[Federal Register Volume 83, Number 177 (Wednesday, September 12, 2018)]
[Rules and Regulations]
[Pages 46069-46075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-19825]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

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. 

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Federal Register / Vol. 83, No. 177 / Wednesday, September 12, 2018 / 
Rules and Regulations

[[Page 46069]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 929

[Doc. No. AMS-SC-18-0012; SC18-929-2 FR]


Cranberries Grown in States of Massachusetts, et al.; 
Establishment of 2018-19 Seasonal Volume Regulation

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule implements a recommendation to establish a grower 
allotment percentage for the 2018-19 crop year and allows for the 
diversion of processed products from that year under the marketing 
order for cranberries grown in the production area (Order). This action 
also specifies handlers subject to the regulation, revises the 
definition of outlets for excess fruit, revises dates by which certain 
actions are due, and establishes exemptions to the action.

DATES: Effective October 12, 2018.

FOR FURTHER INFORMATION CONTACT: Doris Jamieson, Marketing Specialist, 
or Christian D. Nissen, Regional Director, Southeast Marketing Field 
Office, Marketing Order and Agreement Division, Specialty Crops 
Program, AMS, USDA; Telephone: (863) 324-3375, Fax: (863) 291-8614, or 
Email: <a href="/cdn-cgi/l/email-protection#fdb9928f948ed3b79c9094988e9293bd9c908ed3888e999cd39a928b"><span class="__cf_email__" data-cfemail="db9fb4a9b2a8f591bab6b2bea8b4b59bbab6a8f5aea8bfbaf5bcb4ad">[email protected]</span></a> or <a href="/cdn-cgi/l/email-protection#c182a9b3a8b2b5a8a0afef8fa8b2b2a4af81a0acb2efb4b2a5a0efa6aeb7"><span class="__cf_email__" data-cfemail="5f1c372d362c2b363e317111362c2c3a311f3e322c712a2c3b3e71383029">[email protected]</span></a>.
    Small businesses may request information on complying with this 
regulation by contacting Richard Lower, Marketing Order and Agreement 
Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue 
SW, STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491, 
Fax: (202) 720-8938, or Email: <a href="/cdn-cgi/l/email-protection#bfedd6dcd7decddb91f3d0c8dacdffded2cc91caccdbde91d8d0c9"><span class="__cf_email__" data-cfemail="36645f555e574452187a5941534476575b45184345525718515940">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This final rule, pursuant to 5 U.S.C. 553, 
amends regulations issued to carry out a marketing order as defined in 
7 CFR 900.2(j). This final rule is issued under Marketing Agreement and 
Order No. 929, as amended (7 CFR part 929), regulating the handling of 
cranberries grown in the States of Massachusetts, Rhode Island, 
Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon, 
Washington, and Long Island in the State of New York. Part 929 
(referred to as the ``Order'') is effective under the Agricultural 
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), 
hereinafter referred to as the ``Act.'' The Cranberry Marketing 
Committee (Committee) locally administers the Order and is comprised of 
growers of cranberries operating within the production area, and a 
public member.
    The Department of Agriculture (USDA) is issuing this final rule in 
conformance with Executive Orders 13563 and 13175. This action falls 
within a category of regulatory actions that the Office of Management 
and Budget (OMB) exempted from Executive Order 12866 review. 
Additionally, because this final rule does not meet the definition of a 
significant regulatory action, it does not trigger the requirements 
contained in Executive Order 13771. See OMB's Memorandum titled 
``Interim Guidance Implementing Section 2 of the Executive Order of 
January 30, 2017 titled `Reducing Regulation and Controlling Regulatory 
Costs'[thinsp]'' (February 2, 2017).
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. Order provisions provide that the Committee may 
recommend and implement, subject to USDA approval, volume control 
regulation which would decrease the available supply of cranberries 
whenever the Secretary of Agriculture (Secretary) finds that ``such 
regulation will tend to effectuate the declared policy of the Act.'' 
Accordingly, this rule establishes a marketable quantity and grower 
allotment percentage for cranberries produced during the 2018-19 crop 
year, beginning September 1, 2018, and ending August 31, 2019.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. A 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing, USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    This final rule establishes a marketable quantity and grower 
allotment percentage for the 2018-19 crop year. This rule is the result 
of the Committee's recommendations made during its August 4, and August 
31, 2017, meetings, and a February 18, 2018, email vote. This rule 
establishes a marketable quantity of 7.275 million barrels and a grower 
allotment percentage of 75 percent. This action also allows handlers to 
process up to 50 percent of the excess cranberries they receive above 
their growers' allotment, provided they divert an equivalent amount of 
2018-19 cranberry processed products. It also establishes an exemption 
for organically grown cranberries, specifies handlers subject to the 
regulation, revises the definition of outlets for excess fruit, and 
revises dates by which certain actions are due.
    The Committee also recommended an exemption for organically grown 
cranberries, and an exemption of 2,500 barrels for each grower. After 
much consideration, USDA determined the recommended grower exemption of 
2,500 barrels should be revised. Consequently, this final rule does not 
include the exemption of 2,500 barrels for each grower and instead 
exempts handlers that processed less than 125,000 barrels during the 
2017-18 fiscal year, or handlers that did not have carryover inventory 
at the end of the 2017-18 fiscal year. Accordingly, growers delivering 
their fruit to exempt handlers are not subject to the allotment.
    In addition, in a February 18, 2018, vote by email, the Committee 
voted unanimously to adjust reporting dates associated with the 
allotment regulation. These changes were previously discussed and 
supported by the Committee at a meeting on April 22,

