations

week is calculated as an average of the

weeks they have shipped during the

current season.

This interim final rule establishes a

weekly percentage of 50 percent for the

first three weeks (September 15 through

October 5), 35 percent for the next three

weeks (October 6 through October 26),

and 30 percent for the remainder of the

11 weeks to be regulated. The regulatory

period runs from the first Monday in

September (September 15, 1997)

through the last Sunday in November

(November 30, 1997). Each regulation

week begins Monday at 12:00 a.m. and

ends 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 can meet and

recommend changes in the percentages

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 can 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) will be deducted

from the handler’s allotment for the

following week. Overshipments are not

allowed during week 11 because there

are 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 will not be carried

forward to the following week.

However, a handler to whom an

allotment has been issued can lend or

transfer all or part of such allotment

(excluding the overshipment allowance)

to another handler. In the event of a

loan, each party will, 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 will

promptly notify the committee so that

proper adjustments of the records can be

made. In each case, the committee will

confirm in writing all such transactions

prior to the following week. The

committee can also act on behalf of

handlers wanting to arrange allotment

loans or participate in the transfer of

allotment. Repayment of an allotment

loan is at the discretion of the handlers

party to the loan.

The committee computes each

handler’s allotment by multiplying the

handler’s average week by the

percentage established by regulation for

that week. The committee will notify

each handler prior to that particular

week of the quantity of sizes 48 and 56

red seedless grapefruit such handler can

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 at the

May 28, 1997, meeting, several concerns

were raised regarding this 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 percentages set 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 can 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

period when there are no restrictions on

small sizes.

Another concern raised was the effect

this rule will have on packouts. It was

stated that this rule can 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 can 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 will 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 can 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

will probably not result in a major shift

to Texas grapefruit because the Texas

industry is much smaller and has 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 address these concerns. There

was also discussion of how restrictive

this rule actually is. Based on shipments

from the past four seasons, available

allotment would have exceeded actual

shipments for each of the first three

weeks that are regulated under this rule

even if the weekly percentage was set at

25 percent. 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. This

rule affects even fewer shipments by

establishing less restrictive weekly

percentages. In addition, a large

percentage of this volume most likely

could have been replaced by larger

sizes. A sufficient volume of small sized

red grapefruit is still allowed into all

channels of trade, and allowances are in
Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations 47917

place to help handlers address any

market shortfall.

At the August 26, 1997, meeting, the

concern was raised that the weekly

percentages recommended were not

restrictive enough. Committee members

responded that not all available

allotment would be utilized, and that

the recommended percentages would

still restrict shipments of small sizes,

while providing handlers with

flexibility to supply those markets that

demand small sizes.

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), the

Agricultural Marketing Service (AMS)

has considered the economic impact of

this action on small entities.

Accordingly, AMS has prepared this

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 over

shipment 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 box during the

1989–90 season, to $3.11 per box during

the 1992–93 season, to $1.82 per box

during the 1994–95 season, to $1.55 per

box 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 rule limits 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 rule limits the

volume of sizes 48 and/or 56 red

seedless grapefruit by establishing the

weekly percentages at 50 percent for the

first three weeks (September 15 through

October 5), 35 percent for the next three

weeks (October 6 through October 26),

and 30 percent for the remainder of the

11 weeks. 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 calculates a

handler’s weekly allotment of small

sizes. This rule provides a supply of

small sized red seedless grapefruit

sufficient to meet market demand,

without saturating all markets with

these small sizes. This rule is necessary

to help stabilize the market and improve

grower returns.

At the May 28, 1997, meeting, the

committee recommended that the

percentage for each of the 11 weeks be

established at the 25 percent level. They

reasoned that 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 have

allowed total shipments of small red

seedless grapefruit to approach the

250,000 carton mark during regulated

weeks without exceeding it.

The committee met again August 26,

1997, and revisited the weekly

percentage issue. The committee

recommended that the weekly

percentages be set to 50 percent for the

first three weeks (September 15 through

October 5), 35 percent for the next three

weeks (October 6 through October 26),

and 30 percent for the remainder of the

11 weeks.

