This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

24291

Vol. 66, No. 93

Monday, May 14, 2001

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 929

[Docket No. FV01–929–2 PR]

Cranberries Grown in the States of

Massachusetts, et al.; Establishment of

Marketable Quantity and Allotment

Percentage; Reformulation of Sales

Histories and Other Modifications

Under the Cranberry Marketing Order

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Proposed rule.

SUMMARY: This rule invites comments

on whether to establish volume

regulation on cranberries and if so, at

what level. If a volume regulation is

implemented, it would limit the volume

of cranberries handlers may purchase

from, or handle for, growers during the

2001–2002 crop year, which begins on

September 1, 2001, and ends on August

31, 2002. The Cranberry Marketing

Committee (Committee), the agency

responsible for local administration of

the cranberry marketing order,

recommended a marketable quantity of

4.7 million barrels, an allotment

percentage of about 67 percent, and an

exemption for fresh and organicallygrown cranberries. An alternative,

supported by a number of independent

growers, includes a marketable quantity

of 4.0 million barrels, an allotment

percentage of about 54 percent, and no

exemption for fresh and organicallygrown cranberries.

Both levels of regulation are intended

to stabilize marketing conditions, help

reduce burdensome inventories, and

improve grower returns. A third option

is to issue no volume regulation at all.

This rule also proposes adding a date by

which transfers of sales histories on

leased acreage must be completed,

deleting the Committee review process

in the sales history appeal procedure,

and giving fresh fruit growers whose

fruit has to be used for processing

priority in the allocation of excess

allotments. Finally, this action proposes

amending a proposed rule published on

January 12 to revise the sales history

reformulation calculation, and

withdraw the proposed reinstatement of

the June 1 allotment notification date.

These additional actions are designed to

improve the operation of the producer

allotment provisions of the order.

DATES: Comments must be received by

May 29, 2001.

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) 720–8938 or

E-mail: moab.docketclerk@usda.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 the following website:

www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT:

Patricia A. Petrella or Kenneth G.

Johnson, DC Marketing Field Office,

Fruit and Vegetable Programs, AMS,

USDA, Suite 2A04, Unit 155, 4700 River

Road, Riverdale, Maryland 20737;

telephone: (301) 734–5243, Fax: (301)

734–5275; or Anne Dec or George

Kelhart, 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, Fax: (202) 720–8938.

Small businesses may request

information on complying 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)

720–8938, or E-mail:

Jay.Guerber@usda.gov.

SUPPLEMENTARY INFORMATION: This

proposal is issued under Marketing

Order No. 929 (7 CFR Part 929), as

amended, regulating the handling of

cranberries grown in Massachusetts,

Rhode Island, Connecticut, New Jersey,

Wisconsin, Michigan, Minnesota,

Oregon, Washington, and Long Island in

the State of New York. The order is

effective under the Agricultural

Marketing Agreement Act of 1937, as

amended [7 U.S.C. 601–674], hereinafter

referred to as the ‘‘Act.’’

Question and Answer Overview

What Does This Rule Propose?

This rule invites comments on

whether a volume regulation should be

in place for the 2001 cranberry crop.

Comments are requested on whether a

volume regulation should be established

and if so, at what level. This proposal

includes two levels of regulation that

have been widely discussed within the

cranberry industry in recent months. It

also proposes a number of

administrative changes designed to

improve the producer allotment

program under the cranberry marketing

order.

Who Would Be Affected by This Action?

Growers and handlers/processors

located in the 10-State production area

would be affected by this action. The

10-State production area covers

Massachusetts, Rhode Island,

Connecticut, New Jersey, Wisconsin,

Michigan, Minnesota, Oregon,

Washington, and Long Island in the

State of New York.

Why Is Volume Control Being

Recommended For This 2001 Crop?

The Committee recommended volume

control the 2001–02 crop year to address

the oversupply situation being

experienced by the industry.

Specifically, the Committee

recommended a marketable quantity of

4.7 million barrels, an allotment

percentage of about 67 percent, and an

exemption for fresh and organicallygrown fruit. For the 2001 crop year,

continued low grower prices are

expected to accompany high production

and inventories. Many cranberry

growers are experiencing difficulties

dealing with current market conditions.

What Is The Marketable Quantity and

Allotment Percentage?

The marketable quantity is defined as

the number of pounds of cranberries

needed to meet total market demand

and to provide for an adequate carryover

into the next season. The Committee

determined that the marketable quantity

for the 2001–2002 crop year should be

established at 4.7 million barrels. This

proposed rule also contains a proposal

24292 Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules

for a marketable quantity of 4.0 million

barrels.

The allotment percentage equals the

marketable quantity divided by the total

of all growers’ sales histories. Total

growers’ sales histories were estimated

by the Committee to be 7.4 million

barrels including all sales, and 7.0

million barrels if it includes only

processed sales. The latter figure is

intended to be used if fresh fruit is

exempt from volume regulation.

How Are Growers’ Annual Allotments

Calculated?

A grower’s annual allotment is the

result of multiplying the individual

grower’s sales history by the allotment

percentage.

Why Is the Department Soliciting

Comments on Alternative Proposals?

A number of growers favor a

marketable quantity of 4.0 million

barrels because they expect that it will

bring grower returns closer to the cost

of production more quickly than the

Committee’s 4.7 million barrel

recommendation. The Department is

soliciting comments on both levels of

regulation because both levels have

been determined to have the potential to

improve grower returns and establish

more orderly conditions in the

cranberry market. Comments are also

being solicited on not establishing

volume regulations and allowing

growers and handlers to voluntarily and

individually decide how much fruit to

market.

Why Are Additional Comments Being

Requested on the Proposal To

Recalculate Sales Histories?

A proposed rule to reformulate sales

history calculations for the 2001–2002

crop year was published in the Federal

Register on January 12, 2001, with a

comment period ending February 12,

2001. The main feature of that proposal

was to provide additional sales history

for acres planted in 1995 or later. At the

Committee meeting on February 5, 2001,

concerns were raised that the proposed

formula would give an unfair advantage

to growers who only have acres with 1

to 3 years of sales history (as opposed

to growers with a combination of mature

acres and new or replanted acres).

Under the January 12 proposal, actual

sales histories for growers with only

newer (or replanted) acreage would be

computed by dividing total sales by the

actual number of years plus an

adjustment based on the year planted. A

grower with a combination of mature

and newer acres would have his/her

sales divided by 4 before the adjustment

was added. At its meeting on February

5, the Committee recommended a

modification of the sales history

calculations so that all growers’ sales

histories would be divided by 4 before

the new acreage adjustment is added.

The January 12 proposal is proposed to

be amended to include the sales history

modification, to withdraw a proposal to

reinstate the June 1 annual allotment

notification date, and to correct an

inadvertent error.

How Can I Comment on This Action?

Interested persons have 15 days from

the date of publication of this proposed

rule to file written comments. Such

comments should be sent to: Docket

Clerk, Fruit and Vegetable Programs,

AMS, USDA, room 2525–S, P.O. Box

96456, Washington, DC 20090–6456;

Fax: (202) 720–8938 or E-mail:

moab.docketclerk@usda.gov. All

comments should reference the docket

number and the date and page number

of this issue of the Federal Register.

When Will This Action be Effective?

After analyzing all comments

received, the Department will make a

final decision. We could choose to issue

a final rule to set a regulation or

withdraw this proposal and have no

volume restriction in place for the 2001

crop. Any final rule issued would be

effective for the 2001–2002 crop year,

which begins on September 1, 2001.

Executive Orders 12866 and 12988

The Department of Agriculture

(Department) is issuing this proposed

rule in conformance with Executive

Order 12866. This proposal has been

reviewed under Executive Order 12988,

Civil Justice Reform. Under the

marketing order provisions now in

effect, a marketable quantity and

allotment percentage may be established

for cranberries during the crop year.

This proposed rule invites comments on

the volume of cranberries that handlers

may purchase from, or handle for,

growers during the 2001–2002 crop year

beginning September 1, 2001, through

August 31, 2002. This proposal would

also add a date by which transfers of

sales histories must be made; streamline

the sales history appeal process; and

give fresh fruit handlers priority in

allocating excess allotment. It would

also modify a previously-issued

proposed rule to revise the sales history

calculations, withdraw a proposed

reinstatement of the annual allotment

notification date, and correct an

inadvertent error. This proposal will not

preempt any State or local laws,

regulations, or policies, unless they

present an irreconcilable conflict with

this rule.

The Act provides that administrative

proceedings must be exhausted before

parties may file suit in court. Under

section 608c(15)(A) of the Act, any

handler subject to an order may file

with the Secretary a petition stating that

the order, any provision of the order, or

any obligation imposed in connection

with the order is not in accordance with

law and request a modification of the

order or to be exempted therefrom. A

handler is afforded the opportunity for

a hearing on the petition. After the

hearing the Secretary would rule on the

petition. The Act provides that the

district court of the United States in any

district in which the handler is an

inhabitant, or has his or her principal

place of business, has jurisdiction to

review the Secretary’s ruling on the

petition, provided an action is filed not

later than 20 days after the date of the

entry of the ruling.

