[Federal Register Volume 74, Number 9 (Wednesday, January 14, 2009)]
[Proposed Rules]
[Pages 1971-1976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-604]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket Nos. AMS-FV-08-0104; FV09-985-1 PR]


Marketing Order Regulating the Handling of Spearmint Oil Produced 
in the Far West; Salable Quantities and Allotment Percentages for the 
2009-2010 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule would establish the quantity of spearmint oil 
produced in the Far West, by class that handlers may purchase from, or 
handle for, producers during the 2009-2010 marketing year, which begins 
on June 1, 2009. This rule invites comments on the establishment of 
salable quantities and allotment percentages for Class 1 (Scotch) 
spearmint oil of 842,171 pounds and 42 percent, respectively, and for 
Class 3 (Native) spearmint oil of 1,196,109 pounds and 53 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 
limitations for the purpose of avoiding extreme fluctuations in 
supplies and prices to help maintain stability in the spearmint oil 
market.

DATES: Comments must be received by March 16, 2009.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
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 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, or can be viewed at: http://www.regulations.gov. All comments submitted in response to this rule 
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: Susan M. Coleman, Marketing Specialist 
or Gary D. Olson, Regional Manager, Northwest Marketing Field Office, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA; Telephone: (503) 326-2724; Fax: (503) 326-7440; or E-mail: 
<a href="/cdn-cgi/l/email-protection#500325357e133f3c353d313e10252334317e373f26"><span class="__cf_email__" data-cfemail="d380a6b6fd90bcbfb6beb2bd93a6a0b7b2fdb4bca5">[email protected]</span></a> or <a href="/cdn-cgi/l/email-protection#f8bf998a81bcd6b7948b9796b88d8b9c99d69f978e"><span class="__cf_email__" data-cfemail="1c5b7d6e65583253706f73725c696f787d327b736a">[email protected]</span></a>.
    Small businesses may request information on complying with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue, SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 
720-2491, Fax: (202) 720-8938, or E-mail: <a href="/cdn-cgi/l/email-protection#69230810472e1c0c1b0b0c1b291c1a0d08470e061f"><span class="__cf_email__" data-cfemail="044e657d2a4371617666617644717760652a636b72">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This rule 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.'' This 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 Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. Under the marketing 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 may be purchased from or handled for producers by handlers 
during the 2009-2010 marketing year, which begins on June 1, 2009. 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 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

