Source: https://www.federalregister.gov/documents/2018/04/27/2018-08528/cranberries-grown-in-states-of-massachusetts-et-al-establishment-of-2018-19-seasonal-volume
Timestamp: 2020-08-07 18:52:34
Document Index: 268052583

Matched Legal Cases: ['art 929', 'art 929', '§\u2009929', '§\u2009929', '§\u2009929', '§\u2009929', '§\u2009929', '§\u2009929', '§\u2009929', '§\u2009929', '§\u2009929', '§\u2009929', '§\u2009929', '§\u2009929']

A Proposed Rule by the Agricultural Marketing Service on 04/27/2018
83 FR 18462
18462-18468 (7 pages)
2018-08528
https://www.federalregister.gov/d/2018-08528
Interested persons are invited to submit written comments concerning this proposed rule. Comments must be sent to the Docket Clerk, Marketing Order and Agreement Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 20250-0237; Fax: (202) 720-8938; or internet: http://www.regulations.gov. All comments should reference the document 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.regulations.gov. All comments submitted in response to this proposal will be included in the record and will be made available to the public. Please be advised that the identity of the individuals or entities submitting the comments will be made public on the internet at the address provided above.
This action, pursuant to 5 U.S.C. 553, proposes amendments to regulations issued to carry out a marketing order as defined in 7 CFR 900.2(j). This proposal Start Printed Page 18463is issued under Marketing Agreement and Order No. 929, as amended (7 CFR part 929), regulating the handling of cranberries grown in the States of Massachusetts, Rhode Island, Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon, Washington, and Long Island in the State of New York. Part 929 (referred to as 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.” The Cranberry Marketing Committee (Committee) locally administers the Order and is comprised of growers of cranberries operating within the production area, and a public member.
The Department of Agriculture (USDA) is issuing this proposed rule in conformance with Executive Orders 13563 and 13175. This action falls within a category of regulatory actions that the Office of Management and Budget (OMB) exempted from Executive Order 12866 review. Additionally, because this proposed rule does not meet the definition of a significant regulatory action, it does not trigger the requirements contained in Executive Order 13771. See OMB's Memorandum titled “Interim Guidance Implementing Section 2 of the Executive Order of January 30, 2017 titled `Reducing Regulation and Controlling Regulatory Costs' ” (February 2, 2017).
This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. Order provisions provide that the Committee may recommend and implement, subject to USDA approval, volume control regulation which would decrease the available supply of cranberries whenever the Secretary of Agriculture (Secretary) finds that “such regulation will tend to effectuate the declared policy of the Act.” Accordingly, this proposed rule would establish a marketable quantity and grower allotment percentage for cranberries produced during the 2018-19 crop year, beginning September 1, 2018, and ending August 31, 2019.
This proposed rule invites comments on the establishment of a marketable quantity and grower allotment percentage for the 2018-19 crop year. This proposal is the result of the Committee's recommendations made during its August 4, and August 31, 2017, meetings, and a February 18, 2018, email vote. The proposal would establish a marketable quantity of 7.275 million barrels and a grower allotment percentage of 75 percent. This proposed action would also allow handlers to process up to 50 percent of the excess cranberries they receive above their growers' allotment, provided they divert an equivalent amount of 2018-19 cranberry processed products. It would also establish an exemption for organically grown cranberries, specify handlers subject to the regulation, revise the definition of outlets for excess fruit, and revise dates by which certain actions are due.
The Committee also recommended an exemption for organically grown cranberries, and an exemption of 2,500 barrels for each grower. After much consideration, USDA determined the recommended grower exemption of 2,500 barrels should be revised. Consequently, this proposal does not include the exemption of 2,500 barrels for each grower and instead proposes to exempt handlers that processed less than 125,000 barrels during the 2017-18 fiscal year, or handlers that did not have carryover inventory at the end of the 2017-18 fiscal year. Accordingly, growers delivering their fruit to exempt handlers would not be subject to the allotment.
In addition, in a February 18, 2018 vote by email, the Committee voted unanimously to adjust reporting dates associated with the proposed allotment regulation. These changes were previously discussed and supported by the Committee at a meeting on April 22, 2014 as part of the consideration of another volume regulation for which a rule was not issued.
