```

[Federal Register Volume 79, Number 50 (Friday, March 14, 2014)]
[Proposed Rules]
[Pages 14441-14447]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05587]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Doc. No. AMS-FV-13-0087; FV14-985-1 PR]

Marketing Order Regulating the Handling of Spearmint Oil Produced 
in the Far West; Salable Quantities and Allotment Percentages for the 
2014-2015 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule invites comments on proposed limits to the 
quantity of Far West Scotch and Native spearmint oil that handlers may 
purchase from, or handle on behalf of, producers during the 2014-2015 
marketing year, which begins on June 1, 2014. The Far West includes 
Washington, Idaho, Oregon, and designated parts of Nevada and Utah. The 
salable quantity and allotment percentage for Class 1 (Scotch) 
spearmint oil would be set at 1,149,030 pounds and 55 percent, 
respectively. For Class 3 (Native) spearmint oil, the salable quantity 
and allotment percentage would be set at 1,090,821 pounds and 46 
percent, respectively. The Spearmint Oil Administrative Committee 
(Committee), the agency responsible for local administration of the 
marketing order for spearmint oil produced in the Far West, recommended 
these quantities.

DATES: Comments must be received by March 31, 2014.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments must be sent to the Docket Clerk, 
Marketing Order and Agreement Division, Fruit and Vegetable Program, 
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938; or Internet: http://www.regulations.gov. All comments should reference the document number 
and the date and page number of this issue of the Federal Register and 
will be made available for public inspection in the Office of the 
Docket Clerk during regular business hours, or can be viewed at: http://www.regulations.gov. All comments submitted in response to this 
proposal will be included in the record and will be made available to 
the public. Please be advised that the identity of the individuals or 
entities submitting the comments will be made public on the internet at 
the address provided above.

FOR FURTHER INFORMATION CONTACT: Manuel Michel, Marketing Specialist, 
or Gary Olson, Regional Director, Northwest Marketing Field Office, 
Marketing Order and Agreement Division, Fruit and Vegetable Program, 
AMS, USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or Email: 
Manuel.Michel@ams.usda.gov or GaryD.Olson@ams.usda.gov.
    Small businesses may request information on complying with this 
regulation by contacting Jeffrey Smutny, Marketing Order and Agreement 
Division, Fruit and Vegetable Program, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-
2491, Fax: (202) 720-8938, or Email: Jeffrey.Smutny@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing 
Order No. 985 (7 CFR Part 985), as amended, regulating the handling of 
spearmint oil produced in the Far West (Washington, Idaho, Oregon, and 
designated parts of Nevada and Utah), hereinafter referred to as the 
``order.'' The order is effective under the Agricultural Marketing 
Agreement Act

[[Page 14442]]

of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the 
``Act.''
    The Department of Agriculture (USDA) is issuing this proposed rule 
in conformance with Executive Orders 12866, 13175, and 13563.
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This proposed rule is not intended to have 
retroactive effect. Under the order now in effect, salable quantities 
and allotment percentages may be established for classes of spearmint 
oil produced in the Far West. This proposed rule would establish the 
quantity of spearmint oil produced in the Far West, by class, which 
handlers may purchase from, or handle on behalf of, producers during 
the 2014-2015 marketing year, which begins on June 1, 2014.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with USDA a petition 
stating that the order, any provision of the order, or any obligation 
imposed in connection with the order is not in accordance with law and 
request a modification of the order or to be exempted therefrom. A 
handler is afforded the opportunity for a hearing on the petition. 
After the hearing, USDA would rule on the petition. The Act provides 
that the district court of the United States in any district in which 
the handler is an inhabitant, or has his or her principal place of 
business, has jurisdiction to review USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    The Committee meets annually in the fall to adopt a marketing 
policy for the ensuing marketing year or years. In determining such 
marketing policy, the Committee considers a number of factors, 
including, but not limited to, the current and projected supply, 
estimated future demand, production costs, and producer prices for all 
classes of spearmint oil. Input from spearmint oil handlers and 
producers regarding prospective marketing conditions for the upcoming 
year is considered as well. During the meeting, the Committee 
recommends to USDA any volume regulations deemed necessary to meet 
market requirements and to establish orderly marketing conditions for 
Far West spearmint oil. If the Committee's marketing policy 
considerations indicate a need for limiting the quantity of any or all 
classes of spearmint oil marketed, the Committee subsequently 
recommends the establishment of a salable quantity and allotment 
percentage for such class or classes of oil for the forthcoming 
marketing year.