The Committee met on February 5,

2001, to discuss implementing a volume

regulation to restrict the marketing of

the 2001 cranberry crop. Because the

Committee was divided on the volume

of cranberries that should be released to

market, it established a subcommittee to

consider volume regulation alternatives

to help the industry overcome its

oversupply situation. Since 1996,

cranberry production has been greater

than demand by increasing margins.

Large carryover inventories and higher

production yields have resulted in a

market burdened by large supplies and

low grower prices. Grower returns have

fallen 73 percent from 1997 to 2000,

dropping from $65.90 to $15–20 per

barrel.

During the 1999 crop year, production

totaled 6.34 million barrels, a 17 percent

increase over 1998. Market demand has

not kept up with mounting carryover

inventories and production.

The subcommittee, comprised of

independent and cooperative growers,

and a representative of the public,

explored various options for helping to

stabilize market supply and demand

conditions in 2001–02. After analyzing

various alternatives, the subcommittee

decided to recommend the

establishment of a marketable quantity

of 4.0 million barrels applicable to all

sales. The public representative on the

subcommittee developed an

econometric model showing that a

marketable quantity of 4.0 million

barrels would eliminate excess

inventories in a single year and bring

grower prices closer to the cost of

production. A marketable quantity at

this level would permit growers to

deliver an estimated 54 percent of their

sales history to handlers, keeping

Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules 24293

approximately 46 percent of their sales

history off the market.

The econometric model also shows

that inventories would decline to 2.2

million barrels, and that grower prices

would increase to $31 per barrel. The

estimated average cost of production is

$35 per barrel, although the range in

individual costs is quite broad, being as

low as $15 and as high as $45 per barrel.

The subcommittee presented its

recommendation to the full Committee

at a March 4–5, 2001, meeting. At that

meeting, the full Committee discussed

the 4.0 million barrel marketable

quantity. It indicated that it is

supportive of raising grower prices and

reducing excessive inventories.

However, it believed that a restriction

this large would be harmful to the

industry in the long run. The Committee

believes that a more gradual correction

in inventory and grower prices is

necessary to allow efforts to expand

demand through the introduction of

new products and foreign market

development. It further believes that a

substantial price increase in a single

season could result in buyers

substituting other commodities for

cranberries in their products. It is also

the Committee’s view that the more

restrictive level of regulation could

result in a less than desirable carryover

into the 2002 season. It is preferable to

freeze and store cranberries for several

months after harvest in October before

processing them. Sales for the first 3

months of the season are estimated at

about 2.0 million barrels.

In addition, a large number of

independent handlers oppose a

regulation of this magnitude. There is

concern that under a 4.0 million barrel

marketable quantity there will not be

enough excess fruit to fill their needs. If

independent handlers were short of

fruit, and not able to meet the needs of

their customers, they could lose market

share.

While acknowledging that bringing

grower prices to profitable levels is

necessary as soon as possible, the

Committee also believes that it is very

important to provide enough fruit for

market growth. The Committee

ultimately recommended a marketable

quantity of 4.7 million barrels to be

implemented through an allotment

program that would permit producers to

move about 67 percent of their sales

history to handlers, applied to

processed fruit only. This would result

in about 33 percent of sales histories

being held off the market as opposed to

approximately 46 percent under the 4.0

million barrel proposal. Fresh and

organic sales would be exempt under

this recommendation and add about

300,000 barrels to the available

marketable supply.

The Committee believes that a 4.7

million barrel marketable quantity is a

sustainable solution to eliminating the

surplus, because it would contribute

toward reducing supplies in the short

term and provide enough fruit to

increase demand in the long term. The

Committee believes that supply

reduction and market growth are

important to the long term viability of

the industry.

After reviewing these alternative

proposals, the Department believes that

each could help the industry solve its

oversupply problems and improve

grower prices. Therefore, the

Department is soliciting comments on

both levels of regulation. The

Department is also soliciting comments

on not establishing volume regulations

and allowing growers and handlers to

voluntarily and individually decide

how much fruit to market.

At the March 4–5, 2001, meeting, the

Committee also recommended adding a

date by which transfers of sales histories

on leased acreage must be completed,

deleting the Committee review process

from the sales history appeals

procedures, and giving fresh fruit

growers priority in the allocation of

excess allotment. The Committee also

recommended revising a sales history

reformulation calculation contained in a

proposed rule published on January 12.

The Department is proposing

withdrawing a proposal to reinstate a

June 1 grower allotment notification

date.

Introduction

Section 929.49 of the order currently

provides that if the Secretary finds from

the recommendation of the Committee

or from other available information, that

limiting the quantity of cranberries

purchased from or handled on behalf of

growers during a crop year would tend

to effectuate the declared policy of the

Act, the Secretary shall determine and

establish a marketable quantity for that

year. In addition, the Secretary would

establish an allotment percentage which

shall equal the marketable quantity

divided by the total of all growers’ sales

histories.

Section 929.49(b) of the order

provides that the marketable quantity be

apportioned among growers by applying

the allotment percentage to each

grower’s sales history. Handlers can

only purchase or handle cranberries that

are covered by the grower’s annual

allotment.

Total growers’ sales histories have

been estimated by the Committee to be

about 7.0 million barrels if they include

only processed sales, and 7.4 million

barrels if they include all sales (fresh

and processed). If fresh fruit sales are

exempt from volume regulation, it is

intended that the 7.0 sales history figure

be used. Otherwise, the 7.4 million

barrel sales history would be used.

Growers are required to file a form

with the Committee by April 15 each

year if they wish to receive an annual

allotment. Among other things, growers

also must notify the Committee of any

new acreage that will be coming into

production for the upcoming crop year.

The Committee notifies each grower of

his or her annual allotment and notifies

each handler of the annual allotment

that can be handled for each grower

whose total crop will be delivered to

such handler. In cases where a grower

delivers a crop to more than one

handler, the grower may determine how

to apportion the annual allotment

among those handlers.

A grower who does not produce

cranberries equal to his or her annual

allotment must transfer any unused

allotment to such grower’s handler(s).

The handlers are then required to

equitably allocate the unused allotment

to growers with excess cranberries

(those not covered by allotment) who

deliver to those handlers. Unused

allotment remaining after all such

transfers have taken place are

transferred to the Committee.

Handlers who receive more

cranberries than are covered by their

growers’ annual allotments have excess

cranberries. The Committee is required

to equitably distribute any unused

allotment it receives to those handlers

that have excess cranberries.

The Committee’s Marketing Policy for

the 2001 Crop

Section 929.46 of the order requires

the Committee to develop a marketing

policy each year prior to May 1. In its

marketing policy, the Committee

projects expected supply and market

conditions for the upcoming season,

including an estimate of the marketable

quantity (defined as the number of

pounds of cranberries needed to meet

total market demand and to provide for

an adequate carryover into the next

season).

At its February 2001 meeting, the

Committee estimated 2001–2002

domestic production of cranberries at

5,675,000 barrels. Carryin as of

September 1, 2001, is estimated at

3,325,000 barrels. Foreign production

(primarily Canada) is projected at

835,000 barrels. Allowing for shrinkage

of approximately 2 percent on carryin

and 4 percent on production (327,000

barrels), the total adjusted available

24294 Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules

supply of cranberries is expected to be

9,508,000 barrels. Based in large part on

historical sales figures, the Committee

estimated utilization of processing fruit

at 5,198,000 barrels and of fresh fruit at

310,000 barrels. The carryout as of

August 31, 2002, is projected to be 4

million barrels.

A summary of the marketing policy

follows:

CRANBERRY MARKETING POLICY

[2001 crop year estimates]

Barrels

Carryin as of 9/1/2001 ................ 3,325,000

Domestic production ................... 5,675,000

Foreign production ...................... 835,000

Available supply (sum of the

above) ..................................... 9,835,000

Minus shrinkage ......................... 327,000

Adjusted Supply .......................... 9,508,000

Fresh Fruit .................................. 310,000

Processing fruit ........................... 5,198,000

Total Sales and Usage ............... 5,508,000

Carryout as of 8/31/2002 ............ 4,000,000

The industry is expected to enter the

2001–2002 crop year with inventories

estimated at about 3,325,000 barrels

(assuming USDA purchases 1.0 million

barrels). This level of inventory,

coupled with the industry’s current

capacity to produce in excess of

estimated demand, has resulted in the

industry debating two volume

regulation levels for the 2001–2002 crop

year. These alternatives are discussed

below.

Option 1

Proposed Establishment of a Marketable

Quantity of 4.0 Million Barrels and an

Allotment Percentage Applicable to All

Sales

As mentioned earlier, in early

February 2001, the Committee

established a volume regulation

subcommittee to discuss volume

regulation methods available under the

order. This subcommittee was

comprised of growers. The

subcommittee discussed several issues

involving the upcoming season and how

the order could be used to address

industry needs. One of the

subcommittee’s main concerns was that

grower prices be increased to cover

production costs.

