Almonds Grown in California; Proposed Salable, Reserve, and Export Percentages for the 1994-95 Crop Year

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[FV94-981-3PR]

Almonds Grown in California; Proposed Salable, Reserve, and

Export Percentages for the 1994-95 Crop Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule with request for comments.

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SUMMARY: This proposed rule invites comments on the establishment of

salable, reserve, and export percentages for California almonds

received by handlers during the 1994-95 almond crop year, which

commenced on July 1, 1994. Based on the recommendation of the Almond

Board of California (Board), the agency which locally administers the

almond marketing order, and other available information, it is proposed

to establish salable, reserve, and export percentages of 90 percent, 10

percent, and 0 percent, respectively. This proposed rule is authorized

under the marketing order for almonds grown in California and is

intended to promote orderly marketing conditions and avoid unreasonable

fluctuations in supplies and prices.

DATES: Comments must by received by September 22, 1994.

ADDRESSES: Interested persons are invited to submit written comments

concerning this proposal. Comments must be sent in triplicate to the

Docket Clerk, Fruit and Vegetable Division, AMS, USDA, P.O. Box 96456,

Room 2523-S, Washington, D.C. 20090-6456, FAX (202) 720-5698. Comments

should reference the docket number and the date and page number of this

issue of the Federal Register and will be available for public

inspection in the Office of the Docket Clerk during regular business

hours.

FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn, Marketing

Specialist, Marketing Order Administration Branch, Fruit and Vegetable

Division, AMS, USDA, Room 2536-S, P.O. Box 96456, Washington, D.C.

20090-6456; telephone: (202) 720-1509, or FAX (202) 720-5698; or Martin

Engeler, Assistant Officer-in-Charge, California Marketing Field

Office, Fruit and Vegetable Division, AMS, USDA, 2202 Monterey Street,

Suite 102-B, Fresno, CA 93721; telephone: (209) 487-5901, or FAX (209)

487-5906.

SUPPLEMENTARY INFORMATION: This proposed rule is issued under Marketing

Agreement and Order No. 981 [7 CFR Part 981], both as amended,

hereinafter referred to as the ``order'', regulating the handling of

almonds grown in California. 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 Department of Agriculture (Department) is issuing this proposed

rule in accordance with Executive Order 12866.

This proposed rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This proposal is not intended to have retroactive

effect. The proposed rule will not preempt any State or local laws,

regulations, or policies, unless they present an irreconcilable

conflict with this rule.

The Act provides that administrative proceedings must be exhausted

before parties may file suit in court. Under section 608c(15)(A) of the

Act, any handler subject to an order may file with the Secretary a

petition stating that the order, any provision of the order, or any

obligation imposed in connection with the order is not in accordance

with law and request a modification of the order or to be exempt

therefrom. A handler is afforded the opportunity for a hearing on the

petition. After a hearing the Secretary will rule on the petition. The

Act provides that the district court of the United States in any

district in which the handler is an inhabitant, or has his or her

principal place of business, has jurisdiction in equity to review the

Secretary's ruling on the petition, provided a bill in equity is filed

not later than 20 days after date of entry of the ruling.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), the Administrator of the Agricultural Marketing Service

(AMS) has considered the economic impact of this action on small

entities.

The purpose of the RFA is to fit regulatory actions to the scale of

business subject to such actions in order that small businesses will

not be unduly or disproportionately burdened. Marketing orders issued

pursuant to the Act, and rules issued thereunder, are unique in that

they are brought about through group action of essentially small

entities acting on their own behalf. Thus, both statutes have small

entity orientation and compatibility.

There are approximately 115 handlers of almonds who are subject to

regulation under the marketing order and approximately 7,000 producers

in the regulated area. Small agricultural service firms are defined as

those whose annual receipts are less than $5,000,000, and small

agricultural producers have been defined by the Small Business

Administration [13 CFR 121.601] as those having annual receipts of less

than $500,000. The majority of handlers and producers of California

almonds may be classified as small entities.

The National Agricultural Statistics Service estimates 1994

California almond production at 640 million kernelweight pounds, 31

percent larger than last year. If realized, this could be one of the

largest crops on record.

