Source: https://www.federalregister.gov/documents/2008/04/21/E8-8468/marketing-order-regulating-the-handling-of-spearmint-oil-produced-in-the-far-west-salable-quantities
Timestamp: 2018-02-18 07:59:44
Document Index: 622837485

Matched Legal Cases: ['§\u2009985', '§\u2009985', '§\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 2008-2009 Marketing Year
A Rule by the Agricultural Marketing Service on 04/21/2008
73 FR 21215
21215-21220 (6 pages)
Docket Nos. AMS-FV-07-0135
FV08-985-2 FR
E8-8468
https://www.federalregister.gov/d/E8-8468 https://www.federalregister.gov/d/E8-8468
This rule establishes the quantity of spearmint oil produced in the Far West, by class that handlers may purchase from, or handle for, producers during the 2008-2009 marketing year, which begins on June 1, 2008. This rule establishes salable quantities and allotment percentages for Class 1 (Scotch) spearmint oil of 993,067 pounds and 50 percent, respectively, and for Class 3 (Native) spearmint oil of 1,184,748 pounds and 53 percent, respectively. The Spearmint Oil Administrative Committee (Committee), the agency responsible for local administration of the marketing order for spearmint oil produced in the Far West, recommended these limitations for the purpose of avoiding extreme fluctuations in supplies and prices to help maintain stability in the spearmint oil market.
Susan M. Coleman, Marketing Specialist or Gary D. Olson, Regional Manager, Northwest Marketing Field Office, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA; Telephone: (503) 326-2724; Fax: (503) 326-7440; or E-mail: Sue.Coleman@usda.gov or GaryD.Olson@usda.gov.
This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order now in effect, salable quantities and allotment percentages may be established for classes of spearmint oil produced in the Far West. This final rule establishes the quantity of spearmint oil produced in the Far West, by class, which may be purchased from or handled for producers by handlers during the 2008-2009 marketing year, which begins on June 1, 2008. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.
Pursuant to authority in §§ 985.50, 985.51, and 985.52 of the order, the Committee, with seven of its eight members present, met on October 17, 2007, and recommended salable quantities and allotment percentages for both classes of oil for the 2008-2009 marketing year. The Committee unanimously recommended the establishment of a salable quantity and allotment percentage for Scotch spearmint oil of 993,067 pounds and 50 percent, respectively. For Native spearmint oil, the Committee unanimously recommended the establishment of a salable quantity and allotment percentage of 1,184,748 pounds and 53 percent, respectively.
This final rule limits the amount of spearmint oil that handlers may purchase from, or handle for, producers during the 2008-2009 marketing year, which begins on June 1, 2008. Salable quantities and allotment percentages have been placed into effect each season since the order's inception in 1980.
The U.S. production of Scotch spearmint oil is concentrated in the Far West, which includes Washington, Idaho, and Oregon and a portion of Nevada and Utah. Scotch spearmint oil is also produced in the Midwest states of Indiana, Michigan, and Wisconsin, as well as in the States of Montana, South Dakota, North Dakota, and Minnesota. The production area covered by the marketing order currently accounts for approximately 62 percent of the annual U.S. sales of Scotch spearmint oil.
When the order became effective in 1980, the Far West had 72 percent of the world's sales of Scotch spearmint oil. While the Far West is still the leading producer of Scotch spearmint oil, its share of world sales is now estimated to be about 46 percent. This loss in world sales for the Far West region is directly attributed to the increase in global production. Other factors that have played a significant role include the overall quality of the imported oil and technological advances that allow for more blending of lower quality oils. Such factors have provided the Committee with challenges in accurately predicting trade demand for Scotch oil. This, in turn, has made it difficult to balance available supplies with demand and to achieve the Start Printed Page 21216Committee's overall goal of stabilizing producer and market prices.