The subcommittee met with handlers

in the industry to also try and address

their concerns for the upcoming season.

Some handlers, who do not have a large

inventory of cranberries, expressed that

if there were a very restrictive volume

regulation, they would not have

adequate supplies of cranberries to meet

their market needs and would have to

purchase cranberries from their

competitors. Moreover, these handlers

were concerned about availability and

about the prices they would have to pay

for such cranberries.

The subcommittee also discussed the

idea of a buy-back provision in a

producer allotment program which

would allow a handler to buy back

cranberries from the Committee to fulfill

his/her needs. The Committee in turn

would purchase free cranberries from

another handler to replace those that

were bought back. The subcommittee

also discussed the possibility of using

both of the volume control programs

under the order, the producer allotment

program and handler withholding

program, in the same crop year.

However, buyback is not authorized

under an allotment program, and the

simultaneous use of producer

allotments and handler withholding is

not authorized under current order

provisions.

The subcommittee recommended to

the full Committee on March 4, 2001, by

a 6 to 2 vote, that a marketable quantity

be set at 4.0 million barrels for the

upcoming season with no exemption for

fresh or organically-grown fruit. In

recommending this level of regulation,

the subcommittee stated that it would

like to decrease excessive industry

inventories to desirable levels in one

year. It believes that by reducing

inventories, grower prices and revenues

will increase. It further believes that this

level of marketable quantity balances

supply with demand with a 2.325

million barrel carryout inventory which

should sufficiently meet the next year’s

demand until the new crop is properly

frozen and stored. The subcommittee

also believes that this level of regulation

would bring grower prices closer to the

average cost of production, and that this

would allow growers, both large and

small, to more easily obtain loans which

are used to cover operating and planting

expenses during the course of the

season. Prices have been below the

average cost of production for several

years. Some in the industry have

informed the Department that lenders

are becoming reluctant to fund these

losses.

A 4.0 million barrel marketable

quantity would result in an allotment

percentage of about 54 percent based on

sales histories of about 7.4 million

barrels. Sales histories would be set at

7.4 million barrels instead of 7.0 million

barrels because fresh fruit and organic

sales would not be deducted from sales

histories. The subcommittee expects

that a marketable quantity at this level

would increase grower returns to about

$31 per barrel. The estimated average

cost of production is $35 per barrel,

although the range in individual costs is

quite broad, being as low as $15 and as

high as $45. The subcommittee also felt

that a fresh fruit exemption was not

necessary, and that it could lead to an

oversupply of fresh fruit and decrease

the value of such product.

The Committee believes that under a

4.0 million barrel marketable quantity,

there would not be enough carryover

fruit in inventory to meet market

demand early next season (2002–2003).

They also expressed the belief that a

significant increase in grower returns in

one season may make growers more

reluctant to reduce production at this

time.

Option 2

Establishment of a Marketable Quantity

of 4.7 Million Barrels and an Allotment

Percentage Applicable to Processed

Sales Only

The subcommittee’s

recommendations were not adopted by

the Committee. Instead, the Committee

chose to recommend a higher

marketable quantity of 4.7 million

barrels applicable to processed sales

only. This would add an estimated

300,000 barrels to the available

marketable supply and set a less

restrictive allotment percentage (67

percent instead of 54 percent).

Most independent handlers have

indicated that they do not have

inventories of cranberries to carry into

the 2001 season. The Committee felt

that a restriction based on a marketable

quantity of 4.7 million barrels

applicable to processed sales only

would allow handlers to purchase

additional cranberries if they needed

them from other handlers, while having

adequate supplies to expand markets

with new products. Some handlers have

indicated that they cannot support

volume regulation unless they have

assurances that they will have sufficient

supplies to meet their customers’ needs.

They contend that a 4.0 marketable

quantity applicable to all sales would

not allow them to meet their customers’

needs, which could result in giving up

market share. However, there is no

mechanism in the order which could

provide such assurances.

The Committee determined that the

marketable quantity for the 2001–2002

crop year should be established at 4.7

million barrels. The Committee

recommended this volume regulation

level by a 6 to 2 vote. With sales history

estimated at 7 million barrels of

processed fruit, the allotment

percentage would be about 67 percent.

Fresh fruit sales are not included in the

Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules 24295

sales history figure because fresh fruit

would not be covered by the allotment

percentage. The fresh fruit exemption

would add about 300,000 barrels to the

available marketable supply. The

Committee determined that a 5.0

million barrel available marketable

supply (4.7 million-barrel marketable

quantity plus about 300,000 barrels of

fresh fruit) is an appropriate amount to

deplete some of the existing inventory

but not short the handlers from

supplying market needs. Exports are

expected to increase and enough

marketable quantity must be available to

meet this demand.

Those voting against this level of

regulation wanted a more restrictive

volume regulation. Those Committee

members were also of the opinion that

cheap and abundant cranberries allow

handlers to undercut product prices in

order to build market share without

increasing total industry sales or grower

returns.

Fresh and Organic Fruit Exemption

Recommended by the Committee

The Committee also recommended

that fresh fruit and organically-grown

cranberries be exempted from regulation

this season. Fresh and organicallygrown fruit would be exempt pursuant

to § 929.58 of the order which provides

that the Committee may relieve from

any or all order requirements

cranberries in such minimum quantities

as the Committee, with the approval of

the Secretary, may prescribe.

Under current marketing practices,

there is a distinction between

cranberries for fresh market and those

for processing markets. Cranberries

intended for fresh fruit outlets are

grown and harvested differently. Fresh

cranberries are dry picked while

cranberries used for processing are

water picked. When cranberries are

water picked, the bog is flooded and the

cranberries that rise to the top are

harvested. Dry picking is a more labor

intensive and expensive form of

harvesting. Cranberry bogs are

designated as ‘‘fresh fruit’’ bogs and are

grown and harvested accordingly. Only

the lower quality fruit from a fresh bog

goes to processing outlets.

Fresh fruit accounts for less than 6.0

percent of total production. The

Committee estimated that about 310,000

barrels will be sold fresh this year,

compared to 280,000 barrels sold last

season. All fresh cranberries can be

marketed and do not compete with

processing cranberries. Fresh

cranberries are seasonal (due to their

limited shelf life) and are not a part of

the growing industry inventories. The

Committee concluded that fresh

supplies do not contribute in any

meaningful way to the current cranberry

surplus. Therefore, the Committee

recommended that such cranberries be

exempt from the allotment percentage

this rule proposes.

The Committee addressed the impacts

of having a sales history that includes

only processed fruit, and how the

allotment percentage would be applied.

In the fresh fruit industry, there are

instances when growers deliver fresh

fruit that fails the handler’s fresh fruit

specifications and therefore is used as

processing fruit. In this case, if a grower

has an inadequate processing fruit

allotment to cover the rejected fruit, the

handler can allocate unused allotment

from other growers to cover the excess.

Each handler should give priority to

these growers when allocating unused

allotment to cover excess cranberries.

This would allow the grower to deliver

the rejected fruit for processing. This

proposal would be implemented by

adding a new paragraph (f) to § 929.149

of the order’s rules and regulations.

Organically-grown cranberries

comprise an even smaller portion of the

total crop than fresh cranberries. The

Committee estimated that about 1,000

barrels of organic fruit will be sold this

season, compared to 450 barrels last

season. Organic cranberries are a

growing niche market and regulating

them could have an adverse effect on

the production and marketing of this

product. Like fresh cranberries, demand

for organic cranberries is in line with

the current limited production. Thus,

organic cranberries do not contribute in

any meaningful way to the current

oversupply experienced with processing

fruit. The Committee, therefore,

recommended that organically-grown

cranberries be exempt from volume

regulation during the upcoming season.

To be exempt, organic cranberries

would have to be certified as such by a

certifying organization acceptable to the

Committee, as required under § 929.158

of the order’s rules and regulations.

Option 3

Establish No Volume Regulation for the

2001–2002 Crop

USDA is also soliciting comments on

issuing no volume regulation. Under

this third option, cranberry growers and

handlers would voluntarily and

individually decide how much fruit to

market.

Although this rule proposes two

levels of regulation discussed within the

industry, it is still possible that no

volume regulations will be implemented

for the 2001 crop.

To fully analyze the issue of an

appropriate volume restriction for the

2001 cranberry crop, the Department

has decided to solicit comments on both

levels of regulation as well as issuing no

volume regulation. Comments are

invited on which option would be more

feasible and why, in view of current

demand in foreign and domestic

markets, and which option would be

more consistent with the short and long

term goals of the industry to correct the

oversupply situation in the interest of

the industry and the public, and why.

