Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 1997-98 Marketing Year

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket No. FV-96-985-4 FR]

Spearmint Oil Produced in the Far West; Salable Quantities and

Allotment Percentages for the 1997-98 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule establishes the quantity of spearmint oil

produced in the Far West, by class, that handlers may purchase from, or

handle for, producers during the 1997-98 marketing year. The Spearmint

Oil Administrative Committee (Committee), the agency responsible for

local administration of the marketing order for spearmint oil produced

in the Far West, recommended this rule for the purpose of avoiding

extreme fluctuations in supplies and prices, thus helping to maintain

stability in the spearmint oil market.

DATES: This final rule becomes effective July 10, 1997 and applies to

all spearmint oil handled from the beginning of the 1997-98 marketing

year.

FOR FURTHER INFORMATION CONTACT: Robert J. Curry, Northwest Marketing

Field Office, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, 1220 SW Third Avenue, room 369,

Portland, Oregon 97204; telephone: (503) 326-2043; Fax: (503) 326-7440;

or Anne M. Dec, Marketing Order Administration Branch, Fruit and

Vegetable Division, AMS, USDA, room 2525, South Building, P.O. Box

96456, Washington, D.C. 20090-6456; telephone: (202) 720-2491; Fax:

(202) 720-5698. Small businesses may request information on compliance

with this regulation by contacting: Jay Guerber, Marketing Order

Administration Branch, Fruit and Vegetable Division, AMS, USDA, P.O.

Box 96456, room 2523-S, Washington, DC 20090-6456; telephone (202) 720-

2491; Fax (202) 720-5698.

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing

Order No. 985 (7 CFR Part 985), as amended, regulating the handling of

spearmint oil produced in the Far West (Washington, Idaho, Oregon, and

designated parts of Nevada and Utah), 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 final rule has been reviewed under Executive Order 12988,

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

in effect, salable quantities and allotment percentages may be

established for classes of spearmint oil produced in the Far West. This

final rule establishes the quantity of spearmint oil produced in the

Far West, by class, that may be purchased from or handled for producers

by handlers during the 1997-98 marketing year, which begins on June 1,

1997. This final 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 to review the Secretary's

ruling on the petition, provided an action is filed not later than 20

days after date of the entry of the ruling.

Pursuant to authority contained in Secs. 985.50, 985.51, and 985.52

of the order, the Committee recommended the salable quantities and

allotment

[[Page 36647]]

percentages for the 1997-98 marketing year at its October 2, 1996,

meeting, and reconfirmed its recommendation following review of

additional information at its meeting held on November 14, 1996. The

Committee recommended the establishment of a salable quantity and

allotment percentage for Scotch spearmint oil with one member opposing

the motion because he favored the establishment of a higher salable

quantity and allotment percentage. In a unanimous vote, the Committee

recommended the establishment of a salable quantity and allotment

percentage for Native spearmint oil.

This final rule establishes a salable quantity of 996,522 pounds

and an allotment percentage of 55 percent for Scotch spearmint oil, and

a salable quantity of 1,125,351 pounds and an allotment percentage of

56 percent for Native spearmint oil. This rule limits the amount of

spearmint oil that handlers may purchase from, or handle for, producers

during the 1997-98 marketing year, which begins on June 1, 1997.

Salable quantities and allotment percentages have been placed into

effect each season since the order's inception in 1980.

The U.S. production of spearmint oil is concentrated in the Far

West, primarily Washington, Idaho, and Oregon (part of the area covered

by the order). Spearmint oil is also produced in the Midwest. The

production area covered by the order accounts for approximately 75

percent of the annual U.S. production of both classes of spearmint oil.

When the order became effective in 1980, the United States produced

nearly 100 percent of the world's supply of Scotch spearmint oil, of

which approximately 80 percent was produced in the regulated production

area in the Far West. International production characteristics have

changed in recent years, however, with foreign Scotch spearmint oil

production contributing significantly to world production. Although

still a leader in production, the Far West's market share has decreased

to approximately 65 percent of the world total. Thus, in recent

marketing years, the Committee has taken a different approach in its

method of addressing the historical fluctuations in supply and price.

