Source: https://www.federalregister.gov/documents/2020/06/11/2020-10945/marketing-order-regulating-the-handling-of-spearmint-oil-produced-in-the-far-west-salable-quantities
Timestamp: 2020-07-08 12:01:40
Document Index: 298431497

Matched Legal Cases: ['§\u2009985', '§\u2009985', '§\u2009985', '§\u2009985', '§\u2009985', '§\u2009985', '§\u2009985']

A Rule by the Agricultural Marketing Service on 06/11/2020
85 FR 35545
35545-35550 (6 pages)
SC20-985-1 FR
https://www.federalregister.gov/d/2020-10945
Start Preamble Start Printed Page 35545
The Department of Agriculture (USDA) is issuing this final 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 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 final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect. The Order now in effect states that salable quantities and producer allotment percentages may be established for classes of spearmint oil produced in the Far West. This final rule establishes quantities and percentages for Class 1 (Scotch) and Class 3 (Native) spearmint oil for the 2020-2021 marketing year, which begins on June 1, 2020.
According to § 985.12, “salable quantity” is the total quantity of each class of oil (Scotch or Native) that handlers may purchase from, or handle on behalf of, producers during a given marketing year. The total industry allotment base is the aggregate of all allotment bases held individually by producers as prescribed under § 985.53(d)(1). The total allotment base is revised each year on June 1 due to producer base being lost because of the “bona fide effort” production provision of § 985.53(e).
The Committee met on October 16, 2019, to consider its marketing policy for the 2020-2021 marketing year. At that meeting, the Committee determined that, based on the current market and supply conditions, volume regulation for both classes of oil is necessary. With a 7-1 vote, the Committee recommended a salable quantity and allotment percentage for Scotch spearmint oil of 838,404 pounds and 38 percent. The member voting in opposition to the recommendation favored volume regulation, but at a level closer to 30 percent. The Committee voted unanimously on its recommended salable quantity and allotment percentage for Native spearmint oil of 1,230,531 pounds and 49 percent.Start Printed Page 35546
This action establishes the amount of Scotch and Native spearmint oil that handlers may purchase from, or handle on behalf of, producers during the 2020-2021 marketing year, which begins on June 1, 2020. Salable quantities and allotment percentages have been placed into effect each season since the Order's inception in 1980.
The Committee's recommended 2020-2021 marketing year salable quantity and allotment percentage for Scotch spearmint oil represent an increase from the previous year's levels. The 2020-2021 marketing year salable quantity of 838,404 pounds is 6,323 pounds more than the 2019-2020 marketing year salable quantity of 832,081 pounds. The allotment percentage, recommended at 38 percent for the 2020-2021 marketing year, is the same as the percentage in effect the previous year. The total estimated allotment base for the coming marketing year is estimated at 2,206,325 pounds. This figure represents a one-percent increase over the 2019-2020 marketing year total allotment base of 2,184,480.
According to the Committee, as costs of production have increased, many producers have forgone new plantings of Scotch spearmint. This has resulted in a significant decline in production of Scotch spearmint oil over the past years. Production has decreased from 1,113,346 pounds produced in 2016 to an estimated 567,623 pounds produced in 2019.
Given the general decline in demand and anticipated market conditions for the coming year, the Committee decided it was prudent to estimate that the Scotch spearmint oil trade demand for the 2020-2021 marketing year trade will be 750,000 pounds, 55,000 pounds lower than the prior year. Should the volume regulation levels established by this action prove insufficient to adequately supply the market, the Committee has the authority to recommend intra-seasonal increases, as it has in previous marketing years.