Appeal Procedures

The Committee unanimously

recommended that the Committee

review step be removed from the sales

history appeals process. Currently,

§ 929.125 provides that a grower may

appeal to an appeals subcommittee

within 30 days of receipt of the

Committee’s determination of his/her

sales history. If the grower is not

satisfied with the subcommittee’s

decision, the grower may further appeal

to the full Committee. Such grower must

notify the full Committee of his or her

appeal within 15 days after notification

of the subcommittee’s decision. The

Committee has 15 days to review the

appeal. The grower may further appeal

to the Secretary, within 15 days after

notification of the full Committee’s

findings, if the grower is not satisfied

with the Committee’s decision. All

decisions by the Secretary are final.

The appeals procedure as described

above could take 60 or more days to

complete. Last season, the Committee

recommended and the Department

approved, removing the Committee’s

review from the procedures to shorten

the process. Growers were able to take

their appeals directly to the Secretary

for a final decision if they were not

satisfied with the appeals

subcommittee’s determinations.

The Committee recommended for this

season and future seasons that the full

Committee review step of the appeals

process described in the rules and

regulations be removed in order to

expedite the process. The appeals

subcommittee reviewed over 250

appeals for the 2000–2001 crop year.

This required many hours of meetings

and recalculations of appealed sales

histories, when warranted. The

Committee determined that the appeal

process, absent Committee review, was

efficient and provided the grower with

a quicker response than would have

otherwise occurred. Therefore, the

Committee recommended that the

Committee review of sales history

appeals is not needed and should be

removed from the procedures.

24296 Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules

Transfers of Sales Histories on Leased

Acreage

The Committee also unanimously

recommended that, during a year of

volume regulation, transfers of sales

histories through partial or total leases

of acreage only be recognized by the

Committee during the period January 1

through July 31 of each crop year. The

appropriate paperwork would have to

be received in the Committee’s office by

close of business on July 31.

Currently, § 929.50 provides that,

during a year of regulation, no transfer

or lease of cranberry producing acreage,

without accompanying sales history,

shall be recognized until the Committee

is in receipt of a completed transfer or

lease form. The Committee has found

through experience last season that

many growers were delaying these

adjustments until the busy harvest

season. The review and approval of

such transfers required a great deal of

time and this placed an added burden

on the Committee’s staff, especially

during the busy harvest season.

Therefore, the Committee recommended

that all transfers must be received by

close of business on July 31 during a

year of volume regulation. This change

would be implemented for the 2001–

2002 season, which begins September 1,

2001. This would allow sales histories

to be distributed in a more equitable

manner and also allow the Committee to

complete the transfers prior to the busy

harvest season. All forms associated

with this issue have been previously

approved by the Office of Management

and Budget under OMB No. 0581–0103.

This proposal would be implemented

by adding a new paragraph (d) to

§ 929.110 of the order’s rules and

regulations.

Amendment of Proposed Rule

Published on January 12, 2001

A proposed regulation to reformulate

sales history calculations for the 2001–

2002 crop year was published in the

Federal Register on January 12, 2001

(66 FR 2838), with a comment period

ending February 12, 2001. The January

proposal would modify the current sales

history formula to apportion sales

histories more equitably among

producers. The January proposal also

would clarify the exemption provisions

for fresh cranberries under the volume

regulation provisions, modify the

outlets for excess cranberries and

reinstate the dates for the Committee to

notify growers and handlers of their

allotments. The final rule will include a

determination on the January proposals

as well as the proposals contained in

this rule.

This action proposes amending the

January proposal to revise the sales

history reformulation, and withdraw the

proposed reinstatement of the June 1

allotment notification date. This action

also corrects an inadvertent error in the

January proposal regarding the

definition of commercial crop.

Reformulation of Sales History

Calculations for the 2001–2002 Crop

Year

Under the January proposal, actual

sales histories for growers with only

newer or replanted acreage were

proposed to be computed by dividing

the total sales by the actual number of

years plus an adjustment based on the

year planted. A grower with a

combination of mature and newer

acreage would have his/her sales

divided by 4 before the adjustment was

added.

At a Committee meeting on February

5, 2001, concerns were raised that the

proposed formula would give an unfair

advantage to growers who only had

acres with 1 to 3 years of sales history

(as opposed to growers with mature

acres combined with new or replanted

acres). The Committee believed that

these growers would be provided an

adjusted sales history in excess of

average yields. The Committee

recommended that the proposal be

modified to be more equitable to all

growers by providing that growers with

acreage with 1 to 3 years of sales

histories divide their total sales by 4

instead of all available years and then be

provided additional sales history in

accordance with the formula which is

provided in the proposed rule for

adjusting sales history.

The Committee’s recommendation to

modify how sales histories are

calculated would not change the

formula that provides the additional

sales history. The additional sales

history would still be calculated using

the figures in Table 1.

TABLE 1.—ADDITIONAL SALES HISTORY ASSIGNED TO ACREAGE

Expected 2001

yield

(bbl/acre)

Average sales

history

(bbl/acre)

Additional 2001

sales history per

acre

(bbl/acre)

Date Planted:

1995 .................................................................................................................... 275 226 49

1996 .................................................................................................................... 275 158 117

1997 .................................................................................................................... 252 95 157

1998 .................................................................................................................... 222 39 183

1999 .................................................................................................................... 156 0 156

2000 .................................................................................................................... 75 0 75

The Committee recommended

changing the way the actual sales

histories are calculated. The January

proposal states that for growers with 7

or more years of sales a new history

would be computed using an average of

the highest 4 of the most recent 7 years

of sales. If the growers have acreage

with 6 years of sales history, a new sales

history would be computed by

averaging the highest 4 of the 6 years.

For growers with acreage with 5 years

of sales history which was planted prior

to 1995, a new sales history would be

computed by averaging the highest 4 of

the 5 years.

For growers with acreage of 5 years or

less of sales history planted in 1995 or

later, the sales history is proposed to be

computed using the average of all

available years and adjusting it by

providing additional sales history in

accordance with the formula. For

growers with acreage with no sales

history or for the first harvest of

replanted acres, the sales history was

proposed to be 75 barrels per acre for

acres planted or re-planted in 2000 and

first harvested in 2001, and 156 barrels

per acre for acres planted or re-planted

in 1999 and first harvested in 2001.

The portion of the proposal that the

Committee is concerned with is the

calculation for growers with 1 to 3 years

of sales history (and no mature acres)

Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules 24297

whose total sales from that acreage are

divided by all available years. The

Committee believes that the formula

already compensates these growers by

providing additional sales history as if

the grower also had mature acres and

divided the sales history by 4. The

recommendation of February 5

proposed that these growers also divide

by 4, like every other grower is expected

to do under this scenario. At the

meeting, the following examples were

used to explain the situation:

Example 1

A grower with two acres has the

following sales history:

Sales history

1994 1995 1996 1997 1998 1999 2000

Planted 1992 ............................................ 156 222 252 275 275 275 275

Planted 1996 ............................................ .................... .................... .................... .................... 156 222 252

Total Sales ........................................ 156 222 252 275 431 497 527

Under the proposal of January 12,

2001, this grower’s sales history would

be calculated by totaling the highest 4

years of sales and dividing by 4

(275+431+497+527/4) or 432.5 barrels.

Using the table for assigning additional

sales history, this grower would be

provided an additional 117 barrels for

the one acre planted in 1996 for a total

sales history of 549.5 barrels. This

grower’s sales history represents

approximately 275 barrels per acre for

each of the two acres, which is a

reasonable average for acreage of that

age.

Example 2

A grower with one acre has the

following sales history:

Planted

1996 1998 1999 2000

Sales ................................................................................................................................ .................... 156 222 252

Under the proposal of January 12,

2001, this grower’s sales history would

be the total of the 3 years divided by all

available years (156+222+252/3) or 210.

Using the table for assigning additional

sales history, this grower would be

provided an additional 117 barrels for a

total of 327 barrels of sales history for

1 acre. The amount of 327 barrels is far

in excess of the average yield for acreage

of that age. If the total sales were

divided by 4 (156+222+252/4), the

actual sales history would be 157.5

barrels. Using the table for assigning

additional sales history, this grower

would be assigned the same 117 barrels

for a total of 274.5 barrels of sales

history. The Committee believes this

number is more in line with average

yields.

Therefore, the Committee’s

recommendation would require

modifying § 929.149 in the following

manner: For growers whose acreage has

5 years of sales history and was planted

in 1995 or later, the sales history would

be computed by averaging the highest 4

of the 5 years and adjusting in

accordance with Table 1; For growers

whose acreage has 4 years of sales

history, the sales history would be

computed by averaging all 4 years and

adjusting in accordance with Table 1;

For growers whose acreage has 1 to 3

years of sales history, the sales history

would be computed by dividing the

total years sales by 4 and adjusting in

accordance with Table 1.

Since this recommendation directly

relates to the 2001–2002 volume

regulation, the Committee’s

recommendation to modify the sales

history calculations is being

incorporated into this proposal so that

interested parties are provided the

opportunity to comment on this

modification. This proposed

modification to the sales history formula

should be more equitable to growers in

the event volume regulations are

implemented for the 2001–2002 season.

