34332 Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 929

[Docket Nos. FV01–929–2 FR and FV00–

929–7 FR]

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: Final rule.

SUMMARY: This rule establishes a

marketable quantity of 4.6 million

barrels and an allotment percentage of

65 percent for the 2001–02 cranberry

season which begins September 1. The

marketable quantity is the total amount

of fruit that handlers may purchase

from, or handle for, growers during the

season. Fresh and organically-grown

cranberries are exempt from the volume

limitations to facilitate marketing of

these products. This final rule also

modifies the way growers’ sales

histories are calculated (including

deducting fresh sales), streamlines the

sales history appeals procedure, adds a

deadline for transfers of sales histories,

clarifies the outlets for excess

cranberries, and withdraws a proposed

reinstatement of the June 1 allotment

notification date. These actions are

designed to stabilize cranberry market

conditions, improve grower returns,

provide for a more equitable allocation

of the marketable quantity among

growers, and improve the

administration of the cranberry

producer allotment program.

EFFECTIVE DATE: This final rule becomes

effective June 28, 2001.

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 Kathleen M. Finn,

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 final

rule 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

When Will This Final Rule Be Effective?

The final rule is effective on June 28,

2001, and the volume regulation will

apply to the 2001–2002 crop year which

begins on September 1, 2001, and ends

on August 31, 2002.

Who Will Be Affected by This Action?

Cranberry growers and handlers/

processors located in the 10-State

production area will 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

Implemented This Year?

In recent years, cranberry production

has exceeded market demand, resulting

in building inventories and dramatic

declines in grower prices. In 2000, the

Cranberry Marketing Committee

(Committee) recommended the use of

volume regulation to bring supplies

more in line with demand. The

Committee recommended using

regulation again in the upcoming season

to continue the effort to restore

economic health to the cranberry

industry.

The use of volume control is not the

only avenue that is being used to

address the current oversupply

situation. The industry is also looking

into methods of increasing demand by

developing new markets, both domestic

and foreign, developing new products,

and increasing promotion efforts.

What Is Marketable Quantity and

Allotment Percentage?

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 marketable

quantity for the 2001–2002 crop year is

being established at 4.6 million barrels.

Sales of fresh and organically-grown

fruit are exempt from the volume

regulation.

The allotment percentage equals the

marketable quantity divided by the total

of all growers’ sales histories. Total

growers’ sales histories were set by the

Committee at 7.1 million barrels. Using

the formula established under the order

(4.6 million barrels divided by 7.1

million barrels), the annual allotment

percentage is 65 percent.

How Are Growers’ Annual Allotments

Calculated?

A grower’s annual allotment is the

result of multiplying the individual

grower’s sales history by the 65 percent

allotment percentage.

How Will Sales Histories Be Calculated

This Year?

The Committee is responsible for

calculating each grower’s sales history

on an annual basis. The way sales

histories are being calculated for the

2001–2002 season is modified so that

the marketable quantity is apportioned

more equitably among producers.

For growers with 7 or more years of

sales history, a new sales history will be

computed using an average of the

highest 4 of the most recent 7 years of

sales. For growers with 6 years of sales

history, a new sales history shall be

computed by averaging the highest 4 of

the most recent 6 years.

For growers with 5 years of sales

history, a new sales history will

computed by averaging the highest 4 of

the 5 years. Additional sales history will

be added for acreage planted in 1995 or

later in accordance with a formula

developed by the Committee.

For growers whose acreage has 5 years

of sales history and was planted in 1995

or later, the sales history will be

computed by averaging the highest 4 of

the 5 years and adjusting in accordance

with the established formula. For

growers whose acreage has 4 years of

sales history, the sales history will be

computed by averaging all 4 years and

adjusting in accordance with the

established formula. For growers whose

acreage has 1 to 3 years of sales history,

the sales history will be computed by

dividing the total years’ sales by 4 and

adjusting in accordance with the

established formula.

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

replanted in 2000 and first harvested in

2001, and 156 barrels per acre for acres

Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations 34333

planted or replanted in 1999 and first

harvested in 2001.

In addition, fresh sales will be

deducted from each grower’s sales

history. This is because fresh fruit sales

are exempt from volume regulation.

Do Growers Have Recourse if They Are

Not Satisfied With Their Sales History

Calculation?

If growers are dissatisfied with their

sales history as calculated by the

Committee, they can appeal to the

appeals subcommittee appointed by the

Committee. If growers are not satisfied

with the decision by the appeals

subcommittee, they may further appeal

to the Secretary of Agriculture. All

decisions by the Secretary will be final.

Growers may appeal if they believe

the figures used in the sales history

calculation are incorrect or if they

believe the calculation was incorrectly

performed by the Committee staff.

Appeals should be filed with David N.

Farrimond, General Manager, Cranberry

Marketing Committee, 266 Main Street,

Wareham, Massachusetts 02571;

Telephone: (800) 253–0862; or Fax (508)

291–1511.

Executive Orders 12866 and 12988

The Department of Agriculture

(Department) is issuing this final rule in

conformance with Executive Order

12866.

This rule 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 a

crop year. This rule establishes the

quantity 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 rule also modifies

the way growers’ sales histories are

calculated; streamlines the sales history

appeal process; adds a deadline for

transfers of sales histories; clarifies

provisions pertaining to the use of

excess cranberries; and withdraws a

proposed reinstatement of the June 1

allotment notification date. This action

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.

Introduction

The U.S. cranberry industry is

experiencing an oversupply situation.

Recent increases in acreage and yields

have resulted in greater supplies, while

demand has remained fairly constant.

The result has been building inventories

and reduced grower returns.

In recent years, the Committee has

been considering ways in which the

marketing order could be used to

address this situation. After much

debate, the Committee recommended

the use of volume regulation (in the

form of producer allotments) during the

2000–01 season for the first time in over

30 years.

Based on industry experience during

the 2000–01 season, the Committee

recommended late last year to change

some provisions of the order’s rules and

regulations pertaining to the producer

allotment program. This was done to

prepare for the possibility that volume

regulation would be needed again in the

2001–02 season. The changes

recommended were to modify the way

in which growers’ sales histories are

calculated, clarify the fresh fruit

exemption, modify the outlets for excess

cranberries, and reinstate the June 1

allotment notification date. These

changes were proposed in a rule

published in the Federal Register on

January 12, 2001 [66 FR 2838].

Comments on that proposed rule were

due on February 12, 2001.

Subsequently, in a meeting held

March 4–5, 2001, the Committee

recommended establishing a marketable

quantity of 4.7 million barrels and an

allotment percentage of 67 percent for

the 2001–02 season (with an exemption

for fresh and organically-grown fruit).

At that meeting, the Committee also

recommended a further revision in the

way sales histories are calculated,

establishing a deadline for transfers of

sales histories, and streamlining the

sales history appeals procedure. These

recommendations were included in a

proposed rule published in the Federal

Register on May 14, 2001 [66 FR 24291].

Also included in that rule were

alternative proposals to establish a

marketable quantity of 4 million barrels

with an allotment percentage of 54

percent and no exemptions for fresh or

organically-grown fruit; and to establish

no volume restrictions for the upcoming

season. In that rule, the Department also

proposed withdrawing the

reinstatement of the June 1 allotment

notification date. Comments on the

second proposed rule were due May 29,

2001.

This rule finalizes the actions

proposed in both the January 12 and

May 14 proposed rules.

History of the Marketing Order

The cranberry industry has operated

under a Federal marketing order since

1962. The order’s primary regulatory

authority is volume regulation. At that

time, production was trending sharply

upward, due primarily to improving

yields, and demand was not keeping

pace. The intent of the program was to

limit the volume of cranberries available

for marketing in fresh market outlets in

the United States and Canada, and in all

processing outlets, to a quantity

reasonably in balance with the demand

in such outlets. This method of

controlling volume was the

‘‘withholding’’ provisions whereby

‘‘free’’ and ‘‘restricted’’ percentages

would be established. Growers would

deliver all contracted cranberries to

their respective handlers. Free

cranberries could be marketed by

handlers in any outlet, while restricted

berries would have to be withheld from

handling and, if possible, diverted by

handlers to noncompetitive markets.

The withholding program has not been

used since 1971.

The order was amended in 1968 to

authorize another form of volume

regulation—producer allotments. The

intent was to discourage new plantings

and allow growers to remove surplus

berries in a more economical manner,

by reducing their production to

approximate the marketable quantity or

by leaving excess berries unharvested.

Production had continued to increase,

and the industry was reluctant to

recommend a sufficient restricted

percentage under the withholding

regulations. Under the producer

allotment program, growers were issued

base quantities. Base quantity was the

quantity of cranberries equal to a

grower’s established cranberry acreage

multiplied by such grower’s average per

acre sales made from the acreage during

a representative period. If the allotment

base program were activated, each

handler would be allowed to acquire for

normal marketing only a certain

34334 Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations

percentage of each grower’s base

quantity. This authority was used to

establish a regulation for the 1977–78

season, but that regulation was

subsequently rescinded.

In 1992, the producer allotment

provisions were amended to change the

method of calculating growers’ annual

allotments from the base quantity

method to a sales history method. Under

this amendment, a grower’s sales history

is calculated based on a grower’s actual

sales, expressed as an average of the best

4 of the previous 6 years of sales. There

were concerns that base quantities did

not accurately reflect actual levels of

sales because as growers’ acreage

increased or decreased, the base

quantity did not change. It was

concluded that basing allotments on

actual sales off acreage would be a more

realistic and practical way to determine

annual allotments. These provisions

were first used in the 2000–2001 season.

Producer Allotment Order Provisions

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. The allotment percentage

would be applied to each grower’s

individual sales history to derive each

grower’s annual allotment. Handlers

cannot handle cranberries unless they

are covered by a grower’s annual

allotment.