The marketing order has continued to contribute to price and general market stabilization for Far West producers. The Committee, as well as spearmint oil producers and handlers attending the October 17, 2007, meeting, estimated that the 2007-2008 producer price for Scotch oil would be $14.00 to $15.00 per pound. However, there is very little forward contracting being done at the present time and producers are wary of doing so because of significant increases in their cost of production. This producer price is approaching the cost of production for most producers as indicated in a study from the Washington State University Cooperative Extension Service (WSU), which estimates production costs to be between $13.50 and $15.00 per pound. However, this study was completed in 2001 and fuel costs alone have doubled in price. The rises in fuel costs have also increased other petroleum based products, such as tires, fertilizer, and chemicals, which also increase production costs.
This low level of producer returns has caused an overall reduction in acreage. When the order became effective in 1980, the Far West region had 9,702 acres of Scotch spearmint. The Committee reported that the 2007-2008 acreage of Scotch was 6,528 acres, which resulted in 810,675 pounds of Scotch oil.
The Committee recommended the 2008-2009 Scotch spearmint oil salable quantity (993,067 pounds) and allotment percentage (50 percent) utilizing sales estimates for 2008-2009 Scotch spearmint oil as provided by several of the industry's handlers, as well as historical and current Scotch spearmint oil sales levels. The Committee is estimating that about 920,000 pounds of Scotch spearmint oil, on average, may be sold during the 2008-2009 marketing year. When considered in conjunction with the estimated zero carry-in of oil on June 1, 2008, the recommended salable quantity of 993,067 pounds results in a total available supply of Scotch spearmint oil next year of 993,067 pounds.
The recommendation for the 2008-2009 Scotch spearmint oil volume regulation is consistent with the Committee's stated intent of keeping adequate supplies available at all times, while attempting to stabilize prices at a level adequate to sustain the producers. Furthermore, the recommendation takes into consideration the industry's desire to compete with less expensive oil produced outside the regulated area.
The supply and demand characteristics of the current Native spearmint oil market, combined with the stabilizing impact of the marketing order, have kept the price relatively steady. The average price for the five-year period ending in 2006 is $9.80, which is $0.06 higher than the average price for the ten-year period (1997-2006) of $9.74. The Committee considers these levels too low for the majority of producers to maintain viability. The WSU study referenced earlier indicates that the cost of producing Native spearmint oil ranges from $10.26 to $10.92 per pound.
Similar to Scotch, the low level of producer returns has also caused an overall reduction in Native spearmint acreage. When the order became effective in 1980, the Far West region had 12,153 acres of Native spearmint. The Committee reported that the 2007-2008 acreage of Native spearmint was 8,436 acres, which resulted in 1,221,238 pounds of Native oil.
The Committee recommended the 2008-2009 Native spearmint oil salable quantity (1,184,748 pounds) and allotment percentage (53 percent) utilizing sales estimates for 2008-2009 Native oil as provided by several of the industry's handlers, as well as historical and current Native spearmint oil sales levels. The Committee is estimating that about 1,250,000 pounds of Native spearmint oil, on average, may be sold during the 2008-2009 marketing year. When considered in conjunction with the estimated carry-in of 56,433 pounds of oil on June 1, 2008, the recommended salable quantity of 1,184,748 pounds results in a total available supply of Native spearmint oil next year of about 1,241,181 pounds.
The Committee believes that the order has contributed extensively to the stabilization of producer prices, which prior to 1980 experienced wide fluctuations from year to year. According to the National Agricultural Statistics Service, for example, the average price paid for both classes of spearmint oil ranged from $4.00 per pound to $11.10 per pound during the period between 1968 and 1980. Prices since the order's inception, the period from 1980 to 2006, have generally stabilized at an average price of $12.69 per pound for Scotch spearmint oil and $9.89 per pound for Native spearmint oil.
The Committee based its recommendation for the proposed salable quantity and allotment percentage for each class of spearmint oil for the 2008-2009 marketing year on the information discussed above, as well as the data outlined below.
(A) Estimated carry-in on June 1, 2008—0 pounds. This figure is the difference between the revised 2007-2008 marketing year total available supply of 816,718 pounds and the estimated 2007-2008 marketing year trade demand of 816,718 pounds.