The Committee calculated the minimum salable quantity of Scotch spearmint oil that will be required during the 2020-2021 marketing year (471,029 pounds) by subtracting the estimated salable carry-in on June 1, 2020, (278,971) from the estimated trade demand (750,000). This minimum salable quantity represents the estimated minimum amount of Scotch spearmint oil that will be needed to satisfy estimated trade demand for the coming year. To ensure that the market will be fully supplied, the Committee recommended a 2020-2021 marketing year salable quantity of 838,404 pounds. The recommended salable quantity of 838,404 pounds, combined with an estimated 278,971 pounds of salable quantity carried in from the previous year, will yield a total available supply of 1,117,375 pounds of Scotch spearmint oil for the 2020-2021 marketing year, and will leave an estimated 367,375 pounds of salable Scotch spearmint oil to carry into the 2021-2022 marketing year.
The Committee estimates that there will be 278,971 pounds of salable carry-in of Scotch spearmint oil on June 1, 2020. If current market conditions are maintained and the Committee's projections are correct, salable carry-in will increase to 367,375 pounds at the beginning of the 2021-2022 marketing year. This level is above the quantity that the Committee generally considers favorable (150,000 pounds). However, the Committee anticipates that this higher salable carry-in will be manageable given the expected declining production levels of Scotch spearmint oil. The Committee believes that, given the current economic conditions in the Scotch spearmint oil industry, some Scotch spearmint oil producers will not produce enough oil in the 2020-2021 marketing year to fill all of their base allotment. Therefore, it is anticipated that the actual quantity of Scotch spearmint oil carried into the next marketing year will be less than the quantity calculated above.
The Committee recommended an allotment percentage of 38 percent for the 2020-2021 marketing year for Scotch spearmint oil. During its October 16, 2019, meeting, the Committee calculated an initial allotment percentage by dividing the minimum required salable quantity (471,029 pounds) by the total estimated allotment base (2,206,325 pounds), resulting in 21.3 percent. However, producers and handlers at the meeting indicated that the computed percentage (21.3 percent) might not adequately supply the potential 2020-2021 Scotch spearmint oil market demand and may also result in inadequate carry-in for the subsequent marketing year. After deliberation, the Committee increased the recommended allotment percentage to 38 percent. The total estimated allotment base (2,206,325 pounds) for the 2020-2021 marketing year, multiplied by the recommended salable allotment percentage (38 percent), yields 838,404 pounds, which is the recommended salable quantity for the 2020-2021 marketing year.
The 2020-2021 marketing year computational data for the Committee's recommendations is detailed below.Start Printed Page 35547
For the reasons stated above, the Committee believes that the recommended salable quantity and allotment percentage will adequately satisfy trade demand, will result in a reasonable carry-in for the following year, and will contribute to the orderly marketing of Scotch spearmint oil.
Further, the Committee estimates that there will be 1,153,192 pounds of Native spearmint oil in the reserve pool at the beginning of the 2020-2021 marketing year. This figure is 101,237 pounds higher than the quantity of reserve pool oil held by producers in the previous year and is consistent with the gradual increase in reserves that the industry has experienced over the past three marketing years.
The Committee expects end users of Native spearmint oil to continue to rely on Far West production as their main source of high-quality Native spearmint oil, with market demand similar to the past year. A sharp spike in demand for Native spearmint oil was experienced by handlers late in the 2017-2018 marketing year, spurred by the popularity of a new product in the market. This sharp spike in demand caused the remaining available 2017-2018 marketing year salable quantity to be depleted. While sales in the 2020-2021 marketing year are expected to come down from the 2017-2018 levels, the Committee still anticipates demand to be relatively high.
The Committee estimates the 2020-2021 marketing year Native spearmint oil trade demand to be 1,347,042 pounds. This figure is based on input provided by producers at six production area meetings held in mid-October 2019, as well as estimates provided by handlers and other meeting participants at the October 16, 2019 meeting. This figure represents an increase of 17,042 pounds from the previous year's estimate. The average estimated trade demand for Native spearmint oil derived from the producer meetings was 1,347,042 pounds, whereas the handlers' estimates ranged from 1,150,000 to 1,450,000 pounds. The average of Native spearmint oil sales over the last three years is 1,366,094 pounds. The quantity marketed over the most recent full marketing year, 2018-2019, was 1,245,076 pounds. The Committee chose to be slightly conservative in the establishment of its trade demand estimate for the 2020-2021 marketing year to avoid oversupplying the market.