    The salable quantity represents the total amount of each class of 
spearmint oil that handlers may purchase from, or handle on behalf of, 
producers during the marketing year. The allotment percentage is the 
percentage used to calculate each producer's prorated share of the 
salable quantity. The calculation applies the allotment percentage to a 
producer's allotment base for each applicable class of spearmint oil. 
The allotment base is each producer's quantified share of the spearmint 
oil market based on a statistical representation of past spearmint oil 
production, with accommodation for reasonable and normal adjustments to 
such base as prescribed by the Committee and approved by USDA. Salable 
quantities are established at levels intended to meet market 
requirements and to establish orderly marketing conditions. Committee 
recommendations for volume controls are made well in advance of the 
period in which the regulations are to be effective, thereby allowing 
producers the chance to adjust their production decisions accordingly.
    Pursuant to authority in Sec. Sec.  985.50, 985.51, and 985.52 of 
the order, the full eight-member Committee met on November 6, 2013, and 
recommended salable quantities and allotment percentages for both 
classes of oil for the 2014-2015 marketing year. The Committee 
unanimously recommended the establishment of a salable quantity and 
allotment percentage for Class 1 (Scotch) spearmint oil of 1,149,030 
pounds and 55 percent, respectively. The Committee, also with a 
unanimous vote, recommended the establishment of a salable quantity and 
allotment percentage for Class 3 (Native) spearmint oil of 1,090,821 
pounds and 46 percent, respectively.
    This action would set the amount of Scotch and Native spearmint oil 
that handlers may purchase from, or handle on behalf of, producers 
during the 2014-2015 marketing year, which begins on June 1, 2014. 
Salable quantities and allotment percentages have been placed into 
effect each season since the order's inception in 1980.

Class 1 (Scotch) Spearmint Oil

    As noted above, the Committee unanimously recommended a salable 
quantity of Scotch spearmint oil of 1,149,030 pounds and an allotment 
percentage of 55 percent for the upcoming 2014-2015 marketing year. The 
Committee utilized 2014-2015 sales estimates for Scotch spearmint oil, 
as provided by several of the industry's handlers, as well as 
historical and current Scotch spearmint oil production and inventory 
statistics, to arrive at these recommendations.
    Trade demand for Far West Scotch spearmint oil is expected to rise 
from 981,536 pounds in the 2013-2014 marketing year to 1,000,000 pounds 
in 2014-2015, if not more. Industry reports indicate an increasing 
consumer demand for mint flavored products has resulted in increasing 
demand for Far West Scotch spearmint oil. Information gathered from 
spearmint oil handlers also supports this conclusion.
    Production of Far West Scotch spearmint oil increased from 636,626 
pounds in 2012 to 1,057,377 pounds in 2013. Committee members attribute 
the increase in production to both the low level of reserves and 
growing demand. Given that these factors are expected to continue in 
the coming 2014-2015 year, the Committee expects production to increase 
to as much as 1,300,000 pounds in that marketing year.
    The Committee also estimates that there will be zero carry-in of 
Scotch spearmint oil on June 1, 2014, the beginning of the 2014-2015 
marketing year. This figure, which is the primary measure of excess 
supply, down from an estimated 16,022 pounds the previous year, is 
below the minimum carry-in quantity that the Committee considers 
favorable. The demand during the 2012-2013 marketing year equaled total 
supply resulting in the zero carry-in.
    The 2014-2015 salable quantity of 1,149,030 pounds recommended by 
the Committee represents an increase of 75,631 pounds over the total 
supply available during the previous marketing year. Total supply for 
2013-2014 amounted to 1,073,399 pounds (1,057,377 pounds produced plus 
16,022 pounds held in reserve).
    The Committee estimates 2014-2015 demand for Scotch spearmint oil 
at 1,000,000 pounds. When considered in conjunction with the forecast 
that there will be zero available carry-in of Scotch spearmint oil on 
June 1, 2014, the recommended salable quantity of 1,149,030 pounds 
would satisfy market demand and yield a carry-in of 149,030 pounds for 
the 2015-2016 marketing year.
    The Committee's stated intent in the use of marketing order volume 
control regulations for Scotch spearmint oil is to keep adequate 
supplies available to meet market needs and establish orderly marketing 
conditions. While the salable quantity recommended for the upcoming 
marketing year is less than the salable quantity set for the previous 
year (2013-2014 at 1,344,500 pounds), the Committee felt that the

[[Page 14443]]

recommended limit would adequately meet demand, as well as result in 
carry-in for the following year. With that in mind, the Committee 
developed its recommendation for the proposed Scotch spearmint oil 
salable quantity and allotment percentage for the 2014-2015 marketing 
year based on the information discussed above, as well as the data 
outlined below.
    (A) Estimated carry-in of Scotch spearmint oil on June 1, 2014-0 
pounds. This figure is the difference between the revised 2013-2014 
marketing year total available supply of 1,073,399 pounds and the 
estimated 2013-2014 marketing year trade demand of 1,073,399 pounds.
    (B) Estimated trade demand of Scotch spearmint oil for the 2014-
2015 marketing year--1,000,000 pounds. This figure is based on input 
from producers at five Scotch spearmint oil production area meetings 
held in late September and early October 2013, as well as estimates 
provided by handlers and other meeting participants at the November 6, 
2013, meeting. The average estimated trade demand provided at the five 
production area meetings is 1,033,000 pounds, which is 25,750 pounds 
less than the average of trade demand estimates submitted by handlers. 
However, Far West Scotch spearmint oil sales have averaged 819,824 
pounds per year over the last five years. Given this information, the 
Committee decided it was prudent to anticipate the trade demand at 
1,000,000 pounds. Should the initially established volume control 
levels prove insufficient to adequately supply the market, the 
Committee has the authority to recommend intra-seasonal increases as 
needed.
    (C) Salable quantity of Scotch spearmint oil required from the 
2014-2015 marketing year production--1,000,000 pounds. This figure is 
the difference between the estimated 2014-2015 marketing year trade 
demand (1,000,000 pounds) and the estimated carry-in on June 1, 2014 (0 
pounds). This figure represents the minimum salable quantity that may 
be needed to satisfy estimated demand for the coming year with no 
carryover.
    (D) Total estimated allotment base of Scotch spearmint oil for the 
2014-2015 marketing year--2,089,146 pounds. This figure represents a 
one-percent increase over the revised 2013-2014 total allotment base. 
This figure is generally revised each year on June 1 due to producer 
base being lost because of the bona fide effort production provisions 
of Sec.  985.53(e). The revision is usually minimal.
    (E) Computed Scotch spearmint oil 2014-2015 marketing year 
allotment percentage--47.9 percent. This percentage is computed by 
dividing the minimum required salable quantity (1,000,000 pounds) by 
the total estimated allotment base (2,089,146 pounds).
    (F) Recommended Scotch spearmint oil 2014-2015 marketing year 
allotment percentage--55 percent. This is the Committee's 
recommendation and is based on the computed allotment percentage (47.9 
percent), the average of the computed allotment percentage figures from 
the five production area meetings (46.2 percent), and input from 
producers and handlers at the November 6, 2013, meeting. The 
recommended 55 percent allotment percentage is also based on the 
Committee's belief that the computed percentage (47.9 percent) may not 
adequately supply the potential 2014-2015 Scotch spearmint oil market.
    (G) Recommended Scotch spearmint oil 2014-2015 marketing year 
salable quantity--1,149,030 pounds. This figure is the product of the 
recommended allotment percentage (55 percent) and the total estimated 
allotment base (2,089,146 pounds).
    (H) Estimated total available supply of Scotch spearmint oil for 
the 2014-2015 marketing year--1,149,030 pounds. This figure is the sum 
of the 2014-2015 recommended salable quantity (1,149,030 pounds) and 
the estimated carry-in on June 1, 2014 (0 pounds).

Class 3 (Native) Spearmint Oil

    At the November 6, 2013, meeting, the Committee also recommended a 
2014-2015 Native spearmint oil salable quantity of 1,090,821 pounds and 
an allotment percentage of 46 percent. The Committee utilized Native 
spearmint oil sales estimates for 2014-2015 marketing year, as provided 
by several of the industry's handlers, as well as historical and 
current Native spearmint oil market statistics to establish these 
thresholds. The recommended volume control levels represent a decrease 
of 341,380 pounds and 15 percentage points over the previous year's 
initially established salable quantity and allotment percentage.
    The Committee also estimates that there will be 461,260 pounds 
reserve of Native spearmint oil on June 1, 2014. This figure, which is 
the oil held in reserve by producers, is down from an industry peak of 
606,942 pounds in 2011. Reserve levels of Native spearmint oil are 
nearing the level that the Committee believes is optimal for the 
industry.