Section 929.48 of the order provides

for computing growers’ sales histories.

Sales history is defined in § 929.13 as

the number of barrels of cranberries

established for a grower by the

Committee. The Committee updates

growers’ sales histories each season. The

Committee accomplishes this by using

information submitted by the grower on

a production and eligibility report filed

with the Committee. The order sets forth

that a grower’s sales history is

established by computing an average of

the best 4 years’ sales out of the last 6

years’ sales for those growers with

existing acreage. For growers with 4

years or less of commercial sales

history, the sales history would be

calculated (prior to the 2000–01 volume

regulation) by averaging all available

years of such grower’s sales. A new

sales history for a grower with no sales

history is calculated by using the State

average yield per acre or the total

estimated commercial sales, whichever

is greater. This section also provides the

authority for calculating new sales

histories for growers after each crop year

where a volume regulation was

established using a formula

recommended by the Committee and

approved by the Secretary.

Section 929.49 provides that the

Committee must notify each grower of

his or her annual allotment, and must

notify 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 to more than

one handler, the annual allotment will

be apportioned among those handlers.

The order provides for the transfer of

any unused grower allotment to the

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

who have excess cranberries.

Section 929.59 defines excess

cranberries as cranberries withheld by

handlers after all unused allotment has

been allocated. This provision also

provides for handlers to notify the

Committee by January 1 of a written

plan to dispose of excess cranberries

and to dispose of them by March 1.

Section 929.61 of the order provides the

authority for establishing outlets for

excess cranberries.

Section 929.58 of the order provides

for relieving from any or all

requirements of the order the handling

of cranberries in such minimum

quantities as the Committee, with the

approval of the Secretary, may

prescribe. The exemption for fresh and

organically-grown cranberries was

implemented in 2000 under the

authority in this section.

Marketable Quantity, Allotment

Percentage and Sales Histories

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).

The Committee’s Marketing Policy for

the 2001 Crop

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, was estimated at

3,325,000 barrels. Foreign production

(primarily Canada) was 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

supply of cranberries was 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, was 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 was expected to enter

the 2001–2002 crop year with

inventories of about 3,325,000 barrels

(assuming USDA purchases of 1.0

million barrels). This level of inventory,

coupled with the industry’s current

capacity to produce in excess of

estimated demand, resulted in the

industry debating two volume

regulation levels for the 2001–2002 crop

year. These alternatives are discussed

below.

Summary of Options

The rule published on May 14, 2001,

proposed three options of volume

regulation. The first option was

recommended by the Committee to

establish a marketable quantity of 4.7

million barrels and an allotment

percentage of 67 percent. This

percentage would be applicable to

processed sales only since fresh fruit

Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations 34335

and organically grown cranberries

would be exempt.

The second option was recommended

by a volume regulation subcommittee

and supported by a number of mostly

independent growers. This option

would establish a marketable quantity of

4.0 million barrels and an allotment

percentage of 54 percent. This

percentage would be applied to all sales

of cranberries.

Finally, a third option proposed by

USDA would establish no volume

regulation for the upcoming season.

Cranberry growers and handlers would

voluntarily and individually decide

how much fruit to market.

Volume Regulation for the 2001–2002

Season

The Committee met on February 5,

2001, to discuss implementing a volume

regulation to restrict the marketing of

the 2001 cranberry crop. The Committee

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 growing production,

resulting in mounting carryover

inventories.

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

approximately 46 percent of their sales

history off the market.

The econometric model shows that

grower prices would increase to $31 per

barrel. Under this scenario, inventories

would decline to 2.325 million barrels.

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. The Committee indicated that

it was supportive of improving grower

returns 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, most independent

handlers oppose a regulation of this

magnitude. There is concern that under

a 4.0 million barrel marketable quantity,

there would not be enough 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 to

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.

Based upon an initial review of these

alternative levels of regulation, the

Department concluded that both could

tend to effectuate the goals of the Act,

which are to improve grower prices and

establish more orderly marketing

conditions. Additionally, the

Department considered the possibility

of having no volume restriction for the

upcoming cranberry season, and

allowing growers and handlers to

individually and voluntarily decide

how much fruit to market. Therefore, a

proposed rule was issued which

solicited comments on both levels of

regulation as well as on the possibility

of no regulation.

During the comment period, hundreds

of comments were filed by cranberry

growers, handlers and other interested

parties. After analyzing all available

information, including that received in

response to the proposed rule, USDA

has concluded that a volume regulation

for the 2001–02 crop would be

consistent with the purposes of the Act

and the order. In addition, we have

concluded that the regulation likely to

provide more benefits to the industry in

the short and long term is that which

establishes a marketable quantity of 4.6

million barrels, an allotment percentage

of 65, and an exemption for fresh and

organically-grown fruit. The bases for

these conclusions are set forth in detail

later in this document.

It should be noted that the allotment

percentage of 65 percent established by

this rule is two percent below the 67

percent contained in the proposed rule.

There are two reasons for this. First, the

Department has determined that the

marketable quantity recommended by

the Committee should be reduced from

4.7 to 4.6 million barrels. At the time

the Committee made its

recommendation, USDA purchases

during the current season (2000–01)

were expected to reach 1.0 million

barrels. It currently appears that this

level will not be attained, resulting in

more inventories being carried into the

2001–02 season. Estimates of total

purchases to be made have been as low

as 500,000 barrels. While it is not

possible to project the exact level of

USDA purchases, we need to be careful

not to underestimate the shortfall

because it would result in a lower

volume of fruit available for sale in the

upcoming season, which could impede

34336 Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations

market growth efforts. Therefore, we are

estimating that USDA purchases of

cranberries will be at least 100,000

barrels below what was anticipated. For

this reason, we are reducing the

marketable quantity for the 2001 crop by

that amount.

Additionally, at the time the proposed

rule was issued, total sales histories

were estimated at 7.0 million barrels.

The current sales history total is 7.1

million barrels. The allotment

percentage equals the marketable

quantity divided by the total sales

history. Reducing the marketable

quantity and increasing the sales history

total yields a slightly lower allotment

percentage of 65 percent.

Exemption for Fresh and OrganicallyGrown Fruit

Fresh fruit and organically-grown

cranberries are exempt from regulation

this season. Fresh and organicallygrown fruit are 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. The

provisions of the regulations concerning

the fresh fruit exemption are also

clarified by this action so that fresh fruit

is handled as it was intended by the

Committee.

Under current production and

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

for this season.

More specific provisions concerning

the fresh fruit exemption are also being

adopted under this action so that the

intent of the fresh exemption is clear.

The exemption provision specifies that

only sales of packed-out cranberries

intended for sale to consumers in fresh

form are exempt from volume

regulations. It is further clarified to state

that fresh cranberries are also sold dry

(either dry picked or dried after water

picking) in bulk boxes, generally

weighing less than 30 pounds. If fresh

cranberries are diverted into processing

outlets, the exemption does not apply.

Although the intent of the fresh fruit

exemption in the 2000–01 volume

regulation was to only exempt

cranberries going to retail outlets as

fresh cranberries, questions arose as to

what constituted ‘‘fresh’’ under the

regulations. For example, some growers

expressed the desire to sell large bulk

bins of wet cranberries to supermarkets.

There was at least one report in 2000 of

bulk wet cranberry sales to a retail

outlet. This is not what was intended by

the Committee. The Committee was

concerned that wet cranberries sold in

bulk bins would experience serious

quality problems for retailers and

consumers and thus, have a negative

impact on the fresh marketplace.

Another example is that some growers

wanted to sell their excess cranberries

as fresh cranberries to foreign markets,

and it was thought that foreign

customers could have an economic

incentive to process the berries and sell

them in direct competition with

regulated cranberries in foreign markets.

This also was not the intent of the

exemption.

This action also establishes that

growers be required to notify the

Committee of their intent to sell fresh

fruit in quantities over 300 barrels. It is

important for the Committee to collect

data on sales of fresh cranberries.

However, it is not intended that small

quantities be subject to reporting

requirements.

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.

Organically grown cranberries are

exempt from the 2001–2002 volume

regulation. Such cranberries must be

certified as organic by a third party

organic certifying organization

acceptable to the Committee. Handlers

qualify for the exemptions by filing the

amount of fresh and organic cranberry

sales on the grower acquisition listing

form.

In addition, fresh and processed fruit

sales histories will be calculated

separately by the Committee. This

action is discussed in detail in the

following portion of this document

relating to sales history calculations.

Sales History Calculations

This rule modifies the way sales

histories are calculated for the 2001–

2002 season to apportion the marketable

quantity more equitably among

producers.

For growers with 7 or more years of

sales history, a new sales history will be

computed using an average of the

highest 4 of the most recent 7 years of

sales. For growers with 6 years of sales

history, a new sales history will be

computed by averaging the highest 4 of

the most recent 6 years. For growers

with 5 years of sales history, a sales

history will computed by averaging the

highest 4 of the 5 years. Additional sales

history will be assigned to acreage

planted in 1995 or later in accordance

with the following table:

Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations 34337

TABLE 1.—ADDITIONAL SALES HISTORY ASSIGNED TO ACREAGE

Date planted

Expected 2001

yield

(bbl/acre)

Average sales

history

(bbl/acre)

Additional

2001 sales

history per

acre

(bbl/acre)

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

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

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

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

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

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

For growers whose acreage has 5 years

of sales history and was planted in 1995

or later, the sales history will 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 will 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 will be computed by

dividing the total years’ sales by 4 and

adjusting in accordance with Table 1.

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

replanted in 2000 and first harvested in

2001, and 156 barrels per acre for acres

planted or replanted in 1999 and first

harvested in 2001.