The estimated 2020-2021 marketing year carry-in of 274,277 pounds of Native spearmint oil, plus the recommended salable quantity of 1,230,531 pounds, results in an estimated total available supply of 1,504,808 pounds of oil during the 2020-2021 marketing year. With the corresponding estimated trade demand of 1,347,042 pounds, the Committee projects that 157,766 pounds of oil will be carried into the 2021-2022 marketing year, resulting in a decrease of 116,511 pounds year-over-year. The Committee estimates that there will be 1,153,192 pounds of Native spearmint oil held in the reserve pool at the beginning of the 2021-2022 marketing year. Should the industry experience an unexpected increase in trade demand, oil in the Native spearmint oil reserve pool could be released to satisfy that demand.Start Printed Page 35548
The Committee recommended a producer allotment percentage of 49 percent for the 2020-2021 marketing year. During its October 16, 2019 meeting, the Committee calculated an initial allotment percentage by dividing the minimum required salable quantity (1,072,765 pounds) by the total estimated allotment base (2,511,288 pounds), resulting in 42.7 percent. However, producers and handlers at the meeting expressed that the computed percentage of 42.7 percent may not adequately supply the potential 2020-2021 Native spearmint oil market demand or result in adequate carry-in for the subsequent marketing year. After deliberation, the Committee increased the recommended allotment percentage to 49 percent. The total estimated allotment base (2,511,288 pounds) for the 2020-2021 marketing year multiplied by the recommended salable allotment percentage (49 percent) yields 1,230,531 pounds, the recommended salable quantity for the year.
(C) Salable quantity of Native spearmint oil required from the 2020-2021 marketing year production: 1,072,765 pounds. This figure is the difference between the estimated 2020-2021 marketing year estimated trade demand (1,347,042 pounds) and the estimated carry-in on June 1, 2020 (274,277 pounds). This is the minimum amount of Native spearmint oil that the Committee believes will be required to meet the anticipated 2020-2021 marketing year trade demand.
The Committee's recommended Scotch and Native spearmint oil salable quantities and allotment percentages of 838,404 pounds and 38 percent, and 1,230,531 pounds and 49 percent, respectively, will match the available supply of each class of spearmint oil to the estimated demand of each, thus avoiding extreme fluctuations in inventories and prices. This rule is similar to the regulations issued in prior seasons.
The salable quantities established in this final rule are not expected to cause a shortage of either class of spearmint oil. Any unanticipated or additional market demand for either class of spearmint oil which may develop during the marketing year could be satisfied by an intra-seasonal increase in the salable quantity and corresponding allotment percentage. The Order contains a provision in § 985.51 for intra-seasonal increases to allow the Committee the flexibility to respond quickly to changing market conditions.
USDA has reviewed the Committee's marketing policy statement for the 2020-2021 marketing year. The Committee's marketing policy statement, a requirement whenever the Committee recommends volume regulation, meets the requirements of §§ 985.50 and 985.51.
The establishment of salable quantities and allotment percentages in this rule is expected to fully satisfy anticipated market needs. In determining anticipated market needs, the Committee considered historical sales, as well as changes and trends in production and demand. This rule also provides producers with information regarding the amount of spearmint oil that should be produced for the 2020-2021 season to meet anticipated market demand.
There are approximately 39 producers and 94 producers of Scotch and Native spearmint oil, respectively, in the regulated production area and approximately 8 spearmint oil handlers subject to regulation under the Order. Small agricultural service firms are defined by the Small Business Administration (SBA) as those having annual receipts of less than $30,000,000, and small agricultural producers are defined as those having annual receipts Start Printed Page 35549of less than $1,000,000 (13 CFR 121.201).