In the discussion of this change, the

committee reviewed the initial

percentages recommended, the current

state of the crop, and shipping

information from past seasons. The

committee recognized that in terms of

available allotment, even establishing a

weekly percentage of 25 percent for the

first three regulated weeks would not be

restrictive. Shipment data from the past

four seasons indicate that available

allotment under a 25 percent restriction

would exceeded actual shipments for

each of the first three weeks that are

regulated under this rule.

The committee determined that if

available allotment would exceed

shipments for the first three weeks even

when establishing a percentage of 25

percent, it would give individual

handlers greater flexibility during these

three weeks to establish the percentage

at 50 percent. They argued that this

would provide each handler with

additional allotment during these three

weeks, reducing the number of loans

and transfers needed to utilize the

available allotment, yet having little or

no affect on the volume of small sizes.

The committee also agreed that setting

the percentage at 50 percent would still

provide some restriction should

shipments for this period this season

exceed past quantities.

For the remainder of the 11 weeks, the

committee believed that the weekly

percentage needed to be tighter than 50

percent which would impose nearly no

restriction but greater than 25 percent.

The issue was raised regarding the

possible market impact when small

sizes exceed 250,000 cartons in a week.

The committee recognized that ideally,

244,195 cartons of red seedless
47918 Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations

grapefruit would be available to the

industry for each of the 11 weeks if the

percentage was set at 25 percent.

However, the committee was concerned

that the true amount available would be

lower. Several members stated that

setting a weekly percentage at 25

percent to approximate the 250,000

cartons was based on total utilization of

allotment, and that assumption was

unreasonable. The committee agreed

that loans and transfers are beneficial,

but that even with their availability a

percentage of allotment would most

likely not be used.

Several other members raised

concerns about focusing too much on

total allotment available, rather than on

allotment per handler. Members

concurred that the season for red

seedless grapefruit is approximately 33

weeks. However, this did not mean that

every handler was shipping during all

33 weeks. Using 33 weeks to divide an

average season to calculate an average

week often resulted in amounts lower

than their actual weekly shipments

because they were not shipping during

all 33 weeks. They stated that applying

a 25 percent restriction regulated them

at a level closer to 15 percent of their

actual shipments during the regulation

period.

Based on this discussion, the

committee thought a weekly percentage

of 35 percent for the regulation weeks

October 6 through October 26 would be

a more appropriate level. They believe

that because total allotment will not be

fully utilized and the way individual

handlers are affected, this level would

provide a sufficient supply of small

sizes without overly exceeding amounts

that would negatively affect other

markets.

The committee further recommended

that the weekly percentage for the

remainder of the 11 weeks be

established at 30 percent. The

committee resolved that moving into the

last five weeks of regulation that a

tighter percentage was desirable. The

committee believed that as industry

moves into the season and shipments

increase, that a weekly percentage of 30

percent provides the best balance

between supply and demand for small

sized red seedless grapefruit.

At the May 28, 1997, meeting, there

was discussion regarding the expected

impact of this change on handlers and

growers in terms of cost. Discussion

focused on the possibility that market

share could be lost to Texas and that

this rule could increase packinghouse

costs. According to EAB, limiting

shipments of small Florida grapefruit

probably will not result in a major shift

to Texas grapefruit because the Texas

industry is much smaller and has 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 action means lower

packouts which may increase cost.

However, the availability of loans and

transfers provides some flexibility. Also,

this rule only affects 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 rule.

A 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. Based

on shipments from the past four

seasons, a total available allotment of

244,195 cartons would exceed actual

shipments for each of the first three

weeks 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. This

rule affects even fewer shipments by

establishing less restrictive weekly

percentages. In addition, a large

percentage of this volume most likely

could have been replaced by larger

sizes. Under this rule a sufficient

volume of small sized red grapefruit is

still allowed into all channels of trade,

and allowances are 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 box during the

1989–90 season, to $3.11 per box during

the 1992–93 season, to $1.82 per box

during the 1994–95 season, to $1.55 per

box 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

will remain at levels around $1.50.

