Source: https://www.federalregister.gov/articles/2002/03/15/02-6144/dried-prunes-produced-in-california-undersized-regulation-for-the-2002-03-crop-year
Timestamp: 2014-03-11 11:10:24
Document Index: 490013269

Matched Legal Cases: ['art 993', '§ 993', '§ 993', '§ 993', '§ 993', '§ 993', '§ 993', '§ 993', '§ 993', '§ 993', '§ 993', '§ 993', '§ 993', '§ 993', '§ 993', '§ 993', 'art 993', 'ART 993', '§ 993', '§ 993', '§ 993']

Federal Register | Dried Prunes Produced in California; Undersized Regulation for the 2002-03 Crop Year
Dates: Comments received by April 15, 2002, will be considered prior to issuance of a final rule.
Comments Close: 04/15/2002
67 FR 11625
-11629 (5 pages)
Docket No. FV02-993-1 PR
Document Number: 02-6144
Shorter URL: https://federalregister.gov/a/02-6144 Related Topics
This rule invites comments on changes to the undersized regulation for dried prunes received by handlers from producers and dehydrators under Marketing Order No. 993 for the 2002-03 crop year. The marketing order regulates the handling of dried prunes produced in California and is administered locally by the Prune Marketing Committee (Committee). This rule would remove the smallest, least desirable of the marketable size dried prunes produced in California from human consumption outlets and allow handlers to dispose of the undersized prunes in such outlets as livestock feed. The Committee estimated that this rule would reduce the excess of dried prunes by approximately 3,800 tons while leaving sufficient prunes to fulfill foreign and domestic trade demand.
Authority for Undersized Regulations for Inventory Management
History of Undersized Regulations Used for Inventory Management
Comments received by April 15, 2002, will be considered prior to issuance of a final rule.
Interested persons are invited to submit written comments concerning this rule. Comments must be sent to the Docket Clerk, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW STOP 0237, Washington, DC 20250-0237; Fax: (202) 720-8938, or E-mail: moab.docketclerk@usda.gov. All comments should reference the docket number and the date and page number of this issue of the Federal Register and will be made available for public inspection in the Office of the Docket Clerk during regular business hours, or can be viewed at: http://www.ams.usda.gov/fv/moab.html.
This proposal is issued under Marketing Agreement and Order No. 993, both as amended (7 CFR part 993), regulating the handling of dried prunes produced in California, hereinafter referred to as the “order.” The marketing agreement and order are effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”
This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect. This proposal will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.
This proposal invites comments on changes to the undersized regulation in § 993.49(c) of the prune marketing order for the 2002-03 crop year for inventory management. The regulation removes prunes passing through specified screen openings. For French prunes, the screen opening would be increased from23/32to24/32of an inch in diameter; and for non-French prunes, the opening would be increased from28/32to30/32of an inch in diameter. This rule would remove the smallest, least desirable of the marketable size dried prunes produced in California from human consumption outlets. This rule would be in effect from August 1, 2002, through July 31, 2003, and was unanimously recommended by the Committee at a November 29, 2001, meeting.
Authority for Undersized Regulations for Inventory Management Back to Top
Section 993.19b of the prune marketing order defines undersized prunes as prunes which pass freely through a round opening of a specified diameter.
Section 993.49(c) of the prune marketing order establishes an undersized regulation of23/32of an inch for French prunes and28/32of an inch for non-French prunes. These diameter openings have been in effect for quality control purposes. Section 993.49(c) also provides that the USDA upon a recommendation of the Committee may establish larger openings for undersized dried prunes whenever it is determined that supply conditions for a crop year warrant such regulation.
Section 993.50(g) states in part: “No handler shall ship or otherwise dispose of, for human consumption, the quantity of prunes determined by the inspection service pursuant to § 993.49(c) to be undersized prunes.” * * * Pursuant to § 993.52 minimum standards, pack specifications, including the openings prescribed in § 993.49(c), may be modified by the USDA on the basis of a recommendation of the Committee or other information.
