Source: https://www.federalregister.gov/documents/2009/02/24/E9-3849/tart-cherries-grown-in-the-states-of-michigan-et-al-final-free-and-restricted-percentages-for-the
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Matched Legal Cases: ['art 930', '§\u2009930', '§\u2009930', '§\u2009930', '§\u2009930', '§\u2009930', '§\u2009930', '§\u2009930']

Federal Register :: Tart Cherries Grown in the States of Michigan, et al.; Final Free and Restricted Percentages for the 2008-2009 Crop Year for Tart Cherries
Tart Cherries Grown in the States of Michigan, et al.; Final Free and Restricted Percentages for the 2008-2009 Crop Year for Tart Cherries
A Rule by the Agricultural Marketing Service on 02/24/2009
74 FR 8143
8143-8148 (6 pages)
Doc. No. AMS-FV-08-0089
FV09-930-1 FR
E9-3849
https://www.federalregister.gov/d/E9-3849 https://www.federalregister.gov/d/E9-3849
This rule establishes final free and restricted percentages for the 2008-2009 crop year tart cherries covered under the Federal marketing order regulating tart cherries grown in seven States (order). The percentages are 73 percent free and 27 percent restricted and will establish the proportion of cherries from the 2008 crop which may be handled in commercial outlets. The percentages are intended to stabilize supplies and prices, and strengthen market conditions. The percentages were recommended by the Cherry Industry Administrative Board (Board), the body that locally administers the marketing order. The order regulates the handling of tart cherries grown in the States of Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin.
Effective Date: February 25, 2009.
Patricia A. Petrella or Kenneth G. Johnson, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, Suite 2A04, Unit 155, 4700 River Road, Riverdale, MD 20737; telephone: (301) 734-5243, Fax: (301) 734-5275; E-mail Patricia.Petrella@usda.gov or Kenneth.Johnson@usda.gov.
This final rule is issued under Marketing Agreement and Order No. 930 (7 CFR part 930), regulating the handling of tart cherries produced in the States of Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin, hereinafter referred to as the Start Printed Page 8144“order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”
This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order provisions now in effect, final free and restricted percentages may be established for tart cherries handled by handlers during the crop year. This rule establishes final free and restricted percentages for tart cherries for the 2008-2009 crop year, beginning July 1, 2008, through June 30, 2009. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.
The order prescribes procedures for computing an optimum supply and preliminary and final percentages that establish the amount of tart cherries that can be marketed throughout the season. The regulations apply to all handlers of tart cherries that are in the regulated districts. Tart cherries in the free percentage category may be shipped immediately to any market, while restricted percentage tart cherries must be held by handlers in a primary or secondary reserve, or be diverted in accordance with § 930.59 of the order and § 930.159 of the regulations, or used for exempt purposes (to obtain diversion credit) under § 930.62 of the order and § 930.162 of the regulations. The regulated Districts for this season are: District one-Northern Michigan; District two-Central Michigan; District three-Southern Michigan; District four-New York; District seven-Utah; and District eight-Washington. Districts five, six and nine (Oregon, Pennsylvania, and Wisconsin, respectively) will not be regulated for the 2008-2009 season.
The order prescribes under § 930.52 that those districts to be regulated shall be those districts in which the average annual production of cherries over the prior three years has exceeded six million pounds. A district not meeting the six million-pound requirement shall not be regulated in such crop year. Because this requirement was not met in the Districts of Oregon, Pennsylvania, and Wisconsin handlers in those districts would not be subject to volume regulation during the 2008-2009 crop year.