The Committee discussed equity

concerns that resulted when calculating

sales histories during the 2000 volume

regulation. Because sales histories are

based on an average of past years’ sales,

newer growers could be restricted to a

greater extent than more established

growers. This is because a cranberry bog

does not reach full capacity until several

years after being planted. Using an

average of early years’ sales (which are

low) can result in sales histories below

future sales potential. A more

established grower, on the other hand,

would have a sales history more

reflective of his or her production

capacity.

The Committee and the Department

gave much thought to the most equitable

method of determining sales histories

within the scope of the order. The final

rule on volume regulation for the 2000

crop year was as flexible as the order

would allow in alleviating the

differential impact of the volume

regulation on growers.

Section 929.48(a)(3) of the order

provides for recalculating the method

for determining sales histories for

growers after a crop year during which

a volume regulation has been

established using a formula determined

by the Committee with the approval of

the Secretary. In light of this authority,

the amendment subcommittee met

several times and developed an

improved method of assigning sales

histories for newer acreage in the event

volume regulations were implemented

for the 2001–2002 season.

The modified method of calculating

sales histories is expected to address

concerns associated with using a

grower’s actual sales history without

taking into account anticipated

production when calculating annual

allotments. Ideally, in a year of volume

regulation, all growers’ actual crops

would be reduced by the same

percentage. Because of uncertainties in

making crop predictions, annual

allotment calculations based on

averaging growers’ sales histories alone

does not provide any adjustment for

new acres as they rapidly increase

production during the first several

harvests. Therefore, growers can be

impacted differently depending upon

their particular situation. The result is

that sales histories for growers with a

significant number of acres being

harvested for the first, second, third, or

fourth time can be below what the

average crop for these growers is

expected to be during the next harvest.

The restriction percentages for these

growers in a year of volume regulation

could therefore exceed the average

allotment restriction percentage. The

method being implemented by this rule

addresses that issue by minimizing the

differential impact among growers with

newer acreage.

The revised formula provides a

specified amount of additional sales

history for newer acreage based on

USDA and industry analysis of

cranberry production. The amount of

such additional sales history depends

on the year of planting. Also, the

formula takes into account different

harvesting times for first year harvests

by basing first year averages on the year

planted.

The subcommittee recommended the

new method of calculating sales

histories to the full Committee. The

Committee recommended this method

at its August 28, 2000, Committee

meeting. This recommendation was set

forth in a proposed rule published in

the Federal Register on January 12,

2001, (66 FR 2838) with a comment

period ending February 12, 2001.

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 for

adjusting sales history.

The Committee’s February 5

recommended modification to the sales

history calculations was incorporated

into the proposed rule for volume

regulation published in the Federal

Register on May 14, 2001 (66 FR 24291).

The revised method of calculating

sales histories addresses the concerns of

equity with the way sales histories were

assigned under the 2000 volume

regulation. The revised formula

provides a specified amount of

additional sales history based on USDA

and industry analysis of cranberry

production depending upon the year of

planting. This formula provides

additional sales histories for acreage

planted in 1995 or later to reflect

expected future production on newer or

replanted acreage.

The modification recommended by

the Committee in February does not

change the formula that provides the

additional sales history. The additional

sales history will still be calculated

using the figures in Table 1. Actual sales

34338 Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations

histories for growers with only 1 to 3

years of sales history (and no mature

acres) will be computed by dividing the

total years’ sales by 4 before the new

acreage adjustment is added, just as

every other grower’s sales history is

calculated. 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.

Therefore, § 929.149 is modified as

follows: For growers whose acreage has

5 years of sales history and was planted

in 1995 or later, the sales history is

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 is 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 is computed by dividing the

total years sales by 4 and adjusting in

accordance with Table 1.

Segregation of Fresh Fruit From Sales

History Calculations

Fresh fruit sales will be deducted

from sales histories and each grower’s

sales history will represent processed

sales only. Fresh fruit was exempt from

the 2000–2001 volume regulation and

concerns were raised that sales histories

were not reflective of actual sales. The

Committee recommended that if fresh

fruit was exempt from volume

regulation, this action be implemented

to ensure that sales histories reflect

actual sales. As stated previously in this

document, fresh fruit is again exempted

from the 2001–2002 volume regulation.

The Committee recommendation

intended that there be separate sales

histories for fresh and processed fruit.

The recommendation also specified that

fresh fruit sales may be added to

processed 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. The Committee

staff indicated that since fresh fruit was

exempt from volume regulation, it

would be administratively easier to

simply deduct fresh sales from each

grower’s sales history rather than to

provide two sales histories. With the

fresh fruit exemption, there is no need

for a sales history for fresh fruit. Also,

since there will be no fresh fruit sales

history, there is no need to specify that

fresh fruit sales may be added to

processed fruit sales histories. Also, a

provision is being implemented

covering growers whose fresh fruit is

rejected upon delivery. The regulatory

text has been modified to reflect this

change. Therefore, a new paragraph (e)

will be added to § 929.149 specifying

that fresh fruit will be deducted from

sales history calculations.

The Committee addressed the impacts

of having a sales history that includes

only processed fruit, and how the

allotment percentage will 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 converted

to 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 will allow the

grower to deliver the rejected fruit for

processing. This action is being

implemented by adding a new

paragraph (f) to § 929.149 of the order’s

rules and regulations.

Section 929.62(c) of the order

specifies that handlers must file

certified reports with the Committee as

to the quantities of cranberries handled

during designated periods. Handlers

have been reporting this information

and would continue to report this

information in accordance with that

provision.

Change in Number of Years Used in

Computing Sales Histories

Sales histories will be computed

using an average of the highest 4 of the

most recent 7 years of sales. Paragraph

(a)(1) of § 929.48 of the order sets forth

that sales histories are computed using

the best 4 out of 6 years of growers’

sales. Paragraph (a)(2) of the same

section states that the Committee, with

the approval of the Secretary, may alter

the number and identity of years to be

used in computing subsequent sales

histories.

At amendment subcommittee

meetings and full Committee meetings,

the impact of using the year of volume

regulation in future calculations of sales

histories was discussed. The Committee

was concerned that sales off acreage in

a year of volume regulation could be

unusually low and if that year was used

in calculating sales histories for the next

year, it could lower some growers’ sales

histories to unrealistic levels.

This change allows the year of volume

regulation (2000–01) to be dropped from

sales history calculations. Adding an

additional year from which growers’

highest 4 years of sales can be chosen

provides a greater opportunity for

growers to maintain a sales history more

reflective of their actual sales.

Paragraph (a) of § 929.149 is modified

to indicate that sales histories will be

computed using an average of the

highest 4 of the most recent 7 years of

sales.

State Average Yield Provisions

The definition of State average yield

is being removed from the rules and

regulations. Section 929.48(a)(5) of the

order sets forth that a new sales history

for a grower with no sales history is

calculated by using the State average

yield per acre or the total estimated

commercial sales, whichever is greater.

For the 2000–2001 crop year, the State

average yield was defined as the average

State yields for the year 1997 or the

average of the best 4 years out of the last

6 years, whichever was greater. This

calculation was similar to that used to

compute sales history for more

established growers (an average of the

best 4 years out of the last 6 years), and

averaged out seasonal variations in

yields. However, if estimated

commercial sales were greater than what

was computed above, the Committee

used the estimated commercial sales.

The formula for recalculating sales

histories being implemented with this

action provides a yield for acres with no

sales history based on analysis of

industry data. For acreage expected to

be harvested for the first time in the year

of a volume regulation, the sales history

will be 75 barrels for acres harvested the

first year after planting and 156 barrels

for acres harvested the second year after

planting. These yields are based on

averages of expected yields from acreage

of that age plus an additional 25 barrels

and are more in line with actual yields

than providing the State average yield,

which is considered high for first

harvests. Under the State average yield

provisions for the 2000 volume

regulation, growers forfeited any unused

allotment. The modified method

provides a simpler, more realistic

approach to acreage with no sales

history.

Since, under the new formula, a

definition of State average yield is

unnecessary, § 929.148 is removed from

the rules and regulations.

Definition of Commercial Crop

The definition of commercial crop is

being removed from the rules and

regulations. The final rule on volume

regulation for the 2000 crop changed the

number of barrels that defined a

commercial crop under the marketing

order from 15 to 50 barrels per acre.

Calculations of sales histories were

based on ‘‘commercial’’ cranberry sales.

Section 929.107 defined commercial

crop as acreage that has a sufficient

Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations 34339

density of growing vines to produce at

least 50 barrels per acre without

replanting or renovation. Acreage that

produced less than 50 barrels per acre

was not considered to produce a

commercial crop.

The intent of this provision was to

assist growers who harvested

cranberries for the first time in 1999.

These growers qualified for a new sales

history determination for the 2000 crop

year if they produced less than 50

barrels per acre in 1999.

A full commercial cranberry crop is

usually not harvested until 3 or 4 years

after being planted. Production is

usually limited during the first year,

with increases in subsequent years until

full capacity is reached. This rule

change allowed growers who produced

less than 50 barrels per acre in 1999, to

be eligible to receive as a sales history

the determination for growers with no

sales history on such acreage (which

was the State average yield or the

grower’s estimated commercial sales,

whichever was greater) for the 2000

volume regulation. This change was

intended to benefit growers who had

very low yields per acre for their first

year of production.

The new calculation of sales histories

being implemented in this action makes

this provision unnecessary. For acreage

expected to be harvested for the first

time in 2001, the sales history will be

75 barrels per acre for acres planted in

2000 and 156 barrels per acre for acres

planted in 1999. No determinations are

necessary as to how many barrels were

produced on the acreage in previous

years.

The Committee will still need to

determine that acreage reported as first

coming into production in the year of

volume regulation is viable planted

acreage. For example, if a grower reports

that 50 acres of cranberries planted in

1999 are going to be harvested for the

first time in 2001, the Committee needs

to verify that this acreage exists and that

the vines are sufficient enough to

provide a crop. Since the definition of

commercial crop is no longer necessary,

§ 929.107, Basis for determining

cranberry acreage, is removed from the

rules and regulations.