(B) Estimated trade demand for the 2008-2009 marketing year—920,000 pounds. This figure was based on input from producers at six Scotch spearmint oil production area meetings held in September 2007, as well as estimates provided by handlers and other meeting participants at the October 17, 2007, meeting. The average estimated trade demand provided at the six production area meetings was 924,583 pounds, whereas the estimated handler trade demand ranged from 875,000 to 950,000 pounds. The average of sales over the last five years was 760,152 pounds.
(C) Salable quantity required from the 2008-2009 marketing year production—920,000 pounds. This figure is the difference between the estimated 2008-2009 marketing year trade demand (920,000 pounds) and the estimated carry-in on June 1, 2008 (0 pounds).
(D) Total estimated allotment base for the 2008-2009 marketing year—1,986,133 pounds. This figure represents a one percent increase over the revised 2007-2008 total allotment base. This figure is generally revised each year on June 1 because of producer base being lost to the bona fide effort production provisions of § 985.53(e). The revision is usually minimal.
(E) Computed allotment percentage—46.3 percent. This percentage is computed by dividing the required salable quantity by the total estimated allotment base.
(F) Recommended allotment percentage—50 percent. This Start Printed Page 21217recommendation was based on the Committee's determination that the computed 46.3 percent would not adequately supply the potential 2008-2009 market.
(G) The Committee's recommended salable quantity—993,067 pounds. This figure is the product of the recommended allotment percentage and the total estimated allotment base.
(H) Estimated available supply for the 2008-2009 marketing year—993,067 pounds. This figure is the sum of the 2008-2009 recommended salable quantity (993,067 pounds) and the estimated carry-in on June 1, 2008 (0 pounds).
(A) Estimated carry-in on June 1, 2008—56,433 pounds. The Committee's estimated carry-in reflects anticipated increases to the salable quantity and allotment percentage that may be needed to meet demand during the remainder of the 2007-2008 marketing year.
(B) Estimated trade demand for the 2008-2009 marketing year—1,250,000 pounds. This figure was based on input from producers at the six Native spearmint oil production area meetings held in September 2007, as well as estimates provided by handlers and other meeting participants at the October 17, 2007, meeting. The average estimated trade demand provided at the six production area meetings was 1,241,667 pounds, whereas the handler estimate ranged from 1,200,000 pounds to 1,250,000 pounds.
(C) Salable quantity required from the 2008-2009 marketing year production—1,193,567 pounds. This figure is the difference between the estimated 2008-2009 marketing year trade demand (1,250,000 pounds) and the estimated carry-in on June 1, 2008 (56,433 pounds).
(D) Total estimated allotment base for the 2008-2009 marketing year—2,235,374 pounds. This figure represents a one percent increase over the revised 2007-2008 total allotment base. This figure is generally revised each year on June 1 because of producer base being lost to the bona fide effort production provisions of § 985.53(e). The revision is usually minimal.
(E) Computed allotment percentage—53.4 percent. This percentage is computed by dividing the required salable quantity by the total estimated allotment base.
(F) Recommended allotment percentage—53 percent. This was the Committee's recommendation based on the computed allotment percentage, the average of the computed allotment percentage figures from the six production area meetings (53.7 percent), and input from producers and handlers at the October 17, 2007, meeting.
(G) The Committee's recommended salable quantity—1,184,748 pounds. This figure is the product of the recommended allotment percentage and the total estimated allotment base.
(H) Estimated available supply for the 2008-2009 marketing year—1,241,181 pounds. This figure is the sum of the 2008-2009 recommended salable quantity (1,184,748 pounds) and the estimated carry-in on June 1, 2008 (56,433 pounds).
The Committee's recommended Scotch and Native spearmint oil salable quantities and allotment percentages of 993,067 pounds and 50 percent, and 1,184,748 pounds and 53 percent, respectively, are based on the Committee's goal of maintaining market stability by avoiding extreme fluctuations in supplies and prices, and the anticipated supply and trade demand during the 2008-2009 marketing year. The salable quantities are not expected to cause a shortage of spearmint oil supplies. Any unanticipated or additional market demand for spearmint oil, which may develop during the marketing year, can be satisfied by an increase in the salable quantities. Both Scotch and Native spearmint oil producers who produce more than their annual allotments during the 2008-2009 marketing year may transfer such excess spearmint oil to a producer with spearmint oil production less than their annual allotment or put it into the reserve pool before November 1, 2008.
