Change of Desirable Carryout Used in Computing Trade Demand

SUMMARY: This proposed rule would change the desirable carryout levels

which are used in computing the yearly trade demand for California

raisins. The trade demand is used to help determine the volume

regulation percentages for each crop year, if necessary. The desirable

carryout would be reduced from the current two and one-half months of

shipments to two and one-fourth months of shipments during the 1995-96

crop year and to two months of shipments in subsequent crop years. The

Raisin Administrative Committee (Committee), which is responsible for

local administration of the Federal marketing order, believes that the

current desirable carryout level results in excessive supplies of

marketable tonnage early in the crop year. This proposal would

contribute to the orderly marketing of California raisins by mitigating

the oversupply of raisins early in the crop year, thus stabilizing the

market conditions for producers and handlers.

DATES: Comments must be received by July 6, 1995.

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, room 2525-S,

P.O. Box 96456, Washington, DC 20090-6456, or faxed to (202) 720-5698.

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: 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 Valerie L. Emmer,

Marketing Specialist, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, room 2523-S, P.O. Box 96456, Washington,

DC 20090-6456; telephone: (202) 205-2829, or fax (202) 720-5698.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing

Agreement and Order No. 989 (7 CFR Part 989), as amended, regulating

the handling of raisins produced from grapes grown in California,

hereinafter referred to as the ``order.'' This 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 proposal would reduce the desirable carryout for

the 1995-96 crop year, beginning August 1, 1995, through July 31, 1996,

and for subsequent crop years. This proposal 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 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 20 handlers of California raisins who are

subject to regulation under the marketing order and approximately 4,500

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 (from all sources) are less than

$5,000,000, and small agricultural producers are defined as those

having annual receipts of less than $500,000. No more than eight

handlers and a majority of producers of California raisins may be

classified as small entities. Twelve of the 20 handlers subject to

regulation have annual sales estimated to be at least $5,000,000, and

the remaining eight handlers have sales less than $5,000,000, excluding

receipts from any other sources.

This proposed rule would change section 989.154 of the

administrative rules and regulations of the raisin marketing order. The

Committee recommended by a vote of 31 to 15 at its April 28, 1995,

meeting, to adjust the desirable carryout level in section 989.154 from

the current two and one-half months of shipments to two and one-fourth

months of shipments during the 1995-96 crop year and to two months of

shipments in subsequent crop years. The crop year includes the 12-month

period August 1 through July 31.

The desirable carryout level is the amount of tonnage from the

prior crop year needed during the first part of the succeeding crop

year to meet market needs, before new crop raisins are harvested and

available for market. [[Page 32281]] Currently, section 989.154

provides that the desirable carryout levels shall be equal to the

shipments of free tonnage to all outlets for each varietal type during

the months of August, September, and one-half of the total shipments

for the month of October of the prior crop year.

The desirable carryout figure is used in marketing policy

calculations to determine trade demand. The trade demand is 90 percent

of prior year's shipments, adjusted by the carryin and desirable

carryout. The trade demand is then used to help determine the volume

regulation percentages for each crop year, if necessary.

Beginning in the 1991-92 crop year the desirable carryout was

reduced from three months of shipments to two and one-half months of

shipments. It was determined that the use of the three month desirable

carryout level resulted in excessive supplies of marketable tonnage

early in the season.

The Committee has used the two and one-half month desirable

carryout figure for four crop years and has determined that the use of

this figure also results in an excessive supply of free tonnage at the

beginning of the marketing season. A majority of the Committee members

believes that this causes unstable market conditions during the early

part of the crop year.

To correct the oversupply of marketable raisin tonnage early in the

season, the Committee has recommended that the desirable carryout

levels be revised from two and one-half months of the prior year's

shipments to two and one-fourth months of the prior year's shipments

for the 1995-96 crop year and to two months of the prior year's

shipments for subsequent crop years.

The change in the desirable carryout levels would reduce the trade

demand and the free tonnage percentage, and would make less free

tonnage available to handlers for immediate use. However, handlers

would still be provided an opportunity to increase their inventories,

if necessary, by purchasing raisins from the reserve pool under order-

mandated 10 plus 10 offers during November and other releases of

reserve pool raisins available under the marketing order. The 10 plus

10 offers are two simultaneous offers of reserve pool raisins which are

made available to handlers each season. For each such offer, a quantity

of raisins equal to 10 percent of the prior year's shipments is made

available for free use. Although this proposed rule would tighten the

supply of raisins early in the season, handlers would still have the

opportunity to obtain additional supplies to meet market needs, if

needed later in the season.