This rule provides 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 can be stabilized at a

higher level. This provides 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

can be maintained at around 250,000

cartons a week, prices should stabilize

and demand for larger, more profitable

sizes should increase. The established

weekly percentages, when combined

with the average weekly shipments for

the total industry, should help maintain

industry shipments of sizes 48 and/or

56 red seedless grapefruit at quantities
Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations 47919

close to the 250,000 carton level per

regulated week. A stabilized price that

returns a fair market value benefits 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

harvest selectively and return to repick

groves as the grapefruit sized. This also

allows growers to maximize returns on

fresh grapefruit by not picking

unprofitable grades and sizes of red

grapefruit that are 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 are

only 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 established under this

action are based on percentages applied

to a handler’s average week. This

process was established by the

committee because it was the most

equitable. All handlers have access to

loans and transfers. Handlers and

growers both will 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.

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 supplies 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. Thus,

the majority of committee members

agreed that weekly percentages should

be established as recommended for the

shipment of small sized red seedless

grapefruit for the 11 week period

beginning September 15, 1997.

This rule changes the requirements

under the Florida citrus marketing

order. Handlers utilizing the flexibility

of the loan and transfer aspects of this

action are required to submit a form to

the committee. The rule increases the

reporting burden on approximately 80

handlers of red seedless grapefruit who

will 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.

As noted in the initial regulatory

flexibility analysis, the Department has

not identified any relevant Federal rules

that duplicate, overlap or conflict with

this 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). Further, the

public comments received concerning

the proposal did not address the initial

regulatory flexibility analysis.

In addition, the committee meetings

were 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 and the August 26, 1997,

meeting were public meetings and all

entities, both large and small, were able

to express views on this issue.

A proposed rule concerning this

action was published in the Federal

Register on Tuesday, July 29, 1997 (62

FR 40482). Copies of the rule were

mailed or sent via facsimile to all

committee members and to grapefruit

growers and handlers. The rule was also

made available through the Internet by

the Office of the Federal Register.

A 15-day comment period was

provided to allow interested persons to

respond to the proposal. Fifteen days

was deemed appropriate because this

rule needs to be in place as soon as

possible since handlers begin shipping

grapefruit in September and handlers

need time to consider their allotment

and how best to service their customers.

The comment period ended August 13,

1997. Thirty five comments were

received.

As previously stated, subsequent to

the end of the comment period, the

committee met and recommended

modifying its original recommendation.

The committee recommended that the

weekly percentages be changed from 25

percent for each of the 11 regulated

weeks to 50 percent for the first three

weeks (September 15 through October

5), 35 percent for the next three weeks

(October 6 through October 26), and 30

percent for the remainder of the 11

weeks. Because of this recommendation,

the Department has determined that

interested parties should be provided

the opportunity to comment on the

changes to the original

recommendation. However, the

Department has further determined that

extending the comment period with no

percentages in effect limiting the

shipments of small red seedless

grapefruit when the period of regulation

begins would be detrimental to the

industry. Therefore, the Department is

instituting the regulations on small red

seedless grapefruit through this interim

final rule which will allow 10

additional days to comment. The

discussion on the comments to the

proposed rule follow.

Thirty-five comments were received,

twenty-four in favor and eleven in

opposition to the proposed rule. Three

additional comments in favor of the

proposed rule were received after the

closing date for comments. The vast

majority of the points made by the

commenters were thoroughly discussed

prior to the committee vote.

The manager of the committee

submitted a comment to the proposed

rule. It stated that the committee went

to great lengths to ensure that the entire

Florida citrus industry had an

opportunity to discuss or comment on

this rule. The committee met three times

in a sixty day period to review and

consider this rule. This included a

meeting where an economic study on

the grapefruit industry prepared by UF–

IFAS was presented. The comment

stated that after these meetings and

discussion the committee voted to

implement a weekly percentage for each

week in the regulatory period. The

comment further stated that this action

was considered and recommended by

the Florida Citrus Commission and its
47920 Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations

appointed subcommittee the Grapefruit

Advisory Council. The comment also

affirmed that prior to the May 28, 1997,

committee meeting, all Florida fresh

citrus fruit shippers were notified of

their average weekly base.

In their comments, most of the

producers and handlers supporting the

rule confirmed their support for the

need to regulate the volume of small

sizes this season. Many referenced the

procedures established to regulate the

small sizes in their comments,

indicating that they contributed to the

support of this regulation.

Fifteen commenters stated specifically

that the over shipment of small sizes

early in the season has resulted in

reduced prices. Eleven comments

expressed that this regulation brings the

early volume of small size red grapefruit

to levels similar to weekly shipments

during most of the season. Nine

commenters wrote that total industry

shipments average around one million

cartons per week, and that during the

regular part of the season, small sizes

account for around 25 percent of

shipments or 250,000 cartons. This

regulation limits early shipments of

small sized red seedless grapefruit to

levels close to this amount. Six

commenters further stated that the

regulatory period was the appropriate

length, ending as shipments begin to

adjust naturally due to the fruit sizing.

Many commenters discussed the

market stabilizing benefits they expect

from of this regulation. Five comments

stated that this action will dampen

spikes in the levels of shipments that

lead to predatory pricing. Five also

stated that this action will provide

steadier, more balanced marketing that

is less disruptive to markets. Four

commenters expressed that with the

regulation in place, there will be a good

flow of all sizes to market.

The comments also discussed the

fairness of the rule. Seven commenters

contended that this action is fair to all

growing areas and shippers. Several of

the commenters favoring this action

stated they had groves in more than one

growing region. They said they did not

believe this action benefited one area at

the expense of another. Another

commenter stated that the regulation

affects part and only part of everyone’s

shipments. Ten referenced the use of an

average week as promoting fairness.

They stated that this provided allotment

to all shippers, not just those who had

shipped early in the past, thus giving

everyone allotment to service the early

markets. Seven expressed that the

availability of transfers will also help

spread allotment to those who need it.

Seven comments also asserted that this

action will not be unfair to consumers.

Several comments inferred that this

regulation actually promotes fairness.

Five commenters believe this regulation

will prevent the oversupply of small

sizes early that negatively affects prices

before the majority of growers are in the

market. Two comments said the rule

will help address to beat the crowd

mentality of pushing fruit on to the

market. This regulation may help

stabilize prices, providing better returns

throughout the season, and benefiting

all growers, not just those in the market

early.

Several comments indicated that this

regulation will make growers plan

ahead on what is harvested. Three

comments stated they have already been

holding back on picking sizes 48 and 56,

allowing them to size. They said this

has enabled them to provide larger,

higher quality fruit to their customers.

Two of the three stated specifically that

selective picking has resulted in better

returns. Two additional commenters

also stated that they have been using

spot picking effectively.

The remaining eleven commenters

raised several issues opposing the

limitation of small sizes. Many

commenters who raised objections to

this action posed concerns regarding the

possible loss of markets and the impact

the rule will have on different regions

of the production area. Each issue raised

is addressed herein.

Eight of the comments received

opposing this action stated that there are

strong markets for small sizes,

particularly in the export markets. Many

of these commenters believe that this

rule will keep Florida from being able

to service these markets and that they

will be lost to Texas and foreign

competitors. These concerns were raised

and discussed at the committee meeting.

As stated above, the purpose of this

regulation is not to eliminate the

marketing of sizes 48 and 56, but rather

to prevent the overshipment of such

sizes from saturating all markets. In

making its recommendations, the

committee recognized that markets exist

for small sizes. That is why they

recommended limiting the volume of

small sizes instead of eliminating them.

In making its recommendation for a

weekly percentage of size, the

committee considered the markets

available for small sizes and set a

weekly percentage sufficient to address

these markets. They also considered

what percentage of the volume did

small sizes represent during most of the

season. They used this information to

recommend a weekly percentage for

each of the regulated weeks.

Sales of smaller sizes continue

throughout the season, with certain

markets preferring the small sizes.

Examining the demand for small sizes

across the season gives a picture of the

level of that demand. During most of the

season, sizes 48 and 56 represent only

26 percent of total shipments.

Comments received stated that total

industry shipments average around one

million cartons per week, and that

during most of the season, small sizes

account for around 25 percent of

shipments or 250,000 cartons. However,

sizes 48 and 56 accounted for 34 percent

of total shipments during the 11 week

regulatory period the past three seasons,

with the average weekly percentage

exceeding 40 percent of shipments.

The weekly percentages, when

combined with the average weekly

shipments for the total industry, provide

for a total weekly industry allotment of

sizes 48 and/or 56 red seedless

grapefruit per regulated week. A weekly

percentage of 26 percent, the percentage

of small sizes to total shipments during

most of the season, would provide a

weekly allotment of about 254,000

cartons. The established percentages

provide additional cartons above this

amount, allowing the industry to service

the markets for small sizes while

providing restrictions to prevent total

saturation of all markets with these

sizes. The established percentages will

help bring the early volume of small

size red grapefruit to levels similar to

weekly shipments during most of the

season.

In terms of exports of red seedless

grapefruit, volume has averaged around

3,779,650 cartons from September

through November. Based on

information available on sizes exported,

on average 43 percent of the exports

from the Interior region are larger than

size 48, and 61 percent of the exports

from the Indian River region are larger

than size 48. Total allotment available

during the 11 weeks as established by

the percentages in this rule exceed the

average volume of exports during the

regulation period. Considering the

export data from these two regions, and

the fact that the Indian River region

accounted for 74 percent of exports

during the 11 week period this past

season, the allotment of small sizes

provided under this rule should be

sufficient to service export demand for

small sizes.

In addition, 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.

This rule establishes less restrictive
Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations 47921

weekly percentages and will affect even

fewer shipments. In addition, a large

percentage of this volume most likely

could have been replaced by larger

sizes. Thus, the available allotment

should be sufficient to address the

demand for small sizes, allowing

Florida to maintain those markets.

The provisions of this rule also

provide for overshipments, loans and

transfers. These allowances are

provided to move allotment to those

who have markets for smaller grapefruit.

Any shortage an individual handler

might have in allotment may be filled by

loan or transfer. The committee

discussion also indicated that markets

that normally demand small sizes have

shown a willingness to purchase larger

sizes. Therefore, a sufficient volume of

small sized red grapefruit should be

available for all channels of trade, and

allowances are in place to help handlers

address their specific market needs.

In regards to Texas or foreign

competitors taking markets from

Florida, available information indicates

that this should not be a significant

problem. As mentioned earlier,

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. In terms of

foreign competition, the UF–IFAS study

determined that current foreign

competition is minimal. It also infers

that even in cases of tightened

standards, foreign competitors are not

likely to take market share from Florida.

Four comments asserted that the

market forces of supply and demand

should be relied upon to regulate the

market. The declaration of policy in the

Act includes a provision concerning

establishing and maintaining such

orderly marketing conditions as will

provide, in the interests of producers

and consumers, an orderly flow of the

supply of a commodity throughout the

normal marketing season to avoid

unreasonable fluctuations in supplies

and prices. As previously stated, during

the 11 week period of regulation, prices

have dropped considerably. This is

thought to stem from an oversupply of

small sizes early in the season.

Limiting the quantity of small red

seedless grapefruit that handlers may

handle early in the season is expected

to contribute to the Act’s objectives of

orderly marketing and improving

producers’ returns. This regulation

provides a practical system to control

the volume of small red seedless

grapefruit early in the season, reducing

gluts of small sizes, enhancing producer

returns and stabilizing the markets for

all sizes. Thus, the rule promotes

orderly marketing by avoiding pricedepressing oversupplies of small sizes

during the first few months of the

season when supplies are heaviest.

Four comments stated that the

benefits of this rule are regional. Two

comments alleged that this rule benefits

one growing area at the expense of

another. They state that fruit grown in

the Gulf region reaches maturity before

other areas in the State. One comment

attested that past seasonal data indicates

that in some years, the Gulf area

represents 90 percent of shipments

during the first week of the regulation

period, and 50 percent of shipments

during the first three weeks. The

commenter stated further that cutting

three-quarters of their shipping volume

will significantly reduce their returns.

As previously stated, this rule limits

the volume of small sizes that can be

shipped during the first 11 weeks of a

season. The rule only affects sizes 48

and/or 56, there are no restrictions on

large sizes. Because of the way

allotment is calculated, shipments from

past seasons indicate that there will be

more allotment available during the first

three weeks of the regulation period

than there are shipments of small sizes.

Therefore, regardless of a handler’s

location, with the availability of loans

and transfers, their shipments should

not be restricted during these first three

weeks, even if their entire supply

consists of small sizes.

One of the comments alleges that

growers in other regions, particularly

the Indian River area, realize that there

is a market for small sizes, and the 11

week period was established to prevent

Gulf growers from selling their small

sizes early in the season. The

commenter contends the other areas

support this rule because they want the

opportunity to sell these sizes when

their fruit matures.

Again, this regulation only limits the

volume of small sizes, it does not

eliminate them. There are no

restrictions on large sizes. With their

allotment, and the availability of loans

and transfers, handlers should be able to

address the markets demanding small

sizes.

In terms of maturity, the Gulf area is

normally the first region to begin

shipping. During the weeks in

September, they do represent the

majority of domestic shipments.

However, when total shipments,

domestic and export are considered, the

Indian River area has averaged similar

or higher shipments than the Gulf in

September the past three seasons. In

October and November, both of which

are included in this regulation, the

shipping totals from the Indian River

area substantially exceed the totals from

other regions. The shipment figures do

not support the claims of regional

inequity.

Several comments expressed how

profitable the early markets are due to

the high prices available during the

early season. This regulation is not an

attempt to keep individuals from taking

advantage of these markets. The goal of

this rule is to control the volume of

small sizes to keep them from saturating

all markets and dragging down prices.

By doing so, this action may buoy prices

providing better returns throughout the

season, not just during the first three

weeks.

Granted, there is a profitable market

for small sizes early in the season.

However, there is an opportunity for

those that do not market responsibly to

dump small sizes on the market, early

in the season. This appears to be

occurring presently. The red seedless

grapefruit season is longer than a few

weeks. Taking profits early in the season

at the expense of far lower returns for

the remainder of the season does not

provide for orderly marketing or

reasonable returns to growers. The

Department must consider the situation

of all growers covered under the order.

It is in the interest of all areas that

adequate funds are returned to the

grower throughout the season. This is

best accomplished by providing stable,

reasonable returns throughout the

season.

Another comment argued that the

vote of the committee signals a lack of

consensus on this issue and the industry

is not united in its support. In the

marketing order, the voting

requirements necessary to recommend

regulation are clearly stated. The order

states that for any decision or

recommendation of the committee to be

valid, ten concurring votes, five of

which must be grower votes, shall be

necessary. The committee vote

supporting this regulation met these

requirements. In terms of industry

support, all industry members had

ample opportunity to express their

opinions on this issue. The Department

considered all views expressed prior to

instituting this interim final rule.

One commenter stated that there are

seasons when there are no large sizes

available during the early season. The

committee meets each season to

consider implementing the procedures
47922 Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations

to control the volume of small sizes

early in the season. One of the things

the committee considers, is the status of

the crop in terms of size. In seasons

where fruit is running small, the

committee could establish a higher

percentage to allow for more small sizes

or choose not to establish regulation. In

the case of this season, the committee

indicated that fruit was sizing well.

However, if there is a change in the

status of the fruit or the market, the

committee could meet and vote to

increase the percentage to allow for

more small sizes, or eliminate the

regulation altogether.

This same commenter also asserts that

enforcing this rule will create an

administrative problem and will create

a market for allotment. The committee

staff has already calculated and

distributed the allotment for each

handler. Information supplied by the

Federal State Inspection Service will be

used to determine compliance with this

rule. Violators will be subject to the

penalties provided for under the Act.

The committee staff will also collect

information regarding loans and

transfers. It is expected that allotment

itself should not have a monetary value,

although it certainly may be transferred

and loaned between handlers.

In another comment, a handler stated

that they have a responsibility to their

stockholders, and that running its

facility at maximum volume provides

them a higher return on their dollar. A

handler that charges growers per field

box does increase its revenue by

handling the greatest number of boxes it

can. The Department takes into account

all those affected by a particular action.

However, the order benefits growers

through orderly marketing and

improved returns. This rule is an

attempt to do both. The purpose of this

rule is to limit the volume of small sizes

marketed early in the season. 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. This rule establishes

less restrictive weekly percentages and

will affect even fewer shipments. In

addition, a large percentage of this

volume most likely could have been

replaced by larger sizes. A sufficient

volume of small sized red grapefruit is

still allowed into all channels of trade,

and allowances are in place to help

handlers address any market shortfall.

Several comments said that increasing

standards will raise the amount of fruit

that does not meet the requirements to

be packed fresh, thereby increasing

eliminations going to the processor and

lowering grower returns. This rule

controls the volume of small sizes. It is

only in effect during the first 11 weeks

of the season. As some comments to this

rule stated, it may cause growers to plan

their harvest. If a grove has a significant

amount of small sizes, it may benefit the

grower to delay harvesting until the fruit

sizes. Several comments stated that they

had used this selective picking

successfully in the past.

Another option considered by the

commenter would be to spot pick, but

he stated that was expensive. However,

two comments received on this rule

were from growers who are using spot

picking effectively. Also, information

provided by the UF–IFAS study

indicated that it would increase returns

if growers would harvest selectively and

return to repick groves as the grapefruit

sized. Growers could maximize returns

on fresh grapefruit by not picking

unprofitable grades and sizes of red

grapefruit that will be sent to the less

profitable processing market. The study

also indicated that selective harvesting

can reduce the f.o.b. cost per carton, and

increase packout rates over clean

harvesting.

Another comment stated that this rule

will make the current problems with

grapefruit worse. It said the rule will

decrease the market window, further

depressing prices. It also said that this

action will increase the total volume by

people picking large sizes and allowing

small fruit to size, thereby increasing

the total number of boxes available later

in the season when prices barely cover

costs. This regulation does not shorten

the marketing window. The rule

provides for a sufficient amount of small

sizes and places no restrictions on larger

sizes. This action should improve

returns on all sizes. In addition,

allowing the fruit to size, could increase

returns as larger sizes can yield higher

returns.

One comment expressed that a

restriction of shipments of sizes 48 and

56 will put an upward pressure on

price. The comment said this would be

bad for the consumer. The EAB

reviewed this comment and determined

that it is true that retail prices tend to

track f.o.b. prices. However, variations

do appear where there are other factors

that influence retail prices including

transportation and marketing costs, the

price situation with competitive fruits,

changes in consumer preferences, and

marketing strategies of individual retail

operations. No undue price

enhancement is expected as a result of

this rule. Consumers will benefit from

the rule because fewer small fruits will

be shipped, resulting in larger, more

mature fruit available to the consumer.

Additionally, the profitability of grower

operations will be improved, helping to

maintain a competitive environment for

marketing, to the benefit of consumers.

Also, the f.o.b. price would need to

rise considerably to have a significant

impact on the consumer. Even if this

regulation was successful in

maintaining the f.o.b. price at one dollar

above the average f.o.b. price from this

past season, such an increase would

translate into an increase of a few cents

per fruit. However, this same increase

would provide an additional return of a

dollar per carton to the grower. This

increase could be the difference

between profit and loss.

The comment also states that

restrictions should not be applied when

prices are above parity. Parity, as

calculated by the National Agricultural

Statistics Service, was $12.03 for the

1996–97 season. The preliminary

calculation of parity for the 1997–98

season is $10.43. At the beginning of the

season, high prices are available.

However, the prices quickly drop as the

volume of shipments increase. The

purpose of this rule is to stabilize prices,

so that the price, even though it

declines, will be maintained at a higher

level. This rule should not elevate

prices to levels above parity. If it were

to maintain prices at a level greater than

parity, the Department would review

the situation and revise or modify the

regulation.

One comment questioned the

accuracy of references made in the rule

in terms of on tree prices. The

commenter stated that on tree returns

should have been used. The comment

also stated that it was not clear whether

the figures were stated in boxes (13⁄5

bushels) or cartons (4⁄5 bushels). It also

stated that the 1989–90 numbers were

unusually high due to a freeze, and that

numbers were missing for the 1995–96

season.

The on tree prices referenced in the

rule are from the Florida Agricultural

Statistics Service. The prices were

attributed to cartons in the proposed

rule. The prices should have been

attributed to boxes. This has been

corrected, and the figures updated.

These figures were chosen to

demonstrate the current status of the

industry. A similar portrait could have

been painted using on tree returns as

suggested by the comment. On tree

returns were $6.87 per box in 1991–92,

$3.38 per box in 1993–94, and were

$1.21 per box for the 1995–96 season.

The on tree price information for the

1995–96 season is $1.71 per box.

This same comment stated that the

cause of the decrease in price

throughout the season is a result of total
Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / Rules and Regulations 47923

volume, not the amount of small sizes

shipped early in the season. The

Department recognizes that there are

several factors contributing to the

current problems facing the grapefruit

industry. However, this rule is not an

attempt to fix every potential problem.

Rather, this rule seeks to slow the

drastic price decline that occurs during

the 11 weeks regulated hereunder. 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.

Larger sized fruit commands a

premium price early in the season. The

f.o.b. for these sizes can be $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,

compared to an average f.o.b. of $5.50

per carton for size 56. By the end of the

11 week period in this rule, the f.o.b. for

large sizes has dropped to within two

dollars of the price for small sizes. In

addition, during the 11 week period,

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, the f.o.b. for size 56,

for the past three seasons.

Later in the season the crop tends to

naturally limit the amount of smaller

sizes available for shipment. However,

the price structure in the market has

already been negatively affected, and

the f.o.b. price for all sizes remains

around $5.00 to $6.00 per carton for the

rest of the season.

In addition, the committee examined

shipment information detailing the

amounts and percentages of sizes 48 and

56 shipped during the 11 week

regulatory period for the last four

seasons. 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. The

committee believes that if shipments of

small sizes can be maintained at around

250,000 cartons a week, prices should

stabilize and demand for larger, more

profitable sizes should increase.

Utilizing these procedures contributes

to the Act’s objectives of orderly

marketing and improving producers’

returns. According to EAB, since sizes

48 and 56 red grapefruit are a small part

of the total supply of Florida red

grapefruit, limiting shipments of these

sizes will have a moderate effect on the

total quantity shipped. It may, however,

help to prevent the average price for all

Florida red grapefruit from being

reduced to below the cost of production.

This rule limitation provides a sufficient

supply of small sized red seedless

grapefruit to meet market demand,

without saturating all markets with

these small sizes. This should help

stabilize prices for all sizes.

After thoroughly analyzing the

comments received and other available

information, including the additional

recommendation by the committee, the

Department has concluded that this

interim final rule is appropriate.

A 10-day comment period is provided

to allow interested persons to respond

to this proposal. Ten days is deemed

appropriate because the regulation

period begins on September 15, 1997,

and continues for 11 weeks. Adequate

time will be necessary so that any

changes made to the regulations based

on comments filed could be made

effective during the 11-week period. All

written comments timely received will

be considered before a final

determination is made on this matter.

After consideration of all relevant

matter presented, including the

information and recommendations

submitted by the committee and other

available information, it is hereby found

that this rule, as hereinafter set forth,

will tend to effectuate the declared

policy of the Act.

It is further found and determined

upon good cause that it is impracticable,

unnecessary, and contrary to the public

intent to give preliminary notice prior to

putting this rule into effect and that

good cause exists for not postponing the

effective date of this rule until 30 days

after publication in the Federal Register

(5 U.S.C. 553) because this rule needs to

be in place when handlers begin

shipping grapefruit in September. This

rule is necessary to help stabilize the

market and to improve grower returns.

Further, handlers are aware of this rule,

which was recommended at public

meetings. Also, a 15-day comment

period was provided for in the proposed

rule and a 10-day comment period is

provided in this rule.

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 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 § 905.306, paragraphs (a) and (b),

the word ‘‘During’’ is removed and the

words ‘‘Except as otherwise provided in

§ 905.601, during’’ are added in its

place.

3. A new § 905.601 is added to read

as follows:

Note: The following section will not appear

in the Code of Federal Regulations.

§ 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:

Week

Weekly

percentage

(a) 9/15/97 through 9/21/97 ............ 50

(b) 9/22/97 through 9/28/97 ............ 50

(c) 9/29/97 through 10/5/97 ............ 50

(d) 10/6/97 through 10/12/97 .......... 35

(e) 10/13/97 through 10/19/97 ........ 35

(f) 10/20/97 through 10/26/97 ......... 35

(g) 10/27/97 through 11/2/97 .......... 30

(h) 11/3/97 through 11/9/97 ............ 30

(i) 11/10/97 through 11/16/97 ......... 30

(j) 11/17/97 through 11/23/97 ......... 30

(k) 11/24/97 through 11/30/97 ........ 30

Dated: September 9, 1997.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 97–24307 Filed 9–11–97; 8:45 am]

BILLING CODE 3410–02–U

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1011

[DA–97–09]

Milk in the Tennessee Valley Marketing

Area; Termination of the Order

AGENCY: Agricultural Marketing Service,

USDA.