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[Federal Register Volume 63, Number 142 (Friday, July 24, 1998)]
[Rules and Regulations]
[Pages 39699-39702]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-19874]

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[FV98-989-2 IFR]

Raisins Produced From Grapes Grown In California; Increase in 
Desirable Carryout Used to Compute Trade Demand

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule increases the desirable carryout used to compute the 
yearly trade demand for raisins covered under the Federal marketing 
order for California raisins. The order regulates the handling of 
raisins produced from grapes grown in California and is administered 
locally by the Raisin Administrative Committee (Committee). Trade 
demand is computed based on a formula specified in the order, and is 
used to determine volume regulation percentages for each crop year, if 
necessary. Desirable carryout, one factor in this formula, is the 
amount of tonnage from the prior crop year needed during the first part 
of the next crop year to meet market needs, before new crop raisins are 
available for shipment. This rule increases the desirable carryout from 
2 to 2\1/2\ months of prior year's shipments. This increase allows for 
a higher free tonnage percentage which makes more raisins available to 
handlers for immediate use early in the season.

DATES: Effective August 1, 1998. Comments must be received by August 3, 
1998.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to the Docket Clerk, Fruit 
and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456, 
Washington, DC 20090-6456; Fax: (202) 205-6632. All comments should 
reference the docket number and the date and page number of this issue 
of the Federal Register and will be made available for public 
inspection in the Office of the Docket Clerk during regular business 
hours.

FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Marketing 
Specialist, California Marketing Field Office, Fruit and Vegetable 
Programs, AMS, USDA, 2202 Monterey Street, suite 102B, Fresno, 
California 93721; telephone: (209) 487-5901, Fax: (209) 487-5906; or 
George Kelhart, Technical Advisor, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 
96456, Washington, DC 20090-6456; telephone: (202) 720-2491, or Fax: 
(202) 205-6632. Small businesses may request information on compliance 
with this regulation by contacting Jay Guerber, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, P.O. 
Box 96456, room 2525-S, Washington, DC 20090-6456; telephone (202) 720-
2491; Fax: (202) 205-6632.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 989 (7 CFR part 989), both as amended, 
regulating the handling of raisins produced from grapes grown in 
California, hereinafter referred to as the ``order.'' The order is 
effective under the Agricultural Marketing Agreement Act of 1937, as

[[Page 39700]]

amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.''
    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This rule will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary a 
petition stating that the order, any provision of the order, or any 
obligation imposed in connection with the order is not in accordance 
with law and request a modification of the order or to be exempted 
therefrom. A handler is afforded the opportunity for a hearing on the 
petition. After the hearing, the Secretary would rule on the petition. 
The Act provides that the district court of the United States in any 
district in which the handler is an inhabitant, or has his or her 
principal place of business, has jurisdiction in equity to review the 
Secretary'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 rule increases the desirable carryout used to compute the 
yearly trade demand for raisins regulated under the order. Trade demand 
is computed based on a formula specified in the order, and is used to 
determine volume regulation percentages for each crop year, if 
necessary. This rule increases the desirable carryout, one factor in 
this formula, from 2 to 2\1/2\ months of prior year's shipments. This 
increase allows for a higher free tonnage percentage which makes more 
raisins available to handlers for immediate use early in the season. 
This rule was unanimously recommended by the Committee at a meeting on 
June 11, 1998.
    The order provides authority for volume regulation designed to 
promote orderly marketing conditions, stabilize prices and supplies, 
and improve producer returns. When volume regulation is in effect, a 
certain percentage of the California raisin crop may be sold by 
handlers to any market (free tonnage) while the remaining percentage 
must be held by handlers in a reserve pool (or reserve) for the account 
of the Committee. Reserve raisins are disposed of through certain 
programs authorized under the order. For instance, reserve raisins may 
be sold by the Committee to handlers for free use or to replace part of 
the free tonnage raisins they exported; used in diversion programs; 
carried over as a hedge against a short crop the following year; or 
disposed of in other outlets not competitive with those for free 
tonnage raisins, such as government purchase, distilleries, or animal 
feed. Net proceeds from sales of reserve raisins are distributed to the 
reserve pool's equity holders, primarily producers.
    Section 989.54 of the order prescribes procedures to be followed in 
establishing volume regulation and includes methodology used to 
calculate percentages. Trade demand is based on a computed formula 
specified in this section, and is used to determine volume regulation 
percentages. Trade demand is equal to 90 percent of the prior year's 
shipments, adjusted by the carryin and desirable carryout inventories.
    At one time, Sec. 989.54(a) also specified actual tonnages for 
desirable carryout for each varietal type regulated. However, in 1989, 
these tonnages were suspended from the order, and flexibility was added 
so that the Committee could adopt a formula for desirable carryout in 
the order's rules and regulations. The formula has allowed the 
Committee to periodically adjust the desirable carryout to better 
reflect changes in each season's marketing conditions.
    The formula for desirable carryout has been specified since 1989 in 
Sec. 989.154. Initially, the formula was established so that desirable 
carryout was based on shipments for the first 3 months of the prior 
crop year--August, September, and October (the crop year runs from 
August 1 through July 31). This amount was gradually reduced to 2\1/2\ 
months in 1991-92, 2\1/4\ months in 1995-96, and to its current level 
of 2 months in 1996-97. The Committee reduced the desirable carryout 
because it believed that an excessive supply of raisins was available 
early in a new crop year creating unstable market conditions.
    At its June 11, 1998, meeting, the Committee evaluated the 2-month 
desirable carryout level and recommended adjusting the formula back up 
to 2\1/2\ months of prior year's shipments (August, September, and one-
half of October). In its deliberations, the Committee considered the 
impact of the reduction in desirable carryout over the past few years 
along with a change to one of its export programs operated under the 
order. Prior to 1995, the Committee administered an industry export 
program whereby handlers who exported California raisins could 
purchase, at a reduced rate, reserve raisins for free use. This 
effectively blended down the cost of the raisins which were exported, 
allowing handlers to be price competitive in export markets (prices in 
export markets are generally lower than the domestic market). One 
problem that the industry found with this ``raisin-back'' program was 
that the reserve raisins which handlers received went back into free 
tonnage outlets creating an excessive supply of raisins. To correct 
this problem, the industry gradually switched to a program which 
offered cash, rather than reserve raisins, to exporting handlers. The 
desirable carryout was reduced down to 2 months to help decrease the 
supply of raisins available early in a season and, thus, stabilize 
market conditions.
    The Committee now believes that not enough raisins are being made 
available for growth. Increasing the desirable carryout allows for a 
higher trade demand figure and, thus, a higher free tonnage percentage 
which makes more raisins available to handlers for immediate use early 
in the season. A higher free tonnage percentage may also improve early 
season returns to producers (producers are paid an established field 
price for their free tonnage).
    At the meeting, the Committee also compared the average desirable 
carryout for the past 7 years with the average, actual tonnage that all 
handlers have in inventory at the end a crop year. Desirable carryout 
has averaged 66,033 tons at 2\1/2\ months, 63,424 tons at 2\1/4\ 
months, and 63,364 tons at 2 months. For the past 7 years, an average 
of 101,459 tons has been held in inventory by all handlers at the end 
of a crop year. Increasing the desirable carryout to 2\1/2\ months 
would allow this factor to move towards what handlers are actually 
holding in inventory at the end of a crop year.
    Much of the discussion at the Committee's meeting concerned the 
desirable carryout of Natural (sun-dried) Seedless raisins (Naturals). 
Naturals are the major commercial varietal type of raisin produced in 
California. Volume regulation has been implemented for Naturals for the 
past several seasons. However, the Committee also believes that the 
increase in desirable carryout to 2\1/2\ months should apply to the 
other varietal types of raisins covered under the order.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities.

[[Page 39701]]