In conjunction with the goal of maintaining price and market stability,

the Committee seeks a moderate growth rate in terms of total North

American market share. The Committee's recommendation is intended to

find a stable price level while keeping Far West Scotch spearmint oil

in a competitive and viable position in the international market. To

that end, the Committee is targeting a specific percentage of the North

American market share for use in its salable quantity and allotment

percentage calculations. For 1997-98, the Committee is targeting 73

percent of the North American market, compared to the nearly 65 percent

targeted for the 1996-97 season. Preliminary figures indicate that the

Far West Scotch spearmint oil market share in North America will reach

approximately 60 percent in 1996-97, up from 55 percent in 1995-96.

The order has contributed extensively to the stabilization of

producer prices, which prior to 1980 experienced wide fluctuations from

year to year. For example, between 1971 and 1975 the price of Native

spearmint oil ranged from $3.00 per pound to $11.00 per pound. In

contrast, under the order, prices have stabilized between $10.50 and

$11.50 per pound for the past ten years. With approximately 90 percent

of U.S. production of Native spearmint oil located in the Far West, the

method of calculating the Native spearmint oil salable quantity and

allotment percentage primarily utilizes information on price and

available supply as they are affected by the estimated trade demand for

Far West Native spearmint oil.

The salable quantity and allotment percentage for each class of

spearmint oil for the 1997-98 marketing year is based upon the

Committee's recommendation and the data presented below.

(1) Class 1 (Scotch) Spearmint Oil

(A) Estimated carry-in on June 1, 1997--309,927 pounds. This figure

is derived by subtracting the estimated 1996-97 marketing year trade

demand of 900,000 pounds from the revised 1996-97 marketing year total

available supply of 1,209,927 pounds.

(B) Estimated North American production (U.S. and Canada) for the

1997-98 marketing year--1,511,461 pounds. This figure is an estimate

based on information provided to the Committee by producers and buyers.

(C) Percentage of North American market targeted--73 percent. This

figure is an approximate average of the recommended target percentages

made at each of the five regional producer meetings held throughout the

Far West production area during the month of September, 1996.

(D) Total quantity of Scotch spearmint oil needed to reach targeted

percentage--1,103,367 pounds. This figure is the product of the

estimated 1997-98 North American production and the targeted

percentage.

(E) Minimum amount desired to have on hand throughout the season--

200,000 pounds. Producers at all of the five regional meetings had

recommended this amount, which continues to reflect the Committee's

commitment to regain market share by maintaining a minimum quantity on

hand.

(F) Total supply required--1,303,367 pounds. This figure is derived

by adding the minimum desired on hand amount to the total quantity

required to meet the targeted percentage.

(G) Additional quantity required--993,440 pounds. This figure

represents the actual amount of additional or new oil needed to meet

the Committee's projections, and is computed by subtracting the

estimated carry-in of 309,927 pounds from the total supply required of

1,303,367 pounds.

(H) Total allotment base for the 1997-98 marketing year--1,811,859

pounds.

(I) Computed allotment percentage--54.8 percent. This percentage is

computed by dividing the required salable quantity by the total

allotment base.

(J) Recommended allotment percentage--55 percent. This is the

Committee's recommendation based on the computed allotment percentage.

(K) The Committee's recommended salable quantity--996,522 pounds.

This figure is the product of the recommended allotment percentage and

the total 1997-98 allotment base.

(2) Class 3 (Native) Spearmint Oil

(A) Estimated carry-in on June 1, 1997--71,764 pounds. This figure

is derived by subtracting the estimated 1996-97 marketing year trade

demand of 1,162,500 pounds from the revised 1996-97 marketing year

total available supply of 1,234,264 pounds.

(B) Estimated trade demand (domestic and export) for the 1997-98

marketing year--1,212,500 pounds. This figure represents an average of

buyer estimates and the amounts recommended at the regional producer

meetings.

(C) Salable quantity required from 1997 production--1,140,736

pounds. This figure is the difference between the estimated 1997-98

marketing year trade demand and the estimated carry-in on June 1, 1997.

(D) Total allotment base for the 1997-98 marketing year--2,009,556

pounds.

(E) Computed allotment percentage--56.8 percent. This percentage is

computed by dividing the required salable quantity by the total

allotment base.

(F) Recommended allotment percentage--56 percent. This is the

[[Page 36648]]

Committee's recommendation based on the computed allotment percentage.

