Almonds Grown in California; Release of the Reserve Established for the 1994-95 Crop Year

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[FV94-981-3IFR]

Almonds Grown in California; Release of the Reserve Established

for the 1994-95 Crop Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This document relaxes volume regulations imposed on California

almond handlers for the 1994-95 crop year by releasing reserve almonds

into salable channels. Volume regulations were imposed under the

authority of the Federal marketing order which regulates the handling

of almonds grown in California and is locally administered by the

Almond Board of California (Board). During the 1994-95 season, handlers

were required to withhold as a reserve, from normal competitive

markets, 10 percent of the almonds which they received from growers.

The remaining 90 percent of the crop could be sold by handlers to any

market at any time. This rule relaxes these regulations on handlers by

releasing the reserve percentage to the salable category and is

necessary to provide a sufficient quantity of almonds to meet

anticipated trade demand and carryover needs.

DATES: Effective on May 25, 1995; comments received by July 3, 1995

will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments

concerning this rule. Comments must be sent in triplicate to the Docket

Clerk, Fruit and Vegetable Division, AMS, USDA, room 2525-S, P.O. Box

96456, Washington, DC 20090-6456. All comments should reference the

docket 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.

FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn, Marketing

Specialist, Marketing Order Administration Branch, Fruit and Vegetable

Division, AMS, USDA, room 2522-S, P.O. Box 96456, Washington, DC 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 102B, Fresno, California 93721; telephone: (209) 487-5901, or fax

(209) 487-5906.

SUPPLEMENTARY INFORMATION: This 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 rule in

accordance with Executive Order 12866.

This rule has been reviewed under Executive Order 12778, Civil

Justice Reform. Under the provisions of the marketing order now in

effect, salable and reserve percentages may be established for almonds

during any crop year. This rule revises the salable and reserve

percentages for marketable California almonds during the 1994-95 crop

year. This 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 exempted

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

petition. After the hearing the Secretary would 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 the 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 [[Page 28521]] 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 have been

defined by the Small Business Administration (13 CFR 121.601) as those

having annual receipts of less than $5,000,000, and small agricultural

producers are defined as those whose annual receipts are less than

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

may be classified as small entities.

This rule relaxes volume regulations imposed on California almond

handlers for the 1994-95 crop year (July 1 through June 30). During the

1994-95 season, handlers were required to withhold, from normal

domestic and export markets, 10 percent of the merchantable almonds

which they received from growers (reserve percentage). The remaining 90

percent of almonds received by handlers could be sold to any market at

any time (salable percentage). Volume regulations were recommended by

the Board and imposed on handlers to lessen the impact of a large

almond supply for the 1994-95 season. Salable and reserve percentages

were established through publication of a final rule in the Federal

Register on December 9, 1994 (59 FR 63693). The Board now believes that

volume regulations on almond handlers are no longer necessary and that

the entire reserve should be released to provide a sufficient quantity

of almonds to meet anticipated trade demand and carryover needs.

Section 981.47 of the almond marketing order provides authority for

the Secretary, based on recommendations by the Board and the analysis

of other available information, to establish salable and reserve

percentages for almonds during a crop year. To aid the Secretary in

fixing the salable and reserve percentages, section 981.49 of the order

requires the Board to submit information to the Department on estimates

of the marketable production of almonds, combined domestic and export

trade demand for the year, carryin inventory at the beginning of the

year, and the desirable carryover inventory at the end of the year.

Authority for the Board to recommend revisions in the volume regulation

percentages is provided in section 981.48 of the order. Such revisions

must be recommended by May 15.

The Board met in July of 1994 to review projected crop estimates

and marketing conditions for the 1994-95 almond season. A very large

crop of 640 million kernelweight pounds was projected for the season.

Estimated shipments for the two prior seasons were 535.9 million pounds

for 1992 crop almonds and 497.7 million pounds for 1993 crop almonds.

Variations in production from season-to-season can cause wide

fluctuations in prices. For example, the Board estimated that grower

prices increased from $1.26 per pound for 1992 crop almonds to $2.00

per pound for the smaller, 1993 crop almonds. The large 1994 California

almond crop estimate 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 is

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

Thus, the Board recommended that the volume regulation provisions of

the order be utilized for the 1994-95 season as a supply management

tool, with 10 percent of the 1994 crop almonds being held by handlers

as a reserve.

On May 12, 1995, the Board met in Modesto, California, and

unanimously recommended releasing the reserve established for the 1994-

95 crop year. Thus, the salable percentage will increase from 90 to 100

percent and the reserve percentage will decrease from 10 to 0 percent.

The Board considered a number of factors in arriving at its

recommendation to release the reserve. The 1994-95 almond crop is now

estimated at 727 million pounds, far above the initial 640 million

pound estimate. Shipments for the year are expected to exceed 600

million pounds. Further, it appears that production in the rest of the

world is well below normal. Production in Spain, the world's second

largest producer of almonds, fell well below usual and is estimated to

have been about 75 million pounds. Spain, California's biggest

competitor in the world almond markets, became the United States'

fourth largest export market.

At the meeting, the Board also considered a crop estimate for

California almonds for the 1995-96 season provided by the California

Agricultural Statistics Service (CASS). CASS released its crop estimate

of 430 million kernelweight pounds on May 11. The estimate is

relatively small compared with normal almond production for a year. An

extremely wet spring that prohibited successful pollination of almond

trees during the critical bloom period as well as crop losses due to

trees having been blown over by high winds have resulted in the

predicted small yield in California. Very short carryin inventories of

1993 crop almonds into the current season combined with reduced

production from California competitors resulted in higher than

anticipated demand for California almonds.