Accordingly, AMS has prepared this initial regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 20 handlers of California raisins who are 
subject to regulation under the order and approximately 4,500 raisin 
producers in the regulated area. Small agricultural service firms have 
been defined by the Small Business Administration (13 CFR 121.601) as 
those having annual receipts of less than $5,000,000, and small 
agricultural producers are defined as those having annual receipts of 
less than $500,000. No more than 7 handlers, and a majority of 
producers, of California raisins may be classified as small entities. 
Thirteen of the 20 handlers subject to regulation have annual sales 
estimated to be at least $5,000,000, and the remaining 7 handlers have 
sales less than $5,000,000, excluding receipts from any other sources.
    This rule increases the desirable carryout used to compute the 
yearly trade demand for raisins regulated under the order. Trade demand 
is computed based on a formula specified under Sec. 989.54(a) of the 
order, and is used to determine volume regulation percentages for each 
crop year, if necessary. Desirable carryout, one factor in this 
formula, is the amount of tonnage from the prior crop year needed 
during the first part of the succeeding crop year to meet market needs, 
before new crop raisins are available for shipment. This rule increases 
the desirable carryout specified in Sec. 989.154 from 2 to 2\1/2\ 
months of prior year's shipments.
    The 2\1/2\ month desirable carryout level applies uniformly to all 
handlers in the industry, whether small or large, and there are no 
known additional costs incurred by small handlers. As previously 
mentioned, increasing the desirable carryout increases trade demand and 
the free tonnage percentage which makes more raisins available to 
handlers early in the season. A higher free tonnage percentage may also 
improve early season returns to producers (producers are paid an 
established field price for their free tonnage).
    The Committee considered a number of alternatives to the one-half 
month increase in the desirable carryout level. The Committee has an 
appointed subcommittee which periodically holds public meetings to 
discuss changes to the order and other issues. The subcommittee met on 
April 21 and June 9, 1998, and discussed desirable carryout. The 
subcommittee considered establishing a set tonnage for desirable 
carryout (i.e., 75,000 tons for Naturals). However, this alternative 
would not allow the desirable carryout to fluctuate with changing 
market conditions from year to year. The subcommittee considered 
lowering the desirable carryout for Naturals by 15,000 tons to tighten 
the supply of raisins early in the season even more. However, the 
majority of subcommittee members believed that the early season supply 
of raisins needed to be increased rather than decreased.
    Another alternative raised at the Committee meeting was to make 
more raisins available to handlers at the end of a crop year through 
the industry's ``10 plus 10'' offers. The ``10 plus 10'' offers are two 
offers of reserve pool raisins which are made available to handlers 
during each season. Handlers may sell their ``10 plus 10'' raisins as 
free tonnage to any market. For each such offer, a quantity of reserve 
raisins equal to 10 percent of the prior year's shipments is made 
available for free use. The Committee considered offering for sale to 
handlers as free use an additional quantity of reserve raisins equal to 
5 percent of the prior year's shipments. Such an additional offer could 
generate revenue that could be used to sustain the Committee's ``cash-
back'' export program. As previously explained, under this program, 
handlers who export raisins to certain markets may receive cash from 
the reserve pool. This effectively blends down the cost of the raisins 
which were exported, allowing handlers to be price competitive in 
export markets (prices in export markets are generally lower than the 
domestic market). However, there is currently no provision in the order 
for this additional 5 percent offer.
    Another alternative that was raised at the Committee's meeting was 
to include a policy statement concerning reserve pool equity along with 
the recommendation to increase the desirable carryout. Some industry 
members are concerned that increasing desirable carryout, thereby 
increasing the free tonnage percentage, may reduce handler purchases of 
``10 plus 10'' raisins and, thus, impact pool revenue. As previously 
mentioned, net proceeds from sales of reserve raisins are distributed 
to reserve pool equity holders, primarily small producers. After much 
discussion, the majority of Committee members agreed that reserve pool 
equity was a separate issue from desirable carryout and would be 
addressed by the Committee's Audit Subcommittee.
    This rule will not impose any additional reporting or recordkeeping 
requirements on either small or large raisin 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. Finally, the Department has not identified 
any relevant Federal rules that duplicate, overlap or conflict with 
this rule.
    In addition, the Committee's subcommittee meetings on April 21 and 
June 9, 1998, and the Committee meeting on June 11, 1998, where this 
action was deliberated were public meetings widely publicized 
throughout the raisin industry. All interested persons were invited to 
attend the meetings and participate in the industry's deliberations. 
Finally, all interested persons are invited to submit information on 
the regulatory and informational impacts of this action on small 
businesses.
    After consideration of all relevant material presented, including 
the Committee's recommendation, and other information, it is found that 
this interim final rule, as hereinafter set forth, will tend to 
effectuate the declared policy of the Act.
    This rule invites comments on increasing the desirable carryout 
level currently specified under the California raisin order. A 10-day 
comment period is deemed appropriate because the order provides that 
the Committee meet to compute and announce the trade demand for any 
varietal type for which volume regulation may be recommended for the 
1998-99 crop year on or before August 15, and desirable carryout is a 
necessary factor in that calculation. Any comments received will be 
considered prior to finalization of this rule.
    Pursuant to 5 U.S.C. 553, it is also found and determined upon good 
cause that it is impracticable, unnecessary, and contrary to the public 
interest to give preliminary notice prior to putting this rule into 
effect and that good cause exists for not postponing the effective date 
of this rule until 30 days after publication in the Federal Register 
because: (1) The 1998-99 crop year begins on August 1, 1998, and this 
rule should be effective promptly because the order provides that the 
Committee meet on or before August 15 to compute and announce the trade 
demand, and

[[Page 39702]]

the desirable carryout level is a necessary item in that calculation; 
(2) this action is a relaxation in that increasing the desirable 
carryout increases the trade demand and free tonnage percentage making 
more raisins available to handlers for immediate use early in the 
season; (3) producers and handlers are aware of this action which was 
unanimously recommended by the Committee at a public meeting; and (4) 
this rule provides a 10-day comment period and any comments received 
will be considered prior to finalization of this rule.

List of Subjects in 7 CFR Part 989

    Grapes, Marketing agreements, Raisins, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 989 is 
amended as follows:

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

    1. The authority citation for 7 CFR part 989 continues to read as 
follows:

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

    2. Section 989.154 is revised to read as follows:

Sec. 989.154  Desirable carryout levels.

    The desirable carryout levels to be used in computing and 
announcing a crop year's marketing policy shall be equal to the total 
shipments of free tonnage of the prior crop year during August, 
September, and one-half of October, for each varietal type, converted 
to a natural condition basis: Provided, That should the prior year's 
shipments be limited because of crop conditions, the Committee may 
select the total shipments during the months of August, September, and 
one-half of October during one of the three crop years preceding the 
prior crop year.

    Dated: July 21, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-19874 Filed 7-22-98; 10:03 am]
BILLING CODE 3410-02-P
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