Walnuts Grown in California; Suspension of Deadline for Relaxing Reserve Requirements

SUMMARY: This proposal would suspend the deadline by which the Walnut

Marketing Board (Board) may recommend a relaxation in reserve

requirements established for a marketing year under the walnut

marketing order. Suspension of the deadline would allow the Board,

which locally administers the order, to make such a decision based on

more current supply and shipment information. This suspension would

provide the walnut industry an opportunity for more orderly marketing.

DATES: Comments must be received by July 3, 1995.

ADDRESSES: Interested persons are invited to submit written comments

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

Docket Clerk, Marketing Order Administration Branch, F&V, AMS, USDA,

room 2523-S, P.O. Box 96456, Washington, D.C. 20090-6456, FAX number

(202) 720-5698. Comments should reference this 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: Mark Hessel, Marketing Specialist,

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; or Mark Kreaggor,

Marketing Specialist, Marketing Order Administration Branch, F&V, AMS,

USDA, room 2523-S, P.O. Box 96456, Washington, D.C. 20050-6456;

telephone: (202) 720-3610, or FAX (202) 720-5698.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing

Agreement and Order No. 984 (7 CFR part 984), regulating the handling

of walnuts 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

conformance with Executive Order 12866.

This proposal has been reviewed under Executive Order 12778, Civil

Justice Reform. This rule is not intended to have retroactive effect.

This proposal would 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 requesting a modification of the order or to be exempted

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

petition. After a 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 the 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 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 65 handlers of California walnuts who are

subject to regulation under the walnut marketing order, and

approximately 5,000 producers in the regulated area. Small agricultural

service firms have been defined by the Small Business Administration

(13 CFR 121.601) as those whose annual receipts are less than

$5,000,000 and small agricultural producers have been defined as those

having annual receipts of less than $500,000. The majority of

California walnut handlers and producers may be classified as small

entities.

The walnut marketing order provides authority for volume control in

the form of free, reserve, and export percentages. The free percentage

is the percentage of certified merchantable walnuts that may be shipped

freely to any market during the marketing year. The reserve percentage

is the amount of certified merchantable walnuts that may be shipped to

export markets, government agencies, charitable institutions, poultry

or animal feed, walnut oil, or other markets noncompetitive with

markets for certified merchantable free walnuts. The export percentage

is the percentage of reserve walnuts that may be shipped to export

markets. Certified merchantable walnuts are walnuts which have been

inspected and certified by the Dried Fruit Association of California as

meeting the minimum grade and size requirements specified under the

order.

The marketing order also provides that handlers may meet their

reserve requirements by either delivering reserve walnuts to the Board

for disposition by the Board or by selling or disposing of their own

walnuts, as agents of the Board, in specified reserve outlets. Any

reserve walnuts the Board receives would be pooled and sold by the

Board in markets specified for reserve walnuts at the highest returns

available. The proceeds from the sale of these pooled walnuts, minus

all expenses incurred by the Board in receiving, holding, and disposing

of the walnuts, would be distributed to handlers who delivered walnuts

to the pool in proportion to each handler's contribution.

[[Page 28745]]

In a marketing year (August 1-July 31) that a reserve program is

implemented, the Board recommends the initial percentages in September

and has the option of recommending an increase in the free and export

percentages and a decrease in the reserve percentage later in the

marketing year. If the Department concurs with the Board's

recommendation, the recommended percentages may be established or

modified. Under current order requirements, the reserve percentage may

be decreased and free percentage increased if the Board makes a

recommendation on or before February 15. Section 984.49(b)(1)

establishes a deadline of February 15 for the Board to recommend to the

Secretary an increase in the free percentage and a decrease in the

reserve percentage. On February 10, 1995, the Board unanimously

recommended suspension of that deadline. The proposed rule would

suspend the phrase ``On or before February 15 of the marketing year,''

in section 984.49(b)(1) and would authorize the Board to recommend an

increase in the free percentage and a decrease in the reserve

percentage at any time during the marketing year, which ends on July

31.

In the past, many export markets were undeveloped and the domestic

market provided better returns than export markets. The reserve

percentage was used as a tool to keep the domestic walnut market from

being oversupplied and the export percentage was used as a tool to

place an orderly flow of California walnuts into the export market at

prices that were competitive with foreign walnuts. Even though the free

walnuts were allowed to be shipped to export markets, free walnuts were

not price competitive with walnuts from other countries and

consequently were not diverted to export markets. Under former

marketing conditions, sufficient information relating to the domestic

market was available prior to February 15 so that the Board could make

an appropriate recommendation for final free and reserve percentages.

Under present marketing conditions, walnut export markets are well

established and have returns equal to or higher than those received in

the domestic market. As a result, the Board could recommend setting an

export percentage of 0 percent which would preclude the shipment of

reserve walnuts to export markets. The export market would then be

supplied with only free walnuts. By setting a reserve percentage and

keeping the export percentage at 0 percent, the Board could remove a

quantity of walnuts in excess of domestic and export market demands.

When large shipments of reserve walnuts were exported, the February

15 deadline for recommending a decrease in the reserve gave handlers

approximately five months to export the remainder of their reserve

after the final reserve percentage was known. Since exports have now

become a viable market for free walnuts, the Board may need more

flexibility to consider later data on free shipments to revise its

estimate of trade demand. The Board may also need more flexibility to

consider the July forecast of the next crop to decide if the desirable

carryout should be increased to supplement a short crop.

In addition, the order requires handlers to file monthly shipment

reports that are due on the fifth day of the following month. Each

additional monthly report the Board receives from handlers after the

February 15 deadline, gives the Board a more accurate picture of the

levels of shipments of walnuts for the current marketing year. More

information is also available at that time on the foreign walnut crop,

the pecan supply which directly, competes with walnuts, exchange rates,

and foreign and domestic economic conditions. This information would

allow the Board to better estimate the current and prospective domestic

and export demand and supply conditions for California walnuts.

Finally, later in the marketing year, the Board can better estimate the

amount of the current crop of walnuts that should be carried over to

the next marketing year. By allowing decisions to be made later in the

season on a reserve program, the industry can better evaluate marketing

conditions.

The Board estimates that sufficient information would be available

by early June, but marketing conditions may cause the Board to wait

longer before making a final recommendation on the free and reserve

percentages. The suspension of the February 15 deadline would allow the

Board more flexibility in dealing with the dynamic marketing conditions

of the California walnut industry and in turn provide for more orderly

marketing of walnuts.

Based on available information, the Administrator of the AMS has

determined that this action would not have a significant economic

impact on a substantial number of small entities.

A 30-day comment period is provided to allow interested persons an

opportunity to comment on this proposal. All written comments timely

received will be considered before a final determination is made on

this matter.

List of Subjects in 7 CFR Part 984

Marketing agreements, Nuts, Reporting and recordkeeping

requirements, Walnuts.

For the reasons set forth in the preamble, 7 CFR part 984 is

proposed to be suspended in part as follows:

PART 984--WALNUTS GROWN IN CALIFORNIA

1. The authority citation for 7 CFR part 984 continues to read as

follows:

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

Sec. 984.49 [Suspended in part]

2. In Sec. 984.49(b)(1), the words ``On or before February 15 of

the marketing year,'' are suspended.

Dated: May 26, 1995.

Lon Hatamiya,

Administrator.

[FR Doc. 95-13509 Filed 6-1-95; 8:45 am]

BILLING CODE 3410-02-P