This regulation is similar to regulations issued in prior seasons. Costs to producers and handlers resulting from this rule are expected to be offset by the benefits derived from a stable market and improved returns. In conjunction with the issuance of this final rule, USDA has reviewed the Committee's marketing policy statement for the 2008-2009 marketing year. The Committee's marketing policy statement, a requirement whenever the Committee recommends volume regulations, fully meets the intent of § 985.50 of the order. During its discussion of potential 2008-2009 salable quantities and allotment percentages, the Committee considered: (1) The estimated quantity of salable oil of each class held by producers and handlers; (2) the estimated demand for each class of oil; (3) the prospective production of each class of oil; (4) the total of allotment bases of each class of oil for the current marketing year and the estimated total of allotment bases of each class for the ensuing marketing year; (5) the quantity of reserve oil, by class, in storage; (6) producer prices of oil, including prices for each class of oil; and (7) general market conditions for each class of oil, including whether the estimated season average price to producers is likely to exceed parity. Conformity with the USDA's “Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders” has also been reviewed and confirmed.
The establishment of these salable quantities and allotment percentages will allow for anticipated market needs. In determining anticipated market needs, consideration by the Committee was given to historical sales, as well as changes and trends in production and demand. This rule also provides producers with information on the amount of spearmint oil that should be produced for the 2008-2009 season in order to meet anticipated market demand.
Based on the SBA's definition of small entities, the Committee estimates Start Printed Page 21218that one of the eight handlers regulated by the order could be considered a small entity. Most of the handlers are large corporations involved in the international trading of essential oils and the products of essential oils. In addition, the Committee estimates that 19 of the 58 Scotch spearmint oil producers and 21 of the 90 Native spearmint oil producers could be classified as small entities under the SBA definition. Thus, a majority of handlers and producers of Far West spearmint oil may not be classified as small entities.
This final rule establishes the quantity of spearmint oil produced in the Far West, by class that handlers may purchase from, or handle for, producers during the 2008-2009 marketing year. The Committee recommended this rule to help maintain stability in the spearmint oil market by avoiding extreme fluctuations in supplies and prices. Establishing quantities to be purchased or handled during the marketing year through volume regulations allows producers to plan their spearmint planting and harvesting to meet expected market needs. The provisions of §§ 985.50, 985.51, and 985.52 of the order authorize this rule.
The significant variability is illustrated by the fact that the coefficient of variation (a standard measure of variability; “CV”) of Far West spearmint oil production from 1980 through 2006 was about 0.23. The CV for spearmint oil grower prices was about 0.14, well below the CV for production. This provides an indication of the price stabilizing impact of the marketing order.
Production in the shortest marketing year was about 50 percent of the 26-year average (1.84 million pounds from 1980 through 2006) and the largest crop was approximately 167 percent of the 26-year average. A key consequence is that in years of oversupply and low prices the season average producer price of spearmint oil is below the average cost of production (as measured by the Washington State University Cooperative Extension Service.)
The wide fluctuations in supply and prices that result from this cycle, which was even more pronounced before the creation of the marketing order, can create liquidity problems for some producers. The marketing order was designed to reduce the price impacts of the cyclical swings in production. However, producers have been less able to weather these cycles in recent years because of the increase in production costs. While prices have been relatively steady, the cost of production has dramatically increased which has caused a hesitation by producers to plant. Producers are also enticed by the prices of alternative crops and their lower cost of production.
On November 1 of each year, the Committee identifies any oil that individual producers have produced above the volume specified on their annual allotment certificates. This excess oil is placed in a reserve pool administered by the Committee.