[[Page 46070]]

2014, as part of the consideration of another volume regulation for 
which a rule was not issued.
    The recommendations included in this rule will adjust supply to 
more closely meet market demand, improve grower and handler returns, 
and help reduce inventory.
    Sections 929.49 and 929.52 provide, in part, authority to establish 
a marketable quantity and grower allotment percentage. Section 929.14 
defines marketable quantity as the volume of cranberries needed to meet 
market demand and provide for an adequate carryover into the next 
season. The allotment percentage is derived by dividing the marketable 
quantity by the total of all growers' sales histories. Section 929.48 
outlines procedures for computing a grower's sales history.
    Section 929.49 also prescribes how the grower allotment percentage 
is calculated and distributed to growers and handlers. Each grower's 
allotment volume is calculated by multiplying the individual's sales 
history by the allotment percentage. A grower's allotment is the total 
volume a handler may purchase from, or handle on behalf of, that grower 
during a year of volume regulation. Cranberries received by a handler 
that exceed the sum of their growers' allotments can be used to fill 
unused allotment. Any remaining cranberries are defined as excess 
cranberries as defined in Sec.  929.59, which also outlines the 
procedures and dates by which excess cranberries are to be diverted. 
Section 929.61 prescribes outlets for excess cranberries, which are 
further defined in Sec.  929.104.
    In addition, Sec.  929.50 provides authority for the transfer of 
sales history and annual allotment. Section 929.51 requires the 
Committee to consider market conditions, including supply and demand, 
prior to recommending an allotment percentage, and that any 
recommendation be made by March 1. Section 929.58(a) provides the 
authority to exempt from any or all requirements the handling of 
cranberries in such minimum quantities as the Committee, with the 
approval of the Secretary, may prescribe. Section 929.58(b) provides, 
in part, the authority to exempt from any or all requirements the 
handling of cranberries of such forms or types, including organic 
cranberries, as the Committee, with the approval of the Secretary, may 
prescribe.
    Domestic cranberry production has been increasing over the past few 
years, up from 8.0 million barrels in 2012 to 9.6 million barrels in 
2016. During the last few years, demand has remained relatively flat, 
and has not kept pace with the increases in supply. This has led to 
increasing levels of inventories. Ending inventory levels increased 
from 5.8 million barrels in 2012 to 9.7 million barrels in 2016.
    Demand for cranberries is inelastic, meaning changes in consumer 
price have a minimal effect on total sales. However, grower prices are 
very sensitive to changes in supply. Consequently, higher inventory 
levels place downward pressure on grower prices for cranberries and 
reduce grower returns. Data reviewed by the Committee indicates that 
the price per barrel received by some growers has fallen from $30 a 
barrel in 2011 to $10 a barrel in 2016. With the cost of production 
estimated at approximately $35 a barrel, for many growers returns have 
fallen below the cost of production.
    The Committee met on August 4, 2017, and again on August 31, 2017, 
and discussed the estimated levels of supply and demand and how market 
conditions were impacting the industry. The Committee discussed the 
approximate levels of production for the 2017-18 season, forecasting 
production at approximately 9.1 million barrels. Carryover inventory 
was estimated at approximately 9.9 million barrels and foreign acquired 
cranberries were expected to provide an additional 2.1 million barrels, 
for a total available supply of approximately 21.1 million barrels for 
the year. After accounting for shrinkage, the Committee agreed on an 
adjusted supply of 20.4 million barrels for the 2017-18 crop year.
    Using these numbers, with estimated sales of 9.5 million barrels 
for 2017-18, the Committee calculated a potential carryover for the 
2018-19 season of 10.9 million barrels. This is an approximately one 
million barrel increase from the carryover inventory for the 2017-18 
crop year. Based on these numbers, carryover inventory for the 2018-19 
crop year would be approximately 115 percent of annual sales.
    In discussing market conditions, the Committee recognized that 
sales have been relatively flat. The Committee also noted supply has 
been exceeding demand by about one million barrels a year. Using crop 
and sales estimates similar to 2017-18, and the estimated carryover 
from the 2017-18 season of 10.9 million barrels, the potential 
carryover supply at the end of the 2018-19 crop year could increase by 
another one million barrels to 11.9 million if no action is taken to 
regulate supply.
    In reviewing these numbers, the Committee agreed the industry is 
faced with a large inventory that continues to build. To address the 
problems associated with oversupply and to try to stabilize grower 
returns, the Committee discussed the need to establish volume 
regulation. The Committee considered several options, including 
establishing free and restricted percentages under a handler 
withholding for the 2017-18 crop year, establishing a grower allotment 
for the 2018-19 season, or recommending both regulations.
    Considering the levels of inventory and low grower returns, the 
Committee voted to recommend a handler withholding, setting the free 
and restricted percentages of 85 percent and 15 percent, respectively, 
for the 2017-18 season. AMS agreed with the Committee's analysis and 
recommendation and published the rule establishing these percentages in 
the Federal Register on April 4, 2018 (83 FR 14350). The Committee 
estimated that the 15 percent restriction would remove approximately 
one million barrels from inventory, helping to maintain inventories at 
current levels. While the Committee recognized a small restriction 
would not immediately balance supply with demand, even a small 
restriction would remove a portion of the volume from the market and 
help prevent an additional increase in inventory.
    With the handler withholding removing an estimated one million 
barrels from the market, the industry would still have approximately 10 
million barrels remaining in inventory. Given the static demand and 
anticipated market conditions for the 2018-19 fiscal year, the 
Committee also recommended establishing a grower allotment percentage 
for the 2018-19 fiscal year.
    The Committee discussed various levels of restriction, being 
sensitive to the impact volume control could have on small growers and 
handlers. Some small handlers are able to sell all their production 
each year and do not maintain an inventory. Several Committee members 
stated a large restriction would place a hardship on these small 
handlers. However, the Committee also recognized that volume control 
measures could help increase grower returns by helping to align supply 
with demand.
    In addition, establishing an allotment regulation can help growers 
reduce production costs. Growers could choose to take bogs out of 
production, or reduce inputs such as fertilizer and pesticides in order 
to reduce their production volume to match their allotment. These and 
other steps could help growers reduce their costs of production for the 
2018-19 crop.
    Based on the information available, the Committee recommended

[[Page 46071]]

establishing a marketable quantity of 7.275 million barrels and an 
allotment percentage of 75 percent for the 2018-19 crop year. With 
volume regulation, returns are expected to be higher than without 
volume regulation. This increase is beneficial to all growers and 
handlers regardless of size, and enhances total revenues in comparison 
to no volume regulation. Establishing an allotment percentage allows 
the industry to help stabilize supplies. This rule could remove a 
potential 2 million barrels from supply, reduce industry inventory, and 
increase industry returns. This rule adds a new Sec.  929.253 to 
establish the marketable quantity and grower allotment.
    The Committee also recommended that handlers have the option to 
receive cranberries over their grower allotment and process up to 50 
percent of the excess cranberries received rather than divert them in 
fresh form, as currently required. Handlers that do so need to divert 
an amount of 2018-19 cranberry processed products equivalent to the 
volume of excess cranberries processed.
    The Committee made this recommendation recognizing that processing 
fresh fruit to produce one of its top-selling items, sweetened dried 
cranberries (SDC), results in juice concentrate as a by-product. A 
significant amount of current inventory is in the form of juice 
concentrate. By allowing handlers to process a portion of the excess 
cranberries they receive, more fresh cranberries are available to 
produce products requiring whole cranberries, such as SDC, and the 
diversion of concentrate will help prevent additional build-up of 
inventory. Handlers still have the option to divert fresh berries as 
excess supply.
    To allow for the diversion of processed products, Sec.  929.104(b), 
which currently prohibits the handling of excess fruit, is removed. To 
ensure the diversion of processed products in lieu of fresh cranberries 
is correctly accounted for, the final rule for volume regulation for 
the 2017-18 season (83 FR 14350) adds guidance under Sec.  929.107 
along with a conversion table. The table recognizes different 
conversion equivalencies of cranberries to processed product based on 
the volume of Brix concentrate.
    Brix is the method for measuring the amount of sugar contained in 
the cranberry products, and the industry average for concentrate is 50 
Brix. The Committee acknowledged that the Brix level can vary depending 
on the growing region and farming practices. The table helps ensure 
that the diversion of processed product in lieu of fresh berries is 
applied equitably among all handlers.
    Using the conversion table, handlers can determine the amount of 
cranberry concentrate they need to divert, in lieu of fresh berries, to 
cover the fresh cranberry equivalent of any excess cranberries 
processed. Juice concentrate should comprise the vast majority of 
processed product used for diversion. Should requests be made to use 
other processed products for diversion, conversion rates for those 
products will be provided by the Committee based on information 
provided by the requesting handler.
    For example, a grower with a sales history of 1,000 barrels will 
have an allotment of 750 barrels (1,000 x .75). If the grower delivered 
all 1,000 barrels to the handler, the handler will have 250 barrels of 
excess fruit. Under this final rule, the handler could divert 250 
barrels of fresh fruit to approved outlets or divert half (125 barrels 
of fresh fruit) and process half, diverting a 125 barrel equivalent in 
2018-19 processed product.
    The Committee also recommended changes to date requirements 
currently specified in the Order. Section 929.59(b) currently states 
that ``prior to January 1, or such other date as recommended by the 
committee and approved by the Secretary, handlers holding excess 
cranberries shall submit to the committee a written plan outlining 
procedures for the systematic disposal of such cranberries in the 
outlets prescribed in Sec.  929.61.'' The Committee agreed the date for 
submitting disposal plans should be extended in order to give handlers 
more time to consider how to divert their excess cranberries. 
Therefore, the Committee recommended changing the deadline prescribed 
in Sec.  929.59(b) from January 1 to March 1 of the regulated season.
    Section 929.59(c) states that ``prior to March 1, or such other 
date as recommended by the committee and approved by the Secretary, all 
excess cranberries shall be disposed of pursuant to Sec.  929.61.'' 
Given the change in the due date for the diversion plans, the Committee 
agreed that this date should also be changed to provide handlers with 
enough time to comply with this requirement. Therefore, the Committee 
recommended changing the date by which diversion is to be completed 
from March 1 to August 31. AMS agrees with the Committee's analysis and 
recommendation and is issuing this rule to add a new Sec.  929.159 to 
make these date changes.
    Section 929.62(a) requires each grower to file a report with the 
Committee by January 15 of each year providing the following 
