[Federal Register Volume 62, Number 250 (Wednesday, December 31, 1997)]
[Rules and Regulations]
[Pages 68142-68150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-34135]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV97-905-1 FIR]


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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (Department) is finalizing 
without change the provisions of an amended interim final rule limiting 
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). The amended interim final rule limited

[[Page 68143]]

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 began 
in September. That rule provided a sufficient supply of small sized red 
seedless grapefruit to meet market demand, without saturating all 
markets with these small sizes. The committee believed this action was 
necessary to help stabilize the market and improve grower returns.

EFFECTIVE DATE: January 30, 1998.

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 M. Dec, Marketing Order 
Administration Branch, F&V, AMS, USDA, room 2522-S, P.O. Box 96456, 
Washington, DC 20090-6456; telephone: (202) 720-2491, Fax: (202) 205-
6632. 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) 205-6632.

SUPPLEMENTARY INFORMATION: This 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 is issuing this rule in conformance with Executive 
Order 12866.
    This 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 3\5/16\ 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 the previous five 
seasons, handlers can calculate the volume of sizes 48 and/or 56 they 
may ship in a regulated week.
    This rule finalizes the provisions of an interim final rule as 
amended limiting the volume of small red seedless grapefruit entering 
the fresh market during the 11 week regulatory period from September 
15, 1997, to November 30, 1997. A proposed rule was published on July 
29, 1997, in the Federal Register (62 FR 40482). Subsequently, an 
interim final rule was published September 12, 1997, in the Federal 
Register (62 FR 47913). That rule limited 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. That rule limited the 
volume of sizes 48 and/or 56 red seedless grapefruit by establishing a 
weekly percentage for each of the 11 weeks. On October 30, 1997, an 
amendment to the interim final rule was published in the Federal 
Register (62 FR 58633) that changed the weekly percentage of sizes 48 
and/or 56 red seedless grapefruit entering the fresh market for the 
last five weeks of the regulatory period from 30 percent to 35 percent. 
This rule finalizes the interim final rule as amended, without change.
    The committee originally voted at its May 28, 1997, meeting to 
establish a weekly percentage of 25 percent for each of the 11 weeks in 
a vote of 10 in favor to 7 opposed. The committee recommended adjusting 
the percentages at its meeting August 26, 1997, in a vote of 14 in 
favor to 3 opposed, recommending weekly percentages 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 at 30 percent 
for the remainder of the 11 weeks. The committee met again, October 14, 
1997, and in a unanimous vote recommended changing the weekly 
percentage for the last five weeks from 30 percent to 35 percent.
    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 (1-3/5 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

[[Page 68144]]

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.
    During committee deliberations at the May 28, 1997, meeting, 
several concerns were raised regarding the regulation. One area of 
concern was the possible impact the regulation may have on exports. 
Several members stated that there was 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 the action would have on 
packouts. It was stated that the rule could reduce the volume packed, 
resulting in higher packinghouse costs. The purpose of the recommended 
rule was 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. The rule might 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, and 
therefore, 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 could 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 at the May 28, 1997, meeting 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.
    At the May 28, 1997, meeting, 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. The rule 
published on September 12, 1997, affected even fewer shipments by

[[Page 68145]]

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 was 
still allowed into all channels of trade, and allowances were in place 
to help handlers address any market shortfall.
    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 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 believed this level 
would 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 the 
industry moves into the season and shipments increase, a weekly 
percentage of 30 percent would provide the best balance between supply 
and demand for small sized red seedless grapefruit.
    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.
    However, the committee met again October 14, 1997, and revisited 
the weekly percentage issue. The committee recommended another revision 
in the weekly percentages. The committee recommended that the weekly 
percentage for the final five weeks of the regulated period (October 27 
through November 30, 1997) be changed from 30 percent to 35 percent.
    In its discussion of this change, the committee reviewed the 
percentages previously recommended and the current state of the crop. 
In addition, the committee had some new information regarding this 
season that was not available during its earlier meetings. On October 
10, 1997, the Department released its crop estimate for Florida 
grapefruit. The estimate for total Florida grapefruit was 54 million 
boxes, a 3.2 percent reduction from last season. In addition, the 
committee was provided information regarding size distribution 
developed from a September size survey. The size survey was conducted 
by the Department as part of the crop estimate and showed that more 
small sizes were available than anticipated. The committee also had the 
benefit of having operated several weeks under a weekly percentage 
regulation.
    During the committee's discussion, there were many comments that 
the use of the weekly percentage rule was being effective. They 
believed that this rule was having a positive effect on the market and 
on returns. The weekly percentages, combined with a very limited 
processing market, has forced the industry to do more spot picking for 
the available markets.
    Several persons attending the committee meeting encouraged the 
committee to stay the course, and leave