In any given year, the total available supply of spearmint oil is composed of Start Printed Page 21219current production plus carry-over stocks from the previous crop. The Committee seeks to maintain market stability by balancing supply and demand, and to close the marketing year with an appropriate level of carryout. If the industry has production in excess of the salable quantity, then the reserve pool absorbs the surplus quantity of spearmint oil, which goes unsold during that year, unless the oil is needed for unanticipated sales.
The Committee estimated the trade demand for the 2008-2009 marketing year for both classes of oil at 2,170,000 pounds, and that the expected combined carry-in will be 56,433 pounds. This results in a combined required salable quantity of 2,113,567 pounds. Therefore, with volume control, sales by producers for the 2008-2009 marketing year will be limited to 2,177,815 pounds (the recommended salable quantity for both classes of spearmint oil).
The recommended salable percentages, upon which 2008-2009 producer allotments are based, are 50 percent for Scotch and 53 percent for Native. Without volume controls, producers would not be limited to these allotment levels, and could produce and sell additional spearmint. The econometric model estimated a $1.40 decline in the season average producer price per pound (from both classes of spearmint oil) resulting from the higher quantities that would be produced and marketed without volume control. The surplus situation for the spearmint oil market that would exist without volume controls in 2008-2009 also would likely dampen prospects for improved producer prices in future years because of the buildup in stocks.
The Committee considered various alternative levels of volume control for Scotch spearmint oil, including increasing the percentage to a less restrictive level, or decreasing the percentage. After considerable discussion the Committee unanimously determined that 993,067 pounds and 50 percent would be the most effective salable quantity and allotment percentage, respectively, for the 2008-2009 marketing year.
The Committee also considered various alternative levels of volume control for Native spearmint oil. After considerable discussion the Committee unanimously determined that 1,184,748 pounds and 53 percent would be the most effective salable quantity and allotment percentage, respectively, for the 2008-2009 marketing year.
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 2008-2009 would decline substantially below current levels.
As stated earlier, the Committee believes that the order has contributed extensively to the stabilization of producer prices, which prior to 1980 experienced wide fluctuations from year-to-year. National Agricultural Statistics Service records show that the average price paid for both classes of spearmint oil ranged from $4.00 per pound to $11.10 per pound during the period between 1968 and 1980. Prices have been consistently more stable since the marketing order's inception in 1980, with an average price for the period from 1980 to 2006 of $12.69 per pound for Scotch spearmint oil and $9.89 per pound for Native spearmint oil.
As previously stated, annual salable quantities and allotment percentages have been issued for both classes of spearmint oil since the order's inception. Reporting and recordkeeping requirements have remained the same for each year of regulation. These requirements have been approved by the Office of Management and Budget under OMB Control No. 0581-0178, Vegetable and Specialty Crops. Accordingly, this action will not impose any additional reporting or recordkeeping requirements on either small or large spearmint oil producers and handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.
In addition, the Committee's meeting was widely publicized throughout the spearmint oil industry and all interested persons were invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, the October 17, 2007, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. Start Printed Page 21220
A proposed rule concerning this action was published in the Federal Register on February 15, 2008 (73 FR 8825). Copies of the rule were provided to Committee staff, which in turn made it available to spearmint oil producers, handlers, and other interested persons. Finally, the rule was made available through the Internet by USDA and the Office of the Federal Register. A 30-day comment period, ending March 17, 2008, was provided to allow interested persons to respond to the proposal. No comments were received.
After consideration of all relevant matter presented, including the information and recommendation submitted by the Committee and other available information, it is herby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.
2. A new § 985.227 is added to read as follows:
§ 985.227
Salable quantities and allotment percentages—2008-2009 marketing year.
The salable quantity and allotment percentage for each class of spearmint oil during the marketing year beginning on June 1, 2008, shall be as follows:
(a) Class 1 (Scotch) oil—a salable quantity of 993,067 pounds and an allotment percentage of 50 percent.
(b) Class 3 (Native) oil—a salable quantity of 1,184,748 pounds and an allotment percentage of 53 percent.
[FR Doc. E8-8468 Filed 4-18-08; 8:45 am]