information: Total acreage harvested and whether owned or leased; total 
commercial cranberry sales in barrels from such acreage; the amount of 
acres either in production but not harvested, or taken out of 
production, and the reason(s) why; the amount of new or replanted 
acreage coming into production; the name of the handler(s) to whom 
commercial cranberry sales were made; and such other information as may 
be needed for implementation and operation of this section. Growers 
might not have all necessary information to complete the report by the 
current deadline. Therefore, the Committee recommended changing the 
grower reporting date from January 15 to March 1.
    The Committee also recommended organically grown cranberries be 
exempt from this regulation as they serve a niche market and represent 
a very small portion of the total crop. All other cranberry production, 
including fresh cranberries, are subject to regulation under the grower 
allotment volume regulation.
    To address the burden the volume regulation would have on small 
growers and handlers, the Committee also recommended providing an 
exemption of 2,500 barrels for all growers. Under the Committee's 
recommendation, the exemption would be applied following the 
calculation of a grower's allotment. However, after much consideration, 
USDA determined the exemption recommendation should be revised. Rather 
than provide an exemption of 2,500 barrels for each grower, this action 
exempts small handlers who processed less than 125,000 barrels from the 
allotment requirement. Further, handlers who did not have carryover 
inventory at the end of the 2017-18 fiscal year are also exempt from 
the allotment requirement. Accordingly, growers delivering their fruit 
to exempt handlers are not subject to the allotment.
    These changes allow handlers who have matched their production with 
market demand to continue to serve their customer base and maintain 
their market share. Small growers also have the option of delivering 
their fruit to handlers who are not subject to the regulation. Handlers 
subject to the allotment percentage should be able to meet any market 
shortfalls by utilizing cranberries or cranberry products available in 
inventory. The provision allowing handlers to process a portion of 
their excess cranberries also helps provide some flexibility.
    With this action, only those handlers carrying inventory are 
subject to

[[Page 46072]]

meeting the allotment requirement. In reviewing the Committee's 
recommendation and other available industry information, USDA has 
determined that existing inventories in excess of 9 million barrels are 
putting the most downward pressure on returns to both growers and 
handlers. Consequently, this rule puts more focus on reducing the 
volume in inventory.
    Section 929.125 provides authority for a grower to request a review 
by an appeals subcommittee if the grower is dissatisfied with his or 
her sales history calculation provided by the Committee. The grower 
must request the review within 30 days after receipt of the Committee's 
determination of sales history and must submit documentation showing 
why he or she believes the calculation is inaccurate. Within 15 days 
after notification of the appeals subcommittee's decision, if the 
grower is not satisfied with the decision, the grower may further 
appeal to the Secretary.
    A grower may transfer all or part of their allotment to another 
grower, provided that the transferred allotment remains assigned to the 
same handler. Transfers of allotment between growers having different 
handlers may occur with the consent of both handlers. All such 
transfers have to be reported to the Committee. After all allotment 
transfers have occurred, any unused allotment would be transferred to 
the Committee. The Committee would then redistribute any unused 
allotment to handlers having excess cranberries in an amount 
proportionate to each handler's total allotment. These provisions help 
ensure that excess supply is utilized, to the extent possible, through 
unfilled allotment.
    The Committee considered the estimated level of production and 
anticipated demand, and determined that without some action on the part 
of the Committee, inventory levels will continue to increase throughout 
the 2018-19 season. The Committee believes using the volume control 
authorities in the Order will help stabilize marketing conditions for 
cranberries by helping to adjust supply to meet market demand and 
improve grower returns.
    Accordingly, this final rule establishes a grower allotment at 75 
percent for the 2018-19 season. It also gives handlers the option to 
process up to 50 percent of the excess cranberries they receive above 
their growers' allotment, provided they divert an equivalent amount of 
2018-19 cranberry processed products. This final rule also exempts 
organically grown cranberries, specifies handlers subject to the 
regulation, revises the definition of outlets for excess fruit, and 
revises dates by which certain actions are due.