The recommendations included in this proposed rule would adjust supply to more closely meet market demand, improve grower and handler returns, and help reduce inventory.
Demand for cranberries is inelastic, meaning changes in consumer price have a minimal effect on total sales. However, grower prices are very sensitive to changes in supply. Consequently, higher inventory levels place downward pressure on grower prices for cranberries and reduce grower returns. Data reviewed by the Start Printed Page 18464Committee indicates that the price per barrel received by some growers has fallen from $30 a barrel in 2011 to $10 a barrel in 2016. With the cost of production estimated at approximately $35 a barrel, for many growers returns have fallen below the cost of production.
Considering the levels of inventory and low grower returns, the Committee voted to recommend a handler withholding, setting the free and restricted percentages of 85 percent and 15 percent, respectively, for the 2017-18 season. The proposed rule to establish these percentages was published in the Federal Register on January 2, 2018 (83 FR 72). The Committee estimated that the 15 percent restriction would remove approximately one million barrels from inventory, helping to maintain inventories at current levels. While the Committee recognized a small restriction would not immediately balance supply with demand, even a small restriction would remove a portion of the volume from the market and help prevent an additional increase in inventory.
With the proposed handler withholding removing an estimated one million barrels from the market, the industry would still have approximately 10 million barrels remaining in inventory. Given the static demand and anticipated market conditions for the 2018-19 fiscal year, the Committee also recommended establishing a grower allotment percentage for the 2018-19 fiscal year.
Based on the information available, the Committee recommended establishing a marketable quantity of 7.275 million barrels and an allotment percentage of 75 percent for the 2018-19 crop year. With volume regulation, returns are expected to be higher than without volume regulation. This increase is beneficial to all growers and handlers regardless of size, and enhances total revenues in comparison to no volume regulation. Establishing an allotment percentage allows the industry to help stabilize supplies. This proposal could remove a potential 2 million barrels from supply, reduce industry inventory, and increase industry returns. This proposed rule would add a new § 929.253 to establish the marketable quantity and grower allotment.
The Committee also recommended that handlers have the option to receive cranberries over their grower allotment and process up to 50 percent of the excess cranberries received rather than divert them in fresh form, as currently required. Handlers that do so would need to divert an amount of 2018-19 cranberry processed products equivalent to the volume of excess cranberries processed.
The Committee made this recommendation recognizing that processing fresh fruit to produce one of its top-selling items, sweetened dried cranberries (SDC), results in juice concentrate as a by-product. A significant amount of current inventory is in the form of juice concentrate. By allowing handlers to process a portion of the excess cranberries they receive, more fresh cranberries would be available to produce products requiring whole cranberries, such as SDC, and the diversion of concentrate would help prevent additional build-up of inventory. Handlers would still have the option to divert fresh berries as excess supply.
To allow for the diversion of processed products, § 929.104(b), which currently prohibits the handling of excess fruit, would be removed. To ensure the diversion of processed products in lieu of fresh cranberries is correctly accounted for, the final rule for volume regulation for the 2017-18 season (83 FR 14350) adds guidance under § 929.107 along with a conversion table. The table recognizes different conversion equivalencies of cranberries to processed product based on the volume of Brix concentrate.
Brix is the method for measuring the amount of sugar contained in the cranberry products, and the industry average for concentrate is 50 Brix. The Committee acknowledged that the Brix level can vary depending on the growing region and farming practices. The proposed table would help ensure that the diversion of processed product in lieu of fresh berries is applied equitably among all handlers.
Using the proposed conversion table, handlers could determine the amount of cranberry concentrate they would need to divert, in lieu of fresh berries, to cover the fresh cranberry equivalent of any excess cranberries processed. Juice concentrate should comprise the vast majority of processed product used for diversion. Should requests be made to use other processed products for Start Printed Page 18465diversion, conversion rates for those products would be provided by the Committee based on information provided by the requesting handler.
For example, a grower with a sales history of 1,000 barrels would have an allotment of 750 barrels (1,000 × .75). If the grower delivered all 1,000 barrels to the handler, the handler would have 250 barrels of excess fruit. Under this proposed rule, the handler could divert 250 barrels of fresh fruit to approved outlets or divert half (125 barrels of fresh fruit) and process half, diverting a 125 barrel equivalent in 2018-19 processed product.