    Committee statistics indicate that demand for Far West Native 
spearmint oil has been gradually increasing since 2009. Spearmint oil 
handlers, who previously projected the 2013-2014 trade demand for Far 
West Native spearmint oil to be in the range of 1,100,000 pounds to 
1,400,000 pounds (with an average of 1,300,000 pounds), have projected 
trade demand for the 2014-2015 marketing period to be in the range of 
1,290,000 pounds to 1,400,000 pounds (with an average of 1,347,500).
    Given the above, the Committee estimates that approximately 
1,300,000 pounds of Native spearmint oil may be sold during the 2014-
2015 marketing year. When considered in conjunction with the estimated 
carry-in of 307,297 pounds of Native spearmint oil on June 1, 2014, the 
recommended salable quantity of 1,090,821 pounds results in an 
estimated total available supply of 1,398,118 pounds of Native 
spearmint oil during the 2014-2015 marketing year. Estimated carry-in 
of Native spearmint oil at the beginning of the 2015-2016 marketing 
year would be approximately 98,118 pounds. Carry-in spearmint oil is 
distinct from reserve pool spearmint oil and represents the amount of 
salable spearmint oil produced, but not marketed, in previous years and 
is available for sale in the current year. It is the primary measure of 
excess spearmint oil supply under the order. Reserve pool oil 
represents the amount of excess oil held by the Committee, on behalf of 
the producers, that is not currently available to the market. The 
Committee's stated intent in the use of marketing order volume control 
regulations for Native spearmint oil is to keep adequate supplies 
available to meet market needs and establish orderly marketing 
conditions. With that in mind, the Committee developed its 
recommendation for the proposed Native spearmint oil salable quantity 
and allotment percentage for the 2014-2015 marketing year based on the 
information discussed above, as well as the data outlined below.
    (A) Estimated carry-in of Native spearmint oil on June 1, 2014--
307,297 pounds. This figure is the difference between the revised 2013-
2014 marketing year total available supply of 1,577,297 pounds and the 
estimated 2013-2014 marketing year trade demand of 1,270,000 pounds.
    (B) Estimated trade demand of Native spearmint oil for the 2014-
2015 marketing year--1,300,000 pounds. This estimate is established by 
the Committee and is based on input from producers at six Native 
spearmint oil production area meetings held in late September and early 
October 2013, as well as estimates provided by handlers and other 
meeting participants at the

[[Page 14444]]

November 6, 2013, meeting. The average estimated trade demand provided 
at the six production area meetings was 1,271,281 pounds, whereas the 
handlers' estimates ranged from 1,290,000 pounds to 1,400,000 pounds, 
and averaged 1,347,500 pounds. The average of Far West Native spearmint 
oil sales over the last five years is 1,190,928 pounds.
    (C) Salable quantity of Native spearmint oil required from the 
2014-2015 marketing year production--992,703 pounds. This figure is the 
difference between the estimated 2014-2015 marketing year trade demand 
(1,300,000 pounds) and the estimated carry-in on June 1, 2014 (307,297 
pounds). This is the minimum amount that the Committee believes would 
be required to meet the anticipated 2014-2015 Native spearmint oil 
trade demand.
    (D) Total estimated allotment base of Native spearmint oil for the 
2014-2015 marketing year--2,371,350 pounds. This figure represents a 
one-percent increase over the revised 2013-2014 total allotment base. 
This figure is generally revised each year on June 1 due to producer 
base being lost due to the bona fide effort production provisions of 
Sec.  985.53(e). The revision is usually minimal.
    (E) Computed Native spearmint oil 2014-2015 marketing year 
allotment percentage--41.9 percent. This percentage is computed by 
dividing the required salable quantity (992,703 pounds) by the total 
estimated allotment base (2,371,350 pounds).
    (F) Recommended Native spearmint oil 2014-2015 marketing year 
allotment percentage--46 percent. This is the Committee's 
recommendation based on the computed allotment percentage (41.9 
percent), the average of the computed allotment percentage figures from 
the six production area meetings (39.9 percent), and input from 
producers and handlers at the November 6, 2013, meeting. The 
recommended 46 percent allotment percentage is also based on the 
Committee's belief that the computed percentage (41.9 percent) may not 
adequately supply the potential 2014-2015 Native spearmint oil market.
    (G) Recommended Native spearmint oil 2014-2015 marketing year 
salable quantity--1,090,821 pounds. This figure is the product of the 
recommended allotment percentage (46 percent) and the total estimated 
allotment base (2,371,350 pounds).
    (H) Estimated available supply of Native spearmint oil for the 
2014-2015 marketing year--1,398,118 pounds. This figure is the sum of 
the 2014-2015 recommended salable quantity (1,090,821 pounds) and the 
estimated carry-in on June 1, 2014 (307,297 pounds).
    The salable quantity is the total quantity of each class of 
spearmint oil that handlers may purchase from, or handle on behalf of, 
producers during a marketing year. Each producer is allotted a share of 
the salable quantity by applying the allotment percentage to the 
producer's allotment base for the applicable class of spearmint oil.
    The Committee's recommended Scotch and Native spearmint oil salable 
quantities and allotment percentages of 1,149,030 pounds and 55 
percent, and 1,090,821 pounds and 46 percent, respectively, are based 
on the goal of establishing and maintaining market stability. The 
Committee anticipates that this goal would be achieved by matching the 
available supply of each class of Spearmint oil to the estimated demand 
of such, thus avoiding extreme fluctuations in inventories and prices.
    The proposed salable quantities are not expected to cause a 
shortage of spearmint oil supplies. Any unanticipated or additional 
market demand for spearmint oil which may develop during the marketing 
year could be satisfied by an intra-seasonal increase in the salable 
quantity. The order contains a provision for intra-seasonal increases 
to allow the Committee the flexibility to respond quickly to changing 
market conditions.
    Under volume regulation, producers who produce more than their 
annual allotments during the 2014-2015 marketing year may transfer such 
excess spearmint oil to producers who have produced less than their 
annual allotment. In addition, up until November 1, 2014, producers may 
place excess spearmint oil production into the reserve pool to be 
released in the future in accordance with market needs.
    This proposed regulation, if adopted, would be similar to 
regulations issued in prior seasons. The average initial allotment 
percentage for the five most recent marketing years for Scotch 
spearmint oil is 41.4 percent, while the average initial allotment 
percentage for the same five-year period for Native spearmint oil is 
50.2 percent. Costs to producers and handlers resulting from this rule 
are expected to be offset by the benefits derived from a stable market 
and improved returns. In conjunction with the issuance of this proposed 
rule, USDA has reviewed the Committee's marketing policy statement for 
the 2014-2015 marketing year. The Committee's marketing policy 
statement, a requirement whenever the Committee recommends volume 
regulation, fully meets the intent of Sec.  985.50 of the order.
    During its discussion of potential 2014-2015 salable quantities and 
allotment percentages, the Committee considered: (1) The estimated 
quantity of salable oil of each class held by producers and handlers; 
(2) the estimated demand for each class of oil; (3) the prospective 
production of each class of oil; (4) the total of allotment bases of 
each class of oil for the current marketing year and the estimated 
total of allotment bases of each class for the ensuing marketing year; 
(5) the quantity of reserve oil, by class, in storage; (6) producer 
prices of oil, including prices for each class of oil; and (7) general 
market conditions for each class of oil, including whether the 
estimated season average price to producers is likely to exceed parity. 
Conformity with USDA's ``Guidelines for Fruit, Vegetable, and Specialty 
Crop Marketing Orders'' has also been reviewed and confirmed.
    The establishment of these salable quantities and allotment 
percentages would allow for anticipated market needs. In determining 
anticipated market needs, the Committee considered historical sales, as 
well as changes and trends in production and demand. This rule also 
provides producers with information on the amount of spearmint oil that 
should be produced for the 2014-2015 season in order to meet 
anticipated market demand.

Initial 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 initial 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 the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are eight spearmint oil handlers subject to regulation under 
the order, and approximately 39 producers of Scotch spearmint oil and 
approximately 91 producers of Native spearmint oil in the regulated 
production area. Small agricultural service firms are defined by the 
Small Business Administration (SBA) as those having annual receipts of 
less than $7,000,000, and small

[[Page 14445]]

agricultural producers are defined as those having annual receipts of 
less than $750,000 (13 CFR 121.201).
    Based on the SBA's definition of small entities, the Committee 
estimates that two of the eight handlers regulated by the order could 
be considered small entities. Most of the handlers are large 
corporations involved in the international trading of essential oils 
and the products of essential oils. In addition, the Committee 
estimates that 22 of the 39 Scotch spearmint oil producers, and 29 of 
the 91 Native spearmint oil producers could be classified as small 
entities under the SBA definition. Thus, a majority of handlers and 
producers of Far West spearmint oil may not be classified as small 
entities.
    The Far West spearmint oil industry is characterized by producers 
whose farming operations generally involve more than one commodity, and 
whose income from farming operations is not exclusively dependent on 
the production of spearmint oil. A typical spearmint oil-producing 
operation has enough acreage for rotation such that the total acreage 
required to produce the crop is about one-third spearmint and two-
thirds rotational crops. Thus, the typical spearmint oil producer has 
to have considerably more acreage than is planted to spearmint during 
any given season. Crop rotation is an essential cultural practice in 
the production of spearmint oil for purposes of weed, insect, and 
disease control. To remain economically viable with the added costs 
associated with spearmint oil production, a majority of spearmint oil-
producing farms fall into the SBA category of large businesses.
    Small spearmint oil producers generally are not as extensively 
diversified as larger ones and as such are more at risk from market 
fluctuations. Such small producers generally need to market their 
entire annual allotment and do not have the luxury of having other 
crops to cushion seasons with poor spearmint oil returns. Conversely, 
large diversified producers have the potential to endure one or more 
seasons of poor spearmint oil markets because income from alternate 
crops could support the operation for a period of time. Being 
reasonably assured of a stable price and market provides small 
producing entities with the ability to maintain proper cash flow and to 
meet annual expenses. Thus, the market and price stability provided by 
the order potentially benefit small producers more than such provisions 
benefit large producers. Even though a majority of handlers and 
producers of spearmint oil may not be classified as small entities, the 
volume control feature of this order has small entity orientation.
    This proposed rule would establish the quantity of spearmint oil 
produced in the Far West, by class, that handlers may purchase from, or 
handle on behalf of, producers during the 2014-2015 marketing year. The 
Committee recommended this rule to help maintain stability in the 
spearmint oil market by matching supply to estimated demand, thereby 
avoiding extreme fluctuations in supplies and prices. Establishing 
quantities that may be purchased or handled during the marketing year 
through volume regulations allows producers to plan their spearmint 
planting and harvesting to meet expected market needs. The provisions 
of Sec. Sec.  985.50, 985.51, and 985.52 of the order authorize this 
rule.
    Instability in the spearmint oil sub-sector of the mint industry is 
much more likely to originate on the supply side than the demand side. 
Fluctuations in yield and acreage planted from season-to-season tend to 
be larger than fluctuations in the amount purchased by handlers. 
Notwithstanding the recent global recession and the overall negative 
impact on demand for consumer goods that utilize spearmint oil, demand 
for spearmint oil tends to change slowly from year to year.
    Demand for spearmint oil at the farm level is derived from retail 
demand for spearmint-flavored products such as chewing gum, toothpaste, 
and mouthwash. The manufacturers of these products are by far the 
largest users of spearmint oil. However, spearmint flavoring is 
generally a very minor component of the products in which it is used, 
so changes in the raw product price have virtually no impact on retail 
prices for those goods.
    Spearmint oil production tends to be cyclical. Years of relatively 
high production, with demand remaining reasonably stable, have led to 
periods in which large producer stocks of unsold spearmint oil have 
depressed producer prices for a number of years. Shortages and high 
prices may follow in subsequent years, as producers respond to price 
signals by cutting back production.
    The significant variability of the spearmint oil market is 
illustrated by the fact that the coefficient of variation (a standard 
measure of variability; ``CV'') of Far West spearmint oil grower prices 
for the period 1980-2012 (when the marketing order was in effect) is 
0.19, compared to 0.34 for the decade prior to the promulgation of the 
order (1970-79) and 0.48 for the prior 20-year period (1960-79). This 
provides an indication of the price stabilizing impact of the marketing 
order.
    Production in the shortest marketing year was about 47 percent of 
the 34-year average (1.92 million pounds from 1980 through 2013) and 
the largest crop was approximately 160 percent of the 34-year average. 
A key consequence is that, in years of oversupply and low prices, the 
season average producer price of spearmint oil is below the average 
cost of production (as measured by the Washington State University 
Cooperative Extension Service).
    The wide fluctuations in supply and prices that result from this 
cycle, which was even more pronounced before the creation of the order, 
can create liquidity problems for some producers. The order was 
designed to reduce the price impacts of the cyclical swings in 
production. However, producers have been less able to weather these 
cycles in recent years because of the increase in production costs. 
While prices have been relatively steady, the cost of production has 
increased to the extent that plans to plant spearmint may be postponed 
or changed indefinitely. Producers are also enticed by the prices of 
alternative crops and their lower cost of production.
    In an effort to stabilize prices, the spearmint oil industry uses 
the volume control mechanisms authorized under the order. This 
authority allows the Committee to recommend a salable quantity and 
allotment percentage for each class of oil for the upcoming marketing 
year. The salable quantity for each class of oil is the total volume of 
oil that producers may sell during the marketing year. The allotment 
percentage for each class of spearmint oil is derived by dividing the 
salable quantity by the total allotment base.
    Each producer is then issued an annual allotment certificate, in 
pounds, for the applicable class of oil, which is calculated by 
multiplying the producer's allotment base by the applicable allotment 
percentage. This is the amount of oil of each applicable class that the 
producer can sell.
    By November 1 of each year, the Committee identifies any oil that 
individual producers have produced above the volume specified on their 
annual allotment certificates. This excess oil is placed in a reserve 
pool administered by the Committee.
    There is a reserve pool for each class of oil that may not be sold 
during the current marketing year unless USDA approves a Committee 
recommendation to increase the salable quantity and allotment 
percentage for a class of oil and make a portion of the pool available. 
However, limited quantities of

[[Page 14446]]

reserve oil are typically sold by one producer to another producer to 
fill deficiencies. A deficiency occurs when on-farm production is less 
than a producer's allotment. In that case, a producer's own reserve oil 
can be sold to fill that deficiency. Excess production (higher than the 
producer's allotment) can be sold to fill other producers' 
deficiencies. All of these provisions need to be exercised prior to 
November 1 of each year.
    In any given year, the total available supply of spearmint oil is 
composed of current production plus carryover stocks from the previous 
crop. The Committee seeks to maintain market stability by balancing 
supply and demand, and to close the marketing year with an appropriate 
level of salable spearmint oil to carry over into the subsequent 
marketing year. If the industry has production in excess of the salable 
quantity, then the reserve pool absorbs the surplus quantity of 
spearmint oil, which goes unsold during that year, unless the oil is 
needed for unanticipated sales.
    Under its provisions, the order may attempt to stabilize prices by 
(1) limiting supply and establishing reserves in high production years, 
thus minimizing the price-depressing effect that excess producer stocks 
have on unsold spearmint oil, and (2) ensuring that stocks are 
available in short supply years when prices would otherwise increase 
dramatically. The reserve pool stocks, which are increased in large 
production years, are drawn down in years where the crop is short.
    An econometric model was used to assess the impact that volume 
control has on the prices producers receive for their commodity. 
Without volume control, spearmint oil markets would likely be over-
supplied. This could result in low producer prices and a large volume 
of oil stored and carried over to the next crop year. The model 
estimates how much lower producer prices would likely be in the absence 
of volume controls.
    The Committee estimated trade demand for the 2014-2015 marketing 
year for both classes of oil at 2,300,000 pounds, and that the expected 
combined salable carry-in will be 307,297 pounds. This results in a 
combined required salable quantity of 1,992,703 pounds. With volume 
control, sales by producers for the 2014-2015 marketing year would be 
limited to 2,239,851 pounds (the recommended salable quantity for both 
classes of spearmint oil).
    The recommended allotment percentages, upon which 2014-2015 
producer allotments are based, are 55 percent for Scotch and 46 percent 
for Native. Without volume controls, producers would not be limited to 
these allotment levels, and could produce and sell additional 
spearmint. The econometric model estimated a decline of about $1.90 in 
the season average producer price per pound (from both classes of 
spearmint oil) resulting from the higher quantities that would be 
produced and marketed without volume control. The surplus situation for 
the spearmint oil market that would exist without volume controls in 
2014-2015 also would likely dampen prospects for improved producer 
prices in future years because of the buildup in stocks.
    The use of volume control allows the industry to fully supply 
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume control is believed to have 
little or no effect on consumer prices of products containing spearmint 
oil and would not result in fewer retail sales of such products.
    The Committee discussed alternatives to the recommendations 
contained in this rule for both classes of spearmint oil. The Committee 
discussed and rejected the idea of recommending that there not be any 
volume regulation for both classes of spearmint oil because of the 
severe price-depressing effects that would occur without volume 
control.
    After computing the initial 47.9 percent Scotch spearmint oil 
allotment percentage, the Committee considered various alternative 
levels of volume control for Scotch spearmint oil. Even with the 
moderately optimistic marketing conditions, there was consensus from 
the Committee that the Scotch spearmint oil allotment percentage for 
2014-2015 should be less than the percentage established for the 2013-
2014 marketing year (65 percent). After considerable discussion, the 
eight-member committee unanimously determined that 1,149,030 pounds and 
55 percent would be the most effective Scotch spearmint oil salable 
quantity and allotment percentage, respectively, for the 2014-2015 
marketing year.