As required under the order, the Board revised a number of

estimates that had been considered when volume regulation was first

recommended in July 1994. The Board's current estimates of marketable

supply, combined domestic and export trade demand for 1994-95, and

desirable carryover to be available for the 1995-96 crop year are shown

below. The Board considered these revised estimates in arriving at its

recommendation to release the 1994-95 reserve. The estimates used by

the Board to establish the original volume regulations for the year are

shown for comparison.

Marketing Policy Estimates--1994 Crop

[Kernelweight basis in millions of pounds]

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12/9/94 5/12/95

Initial Revised

estimates estimates

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Estimated Production:

1. 1994 Production.............................. 640.0 727.1

2. Loss and Exempt--3.0%........................ 19.2 21.8

3. Marketable Production........................ 620.8 705.3

Estimated Trade Demand:

4. Domestic..................................... 175.0 152.8

5. Export....................................... 381.4 449.0

6. Total........................................ 556.4 601.8

Inventory Adjustment:

7. Carryin 7/1/94............................... 99.6 102.6

8. Desirable Carryover 6/30/95.................. 100.0 206.1

9. Adjustment (Item 8 minus item 7)............. 0.4 103.5

Salable/Reserve:

10. Adjusted Trade Demand (Item 6 plus item 9).. 556.8 705.3

11. Reserve (Item 3 minus item 10).............. 64.0 0

12. Salable % (Item 10 divided by item 3 x 100). 90% 100.0

13. Reserve % (100% minus item 12).............. 10% 0

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[[Page 28522]]

As previously mentioned and reflected in the table, estimated

almond crop production for the 1994-95 season increased from 640 to

727.1 million kernelweight pounds. Estimated weight losses resulting

from the removal of inedible kernels by handlers and losses during

manufacturing also increased from 19.2 to 21.8 million kernelweight

pounds. Therefore, marketable production is expected at 705.3 million

kernelweight pounds.

The Board's estimated trade demand (or shipments) also increased

from 556.5 million kernelweight pounds to a total of 601.8 kernelweight

pounds. If the estimates are achieved, this would set a new record for

the California almond industry. Although estimated domestic trade

demand decreased from 175 to 152.8 million kernelweight pounds,

estimated export trade demand increased sharply from 381.4 to 449

million kernelweight pounds. Almond production in the rest of the world

was well below normal, contributing to a significant increase in the

amount of California almonds shipped into export markets.

The Board also revised its inventory estimates. The carryin

figure--supplies of salable almonds carried in from the 1993-94 crop

year--was slightly revised from 99.6 to 102.6 million kernelweight

pounds. The desirable carryout figure--supplies of salable almonds to

be carried out on June 30 for early season shipment during the 1995-96

crop year--was revised from 100 to 206.1 million kernelweight pounds.

With the projected short crop for the upcoming season, the carryout

figure was significantly increased to provide a more adequate supply of

almonds available to meet early market needs. After taking into account

the carryin and desirable carryover figures, the adjusted trade demand

was increased from 556.8 to 705.3 million kernelweight pounds, an

amount equal to the Board's estimate of marketable production.

The order also permits the Board to recommend the establishment of

a percentage of reserve almonds that can be exported. However, export

is currently the largest market for California almonds and is not

considered a secondary or noncompetitive outlet. For the 1994-95 crop

year, exports were included in the trade demand and the export market

was not an authorized reserve outlet. The percentage of reserve almonds

available for export was established at 0 percent in the final rule

previously cited that established volume regulation for the 1994-95

crop. The export percentage is not changed as a result of this action.

The Board believes that immediate release of the reserve will

positively impact market stability by increasing the amount of almonds

available to the market prior to the harvest of the 1995 crop, and by

augmenting the overall supply available for the upcoming season. This

action is expected to facilitate a smooth transition into the 1995-96

season. Since market stability is of paramount importance in achieving

long-term industry health, the Board concluded that there are no viable

alternatives to its recommendation.

This action is not expected to impose any additional costs on

handlers or producers because immediate release of the reserve will

eliminate the need for handlers to continue to store almonds and will

allow the product to enter an eager market in a smooth fashion.

Therefore, the Administrator of the AMS has determined that the

issuance of this interim final rule will not have a significant

economic effect on a substantial number of small entities.

After consideration of all relevant material presented, including

the Board's recommendation, and other available information, it is

found that revision of section 981.239 so as to change the salable

percentage from 90 to 100 percent and the reserve percentage from 10 to

0 percent will tend to effectuate the declared policy of the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good

cause that it is impracticable, unnecessary, and contrary to the public

interest to give preliminary notice prior to putting this rule into

effect and that good cause exists for not postponing the effective date

of this rule until 30 days after publication in the Federal Register

because: (1) This rule relaxes requirements currently in effect by

increasing the quantity of almonds that may be marketed; (2) this rule

was discussed at a public meeting and interested persons had an

opportunity to provide input; (3) the rule was unanimously recommended

by the Board; and (4) this rule provides a 30-day comment period and

any comments received will be considered prior to finalization of this

rule.

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

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.

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

Regulations.

Subpart--Salable, Reserve, and Export Percentages

2. Section 981.239 is revised to read as follows:

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 100 percent, 0 percent, and 0

percent, respectively beginning on May 25, 1995.

Dated: May 25, 1995.

Sharon Bomer Lauritsen,

Deputy Director, Fruit and Vegetable Division.

[FR Doc. 95-13339 Filed 5-31-95; 8:45 am]

BILLING CODE 3410-02-P