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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.
    Pursuant to authority in Sec. Sec.  985.50, 985.51, and 985.52 of 
the order, the full eight-member Committee met on October 15, 2008, and 
recommended salable quantities and allotment percentages for both 
classes of oil for the 2009-2010 marketing year. The Committee in a 
vote with six members in favor and two members opposed, recommended the 
establishment of a salable quantity and allotment percentage for Scotch 
spearmint oil of 842,171 pounds and 42 percent, respectively. For 
Native spearmint oil, the Committee unanimously recommended the 
establishment of a salable quantity and allotment percentage of 
1,196,109 pounds and 53 percent, respectively.
    This rule would limit the amount of spearmint oil that handlers may 
purchase from, or handle for, producers during the 2009-2010 marketing 
year, which begins on June 1, 2009. Salable quantities and allotment 
percentages have been placed into effect each season since the order's 
inception in 1980.
    The U.S. production of Scotch spearmint oil is concentrated in the 
Far West, which includes Washington, Idaho, and Oregon and a portion of 
Nevada and Utah. Scotch spearmint oil is also produced in the Midwest 
states of Indiana, Michigan, and Wisconsin, as well as in the States of 
Montana, South Dakota, North Dakota, and Minnesota. However, production 
in the Midwest states has gone from 200,000 pounds in 2003, down to an 
estimated 25,000 pounds in 2008. This has increased the percentage of 
annual U.S. sales of Scotch spearmint oil in the production area 
covered by the marketing order to approximately 85 percent.
    When the order became effective in 1980, the Far West had 72 
percent of the world's sales of Scotch spearmint oil. While the Far 
West is still the leading producer of Scotch spearmint oil, its share 
of world sales is now estimated to be about 45 percent. This loss in 
world sales for the Far West region is directly attributed to the 
increase in global production. Other factors that have played a 
significant role include the overall quality of the imported oil and 
technological advances that allow for more blending of lower quality 
oils. Such factors have provided the Committee with challenges in 
accurately predicting trade demand for Scotch oil. This, in turn, has 
made it difficult to balance available supplies with demand and to 
achieve the Committee's overall goal of stabilizing producer and market 
prices.
    The marketing order has continued to contribute to price and 
general market stabilization for Far West producers. The Committee, as 
well as spearmint oil producers and handlers attending the October 15, 
2008, meeting, indicated that the 2008-2009 producer price for Scotch 
oil ranges from a low of $12.00 per pound to a high of $14.00 per 
pound. Although there is currently some forward contracting being done 
within this same price range, producers are generally wary of locking 
in a price because of the significant increases in their cost of 
production. The $12.00 to $14.00 producer price is generally less than 
the cost of production for most producers as indicated in a study from 
the Washington State University Cooperative Extension Service (WSU). In 
2001, this study estimated production costs to be between $13.50 and 
$15.00 per pound. However, recent cost comparisons by the Committee 
indicate that the major costs of nitrogen, phosphate, sulfur, potash, 
herbicide, fuel, and rootstock have increased almost 120% since 2001.
    Low producer returns have contributed to an overall reduction in 
acreage planted to Scotch spearmint in recent years. When the order 
became effective in 1980, the Far West region had 9,702 acres of Scotch 
spearmint. The Committee estimates that 2008-2009 Scotch spearmint 
acreage is about 7,435 acres. Based on this amount, the Committee 
estimates that Scotch spearmint oil production for the 2008-2009 
marketing season will be about 841,427 pounds.
    The Committee recommended the 2009-2010 Scotch spearmint oil 
salable quantity of 842,171 pounds and allotment percentage of 42 
percent utilizing sales estimates for 2009-2010 Scotch spearmint oil as 
provided by several of the industry's handlers, as well as historical 
and current Scotch spearmint oil sales levels. The Committee is 
estimating that about 850,000 pounds of Scotch spearmint oil, on 
average, may be sold during the 2009-2010 marketing year. When 
considered in conjunction with the estimated carry-in of 124,735 pounds 
of oil on June 1, 2009, the recommended salable quantity of 842,171 
pounds results in a total available supply of Scotch spearmint oil next 
year of about 966,906 pounds.
    The recommendation for the 2009-2010 Scotch spearmint oil volume 
regulation is consistent with the Committee's stated intent of keeping 
adequate supplies available at all times, while attempting to stabilize 
prices at a level adequate to sustain the producers. Furthermore, the 
recommendation takes into consideration the industry's desire to 
compete with less expensive oil produced outside the regulated area.
    Native spearmint oil producers are facing market conditions similar 
to those affecting the Scotch spearmint oil market. Over 90 percent of 
the U.S. production of Native spearmint is produced within the Far West 
production area. Very little pure Native spearmint oil is produced 
outside of the United States.
    The supply and demand characteristics of the current Native 
spearmint oil market, combined with the stabilizing impact of the 
marketing order, have kept the price relatively steady. The Committee, 
as well as spearmint oil producers and handlers attending the October 
15, 2008, meeting, estimate that the 2008-2009 Native oil producer 
price ranges between $11.50 per pound and $13.00 per pound. As with 
Scotch oil, there is some forward contracting of Native spearmint oil 
within this price range. The Committee is hopeful that this price range 
will be sufficient to stimulate additional increases in acreage in 
2009, although the magnitude of the increases will likely be tempered 
by substantial increases in production costs and the availability of 
attractively priced alternative crops. The WSU study referenced earlier 
indicates that the cost of producing Native spearmint oil has ranged 
from $10.26 to $10.92 per pound. However, as stated earlier, this study 
was completed in 2001 and recent cost comparisons by the Committee 
indicate that the major costs of nitrogen, phosphate, sulfur, potash, 
herbicide, fuel, and rootstock have increased almost 120% since 2001.
    As with Scotch, however, the relatively low level of producer 
returns has also caused an overall reduction in Native spearmint 
acreage. When the order became effective in 1980, the Far West region 
had 12,153 acres of Native spearmint. The Committee estimates that 
about 8,513 acres of Native spearmint were planted for the 2008-2009 
season. Based on the reduced Native spearmint acreage, the Committee 
estimates that production for the 2008-2009 marketing season will be 
about 1,203,754 pounds.
    The Committee's recommendation for the 2009-2010 Native spearmint 
oil salable quantity of 1,196,109 pounds and allotment percentage of 53 
percent utilized sales estimates provided by several of the industry's 
handlers, as well as historical and current Native

