This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

64918

Vol. 66, No. 242

Monday, December 17, 2001

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 81

[Docket No. FV01–81–01 PR]

RIN 0581–AC03

Regulations Governing the California

Prune/Plum (Tree Removal) Diversion

Program

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Proposed rule with request for

comments.

SUMMARY: This proposed rule invites

comments on procedures for a

California Prune/Plum Diversion

Program. The program is voluntary and

would consist wholly of tree removal.

The program would be implemented

under clause (3) of Section 32 of the Act

of August 24, 1935, as amended. The

proposed program would help the

California dried plum industry address

its severe oversupply problems. The tree

removal is expected to bring supplies

into closer balance with market needs,

and provide some relief to growers faced

with excess supplies and acreage, and

low prices.

DATES: Comments received by January

16, 2002, will be considered prior to

issuance of a final rule.

ADDRESSES: Interested persons are

invited to submit written comments

concerning this action. Comments must

be sent to the Docket Clerk, Fruit and

Vegetable Programs, AMS, USDA, P.O.

Box 96456, Room 2525—South

Building, Washington, D.C. 20090–6456;

Fax: (202) 720–8938; or E-mail:

moab.docketclerk@usda.gov. Comments

should reference the docket number and

the date and page number of this issue

of the Federal Register and will be

available for public inspection in the

Office of the Docket Clerk during regular

business hours, or can be viewed at:

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

FOR FURTHER INFORMATION CONTACT:

Anne M. Dec, Marketing Order

Administration Branch, at the above

address; Telephone: 202–720–2491; Fax:

202–720–8938; or E-mail:

Anne.Dec@usda.gov.

Small businesses may request

information on the diversion program

by contacting Jay Guerber at the above

address, telephone, fax, or E-mail:

Jay.Guerber@usda.gov.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This proposed rule has been

determined to be significant for the

purposes of Executive Order 12866 and

therefore has been reviewed by the

Office of Management and Budget

(OMB). In accordance with Executive

Order 12866, the Department of

Agriculture (USDA) has prepared a

regulatory cost-benefit assessment and a

civil rights impact analysis. These

documents can be obtained by

contacting the person listed in the FOR

FURTHER INFORMATION CONTACT section of

this proposed rule.

Public Law 104–4

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA), Pub. L.

104–4, establishes requirements for

Federal agencies to assess the effects of

their regulatory actions on State and

local governments and the private

sector. Under section 202 of the UMRA,

the Agricultural Marketing Service

(AMS) generally must prepare a written

statement, including a cost-benefit

analysis, for proposed and final rules

with ‘‘Federal mandates’’ that may

result in expenditures by State and local

governments, in the aggregate, or by the

private sector, of $100 million or more

in any one year. When such a statement

is needed for a rule, Section 205 of the

UMRA generally requires the AMS to

identify and consider a reasonable

number of regulatory alternatives and

adopt the least costly, most costeffective, or least burdensome

alternative that achieves the objectives

of the rule.

This rule contains no Federal

mandates (under the regulatory

provisions of Title II of the UMRA) for

State and local governments or the

private sector of $100 million or more

in any one year. Therefore, this rule is

not subject to the requirements of

Sections 202 and 205 of the UMRA.

Executive Order 12988

This proposed rule has been reviewed

under Executive Order 12988, Civil

Justice Reform. The rule is intended to

have preemptive effect with respect to

any State or local laws, regulations or

policies which conflict with its

provisions, or which would otherwise

impede its full implementation. Prior to

any judicial challenge to the provisions

of this rule or the application of its

provisions, all applicable administrative

procedures must be exhausted.

Paperwork Reduction Act

In accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C.

chapter 35), the reporting and

recordkeeping provisions that would be

generated by this proposed rule will be

submitted to the Office of Management

and Budget (OMB).

Two forms are needed for the

administration of the tree removal

program. Growers who wish to

participate in the program would have

to submit an ‘‘Application for Prune

Tree Removal Program.’’ We estimate

that 200 growers may submit an

application, and that each form would

take about 30 minutes to complete, for

a total burden of 100 hours. After

removing their trees, growers will then

have to sign a statement stating they

wish payment. No additional burden

has been estimated for this second form

which would require only a signature.

Finally, participants will be required to

retain records pertaining to the tree

removal program for two years after the

year of removal.

Executive Order 12372

This program is not subject to the

provisions of Executive Order 12372,

which requires intergovernmental

consultation with State and local

officials. See the Notice related to 7 CFR

part 3015, subpart V published at 48 FR

29115 (June 24, 1983).

Executive Order 12612

It has been determined that this rule

does not have sufficient Federalism

implications to warrant the preparation

of a Federalism Assessment. The

provisions contained in this rule will

not have a substantial direct effect on

States or their political subdivisions or

on the distribution of power and

responsibilities among the various

levels of government.

Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / Proposed Rules 64919

Authority for Tree Removal Program

The proposed program is intended to

reestablish prune/plum farmers’

purchasing power. Programs to

reestablish farmers’ purchasing power

are authorized by clause (3) of Section

32 of the Act of August 24, 1935, as

amended (7 U.S.C. 612c)(‘‘Section 32’’).