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) 
has considered the economic impact of this action on small entities. 
Accordingly, AMS has prepared this final regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses 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.
    There are approximately 1,100 cranberry growers in the regulated 
area and approximately 65 cranberry handlers subject to regulation 
under the Order. Small agricultural growers are defined by the Small 
Business Administration (SBA) as those having annual receipts of less 
than $750,000, and small agricultural service firms are defined as 
those whose annual receipts are less than $7,500,000 (13 CFR 121.201).
    According to industry and Committee data, the average grower price 
for cranberries during the 2016-17 season was $23.50 per barrel and 
total sales were approximately 9.5 million barrels. The value for 
cranberries that year totaled $223,250,000 ($23.50 per barrel 
multiplied by 9.5 million barrels). Taking the total value of 
production for cranberries and dividing it by the total number of 
cranberry growers provides an average return per grower of $202,955. 
Using the average price and utilization information, and assuming a 
normal distribution, the majority of cranberry growers receive less 
than $750,000 annually.
    According to USDA's Market News report, the average free on board 
(f.o.b.) price for cranberries was approximately $30.00 per barrel. 
Multiplying the f.o.b. price by total utilization of 9.5 million 
barrels results in an estimated handler-level cranberry value of $285 
million. Dividing this figure by the number of handlers (65) yields an 
estimated average annual handler receipt of $4.3 million, which is 
below the SBA threshold for small agricultural service firms. 
Therefore, the majority of growers and handlers of cranberries may be 
classified as small entities.
    While cranberry production has continued to rise, demand has failed 
to keep pace, and inventories have been increasing. In an industry such 
as cranberries, product can be stored in inventory for long periods of 
time. Large inventories are costly to maintain, difficult to market, 
and have a price-depressing effect. When supply outpaces demand and 
results in high levels of inventories, grower and handler returns can 
be negatively impacted.
    Demand for cranberries is inelastic, meaning changes in price have 
a minimal effect on total sales volume. However, grower prices are very 
sensitive to changes in supply. A grower allotment program results in a 
decrease in supply as handlers can only purchase a portion of a 
grower's production, which is based on the grower's past sales history. 
Even a small shift in supply can have a positive effect on grower 
prices. Therefore, using a grower allotment program to reduce supply 
should increase grower prices and revenues.
    This final rule establishes a grower allotment of 75 percent for 
the 2018-19 crop year. It also allows handlers to process up to 50 
percent of the excess cranberries they receive above their growers' 
allotment, provided they divert an equivalent amount of 2018-19 
cranberry processed products. In addition, this rule exempts 
organically grown cranberries, specifies handlers subject to the 
regulation, revises the definition of outlets for excess fruit, and 
revises dates by which certain actions are due. These actions are 
designed to help stabilize marketing conditions, reduce burdensome 
inventories, and improve grower and handler returns. This rule revises 
Sec. Sec.  929.104 and 929.105 and establishes new Sec. Sec.  929.159 
and 929.253. The authority for these actions is provided for in 
Sec. Sec.  929.48, 929.49, 929.51, 929.52, 929.58, 929.59, 929.61, and 
929.62. These changes are based on Committee recommendations from 
meetings on August 4 and August 31, 2017, and a February 18, 2018, 
email vote.
    While these actions could result in some additional costs to the 
industry, the benefits are expected to outweigh them. The purpose of 
establishing an allotment percentage is to address oversupply 
conditions and to stabilize grower prices. The industry has a 
significant volume in inventory, and this has had a negative impact on 
grower and handler returns. Without volume control, inventories will 
likely continue to increase, further lowering returns.

[[Page 46073]]