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spearmint oil sales levels. The Committee is estimating that about 
1,250,000 pounds of Native spearmint oil may be sold during the 2009-
2010 marketing year (trade demand). When considered in conjunction with 
the estimated carry-in of 51,363 pounds of oil on June 1, 2009, the 
recommended salable quantity of 1,196,109 pounds results in a total 
2009-2010 available supply of Native spearmint oil of about 1,247,472 
pounds.
    The Committee's method of calculating the Native spearmint oil 
salable quantity and allotment percentage continues to primarily 
utilize information on price and available supply as they are affected 
by the estimated trade demand. The Committee's stated intent is to make 
adequate supplies available to meet market needs and improve producer 
prices.
    The Committee believes that the order has contributed extensively 
to the stabilization of producer prices, which prior to 1980 
experienced wide fluctuations from year to year. According to the 
National Agricultural Statistics Service, for example, the average 
price paid for both classes of spearmint oil ranged from $4.00 per 
pound to $11.10 per pound during the period between 1968 and 1980. 
Prices since the order's inception, the period from 1980 to 2007, have 
generally stabilized at an average price of $12.69 per pound for Scotch 
spearmint oil and $9.97 per pound for Native spearmint oil.
    The Committee based its recommendation for the proposed salable 
quantity and allotment percentage for each class of spearmint oil for 
the 2009-2010 marketing year on the information discussed above, as 
well as the data outlined below.

(1) Class 1 (Scotch) Spearmint Oil

    (A) Estimated carry-in on June 1, 2009--124,735 pounds. This figure 
is the difference between the revised 2008-2009 marketing year total 
available supply of 974,735 pounds and the estimated 2008-2009 
marketing year trade demand of 850,000 pounds.
    (B) Estimated trade demand for the 2009-2010 marketing year--
850,000 pounds. This figure is based on input from producers at six 
Scotch spearmint oil production area meetings held in late September 
and early October 2008, as well as estimates provided by handlers and 
other meeting participants at the October 15, 2008, meeting. The 
average estimated trade demand provided at the six production area 
meetings is 852,447 pounds, whereas the estimated handler trade demand 
ranged from 800,000 to 1,000,000 pounds. The average of sales over the 
last three years is 831,342 pounds.
    (C) Salable quantity required in the 2009-2010 marketing year 
production--725,265 pounds. This figure is the difference between the 
estimated 2009-2010 marketing year trade demand (850,000 pounds) and 
the estimated carry-in on June 1, 2009 (124,735 pounds).
    (D) Total estimated allotment base for the 2009-2010 marketing 
year--2,005,168 pounds. This figure represents a one percent increase 
over the revised 2008-2009 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 allotment percentage--36.2 percent. This percentage is 
computed by dividing the required salable quantity by the total 
estimated allotment base.
    (F) Recommended allotment percentage--42 percent. This 
recommendation is based on the Committee's determination that the 
computed 36.2 percent would not adequately supply the potential 2009-
2010 market.
    (G) The Committee's recommended salable quantity--842,171 pounds. 
This figure is the product of the recommended allotment percentage and 
the total estimated allotment base.
    (H) Estimated available supply for the 2009-2010 marketing year--
966,906 pounds. This figure is the sum of the 2009-2010 recommended 
salable quantity (842,171 pounds) and the estimated carry-in on June 1, 
2009 (124,735 pounds).