In order to lessen the impact of this projected large almond supply

facing the industry, the Board, at its July 7, 1994, meeting in

Modesto, California, recommended establishing salable, reserve, and

export percentages for the 1994-95 crop year by a vote of seven to

three. This proposal would require handlers of California almonds to

withhold, as a reserve, from normal domestic and export markets, 10

percent of the merchantable almonds they receive from growers during

the 1994-95 crop year. The remaining 90 percent (the salable

percentage) of the crop could be sold by handlers in any market at any

time. The last year salable and reserve percentages were established

was the 1991-92 crop year.

Almond production, like that of many agricultural commodities, can

vary significantly from season-to-season due to a variety of factors.

This in turn can cause wide fluctuations in prices. For example, the

Board has estimated grower prices increased from $1.26 per pound for

1992 crop almonds to nearly $2.00 per pound for 1993 crop almonds, when

the corresponding estimated shipments for those crop years were 535.9

million pounds and 497.7 million pounds, respectively. The large 1994

California almond crop estimate has caused early speculation of grower

prices in the $1.15 per pound range. Such swings in supplies and price

levels can result in market instability and uncertainty for growers,

handlers, buyers, and consumers.

The long term goal of the almond industry is to increase almond

consumption and demand, and the Board believes this can be best

achieved in the presence of stable and orderly market conditions. The

Board believes that the use of the reserve provisions of the marketing

order as a supply management tool, in conjunction with other marketing

tools available in the order, can assist in accomplishing the

industry's goals.

While this rule could restrict the amount of almonds which handlers

could sell in normal domestic and export markets in the short term, the

proposed salable and reserve percentages are intended to promote

orderly marketing conditions by avoiding unreasonable fluctuations in

supplies and prices and improving grower returns. Further, this

proposed rule could help provide market stability during the 1995-96

crop year by reserving almonds for shipment during that season in the

event 1995 production is below trade demand needs.

Authority to establish salable and reserve percentages is provided

in Sec. 981.47 of the order. Section 981.66 authorizes disposition of

reserve almonds to certain outlets, including export. Pursuant to

Secs. 981.47 and 981.49 of the order, the Board based its

recommendation for salable, reserve, and export percentages of 90

percent, 10 percent, and 0 percent, respectively, on estimates of

marketable supply and combined domestic and export trade demand for the

1994-95 crop year. The Board's 1994 marketable production estimate of

620.8 million kernelweight pounds is based on a 1994 crop estimate

issued by the National Agricultural Statistics Service of 640 million

kernelweight pounds, minus an estimated loss of 19.2 million

kernelweight pounds resulting from the removal of inedible kernels by

handlers and losses during manufacturing.

Trade demand is estimated at 556.4 million kernelweight pounds--175

million pounds for domestic needs and 381.4 million pounds for export

needs. An inventory adjustment is made to account for supplies of

salable almonds carried in from the 1993-94 crop year and for supplies

of salable almonds deemed desirable to be carried out on June 30, 1995,

for early season shipment during the 1995-96 crop year. After adjusting

for inventory, the trade demand is calculated at 556.8 million

kernelweight pounds. This is the quantity of almonds from the estimated

1994 marketable production deemed necessary to meet trade demand needs.

The proposed salable percentage of 90 percent would meet those needs.

The remaining 10 percent (64 million kernelweight pounds) of the

1994 crop marketable production would be withheld by handlers to meet

their reserve obligations.

The percentage of reserve almonds available for export is

recommended at 0 percent. Although the order permits establishment of a

percentage of reserve almonds that could be exported, export is

currently the largest market for California almonds and is not

considered a secondary or noncompetitive outlet. Therefore, exports

would be included in trade demand and the export market would not be an

authorized reserve outlet.

All or part of reserve almonds could be released to the salable

category if it is found that the supply made available by the salable

percentage is insufficient to satisfy 1994-95 trade demand needs,

including desirable carryover for use during the 1995-96 crop year. The

Board is required to make any recommendations to the Secretary to

increase the salable percentage prior to May 15, 1995, pursuant to

Sec. 981.48 of the order. Alternatively, all or a portion of reserve

almonds could be sold by the Board, or by handlers under agreement with

the Board, to governmental agencies or charitable institutions or for

diversion into almond oil, almond butter, animal feed, or other outlets

which the Board finds are noncompetitive with existing normal markets

for almonds.