    Inventories have significantly increased since 2011. In 2011, 
existing inventories were around 4.6 million barrels. By the end of the 
2016-17 season, inventories were approximately 9.9 million barrels, and 
by the end of the 2017-18 season, inventories are projected to be 
approximately 10.9 million barrels. Inventories as a percentage of 
total sales have also been increasing from approximately 50 percent in 
2010 to approximately 103 percent in 2016, and could reach an 
anticipated 115 percent after the 2017-18 season. These inventories 
have had a depressing effect on grower prices, which for many growers 
have fallen below their cost of production.
    Retail demand for cranberries is highly inelastic, which indicates 
changes in consumer prices do not result in significant changes in the 
quantity demanded. Consumer prices are also not significantly impacted 
by minor changes in cranberry supplies. Therefore, this action should 
have little or no effect on consumer prices and should not result in a 
reduction in retail sales. However, even a small shift in supply could 
increase grower and handler returns. The use of allotment percentages 
will likely have a positive impact on grower and handler returns for 
this crop year.
    This rule will result in some fruit being taken off the market. 
However, a sufficient amount of fruit will still be available to supply 
all aspects of the market. In addition, allowing handlers the option to 
process up to 50 percent of the excess cranberries they receive above 
their growers' allotment, provided they divert an equivalent amount of 
2018-19 cranberry processed products, provides handlers some additional 
flexibility and may help reduce inventories of juice concentrate, one 
of the largest segments of existing inventory.
    There are also secondary outlets available for excess fruit, 
including foreign markets except Canada, charitable institutions, 
nonhuman food use, and research and development projects. While these 
alternatives may provide different levels of return than sales to 
primary markets, they play an important role for the industry. In 
addition, if demand is greater than anticipated, there are significant 
amounts of fruit in inventory that can be utilized to meet demand.
    This action also exempts small handlers who processed less than 
125,000 barrels in 2017-18 from the allotment percentage. Consequently, 
small handlers whose acquired volume is 125,000 barrels or less are 
exempt from the allotment volume restriction. This will reduce the 
burden the volume restriction has on small handlers and their growers.
    In addition, handlers who did not have carryover inventory at the 
end of the 2017-18 fiscal year are also exempt from the allotment 
percentage. This allows handlers that have matched their production 
with market demand to continue to serve their customer base and 
maintain their market share. Handlers subject to the restriction should 
be able to meet any shortfalls by utilizing cranberries or cranberry 
products they have in inventory.
    Further, making the recommendation to regulate the volume handled 
under a grower allotment program could result in some cost savings for 
growers depending upon what actions they may take to adjust supply.
    As the allotment represents a percentage of the grower's sales 
history, the costs, when applicable, are proportionate and should not 
place an extra burden on small entities as compared to large entities. 
Likewise, growers and handlers, regardless of size, benefit from the 
stabilizing effects of this action.
    One alternative considered by the Committee was not to impose a 
volume regulation during the 2018-19 crop year. However, Committee 
members believed that inventory levels were such that some form of 
volume control was necessary to help stabilize marketing conditions.
    The Committee also considered other allotment percentage levels. 
However, some members were concerned that setting an allotment 
percentage that was too restrictive could negatively impact small 
growers. The Committee also considered not recommending a provision to 
allow a percentage of excess cranberries to be processed into cranberry 
products. The Committee determined that allowing handlers to process up 
to 50 percent of the excess cranberries they receive above their 
growers' allotment would provide additional volumes of fresh 
cranberries for processing and would provide handlers some flexibility 
while not adding additional juice concentrate to the existing inventory 
levels. Therefore, for the reasons mentioned above, these alternatives 
were rejected by the Committee.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the Order's information collection requirements have been 
previously approved by OMB and assigned OMB No. 0581-0189, Fruit Crops. 
No changes in those requirements as a result of this action are 
necessary. Should any changes become necessary, they would be submitted 
to OMB for approval.
    This final rule will not impose any additional reporting or 
recordkeeping requirements on either small or large cranberry growers 
or handlers. As with all Federal marketing order programs, reports and 
forms are periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies.
    As noted in the initial regulatory flexibility analysis, USDA has 
not identified any relevant Federal rules that duplicate, overlap, or 
conflict with this final rule.
    AMS is committed to complying with the E-Government Act to promote 
the use of the internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    In addition, the Committee's meetings were widely publicized 
throughout the cranberry industry and all interested persons were 
invited to attend the meetings and participate in Committee 
deliberations on all issues. Like all Committee meetings, the August 4, 
2017 and August 31, 2017 meetings were public meetings and all 
entities, both large and small, were able to express views on these 
issues.
    A proposed rule concerning this action was published in the Federal 
Register on April 27, 2018 (83 FR 18462). Copies of the proposed rule 
were sent via email to Committee members and cranberry handlers. 
Additionally, the rule was made available through the internet by USDA 
and the Office of the Federal Register. A 30-day comment period ending 
May 29, 2018, was provided to allow interested persons to respond to 
the proposal.
    During the comment period, 24 comments were received in response to 
the proposal. Of the comments received, 12 were in support of the 
regulation, but also requested some changes to the proposal, 11 were 
opposed to the regulation, and 1 took no position.
    Comments: In the comments that supported volume regulation, but 
with changes from what was included in the proposed rule, the 12 
commenters stated the volume regulation was a way to reduce supply and 
benefit the industry. These 12 comments also specifically supported the 
handler's flexibility to divert excess fruit, stating it would help 
handlers maximize the value of the fruit.
    The 12 comments also suggested handlers be allowed to divert 100 
percent of their excess fruit in processed form, rather than the 50 
percent allowed under the proposed rule. They stated