(G) The Committee's recommended salable quantity--1,125,351 pounds.

This figure is the product of the recommended allotment percentage and

the total 1997-98 marketing year allotment base.

The salable quantity is the total quantity of each class of oil

which handlers may purchase from or handle on behalf of producers

during a marketing year. Each producer is allotted a share of the

salable quantity by applying the allotment percentage to the producer's

allotment base for the applicable class of spearmint oil.

The Committee's recommended Scotch spearmint oil salable quantity

of 996,522 pounds and allotment percentage of 55 percent are based on

anticipated supply, demand, and a targeted percentage of the North

American market during the 1997-98 marketing year. The Committee's

recommended Native spearmint oil salable quantity of 1,125,351 pounds

and allotment percentage of 56 percent are based on anticipated supply

and trade demand during the 1997-98 marketing year. The salable

quantities are not expected to cause a shortage of spearmint oil

supplies. Any unanticipated or additional market demand for spearmint

oil which may develop during the marketing year can be satisfied by an

increase in the salable quantities. Both Scotch and Native spearmint

oil producers who produce more than their annual allotments during the

1997-98 season may transfer such excess spearmint oil to a producer

with spearmint oil production less than his or her annual allotment or

put it into the reserve pool.

This regulation is similar to those which have been issued in prior

seasons. Costs to producers and handlers resulting from this action are

expected to be offset by the benefits derived from a stable market, a

greater market share, and possible improved returns. In conjunction

with the issuance of this rule, the Committee's marketing policy

statement for the 1997-98 marketing year has been reviewed by the

Department. The Committee's marketing policy, a requirement whenever

the Committee recommends volume regulations, fully meets the intent of

section 985.50 of the order. During its discussion of potential 1997-98

salable quantities and allotment percentages, the Committee considered:

(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) prospective production of each class of oil; (4) 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 each class of oil, including whether

the estimated season average price to producers is likely to exceed

parity. Conformity with the Department's ``Guidelines for Fruit,

Vegetable, and Specialty Crop Marketing Orders'' has also been reviewed

and confirmed.

The establishment of these salable quantities and allotment

percentages allow for anticipated market needs. In making its

recommendation, the Committee reviewed available information including

historical sales and changes and trends in production and demand. This

rule also provides spearmint oil producers with information on the

amount of oil which should be produced for next season in order to meet

anticipated market demand.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), the Agricultural Marketing Service (AMS) has considered the

economic impact of this action on small entities. Accordingly, the AMS

has prepared this final regulatory flexibility analysis.

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 8 spearmint oil handlers subject to regulation under the

order and approximately 250 producers of spearmint oil in the regulated

production area. Of the 250 producers, approximately 135 producers hold

Class 1 (Scotch) spearmint oil allotment base, and approximately 115

producers hold Class 3 (Native) spearmint oil allotment base. Small

agricultural service firms are defined by the Small Business

Administration (SBA)(13 CFR 121.601) as those having annual receipts of

less than $5,000,000, and small agricultural producers have been

defined as those whose annual receipts are less than $500,000.

Based on the SBA's definition of small entities, the Committee

estimates that none of the eight handlers regulated by the order would

be considered small entities. All of the handlers are large

corporations involved in the international trading of essential oils

and the products of essential oils. Further, the Committee estimates

that 17 of the 135 Scotch spearmint oil producers and 10 of the 115

Native spearmint oil producers would be classified as small entities

under the SBA definition. Thus, a majority of handlers and producers of

Far West spearmint oil may not be classified as small entities.

The Far West spearmint oil industry is characterized by producers

whose farming operations generally involve more than one commodity, and

whose income from farming operations is not exclusively dependent on

the production of spearmint oil. Crop rotation is an essential cultural

practice in the production of spearmint oil for weed, insect, and

disease control. A normal spearmint oil producing operation would have

enough acreage for rotation such that the total acreage required to

produce the crop would be about one-third spearmint and two-thirds

rotational crops. An average spearmint oil producing farm would thus

have to have considerably more acreage than would be planted to

spearmint during any given season. Most spearmint oil producing farms

would fall into the SBA category of large businesses in order to remain

economically viable due to the added costs associated with the

production of spearmint oil.