    The Committee was also able to reach a consensus regarding the 
level of volume control for Native spearmint oil. After first 
determining the computed allotment percentage at 41.9 percent, the 
Committee unanimously recommended 1,090,821 pounds and 46 percent for 
the effective Native spearmint oil salable quantity and allotment 
percentage, respectively, for the 2014-2015 marketing year.
    As noted earlier, the Committee's recommendation to establish 
salable quantities and allotment percentages for both classes of 
spearmint oil was made after careful consideration of all available 
information including: (1) The estimated quantity of salable oil of 
each class held by producers and handlers; (2) the estimated demand for 
each class of oil; (3) the prospective production of each class of oil; 
(4) the total of allotment bases of each class of oil for the current 
marketing year and the estimated total of allotment bases of each class 
for the ensuing marketing year; (5) the quantity of reserve oil, by 
class, in storage; (6) producer prices of oil, including prices for 
each class of oil; and (7) general market conditions for each class of 
oil, including whether the estimated season average price to producers 
is likely to exceed parity. Based on its review, the Committee believes 
that the salable quantity and allotment percentage levels recommended 
would achieve the objectives sought.
    Without any regulations in effect, the Committee believes the 
industry would return to the pronounced cyclical price patterns that 
occurred prior to the order, and that prices in 2014-2015 could decline 
substantially below current levels.
    According to the Committee, the recommended salable quantities and 
allotment percentages are expected to facilitate the goal of 
establishing orderly marketing conditions for Far West spearmint oil.
    As previously stated, annual salable quantities and allotment 
percentages have been issued for both classes of spearmint oil since 
the order's inception.
    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 the Office of Management and Budget (OMB) and 
assigned OMB No. 0581-0178, Vegetable and Specialty 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 proposed rule would establish the salable quantities and 
allotment percentages for Class 1 (Scotch) spearmint oil and Class 3 
(Native) spearmint oil produced in the Far West during the 2014-2015 
marketing year. Accordingly, this action would not impose any 
additional reporting or recordkeeping requirements on either small or 
large spearmint oil producers or handlers. As with all Federal 
marketing order programs, reports and forms are periodically reviewed 
to reduce information requirements and

[[Page 14447]]

duplication by industry and public sector agencies.
    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.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this proposed rule.
    The Committee's meeting was widely publicized throughout the 
spearmint oil industry and all interested persons were invited to 
attend the meeting and participate in Committee deliberations on all 
issues. Like all Committee meetings, the November 6, 2013, meeting was 
a public meeting and all entities, both large and small, were able to 
express views on this issue. Finally, interested persons are invited to 
submit comments on this proposed rule, including the regulatory and 
informational impacts of this action on small businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions 
about the compliance guide should be sent to Jeffrey Smutny at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    A 15-day comment period is provided to allow interested persons to 
respond to this proposed rule. Fifteen days is deemed appropriate 
because: (1) The 2014-2015 fiscal period begins on June 1, 2014, and a 
final determination on the salable quantities and allotment percentages 
should be made prior to handlers purchasing from, or handling on behalf 
of, producers any oil for the ensuing marketing year; and (2) handlers 
are aware of this action, which was recommended by the Committee at a 
public meeting and is similar to other salable quantities and allotment 
percentages issued in past years.

List of Subjects in 7 CFR Part 985

    Marketing agreements, Oils and fats, Reporting and recordkeeping 
requirements, Spearmint oil.

    For the reasons set forth in the preamble, 7 CFR Part 985 is 
proposed to be amended as follows:

PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL 
PRODUCED IN THE FAR WEST

0
1. The authority citation for 7 CFR Part 985 continues to read as 
follows:

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

0
2. Section 985.233 is added to read as follows:

    Note:  This section will not appear in the Code of Federal 
Regulations.

Sec.  985.233  Salable quantities and allotment percentages--2014-2015 
marketing year.

    The salable quantity and allotment percentage for each class of 
spearmint oil during the marketing year beginning on June 1, 2014, 
shall be as follows:
    (a) Class 1 (Scotch) oil--a salable quantity of 1,149,030 pounds 
and an allotment percentage of 55 percent.
    (b) Class 3 (Native) oil--a salable quantity of 1,090,821 pounds 
and an allotment percentage of 46 percent.

    Dated: March 5, 2014.
Rex A. Barnes,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2014-05587 Filed 3-13-14; 8:45 am]
BILLING CODE 3410-02-P
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