There is no third party or governmental entity that collects and reports spearmint oil prices received by spearmint oil handlers. However, the Committee estimates an average spearmint oil handling markup at approximately 20 percent of the price received by producers. Multiplying 1.20 by the 2018 producer price of $16.80 yields a handler free on board (f.o.b.) price per pound estimate of $20.16.
This final rule establishes the quantity of spearmint oil produced in the Far West, by class, which handlers may purchase from, or handle on behalf of, producers during the 2020-2021 marketing year. The Committee recommended this action to help maintain stability in the spearmint oil market by matching supply to estimated demand, thereby avoiding extreme fluctuations in supplies and prices. Establishing quantities that may be purchased or handled during the marketing year through volume regulations allows producers to coordinate their spearmint oil production with the expected market demand. Authority for this action is provided in §§ 985.50, 985.51, and 985.52.
The Committee estimated trade demand for the 2020-2021 marketing year for both classes of oil at 2,097,042 pounds and expects that the combined salable carry-in will be 553,248 pounds. The combined required salable quantity is 1,543,794 pounds. Under volume regulation, total sales of spearmint oil by producers for the 2020-2021 marketing year will be held to 2,622,183 pounds (the recommended salable quantity for both classes of spearmint oil of 2,068,935 pounds plus 553,248 pounds of carry-in).
The established allotment percentages, upon which 2020-2021 marketing year producer allotments are based, are 38 percent for Scotch spearmint oil and 49 percent for Native spearmint oil. Without volume regulation, producers will not be held to these allotment levels, and could sell unrestricted quantities of spearmint oil.
The Committee discussed alternatives to its recommended volume regulation levels for both classes of spearmint oil. The Committee rejected the idea of not regulating any volume for either class of spearmint oil because of the severe, price-depressing effects that will likely occur without volume regulation. The Committee also discussed and considered salable quantities and allotment percentages that were above and below the levels that were ultimately recommended for both classes of spearmint oil. Ultimately, the action recommended by the Committee was to maintain the allotment percentage for Scotch spearmint oil (which will slightly increase the salable quantity) and to decrease both the salable quantity and allotment percentage for Native spearmint oil from the levels established for the 2019-2020 marketing year.
As noted earlier, the Committee's recommendation to establish salable quantities and allotment percentages for both classes of spearmint oil was made after careful consideration of all available information including: (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 Start Printed Page 35550each class of oil, including whether the estimated season average price to producers is likely to exceed parity.
Based on its review, the Committee believes that the salable quantities and allotment percentages established in this rule will achieve the objectives sought. The Committee also believes that, should there be no volume regulation in effect for the upcoming marketing year, the Far West spearmint oil industry will return to the pronounced cyclical price patterns that occurred prior to the promulgation of the Order. As previously stated, annual salable quantities and allotment percentages have been issued for both classes of spearmint oil since the Order's inception. The salable quantities and allotment percentages established herein are expected to facilitate the goal of maintaining orderly marketing conditions for Far West spearmint oil for the 2020-2021 and future marketing years.
Costs to producers and handlers, large and small, resulting from this action are expected to be offset by the benefits derived from a more stable market and increased returns. The benefits of this rule are expected to be equally available to all producers and handlers regardless of their size.
This rule establishes the salable quantities and allotment percentages for Scotch spearmint oil and Native spearmint oil produced in the Far West during the 2020-2021 marketing year. Accordingly, this rule does not impose any additional reporting or recordkeeping requirements on either small or large spearmint oil producers 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 final rule.
A proposed rule concerning this action was published in the Federal Register on February 20, 2020 (85 FR 9699). Copies of the proposed rule were also mailed or sent via facsimile to all Far West spearmint oil handlers. The proposal was made available through the internet by USDA and the Office of the Federal Register. A 60-day comment period ending April 20, 2020, was provided for interested persons to respond to the proposal. No comments were received during the comment period. Accordingly, no changes will be made to the rule as proposed.
2. Add § 985.235 to read as follows: