Source: https://www.federalregister.gov/documents/2014/03/14/2014-05587/marketing-order-regulating-the-handling-of-spearmint-oil-produced-in-the-far-west-salable-quantities
Timestamp: 2017-08-17 22:29:57
Document Index: 509794648

Matched Legal Cases: ['art 985', '§\u2009985', '§\u2009985', '§\u2009985', '§\u2009985', '§\u2009985']

Federal Register :: Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 2014-2015 Marketing Year
A Proposed Rule by the Agricultural Marketing Service on 03/14/2014
79 FR 14441
14441-14447 (7 pages)
2014-05587
https://www.federalregister.gov/d/2014-05587 https://www.federalregister.gov/d/2014-05587
This proposal is issued under Marketing Order No. 985 (7 CFR Part 985), as amended, regulating the handling of spearmint oil produced in the Far West (Washington, Idaho, Oregon, and designated parts of Nevada and Utah), hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act Start Printed Page 14442of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”
The Department of Agriculture (USDA) is issuing this proposed rule in conformance with Executive Orders 12866, 13175, and 13563.
This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. This proposed rule is not intended to have retroactive effect. Under the order now in effect, salable quantities and allotment percentages may be established for classes of spearmint oil produced in the Far West. This proposed rule would establish the quantity of spearmint oil produced in the Far West, by class, which handlers may purchase from, or handle on behalf of, producers during the 2014-2015 marketing year, which begins on June 1, 2014.
The salable quantity represents the total amount of each class of spearmint oil that handlers may purchase from, or handle on behalf of, producers during the marketing year. The allotment percentage is the percentage used to calculate each producer's prorated share of the salable quantity. The calculation applies the allotment percentage to a producer's allotment base for each applicable class of spearmint oil. The allotment base is each producer's quantified share of the spearmint oil market based on a statistical representation of past spearmint oil production, with accommodation for reasonable and normal adjustments to such base as prescribed by the Committee and approved by USDA. Salable quantities are established at levels intended to meet market requirements and to establish orderly marketing conditions. Committee recommendations for volume controls are made well in advance of the period in which the regulations are to be effective, thereby allowing producers the chance to adjust their production decisions accordingly.
Pursuant to authority in §§ 985.50, 985.51, and 985.52 of the order, the full eight-member Committee met on November 6, 2013, and recommended salable quantities and allotment percentages for both classes of oil for the 2014-2015 marketing year. The Committee unanimously recommended the establishment of a salable quantity and allotment percentage for Class 1 (Scotch) spearmint oil of 1,149,030 pounds and 55 percent, respectively. The Committee, also with a unanimous vote, recommended the establishment of a salable quantity and allotment percentage for Class 3 (Native) spearmint oil of 1,090,821 pounds and 46 percent, respectively.
This action would set the amount of Scotch and Native spearmint oil that handlers may purchase from, or handle on behalf of, producers during the 2014-2015 marketing year, which begins on June 1, 2014. Salable quantities and allotment percentages have been placed into effect each season since the order's inception in 1980.
Trade demand for Far West Scotch spearmint oil is expected to rise from 981,536 pounds in the 2013-2014 marketing year to 1,000,000 pounds in 2014-2015, if not more. Industry reports indicate an increasing consumer demand for mint flavored products has resulted in increasing demand for Far West Scotch spearmint oil. Information gathered from spearmint oil handlers also supports this conclusion.
The Committee also estimates that there will be zero carry-in of Scotch spearmint oil on June 1, 2014, the beginning of the 2014-2015 marketing year. This figure, which is the primary measure of excess supply, down from an estimated 16,022 pounds the previous year, is below the minimum carry-in quantity that the Committee considers favorable. The demand during the 2012-2013 marketing year equaled total supply resulting in the zero carry-in.
The Committee's stated intent in the use of marketing order volume control regulations for Scotch spearmint oil is to keep adequate supplies available to meet market needs and establish orderly marketing conditions. While the salable quantity recommended for the upcoming marketing year is less than the salable quantity set for the previous year (2013-2014 at 1,344,500 pounds), the Committee felt that the Start Printed Page 14443recommended limit would adequately meet demand, as well as result in carry-in for the following year. With that in mind, the Committee developed its recommendation for the proposed Scotch spearmint oil salable quantity and allotment percentage for the 2014-2015 marketing year based on the information discussed above, as well as the data outlined below.
(A) Estimated carry-in of Scotch spearmint oil on June 1, 2014-0 pounds. This figure is the difference between the revised 2013-2014 marketing year total available supply of 1,073,399 pounds and the estimated 2013-2014 marketing year trade demand of 1,073,399 pounds.
(B) Estimated trade demand of Scotch spearmint oil for the 2014-2015 marketing year—1,000,000 pounds. This figure is based on input from producers at five Scotch spearmint oil production area meetings held in late September and early October 2013, as well as estimates provided by handlers and other meeting participants at the November 6, 2013, meeting. The average estimated trade demand provided at the five production area meetings is 1,033,000 pounds, which is 25,750 pounds less than the average of trade demand estimates submitted by handlers. However, Far West Scotch spearmint oil sales have averaged 819,824 pounds per year over the last five years. Given this information, the Committee decided it was prudent to anticipate the trade demand at 1,000,000 pounds. Should the initially established volume control levels prove insufficient to adequately supply the market, the Committee has the authority to recommend intra-seasonal increases as needed.
(C) Salable quantity of Scotch spearmint oil required from the 2014-2015 marketing year production—1,000,000 pounds. This figure is the difference between the estimated 2014-2015 marketing year trade demand (1,000,000 pounds) and the estimated carry-in on June 1, 2014 (0 pounds). This figure represents the minimum salable quantity that may be needed to satisfy estimated demand for the coming year with no carryover.
(D) Total estimated allotment base of Scotch spearmint oil for the 2014-2015 marketing year—2,089,146 pounds. This figure represents a one-percent increase over the revised 2013-2014 total allotment base. This figure is generally revised each year on June 1 due to producer base being lost because of the bona fide effort production provisions of § 985.53(e). The revision is usually minimal.
(E) Computed Scotch spearmint oil 2014-2015 marketing year allotment percentage—47.9 percent. This percentage is computed by dividing the minimum required salable quantity (1,000,000 pounds) by the total estimated allotment base (2,089,146 pounds).
(F) Recommended Scotch spearmint oil 2014-2015 marketing year allotment percentage—55 percent. This is the Committee's recommendation and is based on the computed allotment percentage (47.9 percent), the average of the computed allotment percentage figures from the five production area meetings (46.2 percent), and input from producers and handlers at the November 6, 2013, meeting. The recommended 55 percent allotment percentage is also based on the Committee's belief that the computed percentage (47.9 percent) may not adequately supply the potential 2014-2015 Scotch spearmint oil market.
(G) Recommended Scotch spearmint oil 2014-2015 marketing year salable quantity—1,149,030 pounds. This figure is the product of the recommended allotment percentage (55 percent) and the total estimated allotment base (2,089,146 pounds).
(H) Estimated total available supply of Scotch spearmint oil for the 2014-2015 marketing year—1,149,030 pounds. This figure is the sum of the 2014-2015 recommended salable quantity (1,149,030 pounds) and the estimated carry-in on June 1, 2014 (0 pounds).
At the November 6, 2013, meeting, the Committee also recommended a 2014-2015 Native spearmint oil salable quantity of 1,090,821 pounds and an allotment percentage of 46 percent. The Committee utilized Native spearmint oil sales estimates for 2014-2015 marketing year, as provided by several of the industry's handlers, as well as historical and current Native spearmint oil market statistics to establish these thresholds. The recommended volume control levels represent a decrease of 341,380 pounds and 15 percentage points over the previous year's initially established salable quantity and allotment percentage.
Given the above, the Committee estimates that approximately 1,300,000 pounds of Native spearmint oil may be sold during the 2014-2015 marketing year. When considered in conjunction with the estimated carry-in of 307,297 pounds of Native spearmint oil on June 1, 2014, the recommended salable quantity of 1,090,821 pounds results in an estimated total available supply of 1,398,118 pounds of Native spearmint oil during the 2014-2015 marketing year. Estimated carry-in of Native spearmint oil at the beginning of the 2015-2016 marketing year would be approximately 98,118 pounds. Carry-in spearmint oil is distinct from reserve pool spearmint oil and represents the amount of salable spearmint oil produced, but not marketed, in previous years and is available for sale in the current year. It is the primary measure of excess spearmint oil supply under the order. Reserve pool oil represents the amount of excess oil held by the Committee, on behalf of the producers, that is not currently available to the market. The Committee's stated intent in the use of marketing order volume control regulations for Native spearmint oil is to keep adequate supplies available to meet market needs and establish orderly marketing conditions. With that in mind, the Committee developed its recommendation for the proposed Native spearmint oil salable quantity and allotment percentage for the 2014-2015 marketing year based on the information discussed above, as well as the data outlined below.
(A) Estimated carry-in of Native spearmint oil on June 1, 2014—307,297 pounds. This figure is the difference between the revised 2013-2014 marketing year total available supply of 1,577,297 pounds and the estimated 2013-2014 marketing year trade demand of 1,270,000 pounds.
(B) Estimated trade demand of Native spearmint oil for the 2014-2015 marketing year—1,300,000 pounds. This estimate is established by the Committee and is based on input from producers at six Native spearmint oil production area meetings held in late September and early October 2013, as well as estimates provided by handlers and other meeting participants at the Start Printed Page 14444November 6, 2013, meeting. The average estimated trade demand provided at the six production area meetings was 1,271,281 pounds, whereas the handlers' estimates ranged from 1,290,000 pounds to 1,400,000 pounds, and averaged 1,347,500 pounds. The average of Far West Native spearmint oil sales over the last five years is 1,190,928 pounds.
(C) Salable quantity of Native spearmint oil required from the 2014-2015 marketing year production—992,703 pounds. This figure is the difference between the estimated 2014-2015 marketing year trade demand (1,300,000 pounds) and the estimated carry-in on June 1, 2014 (307,297 pounds). This is the minimum amount that the Committee believes would be required to meet the anticipated 2014-2015 Native spearmint oil trade demand.
(D) Total estimated allotment base of Native spearmint oil for the 2014-2015 marketing year—2,371,350 pounds. This figure represents a one-percent increase over the revised 2013-2014 total allotment base. This figure is generally revised each year on June 1 due to producer base being lost due to the bona fide effort production provisions of § 985.53(e). The revision is usually minimal.
(E) Computed Native spearmint oil 2014-2015 marketing year allotment percentage—41.9 percent. This percentage is computed by dividing the required salable quantity (992,703 pounds) by the total estimated allotment base (2,371,350 pounds).
(F) Recommended Native spearmint oil 2014-2015 marketing year allotment percentage—46 percent. This is the Committee's recommendation based on the computed allotment percentage (41.9 percent), the average of the computed allotment percentage figures from the six production area meetings (39.9 percent), and input from producers and handlers at the November 6, 2013, meeting. The recommended 46 percent allotment percentage is also based on the Committee's belief that the computed percentage (41.9 percent) may not adequately supply the potential 2014-2015 Native spearmint oil market.
(G) Recommended Native spearmint oil 2014-2015 marketing year salable quantity—1,090,821 pounds. This figure is the product of the recommended allotment percentage (46 percent) and the total estimated allotment base (2,371,350 pounds).
(H) Estimated available supply of Native spearmint oil for the 2014-2015 marketing year—1,398,118 pounds. This figure is the sum of the 2014-2015 recommended salable quantity (1,090,821 pounds) and the estimated carry-in on June 1, 2014 (307,297 pounds).
The Committee's recommended Scotch and Native spearmint oil salable quantities and allotment percentages of 1,149,030 pounds and 55 percent, and 1,090,821 pounds and 46 percent, respectively, are based on the goal of establishing and maintaining market stability. The Committee anticipates that this goal would be achieved by matching the available supply of each class of Spearmint oil to the estimated demand of such, thus avoiding extreme fluctuations in inventories and prices.