This clause of Section 32 authorizes

USDA to ‘‘* * * reestablish farmers’’

purchasing power by making payments

in connection with the normal

production of any agricultural

commodity for domestic consumption.’’

Section 32 also authorizes USDA to use

Section 32 funds ‘‘* * * at such times,

and in such manner, and in such

amounts, as USDA finds will effectuate

substantial accomplishments of any one

or more of the purposes of this section.’’

Furthermore, ‘‘Determinations by USDA

as to what constitutes * * * normal

production for domestic consumption

shall be final.’’

Need for the Tree Removal Program

Production of prune/plums for

marketing as dried plums is

concentrated in California. Production

of dried plums during the 2000 season

increased for the second consecutive

year, to nearly 219,000 tons (natural

condition).

Changes in growing conditions have

substantially altered the production

outlook for 2001. Production was

originally estimated to be 220,000 tons.

However, due to a lighter crop-set in

major producing areas, as well as

freezing temperatures and hail,

production for the 2001 crop year is

now estimated at about 155,000 tons.

This smaller crop somewhat alleviates

the oversupply situation, but does not

represent a change in the longer-term

oversupply situation.

When the crop was estimated at

220,000 tons in the spring of 2001, the

industry discussed the use of volume

control authorized under the Federal

marketing order. In addition, carryin

inventories from the 2000 crop year

were reported at 100,829 tons. With this

level of inventories and crop, the total

available supply would have been

320,829 tons.

With this estimated crop size,

establishing a 48 percent reserve (52

percent free tonnage) was discussed.

The industry does not have a history of

establishing reserve percentages, and

reserve percentages were last used in

the 1970’s. The fact that the marketing

order committee even considered use of

the reserve provision indicates the

gravity with which the industry views

the oversupply problem. The use of

marketing order reserve provisions is

intended to help industries deal with

surplus production and facilitate

orderly marketing of their crops.

The Prune Bargaining Association

(PBA) represents about 40 percent of the

independent growers and negotiates a

selling price for its members. With the

large anticipated crop for the 2001

season and the large carryin inventory,

the PBA had difficulty establishing a

price with handlers. Even with the

smaller crop of 155,000 tons, the PBA

could only negotiate a price of $763 per

ton. This compares to $845 for the 2000

season, or a decrease of 9.7 percent.

Although the price has been set, not all

handlers have signed the agreement.

Even this lower price may be too high

in the eyes of the non-signing handlers,

given current supply conditions.

The smaller crop size for 2001 has

provided the industry some relief in

reducing total available supplies.

However, there are still a large number

of nonbearing acres (15,000) that will

become productive over the next six

years. In addition, there are many acres

with older, less productive trees which

could be replanted in the near future. A

tree removal program would assist

growers who are facing difficult

replanting decisions by allowing them

to receive funds for the removal of trees

and, at the same time, prohibit those

growers from replanting prune/plums in

those orchards. Prune/plum growers

also tend to be producers of almonds,

walnuts, and cling peaches. Plantings of

these crops could increase in future

years as growers remove prune/plum

acreage.

Bearing acreage expanded to a record

86,000 acres during the 2000 season and

the average yield increased 19 percent.

Yields are anticipated to increase

further as more densely planted acres

become productive over the next several

years.

Nonbearing acreage, which is an

indicator of future production levels,

increased to an all-time high of 26,000

acres in 1998. This represented a 22-

percent increase in the productive

capacity of the industry. The nonbearing acres are more densely planted

than in previous years which results in

a higher yield per acre.

The dried plum industry faces a longrun surplus situation. For the 2000 crop

year, bearing acres were 86,000 and

non-bearing acres were 15,000. Bearing

acres could exceed 100,000 in the near

future. With yields in excess of 2.0 tons

per acre, production could be expected

to be above 200,000 tons in many crop

years.

Total domestic shipments exceeded

100,000 tons for six seasons in the late

1980’s and early 1990’s, but have

declined from a high of 108,085

processed tons in 1996. Per capita

consumption has been steadily

declining since 1980. Export shipments

have been stagnant. As a result of these

domestic and export trends, total

shipments have never exceeded 190,000

processed tons.

Until recently, export shipments were

a source of growth in the dried plum

industry. In 2000, exports represented

47 percent of total shipments. However,

the strong dollar and the downturn in

the economies in Asia and Europe have

significantly slowed export sales.

Due to the significant supply-demand

imbalance, the industry anticipates

several years in which the expected

annual carryin inventories will exceed

the industry’s desirable carryin level of

approximately 40,000 tons. If dried

plum markets continue to be oversupplied with product, grower prices

and grower relations with packers will

deteriorate significantly. Even with the

lower production estimate for the 2001

crop year, the carryout inventory is

expected to exceed 76,000 tons.

High prices from 1992 through 1995,

and a more balanced supply and

demand situation, helped to stimulate

investments in new acreage. This

additional acreage came from a variety

of sources, mainly rice and pasture land.