Pursuant to the authority in § 993.52 of the order, § 993.400 modifies the undersized prune openings prescribed in § 993.49(c) to permit openings of23/32or24/32of an inch for French prunes and28/32or30/32of an inch for non-French prunes.
History of Undersized Regulations Used for Inventory Management Back to Top
During the 1974-75 and 1977-78 crop years, the undersized prune regulation was established by USDA at23/32of an inch in diameter for French prunes and28/32of an inch in diameter for non-French prunes. These diameter openings were established in §§ 993.401 and 993.404, respectively (39 FR 32733, September 11, 1974; and 42 FR 49802, September 28, 1977). In addition, the Committee recommended and the Department established volume regulation percentages during the 1974-75 crop year with an undersized regulation at the aforementioned23/32and28/32inch diameter screen sizes. During the 1975-76 and 1976-77 crop years, the undersized prune regulation was established at24/32of an inch for French prunes and30/32of an inch for non-French prunes. These diameter openings were established in §§ 993.402 and 993.403 respectively (40 FR 42530, September 15 1975; and 41 FR 37306, September 3, 1976). The prune industry had an excess supply of prunes—particularly small size prunes. Rather than recommending volume regulation percentages for the 1975-76, 1976-77, and 1977-78 crop years, the Committee recommended the establishment of an undersized prune regulation applicable to all prunes received by handlers from producers and dehydrators during each of those crop years.
With these experiences as a basis, the marketing order was amended on August 1, 1982, establishing the continuing quality-related regulation for undersized French and non-French prunes under § 993.49(c). That regulation has removed from the marketable supply those prunes which are not desirable for use in prune products.
As in the 1970's, the prune industry is currently experiencing an excess supply of prunes, including the smaller sizes. During the 1998-99 crop year, an undersized prune regulation was established at24/32of an inch for French prunes, and30/32of an inch for non-French prunes. These diameter openings were established in § 993.405 (63 FR 20058, April 23, 1998). With larger than desired carryin inventories and a 1999-2000 prune crop of about 172,000 natural condition tons, the Committee unanimously recommended continuing with an undersized prune regulation at24/32of an inch in diameter for French prunes and30/32of an inch in diameter for non-French prunes. These diameter openings were established in § 993.406 (64 FR 23759, May 4, 1999) and made effective from August 1, 1999, through July 31, 2000. Because carryin inventories were larger than desired and the 2000-01 prune crop was expected to be about 203,000 natural condition tons, the Committee unanimously recommended continuing with an undersized prune regulation at24/32of an inch in diameter for French prunes and30/32of an inch in diameter for non-French prunes. These diameter openings were established in § 993.407 (65 FR 29945, May 10, 2000) and made effective from August 1, 2000, through July 31, 2001. Because supplies were expected to remain excessive in 2001-02, the Committee again unanimously recommended continuing with an undersized prune regulation at24/32of an inch in diameter for French prunes and30/32of an inch in diameter for non-French prunes. These diameter openings were established in § 993.408 (66 FR 30642, June 7, 2001) and made effective from August 1, 2001, through July 31, 2002.
For the 1998-99 crop year, the carryin inventory level reached a record high of 126,485 natural conditions tons. Excessive inventories tend to dampen producer returns, and cause weak marketing conditions. The carryin for the 1999-2000 crop year was reduced to 59,944 natural condition tons. This reduction was due to the low level of salable production in 1998-99 (about 102,521 natural condition tons and 50 percent of a normal size crop) and the undersized prune regulation. The carryin for the 2000-01 crop increased to 65,131 natural condition tons. This increase was due to a larger crop of about 178,000 natural condition tons and reduced shipments during the 1999-2000 crop year. The carryin for the 2001-02 crop increased to 100,829 natural condition tons. This increase was due to a larger crop size of about 219,000 natural condition tons and a modest increase in shipments during the 2000-01 crop year. According to the Committee, the desired inventory level to keep trade distribution channels full while awaiting the new crop has ranged between 35,353 and 42,071 natural condition tons since the 1996-97 crop year while the actual inventory has ranged between 59,944 and 126,485 natural condition tons since that year. The desired inventory level for early season shipments fluctuates from year-to-year depending on market conditions.