This final rule establishes the quantity of spearmint oil produced

in the Far West, by class, that handlers may purchase from, or handle

for, producers during the 1997-98 marketing year. The Committee

recommended this rule for the purpose of avoiding extreme fluctuations

in supplies and prices, and thus help to maintain stability in the

spearmint oil market. This action is authorized by the provisions of

Secs. 985.50, 985.51 and 985.52 of the order.

Small spearmint oil producers generally are not extensively

diversified and as such are more at risk to market fluctuations. Such

small farmers generally need to market their entire annual crop and do

not have the luxury of having other crops to cushion seasons with poor

spearmint oil returns. Conversely, large diversified producers have the

potential to endure one or more seasons of poor spearmint oil markets

because incomes from alternate crops could support the operation for a

period of time. Being reasonably assured of a stable price and market

provides small producing entities with the ability to maintain proper

cash flow and to

[[Page 36649]]

meet annual expenses. Thus, the market and price stability provided by

the order potentially benefit the small producer more than such

provisions benefit large producers. Even though a majority of handlers

and producers of spearmint oil may not be classified as small entities,

the volume control feature of this order has small entity orientation.

The order has contributed extensively to the stabilization of

producer prices, which prior to 1980 experienced wide fluctuations from

year to year. For example, between 1971 and 1975 the price of Native

spearmint oil ranged from $3.00 per pound to $11.00 per pound. In

contrast, under the order, prices have stabilized between $10.50 and

$11.50 per pound for the past ten years.

Alternatives to the proposal included not regulating the handling

of spearmint oil during the 1997-98 marketing year, and recommending

either higher or lower salable quantities and allotment percentages.

The Committee reached its recommendation to establish salable

quantities and allotment percentages for both classes of oil after

careful consideration of 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)

prospective production of each class of oil; (4) 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 each 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

quantity and allotment percentage levels recommended will achieve the

objectives sought.

Without any regulations in effect, the Committee believes the

industry would return to the pattern of cyclical prices of prior years,

as well as suffer the potentially price depressing consequence that a

release of the nearly 1,300,000 pounds of spearmint oil reserves would

have on the market. According to the Committee, higher or lower salable

quantities and allotment percentages would not achieve the intended

balance between market and price stability, and market share

maintenance and growth.

Annual salable quantities and allotment percentages have been

issued for both classes of spearmint oil since the order's inception.

Reporting and recordkeeping requirements have remained the same for

each year of regulation. Accordingly, this action will not impose any

additional reporting or recordkeeping requirements on either small or

large spearmint oil producers and handlers. All reports and forms

associated with this program are reviewed periodically in order to

avoid unnecessary and duplicative information collection by industry

and public sector agencies. The Department has not identified any

relevant Federal rules that duplicate, overlap, or conflict with this

final rule.

A proposed rule was published in the Federal Register (62 FR 942)

on January 7, 1997. A 30-day comment period was provided to allow

interested persons the opportunity to respond to the proposal,

including any regulatory and informational impacts of this action on

small businesses. Copies of the rule were faxed and mailed to the

Committee office, which in turn notified Committee members and

spearmint oil producers and handlers of the proposed action. In

addition, the Committee's meetings were widely publicized throughout

the spearmint oil industry and all interested persons were invited to

attend and participate on all issues. A copy of the proposal was also

made available on the Internet by the U.S. Government Printing Office.

One comment was received from the U.S. Small Business

Administration, Office of Advocacy, regarding the Department's initial

regulatory flexibility analysis (IRFA). The SBA noted that a brief

overview of the facts supported the Department's decision not to

certify the proposal as not having a significant economic impact on a

substantial number of small entities. Further, SBA was of the view that

AMS should flesh out some of its assumptions and statements.

The assumptions and statements of concern to SBA include references

to the fact that records show that the marketing order has contributed

extensively to the stabilization of grower prices, which prior to 1980

experienced wide fluctuations from year to year. The commenter

questioned whether current information suggested that the spearmint oil

market would experience instability under today's market conditions

without the order. Also, based upon the statement in the IRFA that the

Committee reached its recommendation to establish salable quantities

and allotment percentages after careful consideration of all available

information, the commenter was of the view that the Committee seemed to

be privy to information not contained in the proposed rule. SBA went on

to raise questions concerning alternative allotment percentages and

quantities of spearmint oil producers must have in order to survive.