Intensifying the anticipated surplus

situation is the fact that new acres are

more productive than existing acres,

which causes output to grow more

rapidly in proportion to acreage growth.

It takes dried plum trees 6 years to

become fully productive. Many of the

costs of producing plum trees are

‘‘sunk,’’ making it difficult to reverse

decisions once those acres are planted.

Because supply is slow to adjust to

changing market conditions, the

industry anticipates many years of

production outpacing demand, resulting

in continued distressed grower

conditions.

From 1980 through 2000, the total

cost per ton of producing dried plums

exceeded the growers’ season-average

prices. Similarly, the total cost per acre

exceeded revenue per acre.

However, it is also important to

consider variable cost. In recent years,

the total revenue per ton and per acre

has been greater than the total variable

cost per ton and per acre. Prices and

revenues greater than variable costs

provide some indication of why a dried

plum producer continues to harvest and

process a crop despite losing money.

Tree Removal Diversion Program

The industry is requesting a voluntary

tree removal program estimated to cost

$17 million. The industry would like to

64920 Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / Proposed Rules

remove a minimum of 20,000 bearing

acres of prune/plum trees. With many of

the current bearing acres reaching the

age where replanting would be

considered, the industry is trying to

provide an incentive to growers to

remove older trees, while ensuring that

those orchards are not replanted with

prune/plum trees.

To be eligible for the proposed tree

removal program, orchards must have a

minimum yield of 1.5 tons per acre.

With a minimum threshold yield of 1.5

tons per acre, sufficient land would be

enrolled in the tree removal program to

reduce annual production by

approximately 30,000 tons.

The industry has estimated that it will

take $8 to $9 per tree to induce growers

to participate in such a program. It is

believed that financial institutions that

provide growers operating funds would

not allow them to participate if the

payment per tree is below this level.

This type of one-time decrease in

production would more closely align

supply with demand, while assuring an

adequate supply. This would allow the

industry to concentrate their efforts on

rebuilding demand for future years.

The industry has already undertaken

an initial smaller-scale tree removal

program. However, to finance this

grower-initiated tree pull program,

grower assessments for promotion were

reduced from $50 per ton to $30 per ton.

Less money is available for promotion,

but growers felt that this re-direction of

funds was necessary to help redress the

oversupply situation.

The tree removal program would be

administered through the Agricultural

Marketing Service (AMS) and the Prune

Marketing Committee (Committee). The

Committee is an administrative agency

appointed by AMS to locally administer

the terms of Federal Marketing Order

No. 993.

Any prune/plum producer wishing to

participate in the program would file an

application with the Committee. The

application period would begin 15 days

after publication of the program

announcement and last for 30 days.

Each applicant would provide

information needed by the Committee to

operate the program. This would

include, for example, the number of

trees the applicant wished to remove

and their location. The applicant would

have to certify that he/she has not

contracted to sell the land or otherwise

already arranged to have the trees

removed. The Committee would review

each application for completeness, and

would make reasonable efforts to

contact growers to obtain any missing

information.

In order to be eligible to participate in

the program, the orchards or blocks of

trees being removed from production

would have to have a minimum yield of

1.5 tons per net planted acre during

both the 1999 and 2000 crop years. A

net planted acre is the actual acreage

planted with prune/plum trees. This

would mean that abandoned orchards

would not be eligible for participation.

The Department considered establishing

the minimum qualifying yield at 2.2

tons per acre, but determined that at

that level, too many orchards would be

ineligible for the program.

USDA has allocated $17 million for

this program, including administrative

costs. Applications would be approved

until the level of available funding was

reached. Each participating grower

would have to then remove trees from

production by June 30, 2002. Growers

would be paid $8.50 for each eligible

tree removed. This level of payment is

deemed necessary for a significant

number of growers to participate in the

tree-removal program. It would cover

most of the costs of removing the trees

(bulldozing, cutting, etc.), and preparing

the land for other uses. The costs vary

depending on the number of acres

removed. Some cost savings may accrue

with larger acreage removals.

Estimated costs for removing, piling,

chipping, or other disposal methods

range from $142–$225 per acre or from

$1.29–$2.05 per tree. Costs for removing

the roots and other debris are expected

to range from $163–$289 per acre or

from $1.48–$2.63 per tree. Leveling of

the ground is expected to cost $161–

$401 per acre or $1.46–$3.65 per tree.

Fumigation of the tree holes is expected

to cost $550 per acre or $5.00 per tree.

This would amount to $9.23–$13.33 for

each tree removed. The $8.50 payment

proposed under the program is expected

to offset most of the grower’s costs.

Each grower participating in the

program would have to agree not to

replant prune/plum trees on land

cleared under this program through June

30, 2004. Because it takes new acres at

least six years to be productive, acreage

participating in the tree-removal

program would not return to

commercial prune/plum production for

at least eight years and possibly nine

years because plantings occur in January

and February. Alternative crops could

be planted. Additionally, the current

economic conditions in the industry,

specifically weak demand, reduced per

capita consumption, stagnant domestic

shipments and exports, and declining

grower prices and revenues, would

appear to limit the incentives for

replanting acreage to prune/plum trees.