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 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 Department concludes

that the Committee review of sales

history appeals is not needed and is

therefore, being removed from the

appeal procedures.

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 is being implemented for

the 2001–2002 season, which begins

September 1, 2001. All paperwork for

transfers must be received by the

Committee staff by July 31, 2001. This

will allow sales histories to be

distributed in a more timely manner and

also allow the Committee to complete

the transfers prior to the busy harvest

season. This change is being

implemented by adding a new

paragraph (d) to § 929.110 of the order’s

rules and regulations.

Outlets for Excess Cranberries

This action modifies the provisions

on outlets for excess cranberries to

broaden the scope of research and

development projects authorized as

outlets for excess cranberries.

The purpose of the producer

allotment program is to limit the

amount of the total crop that can be

marketed for normal commercial uses.

There is no need to limit the volume of

cranberries that may be marketed in

noncommercial or noncompetitive

outlets. Thus, in accordance with

§ 929.61, handlers are allowed to

dispose of excess cranberries in certain

designated noncommercial outlets. That

section of the order provides that

noncommercial outlets may include

charitable institutions and research and

development projects for market

development purposes. Noncompetitive

outlets may include any nonhuman food

use (animal feed) and foreign markets,

except Canada. Canada is excluded

because significant sales of cranberries

to Canada could result in transshipment

back to the United States of the

cranberries exported there. This could

disrupt the U.S. market, contrary to the

intent of the volume regulation. To

ensure that excess cranberries diverted

to the specified outlets do not enter

normal marketing channels, certain

safeguard provisions are established

under § 929.61. These provisions

require handlers to provide

documentation to the Committee to

verify that the excess cranberries were

actually used in a noncommercial or

noncompetitive outlet. In the case of

nonhuman food use, a handler is

required to notify the Committee at least

48 hours prior to disposition so that the

Committee staff will have sufficient

time to be available to observe the

disposition of the cranberries.

34340 Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations

In the final rule establishing the

2000–2001 volume regulation, § 929.104

specified the noncommercial and

noncompetitive outlets for excess

cranberries as: (1) Foreign countries,

except Canada; (2) Charitable

institutions; (3) Any nonhuman food

use; and (4) Research and development

projects dealing with dehydration,

radiation, freeze drying, or freezing of

cranberries, for the development of

foreign markets. This regulation also

specified that excess cranberries cannot

be handled, i.e. converted into canned,

frozen, or dehydrated cranberries or

other cranberry products by any

commercial process.

The amendment subcommittee

concluded that the provision regarding

research and development projects was

too restrictive and could exclude some

outlets for excess cranberries that could

be deemed noncommercial and

noncompetitive. The Committee

unanimously recommended to modify

paragraph (a)(4) of § 929.104 to state that

any research and development projects

approved by the Committee will be

eligible as outlets for excess cranberries.

This will provide more flexibility in

determining if a specific project could

be considered noncompetitive or

noncommercial. The Committee will

review the activity and make that

determination. Research and

development projects will not be

limited to dehydration, radiation, freeze

drying, or freezing of cranberries for the

development of foreign markets.

Therefore, § 929.104 is modified to

broaden the scope of research and

development projects authorized for

excess cranberries.

Allotment Notification Date

This action withdraws the proposed

reinstatement of the June 1 deadline for

the Committee to notify growers and

handlers of their annual allotments.

The rule 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

volume regulation. Therefore, the

proposal to reinstate the June 1 deadline

date is withdrawn.

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 final 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 final rule will

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 action makes the following

amendments to the regulations under

the cranberry marketing order: (1)

Establishes a marketable quantity and

an allotment percentage for cranberries

in a 10-State production area for the

crop year from September 1, 2001,

through August 31, 2002; (2) exempts

fresh and organically grown cranberries

from the volume regulation; (3) changes

the way in which sales histories are

calculated; (4) deletes the Committee

review step in the sales history appeal

process; (5) adds a deadline date by

which requests for transfers of sales

histories on leased acreage must be filed

with the Committee; (6) broadens the

scope of research and development

projects authorized as outlets for excess

cranberries; and (7) withdraws a

proposal to reinstate a June 1 allotment

notification date. These actions are

designed to establish more orderly

marketing conditions for cranberries,

improve grower returns, provide for a

more equitable allocation of the

marketable quantity among growers, and

improve the administration 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

Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations 34341

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

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 3.325 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. A

marketable quantity of 5.468 million

barrels was established for the 2000–01

season, implemented through an

allotment percentage of 85 percent.

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 are 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

were included in the proposed rule.

Also included was a proposal to have no

volume regulation. The Department

believed that both levels of volume

regulation 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 those levels proposed to

establish a marketable quantity of 4.7

million barrels and an allotment

percentage of 67, with an exemption for

fresh and organically-grown fruit. The

second proposed to establish a

marketable quantity of 4.0 million

barrels and an allotment percentage of

54, applicable to all fruit.

In its initial analysis of these options,

the Department relied in part upon an

econometric model developed by the

University of Wisconsin and widely

discussed within the 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

was estimated at 3.325 million barrels,

domestic production was estimated at

5.675 million barrels, imports were

projected at 0.835 million barrels, and

total sales for the 2001–02 crop year

were 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.

34342 Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations

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

Carryin 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 7.833 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 56 66

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

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

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

an estimated $56.75 million, and ending

inventories would grow to 4 million

barrels. Heavy inventories will continue

to put downward pressure on grower

prices for ensuing seasons.

The second column of the table shows

that a 4.0 million barrel marketable

quantity will result in inventories

declining to 2.325 million barrels, and

the grower price increasing to an

estimated $31 per barrel. Total grower

revenue under this option is projected

to reach $124 million. Under this

option, sales will 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 56 percent.

As shown in the last column, the 4.7

million barrel alternative will result in

carryout inventories remaining at 3.325

million barrels. The grower price will be

an estimated $19.50 per barrel, and

revenues will total $97.5 million. With

a marketable quantity of 4.7 million

barrels, sales will 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 7.1

million barrels of processed sales. Using

the formula established under the order

(4.7 million barrels divided by 7.1

million barrels), the annual allotment

percentage would be 66 percent.

As previously discussed, the

Department believes carryin inventories

will be higher than originally projected

because USDA purchases during the

2000–01 crop year are likely to be less

than anticipated. An increase in the

carryin level (100,000 barrels) would be

offset by a like reduction in the

marketable quantity. Thus, total

available supplies would remain the

same as in the above table, and the

impact on grower prices and sales

would be as estimated above.

The econometric model provides a

framework for estimating the short-term

price impacts 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 will 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. In the

proposed rule, we solicited comments

on all three alternatives, including the

longer range impacts of these

alternatives at the grower, handler and

consumer levels. Based on current

information, including the comments

received (which are analyzed in the

subsequent portion of this document),

we have reached the following

conclusions.

Given the anticipated size of the 2001

cranberry crop in addition to current

inventory levels, volume regulation

appears to be the favorable market

stabilization technique over no volume

regulation. A no volume regulation

adjustment could easily result in a loss

of a substantial number of smaller to

mid-sized cranberry producers, as

market prices without any form of

market intervention would remain

below the cost of production until

market supply fell to the level of market

demand. In addition to a loss of a

profitable return on commodity

production, which is a mainstay for

many of the producers likely to be

negatively impacted, investments in

land and production start-up costs

would also be lost as much of the

potentially affected acreage has no

alternative agricultural uses. Cranberry

production is a key agricultural industry

in various regions of the major

producing states, including Wisconsin,

Massachusetts, New Jersey, Oregon, and

Washington. Failure of cranberry farms

in these regions would have major

implications for the vitality of these

economies.

Volume regulation is a market

stabilization technique whereby a

portion of annual production is

withheld from the market, thereby

reducing the flow of supply to market

and improving producer prices.

Depending on the amount of production

Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations 34343

impacted by volume control regulation,

short- and long-term effects on the

market vary. Some proponents of

volume regulation advocate a more

significant reduction in market supply,

indicating that such action would result

in a bigger jump in market prices, a

quicker improvement in grower returns,

and a necessary reduction in

inventories. In addition, these advocates

intimate that any increases in demand

could be met by drawing down surplus

inventories, thereby simultaneously

reducing price-depressing affects of

large stocks in a time of ample

production. While this argument may be

well grounded in economic theory,

there are many externalities which are

not given due attention, as well as

producers’ inclinations to increase

production as market prices increase. In

other words, too large of a volume

control regulation leaves little margin

for unforeseen market events and may

result in misleading market signals to

producers as a result of an overly

adjusted price.

A less stringent volume regulation

would reduce market supply and

improve market prices while allowing

for a more gradual market supplydemand adjustment. While the shortterm affect of a less stringent volume

regulation would result in relatively

lower market prices than with a greater

reduction, as described above, prices

would likely offer a greater return than

if no volume control existed. A more

conservative approach is also less likely

to result in a surge of production

triggered by higher prices and allow for

a greater margin of supply to address

any unforeseen market complications in

subsequent production years.

In weighing the relative benefits of

differing volume regulation, it is

important to consider impacts on

handler competition for product to fill

sale orders, and consumer demand

elasticity relative to fluctuating prices.

A more restrictive volume control

would result in a smaller volume of

product available to handlers to satisfy

sale orders or promote market growth.

Handlers who do not maintain

inventories of cranberries may be unable

to effectively compete for supplies, thus

resulting in their inability to fill sale

orders and a loss of business. Such a

result would have a negative impact on

producers, as some market outlets

(demand) may be lost to substitution of

like products for cranberries. Rapid

fluctuations in price could have similar

results, as consumers, especially food

manufacturers using cranberries to

enhance processed products, are likely

to respond negatively to market

inconsistencies in price as well as

supplies. A more gradual reduction in

supply could ease market tensions and

allow suppliers to maintain strong

market relations with industry

consumers.