As noted earlier in the regulatory flexibility analysis, the market

and price stability provided by the order potentially benefit the small

producer more than such provisions benefit large producers. Although a

majority of handlers and producers of spearmint oil may not be

classified as small entities, the volume control feature of this order

has small entity orientation. Furthermore, were salable quantity and

allotment percentage regulations not issued, the Committee believes the

industry would return to the pattern of cyclical prices of prior years,

as well as potentially suffer the significant, and likely negative

economic impact that a release of the nearly 1,300,000 pounds of

spearmint oil reserves would have on the market.

In accordance with Sec. 985.50 of the order, the Committee is

required to submit on an annual basis to the Secretary recommendations

for volume regulations deemed necessary to meet market requirements and

establish orderly market conditions. In determining a marketing policy,

the Committee is required to consider certain factors including but not

limited to (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) prospective production of each class of oil; (4) 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 each class of oil, including whether

the estimated season average price to producers is likely to exceed

parity.

The information available to the Committee includes just such

information as is contained in the marketing policy which is developed

by the Committee. At the public meetings held prior to the Committee's

recommendation for the 1997-98 marketing year salable quantities and

allotment percentages, the marketing policy was considered and

discussed. Further, discussion of the history of the marketing order

and market conditions from 1980 to the present represents some of the

background and experience that is brought to bear in arriving at a

recommendation for regulation. In making its recommendation, the

Committee looked at and considered current and prospective marketing

[[Page 36650]]

conditions to determine whether the marketing policy considerations

indicated a need for limiting the quantity of spearmint oil in a

particular class.

Finally, the SBA questioned why the proposed rule did not contain

reference to the number of new producers who will be allocated base of

sufficient quantity so as to ensure their entry into the industry next

season. The procedures for determining how new producers are selected

and how additional allotment bases are distributed is provided for in

Secs. 985.53 and 985.153 of the order and its regulations and is

separate from this action. Under these provisions, an additional \1/2\

percent of the current total allotment base for each class of spearmint

oil is annually allocated to new producers. For the 1997-98 marketing

year, three new Class 1 producers were issued an equal proportion of

the Scotch spearmint oil additional allotment base, and four new Class

3 producers were issued an equal proportion of the Native spearmint oil

additional allotment base. This increased the total number of producers

in the regulated production area by nearly three percent. As provided

for in Sec. 985.153, the Committee determined that the levels of

issuance for the 1997-98 marketing year, approximately 3,000 pounds per

new producer for Scotch spearmint oil and 2,500 pounds per new producer

for Native spearmint oil, are at levels sufficient for a minimum

economic enterprise to produce each class of spearmint oil.

Accordingly, based on the comment received, no changes are made to

the rule as proposed.

After consideration of all relevant matter presented, including the

information and recommendation submitted by the Committee and other

available information, it is hereby found that this rule, as

hereinafter set forth, will tend to effectuate the declare policy of

the Act.

It is further found that good cause exists for not postponing the

effective date of this rule until 30 days after publication in the

Federal Register (5 U.S.C. 553) because handlers need to be able to

ship their spearmint oil for the 1997-98 season which began June 1,

1997. Further, handlers are aware of this rule, which was recommended

at a public meeting. Also, a 30-day comment period was provided for in

the proposed rule.

List of Subjects in 7 CFR Part 985

Marketing agreements, Oils and fats, Reporting and recordkeeping

requirements, Spearmint oil.

For the reasons set forth in the preamble, 7 CFR Part 985 is

amended as follows:

PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL

PRODUCED IN THE FAR WEST

1. The authority citation for 7 CFR Part 985 continues to read as

follows:

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

2. A new section 985.216 is added to read as follows:

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

Regulations.]

Sec. 985.216 Salable quantities and allotment percentages--1997-98

marketing year.

The salable quantity and allotment percentage for each class of

spearmint oil during the marketing year beginning on June 1, 1997,

shall be as follows:

(a) Class 1 (Scotch) oil--a salable quantity of 996,522 pounds and

an allotment percentage of 55 percent.

(b) Class 3 (Native) oil--a salable quantity of 1,125,351 pounds

and an allotment percentage of 56 percent.

Dated: July 2, 1997.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 97-17867 Filed 7-8-97; 8:45 am]

BILLING CODE 3410-02-P