Initial Regulatory Flexibility Analysis

Pursuant to requirements set forth in

the Regulatory Flexibility Act (RFA), the

Agricultural Marketing Service (AMS)

has considered the economic impact of

this rule on small entities. Accordingly,

AMS has prepared this initial regulatory

flexibility analysis.

The purpose of the RFA is to fit

regulatory actions to the scale of

business subject to actions in order that

small businesses will not be unduly or

disproportionately burdened.

There are approximately 1,250

producers of dried plums in California.

Small agricultural producers have been

defined by the Small Business

Administration (13 CFR 121.201) as

those having annual receipts of less than

$750,000. An estimated 32 producers, or

less than 13 percent of the 1,250 total

producers, would be considered large

producers with annual incomes over

$750,000.

This proposed rule would establish a

tree removal program diversion program

for California dried prune/plums.

Authority for the program is provided in

clause (3) of Section 32 of the act of

August 24, 1935, as amended.

Participation in the diversion program

is strictly voluntary, so individual

producers, both small and large, can

weigh the benefits and costs for their

own operations before deciding whether

to participate in the program.

Economic Assessment of the Tree

Removal Diversion Program

To assess the impact a tree removal

program would have on prices growers

receive for their product, impacts on

grower prices and inventories with a

tree removal program and without a tree

removal program were estimated. An

econometric model was estimated for

the purpose of estimating nominal

season average grower prices under both

scenarios.

A tree removal program will directly

reduce the number of bearing acres, but

there will not be an impact until the

2002 crop year since harvesting of the

2001 crop is completed.

In 2000, there were still 15,000 nonbearing acres. The industry has

indicated that no additional plantings of

prune/plum trees for acreage expansion

are occurring at this time. Therefore,

after the 15,000 non-bearing acres come

into production, the productive capacity

of the industry is assumed to stay

constant.

The tree removal analysis assumes

that 20,000 acres are removed through

the tree removal program, while 3,000 of

the non-bearing acres become

productive in 2002. This results in

Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / Proposed Rules 64921

bearing acres being reduced from 86,000

in 2001 to 69,000 in 2002. Bearing acres

increase by 3000 acres in each of the

subsequent years until 2007, rising to

72,000 in 2003, 75,000 in 2004, 78,000

in 2005, and 81,000 in 2006 and 2007.

Production for the 2001 crop year is

currently estimated by the Department’s

National Agricultural Statistics Service

(NASS) at 155,000 natural condition

tons. Marketable production is generally

93 percent of total production, yielding

an estimated 144,500 marketable tons

for 2001. Carryin inventory for the 2001

crop year was computed by the

marketing order committee at 100,829

tons as of June 30, 2001. These figures

are used to derive an estimated total

available supply of 244,979 tons for

2001. This level of supply accounts for

the fact that a number of voluntary

measures have been taken by the

industry to reduce the level of

production for the 2001 crop year,

including crop abandonment and

cutbacks on cultural practices.

Shipments are estimated to grow by 1

percent annually, which results in

estimated total shipments of 165,932

tons for 2001. The one percent growth

in shipments reflects decreased

government surplus purchases and

possible retail price effects.

For 2002, total shipments are

estimated at 165,932 tons and the

carryin inventory is estimated at 79,047

tons. With the tree removal diversion

program reducing bearing acres to

69,000 for the 2002 crop year, total

available supply is estimated at 256,900

tons. It should be noted that through

2001, carryin inventory does not exactly

match the prior year’s difference

between total available supply and total

shipments. This is due to shrinkage and

other minor adjustments computed by

the Federal marketing order committee.

However, for this analysis, the estimated

carryin from 2002 to 2007 is estimated

to be the exact difference between

estimated total supply and estimated

shipments from the prior year.

The analysis also assumes that yields

will fluctuate up and down, in keeping

with the known ‘‘alternate bearing’’

tendency of prune/plum trees.

Estimated production, computed by

multiplying acreage times yield,

fluctuates accordingly.

As carryin inventories are reduced,

the total available supply moderates for

crop years 2003 through 2007, relative

to the situation without a tree removal

program. This results in season average

grower prices ranging from $845 to

$1,084 during that same time span. It

should be noted that the margin of error

for these estimates becomes very large

for future crop years.

Even though season-average grower

prices per ton rise under the tree

removal program, all product produced

is not necessarily of marketable

quantity. Costs are incurred on all the

production, but revenue is received only

on product actually marketed. Thus, the

economic effect of the tree removal

program on a per acre basis is to

dramatically reduce losses and bring

producer returns closer to a break-even

level. With losses still being incurred by

producers, there should be only a

limited incentive to further expand

production as a result of the tree

removal program. It will remain for

growers to control costs and to expand

demand to ensure their longer-term

economic stability.

Grower prices are a small component

of the finished dried plum product and

are not closely associated with

movements in retail prices. However,

the increases in grower prices estimated

for crop years 2003 through 2007 may

have an impact on retail prices. The

extent of any retail price increases

would depend on processor and retailer

margins and the pricing and availability

of substitute products, such as raisins or

other dried fruits. It should be noted

that dried plum prices are estimated to

increase with or without a tree removal

program, but the magnitude of the

grower price increase is greater with the

program.

Without a tree removal program,

bearing acres are estimated to increase

to 89,000 by the 2002 crop year.

Production would be in excess of

200,000 tons, resulting in carryout

inventories in excess of 100,000 tons in

2003. In addition, under this scenario,

2002 grower prices are estimated at

$789 per ton. With high inventories and

low grower prices, market forces are

assumed to induce growers to remove

less productive acres and the number of

bearing acres is estimated to decline

from 89,000 in 2002 to 84,000 in 2007.

Even with the decline in bearing acres,

production and inventories remain

excessive from 2002 through 2007.

However, in 2007, carryout inventories

fall to an estimated 6,592 tons.

Under both scenarios, grower prices

increase and inventories become more

manageable. The difference is that,

under a tree removal program,

adjustments to inventories and prices

occur more rapidly. This would

accelerate benefits to growers, who

would otherwise be struggling to break

even in a depressed market, until

market forces brought about a slow

correction.

In addition to the direct impact on

growers’ prices and revenues that a tree

removal program would have, there are

also indirect impacts. A tree removal

program assists in decreasing

burdensome (undesirable) carryout

inventories. Without a tree removal

program, large quantities of dried plums

held in packers’ inventories prevent

grower pools from being closed, which

delays grower payments. Large amounts

of undesirable inventory lead to strained

grower-packer relations. In an attempt to

sell the excessive inventories, packers

reduce f.o.b. prices, which in turn leads

to market share battles and lower prices

being passed back to producers. A more

balanced supply and demand situation

allows growers and packers to jointly

continue developing markets in ways

that benefit the entire industry.

Industry Self-Help Initiatives

The California dried plum industry

has undertaken an initiative to reduce

acreage and production. The industry

implemented a pre-harvest tree removal

program during the 2001 crop year. The

industry collected about $3 million to

support this effort by reducing

assessments under their California State

marketing order from $50 to $30 a ton.

The $20 per ton reduced assessment

was used to support the industry tree

removal program.

The program was successful in

removing about 3,500 acres. The effects

of this industry self-help diversion are

included in the analysis of the Federal

program.

The industry also has taken measures

to stimulate demand, including: (1) The

development of new products and new

uses for dried plums; (2) marketing

efforts to attract younger customers; and

(3) domestic and export market

promotion programs under the

California State marketing order and the

Foreign Agricultural Service’s

Marketing Assistance Program (MAP).

One of the most recent initiatives

involved securing approval from the

Food and Drug Administration to

change the name ‘‘dried prunes’’ to

‘‘dried plums.’’ This has allowed the

industry to redirect its generic

marketing efforts to attract a new

generation of consumers.

Benefits of the Program

The economic assessment of the tree

removal program indicates that it is

expected to benefit producers,

particularly small, under-capitalized

producers, as well as the entire dried

plum industry, including packers. The

per ton sales price is projected to

increase from 2002-2007, reducing

losses and moving producer returns

closer to break-even levels. The benefit

to producers from reduced losses is

projected to total approximately $128

64922 Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / Proposed Rules

million over the six-year period 2002–

2007. The benefits over the six-year

period would average nearly $24

million annually.

Costs of the Program

The major cost of the program would

be the payment to producers for

removing their prune/plum trees. A

total of $17 million, less Committee

administrative costs, is available for the

tree removal program. Committee

administrative costs for reviewing

applications and verifying tree removals

are expected to be about $125,000.

Major expense categories for

administration include costs for salaries

and benefits; vehicle rental and

maintenance; insurance and overhead,

and supplies.

Total producer costs associated with

filing applications to participate in the

program and maintaining records for the

period specified after tree removal are

expected to be about $1,000.

Overall Assessment

Payments made through this program

could help prune/plum producers by

addressing the oversupply problem that

is adversely affecting the dried plum

industry. A tree removal program is

expected to allow supply to be adjusted

downward more quickly. Market forces

will also result in supplies being

reduced, but this adjustment may occur

more slowly, likely resulting in a

number of farm failures. The treeremoval program may be beneficial in

reducing the risk of loan default for

lenders that financed prune/plum

growers. This program will likely help

small, under-capitalized producers to

stay in business. These producers are

often efficient, but do not have adequate

resources to continue to operate given

the current depressed conditions within

their industry.

Reducing the level of unprofitability

also should provide opportunities for

the industry to engage in additional

demand-enhancing activities, especially

directed at the domestic market. Even a

moderate increase in domestic per

capita consumption will have a

significant, positive impact on grower

returns.

Costs for the program would include

the $17 million to be paid growers and

to the Committee for administration

costs under the Federal tree removal

diversion program. Additionally,

growers would incur costs totaling

$1,000 to comply with the filing and

record-keeping requirements of the

program.

Benefits to growers under the tree

removal program could total

approximately $93 million. The first

step in this calculation is to multiply

marketable production for each of the

six years (2002–2007) times the

difference between grower price and

variable cost, and to sum those figures.

This is done for each of the two

scenarios (with and without a tree pull

program). The $93 million difference

between those figures represents a

conservative (low-end) estimate of

program benefits resulting from reduced

grower losses. This cost calculation

assumes that the acreage on which trees

are removed remain idle, and that

growers must therefore absorb all fixed

costs on that acreage. To the extent that

the land is put to other productive uses,

growers would not be absorbing all

fixed costs of producing prune/plums,

and grower benefits would be higher.

If growers are earning more, it follows

that processors and/or retailers beyond

the farmgate would pay higher raw

product costs to obtain the prune/plums

from the growers. These higher costs

could be passed on to consumers

through higher retail prices or could be

absorbed as reduced operating margins

for other affected sectors of the

economy—processors, wholesalers, or

retailers. An estimate of these costs is

obtained by multiplying the estimated

grower price changes over each of the

six years (2002–2007) times annual

shipments (an average of the prune/

plum shipments with the tree pull

program and without the tree pull

program). That figure, summed over the

six years, is approximately $68 million.

However, this $68 million cost is likely

overstated due to the fact that grower

prices are currently less than the cost of

production. Adjustments in retail

prices, and retailer and processor

margins, are anticipated to change with

or without a tree removal program.

Another cost of the tree removal

program is the reduced economic

activity due to the growers purchasing

fewer inputs (labor, chemicals, etc.)

from the reduction in prune/plum acres

managed and harvested. Input

producers (laborers and agricultural

chemical firms) would see less revenue

because of lowered purchases of these

inputs. To the extent that acreage

removed is replanted in other crops,

those costs could be somewhat offset by

purchases of inputs to produce the

alternative crops. This cost of the tree

removal program is difficult to quantify

and is not included in this analysis.

Savings over the same period of up to

$60 million could be realized through

reduced surplus removal purchases of

dried plum products for Federal feeding

programs. These government savings

would be used to purchase other

commodities for use in school and other

food assistance programs.

Historically, the dried plum industry

has not relied heavily on the Federal

surplus removal program. Since the

1991 season, the industry has requested

and received surplus removal purchases

in only 4 of the past 11 seasons. Should

the tree removal program be

implemented and supplies be reduced

as expected, it would be unlikely that

the dried plum industry would seek

government assistance in the form of

surplus removal purchases for several

years to come.

Conclusion

Based on this information, USDA has

determined that there is a surplus of

dried plums, and that reestablishment of

producers’ purchasing power would be

encouraged by using Section 32 funds to

reduce supplies under a Diversion

Program for Dried Plums/Prunes

consisting wholly of a tree-removal

program. USDA has further determined

that this program would be a long-term

solution to the oversupply situation that

exists in the California dried plum

industry, and that it would provide

relief to growers.

List of Subjects in 7 CFR Part 81

Administrative practice and

procedures, Agriculture, Prunes,

Reporting and recordkeeping

requirements, Surplus agricultural

commodities.

For the reasons set forth in the

preamble, it is proposed that Title 7,

Subtitle B, Chapter 1 be amended as

follows:

1. The authority citation for 7 CFR

part 81 reads as follows:

Authority: 7 U.S.C. 612c.

1. In Subtitle B, Chapter 1, Part 81 is

added to read as follows:

PART 81—PRUNE/DRIED PLUM

DIVERSION PROGRAM

Sec.

81.1 Applicability.

81.2 Administration.

81.3 Definitions.

81.4 Length of program.

81.5 General requirements.

81.6 Rate of payment.

81.7 Eligibility for payment.

81.8 Application and approval for

participation.

81.9 Inspection and certification of

diversion.

81.10 Claim for payment.

81.11 Compliance with program provisions.

81.12 Inspection of premises.

81.13 Records and accounts.

81.14 Offset, assignment, and prompt

payment.

81.15 Appeals.

Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / Proposed Rules 64923

81.16 Refunds; joint and several liability.

81.17 Death, incompetency or

disappearance.

Authority: 7 U.S.C. 612c.

PART 81—PRUNE/DRIED PLUM

DIVERSION PROGRAM

§ 81.1 Applicability.

Pursuant to the authority conferred by

section 32 of the Act of August 24, 1935,

as amended (7 U.S.C. 612c)(Section 32),

the Secretary of Agriculture will make

payment to California producers who

divert prune/plums by removing trees

on which the fruit is produced in

accordance with the terms and

conditions set forth in this part.

§ 81.2 Administration.

The program will be administered

under the general direction and

supervision of the Deputy

Administrator, Fruit and Vegetable

Programs, Agricultural Marketing

Service (AMS), United States

Department of Agriculture (USDA), and

will be implemented by the Prune

Marketing Committee (Committee). The

Committee, or its authorized

representatives, does not have authority

to modify or waive any of the provisions

of this part.

§ 81.3 Definitions.

(a) Application means ‘‘Application

for Prune Tree Removal Program.’’

(b) Diversion means the removal of

prune-plum trees after approval of

applications by the Committee through

June 30, 2002.