Twenty-five comments were received

on the January 12, 2001 proposed rule.

Three comments supported the

recalculation of sales history as

proposed, five comments supported that

proposal but recommended modifying

the way sales histories are calculated as

recommended by the Committee at its

meeting on February 5, 2001, and three

comments opposed the proposal on

sales history reformulation. The

remaining comments received

concerned other changes proposed in

the January 12, 2001, issue of the

Federal Register. These comments will

be considered along with any additional

comments received during this

comment period prior to issuing a final

rule.

Reinstatement of Allotment Notification

Date

The proposal of January 12, 2001,

proposed reinstating the June 1 deadline

for the Committee to notify growers and

handlers of their annual allotments.

Section 929.49 of the order provides,

that in any year in which an allotment

percentage is established by the

Secretary, the Committee must notify

growers of their annual allotment by

June 1. That section also requires the

Committee to notify each handler of the

annual allotments for that handler’s

growers by June 1. The June 1 date was

indefinitely suspended in the final rule

establishing a volume regulation for the

2000–2001 crop year (65 FR 42598) to

allow adequate time for interested

parties to comment on the volume

regulation proposal for that season and

for the Department to give due

consideration to the comments received

and issue a final rule.

The Department has determined that

this time is needed again for this year’s

proposed volume regulation. Therefore,

the proposal to reinstate the June 1

deadline date is being withdrawn.

Definition of Commercial Crop

The proposal to remove § 929.107

from the rules and regulations is not

being modified in any way from the

proposed rule published January 12,

2001. However, in the proposed rule,

the removal of this section was

inadvertently not included in the

amendatory text. This section would be

removed, and that change is included in

this document.

24298 Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules

The Regulatory Flexibility Act and

Effects on Small Businesses

Pursuant to requirements set forth in

the Regulatory Flexibility Act (RFA), the

Agricultural Marketing Service (AMS)

has considered the economic impact of

this action and alternatives considered

on small entities. The purpose of the

RFA is to fit regulatory actions to the

scale of business subject to such actions,

in order that small businesses are not

unduly or disproportionately burdened.

Marketing orders issued pursuant to the

Act, and rules 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. Accordingly, AMS

has prepared this initial regulatory

flexibility analysis.

According to the Small Business

Administration (13 CFR 121.201) small

handlers are those having annual

receipts of less than $5,000,000 and

small agricultural producers are defined

as those with annual receipts of less

than $500,000. Based on recent years’

price and sales levels, AMS finds that

nearly all of the cranberry producers

and some of the handlers are considered

small under the SBA definition. Of the

1,100 cranberry growers, between 86

and 95 percent are estimated to have

sales equal to or less than $500,000.

Fewer than 60 growers are estimated to

have sales that would have exceeded

this threshold in 2000. Thus, the

consequences of this proposed rule

would apply almost exclusively to small

entities.

Six handlers handle over 97 percent

of the cranberry crop. Using Committee

data on volumes handled, AMS has

determined that none of these handlers

qualify as small businesses under SBA’s

definition. The remainder of the crop is

marketed by about a dozen growerhandlers who handle their own crops.

Dividing the remaining 3 percent of the

crop by these grower-handlers, all

would be considered small businesses.

This rule invites comments on

whether to establish volume regulations

and if so, at what level. Two alternatives

for volume regulation contained in this

document would establish a marketable

quantity and an allotment percentage for

cranberries in a 10-State production area

during the crop year from September 1,

2001, through August 31, 2002.

Handlers would only be allowed to

handle those cranberries that are

covered by annual allotment. This

action proposes two levels of volume

regulation with the requisite marketable

quantities and allotment percentages as

well as no volume regulation. One level

of volume regulation includes an

exemption for fresh and organic

cranberries, and the other does not. This

proposed rule would also add a

deadline date by which requests for

transfers of sales histories on leased

acreage must be filed with the

Committee, delete the Committee

review step in the sales history appeal

process, and give fresh fruit growers

whose fruit had to be used for

processing due to quality or other

problems first priority over other

growers when excess allotment is

allocated. Finally, this rule would

amend a previously issued proposed

rule to change the way in which sales

histories are reformulated, and

withdraw a proposal to reinstate a June

1 allotment notification date. The RFA

analysis in the previous proposal

discussed the impacts and alternatives

relevant to the previously proposed

amendments. These actions are

designed to improve grower returns,

establish more orderly marketing

conditions for cranberries, and improve

the operation of the volume regulation

program.

Industry Profile

Cranberries are produced in 10 States,

but the vast majority of farms and

production are concentrated in

Massachusetts, New Jersey, Oregon,

Washington, and Wisconsin.

Massachusetts was the number one

producing State until 1990, when

Wisconsin took over the lead. Since

1995, Wisconsin has been the top

producing State. Together, both States

account for over 80 percent of cranberry

production.

Average farm size for cranberry

production is very small. The average

across all producing States is about 33

acres. Wisconsin’s average is twice the

U.S. average, at 66.5 acres, and New

Jersey averages 83 acres. Average farm

size is below the U.S. average for

Massachusetts (25 acres), Oregon (17

acres) and Washington (14 acres).

Small cranberry growers dominate in

all States: 84 percent of growers in

Massachusetts harvest 10,000 or fewer

barrels of cranberries, while another 3.8

percent harvest fewer than 25,000

barrels. In New Jersey, 62 percent of

growers harvest less than 10,000 barrels,

and 10 percent harvest between 10,000

and 25,000 barrels. More than half of

Wisconsin growers raise less than

10,000 barrels, while another 29 percent

produce between 10,000 and 25,000

barrels. Similar production patterns

exist in Washington and Oregon.

About 94 percent of the cranberry

crop is processed, with the remainder

sold as fresh fruit. In the 1950’s and

early 1960’s, fresh production was

considerably higher than it is today, and

in many years, constituted as much as

25 to 50 percent of total production.

Fresh production began to decline in the

1980’s, while processed utilization and

output soared as cranberry juice

products became popular. Today, fresh

fruit claims only about 5 to 6 percent of

total production. Three of the top five

States produce cranberries for fresh

sales. New Jersey and Oregon produce

fruit for processed products only.

Historical Trends and Near Term

Outlook

The cranberry industry has operated

under a Federal marketing order since

1962. For many years, the industry

enjoyed increasing demand for

cranberry products, primarily due to the

success of cranberry juice-based drinks.

This situation encouraged additional

production. Between 1960 and 1999,

production increased from 1.34 million

barrels (one barrel equals 100 pounds of

cranberries) to a record 6.3 million

barrels. This represents a 370 percent

increase from 1960 and a 17-percent

gain from the 1998 crop year.

Production in the 2000 crop year

declined to 5.5 million barrels, due to

the use of volume control by the

industry and a decrease in yields in

some production areas due to adverse

weather conditions during the growing

season.

While production capacity continues

to rise, demand has leveled off. Over the

past several years, per capita

consumption of cranberries in the

United States has averaged 1.69 pounds.

Per capita consumption peaked in 1994

at 1.80 pounds and began trending

downward. In 1999, per capita

consumption was 1.68 pounds.

Associated with these per capita

consumption figures is the fact that total

domestic sales also peaked in 1994 at

4,692,507 barrels but declined to

4,506,632 barrels in 1999.

In 1998, sales totaled 5.1 million

barrels, slightly above the prior 5-year

average. In 1999, sales were 5.5 million

barrels, and sales for 2000 are estimated

at 5.9 million barrels. Most of the recent

increase in sales can be attributed to

stronger activity in export markets.

Increased total supplies in excess of

demand have resulted in large

inventories. Carryin inventories have

grown from 883,773 barrels in 1988 to

3,058,921 barrels in 1999, to 4,273,067

barrels in 2000. From 1988 through

1997, carryin as a percent of production

ranged from 21 to 36 percent. However,

in 1998, carryin as a percent of

production increased to 40 percent; in

1999 it increased to 49 percent. Carryin

Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules 24299

inventory for the 2000 season exceeded

4 million barrels for the first time in the

industry’s history. Carryin for the 2001

crop is estimated at 3.3 million barrels.

When supply outpaces demand,

resulting in high levels of carryover

inventories, grower prices can be

negatively impacted. Grower prices rose

from $8.83 per barrel in 1960 to a peak

level of $65.90 per barrel in 1996. These

rising price levels provided an incentive

for producers to expand planted acres

and to increase yields. In recent seasons,

prices have declined dramatically. In

1998, grower prices decreased to $36.60

per barrel. The returns for the 1999 crop

year were $17.70 per barrel. Returns for

the 2000 season are expected to be

between $15 and $20 per barrel. The

cost of production ranges from $15 to

$45 per barrel.