The proposed salable quantities are not expected to cause a shortage of spearmint oil supplies. Any unanticipated or additional market demand for spearmint oil which may develop during the marketing year could be satisfied by an intra-seasonal increase in the salable quantity. The order contains a provision for intra-seasonal increases to allow the Committee the flexibility to respond quickly to changing market conditions.
This proposed regulation, if adopted, would be similar to regulations issued in prior seasons. The average initial allotment percentage for the five most recent marketing years for Scotch spearmint oil is 41.4 percent, while the average initial allotment percentage for the same five-year period for Native spearmint oil is 50.2 percent. Costs to producers and handlers resulting from this rule are expected to be offset by the benefits derived from a stable market and improved returns. In conjunction with the issuance of this proposed rule, USDA has reviewed the Committee's marketing policy statement for the 2014-2015 marketing year. The Committee's marketing policy statement, a requirement whenever the Committee recommends volume regulation, fully meets the intent of § 985.50 of the order.
During its discussion of potential 2014-2015 salable quantities and allotment percentages, the Committee considered: (1) The estimated quantity of salable oil of each class held by producers and handlers; (2) the estimated demand for each class of oil; (3) the prospective production of each class of oil; (4) the total of allotment bases of each class of oil for the current marketing year and the estimated total of allotment bases of each class for the ensuing marketing year; (5) the quantity of reserve oil, by class, in storage; (6) producer prices of oil, including prices for each class of oil; and (7) general market conditions for each class of oil, including whether the estimated season average price to producers is likely to exceed parity. Conformity with USDA's “Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders” has also been reviewed and confirmed.
The establishment of these salable quantities and allotment percentages would allow for anticipated market needs. In determining anticipated market needs, the Committee considered historical sales, as well as changes and trends in production and demand. This rule also provides producers with information on the amount of spearmint oil that should be produced for the 2014-2015 season in order to meet anticipated market demand.
There are eight spearmint oil handlers subject to regulation under the order, and approximately 39 producers of Scotch spearmint oil and approximately 91 producers of Native spearmint oil in the regulated production area. Small agricultural service firms are defined by the Small Business Administration (SBA) as those having annual receipts of less than $7,000,000, and small Start Printed Page 14445agricultural producers are defined as those having annual receipts of less than $750,000 (13 CFR 121.201).
Small spearmint oil producers generally are not as extensively diversified as larger ones and as such are more at risk from market fluctuations. Such small producers generally need to market their entire annual allotment and do not have the luxury of having other crops to cushion seasons with poor spearmint oil returns. Conversely, large diversified producers have the potential to endure one or more seasons of poor spearmint oil markets because income from alternate crops could support the operation for a period of time. Being reasonably assured of a stable price and market provides small producing entities with the ability to maintain proper cash flow and to meet annual expenses. Thus, the market and price stability provided by the order potentially benefit small producers more than such provisions benefit large producers. Even though a majority of handlers and producers of spearmint oil may not be classified as small entities, the volume control feature of this order has small entity orientation.
This proposed rule would establish the quantity of spearmint oil produced in the Far West, by class, that handlers may purchase from, or handle on behalf of, producers during the 2014-2015 marketing year. The Committee recommended this rule to help maintain stability in the spearmint oil market by matching supply to estimated demand, thereby avoiding extreme fluctuations in supplies and prices. Establishing quantities that may be purchased or handled during the marketing year through volume regulations allows producers to plan their spearmint planting and harvesting to meet expected market needs. The provisions of §§ 985.50, 985.51, and 985.52 of the order authorize this rule.
The significant variability of the spearmint oil market is illustrated by the fact that the coefficient of variation (a standard measure of variability; “CV”) of Far West spearmint oil grower prices for the period 1980-2012 (when the marketing order was in effect) is 0.19, compared to 0.34 for the decade prior to the promulgation of the order (1970-79) and 0.48 for the prior 20-year period (1960-79). This provides an indication of the price stabilizing impact of the marketing order.
There is a reserve pool for each class of oil that may not be sold during the current marketing year unless USDA approves a Committee recommendation to increase the salable quantity and allotment percentage for a class of oil and make a portion of the pool available. However, limited quantities of Start Printed Page 14446reserve oil are typically sold by one producer to another producer to fill deficiencies. A deficiency occurs when on-farm production is less than a producer's allotment. In that case, a producer's own reserve oil can be sold to fill that deficiency. Excess production (higher than the producer's allotment) can be sold to fill other producers' deficiencies. All of these provisions need to be exercised prior to November 1 of each year.
The Committee estimated trade demand for the 2014-2015 marketing year for both classes of oil at 2,300,000 pounds, and that the expected combined salable carry-in will be 307,297 pounds. This results in a combined required salable quantity of 1,992,703 pounds. With volume control, sales by producers for the 2014-2015 marketing year would be limited to 2,239,851 pounds (the recommended salable quantity for both classes of spearmint oil).
The recommended allotment percentages, upon which 2014-2015 producer allotments are based, are 55 percent for Scotch and 46 percent for Native. Without volume controls, producers would not be limited to these allotment levels, and could produce and sell additional spearmint. The econometric model estimated a decline of about $1.90 in the season average producer price per pound (from both classes of spearmint oil) resulting from the higher quantities that would be produced and marketed without volume control. The surplus situation for the spearmint oil market that would exist without volume controls in 2014-2015 also would likely dampen prospects for improved producer prices in future years because of the buildup in stocks.
As noted earlier, the Committee's recommendation to establish salable quantities and allotment percentages for both classes of spearmint oil was made after careful consideration of all available information including: (1) The estimated quantity of salable oil of each class held by producers and handlers; (2) the estimated demand for each class of oil; (3) the prospective production of each class of oil; (4) the total of allotment bases of each class of oil for the current marketing year and the estimated total of allotment bases of each class for the ensuing marketing year; (5) the quantity of reserve oil, by class, in storage; (6) producer prices of oil, including prices for each class of oil; and (7) general market conditions for each class of oil, including whether the estimated season average price to producers is likely to exceed parity. Based on its review, the Committee believes that the salable quantity and allotment percentage levels recommended would achieve the objectives sought.
Without any regulations in effect, the Committee believes the industry would return to the pronounced cyclical price patterns that occurred prior to the order, and that prices in 2014-2015 could decline substantially below current levels.
This proposed rule would establish the salable quantities and allotment percentages for Class 1 (Scotch) spearmint oil and Class 3 (Native) spearmint oil produced in the Far West during the 2014-2015 marketing year. Accordingly, this action would not impose any additional reporting or recordkeeping requirements on either small or large spearmint oil producers or handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and Start Printed Page 14447duplication by industry and public sector agencies.
The Committee's meeting was widely publicized throughout the spearmint oil industry and all interested persons were invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, the November 6, 2013, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. Finally, interested persons are invited to submit comments on this proposed rule, including the regulatory and informational impacts of this action on small businesses.
A 15-day comment period is provided to allow interested persons to respond to this proposed rule. Fifteen days is deemed appropriate because: (1) The 2014-2015 fiscal period begins on June 1, 2014, and a final determination on the salable quantities and allotment percentages should be made prior to handlers purchasing from, or handling on behalf of, producers any oil for the ensuing marketing year; and (2) handlers are aware of this action, which was recommended by the Committee at a public meeting and is similar to other salable quantities and allotment percentages issued in past years.
2. Section 985.233 is added to read as follows:
The salable quantity and allotment percentage for each class of spearmint oil during the marketing year beginning on June 1, 2014, shall be as follows:
(a) Class 1 (Scotch) oil—a salable quantity of 1,149,030 pounds and an allotment percentage of 55 percent.
(b) Class 3 (Native) oil—a salable quantity of 1,090,821 pounds and an allotment percentage of 46 percent.
[FR Doc. 2014-05587 Filed 3-13-14; 8:45 am]