[[Page 46074]]

that with a significant amount of the current inventory in the form of 
juice concentrate, this would help prevent additional build-up of 
inventory.
    Response: While a significant portion of existing inventory is 
concentrate, not all handlers produce concentrate or concentrate as a 
byproduct of SDC production. Allowing the use of 50 percent of 2018-19 
cranberry products to meet the excess fruit restriction recognizes the 
need to reduce cranberry concentrate inventory, while also addressing 
the overall oversupply facing the industry.
    Comments: Eleven of these commenters also expressed that the 
exemption for small handlers does not help small growers. These 
commenters asked USDA to reconsider its decision to do away with the 
2,500 barrel exemption for each grower as recommended by the Committee.
    Response: In reviewing the Committee's recommendation and other 
available industry information, USDA has determined that existing 
inventories in excess of 9 million barrels are putting the most 
downward pressure on returns to both growers and handlers. 
Consequently, this rule puts more focus on reducing the volume in 
inventory, which should benefit both small growers and small handlers.
    Rather than provide an exemption of 2,500 barrels for each grower, 
an action which would have exempted nearly 2.75 million barrels, this 
action exempts small handlers who processed less than 125,000 barrels 
during the 2017-18 fiscal year from the allotment requirement. Small 
handlers processing less than 125,000 barrels make up nearly 88 percent 
of all handlers, yet combined, account for less than 10 percent of the 
total volume of cranberries processed. Based on Committee data, these 
small handlers were holding little or no volume in inventory at the end 
of the 2016-17 season. USDA's revisions to the Committee's proposal 
therefore exempts these handlers from the allotment requirement. 
Although focused on handlers, this change is expected to have a 
positive impact on grower returns by reducing overall supply in the 
market. Additionally, small growers would have the option of delivering 
their fruit to handlers who are not subject to the regulation.
    In addition, handlers who did not have carryover inventory at the 
end of the 2017-18 fiscal year are also exempt. USDA believes that this 
will allow handlers who have matched their production with market 
demand to continue to serve their customer base and maintain their 
market share. Only those handlers carrying inventory will be subject to 
meeting the allotment requirement.
    Handlers subject to the allotment percentage should be able to meet 
any market shortfalls by utilizing cranberries or cranberry products 
available in inventory. The provision allowing handlers to process a 
portion of their excess cranberries also helps provide some 
flexibility.
    Comment: Another comment stated they did not support using 2017 
deliveries to determine the 2018 exemptions, and that the no carryover 
inventory exemption is flawed.
    Response: Regarding using 2017-18 information to determine 2018-19 
exemptions, this is a grower's production allotment volume regulation. 
As such, it is important for growers to have an idea of what their 
allotment will be for the upcoming season. Growers can then use that 
information to make determinations regarding their production. By using 
the information from 2017-18, USDA provided growers with exemptions 
they could use to determine whether their production would be subject 
to the allotment, or the potential opportunity to choose to deliver 
their production to an exempt handler.
    Comments: Of the 11 comments in opposition of the proposed rule, 
five support the reinstatement of the 2,500 barrel exemption for each 
grower as discussed above. Four stated the proposed change would do 
little or nothing to accomplish USDA's stated goal of controlling the 
overage of cranberry concentrate.
    Response: Concentrate represents a large portion of existing 
inventory. However, at the end of the 2016-17 fiscal year, of the 
estimated 9.7 million barrels in inventory, approximately 4.2 million 
barrels were frozen berries, while approximately 3.7 million barrels 
were concentrate. The rule provides for the diversion of processed 
product to meet 50 percent of the restriction as a way to reduce the 
inventory of concentrate. However, reducing overall supply, including 
whole fruit, is also important in addressing the current level of 
inventory.
    Comments: Six comments stated that the proposed regulation would 
negatively impact independent growers and another stated that this 
would hurt small growers. Four commenters stated this regulation would 
adversely affect midsize handlers.
    Response: While these actions could result in some additional costs 
to the industry, the allotment percentage established by this rule 
applies uniformly to all those regulated, regardless of size. A 
grower's allotment is the total volume a handler may purchase from, or 
handle on behalf of, that grower during a year of volume regulation. 
Each grower's allotment volume is calculated by multiplying the 
individual's sales history by the allotment percentage. As the 
allotment percentage is applied to each grower's sales history, the 
costs, when applicable, are proportionate and should not place an extra 
burden on small entities as compared to large entities.
    Further, the benefits are expected to outweigh any additional costs 
and positively impact all growers and handlers, regardless of size. The 
industry has a significant volume in inventory, and this has had a 
negative impact on all grower and handler returns. If steps are not 
taken to reduce the level of inventory, these downward pressures will 
persist. The purpose of establishing the allotment percentage is to 
address the oversupply conditions which are negatively impacting 
industry returns. Generally, reducing supply levels results in prices 
increasing for growers and handlers. Therefore, lowering inventory 
levels is expected to result in positive returns for the entire 
industry.
    Comments: Four comments stated the shortage in the 2017 crop makes 
the grower allotment unnecessary and harmful, and the rule will create 
an artificial spike in market price for finished goods. Another 
commenter questioned regulating cranberries when Canadian production is 
not subject to the allotment.
    Response: In reviewing the Committee's recommendation and other 
available industry information, USDA has determined that existing 
inventory is putting the most downward pressure on returns to both 
growers and handlers. Even with the shortfall in the 2017 crop and the 
handler withhold established for the 2017-18 season, the industry will 
enter the 2018-19 season with inventory levels that will continue to 
negatively affect industry returns. In addition, existing inventory, 
combined with an additional 9 million barrels of anticipated 2017 
domestic production, will provide a more than ample domestic supply to 
meet sales requirements. Consequently, this regulation should have 
little effect on consumer prices. Moreover, while the Order does not 
regulate the volume of imports, given the current levels of available 
domestic supply, this rule is not expected to lead to an increase in 
imported product.
    Comment: One comment in opposition to the proposal stated it