(c) Removal means that the pruneplum trees are no longer standing and

capable of producing a crop. The

producer can accomplish removal by

any means the producer desires.

(d) Producer means an individual,

partnership, association, or corporation

in the State of California who grows

prune/plums that are dehydrated into

dried plums for market.

(e) Committee means the Prune

Marketing Committee established by the

Secretary of Agriculture to locally

administer Federal Marketing Order No.

993 (7 CFR part 993), regulating the

handling of dried prunes produced in

California.

§ 81.4 Length of program.

This program is implemented January

2, 2002, through June 30, 2004.

Producers diverting prune/plums by

removing prune-plum trees must

complete the diversion no later than

June 30, 2002.

§ 81.5 General requirements.

(a) To be eligible for this program,

during one of the last two seasons, the

trees to be removed must have yielded

at least 1.5 tons per net planted acre

during the 1999 or 2000 crop year. A net

planted acre is the actual acreage

planted with prune-plum trees.

Abandoned orchards and dead trees will

not qualify. In new orchards diverted,

qualifying trees must be at least 5 years

of age (6th leaf), contain at least two

scaffolds, and be capable of producing

at least 1.5 tons per net planted acre.

The block of trees for removal must be

easily definable by separations from

other blocks and contain at least 1,000

eligible trees or comprise an entire

orchard.

(b) Any grower participating in this

program must agree not to replant

prune-plum trees on the land cleared

under this program through June 30,

2004. Participants bear responsibility for

ensuring that trees are not replanted,

whether by themselves, or by successors

to the land, or by others, until after June

30, 2004. If trees are replanted before

June 30, 2004, by any persons,

participants must refund any USDA

payment, with interest, made in

connection with this tree removal

program.

§ 81.6 Rate of payment.

(a) The rate of payment for each

eligible prune-plum tree removed will

be $8.50 per tree.

(b) Payment under paragraph (a) of

this section will be made after tree

removal has been verified by the staff of

the Committee.

(c) The $8.50 per tree payment is

intended to cover the costs of tree

removal. USDA will make no other

payment with respect to such removals.

The producer will be responsible for

arranging, requesting, and paying for the

tree removal in the specified orchard

blocks or orchard(s), as the case may be.

§ 81.7 Eligibility for payment.

(a) If applications for payment do not

exceed $17,000,000, less administration

costs, payments will be made under this

program to any producer of prune/

plums who complies with the

requirements in § 81.8 and all other

terms and conditions in this part.

(b) If applications for participation in

the program authorized by this part

exceed $17,000,000, less administration

costs, the Committee will approve the

applications (subject to the

requirements in § 81.8) in the order in

which the completed applications are

received in the Committee office.

Applications received after total outlays

exceed the amount of money available

will be denied.

§ 81.8 Application and approval for

participation.

(a) Applications will be reviewed for

program compliance and approved or

disapproved by Committee office

personnel.

(b) Applications for participation in

the Prune-Plum Diversion Program can

be obtained from the Committee office

at 3841 North Freeway Boulevard, Suite

120, Sacramento, California 95834;

telephone (916) 565–6235.

(c) Any producer desiring to

participate in the prune-plum diversion

program must file an application with

the Committee prior to January 31, 2002.

The application shall be accompanied

by a copy of any two of the following

four documents: Plat Map from the

County Hall of Records; Irrigation Tax

Bill; County Property Tax Bill; or any

other documents containing an

Assessor’s Parcel Number. Such

application shall include at least the

following information:

(1) The name, address, telephone

number and tax identification number/

social security number of the producer;

(2) The location and size of the

production unit to be diverted;

(3) The prune/plum production from

the orchard or portion of the orchard to

be diverted during the 1999–2000 and

2000–2001 seasons;

(4) A statement that all persons with

an equity interest in the prune/plums in

the production unit to be diverted

consent to the filing of the application.

That is, the applicant has clear title to

the property in question, or agreement

to participate in the tree removal

program from lien or mortgage holders,

and/or land owners, lessors, or similar

parties;

(5) A statement that the applicant

agrees to comply with all of the

regulations established for the prune/

plum diversion program;

(6) The producer applicant shall sign

the application certifying that the

information contained in the

application is true and correct;

(7) The year that the unit of prune/

plums was planted;

(8) The handlers who received the

prune/plums from the producer in the

last two years.

(d) After the Committee receives the

producer applications, it shall review

them to determine whether all the

required information has been provided

and that the information appears

reliable.

(e) If the number of trees to be

removed in such applications,

64924 Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / Proposed Rules

multiplied by $8.50 per tree, exceeds

the amount of funds available for the

diversion program, each grower’s

application will be considered in the

order in which they are received at the

Committee office.

(f) After the application reviews and

confirmation of eligible trees are

completed, the Committee shall notify

the applicant, in writing, as to whether

or not the application has been

approved and the number of trees

approved for payment after removal. If

an application is not approved, the

notification shall specify the reason(s)

for disapproval.

§ 81.9 Inspection and certification of

diversion.