The Committee also recommended changes to date requirements currently specified in the Order. Section 929.59(b) currently states that “{p}rior to January 1, or such other date as recommended by the committee and approved by the Secretary, handlers holding excess cranberries shall submit to the committee a written plan outlining procedures for the systematic disposal of such cranberries in the outlets prescribed in § 929.61.” The Committee agreed the date for submitting disposal plans should be extended in order to give handlers more time to consider how to divert their excess cranberries. Therefore, the Committee recommended changing the deadline prescribed in § 929.59(b) from January 1 to March 1 of the regulated season.
Section 929.59(c) states that “{p}rior to March 1, or such other date as recommended by the committee and approved by the Secretary, all excess cranberries shall be disposed of pursuant to § 929.61.” Given the change in the due date for the diversion plans, the Committee agreed that this date should also be changed to provide handlers with enough time to comply with this requirement. Therefore, the Committee recommended changing the date by which diversion is to be completed from March 1 to August 31. This proposed rule would add a new § 929.159 to make these date changes.
Section 929.62(a) requires each grower to file a report with the Committee by January 15 of each year providing the following information: Total acreage harvested and whether owned or leased; total commercial cranberry sales in barrels from such acreage; the amount of acres either in production but not harvested, or taken out of production, and the reason(s) why; the amount of new or replanted acreage coming into production; the name of the handler(s) to whom commercial cranberry sales were made; and such other information as may be needed for implementation and operation of this section. Growers might not have all necessary information to complete the report by the current deadline. Therefore, the Committee recommended changing the grower reporting date from January 15 toMarch 1.
The Committee also recommended organically grown cranberries be exempt from this proposed regulation as they serve a niche market and represent a very small portion of the total crop. All other cranberry production, including fresh cranberries, would be subject to regulation under the grower allotment volume regulation.
To address the burden the volume regulation would have on small growers and handlers, the Committee also recommended providing an exemption of 2,500 barrels for all growers. Under the Committee's recommendation, the exemption would be applied following the calculation of a grower's allotment. However, after much consideration, USDA determined the exemption recommendation should be revised. Rather than provide an exemption of 2,500 barrels for each grower, this proposed action would exempt small handlers who processed less than 125,000 barrels from the allotment requirement. Further, handlers who did not have carryover inventory at the end of the 2017-18 fiscal year would also be exempt from the allotment requirement. Accordingly, growers delivering their fruit to exempt handlers would not be subject to the allotment.
These changes would allow handlers who have matched their production with market demand to continue to serve their customer base and maintain their market share. Small growers would also have the option of delivering their fruit to handlers who are not subject to the regulation. Handlers subject to the allotment percentage should be able to meet any market shortfalls by utilizing cranberries or cranberry products available in inventory. The provision allowing handlers to process a portion of their excess cranberries should also help provide some flexibility.
With this proposed action, only those handlers carrying inventory would be subject to meeting the allotment requirement. In reviewing the Committee's recommendation and other available industry information, USDA has determined that existing inventories in excess of 9 million barrels are putting the most downward pressure on returns to both growers and handlers. Consequently, this proposal would put more focus on reducing the volume in inventory.
A grower may transfer all or part of their allotment to another grower, provided that the transferred allotment remains assigned to the same handler. Transfers of allotment between growers having different handlers may occur with the consent of both handlers. All such transfers would have to be reported to the Committee. After all allotment transfers have occurred, any unused allotment would be transferred to the Committee. The Committee would then redistribute any unused allotment to handlers having excess cranberries in an amount proportionate to each handler's total allotment. These provisions help ensure that excess supply is utilized, to the extent possible, through unfilled allotment.
The Committee considered the estimated level of production and anticipated demand, and determined that without some action on the part of the Committee, inventory levels would continue to increase throughout the 2018-19 season. The Committee believes using the volume control authorities in the Order would help stabilize marketing conditions for cranberries by helping to adjust supply to meet market demand and improve grower returns.
Accordingly, this proposal would establish a grower allotment at 75 percent for the 2018-19 season. It would also give handlers the option to process up to 50 percent of the excess cranberries they receive above their growers' allotment, provided they divert an equivalent amount of 2018-19 cranberry processed products. This proposed rule would also exempt organically grown cranberries, specify handlers subject to the regulation, revise the definition of outlets for excess fruit, and revise dates by which certain actions are due.
Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, Start Printed Page 18466AMS has prepared this initial regulatory flexibility analysis.
This proposed rule would establish a grower allotment of 75 percent for the 2018-19 crop year. It would also allow handlers to process up to 50 percent of the excess cranberries they receive above their growers' allotment, provided they divert an equivalent amount of 2018-19 cranberry processed products. In addition, this proposal would exempt organically grown cranberries, specify handlers subject to the regulation, revise the definition of outlets for excess fruit, and revise dates by which certain actions are due. These actions are designed to help stabilize marketing conditions, reduce burdensome inventories, and improve grower and handler returns. This rule revises §§ 929.104 and 929.105 and establishes new §§ 929.159 and 929.253. The authority for these actions is provided for in §§ 929.48, 929.49, 929.51, 929.52, 929.58, 929.59, 929.61, and 929.62. These changes are based on Committee recommendations from meetings on August 4 and August 31, 2017, and a February 18, 2018, email vote.
While these actions could result in some additional costs to the industry, the benefits are expected to outweigh them. The purpose of establishing an allotment percentage is to address oversupply conditions and to stabilize grower prices. The industry has a significant volume in inventory, and this has had a negative impact on grower and handler returns. Without volume control, inventories would likely continue to increase, further lowering returns.
Retail demand for cranberries is highly inelastic, which indicates changes in consumer prices do not result in significant changes in the quantity demanded. Consumer prices are also not significantly impacted by minor changes in cranberry supplies. Therefore, this action should have little or no effect on consumer prices and should not result in a reduction in retail sales. However, even a small shift in supply could increase grower and handler returns. The use of allotment percentages would likely have a positive impact on grower and handler returns for this crop year.
This proposal would result in some fruit being taken off the market. However, a sufficient amount of fruit would still be available to supply all aspects of the market. In addition, allowing handlers the option to process up to 50 percent of the excess cranberries they receive above their growers' allotment, provided they divert an equivalent amount of 2018-19 cranberry processed products, would provide handlers some additional flexibility and may help reduce inventories of juice concentrate, one of the largest segments of existing inventory.
There are also secondary outlets available for excess fruit, including foreign markets except Canada, charitable institutions, nonhuman food use, and research and development projects. While these alternatives may provide different levels of return than sales to primary markets, they play an important role for the industry. In addition, if demand is greater than anticipated, there are significant amounts of fruit in inventory that could be utilized to meet demand.
This action would also exempt small handlers who processed less than 125,000 barrels in 2017-18 from the allotment percentage. Consequently, small handlers whose acquired volume is 125,000 barrels or less would be exempt from the allotment volume restriction. This would reduce the burden the volume restriction has on small handlers and their growers.
In addition, handlers who did not have carryover inventory at the end of the 2017-18 fiscal year would also be exempt from the allotment percentage. This would allow handlers that have matched their production with market demand to continue to serve their customer base and maintain their Start Printed Page 18467market share. Handlers subject to the restriction should be able to meet any shortfalls by utilizing cranberries or cranberry products they have in inventory.
As the allotment represents a percentage of the grower's sales history, the costs, when applicable, are proportionate and should not place an extra burden on small entities as compared to large entities. Likewise, growers and handlers, regardless of size, would benefit from the stabilizing effects of this proposal.
This proposed rule would not impose any additional reporting or recordkeeping requirements on either small or large cranberry growers or 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. USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this proposed rule.
In addition, the Committee's meetings were widely publicized throughout the cranberry industry and all interested persons were invited to attend the meetings and participate in Committee deliberations on all issues. Like all Committee meetings, the August 4, 2017 and August 31, 2017 meetings were public meetings and all entities, both large and small, were able to express views on these issues. Finally, interested persons are invited to submit comments on this proposed rule, including the regulatory and information collection impacts of this action on small businesses.
2. In § 929.104, revise paragraph (a) and remove and reserve paragraph (b) to read as follows:
5. Add § 929.253 to read as follows:
[FR Doc. 2018-08528 Filed 4-26-18; 8:45 am]