Source: https://www.federalregister.gov/documents/2002/03/15/02-6144/dried-prunes-produced-in-california-undersized-regulation-for-the-2002-03-crop-year
Timestamp: 2019-12-05 17:08:04
Document Index: 250238453

Matched Legal Cases: ['§\u2009993', '§\u2009993', '§\u2009993', '§\u2009993', '§\u2009993', '§\u2009993', '§\u2009993', '§\u2009993']

11625-11629 (5 pages)
02-6144
https://www.federalregister.gov/d/02-6144 https://www.federalregister.gov/d/02-6144
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 from 23/32 to 24/32 of an inch in diameter; and for non-French prunes, the opening would be increased from 28/32 to 30/32 of 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.
Section 993.49(c) of the prune marketing order establishes an undersized regulation of 23/32 of an inch for French prunes and 28/32 of an inch for non-French prunes. These diameter openings have been in effect for quality control purposes. Section 993.49(c) also Start Printed Page 11626provides 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.
During the 1974-75 and 1977-78 crop years, the undersized prune regulation was established by USDA at 23/32 of an inch in diameter for French prunes and 28/32 of 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 aforementioned 23/32 and 28/32 inch diameter screen sizes. During the 1975-76 and 1976-77 crop years, the undersized prune regulation was established at 24/32 of an inch for French prunes and 30/32 of 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.
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 at 24/32 of an inch for French prunes, and 30/32 of 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 at 24/32 of an inch in diameter for French prunes and 30/32 of 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 at 24/32 of an inch in diameter for French prunes and 30/32 of 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 at 24/32 of an inch in diameter for French prunes and 30/32 of 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.
At its meeting on November 29, 2001, the Committee unanimously recommended continuing an undersized prune regulation at 24/32 of an inch in diameter for French prunes and 30/32 of 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.
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 Start Printed Page 11627continuing 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.
The 1997-98 crop year producer prices for the 24/32 of 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 the 24/32 of 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 1998-99, 1999-2000, 2000-01, and 2001-02 undersized prune rules of 24/32 of an inch for French prunes and 30/32 of 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 the 23/32 and 28/32 inch 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 of 23/32 of an inch for French prunes and 28/32 of an inch for non-French prunes were implemented to improve product quality. The recommended increases to 24/32 of an inch in diameter for French prunes and 30/32 of 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 Start Printed Page 11628those whose annual receipts are less than $5,000,000.
As recommended by the Committee, this proposed rule would establish an undersized prune regulation of 24/32 of an inch in diameter for French prunes and 30/32 of 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.
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 for 24/32 screen 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 of 24/32 screen French prunes produced and delivered to handlers.
As the marketable dried prune production and surplus prune inventories are reduced through this proposal, and producers continue to implement improved cultural and Start Printed Page 11629thinning 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 a 25/32 screen 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 of 23/32 of an inch for French prunes and 28/32 of an inch for non-French prunes were implemented for the purpose of improving product quality. The recommended increases to 24/32 of an inch in diameter for French prunes and 30/32 of 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.