[[Page 46075]]

would be implemented too late, as growers have already made their 
production decisions. It further stated the rule should be implemented 
next season when they have more time to make economic decisions 
relating to their crop.
    Response: Utilizing a production allotment allows growers to make 
adjustments to reduce their costs. Given the oversupply, it is 
important to take action on this issue. Further, growers have been 
aware of this recommendation for some time, and the proposed rule on 
this action published on April 27, 2018.
    Comment: Another commenter stated the proposed regulation 
originated from the major cooperative.
    Response: As stated above, the proposal for production allotment 
was discussed and ultimately recommended by the Committee for USDA's 
consideration at the August 4, 2017 and August 31, 2017 meetings. The 
Committee is comprised of growers of cranberries operating within the 
production area and a public member, and all meetings are open to 
industry and public participation.
    Comment: The one comment taking a neutral position on the proposed 
action also indicated support for reestablishing the 2,500-barrel 
exemption for each grower, as recommended by the Committee, should USDA 
decide to go forward with the regulation.
    Response: For the reasons given above, the 2,500-barrel exemption 
for growers will not be reestablished.
    Comments: Additional comments were received that addressed issues 
outside the scope of the proposed rule.
    For the reasons discussed above, no changes will be made to the 
rule as proposed, based on the comments received.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions 
about the compliance guide should be sent to Richard Lower at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    After consideration of all relevant matter presented, including the 
information and recommendation of 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 929

    Cranberries, Marketing agreements, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 929 is 
amended as follows:

PART 929--CRANBERRIES GROWN IN STATES OF MASSACHUSETTS, RHODE 
ISLAND, CONNECTICUT, NEW JERSEY, WISCONSIN, MICHIGAN, MINNESOTA, 
OREGON, WASHINGTON, AND LONG ISLAND IN THE STATE OF NEW YORK

0
1. The authority citation for part 929 continues to read as follows:

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

Subpart B--Administrative Requirements

0
2. In Sec.  929.104, revise paragraph (a) introductory text and remove 
and reserve paragraph (b).
    The revision reads as follows:


Sec.  929.104  Outlets for excess cranberries.

    (a) In accordance with Sec.  929.61, excess cranberries may be 
diverted only to the following noncommercial or noncompetitive outlets:
* * * * *

0
3. In Sec.  929.105, add paragraph (c) to read as follows:


Sec.  929.105  Reporting.

* * * * *
    (c) Beginning with crop year 2018-19, the due date for the grower 
report required under Sec.  929.62(a) is changed to March 1.

0
4. Add Sec.  929.159 to read as follows:


Sec.  929.159  Excess cranberries.

    (a) Beginning with crop year 2018-19, handlers holding excess 
cranberries shall submit to the Committee a written plan outlining 
procedures for the systematic disposal of such cranberries as specified 
in Sec.  929.59(b) by March 1.
    (b) Beginning with crop year 2018-19, all excess cranberries shall 
be diverted as specified in Sec.  929.59(c) prior to August 31.

0
6. Add Sec.  929.253 to read as follows:


Sec.  929.253  Marketable quantity and allotment percentage for the 
2018-19 crop year.

    (a) The marketable quantity for the 2018-19 crop year is set at 
7.275 million barrels and the allotment percentage is designated at 75 
percent.
    (b) Organically grown fruit shall be exempt from the volume 
regulation requirements of this section. Small handlers who processed 
less than 125,000 barrels during the 2017-18 fiscal year are exempt 
from the volume regulation requirements of this section. Any handler 
who did not have carryover inventory at the end of the 2017-18 fiscal 
year is also exempt from the volume regulation requirements of this 
section.
    (c) Handlers have the option to process up to 50 percent of the 
excess cranberries received over their growers' allotments into 
dehydrated cranberries or other processed products. Handlers utilizing 
this option shall divert an amount of 2018-19 processed products 
equivalent to the volume of excess cranberries processed as provided 
for in Sec.  929.107. The remaining volume of excess cranberries must 
be diverted as whole fruit.

    Dated: September 7, 2018.
Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2018-19825 Filed 9-11-18; 8:45 am]
 BILLING CODE 3410-02-P


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