Similarly, grower revenues have

dropped from a high of $350 million in

1997 to $112 million in 1999. Grower

revenues declined by 68 percent in just

two growing seasons. Grower revenues

are expected to be less than $100

million for the 2000 crop year,

potentially the first time that grower

revenues will be less than $100 million

since the 1980 crop year.

Impacts of Volume Control

To help stabilize market supply and

demand conditions, volume regulation

was introduced in 2000, marking the

first time in 30 years that such

regulation was implemented. This, in

addition to a planned government

purchase of up to 1,000,000 barrels,

assisted somewhat in relieving market

pressures. Also, yields in parts of the

production area were below normal due

to adverse weather during the growing

season.

In an industry such as cranberries,

where the product can be stored for long

periods of time, volume control is a

method that can be used to reduce

supplies so that they are more in line

with market needs. Large inventories are

costly to maintain and, with the outlook

for continued high production levels,

these inventories would be difficult to

market. Producers may not receive full

payment for cranberries delivered to

storage for several years, and storage

costs are deducted from their final

payment.

The demand for cranberries is

inelastic. A producer allotment program

results in a decrease in supply because

producers can only deliver a certain

portion of their past sales history. With

an inelastic demand, a small shift

(decrease) in the supply curve results in

relatively large impacts on grower

prices. An allotment program results in

increasing grower prices and grower

revenues.

The level of unsold inventory, the

current capacity to produce in excess of

expected demand, and continuing low

grower prices have resulted in the

industry debating various alternatives

under their marketing order.

Level of Volume Restriction for the 2001

Crop

As previously discussed, two levels of

volume regulation for the 2001 crop

have been widely discussed within the

cranberry industry in recent months and

are included in this proposed rule. Also

included is a proposal to have no

volume regulation. The Department

believes that the two levels of volume

regulation proposed could tend to

further the goals of the Act—that is,

improve grower returns and establish

more orderly conditions in the

cranberry market. One of these levels

would establish a marketable quantity of

4.0 million barrels and an allotment

percentage of 54, applicable to all fruit.

The second would establish a

marketable quantity of 4.7 million

barrels and an allotment percentage of

67, with an exemption for fresh and

organically-grown fruit.

To assist in our initial analysis of

these options, the Department has relied

upon an econometric model developed

by the University of Wisconsin and

widely discussed industry to project the

impact of each on grower returns and

revenues for the 2001 crop. We looked

at both levels of regulation

recommended by the industry as well as

what might occur with no regulation. In

making our projections, we used figures

from the Committee’s marketing policy.

For example, carryin inventory is

estimated at 3.325 million barrels,

domestic production is estimated at

5.675 million barrels, imports are

projected at 0.835 million barrels, and

total sales for the 2001–02 crop year are

projected at 5.508 million barrels. We

used a figure of 1.8 million barrels for

the desirable carryout into the 2002 crop

year. The following table summarizes

our findings.

MARKETABLE QUANTITIES

[In millions of barrels]

No volume

control

4.0 with no

fresh fruit

exemption

4.7 with a

fresh fruit

exemption

Supply:

Domestic production ............................................................................................................. 5.675 4.000 5.000

Carrying Inventory ................................................................................................................ 3.325 3.325 3.325

Imports .................................................................................................................................. 0.835 0.835 0.835

Shrink .................................................................................................................................... 0.327 0.327 0.327

Total Available Supply ................................................................................................... 9.508 7.83 8.833

Demand:

Processed Domestic and Export Sales ................................................................................ 5.198 5.198 5.198

Fresh Fruit ............................................................................................................................ 0.310 0.310 0.310

Total Sales .................................................................................................................... 5.508 5.508 5.508

Carryout Inventories ............................................................................................................. 4.000 2.325 3.325

Desirable Carryout ................................................................................................................ 1.800 1.800 1.800

Surplus .................................................................................................................................. 2.200 0.525 1.525

Allotment Percentage ........................................................................................................... 0 54 67

Estimated Price per Barrell ........................................................................................... $10.00 $31.00 $19.50

Estimated Total Revenue (millions) .............................................................................. $56.750 $124.000 $97.500

24300 Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules

As shown above, ample supplies are

expected to be available during the

upcoming year, and prices will likely

continue to fall in 2001 without some

form of market intervention. Absent any

regulation in 2001, the estimated grower

price per barrel is projected to decline

to $10, grower revenue would drop to

$56.75 million, and ending inventories

would grow to 4 million barrels. Heavy

inventories would put downward

pressure on grower prices for ensuing

seasons.

The second column of the table shows

that a 4.0 million barrel marketable

quantity would result in inventories

declining to 2.325 million barrels, and

the grower price increasing to $31 per

barrel. Total grower revenue under this

option is projected to reach $124

million. Under this option, sales would

have to reach 6.0 million barrels to

reach the desirable carry out level of 1.8

million barrels. A marketable quantity

of 4.0 million barrels applicable to total

sales history of an estimated 7.4 million

barrels would result in an allotment

percentage of about 54 percent.

As shown in the last column, the 4.7

million barrel alternative would result

in carryout inventories remaining at

3.325 million barrels. The grower price

would be an estimated $19.50 per

barrel, and revenues would total $97.5

million. With a marketable quantity of

4.7 million barrels, sales would have to

increase to 6,723,000 barrels to reach

the desirable carry out inventory level of

1.8 million barrels. Under this option,

total growers’ sales histories are

estimated at 7.0 million barrels of

processed sales. Using the formula

established under the order (4.7 million

barrels divided by 7.0 million barrels),

the annual allotment percentage would

be about 67 percent.

The econometric model looks at the

short-term impact of reducing supplies

at the grower level. According to the

above table, of the three options

presented, the 4.0 million barrel

marketable quantity alternative would

result in the highest grower price for the

upcoming season, and the lowest level

of carry out inventories. However, in

deciding whether to issue a volume

regulation for the 2001 crop, and at

what level, other factors need to be

considered as well.

As long as production capacity

exceeds market demand, the cranberry

industry will continue to be in a surplus

situation. An alternative solution to

reducing supply through regulation

would be to increase demand.

Supporters of the 4.7 million barrel

proposal argue that a more restrictive

regulation would thwart planned market

expansion activities. They argue that a

more gradual correction in prices is

needed to increase demand through the

introduction of new products and

export market development. A

substantial increase in product cost

from one season to the next may hinder

these expansion efforts, and result in a

loss of current customers as well.

Supporters of the 4.0 million barrel

proposal argue that until inventories are

reduced to more desirable levels, grower

prices will remain low. With cheap

cranberries, handlers destructively

undercut prices to ingredient customers

in an attempt to build market share

without increasing the overall demand

for cranberries.

The probable impact of these

alternatives at the handler level also

needs to be considered. While carry-in

inventories are estimated at 3.325

million barrels, these supplies are

expected to be concentrated in the

hands of only some of the major

handlers. The handlers without

substantial inventories claim that a

reduction of their growers’ crops at the

46 percent level would leave them

without enough fruit to supply their

customers. Overly restricting this year’s

crop would therefore hurt their

competitive position by requiring them

to surrender market share to other

handlers. They claim that any losses

they incur will be passed on to their

growers.

Grower prices are a small component

of the cost of finished cranberry

products, and are not closely associated

with movements in retail prices. Neither

level of volume regulation is expected to

have a meaningful impact on the retail

price of cranberry products.

We are soliciting comment on all

three alternatives, including the short

term and longer range impacts of these

alternatives at the grower, handler, and

consumer levels.

Exemption for Fresh and OrganicallyGrown Fruit

The Committee also recommended

that organic cranberries be exempt from

volume regulations. Fresh and

organically-grown fruit would be

exempt pursuant to ’ 929.58 of the order

which provides that the Committee may

relieve from any or all requirements,

cranberries in such minimum quantities

as the Committee, with the approval of

the Secretary, may prescribe.

Fresh fruit accounts for about 6

percent of the total production. The

Committee estimated that about 310,000

barrels will be sold fresh this year,

compared to 280,000 barrels sold last

season. All fresh cranberries can be

marketed and do not compete with

processing cranberries. Fresh

cranberries are seasonal (due to their

limited shelf life) and are not part of the

growing industry inventories. The

Committee recommended that such

cranberries be exempt from the

proposed allotment percentage.

Organically-grown cranberries

comprise an even smaller portion of the

total crop than fresh cranberries do. The

Committee estimated that about 1,000

barrels of organic fruit will be sold this

season, compared to 450 barrels last

season. Organic cranberries are a

growing niche market and regulating

them could have an adverse effect on

marketing this product. Demand for

organic cranberries is in line with the

current limited production. Thus, all

organic cranberries can be marketed,

and they do not contribute in any

meaningful way to the current

oversupply experienced with processing

fruit. The Committee therefore

recommended that organically-grown

cranberries be exempt from volume

regulation during the upcoming season.

The supporters of the 4.0 million

barrel level of regulation felt that a fresh

fruit exemption was not necessary and

that it added administration problems

for the Committee. Growers who

delivered fresh and processed fruit last

season were able to deliver all of their

processed fruit since such grower’s sales

history contained processed and fresh

fruit sales. They also believe that an

exemption could result in an

oversupply in the fresh fruit market.

Revision in the Appeals Process

The Committee also unanimously

recommended that the appeals process

be shortened by removing the

Committee’s review. Currently,

§ 929.125 provides an appeal procedure

for growers that are dissatisfied with a

determination made pursuant to

§ 929.48(a) and (b) of the order which

describes the computation of a grower’s

sales history.

Currently, § 929.125 provides that a

grower may appeal to an appeals

subcommittee within 30 days of receipt

of the Committee’s determination of his/

her sales history. If the grower is not

satisfied with the subcommittee’s

decision, the grower may further appeal

to the full Committee. Such grower must

notify the full Committee of his or her

appeal within 15 days after notification

of the subcommittee’s decision. The

Committee has 15 days to review the

appeal. The grower may further appeal

to the Secretary, within 15 days after

notification of the full Committee’s

findings, if the grower is not satisfied

with the Committee’s decision. All

decisions by the Secretary are final.

Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules 24301

The appeals procedure as described

above could take 60 or more days to

complete. Last season, the Committee

recommended and the Department

approved through rulemaking, the

suspension of the Committee’s review

from the procedures to shorten the

process. Thus, growers were able to take

their appeals directly to the Secretary

for a final decision if they are not

satisfied with the appeals

subcommittee’s determinations. The

Committee believes that this process

would prove to be more efficient in

considering grower appeals, and

recommended that the Committee

review be permanently removed from

the appeals procedure.

Establishment of a July 31 Deadline for

Transfers of Sales History

The Committee also unanimously

recommended that, during a year of

volume regulation, transfers of annual

allotments through partial or total leases

of acreage would only be recognized by

the Committee through July 31 of each

crop year. The appropriate paperwork

would have to be received in the

Committee’s office by close of business

on July 31.

Currently, § 929.50 provides that,

during a year of regulation, no transfer

or lease of cranberry producing acreage,

without accompanying sales history,

shall be recognized until the Committee

is in receipt of a completed transfer or

lease form. The Committee has found

through experience last season that

many growers were leasing acreage and

transferring sales history many times

throughout the season and even after

harvest. Growers were able to take

advantage of additional sales history

through these transactions. In addition,

such actions require a great deal of time

on the part of Committee staff, and

became particularly burdensome during

the busy harvest season.

Therefore, the Committee

recommended that all transfers must be

received by close of business on July 31

during a year of volume regulation. This

would allow sales histories to be

distributed in a more equitable manner

and also allow the Committee to

complete the transfer prior to the busy

harvest season.

Amendments to January Proposed Rule

The amendments to the sales history

calculations proposed in this rule would

benefit a majority of growers, and would

be especially beneficial to growers who

planted acreage in 1995 or later and

growers who have a combination of

mature acres and acreage planted in

1995 or later. Specifically, the

amendment to the sales history

calculation modifies the way growers’

sales histories are calculated so that the

additional sales history provided is

more in line with average acreage

yields. The amendment also ensures

that growers with mature acreage who

also have newer acreage and growers

with only newer acreage are treated

equitably. Approximately 30 percent of

all cranberry acreage was planted in

1995 or later and would be impacted by

this proposed amendment.

The amendment to the January 12

proposal would also withdraw the

proposed reinstatement of the June 1

allotment notification date. Reinstating

this date would be impractical and

therefore is being withdrawn from the

proposal. The January proposal is also

being amended to include the removal

of the section on determining cranberry

acreage which was inadvertently

omitted from the January proposal. This

amendment merely corrects that

omission.

In the event volume regulations are

implemented for the 2001–2002 crop

year, these proposed further changes

would have a positive effect on all

growers and handlers because they

would more equitably provide

additional allotment for newer or

replanted acreage, and clarify the

present regulations.

Other Alternatives Considered

Withholding Volume Regulation

The marketing order provides for two

methods of volume controls, the

producer allotment and the withholding

programs. Prior to recommending a

producer allotment program for the

2001–2002 crop, the Committee also

considered the benefits of a withholding

program.

Unlike the producer allotment

program which allows cultural practices

to be changed at the grower level closer

to harvest, growers deliver all their

cranberries to their respective handlers

under the withholding program. The

handler is responsible for setting aside

restricted cranberries and ultimately

disposing of the cranberries in

authorized noncommercial and

noncompetitive outlets. This could

result in a large volume of cranberries

being disposed of and perhaps

destroyed. In addition, the withholding

provisions require that all withheld

cranberries be inspected by the Federal

or Federal-State Inspection Service,

which would add costs. Although the

benefits to growers under a withholding

program are that all cranberries can be

delivered to handlers, growers would

generally only be paid by their handlers

for unrestricted cranberries. In addition,

it would be expected that costs

associated with disposal of withheld

cranberries would be deducted from

grower returns, further reducing grower

revenues. This could result in grower

returns well below cost of production.

As with the 2000–2001 volume

regulation, the Committee again

determined that the producer allotment

method of volume regulation was

preferable over the withholding method.

The producer allotment program allows

for less fruit to be produced and would

not require the disposal of as many

cranberries as with the withholding

provisions. In addition, inspections are

not required under the producer

allotment method, which is more cost

effective and would be simpler to

administer. This helps growers reduce

some of the variable costs associated

with preparing and maintaining a bog

for production and harvest.

Establishing a Cranberry Marketing Pool

Under a Producer Allotment Program

A group of independent handlers

indicate that any volume regulation

cannot be supported unless there are

some assurances that sufficient supplies

of cranberries would be made available

to meet their customer needs. Most

independent handlers claim that they

do not have inventories of cranberries to

carry into the new season. Although

handler to handler purchases are a

normal business practice (with or

without a volume regulation), a

producer allotment restriction increases

the need for handlers to purchase from

handlers with inventories to maintain

market share. Some handlers believe

this places them in a vulnerable

position, needing more fruit than

normal from their competitors.

The marketing order does not contain

a mechanism to provide the assurances

some of the independent handlers are

seeking. The amendment subcommittee

is working towards amending the order

to incorporate a handler marketing pool,

whereby a specified amount of

cranberries would be pooled to allow for

handlers with little or no inventories to

purchase cranberries at a price

established by the Committee. However,

amending the order in this manner

cannot be accomplished prior to the

2001 season.

Using All or Part of Both Methods of

Volume Regulation in the Same Year

Also considered by the Committee

was utilizing both methods of volume

regulation in the same year. Some

growers and handlers believe that the

producer allotment program does not

adequately address all the concerns

faced by the different segments of the

24302 Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules

industry. It was thought that using the

most useful parts of each program

would address a broader range of issues.

For example, under the withholding

program, handlers can apply to the

Committee for a release of their

restricted cranberries. To receive a

release, they have to deposit with the

Committee an amount equal to the fair

market value of the cranberries they

want to be released. The fair market

value is determined by the Committee.

The Committee uses these funds to

purchase an equal amount of free

cranberries from other handlers and to

dispose of those cranberries. This

provision of the withholding program is

referred to as the ‘‘buy-back’’ provision.

Some growers and handlers indicated

if there were a buy-back provision under

the producer allotment program, the

concern of handlers without inventories

having access to fruit would be

specifically addressed. There is no

authority in the marketing order to use

both methods of volume control

concurrently, and buy-back cannot be

used under the producer allotment

program. Additionally, the intent of a

producer allotment program is to

discourage production at the grower

level so that less fruit is delivered to

handlers. Establishing a ‘‘buy-back’’

under a producer allotment program is

problematic for that reason. If growers

believed that some of their excess fruit

could eventually be ‘‘bought back’’,

increased production could be

encouraged, defeating the purpose of the

program. Also, it is unclear exactly what

amount would be ‘‘bought back’.

Other growers and handlers have

indicated that if a producer allotment

and a withholding program were

recommended in the same year, growers

would still be encouraged to reduce

growing and handlers would be in a

position to buy-back berries to meet

market needs. For example, if a 20

percent restriction under a producer

allotment were recommended in

February for the upcoming season,

growers would be encouraged to reduce

production. If a withholding provision

were recommended in August of the

same year with a restricted percentage

of 10 percent, handlers would have the

opportunity to buy back cranberries to

meet their marketing needs.

Section 929.52 of the order specifies

that either a withholding or a producer

allotment program may be implemented

during any fiscal period, not both. Also,

further discussion is needed to

determine what problems would be

associated with implementing both

programs in one year, if authorized. The

amendment subcommittee is

considering this as an amendment to the

order.

The Committee recommendation for a

4.7 million barrel marketable quantity

resulting in an allotment percentage of

about 67 percent passed by a six to two

vote. As discussed earlier, the persons

voting against the recommendation

wanted a more restrictive allotment

percentage that would in turn increase

returns to growers to cover production

costs. All of the other recommendations

were passed by unanimous votes. The

other changes discussed in this

document are designed to improve the

operation of the volume regulation

should volume regulation be

implemented for the 2001–2002 season.

The subcommittee’s proposal of

setting the marketable quantity at 4.0

million barrels and an allotment

percentage of about 54 percent passed

by a 6 to 2 vote. Those voting against

the recommendation favored a higher

marketable quantity.

As with all Federal marketing order

programs, reports and forms are

periodically reviewed to reduce

information requirements and

duplication by industry and public

sectors.

As previously discussed in the

proposed rule published on January 12,

2001, that proposed rule would

necessitate reconfiguring one form

currently approved by OMB. The form

is entitled CMC–AL 1, Growers Notice

of Intent to Produce and Qualify for

Annual Allotment. Growers are required

to supply the Committee with

information relative to their cranberry

acreage in order to qualify for an annual

allotment. The information includes

how many existing and new acres

would be producing cranberries in the

following season and who would be

handling the cranberries. The estimated

time for 1,285 growers to complete this

form is 20 minutes, once a year, for total

annual burden hours of 424.05. If the

relevant portion of that proposed rule

were implemented, the Committee

would reconfigure this form to ensure

that information relative to this proposal

would be included, particularly the date

of planting of the acreage. The burden

hours of the form would not change and

the reconfigured form would be

submitted to OMB to replace the current

form.

All of the forms associated with the

transfer of sales histories associated

with leases have been previously

approved by OMB. There are also some

other reporting and recordkeeping and

other compliance requirements under

the marketing order. The reporting and

recordkeeping burdens are necessary for

compliance purposes and for

developing statistical data for

maintenance of the program. The forms

require information which is readily

available from handler records and

which can be provided without data

processing equipment or trained

statistical staff. This rule does not

change those requirements.

In compliance with Office of

Management and Budget (OMB)

regulations (5 CFR Part 1320) which

implement the Paperwork Reduction

Act of 1995 (44 U.S.C. Chapter 35), the

information collection and

recordkeeping requirements imposed by

this order have been previously

approved by OMB and assigned OMB

Number 0581–0103.

The Committee’s meetings were

widely publicized throughout the

cranberry industry and all interested

persons were invited to attend them and

participate in Committee deliberations.

Like all Committee meetings, the March

4–5, 2001, meeting was a public meeting

and all entities, both large and small,

were able to express their views on

these issues.

The Committee itself is composed of

eight members, of which seven members

are growers and one represents the

public. Also, the Committee has a

number of appointed subcommittees to

review certain issues and make

recommendations. The Committee

manager also held several meetings with

growers throughout the production area

to discuss the methods of volume

regulation and the procedures for

regulation.

The Department has not identified

any relevant Federal rules which

duplicate, overlap or conflict with this

rule.

A small business guide on complying

with fruit, vegetable, and specialty crop

marketing agreements and orders may

be viewed at the following website:

http://www.ams.usda.gov/fv/

moab.html. 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 15-day comment period is provided

to allow interested persons to respond

to this proposal. Fifteen days is deemed

appropriate because this rule, if

adopted, needs to be in place as soon as

possible to allow growers to implement

cultural practices that could curtail the

production of the crop should volume

regulation be implemented for the

2001–2002 season. All written

comments timely received will be

considered before a final determination

is made on this matter.

Federal Register / Vol. 66, No. 93 / Monday, May 14, 2001 / Proposed Rules 24303

List of Subjects in 7 CFR Part 929

Cranberries, Marketing agreements,

Reporting and recordkeeping

requirements.

For the reasons set forth in the

preamble, 7 CFR Part 929 is proposed to

be amended as follows:

PART 929—CRANBERRIES GROWN IN

THE STATES OF MASSACHUSETTS,

RHODE ISLAND, CONNECTICUT, NEW

JERSEY, WISCONSIN, MICHIGAN,

MINNESOTA, OREGON,

WASHINGTON, AND LONG ISLAND IN

THE STATE OF NEW YORK

1. The authority citation for 7 CFR

Part 929 continues to read as follows:

Authority: 7 U.S.C. 601–674.

§ 927.107 [Removed]

2. Section 929.107 is removed.

3. Section 929.110(d) is added to read

as follows:

§ 929.110 Transfers or sales of cranberry

acreage.

* * * * *

(d) During a year of regulation, all

transfers of growers’ sales histories for

partial or total leases of acreage shall be

received in the Committee office by

close of business on July 31.

4. Section 929.125 is revised to read

as follows:

§ 929.125 Committee review procedures.

Growers may request, and the

Committee may grant, a review of

determinations made by the Committee

pursuant to section 929.48, in

accordance with the following

procedures:

(a) If a grower is dissatisfied with a

determination made by the Committee

which affects such grower, the grower

may submit to the Committee within 30

days after receipt of the Committee’s

determination of sales history, a request

for a review by an appeals

subcommittee composed of two

independent and two cooperative

representatives, as well as a public

member. Such appeals subcommittee

shall be appointed by the Chairman of

the Committee. Such grower may

forward with the request any pertinent

material for consideration of such

grower’s appeal.

(b) The subcommittee shall review the

information submitted by the grower

and render a decision within 30 days of

receipt of such appeal. The

subcommittee shall notify the grower of

its decision, accompanied by the

reasons for its conclusions and findings.

(c) The grower may further appeal to

the Secretary, within 15 days after

notification of the subcommittee’s

findings, if such grower is not satisfied

with the appeals subcommittee’s

decision. The Committee shall forward

a file with all pertinent information

related to the grower’s appeal. The

Secretary shall inform the grower and

all interested parties of the Secretary’s

decision. All decisions by the Secretary

are final.

5. Section 929.149 is revised to read

as follows:

§ 929.149 Determination of sales history.

A sales history for each grower shall

be computed by the Committee in the

following manner.

(a) For each grower with acreage with

7 or more years of sales history, a new

sales history shall be computed using an

average of the highest 4 of the most

recent 7 years of sales. If the grower has

acreage with 6 years sales history, a new

sales history shall be computed by

averaging the highest 4 of the 6 years.

If the grower has acreage with 5 years

of sales history and such acreage was

planted prior to 1995, a new sales

history shall be computed by averaging

the highest 4 of the 5 years.

(b) For growers whose acreage has 5

years of sales history and was planted

in 1995 or later, the sales history shall

be computed by averaging the highest 4

of the 5 years and shall be adjusted as

provided in paragraph (d). For growers

whose acreage has 4 years of sales

history, the sales history shall be

computed by averaging all 4 years and

shall be adjusted as provided in

paragraph (d). For growers whose

acreage has 1 to 3 years of sales history,

the sales history shall be computed by

dividing the total years sales by 4 and

shall be adjusted as provided in

paragraph (d).

(c) For growers with acreage with no

sales history or for the first harvest of

replanted acres, the sales history will be

75 barrels per acre for acres planted or

re-planted in 2000 and first harvested in

2001 and 156 barrels per acre for acres

planted or re-planted in 1999 and first

harvested in 2001.

(d) In addition to the sales history

computed in accordance with

paragraphs (a) and (b) of this section,

additional sales history shall be

assigned to growers with acreage

planted in 1995 or later. The additional

sales histories depending on the date

the acreage is planted are shown in

Table 1.

TABLE 1.—ADDITIONAL SALES

HISTORY ASSIGNED TO ACREAGE

Date planted

Additional

2001 sales

history per

acre

1995 .......................................... 49

1996 .......................................... 117

1997 .......................................... 157

1998 .......................................... 183

1999 .......................................... 156

2000 .......................................... 75

(e) Sales histories shall be calculated

separately for fresh and processed

cranberries. Fresh fruit sales history, in

whole or in part, may be added to

process fruit sales history with the

approval of the Committee in the event

that the grower’s fruit does not qualify

as fresh fruit at delivery because of

quality reasons.

(f) If a grower’s fruit does not qualify

as fresh fruit upon delivery to the

handler, and it is converted to processed

fruit, the handler shall give priority to

this grower when allocating unused

allotment if the grower does not have

sufficient processed sales history to

cover the converted fruit.

6. A new section 929.251 is added to

read as follows:

Option 1

§ 929.251 Marketable quantity and

allotment percentage for the 2001–2002

crop year.

The marketable quantity for the 2001–

2002 crop year is set at 4.7 million

barrels and the allotment percentage is

designated at about 67 percent. Fresh

and organically grown fruit shall be

exempt from the volume regulation

provisions of this section.

Option 2

§ 929.251 Marketable quantity and

allotment percentage for the 2001–2002

crop year.

The marketable quantity for the 2001–

2002 crop year is set at 4.0 million

barrels and the allotment percentage is

designated at about 54 percent.

Option 3

Issue no volume regulation for the

2001–2002 crop year.

Dated: May, 8, 2001.

Kenneth C. Clayton,

Acting Administrator, Agricultural Marketing

Service.

[FR Doc. 01–11987 Filed 5–9–01; 2:00 pm]

BILLING CODE 3410–02–P