Furthermore, while it has been

demonstrated that end-market consumer

demand is inelastic to price reductions,

demand may decrease if prices were to

rise. In other words, end-market

consumers are more likely to consume

less cranberries when prices increase

drastically than they are to consume

more when prices drop.

For the above reasons, we conclude

that establishing a marketable quantity

of 4.6 million barrels for the 2001–02

cranberry season is the best course of

action. This represents the Committee’s

recommended marketable quantity

adjusted for the increased carryin due to

lower than anticipated USDA purchases

during the current season.

Sales History Recalculations

The amendments to the sales history

calculations will benefit a majority of

growers, especially growers who

planted some or all of their acreage 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 acres who also

have newer acreage and growers with

only newer acres are treated equitably.

The amendment also provides that the

Committee deduct fresh sales from

growers’ sales histories. The amendment

also provides that sales histories be

computed using an average of the

highest 4 of the most recent 7 years of

sales. Changing the total number of

years from 6 to 7 allows the year of

volume regulation (2000–01) to be

dropped from sales history calculations.

Regarding the 2000 volume

regulation, many growers, particularly

those with acreage 4 years old or less,

indicated that the method of sales

history calculation placed them at a

disadvantage because they realized

more production on their acreage than

their sales history indicated.

Approximately 30 percent of all

cranberry acreage was planted in 1995

or later and will be impacted by this

amendment. With the volume of new

acres within the industry, this would

affect many growers.

The Committee determined that

something needed to be done to address

the concerns associated in the 2000 crop

year with growers with newer acreage.

The Committee discussed other

alternatives to this method. One

suggestion was to allow growers with

newer acreage to add a percentage of the

State average yield to their sales history

each year up to the fourth year. The

example presented was that acreage

being harvested for the second time

during a year of volume regulation

would receive a sales history that was

25 percent of the State average yield, a

third year harvest would receive 50

percent of State average yield, and a

fourth year harvest would receive 75

percent of State average yield. Although

this method would address some of the

problems experienced last year, it was

determined that the method established

by this action is a simpler and more

practical method for growers to obtain

the most realistic sales history.

The Committee and the Department

gave much thought to the most equitable

method of determining sales histories

and the method established by this

action specifically addresses growers’

concerns by providing a more equitable

determination of their sales histories.

The method provides additional sales

history for growers with newer acres to

account for increased yields for each

growing year up to the fifth year by

factoring in appropriate adjustments to

reflect rapidly increasing production

during initial harvests. The adjustments

are in the form of additional sales

histories based on the year of planting.

As discussed previously, an appeals

process is in place for growers to request

a redetermination of their sales

histories. For the 2000–2001 volume

regulation, over 250 appeals were

received by the appeals subcommittee

(the first level of review for appeals) and

these appeals demonstrated the majority

of issues that impacted growers during

the volume regulation. This action

provides more growers with realistic

sales histories. Therefore, fewer appeals

are likely to be filed. The appeals

subcommittee chairman estimated that

over 80 percent of the appeals filed last

year would not have been filed if the

Committee was able to implement this

formula for the 2000–01 season.

These changes will have a positive

effect on all growers and handlers

because they will result in a more

equitable allocation of the marketable

quantity among growers.

Revision in the Appeals Process

Currently, § 929.125 provides a threetiered appeal procedure for growers who

are dissatisfied with the computation of

their sales history pursuant to § 929.48

of the order. First, a grower may appeal

to an appeals subcommittee. The grower

may then further appeal to the full

Committee. Finally, the grower may

34344 Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations

appeal to the Secretary. All decisions by

the Secretary are final.

This rule eliminates the full

Committee review from the procedure to

shorten the process. Thus, growers can

take their appeals directly to the

Secretary for a final decision if they are

not satisfied with the appeals

subcommittee’s determinations. This

change shortens the appeal process,

which should benefit growers who

disagree with their sales history

determination. The earlier growers have

a final decision, the more able they are

to decide how to adjust to their annual

allotment.

Establishment of a July 31 Deadline for

Transfers of Sales History

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. This rule establishes a July

31 deadline for receipt of such

paperwork. This action should assist in

the efficient administration of the

program by having transfers recorded

before the busy harvest season without

unduly reducing grower flexibility in

transferring acreage and sales histories.

Outlets for Excess Cranberries

This action modifies paragraph (a)(4)

of § 929.104 to provide that any research

and development projects approved by

the Committee are eligible as outlets for

excess cranberries. Currently, such

projects are limited to those associated

with the development of foreign

markets. This action will have a positive

impact on growers and handlers because

it broadens the scope of projects eligible

for the use of excess berries. This could

encourage more market development

activities, which could expand the

overall cranberry market to the benefit

of the industry as a whole.

Allotment Notification Date

Section 929.49 requires the

Committee to notify growers and

handlers of their annual allotments by

June 1. This date was suspended prior

to the 2000–01 crop year to allow

adequate time to complete the

rulemaking process for that season. The

proposal to reinstate the June 1

notification date is withdrawn because

USDA has decided that additional time

is again needed this year. While it

would be beneficial to growers to have

an earlier notification of their annual

allotments, any hardship incurred by

delays should be outweighed by the

benefits expected to be accrued by the

use of volume regulation during the

2001–02 crop year.

Analysis of Comments Pertaining to

Volume Restrictions for the 2001

Cranberry Crop

The proposed rule published in the

May 14, 2001, Federal Register solicited

comments on three options for

restricting the 2001 cranberry crop. A

total of 436 comments were filed during

the comment period which ended May

29, 2001. By far, the majority of

comments were filed by cranberry

growers (almost 90 percent of the total).

In addition, all six major cranberry

handlers commented, as did the

Cranberry Marketing Committee, several

U.S. Congressmen and Senators, the

Wisconsin State Cranberry Growers

Association, the New Jersey Department

of Agriculture, two agricultural

economists, an industry attorney,

employees of growers and handlers, and

other interested parties.

Of the comments filed, 294 favored

the 4.7 million barrel marketable

quantity, 59 favored the 4.0 million

barrel marketable quantity, and 72

favored no volume regulation at all for

the upcoming season. The remaining

comments generally supported volume

regulation but not either of the specific

levels contained in the proposed rule.

Some comments also addressed the

issue of whether fresh and organicallygrown fruit should be exempt from any

established volume restriction.

In addition to the 436 timely

comments, 64 comments were received

after the comment period ended. These

late comments were reviewed and it was

determined that no substantive issues

raised by these commenters that were

not already known to the Department or

raised by those who filed in a timely

manner and given due consideration.

Therefore, even if these comments were

timely filed, the outcome of this final

action would not be changed.

The main arguments raised in the

comments are addressed below.

Potential Impact of the Various Options

on Grower Returns

As expressed by the large number of

comments received, it is widely

accepted that the cranberry industry’s

current oversupply situation has caused

severe financial hardships for a majority

of cranberry producers. Due to the

oversupply’s price-deflationary affects,

grower returns have suffered sharp

declines, frequently resulting in marketclearing prices below the cost of

production. Since low prices have

plagued the industry for more than two

crop years, many growers are now at the

point of facing foreclosure and

bankruptcy. A financial lending

institution, commenting on the financial

hardships faced by many cranberry

producers, indicated that the U.S.

cranberry industry has lost an estimated

$160 to $200 million, cumulatively, in

recent growing seasons.

This comment was supported by

many growers, stressing that immediate

action is needed to bring about a market

correction and begin the process of

returning growers to financial stability.

Absent any improvement in the current

situation, growers will continue to

operate under financial stress and will

find it difficult to obtain financing for

their farms. Financial institutions have

already had to make arrangements for

loan deferrals for many cranberry

growers. Commenters asserted that if

grower prices continue at the levels

received during past seasons ($15 to $20

per barrel estimated for 2000), the result

could be a significant loss of smaller to

mid-sized producers.

In addition to producer financial

distress, many commenters brought to

light corollary impacts. Cranberry

growers maintain a national average of

five acres of open space for every acre

of farm. Much of this acreage is located

in States where land is under pressure

for development. Loss of cranberry

farms in these areas will carry with it

the loss of open space, which will not

be regained.

Communities in which cranberries are

grown will also suffer as local resources

will be strained. Cranberry production

is a key agricultural industry in various

regions of Wisconsin, Massachusetts,

New Jersey, Oregon, and Washington.

Failure of cranberry farms in these

regions would have major implications

for the economic vitality of smaller

farming communities. Moreover, a

potential loss of these cranberry growing

communities would also represent a

loss of long-standing cranberry heritage

in these producing regions.

While divided on which form of

volume control would be most effective,

most commenters agreed that some level

of volume regulation is necessary to

increase grower returns in the upcoming

2001 season. Results from

independently circulated grower

surveys recently conducted by the

cranberry industry also demonstrate an

overwhelming support for some level of

volume regulation. The two volume

regulation options considered would

limit the supply of marketable

cranberries to either 4.0 million or 4.7

million barrels.

Those in favor of the 4.0 million

barrel marketable quantity commented

that a volume control at this level would

significantly decrease inventory

Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations 34345

supplies and bolster grower prices to a

level close to or above the cost of

production. The cost of production

ranges from $15 to $45 per barrel,

depending on the efficiency and

economies of scale of the producer.

An industry economist in favor of a

4.0 million barrel volume restriction

estimated that, based on his

calculations, limiting the marketable

quantity to this level would yield a 2001

season-average price of $25 to $35 per

barrel. Moreover, a constant marketable

quantity level of 4.0 million barrels in

subsequent years would gradually

elevate prices to over $40 per barrel by

2003 or 2004. Any increases in demand

would be met by drawing down surplus

inventories, thereby simultaneously

reducing price-depressing affects of

large stocks. Carryover inventories at

this level would be approximately 2.3

million barrels while at the 4.7 million

barrel level, carryover inventory would

be in the range of 2.5 to 2.7 million

barrels.

It was further argued that, at this

level, fewer growers would be forced to

exit the industry because recovery

would be achieved more rapidly than

under the alternative 4.7 million barrel

scenario. Many commenters agreed with

the assumptions and conclusions made

in this argument and voiced their

opinion in favor of a more restrictive

regulation, acknowledging that, while

more severe in action, this approach

would result in higher prices faster.

Commenters in favor of the alternative

option to the above, establishing a

marketable quantity at 4.7 million

barrels, stressed the need for a more

gradual, cautionary return to market

stability and grower profitability. Most

commenters supporting this option

believe that a more gradual correction in

inventory supplies and grower prices is

necessary rather than the severe cut

proposed with the 4.0 million barrel

marketable quantity level. A more

conservative approach to volume

regulation would reduce market supply

and improve market prices while

allowing for a more gradual market

supply-demand adjustment. A more

conservative approach is also less likely

to result in a surge of production

triggered by artificially high prices and

allow for a greater margin of supply to

address any unforeseen market

complications in subsequent crop years.

It is estimated that under the 4.7 million

barrel volume control scenario, 2001–02

grower returns would be approximately

$20 per barrel, as compared to returns

of $15 to $20 in 2000. One handler’s

comment included estimated crop

returns of $20 to $25 per barrel for the

2001 crop, $22 to $30 for the 2002 crop,

and higher returns for the 2003 crop.

A third option considers no volume

regulation and would allow market

forces to address market supply and

demand imbalances. Commenters in

favor of no regulation stated that this is

the only option that supports fairness to

all growers and handlers involved in the

cranberry industry.

As discussed above, while divided on

which form of volume control would be

most effective, most commenters agreed

that some level of volume regulation is

necessary to increase grower returns in

the upcoming 2001 season. Those in

favor of volume control, for the most

part, view no volume regulation as

potentially detrimental to the cranberry

industry.

In a separate comment filed in favor

of the 4.7 million barrel marketable

quantity limit, another industry

economist asserted that allowing the

market forces to correct demand-supply

imbalances would not be effective in the

case of cranberries due to the nature of

this industry’s crop production cycle

and high start-up costs. A supplydemand adjustment in production of a

perennial crop such as cranberries does

not occur as quickly as traditional

economic theory would imply, and

others have argued. Moreover,

investment in land and bog preparation

represents a significant share of

cranberry production costs that can not

be re-captured or transferred to alternate

agriculture crop production. For these

reasons, the current conditions in the

cranberry industry strongly justify

implementation of some form of volume

control for the 2001–02 season.

Another commenter opposing the

option of no volume regulation stated

that prices would be far below

production costs if no regulation were

implemented for the 2001–02 season.

Marginal acreage would be driven out of

production as less efficient producers

and operations of smaller economies of

scale would not be economically able to

survive.

Other comments opposing the no

volume regulation option claimed that

this approach to market stabilization

could easily result in a loss of a

substantial number of smaller to midsized cranberry producers, as market

prices without any form of market

intervention would remain below the

cost of production until market supply

fell to the level of market demand. In

addition to a loss of a profitable return

on commodity production, which is a

mainstay for many of the producers

likely to be negatively impacted,

investments in land and production

start-up costs would also be lost as

much of the potentially affected acreage

has no alternative agricultural uses.

Given the anticipated large size of the

2001 cranberry crop in addition to

currently existing inventory levels,

volume regulation is the preferable

market stabilization technique.

Availability of Sufficient Supplies to

Support Market Expansion Efforts

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 is to

increase demand. Comments filed to

this effect noted that a volume

regulation at the 4.7 million barrel level

would allow a more gradual correction

in prices, thereby affording market

participants the time needed to increase

demand through the introduction of

new products and export market

development. These comments also

stated that a 4.0 million barrel

marketable quantity limit would result

in too drastic, and too substantial, of an

increase in product cost from one

season to the next. They argue that

erratic price fluctuations could hinder

expansion efforts and be

counterproductive, resulting in a loss of

current customers, as was experienced

in 1995.

Citing the 1995 industry price

increase, commenters in favor of a more

conservative approach to volume

regulation recollected that industrial

customers at that time turned away from

using cranberries as an ingredient,

reduced cranberry content in existing

products, and substituted other fruits for

baking and cereal applications, as well

as in other processed products. The

industry economist cited above further

supported this argument by stating that

historical evidence shows that food

manufacturers respond adversely to

wide swings in commodity prices, and

especially the inability to source the

commodity.

Based on the comments, a large

portion of the industry favors some form

of volume control. Commenters in favor

of the 4.7 million barrel marketable

quantity limitation stated that it would

more easily allow the development of

new products and markets than if

supplies were severely restricted. A

commenter asserted that a 4.0 million

barrel marketable quantity would

dampen growth of the industry at a time

when the industry cannot afford to cut

back on market expansion. Another

commenter added that a handler, who

has announced the development of

several new products, could launch new

products only if reliable supplies

existed in the industry.

34346 Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations

While recognizing the need for market

expansion, commenters favoring a 4.0

million barrel marketable quantity limit

argued that any short-fall in supplies

between handlers could be easily

avoided by a draw-down of product

from storage, or a transfer of product

between handlers. Counter to the

argument of increased market prices

having a negative impact on sales, those

in favor of the 4.0 million barrel

limitation believe it is necessary to

expand markets at prices that will

restore profitability to the grower. They

do not consider that a price increase

would have a negative impact on sales.

Moreover, they argue that growers

cannot afford to develop new markets

while selling at below cost of

production.

The Department believes that any

long-term solution to the industry’s

oversupply situation should include

market expansion efforts, and that

volume regulations should be used

sparingly. The higher marketable

quantity (4.6 million barrels) is

consistent with this conclusion.

Impact of the Volume Restrictions at the

Handler Level

In weighing the relative benefits of

differing volume regulation, it is

important to consider impacts on

handler competition for product to fill

sale orders.

The majority of handlers commenting,

and others commenting on the handler

supply issue, either favored no volume

restriction or the more conservative, 4.7

million barrel marketable quantity

option of volume control. To this effect,

one commenter stated that a 4.0 million

barrel marketable quantity would cause

a severe reduction in inventories, which

would result in an unreasonable

fluctuation in supply and prices.

Even though, in addition to

establishing orderly marketing

conditions, a major goal of the Act is to

protect the interests of producers

(farmers) and consumers, we also

consider the impact of this regulation on

handlers (both large and small). As we

have already stated, in the case of

cranberries, volume regulation as a

market stabilization technique appears

to be a better choice than a no volume

regulation adjustment. One of the

reasons is because market adjustment

could easily result in the loss of a

substantial number of smaller to midsized producers. In weighing the

relative benefits of the two levels of

volume regulation under consideration,

we also considered the impacts they

would have on handlers and product

needed to fill sale orders.

From the comments received, and

other available information, it was

apparent that the more restrictive

volume control would result in a

smaller volume of product available to

handlers to satisfy sale orders or

promote market growth. Therefore,

handlers who maintain a less

competitive position in the market

might be unable to effectively compete

for supplies, thus resulting in their

inability to fill sale orders and a loss of

business.

While the Committee estimates carryin inventories at 3.325 million barrels,

it has been argued by a number of

commenters that these supplies will be

concentrated among only a few of the

major handlers. Control over a

potentially limited supply of surplus

cranberries could put smaller, less

competitive handlers at a disadvantage.

Smaller handlers would be forced to

purchase cranberries at a price set by

the larger handlers holding excess

inventory or forego filling their sales

demand. These smaller handlers have

also expressed concerns that such a

position of control within the market

could be used as a predatory tool to

consolidate market power by the larger

handlers.

One handler commented that supply

constricting regulation could result in

some handlers turning to low-cost

growing regions outside of the United

States in order to obtain supplies.

Overall, commenters opposed to

restrictive volume control conveyed that

any negative effects resulting from such

regulation (any losses incurred), would

be passed on to their growers.

Those in favor of a more conservative,

gradual reduction in supply state that

this approach could ease market

tensions regarding price while allowing

suppliers to maintain strong market

relations with industry consumers.

Commenters in favor of the 4.7 million

barrel marketable quantity stated that, at

this level, cranberries will be available

to those independent handlers who do

not have inventories. Moreover, one

handler indicated that the industry is

willing to ensure that independent

handlers without inventories have

access to an adequate supply of fruit if

a volume regulation is established. It is

common practice within the cranberry

industry for handlers lacking adequate

contracted supplies to purchase

cranberries from other handlers. While

those in favor of some form of volume

control realize that adequate supply

cannot be guaranteed, a marketable

quantity of 4.7 million barrels would

more likely ensure a stable supply to

smaller handlers.

In addition to the above, commenters

raised the issue of USDA cranberry

purchases. Commenters are concerned

that USDA may purchase less than

previously expected and, therefore, the

marketable quantity should be adjusted

accordingly. A lower level of purchases

would result in a higher carryin, thus

making more supplies available than

anticipated. It is not possible to

anticipate at this time the exact number

of barrel equivalents that will be

purchased by USDA in 2001. However,

we have estimated the shortfall in

purchases at 100,000 barrels, and

adjusted the marketable quantity

accordingly.

Commenters also raised the issue of

the establishment of a reserve pool in

future years. The industry has been

informed that such a concept would

have to be implemented through the

formal rulemaking process. This pooling

mechanism could be used in years of a

volume regulation in order to provide

all handlers a supply of cranberries for

their needs. Commenters urged the

USDA to move forward on this issue.

The Need for a Prompt Decision

Many commenters were urging USDA

to make an immediate decision

regarding the issue of regulation for the

upcoming crop. This is because a

volume regulation would be more

helpful to growers if they have time to

save production costs. Growers can find

ways to reduce costs throughout the

year, however, the optimal time for

growers to reduce the amount of

cranberries to be harvested is during the

bloom period. Growers can flood their

bogs, which will eliminate the flowers

and therefore the fruit. This can be done

fairly inexpensively on most cranberry

farms. Bloom usually occurs in the

month of June but varies with the

weather.

Initial Regulatory Flexibility Analysis

One comment, submitted by a law

firm, was filed on behalf of several

Massachusetts growers and a handler.

The commenter argued that one major

handler has created the surplus and that

smaller independent handlers do not

have, and never had, a surplus. It was

further argued that volume control will

leave the smaller handlers without

adequate supplies to fill orders. This

situation, the commenter argued, is

exacerbated by USDA’s refusal to create

a reserve pool under the order. The

commenter further argued that imposing

volume control would be disruptive to

the market and that USDA’s regulatory

flexibility analysis is flawed.

Specifically, the commenter disagreed

with the Department’s classification of

Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations 34347

some handlers as large businesses and

argued that the Department dealt

inadequately with growers in its

analysis of the economic impact of

volume control. The commenter

concluded that volume control will

result in the destruction of 33 to 44

percent of the crop to maintain prices

which would encourage the importation

of foreign cranberries. American

handlers would be forced to seek foreign

cranberries or would be forced to buy

from the handlers who caused the

surplus.

As we have already explained, in

recent years, cranberry production has

exceeded demand which has caused

dramatic declines in grower prices. One

of the major goals of the Act and the

order is to protect the interests of

growers and consumers. In 2000, the

Committee (which represents the

interests of the industry) recommended

the use of volume control to bring

supplies more in line with demand.

This was the first time in over 30 years

that volume control was imposed. Given

the anticipated size of the 2001 crop, in

March of 2001, the Committee again

recommended volume regulation for the

coming year. Based on its analysis of the

problems faced by the cranberry growers

and handlers, the comments received in

response to the proposed rule, and other

available information, the Department

decided that volume regulation would

be preferable to a no volume regulation

adjustment as a market stabilization

technique.

In classifying businesses as to size for

purposes of the regulatory flexibility

analysis, AMS has used gross annual

receipts. The analysis of the impacts of

this rule was based on the premise that

it would apply almost exclusively to

small entities (both growers and

handlers). Therefore, even if one of the

handlers the commenter mentions were

to be reclassified as to size, the analysis

would not change.

The commenter’s assertion that USDA

refuses to create a reserve pool

disregards the fact that such a

mechanism in the order can only be

created through formal rulemaking

(through testimony and evidence on the

record). This process is normally

initiated by a recommendation to the

Department by members of the industry.

The Department has not indicated that

it would not entertain such a

recommendation.

Finally, it is clear that the cranberry

industry is facing a number of economic

problems, the main ones being

oversupply and inelasticity of demand.

We realize that there are numerous ways

to go about resolving some of these. The

marketing order with its volume control

provisions is one which the industry

has chosen to pursue. The Department

has come to the conclusion (for reasons

explained in this document) that the

volume control provisions in this rule

should be implemented in order to

stabilize the industry and to bring

available supplies of cranberries closer

to market demand.

Based on the Department’s analysis of

the economics of the cranberry industry

and on the plight faced by many

growers and handlers, it is our view that

volume control is necessary and that the

level of control contained in this rule

will best tend to effectuate the purposes

of the Act and order.

Exemption for Fresh and OrganicallyGrown Fruit

The 4.7 million barrel option includes

an exemption for fresh and organicallygrown cranberries. The 4.0 million

barrel option does not include a fresh

and organically-grown fruit exemption.

Most commenters who favored the 4.0

million barrel marketable quantity also

agreed that there was no need for a fresh

or organic fruit exemption. Those who

specifically addressed this issue stated

that such an exemption would create a

glut of fresh fruit. Some of this fruit

would be inferior in quality, and its

presence would injure overall demand

in the fresh fruit market. No one

specifically opposed an exemption for

organically-grown fruit. Some

commented that the fresh fruit

exemption last year provided incentives

for abuse as some growers reportedly

sold fruit as ‘‘fresh’’ that ultimately

ended up in processing channels. Some

commenters were also concerned that

the exemption would give an unfair

advantage to processors that handle

fresh fruit and their growers. This is

because (as occurred last year),

allotments not used by fresh fruit

growers (because their fruit was exempt)

could be used to offset any excess

cranberries delivered by processing fruit

growers.

Most commenters in favor of a 4.7

million barrel marketable quantity also

supported a fresh and organically-grown

fruit exemption. They stated that fresh

and organically-grown fruit does not

contribute in any meaningful way to the

current cranberry surplus.

The Department supports an

exemption for fresh and organicallygrown cranberries because they do not

contribute significantly to the current

cranberry surplus. This conclusion is

based on: (1) The relatively minor

portion of total production these

cranberries represent (fresh fruit—less

than 6 percent and organically-grown

fruit—about 1,000 barrels); (2) the

distinction between fresh market/

organically-grown cranberries and

cranberries for processing; (3)

information relative to the production

and marketing of fresh and organic

cranberries; and (4) the steps that have

been taken to improve compliance with

the exemption and to make the

exemption more equitable among

handlers and growers. In addition,

continued encouragement for growth in

the fresh and organic markets is

consistent with industry objectives to

develop additional markets and expand

existing markets.

Analysis of Comments Pertaining to

Sales History Calculations and Other

Administrative Rule Changes

A proposed rule was published in the

Federal Register on January 12, 2001

(66 FR 2838), to change the way in

which sales histories are calculated

(including deducting fresh sales from

growers’ sales histories). That rule,

among other things, also proposed a

clarification of the fresh fruit exemption

and expanding the outlets available for

excess cranberries. Twenty-five

comments were filed during the

comment period ending February 12,

2001. Most of those comments

expressed general opinions on the use of

volume regulation under the cranberry

marketing order, and did not address

the specific changes in the proposal.

During the comment period of this

rule, the Committee met and

recommended a further modification in

sales history calculations. This

modification was included in a

proposed rule published on May 14,

2001. Eleven additional comments were

received in response to the May 14 rule

relative to amendment of sales history

calculations.

Three comments supported the

reformulation of sales histories in

general, stating that changes made to the

sales history calculations make them

more equitable than last year’s

calculations. Eight commenters

(including one who commented during

both comment periods) supported

amending the sales histories

calculations as proposed in the May 14

rule. Six commenters (one who

commented during both comment

periods) did not support the

modifications to sales history

calculations. One commenter (who

commented during both comment

periods) objected to the modification of

sales history calculations as proposed in

the May 14 rule. Three commenters said

the January 12 proposal did not make it

clear that replanted acres should be

treated the same as new acres when

calculating sales histories. Two

34348 Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations

commenters who supported the

recalculation suggested allowing greater

flexibility in the appeals process

regarding sales histories.

Seven commenters supported the

deduction of fresh fruit sales when

calculating sales histories along with the

clarification of the fresh fruit

exemption. One commenter did not

support the fresh fruit clarification. One

commenter expressed support for the

modifications to the excess cranberry

provision, and one commenter

suggested further modifications of that

provision.

Reformulation of Sales History

Calculations

The comments in support of the new

formula for calculating sales histories

expressed that the new method would

be more equitable to growers, especially

newer growers, than the way sales

histories were calculated last year.

Regarding modifying the formula to

divide all available years by 4, those in

support indicated that this revision

would provide growers with sales

histories more in line with actual

expected production from new and

replanted acres.

A comment in opposition to the

formula expressed that growers with

newly planted acres should not be

rewarded for making poor business

decisions. Growers had ample

information available and should have

known that production was increasing

and sales were not. In addition, this

commenter believed that giving

additional sales histories to compensate

these growers is unfair to growers with

established acres who did not increase

plantings and did not contribute to the

current surplus.

Another commenter in opposition to

the new formula said that providing

newer growers with additional sales

histories would encourage new

plantings.

The Department does not agree that

new plantings will be encouraged by

implementation of this formula or that

growers are being rewarded for making

poor business decisions. The new

method of calculating sales histories is

intended to address equity concerns

expressed last year with newer growers

being impacted to a greater extent than

established growers. The formula

merely compensates growers for

anticipated production on recently

planted acres that do not have sales

histories reflective of current production

potential. The formula is based on data

from all growing areas, from all sizes of

growing operations and represents a

higher than mid range of this data. The

new method is an improved method

from last year.

Regarding the comment about

established growers being treated

unfairly by this action, the modification

contained in the May 14 proposed rule

was specifically recommended to ensure

that sales histories for established

growers were calculated in the same

way as those for newer growers.

One commenter supported the new

formula as proposed in the January 12

rule, but did not support the revision

which divides by 4 for all acreage to

obtain an actual sales history prior to

being assigned the adjustment for newer

acres. This commenter indicated this

change would again put new growers at

a disadvantage, especially those growers

with well managed new acreage with

relatively high production. The

commenter suggested that growers who

are able, be allowed to segregate sales

from older and newer acreage and

divide by the appropriate number of

years to obtain the actual sales history

prior to adjusting the acreage with the

formula.

This commenter discussed the

methodology to determine average

yields per acre depending upon the year

of planting. The data used was

increased by 25 barrels to allow more

growers to have satisfactory sales

histories. The commenter believed this

methodology was flawed in that it did

not take into account the differences

between efficient and non-efficient

growers. This commenter provided

examples showing how this formula

would be detrimental. In one example,

dividing by the available number of

years of sales history and assigning

additional barrels in accordance with

the formula would provide the grower

with an average 373.5 barrels per acre.

Using an example with actual

production with a specific percentage

increase would give the grower an

average of 376.31 barrels per acre. Using

the formula as revised by dividing by 4

and assigning additional sales history

would provide the grower with an

average 271.75 barrels per acre.

The Committee, along with the

amendment subcommittee, gave much

thought to improving the method of

calculating sales histories to minimize

the differential impact among growers

with newer acreage. The data used to

develop the formula was a result of a

Department survey of average yields per

acre depending upon the year of

planting. The averages were adjusted up

by 25 barrels per acre to include as

many growers as possible. The survey

indicated that the average yield for a full

producing acre was 250 barrels per acre.

With the 25 barrel adjustment, the

formula recognizes an acre of full

production to be 275 barrels. This

amount is consistent with the

commenter’s example that computed

the sales history by dividing all years by

4 (an average of 271.75 barrels per acre).

The Committee was aware that some

growers’ yields exceeded the average.

However, if the formula used the

highest yields in its calculations,

growers with lower yields would

receive sales histories well above

average. This would have raised the

total sales histories to an unrealistic

amount which would have reduced the

effectiveness of a volume regulation. It

was decided that increasing the yields

by 25 barrels over average yields brings

more growers into the realm of realizing

satisfactory sales histories without

defeating the purpose of volume

regulation. In addition, the simpler

formula should result in fewer growers

filing appeals.

Therefore, the Department believes

that the sales history calculations as

proposed in the January 12 proposed

rule and as modified in the May 14 rule

are appropriate for the 2001 volume

regulation.

Replanted Acres

Three commenters said that the

January 12 rule did not make it clear

that replanted acres should be treated

the same as new acres when calculating

sales histories. The Department agrees

that replanted acres and new acres

should be assigned sales histories in the

same manner. Changes have been made

where pertinent in the regulatory text

for clarity.

Appeals of Sales History Calculations

One commenter supported the revised

sales history formula, but suggested that

exceptions be authorized under the

appeals process for growers to request

higher sales histories than allowed

under the formula. Specifically, growers

could be required to submit evidence on

yields from separate acreage to be

successful in receiving sales history

above and beyond that allowed under

the formula.

Last year, over 250 appeals were

received by the appeals subcommittee

(the first level of review for appeals).

Many of the appeals were filed by

growers who provided credible

evidence to allow the Committee to

segregate sales histories of newer

acreage so that additional sales histories

could be provided.

The formula specifies certain amounts

of sales histories that will be assigned to

newer acreage. Appeals filed requesting

higher sales histories than authorized

under the provisions of the

Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations 34349

reformulation of sales histories

provisions will be denied.

One of the intents of the

reformulation of sales history

calculations is to eliminate the need for

appeals to be filed. Therefore, fewer

appeals should be filed and the appeals

process can be completed in time for

growers to know what their sales

histories are well before harvest.

Accordingly, no change is made as a

result of this comment.

Deduction of Fresh Sales From Sales

History Calculations and Clarification of

the Fresh Fruit Exemption Provision

The commenters who supported the

deduction of fresh sales when

calculating sales histories expressed that

this change will provide more fairness

in the application of the fresh fruit

exemption. One commenter stated that

the fresh fruit exemption should not be

supported unless fresh sales are

deducted from a grower’s sales history.

Another commenter stated that growers

who produce both fresh and processed

fruit realized an advantage last year over

growers who produced only processed

fruit. As an example, growers who

delivered more than 15 percent of their

crop as fresh during the 2000–01 crop

year did not contribute to the crop

reduction.

Similar comments were made

regarding the clarification of the fresh

fruit exemption provision. One

commenter stated that the provision was

abused during the 2000–01 season as

some growers allegedly sold processed

fruit as fresh fruit to benefit from the

exemption. The commenters in support

of the clarification believe that this

change will help to resolve this issue

and ensure compliance with the volume

regulation.

One commenter was concerned about

the container requirements for fresh

fruit. Another commenter said that the

fresh fruit clarification will make it

difficult for growers to sell their own

fruit.

The clarification of the fresh fruit

exemption provision is to ensure that

fresh fruit does not make its way into

processing outlets. The refinement of

the requirements under the exemption

better addresses the intent of the

exemption and will assist in limiting its

abuse. The clarification also allows for

exceptions to the container requirement.

Therefore, the Department is

implementing the provisions to subtract

fresh sales from growers’ sales histories

and to clarify the fresh fruit exemption

provisions as proposed in the January

12, 2001, rule.

Excess Cranberries

One commenter supported the

modification to broaden the scope of

research and development projects

authorized for excess cranberries.

Another commenter suggested that any

outlet using less than 5 percent of a

grower’s crop be an authorized

‘‘commercial’’ use for excess

cranberries.

Excess cranberries should continue to

be limited to ‘‘noncommercial’’ and

‘‘noncompetitive’’ uses. Any other use

would defeat the purpose of the volume

regulation and add potential incentives

for abuse. This comment is denied, and

the change to the excess cranberry

provisions shall remain as set forth in

the January 12 rule.

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 will 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 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

During discussions of volume

regulations, a group of independent

handlers indicated that any volume

regulation would not be supported

unless there are some assurances that

sufficient supplies of cranberries will 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. An 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

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

34350 Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations

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. However, 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 issue with an

amendment to the order.

Reporting and Recordkeeping

Requirements

As with all Federal marketing order

programs, reports and forms used under

the cranberry order 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, this rule necessitates

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. The Committee

will reconfigure this form to ensure that

information relative to this rule will be

included, particularly the date of

planting of the acreage. The burden

hours of the form will not change.

Accordingly, the form does not have to

be submitted to OMB.

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.

Opportunity for Public Participation in

the Rulemaking Process

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

February 4 and March 4–5 meetings

were public meetings. Meeting

announcements were placed on

websites specifically designed for the

cranberry industry, and all interested

parties were invited to attend. All

entities, both large and small, were able

to express their views on these issues by

attending the meetings or contacting

their Committee representatives about

their concerns prior to the meetings.

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. In addition, several

grower meetings were held throughout

the production area to discuss the

methods of volume regulation and the

procedures for regulation.

A proposed rule on reformulating the

sales history calculations for the 2001–

2002 crop year was published in the

Federal Register on January 12, 2001

(66 FR 2838). A proposed rule on

whether to establish volume regulation

was published in the Federal Register

on May 14, 2001 (66 FR 24291). The

rules were made available on the

Department’s website. The rules were

also made available through the Internet

by the Office of the Federal Register. A

30-day comment period was provided in

the January 12, 2001, rule, which ended

on February 12, 2001. A 15-day

comment period ending May 29, 2001,

was provided on the volume regulation

proposal. These comment periods

allowed interested persons to respond to

the proposals.

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.

After consideration of all relevant

matter presented, including the

information and recommendations

submitted by the Committee and other

available information, it is hereby found

that this rule, as hereinafter set forth,

will tend to effectuate the declared

policy of the Act.

It is further found that good cause

exists for not postponing the effective

date of this rule until 30 days after

publication in the Federal Register (5

U.S.C. 553). The crop year begins on

September 1, 2001. This rule should be

effective prior to the beginning of the

crop year so that the Committee can

initiate its appeals procedures well in

advance of the start of the volume

regulation. Also, growers need time to

adjust their cultural practices in

preparation for the volume regulation.

Further, handlers and growers are aware

of this rule, which was discussed and

Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations 34351

recommended at public meetings and

well-publicized within the cranberry

industry. Also, appropriate public

comment periods were provided in the

two proposed rules relevant to this final

rule.

List of Subjects in 7 CFR Part 929

Cranberries, Marketing agreements,

Reporting and recordkeeping

requirements.

For the reasons set forth in the

preamble, 7 CFR Part 929 is amended as

follows:

PART 929—CRANBERRIES GROWN IN

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.

2. Section 929.104 (a)(4) is revised to

read as follows:

§ 929.104 Outlets for excess cranberries.

(a)* * *

(4) Research and development

projects approved by the committee

dealing with the development of foreign

and domestic markets, including, but

not limited to dehydration, radiation,

freeze drying, or freezing of cranberries.

* * * * *

§ 929.107 [Removed]

3. Section 929.107 is removed.

4. 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.

5. 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.

§ 929.148 [Removed]

6. Section 929.148 is removed.

7. 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) Fresh fruit sales shall be deducted

from the sales histories. The sales

history assigned to each grower shall

represent processed sales only.

(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.

8. Section 929.158 is revised to read

as follows:

§ 929.158 Exemptions.

If fresh and organically-grown

cranberries are exempted from the

volume regulation as recommended by

the Committee and approved by the

Secretary, the following provisions to

these exemptions shall apply:

(a) Sales of packed-out cranberries

intended for sales to consumers in fresh

form shall be exempt from volume

regulation provisions. Fresh cranberries

are also sold dry in bulk boxes generally

weighing less than 30 pounds. Fresh

cranberries intended for retail markets

are not sold wet. If any such fresh

cranberries are diverted into processing

outlets, the exemption no longer

applies. Growers who intend to handle

fresh fruit shall notify the committee of

their intent to sell over 300 barrels of

fresh fruit.

34352 Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 / Rules and Regulations

(b) Sales of organically-grown

cranberries are exempt from volume

regulation provisions. In order to

receive an exemption for organic

cranberry sales, such cranberries must

be certified as such by a third party

organic certifying organization

acceptable to the committee.

(c) Handlers shall qualify for the

exemptions in paragraphs (a) and (b) of

this section by filing the amount of

packed-out fresh or organic cranberry

sales on the grower acquisition form.

9. A new § 929.251 is added to read

as follows:

§ 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 4.6 million

barrels and the allotment percentage is

designated at 65 percent. Fresh and

organically grown fruit shall be exempt

from the volume regulation provisions

of this section.

Dated: June 22, 2001.

Kenneth C. Clayton,

Acting Administrator, Agricultural Marketing

Service.

[FR Doc. 01–16109 Filed 6–22–01; 2:06 pm]

BILLING CODE 3410–02–P