(2) Class 3 (Native) Spearmint Oil

    (A) Estimated carry-in on June 1, 2009--51,363 pounds. This figure 
is the difference between the revised 2008-2009 marketing year total 
available supply of 1,301,363 pounds and the estimated 2008-2009 
marketing year trade demand of 1,250,000 pounds.
    (B) Estimated trade demand for the 2009-2010 marketing year--
1,250,000 pounds. This figure is based on input from producers at the 
six Native spearmint oil production area meetings held in late 
September and early October 2008, as well as estimates provided by 
handlers and other meeting participants at the October 15, 2008 
meeting. The average estimated trade demand provided at the six 
production area meetings was 1,237,945 pounds, whereas the handler 
estimate ranged from 1,250,000 pounds to 1,300,000 pounds.
    (C) Salable quantity required from the 2009-2010 marketing year 
production--1,198,637 pounds. This figure is the difference between the 
estimated 2009-2010 marketing year trade demand (1,250,000 pounds) and 
the estimated carry-in on June 1, 2009 (51,363 pounds).
    (D) Total estimated allotment base for the 2009-2010 marketing 
year--2,256,810 pounds. This figure represents a one percent increase 
over the revised 2008-2009 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 allotment percentage--53.1 percent. This percentage is 
computed by dividing the required salable quantity (1,198,637) by the 
total estimated allotment base (2,256,810).
    (F) Recommended allotment percentage--53 percent. This is the 
Committee's recommendation based on the computed allotment percentage 
(53.1 percent), the average of the computed allotment percentage 
figures from the six production area meetings (52.5 percent), and input 
from producers and handlers at the October 15, 2008, meeting.
    (G) The Committee's recommended salable quantity--1,196,109 pounds. 
This figure is the product of the recommended allotment percentage (53 
percent) and the total estimated allotment base (2,256,810).
    (H) Estimated available supply for the 2009-2010 marketing year--
1,247,474 pounds. This figure is the sum of the 2009-2010 recommended 
salable quantity (1,196,109 pounds) and the estimated carry-in on June 
1, 2009 (51,363 pounds).
    The salable quantity is the total quantity of each class of 
spearmint oil, which 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 842,171 pounds and 42 percent, 
and 1,196,109 pounds and 53 percent, respectively, are based on the 
Committee's goal of maintaining market stability by avoiding extreme 
fluctuations in supplies and prices, and the anticipated supply and 
trade demand during the 2009-2010

[[Page 1974]]

marketing year. 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, can be satisfied by an increase in the salable 
quantities. Both Scotch and Native spearmint oil producers who produce 
more than their annual allotments during the 2009-2010 marketing year 
may transfer such excess spearmint oil to a producer with spearmint oil 
production less than their annual allotment or put it into the reserve 
pool until November 1, 2009.
    This proposed regulation, if adopted, would be similar to 
regulations issued in prior seasons. 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 2009-2010 marketing year. The 
Committee's marketing policy statement, a requirement whenever the 
Committee recommends volume regulations, fully meets the intent of 
Sec.  985.50 of the order. During its discussion of potential 2009-2010 
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 the 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, consideration by the Committee was given to 
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 2009-2010 
season in order to meet anticipated market demand.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this rule 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 
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 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 55 producers of Scotch spearmint oil and 
approximately 94 producers of Native spearmint oil in the regulated 
production area. Small agricultural service firms are defined by the 
Small Business Administration (SBA) (13 CFR 121.201) as those having 
annual receipts of less than $7,000,000, and small agricultural 
producers are defined as those having annual receipts of less than 
$750,000.
    Based on the SBA's definition of small entities, the Committee 
estimates that 2 of the 8 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 
18 of the 55 Scotch spearmint oil producers and 24 of the 94 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 weed, insect, and disease control. 
To remain economically viable with the added costs associated with 
spearmint oil production, most 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 the small producer 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 for, producers during the 2009-2010 marketing year. The 
Committee recommended this rule to help maintain stability in the 
spearmint oil market by avoiding extreme fluctuations in supplies and 
prices. Establishing quantities to 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 buyers. Demand 
for spearmint oil tends to be relatively stable from year-to-year. The 
demand for spearmint oil is expected to grow slowly for the foreseeable 
future because the demand for consumer products that use spearmint oil 
will likely expand slowly, in line with population growth.
    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

[[Page 1975]]