A tabulation of the estimates and calculations used by the Board in

arriving at its recommendations follows:

Marketing Policy Estimates--1994 Crop

[Kernelweight basis]

------------------------------------------------------------------------

Million Percent

pounds

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Estimated Production:

1. 1994 Production................................. 640.0

2. Loss and Exempt--3.0%........................... 19.2

3. Marketable Production........................... 620.8

Estimated Trade Demand:

4. Domestic........................................ 175.0

5. Export.......................................... 381.4

6. Total........................................... 556.4

Inventory Adjustment:

7. Carryin 7/1/94.................................. 99.6

8. Desirable Carryover 6/30/95..................... 100.0

9. Adjustment (Item 8 minus item 7)................ 0.4

Salable/Reserve:

10. Adjusted Trade Demand (Item 6 plus item 9)..... 556.8

11. Reserve (Item 3 minus item 10)................. 64.0

12. Salable % (Item 10 divided by item 3 x 100).. ........ 90

13. Reserve % (100% minus item 12)................. ........ 10

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The ``Guidelines for Fruit, Vegetable, and Specialty Crop Marketing

Orders'' (Guidelines) issued by the Department in 1982 specify that 110

percent of recent years' sales be made available to primary markets

each season. This rule provides an estimated 656.4 million kernelweight

pounds of California almonds for unrestricted sales (1994 crop salable

production plus carryin from the 1993 crop) to meet increasing domestic

and world almond consumption demands. This amount exceeds the actual

1991-92 record for delivered sales of California almonds by 18 percent.

Thus, the Guidelines' goals are met.

The members of the Board that opposed the establishment of salable

and reserve percentages believe that free competition is best for the

industry and that the industry should concentrate on building demand

for almonds rather than imposing a reserve. One member was also

concerned that enforcement procedures would be difficult as many

handlers are reluctant to cooperate with a mandated reserve.

The overall consensus of the Board is that the establishment of

salable and reserve percentages will reduce market volatility and

enhance returns to growers, while stabilizing supplies to customers and

encouraging customer confidence in the industry.

Establishment of salable and reserve percentages are often

contentious and controversial in the almond industry. Those opposed to

reserves generally have philosophical differences with supporters,

favoring a market situation not affected by supply controls as

reflected in the Board discussion and vote. However, a majority of the

Board favored the recommendation, and all Board members (even those

opposed) have indicated they will support the majority Board

recommendation and work to ensure fair and equitable administration of

the reserve, if established.

Based on the above, the Administrator of the AMS has determined

that the issuance of this proposed rule would not have a significant

economic effect on a substantial number of small entities.

Interested persons are invited to submit their views and comments

on this proposal. A 15-day comment period is considered appropriate

because the salable and reserve percentages are recommended to be

established for almonds received by handlers during the 1994-95 crop

year, which began on July 1, 1994.

List of Subjects in 7 CFR Part 981

Almonds, Marketing agreements, Nuts, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, 7 CFR Part 981 is

proposed to be amended as follows:

PART 981--ALMONDS GROWN IN CALIFORNIA

1. The authority citation for 7 CFR Part 981 continues to read as

follows:

Authority: 7 U.S.C. 601-674.

Subpart--Salable, Reserve, and Export Percentages

2. Section 981.239 is added to read as follows:

Note: This section will not appear in the Code of Federal

Regulations.

Sec. 981.239 Salable, reserve, and export percentages for almonds

during the crop year beginning on July 1, 1994.

The salable, reserve, and export percentages during the crop year

beginning on July 1, 1994, shall be 90 percent, 10 percent, and 0

percent, respectively.

Dated: August 29, 1994.

Eric M. Forman,

Deputy Director, Fruit and Vegetable Division.

[FR Doc. 94-21880 Filed 9-6-94; 8:45 am]

BILLING CODE 3410-02-P