[[Page 68146]]

the weekly percentages as they were established. However, others 
thought that the 30 percent weekly percentage rate for the last five 
weeks of the regulation period might be too restrictive. Concerns were 
again voiced that the method for calculating allotment base was not 
always a good approximation of a handler's historical shipments during 
this 11-week period. Based on the shipment data available for the 
current season, and shipments from past seasons, total weekly shipments 
of red seedless grapefruit during the rest of the regulatory period are 
expected to exceed the average week calculated for the industry of 
976,782 cartons. There is also some indication that shipments during 
the remainder of the regulation period may be greater than in past 
seasons. With shipments running higher, the committee concluded that 
establishing a 30 percent weekly percentage rate in combination with 
the calculated average week would result in available allotment of less 
than 30 percent of overall shipments.
    The committee discussed the merits of changing the established 
weekly percentage rate for the last five weeks from 30 percent to 35 
percent. Such a change represents an additional industry allotment of 
less than 50,000 cartons. The effect on an individual handler's 
allotment would be minimal. However, there was discussion that such a 
change would provide some additional flexibility for handlers.
    In addition, having been operating under a weekly percentage for 
several weeks, members stated that the regulation was being effective 
and moving to a more restrictive level was unnecessary. Members agreed 
that one of the most important goals of this regulation was to create 
some discipline in the way fruit was picked and marketed. Several 
individuals stated that there are indications from the current and past 
regulatory weeks that maintaining the weekly percentage at 35 percent 
for the remainder of the 11 weeks would continue to accomplish this 
goal.
    The committee examined the information on past shipments and on the 
size distribution information available for the current season. Based 
on the size survey, 37.6 percent of the crop is size 48 or 56. This 
amount was somewhat larger than originally expected, indicating that 
there was a greater volume of smaller sizes than the committee had 
anticipated. Considering this, and the other information discussed, the 
committee agreed that establishing a weekly percentage of 35 percent 
for the remainder of the regulated period would address the goals of 
this regulation, while providing handlers with some additional 
flexibility.
    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. The committee considered the official crop estimate 
and the information in the UF-IFAS study. Committee members also 
discussed how the crop was sizing. Using this information on the 1997-
98 crop, the committee members believed that establishing the weekly 
percentages as recommended provided enough small sizes to supply those 
markets without disrupting the markets for larger sizes.
    After considering the concerns expressed, and the available 
information, the committee determined that the interim final rule as 
amended was needed to regulate shipments of small sized red seedless 
grapefruit.
    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 was 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 were 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 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.
    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  x  .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 week is calculated as 
an average of the weeks they have shipped during the current season.
    This rule finalizes, without change, the weekly percentages for 
each of the eleven weeks of the regulatory period (September 5 through 
November 30) that appeared in the amended interim final rule.
    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

[[Page 68147]]

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.
    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 final 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, 1997. 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.
    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 Economic Analysis Branch, 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.

[[Page 68148]]

    The concern about packinghouse costs was that volume regulation 
could mean 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. The September 12, 1997, interim final 
rule as subsequently amended on October 30, 1997, affected 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 that action a sufficient volume of 
small sized red grapefruit was still allowed into all channels of 
trade, and allowances were 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.
    The September 12, 1997, interim final rule and the subsequent 
amendment on October 30, 1997, provided 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 is 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 is 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 believed 
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 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.
    The 11-week volume regulation 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 in the weekly volume regulation 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 the recommended volume 
regulation. 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

[[Page 68149]]

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.
    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 that change, the committee reviewed the 
initial and the revised 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 
have exceeded actual shipments for each of the first three weeks that 
were regulated under the September 12, 1997, rule.
    The committee determined that if available allotment would have 
exceeded 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 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.
    At the August 27, 1997, meeting, 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 at the August 27, 1997, meeting, 
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, a tighter percentage was desirable. The 
committee believed that as the industry moves into the season and 
shipments increase, a weekly percentage of 30 percent would provide the 
best balance between supply and demand for small sized red seedless 
grapefruit.
    However, on October 14, 1997, the committee met again and 
recommended a further revision to the weekly percentages. The committee 
recommended that the weekly percentages for the last five weeks of the 
regulatory period be changed from 30 percent to 35 percent. In its 
discussion of this change, the committee reviewed the initial 
percentages recommended and the current state of the crop.
    The committee also reviewed some new information regarding this 
season that was not available during its earlier meetings. On October 
10, 1997, the Department released its crop estimate for Florida 
grapefruit. The estimate for total Florida grapefruit was 54 million 
boxes, a 3.2 percent reduction from last season. In addition, the 
committee was provided information regarding size distribution 
developed from a September size survey. This survey was conducted by 
the Department and showed a larger percentage of small sizes than 
anticipated. The committee also had the benefit of having operated 
several weeks under a weekly percentage regulation.
    There were many comments by those attending the meeting that the 
use of the weekly percentage rule was being effective. Members stated 
that the rule was having a positive effect on the market and on 
returns. Overall committee support for the regulation had increased.
    The committee considered that the 30 percent weekly percentage rate 
for the last five weeks of the regulation period may be too 
restrictive. Reviewing shipment data for the beginning weeks of this 
season and shipments from past seasons, the committee determined that 
total weekly shipments during the rest of the regulatory period would 
exceed the average week calculated for the industry of 976,782 cartons. 
There was also some discussion that shipments during the remainder of 
the regulation period may be greater than in past seasons. The 
committee considered that with shipments running higher, establishing a 
30 percent weekly percentage rate in combination with the calculated 
average week would actually be establishing a rate more restrictive 
than 30 percent of overall shipments.
    The committee discussed the merits of changing the established 
weekly percentage rate for the last five weeks from 30 percent to 35 
percent. Such a change represents an additional industry allotment of 
less than 50,000 cartons, and should have a minimal impact when 
distributed to individual handlers. However, members thought that an 
increase would provide some additional flexibility for handlers.
    In addition, having been operating under a weekly percentage for 
several weeks, members stated that the regulation was being effective 
and moving to a more restrictive level was unnecessary. Members agreed 
that one of the most important goals of this regulation was to create 
some discipline in the way fruit was picked and marketed. Committee 
members believed that maintaining the weekly percentage at 35 percent 
for the remainder of the 11 weeks would continue to accomplish this 
goal.
    The committee examined the information on past shipments and on

[[Page 68150]]

the size distribution information available for the current season. 
Based on the size survey, 37.6 percent of the crop is size 48 or 56. 
This amount was somewhat larger than anticipated, indicating that there 
were more smaller sized red grapefruit than the committee had 
originally thought. Considering this, and the other information 
discussed, the committee agreed that establishing a weekly percentage 
of 35 percent for the remainder of the regulated period would address 
the goals of this regulation, while providing handlers with some 
additional flexibility.
    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 (44 U.S.C. Chapter 
35) 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 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 proposed rule and previous interim final rule relative to this 
action 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, the 
August 26, 1997, meeting, and the October 14, 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). A 15-day comment 
period was provided to allow interested persons to respond to the 
proposal. Thirty-five comments were received. An interim final rule 
concerning this action was published in the Federal Register on Friday, 
September 12, 1997 (62 FR 47913). Copies of both rules were mailed or 
sent via facsimile to all committee members and to grapefruit growers 
and handlers. The rules were also made available through the Internet 
by the Office of the Federal Register.
    The 35 comments received in response to the proposed rule were 
addressed in the interim final rule published in the Federal Register 
on Friday, September 12, 1997 (62 FR 47913).
    In the September 12, 1997, interim final rule, a 10-day comment 
period was provided to allow interested persons to respond to the rule. 
One comment was received, that comment was addressed in an amendment to 
the interim final rule published on October 30, 1997 (62 FR 58633). The 
amendment provided another 10-day comment period. No additional 
comments were received.
    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.

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

    Accordingly, the interim final rule amending 7 CFR Part 905 which 
was published at 62 FR 47913 (September 12, 1997) and amended at 62 FR 
58633 (October 30, 1997), is adopted as a final rule without change.

    Dated: December 24, 1997.
Sharon Bomer Lauritsen,
Acting Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 97-34135 Filed 12-30-97; 8:45 am]
BILLING CODE 3410-02-P