The order also provides that on or about July 1 of each crop year, the Board is required to establish preliminary free and restricted percentages. These percentages are computed by deducting the actual carryin inventory from the optimum supply figure (adjusted to raw product equivalent—the actual weight of cherries handled to process into cherry products) and subtracting that figure from the current year's USDA crop forecast. If the resulting number is positive, this represents the estimated over-production, which would be the restricted tonnage. The restricted tonnage is then divided by the sum of the USDA crop forecast(s) for the regulated districts to obtain percentages for the regulated districts. The Board is required to establish a preliminary restricted percentage equal to the quotient, rounded to the nearest whole number, with the complement being the preliminary free tonnage percentage. If the tonnage requirements for the year are more than the USDA crop forecast, the Board is required to establish a preliminary free tonnage percentage of 100 percent and a preliminary restricted percentage of zero. The Board is required to announce the preliminary percentages in accordance with paragraph (h) of § 930.50.
The Board met on June 19, 2008, and computed, for the 2008-2009 crop year, an optimum supply of 183 million pounds. The Board recommended that the desirable carryout figure be zero pounds. Desirable carryout is the amount of fruit required to be carried into the succeeding crop year and is set by the Board after considering market circumstances and needs. This figure can range from zero to a maximum of 20 million pounds.
The Board calculated preliminary free and restricted percentages as follows: The USDA estimate of the crop for the entire production area was 177 million pounds; a 31 million pound carryin (based on Board estimates) was subtracted from the optimum supply of 183 million pounds which resulted in the 2008-2009 poundage requirements (adjusted optimum supply) of 152 million pounds. The carryin figure reflects the amount of cherries that handlers actually have in inventory at the beginning of the 2007-2008 crop year. Subtracting the adjusted optimum supply of 152 million pounds from the USDA crop estimate (177 million pounds) and subtracting 8 million pounds for USDA committed sales results in a surplus of 17 million pounds of tart cherries. The surplus was divided by the production in the regulated districts (161 million pounds) and resulted in a restricted percentage of 10 percent for the 2008-2009 crop year. The free percentage was 90 percent (100 percent minus 10 percent). The Board established these percentages and announced them to the industry as required by the order.
The preliminary percentages were based on the USDA production estimate and the following supply and demand information available at the June meeting for the 2008-2009 year:Start Printed Page 8145
(1) Average sales of the prior three years 183
(3) Optimum supply calculated by the Board at the June meeting 183
(4) USDA crop estimate 177
(5) Carryin held by handlers as of July 1, 2008 31
(6) Subtract pounds designated for USDA 8
(7) Adjusted optimum supply for current crop year 152
(8) Surplus 17
(9) USDA crop estimate for regulated districts 161
(10) Preliminary percentages (item 8 divided by item 9 × 100 equals restricted percentage; 100 minus restricted percentage equals free percentage) 90 10
The Secretary establishes final free and restricted percentages through the informal rulemaking process. These percentages would make available the tart cherries necessary to achieve the optimum supply figure calculated by the Board. The difference between any final free percentage designated by the Secretary and 100 percent is the final restricted percentage. The Board met on September 12, 2008, to recommend final free and restricted percentages.
The actual production reported by the Board was 210 million pounds, which is a 33 million pound increase from the USDA crop estimate of 177 million pounds.
A 35 million pound carryin (based on handler reports estimates) was subtracted from the optimum supply of 183 million pounds which resulted in the 2008-2009 poundage requirements (adjusted optimum supply) of 148 million pounds. Subtracting the adjusted optimum supply of 148 million pounds from the USDA crop estimate (210 million pounds) and subtracting 8 million pounds for USDA committed sales results in a surplus of 54 million pounds of tart cherries. The surplus was divided by the production in the regulated districts (203 million pounds) and resulted in a restricted percentage of 27 percent for the 2008-2009 crop year. The free percentage was 73 percent (100 percent minus 27 percent).
The final percentages are based on the Board's reported production figures and the following supply and demand information available in September for the 2008-2009 crop year:
(3) Optimum supply calculated by the Board 183
(4) Board reported production 210
(5) Plus carryin held by handlers as of July 1, 2008 35
(6) Subtract USDA committed sales 8
(7) Tonnage available for current crop year 237
(8) Surplus (item 7 minus item 3) 54
(9) Production in regulated districts 203
(10) Final Percentages (item 8 divided by item 9 × 100 equals restricted percentage; 100 minus restricted percentage equals free percentage) 73 27
The USDA's “Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders” (Guidelines) specify that 110 percent of recent years' sales should be made available to primary markets each season before recommendations for volume regulation are approved. This goal would be met by the establishment of a preliminary percentage which releases 100 percent of the optimum supply and the additional release of tart cherries provided under § 930.50(g). This release of tonnage, equal to 10 percent of the average sales of the prior three years' sales, is made available to handlers each season. The Board recommended that such release should be made available to handlers the first week of December and the first week of May. Handlers can decide how much of the 10 percent release they would like to receive on the December and May release dates. Once released, such cherries are released for free use by such handler. Approximately 18 million pounds would be made available to handlers Start Printed Page 8146this season in accordance with the Guidelines. This release would be made available to every handler and released to such handler in proportion to the handler's percentage of the total regulated crop handled. If a handler does not take his/her proportionate amount, such amount remains in the inventory reserve.
There are approximately 40 handlers of tart cherries who are subject to regulation under the tart cherry marketing order and approximately 900 producers of tart cherries in the regulated area. Small agricultural service firms, which includes handlers, have been defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $7,000,000, and small agricultural producers are defined as those having annual receipts of less than $750,000. A majority of the producers and handlers are considered small entities under SBA's standards.
The principal demand for tart cherries is in the form of processed products. Tart cherries are dried, frozen, canned, juiced, and pureed. During the period 1997/98 through 2007/08, approximately 96 percent of the U.S. tart cherry crop, or 247.3 million pounds, was processed annually. Of the 247.3 million pounds of tart cherries processed, 61 percent was frozen, 27 percent was canned, and 12 percent was utilized for juice and other products.
Based on National Agricultural Statistics Service data, acreage in the United States devoted to tart cherry production has been trending downward. Bearing acreage has declined from a high of 50,050 acres in 1987/88 to 34,700 acres in 2007/08. This represents a 31 percent decrease in total bearing acres. Michigan leads the nation in tart cherry acreage with 70 percent of the total and produces about 75 percent of the U.S. tart cherry crop each year.
The 2008/09 crop is moderate in size at 210 million pounds. The largest crop occurred in 1995 with production in the regulated districts reaching a record 395.6 million pounds. The price per pound received by tart cherry growers ranged from a low of 7.3 cents in 1987 to a high of 46.4 cents in 1991. These problems of wide supply and price fluctuations in the tart cherry industry are national in scope and impact. Growers testified during the order promulgation process that the prices they received often did not come close to covering the costs of production.
The volume control mechanism used by the cherry industry results in decreased shipments to primary markets. Without volume control the primary markets (domestic) would Start Printed Page 8147likely be over-supplied, resulting in lower grower prices.
To assess the impact that volume control has on the prices growers receive for their product, an econometric model has been developed. The econometric model provides a way to see what impacts volume control may have on grower prices. The three districts in Michigan, along with the districts in Utah, New York, and Washington are the restricted areas for this crop year and their combined total production is 203 million pounds. A 27 percent restriction means 148 million pounds is available to be shipped to primary markets from these four states. Production levels of 0.6 million pounds for Wisconsin, 2.8 million pounds for Oregon and 3.7 million pounds for Pennsylvania (the unregulated areas in 2008-2009), result in an additional 7.1 million pounds available for primary market shipments.
In addition, USDA requires a 10 percent release from reserves as a market growth factor. This results in an additional 18 million pounds being available for the primary market. The 148 million pounds from Michigan, Utah, Washington, and New York, the 7.1 million pounds from the other producing states, the 18 million pound release, and the 35 million pound carryin inventory gives a total of 208 million pounds being available for the primary markets.
The econometric model is used to estimate the impact of establishing a reserve pool for this year's crop. With the volume controls, grower prices are estimated to be approximately $0.11 per pound higher than without volume controls.
The use of volume controls is estimated to have a positive impact on growers' total revenues. With regulation, growers' total revenues from processed cherries is estimated to be $4.3 million higher than without restrictions. The without restrictions scenario assumes that all tart cherries produced would be delivered to processors for payments.
It is concluded that the 27 percent volume control would not unduly burden producers, particularly smaller growers. The 27 percent restriction would be applied to the growers in Michigan, New York, Utah, and Washington. The growers in the other three States covered under the marketing order will benefit from this restriction.
The use of volume control is believed to have little or no effect on consumer prices and will not result in fewer retail sales or sales to food service outlets.
Without the use of volume controls, the industry could be expected to start to build large amounts of unwanted inventories. These inventories have a depressing effect on grower prices. The econometric model shows for every 1 million-pound increase in carrying inventories, a decrease in grower prices of $0.0036 per pound occurs. The use of volume controls allows the industry to supply the primary markets while avoiding the disastrous results of over-supplying these markets. In addition, through volume control, the industry has an additional supply of cherries that can be used to develop secondary markets such as exports and the development of new products. The use of reserve cherries in the production shortened 2002/03 crop year proved to be very useful and beneficial to growers and packers.
In discussing the possibility of marketing percentages for the 2008-2009 crop year, the Board considered the following factors contained in the marketing policy: (1) The estimated total production of tart cherries; (2) the estimated size of the crop to be handled; (3) the expected general quality of such cherry production; (4) the expected carryover as of July 1 of canned and frozen cherries and other cherry products; (5) the expected demand conditions for cherries in different market segments; (6) supplies of competing commodities; (7) an analysis of economic factors having a bearing on the marketing of cherries; (8) the estimated tonnage held by handlers in primary or secondary inventory reserves; and (9) any estimated release of primary or secondary inventory reserve cherries during the crop year.
The Board's review of the factors resulted in the computation and announcement in September 2008 of the free and restricted percentages by this rule (73 percent free and 27 percent restricted).
One alternative to this action would be not to have volume regulation this season. Board members stated that no volume regulation would be detrimental to the tart cherry industry due to the size of the 2008-2009 crop. Returns to growers would not cover their costs of production for this season which might cause some to go out of business.
As mentioned earlier, USDA's “Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders” specify that 110 percent of recent years' sales should be made available to primary markets each season before recommendations for volume regulation are approved. The quantity available under this rule is 110 percent of the quantity shipped in the prior three years.
In addition, the Board's meeting was widely publicized throughout the tart cherry industry and all interested persons were invited to attend the meeting and participate in Board deliberations on all issues. Like all Board meetings, the September 12, 2008, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. Finally interested persons interested persons were invited to submit information on the regulatory and informational impacts of this action on small businesses.
A proposed rule concerning this action was published in the Federal Register on December 5, 2008 (73 FR 74073). Copies of the rule were mailed or sent via facsimile to all Board members and tart cherry handlers. Finally, the rule was made available through the Internet by USDA and the Office of the Federal Register. A 30-day comment period ending January 5, 2009, was provided to allow interested persons to respond to the proposal. No comments were received.
A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/​fv/​moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned Start Printed Page 8148address in the FOR FURTHER INFORMATION CONTACT section.
After consideration of all relevant matter presented, including the information and recommendation submitted by the Board and other available information, it hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.
It is further found that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register (5 U.S.C. 553) because handlers are already shipping tart cherries from the 2008-2009 crop. Further, handlers are aware of this rule, which was recommended at a public meeting. Also, a 30-day comment period was provided for in the proposed rule. No comments were received.
Final free and restricted percentages for the 2008-2009 crop year.
The final percentages for tart cherries handled by handlers during the crop year beginning on July 1, 2008, which shall be free and restricted, respectively, are designated as follows: Free percentage, 73 percent and restricted percentage, 27 percent.
[FR Doc. E9-3849 Filed 2-23-09; 8:45 am]