products are by far the largest users of mint 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 no impact on 
retail prices for those goods.
    Spearmint oil production tends to be cyclical. Years of large 
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 is illustrated by the fact that the 
coefficient of variation (a standard measure of variability; ``CV'') of 
Far West spearmint oil production from 1980 through 2007 was about 
0.23. The CV for spearmint oil grower prices was about 0.14, well below 
the CV for production. This provides an indication of the price 
stabilizing impact of the marketing order.
    Production in the shortest marketing year was about 50 percent of 
the 28-year average (1.85 million pounds from 1980 through 2007) and 
the largest crop was approximately 166 percent of the 28-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 
marketing order, can create liquidity problems for some producers. The 
marketing 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 dramatically increased which has caused a hesitation by 
producers to plant. 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 for the 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 make a portion of the pool available. However, 
limited quantities of reserve oil are typically sold 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 this needs to take place by November 1.
    In any given year, the total available supply of spearmint oil is 
composed of current production plus carry-over 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 carryout. 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 grown in large production years 
are drawn down in short crop years.
    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, resulting 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 the trade demand for the 2009-2010 
marketing year for both classes of oil at 2,100,000 pounds, and that 
the expected combined carry-in will be 176,098 pounds. This results in 
a combined required salable quantity of 1,923,902 pounds. Therefore, 
with volume control, sales by producers for the 2009-2010 marketing 
year would be limited to 2,038,280 pounds (the recommended salable 
quantity for both classes of spearmint oil).
    The recommended salable percentages, upon which 2009-2010 producer 
allotments are based, are 42 percent for Scotch and 53 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 $1.40 decline 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 2009-
2010 also would likely dampen prospects for improved producer prices in 
future years because of the buildup in stocks.
    The use of volume controls allows the industry to fully supply 
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume controls is believed to have 
little or no effect on consumer prices of products containing spearmint 
oil and will 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.
    The Committee considered various alternative levels of volume 
control for Scotch spearmint oil, including increasing the percentage 
to a less restrictive level, or decreasing the percentage. After 
considerable discussion the Committee unanimously determined that 
842,171 pounds and 42 percent would be the most effective salable 
quantity and allotment percentage, respectively, for the 2009-2010 
marketing year.
    The Committee also considered various alternative levels of volume 
control for Native spearmint oil. After

[[Page 1976]]

considerable discussion the Committee unanimously determined that 
1,196,109 pounds and 53 percent would be the most effective salable 
quantity and allotment percentage, respectively, for the 2009-2010 
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 2009-2010 would decline 
substantially below current levels.
    As stated earlier, the Committee believes that the order has 
contributed extensively to the stabilization of producer prices, which 
prior to 1980 experienced wide fluctuations from year-to-year. National 
Agricultural Statistics Service records show that the average price 
paid for both classes of spearmint oil ranged from $4.00 per pound to 
$11.10 per pound during the period between 1968 and 1980. Prices have 
been consistently more stable since the marketing order's inception in 
1980, with an average price for the period from 1980 to 2007 of $12.77 
per pound for Scotch spearmint oil and $9.98 per pound for Native 
spearmint oil.
    According to the Committee, the recommended salable quantities and 
allotment percentages are expected to achieve the goals of market and 
price stability.
    As previously stated, annual salable quantities and allotment 
percentages have been issued for both classes of spearmint oil since 
the order's inception. Reporting and recordkeeping requirements have 
remained the same for each year of regulation. These requirements have 
been approved by the Office of Management and Budget under OMB Control 
No. 0581-0178, Vegetable and Specialty Crops. Accordingly, this rule 
would not impose any additional reporting or recordkeeping requirements 
on either small or large spearmint oil producers and 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.
    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 rule.
    In addition, 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 October 
15, 2008, 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/AMSv1.0/ams.fetchTemplateData.do?template=TemplateN&page=MarketingOrdersSmallBusinessGuide. Any questions about the compliance guide should be sent to 
Jay Guerber at the previously mentioned address in the FOR FURTHER 
INFORMATION CONTACT section.
    A 60-day comment period is provided to allow interested persons the 
opportunity to respond to this proposal. All written comments timely 
received will be considered before a final determination is made on 
this matter.

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

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

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

    2. A new Sec.  985.228 is added to read as follows:

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

Sec.  985.228  Salable quantities and allotment percentages--2009-2010 
marketing year.

    The salable quantity and allotment percentage for each class of 
spearmint oil during the marketing year beginning on June 1, 2009, 
shall be as follows:
    (a) Class 1 (Scotch) oil--a salable quantity of 842,171 pounds and 
an allotment percentage of 42 percent.
    (b) Class 3 (Native) oil--a salable quantity of 1,196,109 pounds 
and an allotment percentage of 53 percent.

    Dated: January 8, 2009.
James E. Link,
Administrator, Agricultural Marketing Service.
[FR Doc. E9-604 Filed 1-13-09; 8:45 am]
BILLING CODE 3410-02-P


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