At its meeting on November 29, 2001, the Committee unanimously recommended continuing an undersized prune regulation at24/32of an inch in diameter for French prunes and30/32of an inch in diameter for non-French prunes during the 2002-03 crop year for supply management purposes. This regulation would be in effect from August 1, 2002, through July 31, 2003.
The Committee estimated that there would be an excess of about 15,422 natural condition tons of dried prunes as of July 31, 2002. This proposed rule would continue to remove small-sized prunes from human consumption channels, consistent with the undersized prune regulation that was implemented for the 1998-99, 1999-2000, 2000-01, and 2001-02 crop years. It is estimated that approximately 3,800 natural condition tons of small prunes would be removed from human consumption channels during the 2002-03 crop year. This would leave sufficient prunes to fill domestic and foreign trade demand during the 2002-03 crop year, and provide an adequate carryout on July 31, 2003, for early season shipments until the new crop is available for shipment. According to the Committee, the desired inventory level to keep trade distribution channels full while awaiting the 2002-03 crop is about 41,000 natural condition tons.
In its deliberations, the Committee reviewed statistics reflecting: (1) A worldwide prune demand which has been relatively stable at about 260,000 tons; (2) a worldwide oversupply that is expected to continue growing this century (estimated at 317,628 natural condition tons by the year 2006); (3) a continuing oversupply situation in California caused by increased production from increased plantings and higher yields per acre (between the 1990-91 and 2000-01 crop years, the yields ranged from 1.2 to 2.6 versus a 10-year average of 2.1 tons per acre); (4) California's continued excess inventory situation; and (5) extremely low producer prices. The production of these small sizes ranged from 1,335 to 8,778 natural condition tons during the 1990-91 through the 1999-2000 crop years. The Committee concluded that it has to continue utilizing all available supply management techniques to accelerate the return to a balanced supply/demand situation in the interest of the California dried prune industry. There already have been efforts to reduce burdensome supplies. Through an industry-funded tree removal program that was initiated in the fall of 2001, about 3,500 bearing acres of prune plum trees were removed. The Committee also recommended removal of prune plum trees through a USDA funded program, wherein growers would be encouraged to remove up to 20,000 bearing acres of prune plum trees. A proposed rule with request for comments was published by USDA in the December 17, 2001, Federal Register (66 FR 64918). The proposed changes to the undersized regulation for the 2002-03 crop year and the expected removal of prune plum trees are intended to bring supplies in line with market needs.
Despite these supply management efforts, the industry's oversupply situation may continue over the next few years due to new prune plantings in recent years with higher yields per acre. These plantings have a higher tree density per acre than the older prune plantings. During the 1990-91 crop year, the non-bearing acreage totaled 5,900 acres; but by 1998-99, the non-bearing acreage had quadrupled to more than 26,000 acres. The non-bearing acreage has subsequently been reduced to 15,000 acres during the 2000-01 crop year. The 1996-97 through 2000-01 yields have ranged from 1.2 to 2.6 tons per acre. Over the last 10 years, the average was 2.1 tons per acre.
The 2001-02 dried prune crop is expected to be 139,000 natural condition tons. The Committee recently estimated that another large crop of about 200,000 natural condition tons could be expected for the 2002-03 crop year, because of new bearing acreage coming into production and high yields.
The 1997-98 crop year producer prices for the24/32of an inch in diameter French prunes have been about $40-$50 per ton, about $260-$270 per ton below the cost of production. During the 2001-02 crop year, feedlot prices are expected to be about $20 to $40 per ton for the24/32of an inch in diameter French prunes, which is about $270-$290 per ton below the cost of production. The lower producer prices are expected to continue until the prune supply and demand come more closely into alignment.