This proposal is intended to stabilize the early season raisin

market. Bringing early season supplies in line with market needs is

expected to stabilize market prices. This price stabilization should

make raisin buyers less likely to postpone their purchases. Thus,

decreasing the desirable carryout could strengthen the market and

increase shipments, which would benefit raisin producers and handlers.

One alternative that was discussed by the Committee prior to

recommending this proposed change was to immediately set the desirable

carryout level at two months of the prior year's shipments. It was

determined that this was too rapid an adjustment and that first setting

the desirable carryout levels at two and one-quarter months for the

1995-96 season and two months in subsequent crop years would be a more

prudent approach.

Another alternative considered was setting the desirable carryout

at a fixed tonnage. However, this alternative does not allow the

desirable carryout to fluctuate with changing market conditions from

year to year.

Those voting in opposition to the recommendation to reduce the

desirable carryout level believed that the marketing order should not

further restrict supplies during the early part of the crop year.

However, the following table shows that adequate supplies of Natural

(sun-dried) Seedless raisins have been available early in the crop year

to meet demand. Natural (sun-dried) Seedless raisins represent about 90

percent of all raisins produced in California. The other two varieties

which had reserve pools for the 1994-95 crop year, Zante Currant

raisins and Other Seedless raisins, had carryins far exceeding the

annual trade demand. ``Carryin'' is synonymous with the ``carryout'' of

the preceding crop year. All figures are in natural condition tons.

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

Desirable

carryin

(Aug, Sept Physical Aug/Sept

Crop year and 1/2 carryin shipments

Oct (tons) (tons)

shipments)

(tons)

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

1994-95............................... 84,671 92,248 64,374

1993-94............................... 81,867 93,752 67,784

1992-93............................... 82,591 115,440 65,495

1991-92............................... 84,541 109,306 65,613

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

The desirable carryin is set to meet the demand for the early part

of the crop year (August and September) before the new crop becomes

available. The actual physical carryin has far exceeded the desirable

carryin and has resulted in an oversupply of free tonnage during the

early part of the crop year. The reduction in desirable carryout would

contribute to correcting the problem by adjusting the free tonnage

market supply, which would bring it more in line with demand.

The desirable carryout levels that would be established by this

proposed rule would apply uniformly to all handlers in the industry,

whether small or large, and there would be no known additional costs

incurred by small handlers. The stabilizing effects of the revised

desirable carryout levels would impact both small and large handlers

positively by helping them maintain and expand markets.

In the event that the prior year's shipments are limited because of

crop conditions, a proviso in section 989.154 allows the committee to

select the total shipments during the months of August, September and

one-half of the total shipments for October during one of the three

years preceding the prior crop year. Consistent with the need to reduce

early season supplies, this proposed rule would make a corresponding

revision to this proviso, by changing the total shipments from August,

September, and one-half of the total shipments for October to the total

shipments from August and September only.

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.

Interested persons are invited to submit their views and comments

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

because the order requires that the committee meet on or before August

15 to compute and announce the trade demand. As indicated earlier, the

desirable carryover is an important factor in that calculation. Thus, a

decision on whether to issue the Committee's recommendation must be

made prior to that date. A longer comment period would not provide an

adequate amount of time to complete this rulemaking by that date. All

written comments timely received will be considered before a final

determination is made on this matter.

List of Subjects in 7 CFR Part 989

Grapes, Marketing agreements, Raisins, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, 7 CFR part 989 is

proposed to be amended as follows: [[Page 32282]]

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

1. The authority citation for 7 CFR part 989 continues to read as

follows:

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

2. Section 989.154 is revised to read as follows:

Sec. 989.154 Desirable carryout levels.

The desirable carryout levels to be used in computing and

announcing a crop year's marketing policy shall be equal to the total

shipments of free tonnage of the prior crop year during the months of

August and September, for each varietal type, converted to a natural

condition basis: Provided, That the desirable carryout levels to be

used in computing and announcing the 1995-96 crop year's marketing

policy shall be equal to the total 1994 shipments of free tonnage for

the months of August and September, and one-fourth of the total

shipments for the month of October: Provided further, That should the

prior year's shipments be limited because of crop conditions, the

Committee may select the total shipments during the months of August

and September during one of the three crop years preceding the prior

crop year.

Dated: June 15, 1995.

Sharon Bomer Lauritsen,

Deputy Director, Fruit and Vegetable Division.

[FR Doc. 95-15106 Filed 6-20-95; 8:45 am]

BILLING CODE 3410-02-P