When the removal of the prune-plum

trees is complete, the producer(s) will

notify the Committee on a form

provided by the Committee. The

Committee will certify that the trees

approved for removal from the block or

orchard, as the case may be, have been

removed, and notify AMS.

§ 81.10 Claim for payment.

(a) To obtain payment for the trees

removed, the producer must submit to

the Committee by June 30, 2002, a

completed form provided by the

Committee. Such form shall include the

Committee’s certification that the

qualifying trees from the blocks or

orchards have been removed. AMS will

then issue a check to the producer in the

amount of $8.50 per eligible tree

removed.

§ 81.11 Compliance with program

provisions.

If USDA or the Committee determines

that any provision of this part have not

been complied with by the producer,

the producer will not be entitled to

diversion payments in connection with

tree removal. If a producer does not

comply with the terms of this part,

including the requirement specified in

§ 80.5(b), the producer must refund any

USDA payment made in connection

with such tree removal, and will also be

liable to USDA for any other damages

incurred as a result of such failure. The

Committee or USDA may deny any

producer the right to participate in this

program or the right to receive payments

in connection with any diversion

previously made under this program, or

both, if the Committee or USDA

determines that:

(a) The producer has failed to

properly remove the prune/plum trees

from the applicable block or the whole

orchard regardless of whether such

failure was caused directly by the

producer or by any other person or

persons;

(b) The producer has not acted in

good faith in connection with any

activity under this program; or

(c) The producer has failed to

discharge fully any obligation assumed

by him or her under this program.

§ 81.12 Inspection of premises.

The producer must permit authorized

representatives of USDA or the

Committee, at any reasonable time, to

have access to their premises to inspect

and examine the orchard block where

trees were removed and records

pertaining to the orchard to determine

compliance with the provisions of this

part.

§ 81.13 Records and accounts.

(a) The producers participating in this

program must keep accurate records and

accounts showing the details relative to

the prune/plum tree removal, including

the contract entered into with the firm

removing the trees, as well as the

invoices.

(b) The producers must permit

authorized representatives of USDA, the

Committee, and the General Accounting

Office at any reasonable time to inspect,

examine, and make copies of such

records and accounts to determine

compliance with provisions of this part.

Such records and accounts must be

retained for two years after the date of

payment to the producer under the

program, or for two years after the date

of any audit of records by USDA,

whichever is later.

§ 81.14 Offset, assignment, and prompt

payment.

(a) Any payment or portion thereof

due any person under this part shall be

allowed without regard to questions of

title under State law, and without regard

to any claim or lien against the crop

proceeds thereof in favor of the

producer or any other creditors except

agencies of the U.S. Government.

(b) Payments which are earned by a

producer under this program may be

assigned in the same manner as allowed

under the provisions of 7 CFR part 1404.

(c) Prompt payment interest will not

be applicable.

§ 81.15 Appeals.

Any producer who is dissatisfied with

a determination made pursuant to this

part may make a request for

reconsideration or appeal of such

determination.

§ 81.16 Refunds; joint and several liability.

(a) In the event there is a failure to

comply with any term, requirement, or

condition for payment arising under the

application of this part, and if any

refund of a payment to AMS shall

otherwise become due in connection

with the application of this part, all

payments made under this part to any

producer shall be refunded to AMS

together with interest.

(b) All producers signing an

application for payment as having an

interest in such payment shall be jointly

and severally liable for any refund,

including related charges, that is

determined to be due for any reason

under the terms and conditions of the

application of this part.

(c) Interest shall be applicable to

refunds required of any producer under

this part if AMS determines that

payments or other assistance were

provided to a producer who was not

eligible for such assistance. Such

interest shall be charged at the rate of

interest that the United States Treasury

charges the Commodity Credit

Corporation (CCC) for funds, as of the

date AMS made benefits available. Such

interest shall accrue from the date of

repayment or the date interest increases

as determined in accordance with

applicable regulations. AMS may waive

the accrual of interest if AMS

determines that the cause of the

erroneous determination was not due to

any action of the producer.

(d) Interest determined in accordance

with paragraph (c) of this section may

be waived on refunds required of the

producer when there was no intentional

noncompliance on the part of the

producer, as determined by AMS.

(e) Late payment interest shall be

assessed on all refunds in accordance

with the provisions of, and subject to

the rates prescribed for those claims

which are addressed in 7 CFR part 792.

(f) Producers must refund to AMS any

excess payments, as determined by

AMS, with respect to such application.

(g) In the event that a benefit under

this part was provided as the result of

erroneous information provided by the

producer, the benefit must be repaid

with any applicable interest.

§ 81.17 Death, incompetency, or

disappearance.

In the case of death, incompetency,

disappearance, or dissolution of a

prune/plum producer that is eligible to

receive benefits in accordance with this

part, such person or persons in the same

manner as specified in 7 CFR part 707

for other payments and benefits may

receive such benefits, as determined

appropriate by AMS.

Dated: December 12, 2001.

A.J. Yates,

Administrator, Agricultural Marketing

Service.

[FR Doc. 01–31038 Filed 12–13–01; 9:44 am]

BILLING CODE 3410–02–P