The intent of this proposal is to remove small sizes which have limited economic value, help reduce excess prune inventories, and to improve producer returns. Average producer returns currently are below the cost of production and the proposal would assist in enhancing returns.
The 1998-99, 1999-2000, 2000-01, and 2001-02 undersized prune rules of24/32of an inch for French prunes and30/32of an inch for non-French prunes have expedited the reduction of small prune inventories, but more needs to be done to bring supplies into balance with market demand. The excess inventory on July 31, 2001, was 100,829 natural condition tons, and only about 3,800 natural condition tons of dried prunes are expected to be removed from the 2001-02 marketable supply by the current undersized regulation. The Committee believes that the same undersized regulation also should be implemented during the 2002-03 crop year to continue reducing the inventories of small prunes, to help reduce the expected large 2002-03 prune crop, and more quickly bring supplies in line with demand. Attainment of this goal would benefit all of the producers and handlers of California prunes.
The recommended decision of June 1, 1981 (46 FR 29271) regarding undersized prunes states that the undersized prune regulation at the23/32and28/32inch diameter size openings would be continuous for the purposes of quality control even in above parity situations. Congress intended marketing orders to foster income equity for agricultural producers with non-agricultural producers, and used parity as a means of comparison. Parity compares agricultural producer prices against those for non-agricultural producers during the early 1900's, when income for agricultural producers and non-agricultural producers were generally thought to be fair. It further states that any change (i.e. increase) in the size of those openings would not be for the purpose of establishing a new quality-related minimum. Larger openings would only be applicable when supply conditions warranted the regulation of a larger quantity of prunes as undersized prunes. Thus, any regulation prescribing openings larger than those in § 993.49(c) should not be implemented when the grower average price is expected to be above parity. The season average price received by prune growers ranged from 39 percent to 62 percent of parity during the 1994 through 1999 seasons. As discussed later, the average grower price for prunes during the 2002-03 crop year is not expected to be above parity, and implementation of this more restrictive undersized regulation would be appropriate in reference to parity.
Section 8e of the Act requires that when certain domestically produced commodities, including prunes, are regulated under a Federal marketing order, imports of that commodity must meet the same or comparable grade, size, quality, or maturity requirements for the domestically produced commodity. This action would not impact the dried prune import regulation because the action would affect inventory management, not quality control. The smaller diameter openings of23/32of an inch for French prunes and28/32of an inch for non-French prunes were implemented to improve product quality. The recommended increases to24/32of an inch in diameter for French prunes and30/32of an inch in diameter for non-French prunes are for purposes of inventory management. Therefore, the increased diameters would not be applied to imported prunes.
There are approximately 1,205 producers of dried prunes in the production area and approximately 24 handlers subject to regulation under the marketing order. Small agricultural producers are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $750,000, and small agricultural service firms are defined as those whose annual receipts are less than $5,000,000.
An updated industry profile shows that 9 out of 24 handlers (37.5 percent) shipped over $5,000,000 worth of dried prunes and could be considered large handlers by the Small Business Administration. Fifteen of the 24 handlers (62.5 percent) shipped under $5,000,000 worth of prunes and could be considered small handlers. An estimated 32 producers, or less than 3 percent of the 1,205 total producers, would be considered large growers with annual incomes over $750,000. The majority of handlers and producers of California dried prunes may be classified as small entities.
As recommended by the Committee, this proposed rule would establish an undersized prune regulation of24/32of an inch in diameter for French prunes and30/32of an inch in diameter for non-French prunes for the 2002-03 crop year for inventory management. This change in regulation would result in more of the smaller-sized prunes being classified as undersized prunes and is expected to benefit producers, handlers, and consumers. The larger screen openings currently in place for 2001-02 are the same as proposed for 2002-2003 and are expected to remove only 3,806 tons of dried prunes from the excess marketable supply. Implementation of the larger openings in 2002-03 is expected to remove approximately 3,800 tons from the marketable production.
The Committee estimates carryout inventories at July 31, 2002, to be 56,195 tons. This is 15,422 tons greater than desirable carryout inventories. This amount of inventory reflects a serious supply-demand imbalance in the industry. In addition, grower prices are reported at an average of $763 per ton for the 2001-02 crop year. This compares to $845 per ton for the 2000-01 season, or a decrease of 9.7 percent. The $763 average grower price is substantially below total cost of production of $1,724 per ton and the total variable cost of production of $985 estimated for 2001-2002, meaning that most producers may not be earning sufficient returns to cover fixed costs. Some producers will continue to operate in the short run as long as prices are above variable costs, but others will begin to cease production in the longer run if prices do not recover to levels exceeding the total cost of production.
A tree removal program funded by the industry and a USDA-funded program are in various stages of implementation. If these programs are successful in removing 20,000 bearing acres from production, marketable production will be reduced. Even with these tree removal programs, total available supply is estimated at 242,195 tons for the 2002-03 crop year (marketable production estimated at 186,000 tons and 56,195 tons of carryin inventories). Total demand is estimated at 167,591 tons, resulting in carryout inventories of 74,604 tons. With this large estimated crop size, inventories will increase and remain in excess of the industry's desired inventory of 40,000 tons.
This action would result in an additional 3,800 tons being removed from the total available supply. An econometric model shows that this proposed rule would strengthen growers' prices modestly by $11 per ton. This price is still expected to be less than the cost of production for 2002-2003, estimated at $1,032 per ton.
Because the benefits and costs of the proposed action would be directly proportional to the quantity of24/32screen French prunes and30/32screen non-French prunes produced or handled, small businesses should not be disproportionately affected by the proposal. While variation in sugar content, prune density, and dry-away ratio vary from county to county, they also vary from orchard to orchard and season to season. In the major producing areas of the Sacramento and San Joaquin Valleys (which account for over 99 percent of the State's production), the prunes produced are homogeneous enough that the proposal should not be viewed as inequitable by large and small producers in any area of the State.
The quantity of small prunes in a lot is not dependent on whether a producer or handler is small or large; but is primarily dependent on cultural practices, soil composition, and water costs. The cost to minimize the quantity of small prunes is similar for small and large entities. The anticipated benefits of this rule are not expected to disproportionately impact small handlers or producers. The only additional costs on producers and handlers expected from the increased openings would be the disposal of additional tonnage (now estimated to be about 3,800 tons) to non-human consumption outlets. These costs are expected to be minimal and would be offset by the benefits derived by the elimination of some of the excess supply of small-sized prunes.
At the November 29, 2001, meeting, the Committee discussed the financial impact of this change on handlers and producers. Handler and producers receive higher returns for the larger size prunes. Prunes eliminated through the implementation of this rule have very little value. As mentioned earlier, the current situation for producers is quite bleak with producers losing about $270-$290 on every ton of small-sized prunes delivered to handlers. During the 2002-03 crop year, the feedlot prices for24/32screen French prunes are expected to be about $20 to $40 per ton. This price is similar to the $20-$40 price received during the 2001-02 crop year. The cost of drying a ton of such prunes is $260 per ton at a 4 to 1 dry-away ratio, transportation is at least $20 per ton, and the producer assessment paid to the California Prune Board (a body which administers the State marketing order for promotion) is $30 per ton for a total cost of about $310 per ton. This equates to a loss of about $270-$290 per ton for every ton of24/32screen French prunes produced and delivered to handlers.
Utilizing data provided by the Committee, USDA has evaluated the impact of the proposed undersized regulation change upon producers and handlers in the industry. The analysis shows that a reduction in the marketable production and handler inventories could result in higher season-average prices, which would benefit all producers. The removal of the smallest, least desirable of the marketable dried prunes produced in California from human consumption outlets would eliminate an estimated 3,800 tons of small-sized dried prunes during the 2002-03 crop year from the marketplace. This would help lessen the negative marketing and pricing effects resulting from the excess inventory situation facing the industry. California prune handlers reported that they held 100,829 tons of natural condition prunes on July 31, 2001, the end of the 2000-01 crop year. The 100,829 ton year-end inventory is larger than what is desired for early season shipments by the prune industry. The desired inventory level is based on an average 12-week supply to keep trade distribution channels full while awaiting new crop. Currently, it is about 41,000 natural condition tons. This leaves a 2001-02 inventory surplus of about 60,000 tons. The undersized regulation would help reduce the surplus, but the anticipated large 2002-03 prune crop is expected to continue the supply imbalance.
As the marketable dried prune production and surplus prune inventories are reduced through this proposal, and producers continue to implement improved cultural and thinning practices to produce larger-sized prunes, continued improvement in producer returns is expected.
The Committee discussed alternatives to this change, including making no changes to the undersized prune regulation and allowing market dynamics to foster prune inventory adjustments through lower prices on the smaller prunes. While reduced grower prices for small prunes are expected to contribute toward a slow reduction in dried prune inventories, the Committee believed that the undersized rule change is needed to expedite that reduction. The Committee also considered the potential impact of tree removals through the industry-funded program which removed about 3,500 acres, and the proposed tree removal program to be funded through USDA (California Prune/Plum Diversion Program), but concluded that these efforts alone were not likely to reduce the oversupply of small dried prunes sufficiently. With the excess tonnage of dried prunes, the Committee also considered establishing a reserve pool and diversion program to reduce the oversupply situation during the 2001-02 crop year. This alternative was not widely supported for a number of reasons. Reserve pools for prunes have historically been implemented “across the board” as far as sizes are concerned. While there is an exchange provision that allows handlers to remove larger prunes from the pool by replacing them with smaller prunes and the value difference in cash, this would be a comparatively cumbersome, expensive-to-administer alternative to changing the undersized rule as proposed. A third alternative discussed was to advance to a25/32screen undersized regulation for French prunes. However, handlers expressed concern that this would reduce the amount of manufacturing prunes (approximately 6,000 tons) available for the manufacture of prune juice and concentrate. This would increase the prices of these products.
Section 8e of the Act requires that when certain domestically produced commodities, including prunes, are regulated under a Federal marketing order, imports of that commodity must meet the same or comparable grade, size, quality, or maturity requirements as the domestically produced commodity. This action does not impact the dried prune import regulation because the action to be implemented is for inventory management, not quality control purposes. The smaller diameter openings of23/32of an inch for French prunes and28/32of an inch for non-French prunes were implemented for the purpose of improving product quality. The recommended increases to24/32of an inch in diameter for French prunes and30/32of an inch in diameter for non-French prunes are for purposes of inventory management. Therefore, the increased diameters would not be applied to imported prunes.
This action would not impose any additional reporting or recordkeeping requirements on either small or large California dried prune 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 prune 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 29, 2001, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. The Committee itself is composed of twenty-two members. Seven are handlers, fourteen are producers, and one is a public member. Finally, interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses.
The Committee requested a comment period through April 15, 2002, to allow interested persons to respond to this proposal. This longer comment period is needed to give the Committee more time to observe the bloom period during the spring and industry shipment trends during the year and allow sufficient time to comment to the Department concerning any changes that are deemed appropriate. All written comments timely received will be considered before a final determination is made on this matter.
List of Subjects in 7 CFR Part 993 Back to Top
PART 993—DRIED PRUNES PRODUCED IN CALIFORNIA Back to Top
2. A new § 993.409 is added to read as follows:
§ 993.409 Undersized prune regulation for the 2002-03 crop year.
Pursuant to §§ 993.49(c) and 993.52, an undersized prune regulation for the 2002-03 crop year is hereby established. Undersized prunes are prunes which pass through openings as follows: for French prunes,24/32of an inch in diameter; for non-French prunes,30/32of an inch in diameter.
Administrator, Agriculture Marketing Service.
[FR Doc. 02-6144 Filed 3-14-02; 8:45 am]